Finance & Revenue

Last week we learned about the trend to reduce commercial appraisals by the valuation of an empty store.

They’re here. The trend has arrived in Texas. & there’s a trendy name- “dark stores”

Dallas Morning News | Will big box retail’s ‘dark store’ strategy lead to fewer taxes in Texas?

Your Informed Intel on 7th Spetember 2016:

Which commercial property owners are involved? Big Box stores

What is the argument they’re using to lower their property tax bills? That market value is the “sale price of similarly sized but vacant retail buildings”

What local governmental officials say in repsonse? That’s like basing residential property taxes on a foreclosed, vacant home.

Which states have local governments that are feeling the revenue hit? 

• Michigan
• Alabama
• Florida
• Indiana
• Iowa
• North Carolina
• Ohio
• Tennessee
• Washington
• Wisconsin

What have state legislatures done in response? 

• Indiana banned the practice of using vacant stores as market value comparisons
• Alabama gave counties more resources to fight the valuations
• Michigan is considering changes to the appraisal challenge process

Governing | Big-Box Stores Battle Local Governments Over Property Taxes

Who: Robert Lee, Employees Retirement System of Texas’ (ERS) director of investments

Moving to: Texas Tech University System as deputy CIO

When: Starting October 2016

Chief Investment Officer | Texas ERS Hedge Fund Chief Exits

65% of Jacksonville, FL  voters approved a sales tax increase to cover the local pension system.

Pensions & Investments | Jacksonville, Fla., voters approve half-cent tax to fully fund city pension plans

Your Informed Intel on July 9, 2016:

Where: Jacksonville FL

How does the sales tax for pensions work? 1/2 cent sales tax to defer city pension contributions until 2030

What benefits are there to city revenues?

• From 2018 through 2034, the city would spend $857 million less on contributions to its three pension plans
• From 2035 to 2049, the city would spend $2.37 billion more in pension contributions with estimated 1/2 cent sales tax increase revenues being $2.5 billion from 2031 to 2049
• For accounting purposes, the City could use the future sales tax revenue on the current books to offset liabilities

Alternatives to the sales tax increase? property tax increase

Jacksonville | Report on proposed pension fix gives ammunition to supporters and opponents of sales tax

In 2012, South Carolina enacted the following pension reforms that applued to new hires:

• Rule of 90
• Unused leaveis not part of benefit calculations
• Vesting in 8 years, up from 5

The following 2012 pension reforms affected all South Carolina state employees:

• 8% worker contribution, a 1.5% increase phased in over 2 years
• Phased out an incentive program that allowed retirees to return to work and still draw a pension
• Limit all return to work retirees stop drawing benefits when they reach $10,000 in salary in a year
• Standard 1% annual COLA

Charlotte Observer | A look at the Legislature’s last pension reform law

Which commercial property owners are involved? Big Box stores

What is the argument they’re using to lower their property tax bills? That market value is the “sale price of similarly sized but vacant retail buildings”

What local governmental officials say in repsonse? That’s like basing residential property taxes on a foreclosed, vacant home.

Which states have local governments that are feeling the revenue hit? 

• Michigan
• Alabama
• Florida
• Indiana
• Iowa
• North Carolina
• Ohio
• Tennessee
• Washington
• Wisconsin

What have state legislatures done in response? 

• Indiana banned the practice of using vacant stores as market value comparisons
• Alabama gave counties more resources to fight the valuations
• Michigan is considering changes to the appraisal challenge process

Governing | Big-Box Stores Battle Local Governments Over Property Taxes

The State: Nevada

Economic Development Special Sessions:

• 2014 incentives for Tesla
• 2015 incentives for Faraday
• Potential 2016 incentives for a new Raiders Stadium

Economic Arguments for a NFL Stadium in Las Vegas:

• $750 million public contribution base don raising hotel taxes
  • the state is only on the hook for a 1/3 of the stadium cost
• the hotel tax would be put to its intended purpose- to put more heads in beds

Entities behind the stadium push:

• Las Vegas Sands (Sheldon Adelson)
•  Majestic Realty
• Oakland Raiders

Las Vegas Sun | Nevada Legislature mulls special session on NFL stadium

No, the state isn’t liable for local pension obligations.

Why isn’t the state liable? Two reasons according to the rational in the Attorney General opinion:

• no specific statutory authority
• the constitution prohibits it by:
  • Article III, section 49(a) limits the creation of state debt and does not include local pensions
  • Article III, section 50 prohibits the state from lending its credit, which it has not

KP-112

Southeast Texas Record | Texas AG opinion: State not ‘liable’ for municipal pension shortfalls

The City Fee: St. Paul, MN street maintenance fee

The argument against the fee: 2 churches sued saying the fees benefited not just them as property owners, but the public at large which made the fee a tax that counts against taxing limits by cities.

The court: The Minnesota Supreme Court agreed and said the fee amounted to a tax.

Governing | A Threat to City Fees?

What is the hidden property tax? Rising proeprty values that cause a property owner to pay more property taxes when tax rates are reduced. 

For or against the hidden property tax? “An increase in property value should not be an automatic increase in property tax revenue.” 

What changes are supported:

• robust & transparent communications with residents to explain why taxing entities need more revenue

Trib Talk | Daniel Gonzalez | Texas Association of Realtors | Time to talk about the hidden property tax

The company: Sandy Creek coal-fired power plant

The County of appraisal: McLennan County

The Appraisal Disrict’s values:

• $900 million in 2014
• $1.17 billion in 2015

The Company’s 2 legal argument to reduce its appraisal by 60%: 

• A willing buyer would pay no more than $380 million for the plant in 2014 and $395 million in 2015
• Creating a recognition that power markets had slumped.

POWER | Texas Coal Plant Wins Tax Appraisal Case, Property Value Cut 60%

Which state house speaker has a pension reform plan? Virginia

What goals does the Virginia Speaker want to achieve?

• Change from defined pension benefits to defined contributions
• Create the Virginia Commission on Employment Security & Pension Reform
•  Reduce the $22.6 billion in unfunded long-term liabilities
• Create a retirement system that attracts & retains employees

Are the Speaker’s pension reform plans supported by state employees and teachers impacted by the reforms? No

The Daily Progress | Speaker’s pension reform push faces budget headwinds, workforce concerns

In 2015, Kansas state pension system (KPERS) issued $1 billion in bonds to maintain the pension. The results:

• The $1billion bond, which was invested, will be able to pay bond service, but little more than that. 
• It is expected that the return will either be even or minimally positive
• For the numerically minded, KPERS assumes an 8% return rate
• KPERS had a $500 m pension bond in 2004. Those funds investment return rate has been 6.68% while the bond rate is 5.39%, generating $156 million for KPERS

Topeka Capital Journal | Kansas issued a $1 billion pension bond a year ago. How is it doing?

