Most Recent Action
At the request of the chairman, the sponsor agreed to roll the bill until next year (2010) in exchange for the commitment of the chair and other interested parties that this issue would be included in the scheduled review of the act.
Background
In 2005, counties and certain metro governments affected by growth were seeking additional funds to address school construction needs. The county representatives sought authority to establish a local real estate transfer tax as a means to supplement education funding. This effort was opposed by realtors and developers.
Representatives of the administration and the general assembly convened discussions with representatives of county government, realtors and developers. As the underlying request did not include municipal governments, municipalities did not participate in these discussions.
These discussions resulted in the adoption of the “County Powers Relief Act of 2006” in the closing days of the 2005 legislative session. This act granted county governments and certain metro governments authority to, “levy a privilege tax on persons and entities engaged in the residential development of property in order to provide a county with an additional source of funding to defray the cost of providing school facilities to meet the needs of the citizens of the county as a result of population growth.”
Under the act, a county may levy a tax on residential development only if it meets at least one of the following criteria:
(1) The county experienced a growth rate of 20 percent or more in total population from the 1990 federal census to the 2000 federal census, or the county experiences growth of 20 percent or more between any subsequent federal decennial censuses; or
(2) The county experienced a 9 percent or more increase in population over the period from the year 2000 to 2004, or over a subsequent four-year period, according to the United States census bureau population estimates.
In exchange for the aforementioned authority granted counties and certain metro governments under the act, counties agreed to surrender their authority to enact an impact fee on development or a local real estate transfer tax.
Problem
As a result of a drafting error, the “County Powers Relief Act of 2006” has been determined to restrict municipalities’ authority to levy a tax on development.
Although municipal government was not a participant in the initial push for funding or the subsequent discussions, and although municipal governments were not a party to the final agreement that led to the “County Powers Relief Act of 2006,” the Attorney General has opined that the act restricts municipal government’s authority to increase an existing adequate facilities tax or to impose any new adequate facilities tax on residential development.
Despite the fact that the act’s title and statement of purpose clearly suggests it was intended to address counties, and despite the fact that the act includes more than forty references to counties; yet does not include a single reference to municipal governments, the Attorney General has determined that the act imposes limits on municipal taxing authority.
Even though counties willingly entered into an agreement whereby in exchange for new authority to address school construction needs counties agreed to a statutory prohibition of the adoption of new development taxes, the Attorney General has indicated that the taxing authority of municipal government, which entered into no such agreement, is also limited by the act.
The Attorney General’s opinion is based on the use of the term “local governments” in the following paragraph from the act: “After the effective date of this act, no county shall be authorized to enact an impact fee on development or a local real estate transfer tax by private or public act. In addition, this part shall be the exclusive authority for local governments to adopt any new or additional adequate facilities taxes on development.”
The Attorney General reasoned that as “local government” is most commonly used in the statutes to describe county, metropolitan and municipal government, then the limitations imposed under the act are applicable to municipal governments.
Proposed Legislation
Amend the “County Powers Relief Act of 2006” to reflect the original legislative intent, as evidenced in the title and statement of purpose, by replacing “local governments” in TCA, § 67-4-2913 with “county or metropolitan government.”
Benefits to Municipalities
Replacing “local government” with a term that is more consistent with the expressed purpose and stated objective of the act will restore municipal authority and better enable municipalities to respond to the challenges associated with growth.
