Colorado Legislative Council Staff

STATE and LOCAL

FISCAL IMPACT

TITLE:            CONCERNING THE ESTABLISHMENT OF THE LOCAL GOVERNMENT GROWTH ASSISTANCE PROGRAM TO PROVIDE FINANCIAL ASSISTANCE TO GROWTH-IMPACTED LOCAL GOVERNMENTAL ENTITIES, AND MAKING AN APPROPRIATION IN CONNECTION THEREWITH.

Summary of Legislation

            This bill establishes a pilot program within the Department of Local Affairs that allows local governments to work cooperatively to address the impacts of growth by utilizing financial assistance given by the state to growth-impacted regions. The bill authorizes the department to promulgate rules to implement the program. The pilot program is to be repealed July 1, 2005.

            The bill allows any combination of governmental entities, where at least one entity is a growth county and one entity is a subsidizing county and where at least one city or town located in each of the counties is a participant, to enter into an intergovernmental agreement for up to five years. The purpose of the agreement is to implement a plan to relieve financial pressures and facilitate the provision of certain services in regions where growth impacts cross local governmental boundaries.

            The bill requires the agreement to be submitted to the Department of Local Affairs for review and certification that the entities are qualified to enter into the agreement. The bill stipulates the conditions and qualifying criteria of the agreement, including a method to allocate moneys in the Local Government Growth Assistance Fund to the entities that are parties to the agreement. The bill requires the department to determine the amount of excess per capita revenue and the population of each growth county that is a party to the agreement. The bill specifies that the department shall not approve or be required to certify agreements entered into after July 1, 2000. The parties to an agreement may, no later than November 1 of each year, apply to the department for a grant or loan from the fund.

            When an agreement has been approved, the bill requires the parties to the agreement to create a board of trustees. The bill specifies the board membership and the duties of the board, which include establishing a local growth fund and providing an annual fiscal report to the department. Moneys in the local fund are to consist of state grants or loans awarded by the department, revenues from a local sales tax authorized by the bill, and any other moneys received pursuant to the agreement. The board is not to be considered a district, but rather an instrumentality of the parties to the agreement. Moneys distributed from the local growth fund to school districts may only be used for capital construction and/or land acquisition.

            The bill creates a nine-member Local Government Growth Assistance Advisory Committee in the department to establish a method for assessing the impact of growth on parties to the approved agreements, and to establish criteria for awarding grants and loans. The bill creates the Local Government Growth Assistance Fund to consist of all moneys appropriated to the fund by the General Assembly, all loan repayments, and all fund investment earnings. All moneys in the state fund at the end of a fiscal year and all investment earnings of the fund are to remain in the fund. Moneys in the state fund are subject to annual appropriation to the department to administer the Local Government Growth Assistance Program and to award loans and grants.

            Based upon the recommendations of the advisory committee, the department may award a loan or grant to qualifying parties, subject to those parties providing matching funds in the amount of the grant or loan. The bill requires the department to submit an annual report starting January 15, 2000, to the Governor and the Senate and House Local Government Committees concerning the status of all agreements.

            The bill appropriates $10 million from the state General Fund to the Local Government Growth Assistance Fund for further appropriation to the Department of Local Affairs to implement and administer the program starting in FY 1999-2000.

            The bill authorizes any county, city, or town that is party to an intergovernmental agreement to levy a sales tax to create an additional source of revenue to the Local Growth Impact Fund. This local sales tax is to be exempt from the seven percent total sales tax rate limitation imposed by current law. The levy of the sales tax is subject to approval by the voters and certification by the State Controller that the aggregate amount of state revenues exceeds the limitation on state fiscal year spending imposed by Section 20(7)(a) of Article X of the state constitution. The bill specifies certain conditions for the sales tax to be, or not to be, imposed. The bill limits the time period for the imposition of such sales taxes to be within the period of time covered by the intergovernmental agreement.

            The bill requires the county, city, or town for which such a sales tax is authorized to notify the Department of Revenue for purposes of implementing a temporary state sales and use tax rate reduction within that geographic region. If certification of excess state revenue is made by September 1 of a calendar year in which an election authorizes a local sales tax increase, the bill requires the Department of Revenue to reduce the state sales tax for that locality for the period of January 1 through June 30 by a percentage equal to the amount of the local sales tax increase. If certification of excess state revenue is made by September 1 of a calendar year after an election authorizing a local sales tax increase, the bill requires the department to reduce the state sales tax for that locality by a percentage equal to the amount of the local sales tax increase for the period of October 1 of the calendar year during which that fiscal year ended through June 30 of the calendar year immediately subsequent to the calendar year in which such fiscal year ended.

