BRIEFING: PLACING LOCAL TRANSPORTATION TAX ON ELECTION BALLOT

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1 COUNCIL STAFF REPORT CITY COUNCIL of SALT LAKE CITY TO: City Council Members FROM: Russell Weeks Public Policy Analyst DATE: May 29, 2015 at 12:44 PM Item Schedule: Briefing: June 2, 2015 Set Date: Public Hearing: Potential Action: June 9, 2015 RE: BRIEFING: PLACING LOCAL TRANSPORTATION TAX ON ELECTION BALLOT Council Sponsor: Council Member Luke Garrott ISSUE AT-A-GLANCE Goal of the briefing: To determine if the City Council will formally consider a resolution encouraging the Salt Lake County Council to place a.25 percent local option sales tax on the 2015 general election ballot in November. The Utah League of Cities and Towns has provided the draft resolution. It is asking cities statewide to adopt the resolution the week of June 8 to June The proposed tax increase is one of the results of House Bill 362 passed by the Legislature in March. In Salt Lake City, passage of the.25 percent sales tax increase would generate about $4.6 million a year, according to a table provided by the Utah League of Cities and Towns. 2 The increase would be in addition to increased revenue from the conversion of the state tax on gasoline from 24.5 cents per gallon to a 12 percent sales tax per gallon of gas. The conversion also was part of House Bill 362 and is the equivalent of a 4.9 cent increase per gallon. 3 The Utah League of Cities and Towns estimates Salt Lake City would receive about $1.06 million in new gas tax revenue from that source. 4 The local option sales tax would be county-wide if Salt Lake County residents vote in favor of it. If passed, the tax would be distributed in the following ways:.10 percent to each city or town in Salt Lake County;.05 percent to Salt Lake County; and.10 percent to transit. In Salt Lake County the.10 percent for transit would go to the Utah Transit Authority. CITY COUNCIL OF SALT LAKE CITY 451 SOUTH STATE STREET, ROOM 304 P.O. BOX , SALT LAKE CITY, UTAH COUNCIL.SLCGOV.COM TEL FAX LUKE GARROTT DISTRICT 4 COUNCIL CHAIR JAMES ROGERS DISTRICT 1 COUNCIL VICE CHAIR KYLE LAMALFA DISTRICT 2 STAN PENFOLD DISTRICT 3 ERIN MENDENHALL DISTRICT 5 CHARLIE LUKE DISTRICT 6 LISA R. ADAMS DISTRICT 7

2 If county residents approve the proposed sales tax increase, Salt Lake City s sales tax rate would rise to 7.1 percent. The current sales tax rate is 6.85 percent. The rate would be the same sales tax rate charged throughout Salt Lake County with two exceptions. Alta and South Salt Lake s sales tax rates would be higher because their current sales tax rates are higher. 5 POLICY QUESTIONS 1. Should the City Council support having the Salt Lake County Council place the proposed local option sales tax on the general election ballot in November, or should it support placing the item on the 2016 general election ballot? 2. The City Council is considering placing a general obligation bond on the November general election ballot to fund recreation and open space. The bond would be repaid with a property tax increase. Mayor Ralph Becker s Administration will present details of projects and the amount of the bond at a briefing in midsummer. The City Council must decide by August 18 whether to place the bond on the general election ballot. How would placing the local option sales tax on the ballot affect the proposed ballot question on a bond to fund recreation and open space? 3. The proposed.25 percent local option sales tax could help achieve values listed in City Council statements on transportation and mobility, economic development, and neighborhood quality of life. ADDITIONAL & BACKGROUND INFORMATION As indicated, the proposed local option transit tax and companion motor fuel tax increase are part of House Bill 362. The bill was the result of legislators concern and efforts by the Utah League of Cities and Towns, chambers of commerce in Utah, and transportation groups to address deteriorating road systems and the need for transit improvements. Improvements to both may be necessary to meet future needs of Utah s growing population. Figures provided by the Utah League show a shortfall for transportation improvements in Salt Lake City of about $27.2 million. 6 House Bill 362 places the responsibility on Utah s twenty nine counties to put the local option proposal on the general election ballot. The reason for that was to keep sales tax rates within each county fairly uniform. Every county and every city in Utah has a 4.70 percent tax sales tax rate that goes to the state and a 1 percent tax rate that each city or town collects for local purposes. The 1 percent then is split, and half goes to the city or town where a sale occurs, and the other half is apportioned among cities based on population. After that, tax rates vary because some cities and towns have enacted other sales taxes to pay for some services. UTA s transit service area is an example. According to UTA s 2013 annual report, the agency s six-county service area has the following sales tax rates: Box Elder.55 percent; Davis.55 percent; Salt Lake.6875 percent; Tooele.30 percent; Utah.526 percent; and Weber.55 percent. 7 UTA s comprehensive annual reports for the years 2009 through 2013 list the following total sales tax revenue for UTA: 2009 $171,854,169; 2010 $171,893,732; 2011 $183,091,842; 2012 $196,693,534; 2013 $203,806,329. Page 2