New issues emerged at the Sunset Advisory Commission hearing on ERS recommendations.

The new issues:

• Senator Van Taylor is interested in:
  • convicted legislators receiving ERS benefits
  • adding a taxpayer to the ERS board
• Senator Charles Schwertner is interested in ERS alternative investments, hedge fund investments and infrastructure investments best practices and whether Texas practices align with best practices and/or other states.
• Chairman Flynn is working on legislation to add an ERS retiree to the ERS board.

August 22, 2016 Sunset Advisory Commission Hearing on ERS beginning at 11:26:00 

What is the impact of lowering projections for investment returns?

• increased normal pension costs (contributions)
• increased unfunded liabilities

Bond Buyer | Should States Lower Estimates for Pension Investment Returns?

• Low bond rates and high value of the U.S. stock market will keep pension returns lower
• To meet current projected return rates requires higher risk investments

Bond Buyer | Should States Lower Estimates for Pension Investment Returns?

• California wins based on time frame, post-2011, & by using raw numbers counts
• Caliornia is helped by its larger population
• California wins on GDP and personal income growth (0.9% in CA to 0.8% in Texas)

What bodes well for Texas?

• Texas has a lower unemployment rate, for a longer period of time
• Texas has had a better nonfarm employment-to-population ratio
• Examining a bigger picture, from  May 2006 to May 2016, TX job gains of 18.6%.  California experienced 8%.

Politifact Texas | Julián Castro says California besting Texas in creating jobs, economic growth

In lieu of a tax increase, Wyoming is considering recouping the federal tax incentives offered to wind facilities.

Governing | Has the Nation’s Only Wind Tax Paid Off for Wyoming?

• Per pupil spending by state via Census Bureau numbers:
  • Texas #43 at $8,592
  • New York #1 at $20,610
  • Pennsylvania #10 at $13,961
  • California #34 at $9,595
  • Florida #41 at $8,756

What’s included in this per pupil spending amount?

• Instruction: Employee Salaries
• Instruction: Employee Benefits
• Pupil Support
• Instructional Staff Support
• General Administration
• School Administration
• Other

The factors linked to higher per pupil spending:

• High property values
• Experienced Teachers/ Teachers with advanced degrees
• Generous pension benefits

Governing | The States That Spend the Most (and the Least) on Education

New Jersey is cutting its ties to private money managers/hedge funds. New Jersey joins Pennsylvania and California in limiting or eliminating private money managers to hedge their bets for these reasons:

• the hedge funds did not hedge the pension losses
• In New Jersey, the private money managers were working on a projected 8% return. The actual return was -6.5%
• The pensions would have made more money in bonds

Philly.com | New Jersey pension system re-thinks hedge funds

Sacramento has built a new stadium for the Kings. part of the funding mechanism is parking meter revenue.

Sound familiar? Similar revenue sources are bandied about related to Arlington’s new stadium.

Let’s look at Sacramento’s parking meter rate plan:

• 4 Event parking zones will be established in a 12 block radius
• The closer to the Area, the pricier.
  • Parking prices ranging from $11.25, if you pre-arrange parking in a city garage to $18.75
  • Higher event night only prices will be within a 3 block radius of the stadium
  • What is the increase for Kings fans? Previously meters were free on weekends
• Parking meter normal shut down time of 6pm will be extended to 10pm
• Parking meters in midtown will be extended to 8pm
• City parking, and reservation system, will be linked through a smart phone app

Sacramento Bee | Sacramento to ring downtown arena with higher-priced parking zones

The roadblock for fantasy sports legislation in California:  negotiations over legalizing internet poker

Who is behind the push for internet poker? Indian tribes

The opposition to fantasy sports statewide legislation in California and other states:

• existing anti-gambling laws (internet poker in California)
• attorneys generals
• opposition from gaming interests
• gambling opponents

The Recorder | Clock Running on Fantasy Sports Bill in Calif.

Texas Conservative Coalition Research Institute’s piece, Property taxes trigger ‘growing social crises in Texas’, makes the following points:

• Lt. Gov. Patrick chaired a Conservative Coalition group in 2010 that made the property taxes and social crisis link
• Property is no longer the measure of wealth, making property taxes an outmoded system
• Lack of state funding for schools and municipalities leads to higher proeprty taxes and higher debt

The solution proposed: Expanded sales tax

Senior editor at Rice University’s Kinder Institute for Urban Research makes these 4 points about Houston’s $4 billion pension “mess”:

• The $4 billion pension liability in Houston isn’t as shocking as its rapid increase.
  • In 2000, the pension liability in Houston was $0
• There are 2 causes to the pension liability growth:
  • The calculation method backloads costs, which means that even if Houston paid for pension costs in full, liability would continue to accrue
  • Investment Assumptions are not aligning with reality
• What needs to change?  Lower the optimistic rates of return & stop using a rolling amortization schedule

Houston Chronicle | How Houston got into a $4 billion pension mess

Who studied the cost of high risk investments on pensions? Rockefeller Institute of Government

Where did they present their findings?  NCSL

What is the annual cost, nationwide, to pensions of high risk investments? $400 Billion 

What does the study say about pension contributions compared to tax revenue? From 2007-2015, Pension Contributions have increased $0.59 to every $1 of tax revenue.

