HB 2657 would have negative impact on city

As House Bill 2657 moves through legislative process, Mayor Danny Ortega Jr. continues to rally with Arizona League of Cities and Towns in proposing changes to the bill.

The bill makes numerous changes to Arizona law regarding transaction privilege tax (TPT), including eliminating self-collecting cities, local audits and construction sales taxes at the state and local level.

These laws are the main concerns of many cities and towns across Arizona including Douglas.

Douglas took over auditing of local businesses in 2010 and has since collected $188,000 in revenue. When the Arizona Department of Revenue (DOR) was accountable for audits they only collected $2,000 for the city.

“We are a small city and do not get the attention bigger cities get,” City of Douglas Finance Manager, Luis Pedroza said. “They don’t have the resource or staff to conduct audits as quickly as we do.”

The League feels that if cities and towns are moved into the DOR collection program and requiring that all audits be conducted by the DOR would greatly hinder the fiscal management abilities of self-collecting cities

Pedroza added that it takes three or four months for the city to receive sales tax funds from the state.

The state would also like to move construction activity to a materials-only retail transaction. Contractors will be taxed when purchasing material and not at the construction site.

“If the contractor is building a house that cost $100,000 the city tax 65 percent of that amount by 2.8 percent,” he said. “We’ll be losing those funds.”

This will have a significant negative impact on our budget, Pedroza said.

Mayor Ortega feels that HB 2657 is seriously flawed legislation that could cost the city lost revenue and force the city to reduce services.