March 3, 2017

League of Arizona - Legislative Bulletin

Issue 8 - March 3, 2017

Legislative Overview

Today is the 54th day of session and this week standing committees in both chambers reconvened to take action on assigned bills from the opposite chamber. In addition to committee action, floor sessions continued to debate and vote on bills that were not heard during crossover week.

State Budget

To date, the state budget has not been introduced and many of the details being considered remain confidential. However, the League was informed that certain components of the budget that will have a significant impact on local government are under consideration and the conclusion of the legislative session may be delayed due to ongoing negotiations.

While the House has reestablished the use of Appropriations subcommittees, the Senate continues to do most of the work on the budget through small group meetings of members only. Even though the House subcommittees are meeting in public sessions, we know much of the actual negotiating occurs out of the public's view.

Therefore, it is critical that you continue to communicate our serious concerns about the Arizona Board of Regents' proposal to allow the three state universities to keep the transaction privilege taxes they currently pay, including the shared portion that goes to local governments. This is a dangerous precedent for a variety of reasons. First, it will undoubtedly lead other state-funded entities (K-12 school districts, community colleges, etc.) to seek the same opportunity to keep the taxes they pay. This will undermine the integrity of the shared revenue system. The erosion of the tax base, the violation of the shared revenue formula and the continuation of the shift of state responsibility to local governments are all legitimate reasons to oppose this proposal.

It is important to contact your delegation members soon to tell them to reject the taking of local revenue for the university system.

CALL TO ACTION

In last week's bulletin, we wrote about HB 2212 federal financial assistance; reports, sponsored by Rep. Vince Leach R-Tucson, LD 11. It would require all state agencies and political subdivisions to prepare an annual report detailing all of the federal funds they receive and to submit that information to the Arizona Department of Administration (ADOA). Additionally, it requires each agency or political subdivision to submit a plan for what it would do in the event these funds are reduced. This information would be summarized by ADOA in a report that would be shared with the chairs of the House and Senate Appropriations Committees. These committees could use this information to reduce, eliminate or otherwise adjust future appropriations of state monies.

Cities and towns receive most of their shared revenue based on revenue formulas rather than direct appropriation. Local elected officials and their professional staff are in the best position to determine whether to seek federal funding and how to manage their own budgets. This bill unnecessarily intrudes into local decision making and is burdensome in its reporting requirements.

The bill will be heard in the Senate Appropriations committee on Tuesday, March 7, 2017. The following are the members of the committee:
Senator Debbie Lesko (Chair)
Senator John Kavanagh (Vice Chair)
Senator Sylvia Allen
Senator Steve Montenegro
Senator Warren Petersen
Senator Steve Smith
Senator Olivia Cajero Bedford
Senator Steve Farley
Senator Katie Hobbs
Senator Martin Quezada

We would like to amend the bill to remove cities and towns from the requirements of the bill. However, if we are unsuccessful we will oppose it. Please contact members of the committee or members of your delegation to express your concerns about this unnecessary and intrusive proposal.

Construction Sales Tax

Representative Regina Cobb R-Kingman, LD 5, held another meeting this week on her proposed bill, HB 2521 TPT reform; contractors, to reform construction contracting sales taxes. Earlier, the bill was heavily amended in the House Ways and Means Committee. We had many concerns about the bill as amended and have continued to oppose it.

In the meeting this week, Representative Cobb said that she was going to again significantly amend the bill on the floor of the House. While the amendment was not available, she explained that it would include the following provisions:
  • Eliminate the prime contracting tax for state and local governments and imposes retail taxes on construction materials purchased by contractors
  • Create a new excise tax separate from transaction privilege tax (TPT) that would be imposed on 100 percent of a construction project (We believe she intends for this new excise tax to be shared with local governments but cannot be sure until we see the language.)
  • Apply some or all of the existing TPT exemptions to the new excise tax
  • Require all contractors to be licensed and to remit taxes to the Department of Revenue (This includes the contractors who gave up their licenses under the 2013 changes to construction sales taxes.)
  • Eliminate the authority for cities and towns to impose a prime contracting tax on construction projects other than Highway, Street and Bridge projects (This corrects drafting errors that were in the House Ways and Means committee amendment.)
She intends to keep the portion of the underlying bill that establishes the new revenue sharing pool made up of a portion of all retail sales taxes (not just those related to construction) assessed by a city or town. For 2018, the percentage of retail taxes that are to be remitted to the pool is 4% but that would be adjusted semi-annually based on a formula. These retail taxes would then redistributed among cities and towns based on the value of building permits issued by the city or town during the preceding 36 months.

Since we have not seen the amendment, it is impossible to analyze how it would impact our local revenues. Until we are able to analyze the proposal, we have no choice but to oppose the bill and the amendment. Additionally, since the first reforms in 2013, the goal has been to simplify our system of taxing construction activity and we do not believe this proposal achieves that goal.

The bill did not move forward to the Committee of the Whole this week but we want to remain prepared in the event it moves to the floor of the House next week. Please contact your legislators to register your continued concern on this issue.

Vehicle Impounds

Several municipalities have shared concerns about HB 2159 vehicle impoundment; release of vehicles, sponsored by Rep. Darin Mitchell R-Glendale, LD 13. The bill would eliminate the statutory 30-day hold on vehicles that have been impounded twice within 1 year due to the driver lacking a valid license or a DUI. The concern is that removing this deterrent will lead to more unsafe/unlicensed drivers on our streets.

During the House committee hearing, the sponsor explained that the bill is meant to address a situation in which a commercial vehicle was impounded due to an employee's actions and the owner of the company was required to sign the contract establishing the 30-day hold for a second violation in order to recover the vehicle. The League approached Rep. Mitchell about amending the bill to reinstate the 30-day hold contract for all other vehicles except for commercial vehicles/assets and the sponsor agreed. The bill was held this week but will likely be heard next week, along with the League's proposed amendment sponsored by Sen. Fann R-Prescott, LD 1.

Small Cell

On Thursday, League staff met with the wireless carriers to continue negotiations on HB 2365 wireless providers; use of rights-of-way, sponsored by Rep. Jeff Weninger R-Chandler, LD 17. The industry provided changes to the bill that address most of the outstanding issues in regard to maintaining the ability of cities and towns to manage rights-of-way for small cell deployment. While some issues remain, League staff and the wireless carriers have agreed to meet again to offer solutions before the bill will be heard in the Senate Commerce and Public Safety Committee on March 13.

The changes to the bill offered by the industry, among others, limit deployment of wireless infrastructure to the right-of-way only; reduce the number of applications carriers may submit in a batch from 30 to 25; limit the size of equipment from 50 to 28 cubic feet; allow cities and towns to deny applications for small cell deployment that do not meet objective design standards or ground-mounted equipment spacing requirements; and remove provisions regarding make-ready work for replacement utility poles owned by a municipality.

The bill still contains provisions regarding deployment of macro cell sites. After further discussion, Sprint has offered to make changes to the bill that will ensure cities and towns have the ability to manage and limit the placement of these structures in the right-of-way and that they undergo a zoning review and approval process.

Oversize/Overweight Vehicles

This week the Senate Transportation and Technology Committee unanimously passed HB 2371 oversize commercial vehicles; local authority, sponsored by Rep. Drew John R-Safford, LD 14. The Arizona Trucking Association worked with the League prior to session to craft legislation that will require cities, towns and counties to adopt ordinances for oversize and overweight motor carriers that are substantially identical to the rules adopted by the Arizona Department of Transportation to ensure rules are applied uniformly statewide. Cities and towns will maintain the ability to adopt ordinances for infrastructure, route and time of day restrictions to provide safe travel for these vehicles that will not damage bridges or roads or impede traffic during peak hours.

After the bill passed committee, the League was informed of a proposed amendment that would prohibit cities and towns from restricting the number of trips motor carriers may make during a specified period of time. This amendment was drafted to address a specific situation in the Town of Patagonia regarding a proposed ordinance limiting commercial and oversize/overweight truck travel on a residential street to a specified number of trips but included a provision allowing trips to exceed the restriction with a permit from the town.

The town ordinance was proposed to address the concerns of citizens regarding the use of a residential street by a nearby mining operation as a route for large mining trucks from the state highway to the mine site. The street is not built to withstand the frequent travel of large vehicles and traverses areas with a high amount of pedestrian traffic, which prompted the town council to seek a solution to the problem.

Patagonia subsequently tabled their proposal and is no longer considering adopting this ordinance, but we believe the bill, with this amendment, will likely impact other municipalities.

Legislative Bill Monitoring

All bills being actively monitored by the League can be found here.
Legislative Bulletin is published by the League of Arizona Cities and Towns.
Forward your comments or suggestions to league@azleague.org.