eNews February 16, 2018Friday, February 16, 2018 - 02:47pm
In this issue
- Alert: Wireless rights-of-way fee bills to be heard Monday, Tuesday
- Finance bills likely to be tied to budget conference
- State tax collections continue to surge; But state budget gurus sound cautionary note
- Transportation bills move through the process
- House Counties, Cities and Towns reports bills
- House General Laws reports bills of interest
Alert: Wireless rights-of-way fee bills to be heard Monday, Tuesday
Please make sure you let your delegate and senator know of your opposition to these bills.
HB1427 and SB823 set statewide fees for the use of local and state public rights-of-way by wireless providers. HB1427 will be heard in Senate Commerce and Labor on Mon., Feb. 19, after adjournment of the noon floor session. SB823 will be heard in House Commerce and Labor on Tues., Feb. 20, after adjournment of the noon floor session.
If you have a member on either committee, it is critical that you call in OPPOSITION to these bills. Last year localities were successful in retaining the ability to negotiate rights-of-way fees and VML is vehement that localities should retain this authority.
- Localities should retain the authority to set fees for the use of LOCAL rights-of-way
- Statewide fees are not likely to be in tune with actual costs
- Statewide fees will not account for the differences in the cost and availability of rights-of-way throughout the state
- There is no rationale for the preferential treatment for the wireless industry.
- Should this legislation be adopted, every other industry will be fighting for statewide fees as well.
VML contact: Michelle Gowdy, firstname.lastname@example.org
Finance bills likely to be tied to budget conference
The legislation discussed below will likely be issues tied to the House-Senate budget conference. As a reminder, House Appropriations and Senate Finance committees release their budgets this Sunday.
Revenue Reserve Fund
HB763 (Chris Jones), which creates a Revenue Reserve Fund, flew out of the House on Feb. 14 by a unanimous 100 to 0 vote. The bill has been assigned to the Senate Finance Committee.
The intent behind the bill is to prove to Wall Street that Virginia is dealing with its structurally imbalanced budget. Standard and Poor’s gave the state a negative outlook based on the Commonwealth’s recent pattern of structural imbalance despite a period of economic growth. HB763 creates the Revenue Reserve Fund to offset general fund budget shortfalls of two percent or less.
Under the bill’s provisions, a deposit to the Reserve Fund would be required whenever there is a fiscal year in which there is no mandatory deposit to the Revenue Stabilization Fund (“Rainy Day” Fund). The Fund’s total balance could not exceed two percent of the total general fund revenues for the prior fiscal year. The Reserve Fund would be the eighth statutory commitment the State Comptroller must recognize in his annual report required under § 2.2-1514 of the Code of Virginia.
A withdrawal from the Fund would be allowed when a revised general fund forecast is submitted to the legislature that demonstrates a decline of two percent or less when compared with the total general fund revenues appropriated. Any withdrawal or transfer from the Fund could not exceed 50.0 percent of the Fund’s balance.
The introduced Budget Bills (HB/SB29 and HB/SB30) include deposits to a special fund for similar purposes. Gov. Terry McAuliffe had put together a series of amendments for fiscal years 2018, 2019 and 2020 depositing over $400.0 million by FY20. However, the McAuliffe amendments are not as detailed as HB 763. The table below, which was prepared by the Department of Planning and Budget, compares the amounts that could be deposited under the two schemes based on the December 2017 revenue estimates.
The potential issues for the Senate Finance Committee (and perhaps later the budget conferees) would be the decision to accept the creation of another reserve fund and, if accepted, the amounts to be deposited.
FY 2018 GF
Estimates (HB 29)
FY 2019 GF
Estimates (HB 30)
FY 2020 GF
Estimates (HB 30)
|Estimated GF Revenue Collections||$19,328.2||$20,096.5||$20,892.3|
|2% Fund Maximum ($s millions)||$386.6||$401.9||$417.9|
|1% Deposit Maximum ($s millions)||$193.3||$201.0||$208.9|
|Amount Included for Deposit in Budget Bills ($s millions)||$156.4||$50.0||$220.7|
Income tax modifications in qualified localities
HB222 (Morefield) and SB883 (Stanley) are similar, but not identical, measures to allow certain eligible companies operating in qualified localities to apportion Virginia taxable income using modified apportionment factors to drive down their tax liabilities. The bills would also allow employees of such companies a special individual income tax subtraction.
