Legality of variable tax rate questioned
By Dana Trumbull
Appearing on the horizon for the November election are two propositions intended to improve transportation routes throughout Pinal County. Prop 416, the Regional Transportation Plan (view map here), was developed with extensive public input and municipal collaboration. It focuses largely on creating the infrastructure needed to attract new business and industry, as well as facilitating safer, less congested routes between communities and existing economic centers throughout Pinal County. Prop 417 defines a half-cent transportation excise (sales) tax that is intended to fund the 20-year phased plan.
Both proposals were unanimously approved by the Pinal County Board of Supervisors at the June 21 regular Board session (Item 7), clearing the way to place the transportation plan and tax on the November ballot. “A lot of people have been working on this for a very long time,” stated District 5 Supervisor Todd House. “This is the future for Pinal County.” House also praised the cities that collaborated on the plan, “Because that’s real tough bringing all the cities together to come up with one plan. The whole county is growing, knowing that we have to work as a group rather than individual cities.” Participating members of the Regional Transportation Authority (RTA) that formulated the plan include Apache Junction, Casa Grande, Coolidge, Eloy, Florence, Kearny, Mammoth, Maricopa, Queen Creek, and Superior, as well as the Ak-Chin and Gila River Indian Communities. Supporters include Apache Junction Mayor Jeff Serdy and the Apache Junction Chamber of Commerce.
Jackob Anderson, CEO of Saint Holdings, an Arizona-based real estate investment and development company voiced his support stating, “The [investors] I talked to yesterday are very serious to locate here. They have 200 jobs with a $50 million investment. These are the sort of people that, when we present this and show the collaboration between the county and the cities and the outreach the staff has done… it shows them that this is a community that works well together.”
Legality of Tax Structure Questioned
As a prospective commercial transportation hub capable of attracting large manufacturing and logistics industries, Casa Grande is projected to receive a large portion of the tax dollars that would be generated by Prop 417. Apache Junction, on the other hand, would benefit most from the North/South Corridor project, which will afford a practical and convenient alternative connection to I-10 and the Tucson area.
While some have expressed disappointment about the distribution and /or timing of the projects within the Regional Transportation Plan, few individuals or interests have spoken out against the plan. There are, however, concerns about the proposed funding mechanism.
Early on, representatives of the Arizona Automobile Association opposed the half-cent tax. To alleviate these concerns, the Regional Transportation Authority created a variable-rate tax structure with a $10,000 cap. If one were to purchase an item such as a car or RV, the sales tax would only be applied to the first $10,000. Any amount over that cap would not be subject to the transportation excise tax.
At the June 14 Board of Supervisors special session (Item 5), District 1 Supervisor Pete Rios questioned why the bond attorney in 2016 advised against a cap, suggesting that the County would “wind up in court.” Now, in 2017, without any change in verbiage, bond council is advising that the cap is ok, “as long as we describe it very well and thoroughly to the voters in the brochure that we put together for the voters to see.” According to Andy Smith, chairman of the RTA, the change of legal opinion is primarily due to a change in legal representation (legislative council and bond attorneys), rather than a change in verbiage or applicable law.
During public comment at the June 21 Pinal County Board of Supervisors meeting, Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona, voiced opposition to the structure of the proposed tax: “I think you’re pushing the envelope here… it’s imperative that the Board have a legal opinion in writing that what you’re doing is allowed under law.” After all public comments were heard, the Supervisors called an executive session to consult the assistant county attorney one more time, before reconvening for the vote.
Despite their due diligence, however, there are still those who feel the Board does not have the legal authority to levy a variable rate tax. Jennifer Stielow, vice president of the Arizona Tax Research Association (ATRA), stated an opinion in the AZ Capitol Times (azcapitoltimes.com), “Pinal’s ballot language calls for an outright exemption for all sales tax classes beyond the retail class. Other sales tax classifications, such as restaurants and bars, utilities, and prime contracting, will be exempt from paying the new sales tax. Moreover, the ballot also exempts retail purchases in excess of $10,000.”
The controversy is not about the county’s ability to levy a half-cent sales tax to fund the Regional Transportation Plan, but rather it is specifically about the legality of the variable rate and the precedent set “by allowing the county sales tax base to differ from the state tax base,” according to Stielow. ATRA favors reforming Arizona’s sales tax system to bring consistency between state, county and municipal sales tax structures.
It will be up to the voters on November 7, to decide if they believe the tax is fair and appropriate. Implementation, however, could potentially be stalled in court, pending a definitive legal opinion.
Political Action Committee, Yes! on 416 and 417
Projects Development Schedule
Regional Transportation Plan Map: