Finance & Revenue

Is a decline in DVD and CD sales to blame for state governments that seek to tax cloud computing and storage? Are streaming services the root of this taxation push? Did we get bamboozled by the people who watch House fo Cards, and who doesn’t?

The easy answer: sales taxes fail to equitably tax the modern economy.

What cloud taxes have been implemented?

• “Tennessee extended its 7% sales tax to software and digital games that are accessed remotely”
• “Chicago is one of the first cities to wade into taxing digital goods, requiring in the coming months local taxes on cloud computing and streaming entertainment.”
• Alabama legislators voted down a “Netflix” tax
• Vermont halted its plan to tax the cloud when it realized the cloud is more of a service than a good
• “Idaho has moved cautiously on taxing cloud computing and streaming video. Two years ago, the state decided to exempt most cloud-based software from sales taxes, viewing it as a service. The following year, it exempted downloadable software, while taxing digital music, video, books and games, according to the state tax commission.”

Wallstreet Journal

67% of California voters favor raising the tax on cigarettes by an additional $2. 

The legislative proposal is backed by health and labor groups in California, including:

•  Health Access California
• SEIU California State Council
• the California Medical Association
• California Dental Association
• American Cancer Society

• it  is 87cents per pack
• it was last raised in 1998
• In 2012 voters defeated a $1 per pack ballot initiative
• In 2006, tobacco companies stopped an additional $2.60-a-pack tax, Proposition 86, by a margin of 52% to 48%

California is limiting the rebate it gives for electric cars. If you earn more than $500,000 per year, kiss your rebate good-bye.  Tax groups want to do away with all the rebats, which in this case they call  “welfare for the rich.”

How does California fund the electric car subsidies? A surcharge on vehicle registration fees and a portion of the smog fee 

California’s Policy Goal: Rapidly increase the percentage of zero-emission vehicles in the state

What’s the program cost so far? $242 million in rebates awarded to 114,702 Californians, mostly in the L.A. area

What percentage of Teslas are in the mix? 15% of rebates go to Tesla owners

Los Angeles Times

This week the City of Austin filed a lawsuit concerning the inequity in the appraisal system.  We might remember this from commercial appraisal issues in 2014 in Bexar, Harris, Montgomer, and Galveston counties. Its been on the legislative radar for more than a decade.

Who is the City Suing? Travis Central Appraisal District (TCAD), commercial and vacant property owners, and Comptroller Hegar. Its working with TCAD, a big clue being TCAD officals appearing at the press conference.

The City’s Goal: Change state policy prohibiting the use of commercial real estate sale prices in appraisals.

Why do we need disclosure of commercial real estate sale prices? Without it, the tax burden is shifted to residential property owner (AKA voters).

KUT Texas Tribune

This Monday NRA and other gun rights organizations sued Seattle for implementing its ammo tax.  

The legal and opposition arguments:

• the ammo tax is  “a ‘poll tax’ on the Second Amendment”
• the ammo tax is” an effort to drive Seattle’s firearms retailers out of business.”
• The ammo tax violates Washington state law that prohibits cities from implementing these taxes locally.

Reuters

Previously on Information Intelligence:

Lege Trend: Taxing Ammo

Seattle passed an ammo & gun tax this year. Seattle slapped a $25 tax on gun sales and 2-5 cent tax on rounds of ammo within its city limits. Seattle’s goal: fund gun violence prevention programs.

KTRH examines whether Houston might do the same. The answer- not likely. State law prevents local regulation of firearm purchasing.

California is considering expanding legalized marijuana. It estimates an expanded marijuana market would represent a $1.2 Billion industry.

The regulatory structure will resemble that of the alcohol market.

Where are parties aligning?

• California Teamsters advocate the multitier model to regulate marijuana
• Police CHief Association also calls for multi layer regulation so as to “…separate the cultivation, the processing, the distribution or sales for the accountability piece.” 
• Farmers and others support multi tier to prevent “large-scale operations from monopolizing the market”
• California Cannabis Industry Association is concerned that a multi tier system will allow distributors to monolpoize the system in the same way they do for alcohol
• Emerald Growers Association support giving distributors a greater role would minimize the possibility that “a retailer can fill their shelves with only their product (and) can push anyone else out of the market
   

Assembly Bill 266

Sacramento Bee

The Attorney General was asked for an opinion on: 

The Answer:

Not likely. 

The Legislative Fix:

Redefine “person” in Transportation Code Section 681.0101 to include a private business.

KP-0033

Sharing Economy is the phrase of the year. Its ride sharing programs, home sharing programs (short term rentals), shipping sharing… the list of economic sharing grows daily. But, how do legislatures and regulators handle it?

A case study from Los Angeles:

• Mayor Eric Garcetti applauds new technologies like ride sharing apps and the tokens of the sharing economy. He’s a man promoting the future, who is running into a brick wall named City Council.
• L.A.’s City Council sees things differently. They are more sensitive to the pressure of a wide array of local dissenters, including the taxi industry, hotel workers and housing activists.
  • City Council has hit the breaks on ride share ordinances
  • City Council paused a tax agreement with AirBnB
  • A City Council member called the sharing economy- the cheating economy.

L.A.Times: At L.A. City Hall, it’s the visionary vs. the lawmakers

• “In Texas, if you have a million dollars or more in gross revenue, you have to pay this tax. We were able to cut the rate by 25 percent. That is a significant cut. That is $2.6 billion revenue cut in the state of Texas.”
• “We also view that as a first step in repealing the tax,”
• “The tax is generally viewed as a barrier to businesses that want to relocate to Texas or new businesses starting and the growth of businesses.”
• “I believe, and some of the others in the legislative believe, that by cutting this tax we will actually help businesses create jobs and attract businesses to the state of Texas.”