What has this pension contribution tax rate led to? Riskier investments by pensions

Money | Public Pension Plans’ Risky Investments Could Cost Taxpayers Billions

The reasons the municipal pension crisis will worsen according to the Bond Market People:

• The facts are stacked against local pensions. 
  • Underfunded for years
  • People are costing the pensions more by living longer. 
  • Public sector workforce is flat, but the number of retirees increases
• Pension systems did not account for increases in retiree numbers.
• Actuarial methods for accounting for life spans by pensions do not take into account longer life spans.
  • Private pensions use a better life span formula, a generational estimate

Bond Buyer | Why the Municipal Pension Crisis Will Worsen

• Gross receipt taxes do not correlate to the amount of government services a firm uses
• Gross receipt taxes do not correlate to a firm’s cash flow
• Gross receipt taxes push certain industries into high effective tax rates
• Gross receipt taxes reduce competitiveness, fairness, and transparency

Tax Foundation | Gross Receipts Taxes: Lessons from Previous State Experiences

What is the new Rangers Stadium ballot proposal by the City of Arlington? Funding package for the stadium including:

• bonds
• extend & redirect part of its half-cent sales tax
• extend & redirect part of 2%  hotel-motel tax
• extend & redirect part of 5%  car-rental tax
• 10% tax on tickets
• $3 tax on parking

Who filed an ethics complaint? Kelly Canon, Citizens for a Better Arlington PAC

Who was the ethics complaint filed against? the City and Keep the Rangers PAC

What does the Ethics Complaint say? 

• ballot is not specific in relation to bond amounts
• ballot fails to disclose a new tax (an extension of an expiring tax)
• false and misleading statements

Ft. Worth Star Telegram | Group fighting $1 billion stadium files state ethics complaint

Who requested the opinion? Chairman Dennis Bonnen

What question about the use of hotel motel tax revenue does he want answered? Whether a local government can use hotel occupancy tax revenue to fund a feasibility study for a performing arts center.

What’s the kerfuffle? The City of Lakeway attorneys believe they’ve met the statutory requirements to move forward with the feasibility study. Some in the hotel motel industry think there is no specific permission to use the revenue in this manner.

RQ-0122-KP

Which state became the 1st to tax streaming content? Pennsylvania

Does this tax have a nickname? Netflix Tax

Which tax was extended to streaming video? The state sales tax

What does the tax apply to? streaming video services like Netflix and Hulu plus ebooks and music

Is there a netflix tax elsewhere? In Chicago, which extended an amusement tax to steaming services

Governing | The Week in Public Finance: The Netflix Tax, Another Atlantic City Rescue and More

CBS Pittsburgh | ‘Netflix Tax’ Goes Into Effect In Pennsylvania

The Start Ups in litigation funding: LexShares Inc. & Trial Funder Inc.

How do they work? Electronic platforms. Attracting 1000s of investors. Promising double didget returns.

The Wall Street Journal | Litigation Funding Moves Into Mainstream

• It does not help those with little moneyto buy school supplies
• Stores increase prices for the sales tax holiday
• It helps out-of-staters 
• $70M revenue hit to Texas
• No benefit to economic growth

KERA | 5 Reasons Tax Free Weekend Might Be A Bad Deal

The bill: HB 1378 (2015)

The information local governments have to provide to the Office of the Comptroller:

• amount of all authorized debt
• the principal of all outstanding debt
• the principal of each outstanding debt
• combined principal and interest required to pay all outstanding debt obligations
• amount of debt secured by ad voloreum bonds
• credit rating
• amount of debt per capita

Reporting deadline: 210 days after the end of the local government’s FY16

Which local governmental entities are required to comply?

• counties
• cities
• school districts
• junior college districts
• special purpose districts
• other subdivisions of state government

Comptroller | HB 1378: Local Government Debt Transparency

Which city is proposing to fill its pension deficit with a tax? Chicago

Which tax options did the mayor consider? Increasing property taxes or increasing utility taxes 

What’s the proposed water tax rate increase? An escalating utility tax that looks like this:

• Year 1: 7% tax
• Year 2: Double it. 14% tax
• Year 3: 21% tax
• Years 4& 5: 28% utility tax

How much revenue does Chicago think the utility tax will collect?  $239 million over 5 years

What’s the cost per home owner?

• year 1: $4.43 more month /  $53.16 per year
• year 5: $225.96 a year

What do opponents say about the utility tax? It’s regressive

Chicago Sun Times | Pension fix: 28 percent water/sewer tax, phased in over 4 years

• Eerie, PA pension costs trippled in 5 years, schools cannot afford basic items like textbooks or roofs without leaks
• CALPERS & CALstrs have reduced 20 year return rates to roughly 7%
• The pension woes are blamed for reduction in teacher jobs and job seekers

Fortune | The Ugly Ways the Pension Crisis Is Affecting Your Kids’ School

Wall Street Journal | Why Pensions’ Last Defense Is Eroding

On Monday July 25th, the Comptroller told the LBB:

• Texas is in a better position than other energy producing states
• Texas has an unspent surplus of $4 billion from 2015
• Texas is NOT in a recession
• Texas has positive job growth
• June 2015- June 2015 Texas job growth was 1.4%, below the 1.7% national average

Houston Chronicle | Comptroller: Texas lags nation in job growth

Galveston County  tax collector-assessor Cheryl Johnson recommends the following legislative fixes:

• Requiring the state comptroller’s office to sign off on industrial property values.
• Establishing a state-financed legal defense fund for counties facing appraisal lawsuits.

Travis County Chief Appraiser Marya Crigler emphasizes that some form of sales price disclosure would make the appraisal process more efficient and cost-effective.

Watchdog.org | Commercial lawsuits blow back on Texas taxpayers

• Taxpayers pay for the legal fees of the appraisal districts defending its commercial appraisals.
• Taxpayers cover the revenue hit to the taxing jurisdictions when lower commercial appraisals reduce revenue.
• Sen. Kelly Hancock “speculated that Texas counties punish homeowners with inflated appraisals to offset “lost” commercial tax revenue.”
• What does this look like in big Texas counties?
  • Austin
    • ​413 lawsuits
    • $11.3 billion in values are being contested
    • Travis County Appraisal District boosted its legal budget by 20% to cover challenges
  • San Antonio
    • ​$19.4 billion in appraisal disputes in the last year
  • Texas wide
    • 4,000 appraisal challenges in the last year
    • reducing taxable values on average 7.5%

Watchdog.org | Commercial lawsuits blow back on Texas taxpayers

Which Texas city offered a developer a del via a TIRZ? Galveston via the The Galveston Island Redevelopment Authority

What development was promised? Beachtown, which by 2013 was to include:

• a hotel
• 306 single-family houses
• 200 multifamily units
• 250 units of retirement housing

Was the development completed? No

What facts does the lawsuit highlight?