3 Of those amounts, Salt Lake County s total share of sales tax revenue assigned to UTA was: 2009 $112,076,511; 2010 $112,379,368; 2011 $120,094,104; 2012 $129,169,355; 2013 $132,741,111. According to Salt Lake City Council staff calculations, Salt Lake City s share of the county s total share of sales tax revenue assigned to UTA was: 2009 $32,053,446; 2010 $36,535,811; 2011 $29,089,491; 2012 $32,177,519; 2013 $33,367, Salt Lake City s share of sales tax revenue assigned to UTA varies between 16.3 percent and 21.2 percent of UTA s total sales tax revenue collected in each of the five years. It also varies between roughly one-fourth and one-third of the total county sales tax revenue assigned to UTA. 9 The figures indicate that Salt Lake City and Salt Lake County have a substantial stake in UTA s operations and future. Again, the proposed local option sales tax created by House Bill 362 would assign another.10 percent to UTA operations in its six-county service area, if voters in all six counties approve it. If only Salt Lake County voters approve the increase, the revenue from it would stay entirely within Salt Lake County. Another.10 percent of the proposed increase would come to each city in the county. Like standard sales tax, it would be distributed on a formula of 50 percent point of sale and 50 percent population. Again, the Utah League estimates that would generate about $4.6 million a year for Salt Lake City. The money could be used for a variety of items including street improvements; sidewalk, curbs, and gutter; pedestrian safety, such as street lighting or traffic signals; bicycle lanes, and public transit system services particular to the city. Because the law requires counties to put the issue on the ballot, the Salt Lake County Council will make the final decision of when it goes onto the general election ballot. The County Council has not yet discussed when to place the issue on a ballot, according to Bart Barker, Chairman Richard Snelgrove s administrative assistant. Mr. Barker said the County Council chairman wants to hear from cities throughout the county before placing the issue on an agenda for discussion. 10 The County Council must reach a decision by late August, according to the Utah League of Cities and Towns. One issue raised by the Utah League is the size of potential voters. House Bill 362 allows the proposed local option sales tax to appear either on the 2015 ballot or the 2016 ballot. The League of Cities and notes that in the 2008 general election, when state and national offices were open for election, Salt Lake County had 369,884 votes cast, a 71 percent turnout. 11 In contrast, for the 2011 municipal elections in Salt Lake County, 70,554 votes were cast a turnout of 19 percent of registered voters. 12 One question may be: Does an election with a large turnout or a small turnout equally reflect the will of the people? Cc: Cindy Gust-Jenson, David Everitt, Margaret Plane, Jennifer Bruno, Nichol Bourdeaux, Jill Love, Robin Hutcheson, Lynn Pace File Location: Transportation, Transit, Elections. 1 , Utah League of Cities and Towns, Cameron Diehl, May 15, ULCT Funding Estimates Table, Utah League of Cities and Towns Website. 3 HB 362 Frequently Asked Questions, Utah League of Cities and Towns Website. Page 3

4 4 ULCT Funding Estimates Table, Utah League of Cities and Towns Website. 5 Combined Sales and Use Tax Rates as of January 1, 2015, Utah State Tax Commission. Alta s current 8.35 percent rate includes two resort-related taxes. South Salt Lake s current 7.05 percent rate includes a.20 percent city or town option tax, according to the Tax Commission. 6 ULCT Funding Estimates Table, Utah League of Cities and Towns Website. 7 Comprehensive Annual Financial Report for Fiscal Year ended December 31, 2013, Utah Transit Authority, Page The State Tax Commission collects 1 percent of point of sale revenue then apportions all revenue collected from municipalities back to municipalities based on one-half point of sale and one-half population. Salt Lake City Council staff multiplied the amount of revenue collected from the 1 percent for municipalities collected in Salt Lake City in the years 2009 through 2013 by UTA s sales tax rate of.6875 percent to arrive at the amount of sales tax revenue generated for UTA by Salt Lake City. Add your explanation. 9 Please see attached chart. 10 , Bart Barker, May 26, Utah League of Cities and Towns Website. 12 Utah League of Cities and Towns Website. Page 4

5 Percent of UTA Sales Tax Revenue Salt Lake City and County Share of UTA Sales Tax Revenue Other Sources of UTA Sales Tax Revenue Salt Lake County Share of Total UTA Sales Tax Revenue Salt Lake City Share of Total UTA Sales Tax Revenue Year

6 UTA Sales Tax Revenue: Salt Lake City Total UTA Sales Tax Tevenue: Salt Lake County Salt Lake City Share of Salt Lake County Total UTA Sales Tax Revenue Salt Lake County Share of Total UTA Sales Tax Revenue Salt Lake City Share of Total UTA Sales Tax Revenue Other Sources of UTA Sales Tax Revenue Year 2009 $ 32,053,446 $ 112,076, $ 36,535,811 $ 112,379, $ 29,089,491 $ 120,094, $ 32,177,519 $ 129,169, $ 33,367,010 $ 132,741,

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