Waxahachie Daily Light

The moment has come…Thumbtack’s annual Small Business Friendliness Survey is here. Texas is #1 for small businesses.

• Tax equity–the actual rate at which business owners pay taxes--mattered far less than any measure of regulatory compliance.
• Labor rules were 88 percent more important in driving state friendliness scores when compared to tax rates.
• When evaluating cities, small businesses said the ease of compliance with licensing rules mattered far more than tax rates.
• In cities, training was 78 percent more important than the number two factor, and on the state level, small businesses that  had a positive training experience were 1.5 times more likely to rate their states as being very supportive.

eWeek

• Every $1 dollar of collected sales tax for economic development over the past 25 years has returned nearly $10.84 in annual economic activity (real gross product).
• Every dollar of sales tax collected for economic development is significantly exceeded by the ongoing cumulative benefits of the project supported by the program. Every dollar represents an annual impact of $277.67 in expenditures.
• Every dollar represents an annual impact of $140.92 in gross product
• Every dollar represents an annual impact of  $89.72 in personal income
• Every dollar represents an annual impact of $3.57 in gross city tax revenue each year.

New Braunfels Herald Zeitung

The Editorial Baord at the Lubbock Avalanche Journal believes that education reform is imperative to economic vitality, quality job growth, and recruiting industries that can raise the wages of Texas. 

• More Texans need higher education degrees. Texas Higher Education Board wants to reach 60% by 2030.
• Texas is 25th in the world for post secondary education for Texans 25-34
  • But, 5th in the world for Texans 55-64
• Young Texans should be “prepared to leave high school and receive additional vocational/technical training is also very much needed to strengthen our workforce”

Lubbock Avalanche Journal

Pennsylvania’s Office of Open Records ruled this week that a person requesting open records, who uses a smart phone to take pictures of the record cannot be assessed a fee.

“The Office of Open Records ruled “prohibiting the photographing of documents would be contrary to the purpose of the [Right to Know Law], which is to ‘maximize access to government records.’

Free government records, get your free government records…in Pennsylvania.

Governing

Office of Management and Budget  is setting forth data breach standards for federal contractors. The requirements include:

• Required improved data security controls
• Timely contractor reporting of all cyber incidents
• Contractors will be required to undergo Security assessments
• Contractors may face continuous monitoring by the government agency
• Increased business due diligence before entering into a contract

Details about the OMB workgroup and proposals for contract reform are available at the Improving Cybersecurity Protections in Federal Acquisitions wesbite.

Seattle passed an ammo & gun tax this year. Seattle slapped a $25 tax on gun sales and 2-5 cent tax on rounds of ammo within its city limits. Seattle’s goal: fund gun violence prevention programs.

KTRH examines whether Houston might do the same. The answer- not likely. State law prevents local regulation of firearm purchasing.

Pension Forefeiture Reform was front and center in New York. Here’s the background:

• The year, 2011. Governor Cuomo calls for & passes pension forefeiture for ” public officials to lose pensions if they were convicted of a felony related to their office.”
• During legislative discussions, it was discussed that pension forefeiture reform should apply to all government officials and employees.
• The 2011 pension reform only applies to elected government officials.
• The year, 2015, questions emerge as to why prison guards that facilitated the NY prison escape should receive their pensions. Can these prison guards receive their pensions? Yes. The guards are not public officials and can receive their full pensions.

Editorial | Niagra Gazette

North Carolina Legislature passed a tax break for home builders– No property taxes for homes that have not sold. Builders caught a break and lowered their tax burden. 

The promoted goals for the tax break:

• the tax break lower builders’ overall costs
• the tax break will increase construction

WXII12 North Carolina

WHO:   Bob Westbrook

BACKGROUND: 

• Successful restaurant franchisee for CiCi’s Pizza
• Past Preseident of Texas Restaurant Assoc.
• Past President of the East Texas Food Bank
• Two-term Chairman of the Northeast Texas Public Health District,
• One term as Area Development Council Chairman
• Two terms as Government Affairs Committee Chairman for the Tyler Chamber.
• Member of the Board of Directors for the Tyler Economic Development Corporation.
• Serves on the Executive Committee of Catalyst 100, a mentor program to develop Leaders for Tyler for the next 100 years. 
• Rotarian, A “Paul Harris Fellow”, & past president of the Tyler Sunrise Rotary Club.
• Currently a member of the South Tyler Rotary Club. 

GOALS: Focus on transportation

Google opened a facility in New Mexico. The state’s eco devo system allowed the state to upgrade sewer and water into a certain airport to help Google. 

Google is moving this facility back to California, leaving New Mexico having expended $995,000 for the Moriarty Municipal Airport without the tax base to support the improvement.

New Mexico can recoup the eco devo investment because the state doesn’t offer economic development reimbursements, but rather offers economic incentives at the outset like Texas. New Mexico’s neighbors, Arizona and Utah offer economic development reimbursements that are given to a company once benchmarks are reached. 

Albequerque Business First

The following states raised cigarette taxes this year:

• Kansas
  •  tax hike of 50 cents
• Louisianna 
  •  $1.6 billion budget shortfall filled with 50 cent tax hike
• Ohio
  • 35-cent increase
  • Gov. Kasich proposed $1 tax
• Nevada
  • $1 tax increase
• Also increasing cigarette taxes: Connecticut, Rhode Island and Vermont

Governing

Scott Walker & the Bucks have an economic development deal for the new Bucks stadium. That’s generated these campaign triggering statements:

• Walker “commits Wisconsin taxpayers to pay $400 million for a new basketball arena.”
• “…$200,000 that the co-owners of the NBA’s Milwaukee Bucks donated to a group backing his  [Walker’s] campaign”
• The reaction in new Hampshire: “I don’t think taxpayer money should be used for things like that,”

Walker says:

• The state will lose $299 million if the Bucks leave which the team has threatened
• The Bucks will foot 1/2 the cost of the $600 M arena