• Secret negotiations, secret meetings in violation of the Open Meetings Act
• Allegations that the developer forced replacement of commissioners on the Galveston Island Redevelopment Authority
• A contractual gag order on local officials to not discuss the deal

Houston Chronicle | Galveston development project shrouded in secrecy despite public investment

The State: Alabama

The legislative mechanism: A special session of the Legislature for the “specific task of approving a lottery to fund “essential services.”

The revenue shortfall source: Medicaid. Medicaid has doubled in size in the last decade.

The beneficiaries: Rural hospitals whose major patient pool is from Medicaid 

Does Alabama have a lottery currently? No, Alabama is 1 of 6 states without a lottery.

Yellow Hammer News | IT’S OFFICIAL: Bentley urges legislature to approve lottery to fund Medicaid growth

LBB Issued new Guidance to Agencies on their Legislative Appropriation Requests (LARs). The new LAR items:

• New: Budget Overview Schedule. No new data, just a new format with a concise overview
• New: Program-Level Request Schedule. Contrasts previous bienium expenditures with request
• New: Summary of Behavioral Health Funding Schedule.  List behavioral health or substance abuse services expenditures
• Deleted: Budgetary Impacts Related to Federal Health Care Reform and the Budget Control Act 
• Administrator’s Statement concerning the mandated 4% cut
• Exceptional Item Request Schedule 4.A: Information Technology.  Specifically if there is an IT contract or contracts with outside entities from amounts in excess of $50,000. 
• Ten Percent Biennial Base Reduction Options. reduction options should also include estimates of any losses in revenue, including Federal Funds, as part of the agency’s impact statement within the schedule.
• Transferred Programs.  Agencies receiving a transferred program or function should not re-enter historical expenditures for a transferred program 
• Schedule 3.A. Strategy Request. More specifics required to justify a biennial change
• Centralized Accounting and Payroll/Personnel System (CAPPS) –  include all ongoing costs to support and maintain their systems.

LARs are due to LBB in August. 

LBB | Updated 2018-19 agency CAPPS listing on page 45 of the LAR Instructions
 

6 states have enacted laws to support fantasy sports in 2016:

• Colorado
• Missouri
• Mississippi
• Tennessee
• Indiana
• Virginia

21 states did not formally legalize fantasy sports, including: Alabama, Arizona, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Nebraska, New Mexico, Oklahoma, Rhode Island, South Carolina, Vermont, Washington, West Virginia, Wisconsin.

7 states could still act on fantasy sports laws in 2016, including: California, New Jersey, Pennsylvania, Illinois, Massachusetts, Michigan, New York (awaiting governor’s signature)

AP | AT LEAST 6 STATES ADOPT FANTASY SPORTS LAWS; 21 OTHERS DON’T

How did the Permanent School Fund add $98 million in the past 6 months? A 3x increase in Oil & gas leases for Texas’ publicly held land 

How many acres of state land have been leased in the last 6 months? 13,000+ acres

What does this mean for the Permanent School Fund? $98 million in revenue

Average price per acre: $7,365, compared to around $2,500 per acre in January and about $1,700 in August 2015

Statesman | Texas oil and gas leases jump despite oil price slump

• Pension Debt per household
  • Texas is #33 with per household pension debt of $27,343
  • Alaska is #1 with per household pension debt of $113,137
  • California is #3 with per household pension debt of $77,700
• Pension Debt per Capita
  • Texas #42 at $9,235
  • California #4 at $25,325
  • Alaska is #1 at $38,251
• Actuarial Funded Ratios
  • Texas #20 at 81.6%
  • California #24 at 79.4%
  • D.C. #1 at 108.3%

Stanford Institute for Economic Policy | Pension Tracker

Which public pension system is the world’s largest? Japan’s The Government Pension Investment Fund

The parameters for its socially responisble investment: environmental, social and corporate governance factors

Wall Street Journal | Japan’s Public Pension Fund Looking for Socially Responsible Stocks

Harvard Business Review tells us that public pensions perform better when these charactersitics exist:

• Pensions are free from politics & able to focus on maximum returns
• Avoid poor investment choices by public pensions that are linked to:
  • elected official interference related to local economic devleopment
  • elected official interference related to compensation or recruitment of talented staff
• Strong governance model protects pensions from political whims that diminish returns 

Harvard Business Review | Public Pension Funds Perform Better When They Keep Politics at Bay

Why are we concerned about legal issues related to the sharing economy

• Within 4 years, 40% of all American workers will be independent contractors

The top legal issues related to sharing economy:

• Liability
•  Insurance coverage- whose responsible for it?
• Are people engaged in sharing economy employees or indpendent contractors?
• Does the sharing economy, using an app, trigger products liability?

California Bar Journal | On the road to a gig economy, litigators take the wheel

The State: California

The tax cut: Removing the sales tax to cover newspapers and other good

How long had the tax on newspapers been in place? 25 years

Annual tax revenue on subscriptions: $50 million

Sacramento Bee | After 25 years of taxation, California newspapers on verge of tax break

Which pension system is diversting from guns? New York City Pension Fund

What divestment is occuring? A divestment of 3 retailers that sell guns:

• Dick’s Sporting Goods
• Cabela’s
•  Big 5 Sporting Goods

How big is the New York City Pension Fund? $59 billion

Who voted to divest from gun retailers? board of trustees of the New York City Pension Fund

What do the activists say? “We will no longer do business with companies that fund the deaths of our family members and friends.”

New York Times | Dealb%k| New York City Pension Fund to Divest Itself of Gun Retailer Stock

Which pension merged the 13th check fund to the main pension fund? Wayne County Michigan

Did eliminating the 13th check impact pension soundness? Yes, by rolling the 13th check fund into the pension fund pension funding levels improved by 9% within 1 year

Detroit Free Press | Wayne County pension system funding sees improvement

The contract bidder: Texas Precious Metals

The company dates to: 1898

Location: Shiner, Texas

The proposed depository: 46,000 square feet

Victoria Advocate | Shiner Company vies for state depository contract

Where is there a legal fight over the release of pension data? Nevada

What information is sought? Names of employees are taking a pension and how much the employee receive

What type of group wants access to pension data in Nevada? A conservative think tank

What type of information did the pension system release to the conservative think tank? Pension payments by redacted social security number. The pension system believes it complied. The think tank wants the pension system to link the social security numbers to names.

Nevada Appeal | Group wants judge to force release of Nevada pension data

Michigan is funding private schools with $2.5 million in its education budget for complying with mandates like safety drills.