Under the legislation, for the period of January 1, 2018 through December 31, 2028, an eligible company would have to spend at least $5.0 million on new capital investment in a qualified locality and to create a minimum of ten new jobs. These new jobs must pay at least twice the state minimum wage for at least 1,680 hours per year. (The bills are silent regarding the provision of fringe benefits like health insurance.)
The tax benefits for the companies would be made available each year for up to ten-years provided that the companies continue to qualify as eligible.
The impact statement prepared by the Department of Taxation reports that an employee of an eligible company would be permitted an individual income tax subtraction for any compensation received from such company for the taxable year in which the eligible company first elects to use the modified property and payroll factors and for nine subsequent, consecutive taxable years.
The qualified localities identified in the two bills include the Counties of Bland, Buchanan, Carroll, Craig (only in HB 222), Dickenson, Giles, Grayson, Lee, Russell, Scott, Smyth, Tazewell, Wise, Wythe, Amelia, Appomattox, Buckingham, Charlotte, Cumberland, Halifax, Henry, Lunenburg, Mecklenburg, Nottoway, Patrick, Pittsylvania, Prince Edward, Accomack, Caroline, Essex, Gloucester, King and Queen, King William, Lancaster, Mathews, Middlesex, Northampton, Northumberland, Richmond, Westmoreland; and the Cities of Bristol, Galax, Norton, Danville, Martinsville, and Petersburg.
The bills would have an unknown general fund revenue impact beginning in Fiscal Year 2019. The extent to which companies would qualify to use the modified apportionment factors that would be provided, and elect to do so, is unknown. In addition, the extent to which such companies’ employees would claim the subtraction that would be provided in this bill is unknown. This bill also would require eligible companies to remit to the Department an applicable estimated tax. The applicable estimated tax would include (i) the company’s regular income tax liability without the benefit of any of the modified apportionment factors that would be provided under this bill and (ii) the amount that such company would have been required to withhold if the eligible company’s employees were not eligible to claim a subtraction under this bill. The Governor would then be permitted to award funds from the Commonwealth’s Development Opportunity Fund as grants or loans to pay all or a portion of such company’s applicable estimated tax. The impact of this provision is unknown.
Both bills passed their respective bodies this week by veto-proof margins. There is, however, a major difference between the two measures. In SB883, the Senate approved a separate enactment clause that states the bill will not become effective unless a specific general fund appropriation is included in the 2018 Appropriation Act. HB222 does not include a comparable provision.
The Senate’s action means the fate of the two bills will likely be determined as part of the House and Senate budget conference.
State tax collections continue to surge
But state budget gurus sound cautionary note
Virginia’s Secretary of Finance, Aubrey Layne, presented a Valentine’s Day economic and revenue update to the Senate Finance and House Appropriations Committees.
He noted that payroll employment rose 0.9 percent in December compared to a year earlier and that the Virginia Leading Index increased by 0.4 percent in December. However, job growth continues to lag the national 1.4 percent rate.
Notwithstanding meager job growth, total general fund revenues increased 5.1 percent in January, and on a year-to-date basis, total revenues have increased 5.8 percent since last July. This is significantly higher than the 3.4 percent increase embedded in the official forecast. If the trend continues, the state could end up with a revenue surplus hovering around $400.0 million. But, Secretary Layne discouraged re-forecasting this year’s and next biennium’s collections because of the volatility of non-withholding and the unknown consequences that could arise from federal tax and federal budget changes.
|FY 2018 Collections ($s in Thousands)|
|Major Items||YTD Collections||Actual % Growth||Projected % Growth|
|Individual Withholding (64% of total revenues)||$7,145,662||4.7%||3.5%|
|Non-withholding (16% of total revenues)||$1,494,171||20.2%||4.3%|
|Sales & Use (18% of total revenues)||$1,874,761||3.2%||3.0%|
|Corporation Income (4.5% of total revenues)||$422,979||15.5%||5.7%|
|Recordation (2% of total revenues)||$229,094||(1.9%)||3.3%|
Reasons for Revenue Uncertainty:
Non-withholding revenues have propelled total state collections throughout the fiscal year. Explanations for this soaring growth are speculative. Secretary Layne said the strong receipts are probably a combination of higher capital gains realizations and maximizing 2017 payment of state income taxes for federal deduction purposes. Because of this revenue source’s volatility, the Northam Administration does not believe that a re-forecast should be done.
