Legislative Policy Statements and Update David Keller, Assistant City Manager/Chief Financial Officer, City of Weston Kent Olson, Deputy Treasurer-Clerk,

Legislative Policy Statements and Update

David Keller, Assistant City Manager/Chief Financial Officer, City of WestonKent Olson, Deputy Treasurer-Clerk, City of TallahasseeFebruary 14, 2013

Policy Recommendation Development Process

• 1) FGFOA Board Strategic Planning Session• 2) Survey of membership• 3) Development of policy

recommendations• 4) Board approval• 5) Meet with Members of the Legislature• 6) Webinar

Board Strategic Planning Session

• The 2012/2013 FGFOA Board Strategic Planning Session was held April 26, 2012 at Collaborative Labs at St. Petersburg College Epicenter in Largo, FL from 8:30AM-2:00PM.

• Staff at the Lab facilitated the discussion, assisted in development of priorities, and summarized the strategic plan.

• The Strategic Plan was distributed to attendees on May 1, 2013.

Board Strategic Planning Session

• The Legislative Committee had three items in its strategic plan for the current year:– Continue the Rapid Response Team developed

during the previous year– Conduct a survey of membership to obtain input

on new ideas and assist in prioritization of policy recommendations

– Conduct a webinar explaining the process to membership

Rapid Response Team

• The RRT was created in order to have a subcommittee of the Legislative Committee be able to review and respond to legislation prior to and during session within 24-48 hours.

• Lobbyists from the Florida League of Cities and the Florida Association of Counties were invited to participate with the Legislative Committee during policy recommendation development.

Survey

• A survey was developed by the Legislative Committee and distributed to membership through the Executive Director to obtain input and ideas prior to the development of the policy recommendations.

• The survey was open-ended and asked for each respondent to describe up to three areas of concern to local governments throughout the State.

Survey

• Responses were received from 66 members.• The 66 respondents identified 183 areas of

concern to them.• The Legislative Committee summarized the

areas of concern.

• Survey said:

Survey

• 21% - pension reform• 16% - property tax reform• 15% - protect local business streams (local business tax (LBT),

communications service tax (CST), etc,)• 7% - Clerk of Circuit Court issues• 4% - unfunded mandates• 4% - home rule• 4% - County cost shift issues – Medicaid/Dept of Juvenile Justice• =<2% - revenue restrictions/caps, internet sales tax, online

travel tax reform, red light cameras, allowing price in CCNA

Survey

• All survey responses >5% were already being addressed in the policy recommendations with the exception of LBT and CST.

• Those items were added in the policy recommendations for FY 2012-2013.

• The policy recommendations were sorted to reflect the priorities of the membership based upon responses received.

Policy Recommendations

1) Pension Reform


1) Pension ReformIssue: Legislators and local governments need to provide

pension plans where costs are manageable in the short term and sustainable in the long term.

Analysis: • 2011 Annual Investment Report funded ratio of 87.1%.• Most objective sources consider a funding ration >80%

as financially secure• Approximately 500 local law defined benefit pension

plans


1) Pension Reform (Cont’d.)Recommendation:• Ensure any legislation be made on a prospective basis

that provides for existing employees to receive benefits consistent with promises already made

• Provide flexibility• Avoid/eliminate inconsistencies that simultaneously

mandate new benefits and compel reduction of benefit costs


2) Property Tax Reform


2) Property Tax ReformIssue: Legislative and constitutional property tax initiatives

have been enacted that, along with the recession and a declining real estate market, have contributed to an unsustainable tax structure.

Analysis: • Initiatives in 2007, 2008 and 2011• Ongoing short sales and foreclosure actions • A cumulative negative impact on the ability of local

governments to provide core services


2) Property Tax Reform (Cont’d.)Recommendation:

No additional property tax restrictions should be placed on local governments until the full impact of existing limitations is known.


3) Communications Services Tax


3) Communications Services TaxIssue: The CST Working Group was created to review national and

state policies relating to the communications industry. The potential loss of revenue to local governments from proposed changes is a significant concern.