Governing

Talking to the Sealy Chamber, Senator Kolkhorst said her goal is:

• no income tax
• no business tax

Her words:…”“ That brought us that much closer to our goal of having no income tax and no business tax in Texas. ” 

The Sealy News

Questioning TPPF’s Math skills, TEXPERS points to the following issues with TPPF’s pension critique:

• Fuzzy math
• Stop lumping all the pensions together in your analysis
  • “80% of the TPPF’s headline number is attributable to four statewide plans with nearly 2.5 million participants. The remaining $11.4 billion gap is spread among roughly 90 local pensions across Texas, and almost half of that amount is due to four pensions in Houston, Dallas and Fort worth, Patterson said in response to the TPPF op-ed.”
• Stop ” robbing dedicated school employees of a benefit they have paid into their entire career”

TEXPERS

Wyoming, a state with policies epitomizing western individualism, has taken a new step to add privacy protections to the state constitution.

Wyoming’s Legislative Task Force on Digital Information Privacy unanimously voted last week for language concerning open-government protections. 

The constitutional language looks like this:

Individual privacy is essential to the well-being of a free society and shall not be infringed without the showing of a compelling state interest, and the state will not deprive a person of any right provided by law to examine document[s] or to observe the deliberations of any agency or political subdivision of the state, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.

Transparency Meets the Constitution. Libertarians and Tea Party folks rejoice.

Courthouse News Service

Proposition 1

“The constitutional amendment increasing the amount of the residence homestead exemption from ad valorem taxation for public school purposes from $15,000 to $25,000, providing for a reduction of the limitation on the total amount of ad valorem taxes that may be imposed for those purposes on the homestead of an elderly or disabled person to reflect the increased exemption amount, authorizing the legislature to prohibit a political subdivision that has adopted an optional residence homestead exemption from ad valorem taxation from reducing the amount of or repealing the exemption, and prohibiting the enactment of a law that imposes a transfer tax on a transaction that conveys fee simple title to real property.”

Proposition 2

“The constitutional amendment authorizing the legislature to provide for an exemption from ad valorem taxation of all or part of the market value of the residence homestead of the surviving spouse of a 100 percent or totally disabled veteran who died before the law authorizing a residence homestead exemption for such a veteran took effect.”

Governor Abbott Proclamation 

Tim Chase is the new economic development president for the Hutto EDC. 

• From Wichita, Kansas
• Former president of the Greater Wichita Economic Development Coalition.
• Former president and CEO of the Wichita Falls Chamber of Commerce & Industry. 
• 2009 Chase  appointee to the Texas Governor’s Regional Commercialization and Innovation Council
• 2011 elected to the International Economic Development Council Board of Directors.

Austin Business Journal

WHAT? $63.5 Million in Texas Tax Credits

WHO (qualifies)? Private multifamily developers competing in the 2015 Housing Tax Credit Program

WHERE?  Texas Department of Housing and Community Affairs

WHY? The program is estimated to generate $434.6 million in economic activity 

Austin Business Journal  

Harris County is implementing the nationa’s first wireless broadband system for emergency service personnel.

What can this new high tech system do?

• Livestream video, vital signs and EKG results while en route  to ER
• Doctors can transmit back to EMS life-saving treatment protocols

The wireless system, dubbed FirstNet, stems from the 9/11 Commission recommendation that part of the FCC’s radio spectrum be reserved for public safety purposes.

Governing

This week the 3rd Court of Appeals handed a win to the Comptroller by ruling that  out of state comapnies shouldn’t use the 3 factor formula of the multi state compact (which is in Texas Tax Code Chapter 141) but rather should use the fracnhise (margin) tax calculation methods of Chapter 171.

Tax nerd stuff. But, big dollars at stake, so brush up on the nerd lifestyle.  How many corporations can you think of that aren’t headquartered in Texas but do business in Texas?  Lots & Lots.

Next stop: TX Supreme Court.

Graphic Packaging Corp v. Hegar  Law360

• The Debt Plan proposed by JPS assumes savings not detailed.
  • “far fetched financial plan”
  • “dubious assumptions”
• The Plan is inconsistent. It claims simultaneously savings are rooted in operational improvments in one section and in another it claims the the savings are rooted in eliminating 360 jobs.
• Increasing capacity and reducing staff is again inconsistent.

Empower Texans

Arizona has a tax credit for private education. The numbers haven’t broken down quite as estimated:

1. The 1997 estimated cost was $4.5 million a year
2. The current cost per year exceeds $140 million.
3. Plus, Arizona has to eat the cost of $50 million in additional tax credits for public-school extracurricular activities for these students.
4. That’s a total cost to the state of $190 million per year. Far off the $4.5 million estimate.

Governing 

Valero has a large refining facility in Galveston County. The Galveston County Appraisal District valued the facility at $1.05 Billion.

The valuation quickly headed to the courts. Here’s what happened:

• 2013 trial court sided with Valero that the property was inequitably appraised
• Spring of 2015,  14th Court of Appeals said probably some unequal value but let’s have the trial court look at it again.
• July 2015, Valero asks the TXSCT to determine whether the facility was equitably valued

San Antonio Business Journal

Connecticut’s enacted Senate Bill 949 contains significant data security requirements for entities contracting with state agencies and entities in the health insurance and administration business. 

Contracting entities must provide:

• Comprehensive data-security program, including:
  • the use of security policies,
  • annual reviews of such policies,
  • access restrictions, and
  • mandatory security awareness training for employees beginning July 1, 2015.
• Restrict access to Confidential Information only to authorized contractor employees,
• Maintain the Confidential Information in secure servers with firewall protections
• Implement security and breach investigation procedures.
• Undergo annual reviews
• Include ongoing employee security awareness program.

