By Larry Jones
June 23, 2003

During the June 6 meeting of the Urban Economic Policy Committee in Denver, DeKalb (IL) Mayor Greg Sparrow served as acting chairman and introduced several speakers who commented on the fiscal relief bill recently signed by President Bush, the Streamlined Sales Tax Project and the American Community Survey. The committee also heard remarks from the Winnipeg, Canada Mayor Glen Murray and adopted nine resolutions.

Fiscal Relief

Before introducing Bill Pound, executive director of the National Conference of State Legislatures, Sparrow told members of the committee that the Senate had approved a $20 billion fiscal relief package for states. In the Senate version of the bill, $4 billion was earmarked for local governments. But during final negotiations, the language earmarking $4 billion for local governments was dropped by a House and Senate conference panel and all of the funds were given to states.

The economic stimulus package is now public law. Pound told mayors that NCSL, the Conference and other state and local groups had worked together to win approval for the $20 billion and all groups were in favor of sending a portion of the funds down to local governments. But for some unexplained reason, Congress decided in the eleventh hour to drop the language earmarking $4 billion for local governments.

Pound pointed out that of the $20 billion approved for states, $10 billion will be available to assist states with Medicaid payments. Some of these funds will be shared with local governments, particularly counties and some combined city-county governments like New York City that are required to pay a portion of the Medicaid costs. The remaining $10 billion will be made available to help states with general fiscal relief. He explained that states had been given a great deal of flexibility to spend these funds. "The only provisions in the bill said it must be spent for programs that are connected to unfunded mandates and normal domestic spending programs that are consistent with the most recently passed state budget," he said.

In response to concerns raised about some governors stating publicly that they are planning to put a portion of their general fiscal relief money in a reserve fund to spend later on, Pound said he questions whether this was consistent with the legislation. He said "I think they can for a period of time [put the money in reserve], less than a year. But I think to hold it in a permanent reserve is not consistent with congressional intent." Although states are not required to share their general fiscal relief funds with local governments, Pound said they should benefit in two ways: the funds will alleviate some of the financial pressure on state governments; and there may be some direct pass'through to some local governments. But he said that will have to be negotiated in every state.

Streamlined Sales Tax Project

On the Streamlined Sales Tax Project, Pound told mayors that 35 states have joined together to implement a new sales tax simplification plan that will eliminate the burdens on out-of'state merchants (remote sellers) to make it simple and easy for them to collect state and local sales taxes. He explained that under the Commerce Clause of the U.S. Constitution, state and local governments are prohibited from imposing a duty on out-of'state merchants to collect their taxes because the Supreme Court has ruled that to do so would be too cumbersome and difficult. To address this concern, most states have developed a joint plan to simplify the collection of taxes. Last November, they reached agreement on the plan and each state legislature was asked to consider adopting legislation to bring their tax system in compliance with the plan.

Under the plan, states will begin implementing the simplified tax collection system on a voluntary basis after it is adopted by 10 or more states that comprise 20 percent of the U.S. population. As of the last weekend in May, Pound told mayors that 16 states with 25 percent of the United States population had adopted legislation to comply with the new system. "So sometime early fall, the states will come together to try to bring this voluntary agreement online. At the same time, within the month I think, we will go to Congress (an by -we- I mean the mayors, the cities, the counties, the legislators, and the governors) and have a bill introduced which would sanction the system," he said. By approving legislation, Pound said Congress would in essence be saying to state and local governments "you have met the test, you have simplified the system, we grant you authority [to require remote sellers to collect your taxes], so that it takes away any legal question about this."

American Community Survey

Tim Jones from the U.S. Census Bureau in Washington (DC) thanked the U.S. Conference of Mayors for adopting a resolution last year in support of the American Community Survey, which is the Bureau's plan to replace the long form census questionnaire in all future censuses. The reason the long form is being replaced is because it is used to collect data once every ten years that's used by the federal government to make critical decisions like the allocation resources. Because this data is out-dated after the first year, it poses a problem for federal and other decision-makers who must rely on current data.

