Friday, January 19, 2007

Taxes Will Likely Consume Utah Legislature


There will be a large tax cut but at this point the Governor/Senate/House are all playing poker as to the size and composition of the cut. The House has proposals for a cut of nearly $300 million. The Governor has proposed a cut of $100 million. The Senate has yet to play a figure. One challenge is that most of the "surplus" money is in the income tax. This fact means that the cuts are likely to be primarily in the income tax or the state minimum property levy.
There are a number of rumors and other guessing regarding tax changes that could impact cities and towns. Those receiving the most serious discussion involve the "boutique" taxes (resort community,ZAP, special transit taxes). The Speaker would like to remove food from the tax base for these taxes. The result is more serious discussion about shifting some of these taxes to a property tax levy. The net impact is a resurrection of the single-sales tax proposal floated in previous sessions. These discussions will be ongoing but it is fair to say that there is more impetus behind them now than in prior years.

In some ways this area is also a tax issue since it involves the municipal telecommunications tax. However, the broader subject area also incorporates the concept of a state-wide franchise for cable television. Our cities and towns have been on notice for several years that a downward adjustment on the rate cap was coming. It is currently 4%. We have indicated that a 10% (3.6%) cap cut is "swallowable". However, there are others that may be pushing for a greater cut.
Enter the franchise issue. Qwest and others are pushing this concept which would alter the role of cities in granting operating franchises to cable companies. When all is said and done the primary issue is that of "buildout" or whether a new cable company can be obligated to serve an entire community as a condition of operating in a city. This is an issue since prior franchises have imposed the buildout requirement on companies such as Comcast. We have had cities take conflicting positions on the buildout questions and have to date asserted that this issue one of individual city choice. However, the FCC recently issued an order which would restrict city choice in this area and there are varying opinions about if and how Congress may address the issue.
Like it or not discussions on the rate cap and the franchise authority are going to be related if not linked.

As you can imagine, these are not the only issues before cities and towns this year in the Utah legislature -- expect more to come in future posts.