Analysis: • The CST was done to simplify administrative burden for

service providers and local governments• CST provided a reliable, stable bondable source of funding • Legislative and technological changes are eroding CST

revenues to local governments


3) Property Tax Reform (Cont’d.)Recommendation:

Legislation aimed at reforming the CST should:• Be developed with input from local governments,• Allow the CST to remain a locally-controlled revenue

stream,• Stabilize the currently diminished local government

share of CST revenues• Provide similar tax treatment to similar services, and• Provide for more transparency in the tax.


4) Local Business Taxes


4) Local Business TaxesIssue: Local business taxes have been reduced to local

governments by exemptions granted to certain businesses. Other legislation would have repealed the tax altogether.

Analysis: • Repeal would reduce revenues to local governments in

excess of $150 million• Contrary to Home Rule • Has been pledged as a primary source for debt repayment


4) Local Business Taxes (Cont’d.)Recommendation:

No legislation should be enacted that eliminates or further restricts or reduces the revenues generated by the local business tax. No legislation should be enacted that constrains the use of this revenue to more limited purposes.


5) Sept. 30 Fiscal Year-End for Clerk of Circuit Court Remittances


5) Clerk of Circuit Court Year EndIssue: Current statutory language results in two fiscal years

for Clerks of Circuit Court, and two fiscal year-end close outs.

Analysis: • Having two fiscal years is duplicative and expensive in

terms of staff-hours, with no discernible benefit• Having two year-end close outs inhibits staff from

performing their core duties


5) Clerk of Circuit Court Year End (Cont’d.)Recommendation:

Legislation should be introduced that would eliminate the double year-end closings and provide for a single year-end.


6) Streamline Clerk of Circuit Court Funding/Budgeting Process


6) Streamline Clerk of Circuit Funding/Budgeting ProcessIssue: In the past, Clerks would fund their offices with collections and

send excess funds to the State. In 2009, the State had Clerks send all collections to the State, which then deposits the monies into a trust fund used to redistribute the monies back to fund operations, with a service charge of 8%.

Analysis: • Clerks lose ability to quickly adjust to changes in activity and

accompanying need for resources• Recovery from cutbacks causes further delays in the backlog of

cases


6) Streamline Clerk of Circuit Funding/Budgeting Process (Cont’d.)

Recommendation:Legislation should be enacted that returns Clerks to the

revenue-based budgeting model used prior to 2009. In addition, since the Legislature enacted legislation setting “service units” as a determinate factor for funding, the Legislature should define service units.


7) Sales Tax on Internet Transactions


7) Sales Tax on Internet TransactionsIssue: States and local governments are missing out of

sales tax from internet sales, and businesses physically located within a state are placed at a competitive disadvantage.

Analysis: • Estimates for sales tax lost in Florida to internet sales

approach $1.5 billion annually• FL is not in compliance with the Streamlined Sales and

Use Tax Agreement (SSUTA)


7) Sales Tax on Internet Transactions (Cont’d.)Recommendation:

Legislation should be enacted, and the Department of Revenue should adopt rules and regulations, consistent with the Streamlined Sales and Use Tax Agreement to stop discrimination against Florida brick and mortar businesses.


8) Bed Tax on Internet Sales of Lodging


8) Bed Tax on Internet Sales of LodgingIssue: Local governments are losing revenue because of the

practices currently used by online travel companies.

Analysis: • Online travel companies contract to pay discounted

rates to hotels for rooms later sold over the internet to consumers at a higher price

• The online travel companies pay tourist development taxes on the discounted rate as opposed to the rate they charge the consumers


8) Bed Tax on Internet Sales of Lodging (Cont’d.)Recommendation:

Legislation should be enacted to clarify that the tax due is on the total amount paid by the consumer and that it is irrelevant as to which medium a consumer chose to book the room, and to ensure fair and equitable tax treatment among all taxpayers in the State.


9) Allowing Price in Consultants Competitive Negotiation Act

(CCNA)


9) Allowing price in the CCNAIssue: Local governments are not permitted to request price

proposals before selecting a provider for certain professional services.