Opponents say the $2.5 million in funding violates Michigan’s constitutional ban on subsidizing private schools.

Detroit News | Snyder signs education budget with private school aid

Governing | $2.5 million 

• By 2025 $4.3 trillion in annual GDP in 2025 by advancing women’s equality
• Texas GDP can increase by up to 10% by 2025 with more women employment equity

 McKinsey Global Institute | The power of parity: Advancing women’s equality in the United States

The estimated lower revenues? $10 billion lower oil and gas revenues in Texas for the 2017 Legislature

The exemptions to the Governor, Lt. Governor, and Speaker’s call for 4% cut in agency budgets:

• border security
• child protective services-  foster care & adoption subsidies
• Medicaid programs
• the Children’s Health Insurance Program
• permanency care assistance
• mandatory school funding

Houston Chronicle | Call for state budget cuts includes plenty of exemptions

Where: Jacksonville FL

How does the sales tax for pensions work? 1/2 cent sales tax to defer city pension contributions until 2030

What benefits are there to city revenues?

• From 2018 through 2034, the city would spend $857 million less on contributions to its three pension plans
• From 2035 to 2049, the city would spend $2.37 billion more in pension contributions with estimated 1/2 cent sales tax increase revenues being $2.5 billion from 2031 to 2049
• For accounting purposes, the City could use the future sales tax revenue on the current books to offset liabilities

Alternatives to the sales tax increase? property tax increase

Jacksonville | Report on proposed pension fix gives ammunition to supporters and opponents of sales tax

#1 Benefit of the new Rangers Stadium proposal: Climate Control

Economic Support for new Rangers Stadium: City of Arlington is paying off its portion of the new Cowboys stadium 14 years early

Is the Ranger deal as good as the Cowboy deal financially for Arlington? No. 

• The ticket and parking taxes that helped Arlington with its payoff of the Cowboys stadium will go into the pockets of the Rangers
• The Cowboys stadium packed its ticket sales with Super Bowls, the NCAA Final Four, college football championship games, boxing matches, international soccer matches, motocross, concerts …that’s what paid the bills.

Market Watch opinion | $1 billion ballpark proposal in Texas withers in the heat

• 12th highest combined sales tax in Texas at 8.17%
• 1st highest combined sales tax is Louisiana at 9.98%
• 10th highest combined sales tax is California at 8.48%
• 9th highest combined sales tax is New York at 8.49%
• 33rd highest combined sales tax is Pennsylvania at 6.34%
• 30th highest combined sales tax is Florida at 6.66%
• 19th highest combined sales tax is Ohio at 7.14%

Tax Foundation | How high are sales taxes in your state?

Which state Legislature is moving a new music production tax credit? New York

The tax credit’s details:

• 25% tax break for eligible music-production-related costs downstate
• 35% tax credit for upstate music production
• 75% of the project must be made in New York
• Funded with $25 Million per year

What costs are included in the Tax Credit calculation?

• below-the-line fees like:
  • studio rental fees
  • mixing
  • session-musician salaries
  • engineering and mastering services

Why did New York revisit a music production tax credit?

• New York lost the Grammy’s to Los Angeles
• 50% reduction in New York based music production since 1999

Crain’s New York Business | State legislature passes music production tax credit

• #1 in outstanding debt: Business & Economic Development
• #2 in outstanding state debt: Education
• $41 billion in outstanding state bonds in Texas
• $4 billion in biennial appropriation for debt service

LBB Texas State Debt

Which state representative & senator: James Frank & Donna Campbell

The 2017 legislative idea: restrict wind energy tax abatements near military facilities

What’s the motivation? 

• 2 wind farm projects are seen as a threat to pilot safety at Sheppard Air Force Base
• If the Air Force moves operations, that’s an estimated $750 million loss 

Times Record News | Rep. James Frank to file wind farm-related proposal

How does the proposed 50-50 stadium in Arlington for the Rangers become a 80% taxpayer funded stadium?

• The 50-50 agreement includes tax increases
• An ‘admissions and parking tax’ of up to:
  • 10% percent surcharge on event tickets
  •  $3 additional surcharge on parking
• ​The Rangers can use their portion of the admissions and parking tax revenue to offset their construction costs, reducing their 50%

Breitbart | Analysis Shows Texas Taxpayers May Be Stuck with 80 Percent of Costs for New Rangers Park

Which local government is considering less costly pension reforms? Philadelphia Board of Pensions

What’s Philadelphia’s end game? To convince 30,000 retirees to switch to a less lucrative & less costly benefits plan

What’s the liability of Phildelphia’s pensions? $10.8 billion liability with $4.9 billion funded

Didn’t Phildelphia try to buy out pensions? Yes a buy out was considered but it was determined that it would cost the pension system more than to retain the pensions

So what’s on the table to encourage a switch from a costly pension plan to a less costly pension plan?

• a one time partial payment to switch pension plan
• the partial payment would equal 50% the difference in benefits from the more costly plan to the less costly pension plan

Philly.com | Philly Pensions Board considers a less costly plan for retirees

The Fort Worth Employees’ Retirement Fund lost money in its investments.

What will it take to overcome the investment loss?

• additional 5 percent in payroll contribution
• currently 30% of Ft. Worth’s payroll goes to its pension

WFAA | Fort Worth’s employee pension problems grow worse

• Pensions in Houston are “a mess”- take a look:
  • 31% of Houston’s payroll costs go to pension costs
  • pension liability is $5.6 billion
• Support lower cost-of-living adjustments
• Support higher retirement ages
• Keep on the table for consideration moving new hires to 401K style plans because:
  •  We can’t predict pension investments in the future
  • Businesses abandoned pensions for 401K systems
• If Houston won’t fix it, Austin must

Houston Chronicle Editorial | Editorial: Pension tension In critical city employee pensions talks, no solution should be off the table

A Tyler Morning Telegraph Editorial  makes these points in opposition to a Texas soda tax:

• its the worst tax as it unfairly hits the poor
• studies show that soda taxes  have little or no effect on health
• using revenues for education means the poor pay the pre-K costs for the middle class

Tyler Morning Telegraph | Soda tax would hurt the poor

• $11.64 billion in state and local taxes are paid nationally each year by undocumented immigrants
• Texas #2 for state & local taxe revenue of $1.5 billion paid by undocumented immigrants 
• California #1 at $3.17 billion per year in tax revenue from undocumented immigrants

Texas is:

