Glendale seeing sales tax revenue delay

By Cecilia Chan
Independent Newsmedia

Glendale anticipates a larger sales tax haul in the coming fiscal year, however, getting its hands on the money in a timely manner is another story.

A state law that changes how businesses file and remit their sales taxes kicked into effect this year, causing confusion among filers, which is delaying payments to cities.

“The taxpayers are still doing what they have always done, they are paying their taxes,” Councilwoman Joyce Clark said at last week’s budget workshop, which focused on key revenue streams. “The problem is not with them but with the state and the state’s newly rolled-out system and frankly I don’t have a lot of confidence in the state solving this.”

Ms. Clark said the city may not see all its money until after the June 30 deadline to adopt a balanced budget.

“We can’t retroactively apply that excess,” she said and suggested the city perhaps scale back its spending for the new fiscal year, which begins July 1.

Glendale anticipates receiving $197 million in sales tax revenue for fiscal year 2017-18, a 3.5 percent increase from the prior year.

Sales tax dollars are the city’s biggest pot of money, accounting for 44 percent of the estimated $215 million in general fund revenue for the new budget year.

The sales tax simplification law essentially reduces the paperwork for businesses with a one-point of pay, the state. Before the new law, businesses had to file two tax returns, one with the state and one with Glendale.

Now everything, including licensing, audits and collections, are overseen by the state. Arizona Department of Revenue collects the transaction privilege tax and makes weekly payments to municipalities.

Budget and Finance Director Vicki Rios said staff has heard from some of the city’s larger taxpayers who indicated they ran into problems with the state’s electronic filing process and had to file on paper, which takes longer to process.

Staff has proactively reached out to the top 150 city taxpayers and will eventually make contact with 500 total, which accounts for 90 percent of Glendale’s sales tax revenue, she said.

“One of the things we need to keep in mind is the businesses are still there, they are still collecting the taxes,” she said. “The problem is are they remitting it to the right city in the right way. It’s too early to tell whether or not how many will continue to get it wrong to the end of the year.”

Ms. Clark noted that the city was already taking a $484,000 hit in it sales tax collection because that is the payment the city must fork over to the state for the new program.

She also said if there is still a deficit in the rate of return on June 30, how would it affect what the city anticipated and what it actually receives and how would the city make up that deficit.

“We anticipated the delay,” said Tom Duensing, assistant city manager. “If it gets to the point and we actually work the accounts of those who didn’t pay or know how to file we should not see any changes in the sales tax revenue at all.

“At this point it’s just too early to tell if there is a systemic problem where we have to adjust revenue up or down.”

Ms. Clark pressed on, asking if staff is looking to develop a worse-case scenario budget.

Mr. Duensing said some economists have suggested just that.

But, “I would say at this point in the middle of March, it’s too early to do that,” he said, noting the city has $41 million in fund balance to cushion any kind of a blow.

He said conventional wisdom is to give it a few weeks or a month or two before looking for possible cuts.

“This is really a cash-flow issue right now,” Mayor Jerry Weiers said. “And we do have money to take care of that.”

Councilman Jamie Aldama agreed.

“The sky is not falling, the city is doing really, really good,” he said. “To suggest we create a plan to look at reduction of services is premature.”

Councilman Bart Turner said although he has not seen a downturn in the economy, perhaps the city may get less sales tax because the electronic filing system may find savings for filers.

“It’s worrisome to me,” he said, asking staff to contact the top taxpayers in the city if they are experiencing a reduction in the taxes they owe.

Budget calendar

•March 21 workshop_ draft capital improvement plan

•April 4 workshop _ follow-up items

•April 18 workshop_ all-day department presentations

•April 20 workshop _ all-day department presentations

•May 2 workshop_ follow-up items

•May 23 voting meeting_ tentative budget adoption

•June 13 voting meeting_ final budget adoption/property tax levy

•June 27 voting meeting_Property tax adoption

 

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