Jones told mayors that the ACS will be conducted every year to provide up-to-date data in a variety of critical areas. He said the Bureau has been testing the new survey in 31 comparison sites around the country, and a nationwide supplementary survey since 1996. The plan was to launch the new survey nationwide this year by sending it out to 3 million people in every county in the nation but budget problems forced the Bureau to postpone it. Now the Bureau plans to start conducting the new survey in July 2004 and the first full year of implementation will be 2005. This means the Bureau will begin releasing data from the new survey by mid year of 2006, first for areas with a population of 65,000 and greater. In 2008, data will be released for areas with a population of 20,000 and greater and in 2010 data will be released for areas smaller than 20,000.

Jones said Representative Adam H. Putman (FL), who chairs the House Subcommittee on the Census, would like to see mayors involved in promoting the ACS somewhat similar to what was done for Census 2000. He has proposed that mayors be videotaped at their future conferences so the Bureau can use the video tapes to influence citizens to fill out the questionnaire and send it back.

Canadian City of Winnipeg

Murray told members of the committee that "Canadian cities are not retaining a sufficient share of the wealth they generate, either in their local business community, or in the hands of our laborers or the local government to sustain ourselves." He said this is a problem because "cities have to retain enough of the wealth they generate to sustain themselves so that they can continue to contribute to the building of our nation." He pointed out that Canadian cities are overly dependent on property taxes as their main source of revenue. To address this concern, he said Manitoba, the provincial legislature, is about to pass the first city charter, which will give local governments authority to tax other sources and more flexibility to solve their problems.

Following the presentations, Mayor Sparrow turned to the committee's resolutions. He told members that nine resolutions were submitted for consideration. The following is a summary of each of the resolutions and the committee's action.

Resolutions

Urging Support For Local Fiscal Relief And Economic Growth urges Congress and the President to approve legislation addressing the concerns in The U.S. Conference of Mayors economic growth proposal which calls for general fiscal assistance for local governments, changes in the tax code to provide more incentives to spur private sector investments, an increase in investments in job creation programs such as transportation and housing, and fiscal relief for states. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

Urging Support for The Municipal Debt Refinancing Act urges Congress to enact the Municipal Debt Refinancing Act which would permit municipalities and other issuers of tax-exempt bonds to advance refinance outstanding tax-exempt bonds more than once and allow them to reap the benefits from lower interest rates. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

Earned Income Tax Credit Pre-Certification expresses the United States Conference of Mayors opposition to the Internal Revenue Services initiatives which would impose new burdensome requirements on hard working low- income families making it more difficult for them to qualify for the Earned Income Tax Credit. It also expresses support for H.R. 1894, legislation that would prohibit the new IRS requirements from taking effect without congressional authorization. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

U.S. Metro Areas as Engines of The American Economy expresses mayors support for the continued development of its U.S. Metro Economy Series, which release annual reports on the Gross Metropolitan Product and Metro Employment Out Look for the nation's 319 metro areas. It further encourages the expansion of the series to document how important U.S. metro economies are to individual state economies and urges the continuous development of strategies to increase investment in American cities. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

Reform of the Federal Sugar Subsidy Program urges Congress to pass legislation modifying the Federal Sugar Subsidy program in a way that would better balance the legitimate interests of sugar growers with those from the confectionary and related food products industries. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a majority vote.

Urging Support For The America Saves Program urges The United states Conference of Mayors to support the America Saves program which is a nation-wide campaign in which a broad coalition of private non-profit, corporate and government groups help individuals and families save money, build wealth and reduce debt. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

Extending and Expanding the Federal Brownfield Tax Incentive urges Congress to enact legislation extending the December 31, 2003 expiration date of the Brownfield Remediation Tax Deduction, which provides tax incentives to help local communities cleanup and reuse brownfield sites, and urges the Environmental Protection Agency and the U.S. Treasury Department to work with Congress to investigate opportunities to expand the types of costs eligible for the federal tax benefit. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

Exempting Brownfields Redevelopment Activities from Unrelated Business Income Tax urges Congress to pass legislation that would exempt brownfield investments from incurring Unrelated Business Income Tax and there by encourage additional private sector investment for brownfield properties. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a unanimous vote.

Urging Support for the Equity For Reservists Pay Act urges Congress to enact the Equity for Reservists Pay Act to provide incentives to public and private employers to pay men and women in the National Guard and Reservists their regular salaries instead of military pay when they are called to active duty. A motion was made and duly seconded to adopt the resolution. Motion was agreed to by a majority vote.