• 9th best economy
• 2nd for GDP growth
• Top in Exports, tied with LA and WA for most exports per capita
• 14 years Texas has led the nation in exports
• 12 years Texas has been the top state for business
• 20th in innovation potential
• 2nd in the nation for the number of tech jobs
• More than 585,000 Texas tech jobs

Southeast Texas Record | Texas has ninth-best economy among U.S. states, WalletHub analysis reports

How the soda tax win in Philadelphia was messaged:  A win for education. A win for the coalition of educators, parents, and rec center volunteers

The billionaires/business types supporting the soda tax:

• Former New York Mayor Michael Bloomberg
• Texas billionaires John and Laura Arnold

The impending legal fight: local beverage bottling businessman is filing suit

Dallas Morning News | How Texans helped Philadelphia become first U.S. city with soda tax

The Texas Supreme Court Opinion: Southwest Roaylties Inc. v. Glenn Hegar

How the ruling saved Texas Billions: 

• The Texas Supreme Court agreed with lower courts that Southwest Royalties did not qualify for a sales tax exemption on its products and services used for oil and gas exploration and production
• Southwest Royalties wanted a $500,000 refund
• The Comptroller’s Office indicated the total cost would be $4 billion for all refunds paid

What the lawyers say after the ruling:

• Issue isn’t closed.
• Other equipment may qualify for the sales tax exemption
  • If the equipment can be linked to processing, the exemption lives

Houston Chronicle | Sales tax ruling on oil field equipment saves Texas billions

What local government created a commission to oversee pensions? Grand Trverse County Commissioners

What’s the goal of the pension advisory board?  To prevent and correct pension debt & improve transperancy in the pension plans

What do I need to know about the pension advisory board?

• will meet on a quarterly basis
• will provide regular reports
• membership includes:
  •  commissioners’ chair or vice chair,
  • county administrator,
  • finance director,
  • treasurer
  • 3 citizens with a financial or investment background

Traverse City Record Eagle | Commissioners create pension board

What’s Pennsylvania’s 2016 pension reform? A Stacked Hybrid Plan

What’s a Stacked Hybrid Pension?

• Applies to all new employees- state employees & public school teachers
  • baseline pension
  • traditional formula of years of service x 2% of final average salary
  • converts to a (401)k-style plan for any income earned over $50,000-per-year, & for all income after 25 years of service
  • For new enrollees, the the 401(k) threshold income would be adjusted up by 1%
  • 7% employee contribution
  • 4% state contribution on compensation above the 401(k) income threshold
• No impact to current employees or teachers
• Excludes State law enforcement

What’s the saving to the state with this pension reform plan? $10 billion over 30 years

How’s the reform progressing? Easily passed the House 136 to 59

What do supporters say? This reform will ” save the debt-plagued public pension systems billions over the coming three decades”

Pennsylvania HB 1499

Herald Mail Media | Pa. House sends public pension overhaul to Senate

The Court: 3rd Court of Appeals

The question: Is Austin’s billboard tax permissible?

The Court’s answer: No.  

The logic of the 3rd Court of Appeals:

• The TX Constitution limits local taxes to no more than 1/2 of the state’s tax
• The state has no billboard tax
• A federal judge had already said Austin’s billboard fee is a tax
• Therefore, Austin’s billboard tax is impermissible

What does this mean for Austin? The 3rd Court of Appeals accepted the billboard company’s expert that said the true cost of Austin’s billboard regulation is $115 per billboard.

What does this mean for 2017? Can we say a permissible billboard tax for local governments?

Statesman | Appeals court: Austin must refund $200,000 for improper billboard fee

Which state: Colorado

The key phrases from Governor Hickenlooper:

• Smart regulation to protect consumers, but with a light-touch that does not stifle innovation
• Hope Colorado will be an incubator for the many innovative fantasy sports companies
• Hope the state can become a real home for this emerging sector of the tech industry

Fan Duel | Colorado Legislature Passes Fantasy Sport Bill

Texas Public Radio looks at Philadelphia’s proposed Sugar Tax. 5 Questions Answered:

• What’s included in the proposed new tax?
  • ​1.5 cents-per-ounce on sugar and artifically sweetened soda
  • revnue dedicated to education
• Why is this a big deal?
  • ​precedent setting, other cities have failed to pass a soda tax, only Berkeley has an enacted soda tax
• What’s the evidence that taxing sugary drinks would lead people to drink less of them?
  • ​“its intuitive” says one economist
  • In 2014 immediately after a soda tax in Mexico, sales declined (sales have since rebounded)
• Who supports the proposed tax?
  • ​Philadelphia Mayor says its about an industry that makes a lot of money on the backs of poor people
  • religious leaders &  faith organizations
  • teachers
  • business owners
  • public health advocates
• Who opposes the proposed tax?
  • ​a coalition called  No Philly Grocery Tax
  • teamsters

The Court: New Jersey Supreme Court

The decision:  No contractual right to pension cost of living adjustments 

The response from Moody’s credit service ratings: ” eliminates a major threat to the state’s fiscal stability”

How can this impact other states: Federal Appellate Courts have upheld the contractual COLA payments

CNBC | New Jersey top court sides with state in high-stakes pension case

The trend that just keeps moving- daily fantasy sports regulations.

Which state is immenently passing statewide regulation of daily fantasy sports? New York

The key elements of the deal:

• consumer protections
• registration fee for daily fantasy sports providers of $150,000
• 15% tax to generate $5 million/annually

Lower Hudson | Daily fantasy sports to get Legislature approval

New York Times | Committee in Albany Reaches Deal to Legalize Daily Fantasy Sports

Ray Perryman group analyzed the economic impact of a Texas Supreme Court ruling in favor of Southwest Royalties. 

The informed intel:

• A ruling that allows the sales tax exemption for items used in the processing of oil and gas is consistent with Texas law
• Will pay dividends to the state for decades
  • Within 5 years, total state and local tax gains will exceed losses
  • Tax gains will be due to increased exploration due to lower costs
• The short term revenue hit to the state is lower than projected at $2.4 Billion

Gilmer Mirror | Study by Perryman Group Finds Texas Supreme Court Ruling in Favor of Southwest Royalties Would Provide Substantial Long-Term Economic Benefits to State

The new president of the McKinney Economic Development Corporation:

• Darrell Auterson
• begins post on July 1st 2016
• 35 years experience
• 1st economic development gig in Texas
•  president and CEO of the York County Economic Alliance in York County, Pennsylvania
  • led $2 billion in development & 14,000 jobs
• previous economic development positions in:
  • Indiana
  • Illinois
  • North Carolina
  • California
• board of directors for the International Economic Development Council
• B.S. in urban regional studies from Indiana State University

Community Impact Newspaper | McKinney Economic Development Corporation welcomes new president

TPPF calls for pensions that have state oversight to be returned to full local control in 2017.

TPPF Key Points:

• Being unable to make “good government” changes locally to the pensions has caused financial harm
  • a total of $8.7 billion in total pension liabilities 
  • 9 of the 13 systems have funded ratios below 80%
    • Ft. Worth Employees Retirement Fund’s 55.7 year amoritization period
    • Dallas Police & Fire Pension System – Combined has the most unfunded liabilities at $2.1 billion 
• TPPF relies on Pension Review Board data 
• TPPF highlights Moody’s downgrading of Houston’s credit rating as a direct result of Houston’s pensions 

TPPF target pensions: 

• Austin Employees’ Retirement Fund
• Austin Fire Fighters Relief and Retirement
• Austin Police Retirement System
• Dallas Police & Fire Pension System – Combined
• Dallas Police & Fire Pension System – Supplemental
• El Paso Firemen’s Pension Fund
• El Paso Police Pension Fund
• Ft. Worth Employees’ Retirement Fund
• Galveston Employees’ Retirement Plan for Police
• Houston Firefighters’ Relief and Retirement Fund
• Houston Municipal Employees Pension Systems
• Houston Police Officers’ Pension System
• San Antonio Fire and Police Pension Fund

TPPF | Restoring Local Control of State-Governed Pension Plans 

Annual sin tax revenue:

• Pennsylvania $2.7 billion
  • $1 billion of which was tobacco taxes
• New York $2.65 billion
• Texas $2.51 billion
  • $1.446 billion of which was tobacco taxes
• 8 other states exceed $1 billion:
  • Nevada ($1.05 B)
  • Indiana ($1.15 B)
  • Illinois ($1.81 B)
  • Ohio ($1.34 B)
  • Michigan ($1.35 B)
  • New Jersey ($1.14 B)
  • Florida ($1.02 B)
  • California ($1.2 B)

Included in sin tax calculations are:

• tobacco laxes
• alcoholic beverage taxes
• gaming: casinos, racinos, pari-mutual racing

Value Walk | Mapping Sin Tax Revenues Across America [MAP]

Beekeepers in Wyoming may soon be on par with farmers and ranchers.

The Wyoming Legislature is considering adding beekeeping to the definition of agricultural lands to allow beekpeepers the same tax breaks as farmers and ranchers.

Casper Star Tribune | Wyoming Legislature considers tax breaks for beekeepers  

New York is moving forward to dissolve all local development corporations, because:

• Not enough oversight of local development corporations
• Several Districts had leader convicted of corrpution crimes
• The functions of the local development coporations are best handled by local governments

ABC 13 WHAM | County legislature approves move to dissolve LDCs

•  $3.7 billion in FY16 franchise tax revenues
  • Above 2015 revenue estimates
• March, April, May 2016 sales tax revenues are down 1%
  • Caveat: May 2015 sales tax revenues were unusually high, the 2nd highest in history
• $383.7 million in motor vehicle sales and rental tax revenue
  • 61% increase over May 2015
• $287.1 million in motor fuels tax revenue, down 0.9% from May 2015
• $148.4 million in oil and natural gas production tax revenue, down 45.6% from May 2015

Comptroller Hegar | Franchise Tax Collections Ahead of Projections; State Sales Tax Revenue Totaled $2.4 Billion in May

• #45 Texas national rank
• $2.40 is Texas tas rate per gallon
• #1 state is Washington at a rate of $33.54
• $2.00 per gallon tax in Missouri is the nation’s lowest.

Tax Foundation | How High Are Taxes on Distilled Spirits in Your State?

WHO: Governor Mark Dayton (D-MN)

VETOED PENSION CUTS THAT WOULD:

• cut cost of living adjustments
• for retirees in Minnesota’s teacher retirement system & state employee retirement system

THE TEACHER COST OF LIVING CUT: Total cost of living adjustment would have been 1%, down from 2%

STATE EMPLOYEE COST OF LIVING CUT: Total cost of living adjustment would have been 1.75%, down from 2%

OTHER PENSION REFORMS VETOED IN THE BILL:

• cut the teachers plan’s long-term assumed rate of return to 8% from 8.75%

THE REASON FOR THE VETO: Give and take. If you ask retirees to give up something, the other side, the employer, side has to also take responsibility to lessen the pension liabilities, and the bill did not do that.

Business Insurance | Governor vetoes bill to cut pension cost of living increases

What’s the drafting error forcing a special session? The use of “and” instead of “or” in a tax bill.

What’s the impact of the use of “and” in the tax bill? “And” limits the taxpayers taht will pay the tax.

Will the drafting error reduce state revenues? Yes 

• The drafting error affects paper pull-tabs in bingo halls by eliminating a tax on places that sell pull-tabs under a broader definition of a bingo hall.
• The cost: $101M.
• The reveue is necessary for the state to pay its contribution to the new Vikings Stadium

MINNPOST | Dayton signs budget bill, lays out terms for special session

Which city budget is re-routing special district funds? Houston

Which special district funds are heading into Houston’s general fund? TIRZ funds (Tax Increment Reinvestment Zones)

What are the PROs of re-routing TIRZ funds to the general fund?

• The $19.2 million helps fill a city budget gap
• TIRZ opponetns say the districts do not pay the fair share of the City’s operating costs, this funding change restructures TIRZ funding to ensure that the disricts pay their fair share of Houston’s operating costs

What are the CONs of re-routing TIRZ funds to a city’s general fund?

