To give you a flavor of the budget setting here in Nashville this week, all of the following are true:

Some say the legislature will finish the budget next week (May 26)

Some say the legislature will finish the budget in two weeks (June 2)

Some predict the legislature will be here well into June

Governor Sundquist told legislators that he will veto any budget that doesn’t include true tax reform and then call the legislators back into special session in the fall if they override his veto

Legislators have talked about taking away the Hall income tax going to localities (3/8 of the total)

Legislators have talked about freezing all state-shared revenues at FY 1998-99 levels

Legislators have talked about shifting the payment of police and fire supplements to cities and towns

Legislators have talked about removing the ‘premier resorts’ special sales tax

Some have talked about an increase of $10 or $20 or even $60 on the vehicle registration fee

Even though decisions seem to be splintered and un-jelled right now, once the magic number of votes (a simple majority) forms, the action will change from plodding to warp speed instantly.You need to be ready to respond immediately as soon as we know something about “the budget plan.”

So, what’s a conscientious local official to do?Stay calm, remain focused, and keep one hand on that phone with a speed dial ready to your legislators’ office.When something happens, it will start moving quickly, and your input will be needed.As we have done in the past, as soon as we have urgent information, we will e-mail, fax and phone our TML membership.If you have not sent us your e-mail address, please do so, so that you have the speediest and most current information possible.

On Wednesday, May 24^th, the House Budget subcommittee will consider HJR 532.While our original proposal to clarify the language concerning civil penalties was well received, the resolution was expanded to include criminal fines as well. The resolution has been referred to the House Finance Committee and then its Budget subcommittee because the resolution carries a small fiscal price tag.The secretary of state must publish the resolution this summer in the newspapers of the six largest metropolitan areas of the state.The cost of this publication requirement will be about $20,000.

This resolution for constitutional change now places the authority in the legislature to set statutory maximums for fines as well as civil penalties. Sen. Joe Haynes is sponsoring this legislation in the Senate, and Rep. Jere Hargrove is sponsoring this legislation in the House, both at the request of the Municipal League.Please call the members of the committee listed below to seek their support of HJR 532.Sen. Haynes will have SJR 629 on the Senate floor Monday evening for third and final consideration.Members of the House Finance Budget subcommittee are Reps.:

Tommy Head, Chair741-4441Joe Kent741-6813
Joe Armstrong741-0768Shelby Rhinehart741-3879
Ralph Cole741-5725Randy Rinks741-2007
Ronnie Cole741-6241Zane Whitson741-6800
Tim Garrett741-6811Matt Kisber741-4156

On May 17^th, the county property transfer tax bill (SB 3147 (Kyle)/HB 3259 (Head)) was voted out of the Budget subcommittee of the House Finance Committee.Its next stop is the full House Finance Committee, which will hear the bill at 1:30 p.m., Tuesday, May 23^rd (time subject to change).The bill has been amended to apply only to counties with substantial growth in K-12 student enrollment.The twelve counties are Cheatham, Jackson, Jefferson, Macon, Montgomery, Rutherford, Sevier, Shelby, Smith, Stewart, Tipton, and Williamson.

As amended, the bill would give these counties the option of imposing a transfer tax in an amount equal to the state rate of $.37 per $100 of recorded value.Proceeds from the tax could be used only to pay interest or principal on debt issued for education purposes.If a county imposes the tax, neither the county nor any city within the county could impose an adequate facilities tax or development tax in the future.Additionally, upon adoption of the tax by a county, all existing adequate facilities taxes or development taxes currently imposed by the county or its cities would be repealed automatically.County or city-levied impact fees would be unaffected by the bill.In the first year after the adoption of a county transfer tax, a city would receive “replacement revenue” from the county in an amount equal to 100% of the three-year average collections from the city’s development charge.In year two and each year thereafter, a city’s revenue from the transfer tax would decline by 10% of the original amount.In the eleventh year and thereafter, the city would receive no replacement revenue at all.

TML does not object to allowing growth counties some mechanism to fund capital projects for education. TML opposes this legislation in its present form because it precludes cities from levying certain types of development taxes.If a county is experiencing significant education-related capital costs because of growth, it is also very likely that cities within the county are experiencing significant new infrastructure and urban services costs.Cities and counties – not just counties – should be allowed to recoup these growth-related costs.Please tell your legislators that this bill is harmful to cities.Members of the House Finance, Ways and Means Committee are:

Matt Kisber, Chair741-1326Tommy Head741-1326
Joe Armstrong741-0768Joe Kent741-6813
H.E. Bittle, Jr.741-0810Butch Lewis, Jr.741-5068
Jim Boyer741-5046Steve McDaniel741-0750
Tommie Brown741-4374Bob McKee741-1946
Carol Chumney741-1855Larry Miller741-4453
Ralph Cole741-5725Phillip Pinion741-0718
Ronnie Cole741-6241Shelby Rhinehart741-3879
Gene Davidson741-3979Randy Rinks741-2007
Ronnie Davis741-1717Robb Robinson741-3897
Mary Ann Eckles741-2405Harry Tindell741-2031
Craig Fitzhugh741-2134Zane Whitson741-6800
Tim Garrett741-6811Leslie Winningham741-6852
Ken Givens741-0746Bobby Wood    741-3920
Doug Gunnels 741-3736
Jere Hargrove741-1875

