Municipal finance

Important updates on Initiative 1033

AWC to host webinars for city officials if I-1033 passes

Provided Initiative 1033 passes in November, AWC will host two webinars within the week. These webinars will provide an overview of the initiative, a synopsis of what you can expect from AWC, and Q&A. Presenters will include Jim Justin, Director of State and Federal Relations with AWC, and Alice Osdeik, Attorney with Foster Pepper.

Keep an eye out for more specific information and instructions on how to register.

Recent polling indicates that despite losing ground, I-1033 leads by 24 points

The Elway Poll recently released new polling results on Initiative 1033. Results show that the number of people indicating they will "probably" vote for the initiative is declining and the number opposed or undecided are growing. Elway notes that nearly all movement was in the negative direction, which was "politically significant."

The poll found that support for the initiative dropped for every demographic except retirees and voters over 65. Support from both Democrats and Republicans fell. Democrat support fell from 48% in August to 36% in September, and Republic support fell from 66% to 53% over the same time period.

I-1033 sponsors’ challenge OFM fiscal impact assumptions

In early September, I-1033 co-sponsors, Tim Eyman, Mike Fagan and Jack Fagan, filed a law suit against the director of OFM and the Secretary of State challenging the assumptions outlined in OFM’s fiscal impact statement which will appear in the general election voter’s pamphlet. The co-sponsors challenged that OFM’s impact statement was based on a series of assumptions which inaccurately described the initiative.

The case was heard in Thurston County Superior Court on September 11, 2009 and the judge ruled that the burden of proof had not been met by the co-sponsors. As a result, OFM’s fiscal note will be published in the general election voter’s pamphlet as originally released in August. An excerpt of the court documents outlining the co-sponsors’ arguments can be found on AWC’s website.

The Attorney General’s Office (AG) represented the defendants, OFM and the Secretary of State. During testimony the AG noted that their office avoids interpreting initiatives before becoming law. In following this charge, they were consulted by OFM while the impact statement was being developed, and concluded the OFM’s assumptions were "reasonable." This leaves the door open for another AG or court interpretation of the initiative should it become law.

City fiscal estimates

When OFM developed their fiscal impact statement, they did not do so at a jurisdictional level. This is due to data limitations and the significant variation of economic conditions affecting jurisdictional revenues and population growth (or decline).

Therefore, AWC worked with a group of finance directors to build off the assumptions OFM outlined in their impact statement, further interpret the I-1033 language, and develop a model that will assist cities in estimating the initiative’s impacts. This model was emailed to city finance officers, mayors and managers/administrators at the beginning of the month. Some cities have completed these impact estimates and forwarded them to AWC. These are now posted on the AWC website so cities can compare impact results.

Other AWC resources

In addition to information about I-1033’s fiscal impacts on cities, AWC’s website now provides examples of resolutions concerning I-1033 passed by city councils and PowerPoint presentations outlining jurisdictional impacts. City officials are encouraged to visit www.awcnet.org/initiatives for this information and:

• Basic information on I-1033;
• Links to I-1033 sponsors’ website and the Vote No on I-1033 website
• News articles about I-1033 concerning cities
• Previous AWC email alerts and I-1033 news
• PDC and AGO resources

Implicit Price Deflator for property tax limit factor released

On September 22, 2009 the Department of Revenue released the rate of inflation for property taxes due in 2010. The implicit price deflator used to determine the property tax limit factor is negative 0.848 percent (-0.848%).

Anticipating a negative IPD, the Department of Revenue released a special notice in April of this year answering questions about the impact of deflation (or negative "inflation") on local property taxes. For taxing districts with a population of 10,000 or less the limit factor is 101% regardless of the IPD. For taxing districts with a population of 10,000 or more the limit factor is the lesser of 101% or 100% plus inflation. However, with a finding of substantial need and supermajority council approval, larger taxing districts can adopt a limit factor up to a maximum of 101%.

• For DOR’s memo to county assessors regarding the negative IPD (9/22/09) click here.
• For DOR’s Q&A on property tax levy increases (4/22/09) click here.

AWC will post on our website and email city officials information outlining the steps a city over 10,000 population must take to collect 101%.

