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Taxing debate


Tax collection revenue, the American Indian Cultural Center and Museum and the Marketplace Fairness Act top the list of legislative priorities.

Tim Farley November 13th, 2013

Sales tax revenue is the largest source of income for any city in Oklahoma, and the money pot could get bigger if new legislation is passed next year.

House Bill 1875 likely will be heard in the early part of the 2014 legislative session, which begins Feb. 2.

The bill is one of four legislative priorities the Oklahoma City Council will push forward next year. The council’s state and federal legislative agendas were approved at the Nov. 5 council meeting. The priorities were established by the council’s legislative committee comprised of Mayor Mick Cornett, Ward 3 Councilman Larry McAtee and Ward 4 Councilman Pete White.

Other top state issues involve local control over local issues, an increase in public transit funding and financing the completion of the American Indian Cultural Center and Museum.

HB 1875
Under current law, all cities and towns are required to contract with the state tax commission to collect their local sales and use taxes from businesses.

But that comes with a price.

Presently, the commission charges a service fee ranging from 1 percent to 1.75 percent of the collected taxes.

For Oklahoma City, that amounts to about $4.5 million a year. A proposed measure, HB 1875, authored by state Sen. Clark Jolley (R-Edmond) and state Rep. Charles McCall (R-Atoka), would reduce the fee cities, towns and counties are required to pay to half a percent of the collected taxes. If approved, the measure would save OKC an estimated $2.2 million a year.

“This would be closer to the actual cost of providing that service,” said Jane Abraham, OKC’s Community and Government Affairs manager. “The tax commission is in favor of this legislation, but they’re also concerned what it will do to their budget.”

The cost of collections by the commission has dropped in large part because of technology, Cornett said.

“What it comes down to is we’re overpaying and we’re not allowed to collect our own taxes,” he said. “This (HB 1875) isn’t just for Oklahoma City, but, obviously, as the largest city in the state, it would impact us the most.”

The push to complete the American Indian Cultural Center and Museum, located at Eastern Avenue and Interstate 40, has become a political hot potato. Finishing the museum will require $80 million–$40 million in state funding and another $40 million in private donations. Construction on the museum came to a halt in 2012 when money dried up and legislators refused to provide additional funds for the state-initiated project.

Cornett believes it’s time for the museum to be finished.

“It doesn’t make any sense to leave it two-thirds completed,” he said. “We’ve been a good partner in the financing, we’ve put assets in the pot and made good faith efforts to secure the location. If you look going forward, even the most conservative projections show it will be a success.”

However, some Republican legislators, led by Sen. Cliff Aldridge (R-Midwest City) and Sen. Greg Treat (R-OKC), contend the state has put enough money into the museum. Lawmakers have spent $97 million on the project during the last 18 years.

Still, Cornett contends it’s time for current legislators to uphold the commitments of previous lawmakers.

“What it comes down to is a series of legislatures that don’t feel the need to fulfill the obligation of previous legisla tures,” he said. “The people we dealt with aren’t there now.”

This legislative session will be critical to the future of the cultural center and museum since private donors have said they will keep their financial commitments as long as lawmakers agree to provide $40 million in state funds, according to Blake Wade, executive director of the Native American Cultural and Educational Authority, a state agency created by lawmakers in 1994. The NACEA has direct oversight of the museum project.

Federal concerns
Topping the list is the enactment of the Marketplace Fairness Act, which would require Internet shoppers to pay a use tax for all products purchased online just as consumers at traditional businesses pay sales taxes.

According to Abraham, OKC loses an estimated $15 million to $18 million a year to electronic vendor and Internet sales. Currently, buyers voluntarily report their purchases and pay the use tax, but the compliance rate is an estimated 3 percent.

“Some people view it as a new tax, but actually, it’s the collection of the use tax, which already exists,” Abraham said.

City officials also are working to ensure that the tax-free status of municipal general obligation bonds remains intact. Federal lawmakers have discussed eliminating the tax-free status as a way to increase revenue.

However, Abraham said that would have devastating effects on OKC’s ability to fund capital improvement projects such as street repair and sidewalk construction. In 2007, OKC voters approved an $835 million bond issue that continues to fund a plethora of projects, including street and drainage repair, a new police headquarters, libraries, public transportation, bridges and parks and recreational facilities.

If the tax-free status had been eliminated in 2012, the move would have cost the city almost $9 million in lost opportunities to fund capital improvement projects, Abraham wrote in a report to the city council.

 
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