No action was taken on HB 1180 (Buck)/SB 305 (Crutchfield) this week in the House Finance Budget subcommittee.The bill will be considered next Wednesday, May 24^th at 11:00 a.m.This bill would raise the current tort limits to $1 million per occurrence and create a reinsurance fund to cover damages for amounts in excess of $1 million.The proponents of this legislation have proposed an amendment that would:(1) ultimately raise the existing tort liability limits to $300,000 per individual and $1 million per occurrence; (2) create an “Excess Coverage Fund” ultimately requiring coverage of $3 million per individual and $10 million per occurrence; and (3) once the above limits are reached, provide for annual consumer price index increases in the amounts. The revised fiscal note for this amendment is still under consideration, but it is anticipated the fiscal note will exceed the current fiscal note, which is over $6 million for localities across the state.The bill and amendment are contrary to the TML position in support of the TACIR recommendations.TACIR recommended: (1) inflationary increases to the current limits and (2) development of a catastrophic fund.TACIR’s proposal balances the needs of injured parties with the fiscal limitations of local governments that must provide necessary and sometimes risky services to the public.

With talk among legislators over freezing all state-shared revenues going to cities and counties, now is not the time to implement measures that would have such a severe fiscal impact on local governments. Please contact members of the House Budget subcommittee to express your opposition. Members are listed on the first page of this bulletin. 

During the May 16^th meeting of the Senate Finance, Ways and Means Committee, Sen. Kyle rolled SB 2342 two weeks.So far this session, Sen. Kyle has placed this bill on the Finance Committee calendar eight times – each time he has rolled the bill.At 8:30 a.m., Tuesday, May 30^th the bill will be before the Finance Committee for the ninth time.The House companion bill (HB 2398 (Head)) has not been put on notice.Your calls and letters are making the difference on this bill.

HB 2584 (Briley)/SB 2481 (Haynes) will be heard by the House Finance Budget subcommittee next Wednesday, May 24^th, at 11:00 a.m. The bill requires property assessors to value real property rented or leased to low-income individuals or families based only on the rent paid for the property.The bill would provide a tax break not to low-income individuals, but instead, to the developers or owners of the property.The fiscal note assigned to the bill states that the potential loss of revenue to local governments exceeds $45 million.The executive director of the State Board of Equalization testified before the Senate Finance Tax subcommittee about his misgivings about the proposed legislation.An Attorney General’s opinion, while judging the bill to be constitutional, also raised concerns about some portions of the proposed legislation.It is important that members of this committee hear from local government officials about their opposition to this bill. Please see the list of members of the House Budget subcommittee listed on the first page of this bulletin.

The House Budget Subcommittee delayed action for one week on HB 2578 (Briley) which would require businesses that have five or more employees and that contract with local governments to participate in the state’s drug-free workplace program.The Senate companion bill was amended on the Senate floor to require all local governments to have a drug-free workplace under the state law, creating a significant fiscal impact on local governments.Proponents of the bill hope to remove this amendment to improve chances for the bill to pass.As the House subcommittee discussed the bill this week, Rep. Randy Rinks said he would like to try to amend the bill to apply only to safety-sensitive positions. Proponents of the bill have agreed to an amendment proposed by TML that would absolve the local government of liability once it has received certification from a contractor that the contractor is in compliance with the law. The bill will be on the Budget subcommittee's calendar on Wednesday, May 24^th.

Despite repeated requests by the Attorney General, the Tennessee Supreme Court refused to review the Court of Appeals decision in Hunstville v. Duncan, which held that there was no rational basis for the special “tiny town” incorporation provisions in Public Chapter 1101.With the appellate decision left intact, Helenwood is no longer a town.Further, the decision becomes a precedent and can be cited in challenges to the validity of the remaining tiny towns.In light of these developments, the Tennessee Attorney General announced that he is no longer prepared to defend the constitutionality of the narrow portion of PC 1101 that allowed Helenwood, Hickory Withe, Midtown, Three Way, and Walnut Grove to incorporate.Further, the Attorney General will be working with counsel in all pending cases to concede the issue and agree to remedies to include the surrender of incorporation charters.All other portions of PC 1101 are unaffected by this decision.

Since PC 1101 does not specify dissolution procedures for these towns, some questions are emerging about the details of the “un-incorporation.”One question is being addressed legislatively.On Wednesday, May 17^th, HB 1920 (Walley) was to be heard by the Budget subcommittee of the House Finance Committee, but was rolled one week.This bill provides that in the event of the surrender of a municipal incorporation charter for any reason, funds expended in good faith for municipal purposes would not have to be returned by the municipal corporation.Any unexpended funds derived from state-shared taxes would be turned over to the county, and any unexpended funds derived from property taxes would be returned to taxpayers.On Tuesday, May 16^th, the Senate companion bill (SB 1811 (Henry)) was approved by the Senate Finance Committee.The caption on these bills opens up sections of the Tennessee code related to taxes, but not sections regarding local government law.Because of the limited caption, these bills could not be used to amend PC 1101.

HB 2677 (McDaniel)/SB 2802 (Womack), relative to public records, was recommended by the House Finance Budget subcommittee on Wednesday, May 17^th.This bill would establish a mechanism for the recovery of some of government’s costs associated with the collection and maintenance of geographic information systems (GIS) data.The bill in its current posture will allow any city to recover at least 10% of their total development costs. A city would also have the power to recoup a larger percentage of its costs by adoption of a resolution. The amendment further provides that the development costs would be subject to audit by the State Comptroller. 

These terms are a compromise agreed upon by both proponents of the legislation and the realtors’ and developers’ associations, which had previously opposed this legislation.The Senate has already passed the companion (31-0) to this bill.HB 2677 is scheduled for the House Finance Committee for Tuesday, May 23^rd, at 1:30 p.m.