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4. Discussion of House BillsMT HAGUE OF CITIES ? i I 'A Montana League of Cities and Towns P. 4. Box 17049 Helem, MT 5624 (406) 442-8765 FAX 442-9231 To: Joe McWcueci, Mark Watson, Clark Johnson, Jack Lynch, Myrt Webb, John Lawton, Dennis Taylor, Bill Sheridan, Steve Gohm, Al Thelen, Mike Kadas and Dale Error From: Alec Hansen Re: Legislation Date: March 16, 1999 In the next few days, the Legislature will act on several issues that are vitally important to cities and towns. This memorandum is intended to provide background information on the bills and to ask you to work with your local delegations to build support for the municipal position on these issues. Hawse Bill 91 -- This is the bill that would effectively terminate municipal building code enforcement beyond city limits. The bill has been heard in the Senate Local Government Committee and will be considered in executive session on Thursday, March 18, It may be necessary to amend this bill to allow for county review and approval of city code enforcement in unincorporated areas. This is one way to deal with the " txation without representation" argument that has been used to promote this Legislation. We will also suggest delaying the effective date of the bill and any other amendments that will make it possible to preserve effective code enforcement. House BM 393 This bill would allow cities and counties to refer a luxury or income tax to local voters far approval. The bill represents an important new source of revenue for local governments, realistic methods to diversify the tax base and the opportunity to er4age voters in a positive discussion of how cities and towns should be financed. This bill was approved by the House Taxation Committee on an 18-2 vote. It is moving along with good momentum and limited resistance, and I encourage all of you to take advantage of what appears to be a very good shot at changing local government finance once and forever by contacting your representatives in the House to express strong support for HB-393. We have been working nearly 20 years to persuade the legislature to enact a local option tax bill. This may be the hest chance we will ever have, and the memben of the Legislature have got to know you want this bill! Reimbursement Formulas -- There is strong support in the Legislature for bills to reduce state WW local taxes on business equipment, motor vehicles, residential and commercial property, telecommunications facilities and electrical generation and supply systems. These bills cost money, and representatives of cities have been working with members of the House Taxation Committee to develop a reimbursement formula that will cover actual and prospective losses to local governments and to provide moderate revenue growth in future years. I have attached a memorandum that explains the municipal position on reimbursement and I ask you to discuss these points with your Legislators in both Houses. In the next few weeks, the Legislature will have a lot to say about the financial fixture of local governments. There is a chance to make some good things happen, and I am asking for all of the help that you can bring to the table. -A C l � ` r c� 1 MT LEAGUE OF CITIES TALKING POINTS LOCAL GOVERNMENT REIMBURSEMENT FORMULA FOR 19" LEGISL.ATra TAX REDUCTION MItASUkZS The 1999 Legislature is considering a series of bills that will reduce and revise property and motor vehicle taxes. The potential loss of local revenues is a vital issue to cities and towns that cannot withstand further erosion of their tax bases without serious consequences on police and fire protection; and other essential services. Cities and towns believe that the Legislature should assure foil reimbursement of actual and prospective losses of local revenue under the following conditions: 1, A percentage of the excise taxes on telecommunications and electrical power equal to the amount of revenues lost by local govern eats as a rWt of the reduction in the tax rate on telecommunications systems and generating facilities should be deposited In a special reimbursement account, Funds in this account will be used to reimburse local governments at FY 1999 levels for the reduction in property taxes on telecommunications systems and ge=ating facilities. Azy funds in excess of the amount required for reimbursement will be distributed to Cities, towns and counties on the basis of population. For the purposes of this part, the population of counties will include only those people living outside the boundaries of an incorporated city or town. 2, Local Governments should also be reimbursed for reductions in the taxes on business equipment, class four property and motor vehicles by dedicating a percentage of the individual and corporate income taxes equal to the losses in tax collections in these categories for F'Y 1999. Funds in excess of the amount required to compensate for reductions in taxes on business equipment, class four property and motor vehicles should also be distributed to cities, towns and counties on the basis of population as provided in the preceding section. 3. The Legislature should also consider including payments for previous business equipment tax reductions (BB-20 and SB-417) in the proposed reimbursement formula. Payments to local governments and schools are now beginning to be phased out at the rate of 100/6 each year, and it might be acceptable to peg future reimbursements at a level somewhere in the upper range of the phase down schedule.