Analysis: • F.S. 287.055, governs procurement of architecture, engineering,

landscape architecture, mapping and surveying services by local governments, excluding price considerations from the process

• The National Institute of Governmental Purchasing, Inc. supports legislation to amend the statute to provide public purchasing officials the option of taking compensation into account as a factor when evaluating bids for such services


9) Allowing price in the CCNA (Cont’d.)Recommendation:

Legislation should be enacted that would allow the option to include pricing as a consideration prior to selection of a service provider.


10) Public Personnel Records


10) Public Personnel RecordsIssue: Current law exempts certain public employees’ personal

information from public disclosure, but all others are open to inspection, subjecting those other employees to possible harassment and identity theft.

Analysis: • Personal information should be used to evaluate an

individual’s qualifications for employment only• Information related to evaluating an employee’s fulfillment

of their duties should be available to the public, but not personal information


10) Public Personnel Records (Cont’d.)Recommendation:

Section 119.071(4)(d) of Florida Statutes should be amended to provide privacy protection to all public employees rather than providing such protection to only a few classifications of employees, such as public safety officers, judges, code enforcement officers, and a few other positions.

House: Republicans , DemocratsSenate: Republicans 26, Democrats 14

2013 Legislative Session

2013 Legislature• New Leadership– Will Weatherford, Speaker of the House– Don Gaetz, Senate President

• New Makeup– House: Republicans 76, Democrats 44– Senate: Republicans 26, Democrats 14

• Previous Makeup– House: Republicans 80, Democrats 39– Senate: Republicans 28, Democrats 12

Work Plan Florida

• Collaboration of Senate President Gaetz and House Speaker Weatherford

• Five areas of focus– Ethics Reform– Campaign Finance Reform– Higher Education Reform– Pension Reform– Elections Review

Ethics Reform

• Focused on elected officials

• Will provide strengthened rules for abstentions and conflict of interest disclosure requirements

• Financial disclosure will be more transparent (and perhaps online)

Campaign Finance Reform

• Increase accountability by ensuring that more dollars are spent to directly influence elections

• Increase transparency through more frequent campaign finance reporting

Higher Education Reform

• “Initiate high quality, affordable options that will keep our higher education system responsive to the realities of a post-recession digital economy through an expansion of online higher education”

• “Continue support for programs that produce high-skill, high-wage and high-demand occupations”

• Translation: More support for online classes

Elections Review

• Provide supervisors of election with flexibility to reduce wait times

• Ensure accurate and timely counting and reporting of results

Pension Reform

• A top priority of new House Speaker Will Weatherford

• Changes proposed for FRS employees– New employees hired after January 1, 2014 will be

enrolled in the Defined Contribution (Investment) Plan– Eliminates disability benefits in pension plan for new

employees, though a replacement plan is being sought– Actuarial analysis on FRS DB Plan expected to be

completed by next week before bill is finalized

Pension Reform (cont.)• Local Government Pension Reform– Changes proposed for Chapters 175 & 185– SB 458 proposed by Senator Ring– “Just a framework”– Two similar Proposed Committee Substitutes (PCS)

have now been filed (Senators Ring & Bradley)– Would dictate use of premium tax monies – Would limit ability to negotiate reductions in

benefits• Will discuss Senator Ring’s PCS below

SB 458 Definition Changes• “Base benefits” – those in existence on March 1,

2013 (same as Bradley’s) (new)• “Base premium tax revenues” – revenues received

for calendar year 1997 (fiscal 1998) (new)• “Additional premium tax revenues” – revenues

which exceed base revenues (slight revision)• “Special benefits” – Benefits provided in a defined

contribution plan (i.e., share plan) (new)

SB 458 – Premium Taxes• Base premium tax revenues must be used to fund base benefits• Adds a new tier for premium taxes received for 2012 calendar year

(FY13) and allows previous excess premium tax revenues accumulated but not yet applied to fund extra benefits – If less than 80% funded, 75% must be used to reduce the plan’s actuarial

deficiency; 25% goes to defined contribution plan (share plan – “special benefits”)

– If more than 80% funded, all goes to the defined contribution plan• Monies received between FY1999 and FY2012 that were spent on

increased benefits must be spent on any minimum benefits not provided as of March 12, 1999 or on extra benefits added after March 12, 1999.

