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We need YOUR Support!

Greetings fellow Goodyear residents:

We are taking this opportunity to bring to your attention a piece of legislation currently being debated at the State Legislature. It is HB2657 titled "Transaction Privilege Tax Changes". This bill seeks to change the way that construction sales taxes are collected in Arizona and would have a devastating impact on the City budget.


Below you will find an e-mail that Council has provided to all our state legislators. Also provided below is an estimate, using current fiscal year information, of the monetary impacts that the legislation would have if it were implemented. As you will note, the City would lose between $5.8m and $6.2m of the estimated total collections of $6.5m in construction sales tax revenue. During years where construction activities increase we would lose even more funding; funding that we use to support a variety of infrastructure projects. And it is our position that growth should pay for growth and this tax allows us to pursue that goal.

Rest assured your Council is doing everything in its power to make sure that this legislation does not get passed. But we need your help! Follow this link (
Who represents you?) and it will provide you with contact information to Governor Brewer and our state legislators. We cannot encourage you strongly enough to contact them and let them know that you do not support this legislation!


E-Mail from City Council to our State Legislators

As you are aware, the introduction of HB2657 Transaction Privilege Tax Changes has caused grave concern among Arizona cities. On several occasions and in various venues we and our fellow elected officials across the state have taken the opportunity to voice our concerns. In spite of this concerted effort we are still hearing from certain quarters that the impact to cities and towns will not be as severe as is being portrayed. Statements such as these are simply not correct and indicate a lack of understanding regarding how the sales tax distribution formulas work and the real impact on cities and towns that would occur if HB2657 passes as currently written.

In order to create a more accurate representation regarding this point we have generated an empirical analysis (below) using the State model and a model provided by the City of Phoenix. What is most telling, regardless of the model used, is that even using the State model we would lose $5.8m of the estimated $6.5m we anticipate collecting in FY13. Further, in years where construction was booming, our losses would have been far more substantial. For example, in FY07 we collected approximately $22m in construction sales tax revenue. Under the state model as proposed, we would have lost approximately 88% of that revenue or $19m.

These losses are unacceptable and would have devastating consequences on our ability to provide services to our community. Projects and programs funded with these one-time monies include streets, fire stations, our vehicle replacement program, our IT replacement program, parks projects, and facilities projects.


Once again, we implore you to consider the significantly negative impact of this legislation. And we further ask; what is it that you are fixing? Construction sales tax has nothing to do with simplification and online retail sales and we respectfully ask that you remove this from the legislation.
 

Analysis of Proposed Financial Impact of Legislation HB2657 on the City of Goodyear

One of the main provisions of the Transaction Privilege Tax Reform Bill (HB2657) requires changing the way construction sales tax is collected in the State of Arizona. Specifically, it seeks to change the point at which taxes are collected from point of destination (where products are used) to point of sale (where products are sold). It has been the contention of some that the impact to cities in Arizona would be negligible or even beneficial. It is the contention of our community that the change being proposed would impact us in a significantly negative fashion.


Using the state's model as a starting point, we calculated that the City of Goodyear would suffer a net loss in revenue of $5.8m out of a total of $6.5m estimated construction sales tax revenue for the current year (FY13). Based on a model provided by the City of Phoenix, we would lose $6.2m out of a total of $6.5m estimated construction sales tax revenue for the current year (FY13). What is most telling about the scenarios is that, in both cases, the City will lose a substantial amount of revenue. Assuming a similar loss rate, in years such as FY07 when our construction sales tax revenue was $22m, we would lose approximately $19m (or 88%).

Projects and programs funded with these one-time monies include streets, fire stations, our vehicle replacement program, our IT replacement program, parks projects, and facilities projects. 

Regardless of the assumptions used, it is clear; our community will lose substantial amounts of revenue under the proposed changes. And for an item that has nothing to do with simplification but is really a tax break for the construction industry.


Construction Sales Tax Revenue Analysis

Local Portion
Net Taxable Construction Value

$185,714,286

Estimated Goodyear CST Revenue FY13

$6,500,000

Net Taxable Construction Materials Treated as Retail*

$7,614,286

Estimated Goodyear Retail Revenue FY13

$190,357

Sales Tax Loss to Goodyear

$6,309,643

*Assumes 41% of total value with 10% of purchasing activity remaining in Goodyear
State Shared Portion

Phoenix Model

State Model

Additional Revenue Shifted to Retail from Construction

$542,327

$942,239

Lost Contracting State Shared Revenue

$390,800

$390,800

Gain in State Shared Revenue

$151,527

$551,439

Net $ Loss Combined Local and State Shared

$6,158,116

$5,758,204

       Percentage Loss

94.74%

88.59%

 



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City of Goodyear • 190 N. Litchfield Road • Goodyear AZ 85338 • Phone 623-932-3910 • Toll-Free 1-800-872-1749