City-County Assistance Account 2010 preliminary certification amounts available

As noted in previous Legislative Bulletins some changes have been made to the City-County Assistance Account. As a result of SB 5511, which passed during the 2009 legislative session, changes to this account were made in response to recommendations from the Joint Legislative Audit and Review Committee’s report released last fall and in an effort to assist cities in budgeting for these funds.

Department of Revenue’s release of 2010 preliminary certification amounts

DOR recently released 2010 preliminary certification amounts for cities to receive funds from the City-County Assistance Account. Cities have until October 18 to review the distributions and address any errors. After this review period the certification will become final.

Previously, certification took place in March for distributions made in April, July, October and January. Now, DOR is releasing a preliminary certification in September and this will become final after a 30-day review period. Distributions based on these eligibility amounts will take place in January, April, July and October. (However, please note that the transfer of these funds is typically made a few days before the beginning of the month).

To view preliminary eligibility amounts for 2010 click here.

Account funded by REET revenues

Cities should remember that the City-County Assistance Account is funded by a portion of the state’s real estate excise tax (REET), which is imposed on real estate sales. Distributions are based on actual collections and the amount available in this account. Because of the recent slowdown in the housing market, cities receiving distributions this past year should have noticed a drop in assistance.

The DOR preliminary certification for 2010 provides a forecast of REET revenues based on the June 2009 revenue forecast. Once again, cities are not expected to reach the amount they are eligible to receive even with additional assistance from the state explained below.

Additional allocation in October 2009/2010 distributions

Because REET collections have fallen significantly, AWC worked hard to secure additional resources for this biennium for cities receiving funds from this account. The state’s 2009-2011 budget appropriation, ESHB 1244, transferred an additional $5 million to the assistance account on July 1, 2009 and an additional $5 million is scheduled to be transferred on July 1, 2010. These funds will be split equally between counties and cities qualifying for assistance in the corresponding year.

Therefore, cities should expect to see a larger distribution in their October 2009 and October 2010 distributions, compared to previous distributions. Cities can view October distribution amounts here.

For questions about this account contact Alicia Seegers Martinelli, Research Coordinator, aliciam@awcnet.org or (360) 753-4137.

Final payment for first year of SST mitigation to be distributed by September 30

The SST mitigation advisory committee is set to meet again on October 1 from 10 am to 2 pm in Olympia. Continuing implementation issues include consideration of how to treat mistakes in mitigation data calculations and finalizing calculations for the base year. For more information, click here.

The fourth Streamlined Sales Tax Mitigation payment will be transmitted on September 30, 2009. It covers taxable retail sales made during the second quarter of 2009 and corresponds to local tax distributions made in June through August 2009. Cities are encouraged to review sourcing impact data as DOR works to finalize base year calculations.

Seventy-nine jurisdictions will receive payments totaling $6.97 million, which is up from $6.51 million last quarter. For more information see the mitigation history information http://dor.wa.gov/Content/AboutUs/StatisticsAndReports/Mitigation/Default.aspx.

This also means that the Department of Revenue (DOR) has made preliminary calculations for an annual estimate of the base year for future mitigation calculations. Cities are strongly encouraged to review the detail information provided in the confidential data on local sourcing impacts by business and report to DOR businesses that were incorrectly included if they would have impacted mitigation calculations.

DOR uses a secure e-mail system to the one contact person per city to send and communicate about confidential detailed-taxpayer information files that were used to determine quarterly mitigation payments. DOR's guidance regarding reviewing and communicating about that information is available in How to Read the Mitigation Detail Files.

House Finance and Senate Ways & Means Committee meetings

The Legislature will be in Olympia this week with meetings scheduled for Wednesday, September 30 through Friday, October 2.

On Thursday, October 1, AWC will give a presentation to the Senate Ways & Means committee on city fiscal status. Information used for this presentation will come from our State of the Cities reports.

The House Finance Committee’s meeting on Friday, October 2 will include a briefing of the September Economic and Revenue Forecast, update from DOR on the conversion from resale certificates to sellers permits, and streamlined sales tax issues.

Department of Revenue Local Government Partnership Meeting

The next Department of Revenue (DOR) Local Government Partnership meeting is scheduled for October 13, 2009. These meetings present an opportunity for local governments to share information with DOR staff and learn from DOR about important upcoming issues.

For registration information visit the Local Government Partnership web page at http://dor.wa.gov/content/doingbusiness/localgovernment.aspx and click the link for Local Government Partnership meeting information.

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