Joseph Krist
Municipal Credit Consultant
With so much focus on the Presidential race and its many bizarre twists and turns, it is easy to lose focus on items which do not have impacts on elective office. Many important state and local spending, taxing, and capital investment issues are subject to a vote of the people. To that end, this edition of the Muni Credit News is devoted to a summary of the major tax and bond ballot initiatives on the November 8 ballot across the country.
TAX INITIATIVES
There are 32 initiatives on ballots across the country dealing with various increases and decreases in taxes as well as changes to various deductions from state income. There are eight in Washington state alone. Four are in Missouri and three each are in Florida and California. Of interest are a Missouri initiative to ban the extension of sales tax to services, an end to the deduction for Federal taxes for state tax purposes in Louisiana, and a ban on increasing sales tax rates in Washington. Here are proposed tobacco tax changes:
COLORADO – shall state taxes be increased $315.7 million annually by an amendment to the Colorado constitution increasing tobacco taxes beginning January 1, 2017 by 8.75 cents per pack ($1.75 PER PACK OF 20 CIGARETTES) and on other tobacco products by 22%?
MISSOURI – The current tax on a pack of 20 cigarettes is 17 cents. Proposition A is designed to increase this tax by 13 cents in January 2017 and by 5 cents in January of 2019 and, again, in January of 2021, when the total tax increase would reach 23 cents per pack. It would also tax non-cigarette tobacco products 5 percent of the manufacturer’s invoice price, paid by the seller. Tax revenue would be used to fund transportation infrastructure projects.
Proposition A is competing against Amendment 3, which would increase the cigarette tax to 77 cents by 2020 in 15 cent increments each year until then. In addition to the cigarette tax, the measure would also impose a fee on wholesalers of 67 cents per pack on cigarettes produced by a “non-participating manufacturer,” as defined by the state of Missouri. At least 75 percent of the revenue generated from these taxes would be devoted to increasing access to early childhood education programs. Around 10 percent of the funds would go toward grants for Missouri health care facilities, and approximately 5 percent would be devoted to smoking prevention programs.
In the event that both Proposition A and Amendment 3 pass, the measure with the most affirmative votes supersedes the other.
NORTH DAKOTA – Statutory Measure 4 is designed to increase the tax on cigarettes from 44 cents per pack to $2.20 per pack and to increase the tax price to 56 percent of the wholesale price. The definition of “tobacco products” would expand to include liquid nicotine and electronic inhalation devices. Measure 4 was designed to create a veterans’ tobacco trust fund, which would be funded by half of the new revenues. The remaining revenues would be dedicated to a community health trust fund for a comprehensive behavioral health plan, county-level health services, and chronic illness prevention and control programs. No revenue from the increase would be allocated to tobacco prevention or cessation programs.
Tax questions dealing with other than tobacco taxes include:
FLORIDA – Constitutional Amendment 5 is an amendment to the State Constitution to revise the homestead tax exemption that may be granted by counties or municipalities for property with just value less than $250,000 owned by certain senior, low-income, long-term residents to specify that just value is determined in the first tax year the owner applies and is eligible for the exemption.
Constitutional Amendment 3 an amendment to the State Constitution to authorize a first responder, who is totally and permanently disabled as a result of injuries sustained in the line of duty, to receive relief from ad valorem taxes assessed on homestead property, if authorized by general law.
HAWAII – Amendment 2 is a constitutional amendment to add alternatives for the disposition of excess general fund revenues. Allows the appropriation of general funds for the pre-payment of general obligation bond debt service or pension or other post-employment benefit liabilities.
ILLINOIS – House Joint Resolution 36 to amend the Revenue Article of the Illinois Constitution. Adds a new Section concerning highway funds. Provides that no moneys derived from taxes, fees, excises, or license taxes, relating to registration, titles, operation, or use of vehicles or public highways, roads, streets, bridges, mass transit, intercity passenger rail, ports, or airports, or motor fuels, including bond proceeds, shall be expended for other than costs of administering laws related to vehicles and transportation, costs for construction, reconstruction, maintenance, repair, and betterment of public highways, roads, streets, bridges, mass transit, intercity passenger rail, ports, airports, or other forms of transportation, and other statutory highway purposes, including the State or local share to match federal aid highway funds. Limits the costs of administering laws related to vehicles and transportation to direct program expenses of the Secretary of State, the State Police, and the Department of Transportation related to the enforcement of traffic laws and safety. Provides that the revenues described herein shall not be diverted to any other purpose. Provides that any additional modes of transportation proposed for State funding shall have dedicated sources of funding. Provides that federal funds may be spent for any purposes authorized by federal law.
LOUISIANA – Amendment 3 eliminates the deductibility of federal income taxes paid in computing state corporate income taxes.
MISSOURI – Amendment 4 amends the Missouri Constitution to prohibit a new state or local sales/use or other similar tax on any service or transaction. This amendment only applies to any service or transaction that was not subject to a sales/use or similar tax as of January 1, 2015.