National Law Review

Because separation of powers in a republican form of democracy is a fluid concept, attorney general opinion request, RQ- 0039-KP, wants to know this:

whether state funds must be expended in accord with US Supreme Court ruling in Obergefell (gay marriage)?

Why does this matter?  If the answer is yes, Obergefell requires funding expended in accord with its holding, then things like ERS offering benefits for couples of the same sex will occur. Which means, members of the Legislature will be on record voting for those expenditures by approving ERS appropriations. 

The State Auditor today released a report on the General Land Office’s contracting process. The audit results are not great for these 4 reasons:

• When the release about your audit leads with this, it’s not great : “significant weaknesses in its processes”
• The GLO did “not adequately plan, procure, or form its contract[s]” with:
  • Grant Thornton, LLP (Grant Thornton) for oil and gas royalty audit services
  • IDEA Integration Corporation (IDEA) for information technology services. 
• Oops, there was a conflict of interest involving the Grant Thornton contract during the procurement
• Oh, by the way, there are a few systemic issues in GLO’s overall procurement and contracting processes.

SAO Report      Texas Tribune

Senate Education Chair Taylor has asked Attorney General Paxton for an opinion as to whether municipalities, or their utilties, may impose impact fees on new development by an open-enrollment charter school.

RQ-0038-KP

TPPF Op-Ed in Ft. Worth Star Telegram points to the following problems with Texas pension system:

• $57.5 Billion in unfunded pension liabilities ($42,073 owed per active member)
• Unfunded liabilities increase at the rate of $40M per month
• The funded ration for all pensions systems under the Pension Review Board is only 80.5%
• The solution: New employees should be placed into defined-contribution plans, like 401(k) plans

TPPF

Texas A&M is eyeing a public-private partnership for a new private dorm.  The  $355 million project will be a “high end dorm” off George Bush Drive near Penberthy Road.

The Brazos County Commissioners approved the tax exempt status last week, 3-1. The lone nay is being vocal:

• “The problem that I see is that there’s no revenue coming in to the two cities who have to pay the bills, they have to pave the roads, they have to take care of the infrastructure, the wastewater, the regular water coming in.”

KBTX

In the press release announcing the influx of $75 Million and a new CEO, the Texas Central Rail noted that investors understood the economic development picture high speed rail paints.  Texas Central Rail Press Release

This week two conservatives also stated their case for supporting high speed rail,highlighting the development opportunities that abound with rail projects. Star Telegram Op-Ed

Texas Capital Fund granted $325,000 to the city of Montgomery for infrastructure improvements and engineering services which will support:

• Creation of a restaurant facility, the Pizza Shack, operated by Azzip Enterprises, as well as create 13 new full-time jobs.
• TDA Office of Rural Affairs   Montgomery Co News  TDA News

Texas Capital Fund granted $750,000 to the city of Sonora for infrastructure improvements and engineering services  to support:

• Creation of a travel center facility operated by Love’s Travel Stops & Country Stores, Inc., along with 31 new full-time jobs.  TDA News

Colorado denied economic development dollars for a pediatric home health care services. That leaves Texas.

The company looks to rapidly expand. And, as it turns out, the other state in their sights, Texas, provides higher Medicaid reimbursement rates.

Denver Post

University of California system voted to extend the $15 minimum wage floor to all Univeristy of California employees.

The increase will impact these 3,200 CalSystem hourly workers for a total of $14 Million to its annual $12.6 Billion annual payroll:

• custodial
• food service
• bookstore staff
• lab assistants
• student workers
• includes private contract workers
  Sacramento Bee

Michigan Gov. Rick Snyder (R-MI) signed HB 4122. Michigan’s film Incentives program  will end October 1, 2016. It remains partially funded. 

Tax Policy Foundation has 3 reasons to oppose filmn incentives:

• Film Production Jobs  are temporary
• Incentives are not shown to create a permanent film industry in a state
• Film incentive programs are financial losers according to most studies
• Economic activity generated by film is questionable, but trickle down effect on films increasing othere non-film jobs is reasonable.

Tax Foundation

In a Trib Talk Perspective this week, TPPF calls for the end of corporate welfare. That means the end of:

• No federal agency loan guarantees to American companies doing busines abroad (AKA no Import Export Bank)
• End the Texas Enterprise Fund and all Texas economic development programs
• No subsidies for renewable energy generators
• No government price controls on electricity
• No government price control on housing/hotels during an emergency
• No tax abatements

The Sharing Economy encompasses tech savvy businesses like ride share, storage share, shipping share, and short term housing rentals.  In terms of labels its Lyft, Uber, AirBnB…

it’s also a campaign issue. Republicans embrace them. Democrats are concerned about the impact to traditional labor allies. The sharing economy is in a legal kerfuffle over whether it has employees or independent contractors.

LA Times

• 10-year, 40% cut on its city property taxes
• large annual refunds on ad valorem taxes on company equipment

Austin Business Journal

• 30 million in tax incentives
• 80% abatement (down from the previous 90% abatement GM had previously receoved)
• Arlington officials point to $26 million in direct and indirect economic impact from the deal

WallStreet Journal

4 Highlights from Senator Burton’s TribTalk Perspective this week:

1. Abolish the Enterprise Fund. She doesn’t like economic incentives to Facebook.
2. Companies that make a lot of money should not be subsidized, like Facebook was.
3. Bills like, HB 2712 (Geren/Hancock), that are written for specific companies also not good.
4. When the # of jobs and pay rate does not exceed the cost of the public investment, not good. Facebook jobs are costing Texas about $183,000 per Facebook job.

Cogitate: The liklihood that this is a Tea Party signal that economic development is still in its crosshairs?

The City of Chicago is proposing a 9% tax on streaming services like Netflix and Spotify.

But, city officials say it’s not a new tax, its 2 existing taxes working in tandum. They point to these taxes:

• Personal Property Lease Transaction Tax
• Amusement Tax(tacked onto tickets for concerts and sporting events.)

Attention Realtors: Chicago will also be taxing MLS service, but not Facebook, so teens everywhere rejoice.

Texas Public Radio: Chicago’s ‘Cloud Tax’ Raises The Cost Of Streaming Videos

Texas Secretary of State Carlos H. Cascos and Governor Abbott are pursuing economic development and stengthening Texas “economic bond” with Mexico.

They’re looking to Mexican Secretary of Foreign Affairs José Antonio Meade Kuribrena. Meade is also pro-business, economy minded official.

Can’t talk about Texas-Mexico and economic development without talking about Mexico’s de-regulated energy market.

• “The talks [Gov. Abbott & Secretary Meade] come amidst a request for proposals from Mexico’s state-owned electric utility for construction of a $1.5 billion, 155-mile pipeline from Nueces County to Brownsville, where it would connect with a $3.1 billion, 500-mile underwater pipeline to the Port of Tuxpan in the state of Veracruz, Mexico.”  

Valley Morning Star

John Oliver takes on publicly financed stadiums, an issue that keeps gaining steam. The concerns:

• Teams retain all the revenue from the stadiums by monitozing every aspect of the stadium
• Teams economic books are private
• Public Stadium funding is often through locally backed bonds (debt)
• Stadiums are replaced frequently
• Stadiums are property tax exempt
• Professional Sport teams use threats to leave as a reason for more local debt funding
• Stadiums do not revitalize economies nor do they provide more stable jobs according to a 20 year study by economists

Deadline Hollywood

The City of Taylor Landing wants to know if it, as a Type C general law municipality can levy a property tax.

In KP-0028, the Attorney General says yes. IN fact, “Section 302.001 of the Tax Code and section 51.051 of the Local Government Code expressly authorize a Type C general-law municipality to levy an ad valorem tax on property within its city limits. “

Two fiscal tidbits from the Comptroller this week, the latter of which was seized on as due to legislative success:

• June 2015 sales tax revenue collections are down 1.4% from June 2014. The first decline in 62 months. Comptroller Release
• Texas will not borrow to cover its cash flow issue for the first time in a long time. Comptroller Release
  • Lt. Gov. Patrick hailed it as a result of legislative success with conservative spending
    • Ft. Bend News

Impending pension doom that people like to talk about is like a he said/she said relationship squabble.

He said:

Local Officials blame the actuaries by saygin things like- People are living longer after retirement, so why are actuaries still using life expectancy tables from 1971? 

She said:

Actuaries say the real problem are “questionable” decisions my politicos such as:

•  funding pensions with borrowed money
• picking risky investments
•  “enacting benefit improvements based on lowballed costs.”

To paraphrase Sun-tzu- Know your enemy like you know yourself. 

NYTimes

Seattle has a transportation funding crisis. The mayor has called for $930 million in additional funding. 

Two City Council members tried to counter the straight $930mllion levy on property taxes with a funding plan that included:

• $600 M levy on property taxes
• with a employee hours tax and a commercial parking tax

The move failed, but the creativity in the funding structure should be appreciated.

KUOW.ORG Seattle

Economic Development Corporations will be exempt from property taxes thanks to this amendment in conference committee:

    SECTION 20.  (a)  Section 11.231, Tax Code, is amended by    adding Subsection (a-1) to read as follows:          (a-1)  In addition to an organization described by    Subsection (a), in this section, “nonprofit community business    organization” also means a Type A corporation governed by Chapter    504, Local Government Code, and a Type B corporation governed by    Chapter 505, Local Government Code.          (b)  This section applies only to ad valorem taxes imposed    for a tax year that begins on or after the effective date of this    section.

Clever move outside the bounds to a bill that began its life concerning alcohol taxes. There’s a narrow window for a point of order, but you have to act quickly.

HB1905

McAllen Monitor

California pension-reform advocates, calling for The Voter Empowerment Act, are working to get pension reform on the California ballot.

The pension reforms they want:

• amend the state constitution to require voter approval for defined-benefit pensions for new public employees
• Voter approval for any enhancements to current employees’ pensions
• Voter approval for the establishment of any pensions in which government subsidizes more than 1/2 of a public employee’s retirement benefit.

Who are the backers?

• Mayors of the bankrupt cities of mayors of San Bernardino and Vallejo

Governing

Water Revenue in California, like in Texas is big business. The water restrictions due to California’s drought are expected to cost governmental entities  $1 Billion in lost revenue.

Paying more for less makes for happy taxpayers? Probably not. Taxpayers in California, and in Austin, are not pleased with water districts raising their rates for less useage. 

Governing    US News and World Report

Moody’s revised Houston’s debt rating to Negative.

TPPF was quick to latch on:

• Calling for pension reform
• Comparing Houston to Detroit

TPPF

Mayor Parker clarified that Houston’s debt outlook can only be changed if the Legislature acts to fix Houston’s pension issues.

Houston Chronicle

Using the Pension Review Board as its analysis catalyst, TPPF points to the following pension problems in Texas:

• $57.4 billion in unfunded liabilities
  • increase of nearly $500 M since December 2014
• The plans’ funded ratios are too low
• Only  3 pension plans are fully funded at 100 percent or more
• two-thirds have amortization periods that exceed 25 years

​​TPPF  Pension Review Board June Pension Valuation (Scroll down the agenda)

Phoenix is building a research and technology campus to make it a leader in waste innovation.

The plan is to focus on:

• The “5 R’s”: reduce, reuse, recycle, reconsider and reimagine.
• For instance- turning a beer bottle into new glassware or compost into natural gas.

When announced, the procurement opportunities were flying:

• Phoenix received 117 proposals from 70 different companies
• “The Closed Loop Fund, which is composed of Fortune 100 consumer goods companies and retailers such as Coca-Cola, Procter & Gamble and Walmart, will offer below-market interest rate loans (some as low as zero percent) to the businesses selected to be part of the campus.” 

Governing

Mayor Rham Emanual is dealing with the Chicago Teacher Pension Funding Crisis. The teacher pension borrowed to make its last $634M payment to the pension system & the state is cutting education funding.

The Mayor has the following proposals to rework the local pension system:

• Ensure there is 1 statewide teacher pension system only. Illinois law separates out Chicago teachers from the rest of the statewide teacher fund.
• In the alternative, the state should fund more of Chicago’s Teacher Pension System. Chicago tax payers are paying for both the statewide teacher pension and the Chicago teacher pension sytem.

NYTimes

Governing 

The Texas Supreme Court reversed the 3rd Court of Appeals, and found that just because the Greater Houston Partnership had received tax dollars for a program does not make it subject to open records.

Southeast Texas Record  GHP v. Paxton

Previously on Information Intelligence (May 7, 2015):

This week the Association of Broadcasters filed an amicus brief in pending Greater Houston Partnership (GHP) v. Paxton to determine whether GHP is subject to open records.

The Broadcasters’ point of view:

• GHP gets tax dollars & is therefore a public entity
• GHP shares a common purpose with the entity from which it receives tax dollars
• GHP often stands in place of the City of Houston
  • GHP can make appointments within the airport system

Association of Broadcasters Brief of Amici Cuiae

The Border Coalition has returned. Originally founded by a former Economic Development leader in South Texas,  it’s new leader is:

•  former Hidalgo County Judge J.D. Salinas

The Border Coalition goals are to:

• Become (again) the go-to group for border issues
• Improve the Border’s fair sdhare of state funding, especially for transportation
• Become a stronger voice in Austin

Rio Grande Guardian

A proposal is floating around Sacramento to allow for excise taxes to be charged on high use water.

• The tax rate could be up to 3 times the normal water charge.
• Excise tax proceeds would be shared between the state & local governments for water conservation projects.

Sacramento Bee

California’s SB789

Comptroller awarded $300,000 to UT- San Antonio to study the monarch butterfly.

The State insect may soon be on an endangered species list which could cause an economic impact to Texas.

The Comptroller says, if the Monarch is listed as endangered, the following businesses can be affected:

• agriculture
•  land development
• energy production

Here’s the list of species the Comptroller has funded studying:

• Since 2013, $5 million has been appropriated per biennium for endangered species studies
• In 2012, the dunes sagebrush lizard  caused a stir as a potential endangered species, a comptroller report found that if the sagebrush was listed as endangered then:
  • it could imperil 31,195 jobs
  • harm more than $8.2 billion in investments
  • harm almost $12.5 billion in business activity 

Houston Chronicle    UTSA Today  CPA

What is this mystery tax issue before the Texas Supreme Court?

Whether films shown at theaters count as a service or whether a film is tangible personal property.

What did the 3rd Court of Appeals ruling say films are for margin tax purposes?

Tangible Personal Property, because Texas statutes say these are things that can be “perceptable to the senses.”

What’s the big deal? It’s a tax court case, I’m mentally drained just thinking about it…

the Comptroller says will cost the margins tax $1.5Billion.  For those counting, that’s a significant chunk of margin tax revenue. And, if the TXSCT agrees with the Court of Appeals, that made property tax revenue sources and school finance a whole lot more complicated.

Fiscal Notes June/July 2015

For the 1st time in 4 years, the 4th largest city saw its sales tax revenue decline by 2.3% while the state’s sales tax revenue increased by 5.2% in the same month.

A University of Houston Economists says no need to panic. 505 of Houston’s sales tax comes from business to business sales, while the other 50% is traditional retail. 

Business interests suggest Houston economy has correced itself and is returning to normal speed.

Houston Chronicle

Pecos County Attorney is asking the AG whether it is permissible under nepotism statutes for the wife of the County Judge to be an employee of the County Hospital District. 

At the time, the County Judghe cleared it with the Texas Association of Counties. TAC said- sure, we see no problem. The County Attorney points to members of the County Commissioners Court serving on the County Hospital Board and being able to impact the salary of the County Judge’s wife.

RQ-0030-KP

St. Louis is home to the Rams- an animal frequently associated with the missouri wilderness.  To keep their beloved revenue generating Rams, St. Louis is encouraged to build a new stadium. St. Louis Dispatch

The City is eager to keep its economic engine, the Rams, started moving forward on funding for a new stadium. Two tax payers and property owners said, hey, wait a minute, we want some public input. So, they sued. 

The City’s funding plan was to add a cool $1 billion, by extending the bonds used to pay for the Edwards Jones Dome. What citizen would notice an extra billion in local debt?

Courthouse News Service

Georgia is touting its film incetives. It offers a 30% credit. That’s mroe generous than Claifornia. Plus, the tax credit can be used for more expenses, such as:

•  salaries of directors and actors as long as the payment is for work performed within the state
• No cap on the credits
• The tax credits are transferrable

Georgia is now #3 in production after California and New York.

Variety

 Governor Deal made appointments to a new Advisory Board for its Film Music and Digital Entertainment Office.

The Appointees from Middle Georgia CEO

Last Friday, Governor Jindal signed a $180 million cap on the film tax cerdits in Louisianna. The film industry opposed the cap, because what industry doesn’t want access to tax credits? 

The Republican Lt. Gov. seeking the Governorship says the cap is too low. He also claims Disney/ABC Films is refusing to film in Louisianna until the cap is fixed. He says it’s bad for Louisian’as economy and bad for tourism.

The Lt. Gov. is trailing U.S. Senator Vitter, because Louisianna loves a Governor with a good sex scandal.