Last week’s congressional budget deal and President Trump’s spending proposal for federal fiscal year 2019 contribute to long-term uncertainty.
The budget deal does effectively end sequestration, meaning the federal government can pump more money into defense and domestic spending. Spending increases in defense should result in more employment opportunities in Hampton Roads and Northern Virginia. More jobs should boost income withholding taxes. But, the federal government’s reliance on debt financing can also lead to higher interest rates, making business expansion costly and reducing general economic activity.
The Trump budget proposal also includes items that can cut state programs, putting decisionmakers in the position of having either to spend more state dollars to make up for the lost federal money or to take the responsibility for cutting services.
For example, the community development block grant program faces elimination along with the nearly $2.0 billion now budgeted to fund public housing capital repairs. The federal subsidy for the Washington Metro is slated to be trimmed from $150.0 million per year to $120.0 million with a warning that future subsidies would be further reduced. Annual funding for the restoration of the Chesapeake Bay would fall from $72.0 million to $7.0 million. And, the U.S. Department of Education’s budget would be slashed by $3.6 billion.
Sales tax collections are another concern. According to the Secretary, the Christmas holiday shopping season in Virginia showed a 0.4 percent increase, well behind the national increase of 4.9 percent. On a year-to-date basis, collections have increased 3.2 percent, slightly ahead of the projected 3.0 percent growth.
The future of the state’s second most important revenue source is at risk as consumers’ shopping habits continue to migrate away from brick and mortar stores to the multiple shopping sites available on the Internet.
For all of these reasons, caution is likely to prevail in the budget packages released by the money committees on Sunday.
Transportation bills move through the process
Comprehensive bill passes House; Heads to Senate
HB765 (Jones, S.C.) takes a comprehensive approach on transportation projects and processes for both state and local highway projects. The bill provides that the Commonwealth Transportation Board’s Six-Year Improvement Program shall only commit funds from the State of Good Repair Program, the High Priority Projects Program, or the Highway Construction District Grant Programs to a project or program if the commitment is enough to complete the project. The bill also prohibits a member of a local governing body from serving on the Commonwealth Transportation Board during his or her term of office.
The bill makes several changes in VDOT’s road revenue-sharing program. Under the bill, the Board may make an equivalent matching allocation to any locality up to $5.0 million for use by a locality to improve, construct, maintain or reconstruct the highway systems. The maximum allocation under current law is $10.0 million. The bill also reduces the maximum amount that can be used for maintenance from $5.0 million to $2.5 million. Lastly, HB765 reduces the maximum amount of revenue-sharing funds in any given fiscal year from $200.0 million to $100.0 million or seven percent of funds available for distribution under § 33.2-358 D, whichever is greater.
HB765 passed the House by a vote of 98-2 and has been referred to the Senate Transportation Committee. Because of the financial implications it will also have to be heard by the Senate Finance Committee. VML will keep you informed on the progress.
House Appropriations to hear two Senate transportation measures
The House of Delegates will now be dealing with two major transportation measures that passed the Senate. SB856 (Saslaw) makes numerous changes to the administration of and revenues for mass transit, specifically as it relates to funding of the Washington Metropolitan Area Transit Authority (WMATA) and the disbursement of funds in the Commonwealth Mass Transit Fund. The Feb. 9 eNews has more details. The provisions of the bill are contingent upon Maryland, the District of Columbia, and the federal government adopting similar actions to raise revenues for WMATA. Another key feature of this bill is that it sets up a Transit Service Advisory Committee that will include representatives from the Virginia Transit Association, Virginia Municipal League and Virginia Association of Counties. The purpose of the committee will be to advise the Director of VaDRPT on transit projects and fund allocation towards those projects. Further, the bill imposes a price floor on the regional gas taxes for both Hampton Roads and Northern Virginia.
The bill passed the Senate on a vote of 25-15 and has been referred to the House Appropriations committee. VML will keep you informed as this bill continues to make its way forward.
The House Appropriations Committee also will be hearing SB896 (Wagner), which sets a “price floor’ using the February 20, 2013, statewide average sales price for gasoline for calculating the two regional gas taxes authorized by the 2013 General Assembly session.
