Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

The state legislature seems to have a love/hate relationship with every city in the state. Here are some of the more egregious examples. One is the state’s diminishment of the cities’ ability to collect Impact Fees; another is the state usurpation of every city’s ability to collect sales tax; and lastly the state’s reduction in the distribution amount of Highway User Revenue Funds (HURF) it is required to share with every city in the state.

In 2011, the Arizona legislature passed Senate Bill 1525. This bill restricts cities’ ability to collect Impact Fees from the development community. This diminishes the amount of money needed for libraries, community parks, streets and infrastructure, open space and trails.

So what, what do you care? Well, you should care because the restrictions on the collection of Impact Fees don’t mean that these things are not built. They still are…only now; you the taxpayer are paying for new growth in your town or city.

How does it impact you? It used to be in this state the mandate was “growth should pay for growth.” That no longer applies. Here’s a hypothetical. A developer wants to build a subdivision of 250 new homes on the periphery of your city. That developer would have to pay a set Impact Fee per house to help cover the cost of infrastructure to support and provide services to the new subdivision. Perhaps the arterial street abutting the subdivision would now require widening to accommodate the new traffic from the subdivision. Or perhaps the nearest fire station or library was pretty far away requiring a new fire station or library.  The Impact Fee charged by the city would help to defray the cost of widening the street or putting in a new fire station or library. The Development Impact Fee cost to the developer is added onto the price of each new home. The developer might raise the price of the new home by a $1,000 or $2,000. That money would go into the city’s accounts to help pay for the new infrastructure causing new growth to help pay for itself.

What happens when the Impact Fees have been reduced or eliminated by the state legislature? The city still needs to widen that street or to build that fire station or library. Where will the money come from? Why, the taxes you pay, of course. Now you are paying for that new growth.

There is one case when the loss of Impact Fees is not as detrimental to a city or town and that is with Infill Development. With Infill Development a developer takes a piece of land within an established area of a city and builds maybe 30 or 50 new homes on it. That land has been vacant for years but already has an adequate arterial street and a nearby fire station or library. There is no need to build new infrastructure. In that case the Development Impact Fees are used for any needed expansion of nearby infrastructure.

Yet in its heavy-handed way, the state legislature makes no distinction on the imposition of Impact Fees between an Infill Development in an established area of a city and new development that is sited where there is no city infrastructure. Why has this happened? Because the pro-development lobby is the 900 lb. gorilla with deep pockets that contributes to every state legislator’s election campaign (if the legislator is on the ‘right’ side of the issue). Taxpayers have no such lobby and therefore in a battle between the pro-development lobby and the taxpayer, guess who wins?

Another example of the heavy handedness of the state legislature is the mandate passed in 2016 requiring all cities and counties sales taxes to be collected by the state by January of 2017. To add further insult to this injury, cities must pay the state to collect sales tax…they must now pay the state to do what they did for a hundred years. Glendale paid over $650,000 this fiscal year to the state to pay for what it had collected on its own previously.

To make matters worse, in an audit of the state Department of Revenue released in June of this year it was revealed that the state does a lousy job of collecting sales tax. The department simply missed identifying businesses and erased a bunch of active businesses that were paying their taxes. After the department took over collection from the cities at one point just stopped checking to see whether all businesses were even licensed.

Cities are now forced to retain their employees that check payment of business sales tax. In other words cities have to double check the work of the state department to insure that not only the tax is being paid but that it is a correct amount. So much for a better state ‘mouse trap’.

Why would the state take over sales tax collection? The state says it’s in the name of efficiency and simplicity for businesses paying sales tax. If a business does business in more than one city, it has to file a sales tax return in each city monthly. Now the business, no matter where or in how many jurisdictions it does business sends all sales tax collected to the state who then distributes it to the appropriate jurisdiction.

But there could be another reason. When cities collected the sales tax they would send the state’s portion to the state in a day or two or perhaps even in a week. While the cities hold the sales tax funds the cities are collecting interest on that money. Obviously the amount of sales tax collected monthly is enormous. With the state collecting the sales tax, it puts the proceeds in an interest bearing account and now the state is receiving the interest until it remits the proper amount to each jurisdiction.  Now the state earns the interest on the funds it collects until it disburses it to the jurisdictions.

Some of the money every taxpayer pays to the state is known as state shared revenue. One is the Highway User Revenue Fund (the tax you pay on each gallon of gasoline and is known by the acronym HURF). There is a formula that dictates a portion of HURF must be distributed to cities based upon their population. When the Great Recession occurred the state unilaterally slashed the amount of HURF state shared revenue it distributed to each and every city to help cover the state’s shortfall in its budget. While that was a great move to keep the state budget whole, it hurt every city that relied upon HURF dollars for part of the revenue for their budgets during that same recession. The state is only now beginning to share all of the state shared revenue amounts with cities that it is mandated to do.

It often appears to city leaders that the state will favor the interests of their business or pro-development friends over those of cities. Often that means that you, the individual, pays for the state’s decisions that favor interests other than yours.  The state continues to demonstrate over the years that it is not always fiscally friendly to the city in which you reside.

© Joyce Clark, 2019         


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