JLARC Releases Report on City-County Assistance Account

On October 22, the Joint Legislative Audit and Review Committee (JLARC) released the preliminary report on the City-County Assistance Account, as directed by ESSB 6050 in 2005.This report evaluated city and county eligibility for sales tax equalization distributions had the Motor Vehicle Excise Tax (MVET) not been repealed. It also examined the amount cities and counties were eligible to receive from the assistance account in 2006.

Report findings include:

Funding provided through the assistance account was less than what would have been provided to cities from equalization (MVET). Based on 2006 data, cities would have been eligible for $43.9 million from sales tax equalization, while only eligible for $7.5 million from the assistance account.
The majority of funds are distributed to low tax-base jurisdictions as they would have been under the former sales tax equalization formula.
According to the survey conducted by JLARC this past summer, a majority of cities did not think funds designated for the assistance account should be directed for other purposes.

AWC was able to address the Committee. While we generally support the report’s findings, we have concerns that it examined assistance account distributions from 2006 only, when there was an unprecedented spike in real estate excise tax (REET) revenues due to the housing boom. In 2008, cities are expected to receive only about 60% of the amount they are eligible to receive under the formula.

We were also able to inform the Committee of our 2009 legislative priority that asks the legislature to establish a "floor" on distributions so they do not drop below a particular amount, and the account be enhanced by the state’s general fund.

Fiscal Flexibility Legislative Subcommittee Progress To-Date

As reported in last month’s Bulletin emerging top priorities have been identified by the full legislative development committee. The Fiscal Flexibility subcommittee forwarded several recommendations to the full Legislative Committee for consideration. Issues advanced to the full Committee focus on greater fiscal flexibility with existing resources, removing supplant language, and additional fiscal assistance to low tax-base cities and towns.

Recommendations to the full Committee and the board included:

City-County Assistance Account: Additional fiscal aid for distressed cities and counties by increasing the City-County Assistance Account and establishing a "floor" so distributions to qualifying cities do not drop below a certain amount.
Sales Tax: Provide additional flexibility with optional sales taxes - specifically the voter-approved 3/10 percent sales tax that is imposed county-wide and used for public safety purposes. The committee is also exploring ways cities may be able to impose this tax independent of county action.
Property Tax: Assist counties in obtaining state resources so every county can conduct annual valuations. Increase the property tax cap for city EMS permanent levies, from 1% to an inflation index such as the Implicit Price Deflator.

One of the forwarded recommendations (additional financial assistance for distressed cities and counties) was chosen by the full legislative committee and the AWC board of directors as an emerging top priority. Other recommendations remain on the subcommittee’s "support" list, including looking at ways cities can use existing resources to meet budget needs by removing non-supplant language.

State Budget Savings

The State continues to strategize on how to save resources in light of worsening economic conditions. A month ago the Governor asked the Office of Financial Management (OFM) to identify $200 million in savings to offset revenue losses this biennium. She has since amended the request, asking for $240 million in savings. OFM has now mandated across-the-board cuts in addition to the hiring freeze established in August.

Lodging Tax Reporting Form Clarification

AWC recently received in inquiry from a member about which lodging taxes must be included in the new reporting forms. It is required for both the state-shared lodging tax as well as any special local lodging taxes.

The lodging tax reporting forms are available on the Department of Community, Trade and Economic Development’s tourism industry site webpage (www.experiencewa.com/industry) and AWC’s website (www.awcnet.org).

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