May 20, 2012 2012 Utah Legislative Interim Report: May 17, 2012
Revenue and Taxation Committee: Telecommunications Taxes
The Rev and Tax interim committee discussed various study items. There were several items that impact municipal interests. First, the committee will begin a study of various taxes and fees on telecommunication activities. Obviously among these charges are the Municipal Telecommunications Tax and E-911 charges. The committee was made aware of the complexity of the issues and the potential impact on city revenues. However, there are also several significant changes in the delivery of telecommunication services that merit further discussion. The committee understands that this is a multiyear undertaking and that cities will have to be involved.
Second, the committee will continue to examine the issue of how to tax hotel room purchases on services such as Travelocity and Expedia. Various proposals have been introduced in the past and all of the options will be discussed during this year’s interim.
Lastly, the committee wants to look at the option of restoring the sales tax on food to the various sales tax levies that it was removed from in the past. The basic 1% local option still has food in the base. However, our specialty levies do not.
Transportation Committee: Buy America Provisions
The Transportation Interim Committee discussed UDOT’s ongoing projects as well as challenges that all political entities are facing with the federal Buy America program. The Buy America program requires that all transportation projects that use any federal funds to only use steel and iron manufactured in the United States. If any portion of the project does not comply with Buy America, then the federal government will not reimburse the costs that they had committed to provide. While the principle is laudable, many cities and towns have encountered difficulties in complying with the program. For example, some cities have discovered that certain steel parts are no longer manufactured in the United States. As a result, the entire project has been delayed. UDOT is also trying to pre-certify vendors to ensure that they are certified. Likewise, UDOT and utility companies are reevaluating how they approach projects so that utility companies could avoid the Buy America requirements. However, that means that utility companies and the transportation agency would have to dig on two separate occasions instead of doing the project simultaneously. The end result that UDOT and municipalities face is increased project costs and delays. ULCT expressed our concern about the consequences of Buy America and will continue to work with the Federal Highway Administration and the congressional delegation.
Business and Labor Committee: Alcohol Regulation
The Business and Labor Interim Committee discussed the current quota alcohol retail license scheme as well as the “monetization” of retail licenses. Currently, there are no full-service restaurant, limited-service restaurant, or club licenses available. In April, 15 applicants unsuccessfully attempted to obtain a full service restaurant license. Cities have continuously declared that restaurants are a key plank of local economic development and “place-making” efforts in the community. Additionally, the “monetization” policy implemented in 2011 would allow for current licensees to sell their license to a willing buyer. The legislative intent was to empower a buyer to purchase a seller’s restaurant, property, and license at once. However, since there are no current available licenses, the “monetization” policy essentially creates a secondary market and turns the license into a commodity. The committee members expressed concern that the current quota scheme was not meeting the demand for restaurants around the state and that the “monetization” policy was not the original intent of the legislature. The committee agreed to evaluate options for the quota system and the “monetization” policy and propose solutions during the June interim session.