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2017 STATE LEGISLATIVE AGENDA
Staff Contact: Brent Stoddard, Director, Public Affairs
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Purpose and Policy Guidance
Recommendation
This is a request for City Council to review and provide guidance on the proposed 2017 state legislative agenda and to give a legislative preview.
The Intergovernmental Programs staff recommends prioritizing the state legislative agenda to a few key issues to allow the city to have a stronger, more consistent message on the items of greatest priority. The proposed key priority issues for consideration are described in the attached reports.
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Background
Prior to each legislative session, the Intergovernmental Programs staff seeks Council adoption of the city’s state legislative agenda. The legislative agenda defines the city’s priorities for the upcoming session and will guide the city’s lobbying activities at the Arizona State Legislature. The Intergovernmental Programs staff will update Council on a regular basis throughout the session for guidance on bills and amendments that may be introduced. The city’s legislative agenda is a flexible document and may change, based on activities at the Legislature and Council direction.
The 53rd Legislature’s First Regular Session will begin on Monday, January 9, 2017.
Analysis
While we will not know the full scope of issues that will impact the city until the session starts there are some major themes we are anticipating.
2017 Budget/Tax Reform
A number of tax reform measures are currently being discussed by various legislators. We have not seen any specific proposals. However, we are encouraging our legislators to carefully consider whether changes to the tax code truly improve our national competiveness enough to justify the loss of revenue or to find new revenues to offset any losses to cities, and whether it is wise policy to be over-reliant on any single revenue source.
Municipalities continue to slowly recover from the Great Recession, but overall municipal expenditures are still lower than pre-recession levels. We are facing a pent up demand for infrastructure improvements as well as the continued delivery of other municipal services. A loss of revenue would hamper these efforts.
Several sessions ago the cities and the construction industry agreed to some changes on how taxes are calculated for certain construction work including treating smaller renovation projects differently than full home construction that the development community provides. Those changes have turned out to be very complicated and more difficult to manage. The development community has communicated that they would like to completely change or eliminate the construction sales tax system. Some of their proposed changes could have significant financial impacts on cities and towns. The League has been working with cities through a League task force made up of several city Finance Directors on this issue. That group is developing different options that can be considered to fix the problems while also minimizing the impacts to city and town budgets. This is likely to be a big issue this session or in subsequent sessions until a final solution is adopted.
Education
The Governor will announce his priorities during his State of the State address. We are hearing that there may be an effort to find additional funds for education including. This could include bringing back full-day kindergarten, increasing funding for buildings and maintenance and higher classroom spending. It remains unclear where those funds will come from or how those additional funds may be allocated between K-12 and higher education institutions.
Residential Rental Tax Elimination
It is likely that there will be another bill to eliminate transaction privilege taxes on residential rental properties in municipalities over 100,000 in population. Elimination of this revenue would cause a loss of more than $71 million statewide that is currently being used to fund critical local services, particularly public safety. The impact in Glendale would be a $6 Million deficit in our budget.
As a matter of local control, these taxing decisions should be left to the individual City Councils to determine the appropriate size and application in each unique city. The Legislature should not be pre-empting or mandating to municipalities.
Economic Development
Cities and towns are on the front line of economic development. Providing the infrastructure necessary to attract and support businesses continues to be a challenge. To that end, we will continue to be supportive of new economic development tool designed to help fund our infrastructure needs. Additionally, the business community is looking at other funding options and may be bringing new tools for our economic development program forward.
It is critical that cities and towns provide the necessary environment for successful job creation by the private sector. Additional tools to help us accomplish this task will be important in our overall economic development efforts.
Several groups have already announced their intent to seek legislation that will severely limit or repeal economic development tools including Government Property Lease Excise Tax (GPLET).
Transportation and Restoration of Highway User Revenue Funds (HURF)
A legislative task force has been studying the need for more transportation infrastructure and need to find the cash for construction and maintenance. The task force consultant, Alan Maguire provided some analysis to the group which included a list of funding options with calculations on what increasing each item would generate. There are likely to be some discussion on increasing the state's gas tax and potentially the sales tax on fuel purchases but it is unclear how such a proposal would be received by the legislature.
HURF funds are routinely swept in amounts greater than the statutory limit to pay for Department of Public Safety operations. Cities and towns have objected to this practice as local streets and roads are falling further into disrepair. However, the amount of funds that have been diverted away from maintenance and construction of transportation projects has continued.
This year the Legislature will see another budget surplus. While they need to continue to be prudent regarding spending, we believe they should place a higher value on investing in transportation infrastructure by fully restoring HURF funding.
PSPRS Reforms/Workers Compensation Presumption of Cancer
One of the first things legislators are likely to discuss this session is the fallout from Arizona Supreme Court ruling in the Hall case. The Supreme Court ruled in that case that Laws 2011, Chapter 357 (S1609; retirement systems plans, plan design) was unconstitutional. The result of the ruling is additional costs to cities in relation to EORP and PSPRS. It is unclear what remedies if any the legislature could explore, however, we believe there will be a serious discussion.
Over the interim period, when the Legislature has not been in session, the Senate Commerce and Workforce Development Committee and the House Agriculture, Water and Land Committee held a joint meeting to discuss two legislative proposals to expand the existing list of worker’s compensation presumed illnesses for firefighters and peace officers. Some of these proposals could have financial impacts of cities. Senator-elect Karen Fann has committed to working through a stakeholders’ group to find a common ground approach that protects taxpayers and public safety employees.
9-1-1 Public Safety Funding
The 911 funding model established in 2001 for telecommunication excise tax (911 tax) had an automatic reduction written into the legislation. The monthly fee dropped from 37 cents per month to 28 cents per month and finally in 2007 to 20 cents per month. More than $52 million in 911 funds have been swept by the legislature since 2003. Approximately $18 million is now collected annually and distributed to the 911 system requirements and requests. These monies are critical to ensure that the 911 public safety network is not compromised. Cities across the state are trying to raise this issue to a priority level so that additional resources that are needed to support the 911 public safety network are provided by the State.
Arizona Coyotes Legislative Proposal
The media has recently reported that the Arizona Coyotes intend to ask the State to provide taxpayer funds for the construction of a new arena in the east valley. There are very few public details regarding what the Coyote’s proposal may be. We expect one component of the public policy discussion at the legislature to center on the appropriateness of an entity asking for new taxpayer funds to construct an arena so they can leave another taxpayer funded facility that the taxpayers are still paying off.
Previous Related Council Action
The Council approved the 2016 State Legislative Agenda on January 5, 2016 which continues to be the guiding document until a new legislative agenda is approved.
Community Benefit/Public Involvement
The 2017 state legislative agenda includes policy statements intended to protect and enhance the quality of life for Glendale residents by maintaining local decision-making authority.
Throughout the 2017 legislative session, policy direction will be sought on proposed statutory changes which fall under the adopted Council policy statements relating to the financial stability of the city, public safety issues, promoting economic development, managing growth and preserving neighborhoods.