NEW JERSEY – Public Question 2 provides that an additional three cents of the current motor fuels tax on diesel fuel, which is not dedicated for transportation purposes, be dedicated to the Transportation Trust Fund. In doing so, the entire State tax on diesel fuel would be used for transportation purposes. The entire State tax on gasoline is currently dedicated to the Transportation Trust Fund and used for transportation purposes. The amendment would also provide that all of the revenue from the current State tax on petroleum products gross receipts be dedicated to the Transportation Trust Fund. In doing so, the entire State tax on petroleum products gross receipts would be used for transportation purposes. This amendment does not change the current tax on motor fuels or petroleum products gross receipts.
OKLAHOMA – State Question 779 creates a limited purpose fund to improve public education. It levies a one cent sales and use tax to provide revenue for the fund. It allocates funds for specific institutions and purposes related to the improvement of public education, such as increasing teacher salaries, addressing teacher shortages, college and career readiness, and college affordability, improving higher education and career and technology education, and increasing access to voluntary early learning opportunities for low-income and at-risk children. It requires an annual audit of school districts’ use of monies from the fund. It prohibits school districts’ use of these funds for administrative salaries. It provides for an increase in teacher salaries. It requires that monies from the fund not supplant or replace other education funding.
OREGON – Measure 97 increases annual minimum tax on corporations with Oregon sales of more than $25 million; imposes minimum tax of $30,001 plus 2.5% of amount of sales above $25 million; eliminates tax cap; benefit companies (business entities that create public benefit) taxed under current law. Applies to tax years beginning on/after January l, 2017. Revenue from tax increase goes to: public education (early childhood through grade 12); healthcare; services for senior citizens.
This list is by no means exhaustive but represents summaries of proposed changes which would represent significant policy changes or offer clear benefits to debt holders.
BOND BALLOT ITEMS
ARKANSAS – Issue 3 removes the cap on the amount of bonds the state is allowed to issue to a corporation, association, institution or individual to help finance economic development projects and services; requires voter approval.
MAINE – Question 6 creates $100,000,000 bond issue for construction, reconstruction and rehabilitation of highways and bridges and for facilities, equipment and property acquisition related to ports, harbors, marine transportation, freight and passenger railroads, aviation, transit and bicycle and pedestrian trails, to be used to match an estimated $137,000,000 in federal and other funds.
MONTANA – I-181 authorizes the creation of state bond debts for $20 million per year for a period of ten years. I-181 establishes the Montana Biomedical Research Authority to oversee and review grant applications for the purpose of promoting the development of therapies and cures for brain diseases and injuries and mental illnesses, including Alzheimer’s, Parkinson’s, brain cancer, dementia, traumatic brain injury and stroke. The grants, which are funded by state general obligation bonds, can be used to pay the costs of peer-reviewed biomedical research and therapy development, recruiting scientists and students and acquiring innovative technologies at Montana biomedical research organizations. I-181 provides specifics for the Montana Biomedical Research Authority’s membership, powers, staffing, grant eligibility and evaluation requirements, and reporting requirements.
NEW MEXICO – Bond Question A the 2016 Capital Projects General Obligation Bond Act authorizes the issuance and sale of senior citizen facility improvement, construction and equipment acquisition bonds. Shall the state be authorized to issue general obligation bonds in an amount not to exceed fifteen million four hundred forty thousand dollars ($15,440,000) to make capital expenditures for certain senior citizen facility improvement, construction and equipment acquisition projects and provide for a general property tax imposition and levy for the payment of principal of, interest on and expenses incurred in connection with the issuance of the bonds and the collection of the tax as permitted by law?
Bond Question B the 2016 Capital Projects General Obligation Bond Act authorizes the issuance and sale of library acquisition bonds. Shall the state be authorized to issue general obligation bonds in an amount not to exceed ten million one hundred sixty-seven thousand dollars ($10,167,000) to make capital expenditures for academic, public school, tribal and public library resource acquisitions and provide for a general property tax imposition and levy for the payment of principal of, interest on and expenses incurred in connection with the issuance of the bonds and the collection of the tax as permitted by law?
Bond Question D the 2016 Capital Projects General Obligation Bond Act authorizes the issuance and sale of public safety capital improvement and acquisition bonds. Shall the state be authorized to issue general obligation bonds in an amount not to exceed eighteen million one hundred ninety-six thousand dollars ($18,196,000) to make capital expenditures for capital improvements and acquisitions for state police, public safety communications and national guard facilities statewide and provide for a general property tax imposition and levy for the payment of principal of, interest on and expenses incurred in connection with the issuance of the bonds and the collection of the tax as permitted by law?
Rhode Island – $35,000,000 in general obligation bonds to invest in the environment and recreation.
$45,500,000 in general obligation bonds to fund higher education-related construction projects at the University of Rhode Island.
$50,000,000 in general obligation bonds to help fund the construction of affordable housing, support urban revitalization and blight remediation.
$70,000,000 in general obligation bonds to fund improvements to the Port of Davisville at Quonset and the Port of Providence.
$27,000,000 in general obligation bonds to complete the construction of a new Veterans Home and support renovations of existing Veterans facilities in Rhode Island.
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