• delay in TIRZ capital projects
• whether or not the TIRZ funds should be exempt from the city’s revenue cap
  • The city is treating the funds as exempt
  •  1 TIRZ says its funds fall within the cap

Houston Press | Potential Problems With Mayor Turner’s First City Budget

Appropriations and Public Education will examine:

• Additional Interim Charge 1:
  • The impact to school districts when the Additional State Aid for Tax Relief ends on 9/1/17
• Additional Interim Charge 2:
  • The use of local property taxes to fund public education
  • The effect on educational quality
  • The effect on Texas taxpayers
  • Recommend ways to reverse increasing reliance on recapture payments

What Speaker Straus said:

• “It’s important that we keep local tax dollars in local districts as much as possible, while still ensuring that all students have access to quality public schools”
• “The Supreme Court made clear that our school finance system can be improved,” Speaker Straus said. “The House will continue working toward better schools for our students and a more efficient funding system for taxpayers.”
• Speaker Straus also honed in on this line from the Texas Suprme Court school fiancne opinion:
  • The Texas school finance system is “undeniably imperfect, with immense room for improvement.”

Speaker Straus | STRAUS INSTRUCTS HOUSE TO CONSIDER ADDITIONAL SCHOOL FUNDING REFORMS

Can a higher education institution enter into a contract with a business entity in which an institution’s board member, or family, has an interest?  NO

What light does Chairman Jane Nelson’s opinion request shed? That Nelson’s Senate Bill 20 (2015) prohibits these contracts

What‘s the hoopla about to cause an attorney general opinion to be required?

• Whether Senate Bill 20’s changes to chapter 2261 of the Government Code conflict with section 51.923(d), Education Code, which says these contracts are A-OK.
• This statutory conflict is between SB 20’s prohibitions on contracting power and the Education Code’s granting contracting power
• The Attorney General finds SB 20’s language specific and express 
  • Specific & Express are important because specific statutes trump general statutes

What could you do to get the opposite result?

• Make the Education Code more specific
• Remove the specificity and express refeences to higher education in chapter 2261, Government Code

KP-0093

Houston’s municipal pension board ousted its fund director. The key intel:

• Houston Municipal Pension Board will have to pay out the director’s contract
• The Houston Municipal Pension is the weakest of Houston’s pensions funds
  • 52% funded for its liabilities
• The replacement- The person responsible for the 2001 legislative reforms to the municipal pension that are alleged to have blown the budget

What does this mean for pension reform in Houston?

• Mayor Turner wants “a deal by the end of the year that will reduce the city’s large and growing pension bill”
• The Municipal pension board is joining  reform talk with the police and firefighter pensions

Houston Chronicle | Houston pension fund’s leader ousted without explanation

• $1 Billion stadium
• Unanimous City Council Vote
• $500 million package deal for voters to approve on 11/8/2016, including:
  • 1/2 cent sales tax 
  • 2% hotel tax 
  • 5% rental car tax
• 56 Stadium Supporters registered support at Arlington City Council meeting
• $77 million, the annual economic loss to Arlington if the Rangers would leave
• $200 million greater cost to Arlington than for AT&T stadium
• 49 acres of parking space to be purchased by City Council and leased back to the Rangers

Dallas Morning News | Unanimous: Arlington City Council signs off on $1 billion Texas Rangers stadium deal

Which state is reforming its open records laws? Massachusettes

What reforms is Massachusettes including?

• state, cities, and towns will pay lawyer fees if a court finds that they inappropriately withheld public records
• require digital responses
• eliminates exorbitant fees on open records document production
• Reforms timelines to ensure specific deadlines for producing documents
• Public Pension records become public information

Boston Globe | Legislature poised to pass public records measure

What entity is estimating the impact on the Texas economy from lower oil prices? Dallas Federal Reserve senior economist Keith Phillips

What did the Dallas Federal Reserve say the chance of an economic downturn in Texas? Only about 15%

What positive economic factors did the Fed point to to be “very confident that it continues in an expansion [of the Texas economy]?”

• Austin and Dallas are still growing
• rebound in hiring by high-tech and other white-collar firms
• a rebound in hiring by high-tech and other white-collar firms

Statesman |  Dallas Fed: Texas unlikely to see recession, despite energy woes

Which state is considering Super Bowl tax breaks? Minnesota

What are the tax breaks?

• sales tax break for tickets
• sales tax break for parking
• event reimbursement up to $1,600,000

Minnesota Senate Bill H.F. 848 Omnibus tax bill

How much funding have pension put toward funds that invest in litigation lending?

• $1.4 billion in commitments from Michigan Municipal Employees’ Retirement System & Employees Retirement System of Texas

Do these funds disclose the rate of return? No

Wall Street Journal | Litigation Financing Attracts New Set of Investors

 Idaho is the 16th state to  prohibit daily fantasy sports.

Idaho Attorney General pointed to Idaho’s  definition of gambling that includes sporting events.

Findlaw | Daily Fantasy Update: Idaho Says No, Tennessee Says Yes (Sort Of)

ESPN | Daily fantasy sports state-by-state tracker

Tax Increment Reinvestment Zones share revenue? Yes, some of the funds collected go toward a city-wide Municipal Services fee

What does the Municipal Services fee fund? Police bicycles like in Kingwood to pay for overtime

How much revenue did Kingwood’s Municipal Service fee generate?

• $490,000 total  Municipal Services fee revenue
•  HPD Kingwood receives $425,000 a year to cover overtime 
• Lake Patrol and Tac teams receive $65,000

Will the revenue in the Municipal Service Fee continue? Mayor Sylvester Turner has requested TIRZ to provide $240,000, any additional revenue contributions will require a vote by  the TIRZ board.

“The TIRZ money helps us to have more officers on the street; without the TIRZ money, it’s a regular day but these officers provide more manpower,” – HPD Kingwood Division Captain Mark Fougerousse

Kingwood Observer | New bike purchased for HPD Kingwood, extra funds provide more officers

Which midwestern state is sclaing back its open records laws? Missouri

Which records will no longer be subject to open records? 

• some police body camera footage
  • footage related to ongoing investigations
  • footage filmed in private homes, hospitals or schools
• some agricultural data
  • protect agricultural practices from competitors
• some criminal records

What’s the argument to seal off these records?

• protect citizens’ privacy
• encourage participation in :
  • programs that track livestock disease
  • provide equipment to police with body cameras

St. Louis Dispatch | Missouri Legislature scales back public access to records

Which pension system wants an A.G. Opinion: Jacksonvilel Florida’s Police & Fire Pension System

What did the city’s counsel do to the pension plan? The city attorney infromed the pension system that they couldn’t take a certain action–creating a senior staff voluntary retirement plan 

What will the state attorney general be asked to clarify? Who has final say over the legality of pension system actions

Florida Times Union | Pension fund board will seek opinion from attorney general