Deadline Hollywood

Houston Municipal Employee Pension System egal wrangling continues.  Pension lawsuits and Houston go together like Humbolt Fog and orange blossom honey.

 This spring the Texas Supreme Court upheld the Pension adding entertainment venues and convention center employees in the pension system.

The ruling was not favorable to the City. But, how does the Pension system ensure that Houston is covering all these new pension enrollees properly? The City is not forthcoming. So, the Pension  filed suit for employee data.

Courthouse News Service

Great new data visual from the Comptroller that shows Texas as it compares to the other 49 states on dozens of economic indicators including:

• Best State for Business (TX #1)
• Best State to Earn a Living (TX #1)
• Cost of Living (TX #15)
• GDP per capita (TX #15)
• Domestic Migration (TX #1)
• Business Tax Burden (TX #10)
• Local Debt Per Capita (TX #48)

Comptroller 50 State Projecthttp://www.comptroller.texas.gov/fiscalnotes/50states/

The Texas Supreme Court last week dealt a blow to the City of Houston by finding the ballot language insufficient to implment the often controversil drainage tax. 

Breitbart Highlights that the drainage tax:

• “cost Houston residents an estimated $400 million in what may now be illegally-collected fees”
• was ardently opposed by now-Senator Bettencourt, who offered this:
  • “This ruling is not only a big victory for City of Houston Taxpayers to stop the drainage tax eventually, but a warning to all governments in Texas to tell the public the truth when using proposition ballot language presented in the voting booth public for voter approval,” Sen. Bettencourt told Breitbart Texas in a written response to an inquiry.”
• was used to fund $32 million in salaries

Breitbart

The Texas Supreme Court denied to review a 3rd Court of Appeals Ruling that permitted Titan Transportation to exlcude from the calculation of the franchise tax, funds which Titan is contractually required to pay out to subcontractors.

Any restructuring/revising/elimination of the franchise/margins tax will address pass through payments/taxable revenue.  

Hegar & Paxton vs. Titan Transportation    Grant Throton LLP Tax Alert

Governor Abbott signed Senate Bill 1396 providing “sales and use-tax reforms for general aviation (GA) aircraft based in or visiting Texas.”

National Business Aviation Association lauds the victory to level the playing field for general aviation.

Aviation Pros

National Business Aviation Association

The Financial Services Institute claims victory in the repeal of the Texas Occupations Tax signed by Gov. Abbott.

The occupations tax + the franchise tax + licensing fees created a “unnecessary financial burden” on small businesses.

Investment News

Sergio Contreras is the new interim director of Pharr Economic Development Corporation. He supports regional cooperation.

His background:

• Born and raised in Alamo, Texas.
• Worked for AT&T for 20 years, rising to the position of director of external affairs.
• Currently serves on the board of directors for:
  • the Rio Grande Valley Partnership
  •  the Border Trade Alliance
  • the Alliance for I-69
  • and the PSJA Foundation.
• He has served on the boards of:
  • Texas Association of Mexican American Chambers of Commerce
  • San Antonio Hispanic Chamber of Commerce
  • Laredo Chamber of Commerce
  • Brownsville Chamber of Commerce
  • McAllen Hispanic Chamber of Commerce
  • Alamo/San Juan Boys and Girls Club

Rio Grande Guardian

Local governments love stadiums. Stadiums bring revenue and economic vitality.

Building stadiums is much harder than it is to reap the benefits. In California, environmental reviews of construction projects can be fast tracked with the help of the Governor’s approval granting your project as a “certified environmental leadership project.”

But, this fast track process has time lines too. And, when you don’t meet those deadlines, which is what the Warriors new stadium faces, lawsuits to stop your stadium gain steam.

What’s the fix? Legislation, naturally. In a bill linked to the budget, it is predicted that the timelines for the Warrior’s stadium construction will be extended to block the opposition.

The Recorder

Deborah Leliaert, a UNT employee, and Paula Woolworth filed suit against Employee Retirement System on June 11th in the U.S. District Court for Western Texas, Austin Division.  

Case No. 1:15-cv-00506

Southeast Texas Record

Senator Nichols has requested an Attorney General opinion as to METRO’s role in a rapid transit bus project down Post Oak in the Uptown Management District. 

The background:

• 2003 Voters approve light rail down Post Oak Blvd. The language included that the proposition created a binding and enforceable contract between the City of Houston, Uptown, and METRO
• Now the proposal is to use the same land area but utilize rapid bus transit rather than light rail
• METRO will probably not provide funding
• METRO will operate the buses

What inquiring minds want to know: Can the voter approved light rail be converted to buses and there still be an existing, enforceable contract?

RQ-0028-KP

DC United is building a new futbol stadium. For the American audience,  a futbol stadium is used for a sport that Americans calls soccer.  Now that we’re on the same page, stadiums are expensive.

In structuring the DC United Stadium deal, it calls for D.C. United to reimburse D.C. 50% of the excess cost (above $89 million on land acquisition and $61 million on land preparation) to a maximum amount of $10 million, paid in annual installments as part of the team’s ground lease.

Washington Business Journal

In 2013 Massachusettes taxed the cloud, as in cloud data storage, not mother nature. Two months later Massachusettes repealed the “tech tax.”

How to tax cloud based and technology based services? In 2012 Texas Comptroller defined cloud computing as data processing services for tax purposes. 

Tech companies dislike the murky, state taxation rule adjustments as much as they dislike new state laws, which leaves tech taxation and cloud taxation up to future legislatures to solve.

Governing

This week Comptroller Hegar alerted us to a pending lawsuit that could cost the margins tax revenue up to $1.5B per year. For those keeping count, that could be at least 1/4 of the margin tax revenue. Oops.

Double oops on the impact to school finance once the TX Supreme Court issues its ruling later this year.