            The bill requires any such state sales tax reduction to be published in rules promulgated by the department, and to be included in all notices and publications issued by the department concerning state sales tax. The bill requires the State Controller to certify the amount of excess state revenues, and requires the State Auditor to audit the report of the State Controller.

State Revenues

            This bill allows local governments, who are parties to intergovernmental agreements, to levy a local sales tax to create an additional source of revenue to the Local Growth Impact Fund. The bill requires the local governments for which the sales tax is authorized to notify the Department of Revenue to implement a temporary state sales and use tax rate reduction by a percentage equal to the amount of the local sales tax increase within that geographic region. The state sales tax reduction is to be within the period of time covered by the intergovernmental agreement.

            The amount of any state sales tax revenue reduction is dependent upon the local governments that enter into such an agreement, the rate of the sales tax reduction, and the period of time the reduction is in force. The amount of any resulting state General Fund revenue reduction has not been estimated.

State Expenditures

            Department of Local Affairs. The bill appropriates $10 million from the state General Fund to the Local Government Growth Assistance Fund for further appropriation to the Department of Local Affairs starting in FY 1999-2000. Moneys in the fund are to be used to award loans and grants to local governments, and to administer the Local Government Growth Assistance Program.

            The department will be required to promulgate rules, administer the program, support the advisory committee, and submit annual reports to the Governor and General Assembly throughout the duration of the program. Table 1 provides a summary of the department's costs to support the program. These costs are based upon the following assumptions:

            •   the department will provide on-going staff assistance to the program through July 1, 2005;

            •   that during FY 1999-2000, local governments and the department will require sufficient time for program start-up;

            •   that few, if any, grants or loans will be awarded during FY 1999-2000;

            •   the department will not approve or certify agreements entered into after July 1, 2000;

            •   that the majority of grants and loans will be awarded during FY 2000-01;

            •   the parties to an agreement may annually apply to the department for a grant or loan from the fund; and

            •   the department will require a sufficient fund balance to pay for annual administrative costs estimated to be a total of approximately $265,000 through July 1, 2005;.

            Department of Revenue. This bill will require the Department of Revenue to revise current procedures to process sales tax returns for any local governments that elect to levy a local sales tax. As a result, the department will incur additional administrative and operating expenses. The amount of those expenses is dependent upon:

            •   the number of local governments that elect to levy a local sales tax;

            •   the period of time the local sales tax is in force;

            •   the number of business that are affected by the local and state sales tax;

            •   the department's ability to identify businesses within the local governments by a jurisdiction code;

            •   the department's ability to collect the state sales tax when a parent and branch business account exists, and the tax rate is different for the parent and branch; and

            •   the number of additional field audits that will have to be conducted.

            In the event the parent and branch businesses are subjected to different sales taxes, the businesses would be required to establish a tax accounting and reporting system to accommodate the different tax rates at each business location.

            Additionally, if the state sales tax rate change is applicable from January to June, the department may be able to make the tax rate adjustment on the sales tax coupon books at no extra cost. However, if the rate change is applicable from October to June, the department will be required to make a separate coupon book mailing for those localities with a different state sales tax rate.

            The amount of any additional General Fund costs necessary for the Department of Revenue to support the provisions of this bill have not been estimated. This fiscal note cannot assess whether those costs can be absorbed within existing resources. If the department incurs additional costs, and if those costs cannot be absorbed, the department will request additional resources at that time.

Expenditures Not Included

            Pursuant to the Joint Budget Committee’s budget policies, the following expenditures have not been included in this fiscal note for the Department of Local Affairs:

            •   health and life insurance costs of $2,211;

            •   short-term disability costs of $87;

            •   inflationary cost factors;

            •   leased space; and

            •   indirect costs.

Other State Impact

            The potential state sales tax revenue reduction authorized in this bill will mean a reduction in the amount of state funds required to be refunded to taxpayers under the terms of TABOR, and less General Fund moneys available for state capital construction requirements.

Local Government Impact

            The bill authorizes any county, city, or town that is party to an intergovernmental agreement to levy a local sales tax, subject to approval of the voters, to create an additional source of revenue to the Local Growth Impact Fund. The levy of the local sales tax is subject to certification by the State Controller that the aggregate amount of state revenues exceeds the limitation on state fiscal year spending imposed by Section 20(7)(a) of Article X of the state constitution. The bill limits the time period for the imposition of the local sales taxes to be within the period of time covered by the intergovernmental agreement. During that period of time, the parties to the agreement would be eligible for an equivalent temporary state sales and use tax rate reduction.

State Appropriations

            This bill would require a General Fund appropriation of $10,000,000 to the Local Government Growth Assistance Fund for FY 1999-2000. Of this amount, the Department of Local Affairs would require a cash fund exempt appropriation of $54,277 and 1.0 FTE, and the Department of Law would require a cash fund exempt spending authority of $3,598.

Departments Contacted

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