VML Contact Mike Polychrones email@example.com
House Counties, Cities and Towns reports bills
The House Counties, Cities and Towns Committee reported today several bills of interest:
- SB211 (Stuart) deals with comprehensive plans and groundwater and surface water. Currently a comprehensive plan by a locality may show designated areas for the implementation of ground water protection measures. This bill changes the language to “The designation of areas for the implementation of reasonable measures ground water protection measures to ensure the continued availability, quality, and sustainability of groundwater and surface water.”
- SB242 (Marsden) grants immunity in a civil action to park authorities for damages caused by ordinary negligence. The Park Authority has to have been created by the Park Authorities Act (§15.2-5700 et. seq.).
- SB179 (Stanley) is the by right solar bill under which solar facilities meeting certain conditions would be deemed to be substantially in accord with the comprehensive plan. Those conditions include: 1) if the facility is located in a zoning district that allows solar facilities by right; 2) if the solar facilities will serve the electricity or thermal needs of the property on which it is located, or that will be operated by utilities offering net metering. 3) localities may allow for a substantial accord review for solar facilities to be advertised and approved concurrently in a public hearing process with a rezoning, special exception or other approval process. HB509 (Hodges) is a similar bill that has already passed the House and will be heard in Senate Local Government.
- SB451 (Dance) give localities the authority to require abatement of criminal blight on real property. It would put another tool in the tool box for localities to attempt to clean up blighted properties. This bill was a request from the City of Richmond Police Department as a way to deal with hotels that have significant drug and prostitution issues. It is also a recommendation of the Housing Commission. HB594 (Carr) is the companion bill that has already passed the House and will be heard in Senate Local Government.
VML contact: Michelle Gowdy, firstname.lastname@example.org
House General Laws reports bills of interest
House General Laws on Feb. 15 speedily dealt with several bills that were identical or similar to measurers the committee considered earlier in the session. Here’s a recap:
- SB391 (Barker) creates a statewide standard for installation and maintenance of smoke and carbon monoxide alarms in rental property. Localities that have enacted ordinances must conform their ordinances by July 1, 2019. These were Housing Commission recommendations. HB609 (Carr) is the companion bill that has already passed the House and likely will be heard in Senate General Laws and Technology.
- SB529 (Mason) removes the requirement for an affidavit supporting a building permit applicant’s statement that he is not subject to licensure or certification as a contractor or subcontractor. Only a written statement is required. HB164 (Yancey) is the companion bill that has already passed the House and likely will be heard in Senate General Laws and Technology.
- SB688 (Ruff) allows cooperative procurement for stream restoration and stormwater management projects as well as all associated and necessary construction and maintenance. HB574 (Hodges) is the companion bill that has already passed the House and will be heard in Senate General Laws and Technology.
- SB921 (Ebbin) applies only to single family residential dwelling engineering and construction plans and drawings submitted for the purpose of complying with the Uniform Statewide Building Code and the Statewide Fire Prevention Code. The bill has the effect of making these submissions non-confidential but retain the current exemption from the Freedom of Information Act. HB683 (Pogge) is the companion bill that has already passed the House and likely will be heard in Senate General Laws and Technology.
- SB125 (Black) and HB134 (Bell, J.) as introduced raised the threshold for value engineering for state highway projects from $5 million to $15 million. Each house of introduction reduced the threshold from $15 million to $10 million. And now the House General Laws amended SB125 (Black) to raise the threshold back up to the $15 million in the original bill. Confusing (it should be)? The House companion (HB134-Bell, J.) currently raises the threshold from $5 million to $10 million, and will be heard in the Senate General Laws and Technology committee.
VML contact: Michelle Gowdy, email@example.com
VML legislative staff and assignments
Michelle Gowdy – Local government authority, planning and zoning, legal matters, housing, Freedom of Information, telecommunications and technology. firstname.lastname@example.org; 804-523-8525
Janet Areson – Health and human services, and the state budget. email@example.com; 804-523-8522
Mike Polychrones – Environment, land use, natural resources, elections and transportation policy. firstname.lastname@example.org; 804-523-8530
Neal Menkes (under contract) – Taxation and finance, the state budget, transportation funding, retirement, education funding and community and economic development. email@example.com; 804-523-8523
Roger Wiley (under contract) – Courts, criminal law, civil law, and procurement. firstname.lastname@example.org; 804-780-3143
Chris LaGow (under contract) –Insurance and workers’ compensation. email@example.com; 804-225-8570