• Premium tax revenues may not be used to fund benefit improvements not provided as of March 1, 2013

SB 458 – Other provisions• Deletes 175.351 & 185.35 language that cities

are to use premium tax dollars to first fund minimum benefits in total before having to fund “extra benefits”– Effectively overturns Division of Retirement

interpretation in Naples and Hollywood letters – Eliminates the opportunity to negotiate reduced

benefits with police and fire unions below those in effect on 3/12/99 and not risk losing premium tax dollars

SB 458 – Other provisions (cont.)• Deletes language that allowed local governments

to use premium taxes either to 1) pay extra benefits or 2) place the monies in a supplemental plan (share plan)

• Plans that created a share plan after March 12, 1999 would have to use “base revenues” for their DB plan; additional revenues would continue to flow to the share plan (if more than 80% funded)

• If less than 80% funded, 75% of monies received after FY13 would go toward the actuarial deficiency

SB 458 – Other provisions (cont.)• If a plan offers extra benefits, may be reduced if

plan still meets base benefits and minimum Chapter standards

• Premium taxes that previously paid for extra benefits that have been reduced must be split 75% to reduce actuarial deficiency and 25% to the defined contribution plan (if less than 80% funded)

• 25% of savings of employer contributions must be contributed to the pension plan to reduce the actuarial deficiency (if less than 80% funded)

Communications Services Tax

• Communications Services Tax Work Group submitted report on 2/01/13– Propose to eliminate CST and replace it with an

increase in the state sales tax from 6% to 6.34%– Department of Revenue to study the proposal– No plan on how to deal with bonds that pledge

CST as revenue or how the replacement revenue would be allocated and distributed to local governments

Communications Services Tax (cont.)

• HB303 – repeals authority of local gov’ts. to levy CST; revises rate to uniform 10.65%;

• Removes exclusion of direct-to-home satellite services under CST and brings it in line with other video services, among other changes

• SB 290 & HB 435 – Provides that a “prepaid calling arrangement” should be subject to sales tax rather than CST

Internet Sales Tax

• SB316 – sales tax revenues would increase by $400 million

– provides an exemption for manufacturers purchasing equipment ($141 million)

– Also provides for a reduction in the state CST by 1% from 6.65% to 5.65% and 1% on direct to home satellite services from 10.8% to 9.8% ($151 million); would affect distributions to local governments (unknown impact)

Local Business Tax

• Likely that an effort will be made again to eliminate or weaken this tax

• No bills have been filed as of the end of January

Tax-Exempt Bonds

• Reports in mid-December seemed to indicate that there was agreement between the President and the House to cap the benefit of tax-exempt income to the 28% marginal tax bracket

• “Fiscal Cliff” was averted/postponed in December with no changes to taxation of municipal bonds

Tax-Exempt Bonds

• Fiscal Cliff originally pushed to late February/early March to match the next required increase in the debt ceiling

• Borrowing authority has been extended through May 18

• Fiscal cliff cuts (sequestration) will take effect on March 1 unless there is Congressional action on alternatives

Tax-Exempt Bonds (cont.)

• Sequestration likely to take effect on March 1– It appears Republicans increasingly are embracing

it as a method to cut spending– Democrats are seeking a combination of tax

increases and spending cuts during February to prevent the sequestration

– Republicans indicate they will not raise taxes• Tax reform is expected to be addressed in

August 2013

Tax-Exempt Bonds (cont.)

• Many groups have lined up to oppose taxation– GFOA– National Association of Bond Lawyers (NABL)– Municipal Bonds for America (MBFA)• Consists of professional and government practitioners

in governmental finance

• FGFOA has an ad hoc Committee on this topic to monitor the issue

Questions?

Documents

Legislative Policy Statements and Update David Keller, Assistant City Manager/Chief Financial Officer, City of Weston Kent Olson, Deputy Treasurer-Clerk,