The legal case: American Multi Cinemas  

Texas Tribune

June 15th is the deadline for Chapter 313 Annual Eligibility Report, Form 50-772A (PDF). From Comptroller Hegar:

Upcoming Deadline for Chapter 313 Annual Eligibility Report

The Chapter 313 Annual Eligibility Report, Form 50-772A (PDF), must be submitted to the Comptroller’s office by June 15. This form is a tool school districts can use to determine the annual eligibility of the applicant subject to the limitation agreement. Under the statute, enforcement is the responsibility of the school district.

Parties to the agreement should complete Form 50-772A using information from the previous tax (calendar) year. School districts should review the completed forms, retain the original and submit PDF scans of the signed forms and any attachments to the Comptroller’s office by June 15, 2015.

Completing Section 5 of the Report

Section 5 of the report is separated into parts A and B; Each applicant will only need to complete one part of this section. 

• Section 5A: Applicants who submitted applications prior to Jan. 1, 2014 (Applications #1 through 999) need to complete Section 5A.
   
• Section 5B: Applicants who submitted applications after  Jan. 1, 2014 (applications #1000 and above) need to complete Section 5B.

If you have not done so already, we urge the school district to contact any businesses having a Chapter 313 agreement with the district to complete the form. Please submit the form and any attachments to chapter313@cpa.state.tx.us by the mandated deadline.

If you have any questions, please contact us at chapter313@cpa.state.tx.us.

The New Jersey Supreme Court ruled that if pension reform statutes cause the state to violate debt spending limits in the State’s constitution, then the pension reofrms cannot be enforced.

It’s a win for Chris Christie, who had diverted $2.5 Billion from pensions to cover state expenses.

New Jersey Law Journal  Governing

California is considering a constitutional proposition to require ANNUAL commerical property tax valuations to ensure that commerical and industrial property valuations follow current market value.

The annual property valuations for commerical & industrial property is estimated to generate $9 Billion per year for local government & schools. 

Sacramento Bee

The head of Pharr’s Economic Development Corporation, Fred Sandoval, has left his position. An interim executive director may be appointed as soon as Saturday.

A special meeting of the Pharr EDC has been called for Saturday, starting at 1 p.m. at City Hall. Rio Grande Guardian

Philadelphia collects roughly $2.2 million per year under civil forfeiture. The funds go straight to city coffers. We’re not talking seizing drug kinpin property, the amounts are lower than one would expect:

• 60% of the funds sized are in quantities below $250
• 33% are less than $100
• 1 in 10 asset siezures are more than $1,000

Washington Post

Big Jolly Politics says civil forfeiture is an issue Republicans should run on in 2016 in Texas. In Texas both TPPF and ACLU support civil asset foreiture reform which means revenue losses to local governments- most likely local police coffers.

Non-profits, charities, who monitors and watches them? NYTimes raised this issue after 4 cancer charities weren’t all that charitable, but were self-indulgent.

Enforcement of bad acting non-profits in Texas rests with the Attorney General. The office has a method to receive public complaints. 

“A group calling itself Mission Bay Alliance announced that Boies will lead a team of prominent land-use plaintiffs lawyers that includes San Francisco attorneys Susan Brandt-Hawley and Thomas Lippe as well as Osha Meserve and Patrick Soluri of Sacramento. Their retention comes days before the city is scheduled to release its environmental analysis of the 18,000-seat arena and accompanying office and retail development.”
The Recorder
 

Viriginia is rethinking whether it saves money with public private partnerships. Spefically, when the P3 investments involve infrastructure like transportation. The state is considering design-build and bond financing to save state revenue on future transportation projects.

The change of heart from the state that has been actively using P3s for 20 years, is controversy. The details:

” The most significant controversy involved a proposed 55-mile toll road linking the Norfolk area to Interstate 95, a major commercial corridor along the East Coast.The project started as a P3 but morphed into a more conventional contract, albeit one shrouded in the type of secrecy that had been afforded to those public-private deals.”  

Governing

The California Senate has set up a system of 24 hour, on call, drivers for Senators, who seem to like to over indulge in adult beverages. 

As the Sacramento Bee notes, it’s logical, but out of touch. I wonder if the list of rides are subject to open records?

Round #3 for a ballot proposal on moving CALPERs to a defined benefit plan.

The 2014 attempt ended up in a lawsuit when the reformers sued California Attorney General Kamala Harris over the language she used on the ballot. The courts sided with the Attroney General. 

Sacramento Bee

The Legislature has fully passed SB 849 to allow small businesses to protest property tax appraisals just as a residential property owner can.

This new tool will be availbale for small businesses with property valued at less than $3 million. 

Austin Business Journal

The Comptroller reminds us that there may be available tax exemptions during disasters & a list of resources:

The two-year, $3.8 billion tax-cut package, presuming final passage this weekend, will:

Cut the Franchise tax rates by 25 %  at a cost of $2.56 billion over two years. Comptroller Hegar Offers a History of the Franchise/Margins Tax.

Increase homestead exemptions on school property taxes from $15,000 to $25,000, with voter approval Nov. 3. The measure would save the average Texas property owner $125 per year.

Require a 60 percent vote by a local governing body before it could increase property tax rates.

Governor Abbott Statement (meaningful tax relief for Texans)

Lt. Gov. Patrick Statement (brings lasting, deserved property tax relief)

Comptroller Hegar (aplauds Legislature for making tax relief a priority)

Dallas Morning News Editorial   (needs (public education & TXDOT are unmet) Houston Chronicle Editorial (Cheap & unwise tax cut)

Empower Texas (tax payers still winning)

TPPF (Legislature right to cut franchise tax) (needed relief from excessive property taxes)

CPPP (Majority of texans will see little benefit & unfunded needs)

New AG opinion on the horizon to guide local government show to build infrastructure in ETJs.

Collin County is asking the Attorney General to specifically clarify :