Lexi Coon.
Mountain Brook representatives met with state legislators on Jan. 4 for a rountable during which they discussed a variety of topics and expressed concerns about bills and laws that could impact the city.
With a little less than a week before the state legislature begins its regular session, Mountain Brook representatives met with state legislators the morning of Jan. 4 to discuss agenda items ranging from 2018 legislative priorities to the Do Not Resuscitate Bill. While no formal decisions were made, council members and local officials were able to express their concerns to their representatives.
Representatives included Rep. David Faulkner, R-District 46, Sen. Slade Blackwell, R-District 15, Rep. Jim Carns, R-District 48 and Sen. Jabo Waggoner, R-District 16.
Alabama Accountability Act
The Alabama Accountability Act, passed in 2013, aims to help students transfer from schools on the "Failing Schools List" to other schools that are not failing. This could include public or private schools. AAA previously created a tax credit for tax payers or organizations that donate to Scholarship Granting Organizations which provide scholarships for these transfers. Money for this act is also taken from the Educational Trust Fund (ETF).
Mayor Stewart Welch presented this topic, asking representatives if there were going to be any changes to the AAA, especially since under the new tax law, donations to the scholarship funds will no longer be tax deductible.
Faulkner said right now the act as it stands is OK, but both he and Carns agreed that it faces heavy opposition across the state since the act takes money from the ETF. The ETF helps fund public schools — both K-12 and higher education — and is especially beneficial for more rural communities that may rely on that funding. Carns said he doesn’t believe the act will be repealed, but it won’t be expanded, either.
School system
While Barlow discussed this idea at the PTO Legislative Roundtable in November 2017, he said he wanted to reiterate the disproportionate split of ETF funding between K-12 schools and higher education. Currently, he said, 73 percent of students in Alabama are in K-12 schools, but only 68 percent of the fund is given to those schools. While this is only a few percentage points, he said, the amount can add up to millions.
“We don’t charge tuition, and universities do,” Barlow added.
Barlow also urged legislators to call him with any questions or input regarding a Do Not Resuscitate bill that would permit schools to honor medical orders and is expected to come up this legislative session. As the bill currently reads, teachers would not be held liable under such situations, but Barlow asked representatives to communicate with him before voting and ask any questions that would help inform them about any potential effects on the school system.
Finally, Barlow noted that Homewood is proposing they be added to the state’s Lid Bill, which regulates the amount of property tax a city can receive. While this would not directly affect Mountain Brook, the superintendent said Homewood has been contributing 1 cent of its sales tax to the school system, and it would allow them to distribute money to their schools.
REIT property tax evaluations
Councilman Billy Pritchard spoke of REIT property tax evaluations after noticing that the Lane Parke Apartments — which sold in May 2016 for $73.3 million — were later reevaluated at $61 million for their property taxes. Upon calling the state Board of Equalization, he said he was told they have a “directive from the state of Alabama revenue department that we ought to disregard any sale to REITs.”
REITs, or real estate investment trusts, are companies that own and/or operates income-producing real estate and can include commercial real estate, hospitals, shopping centers, hotels and timberlands.
Because the value of the property was lowered for property taxes, Pritchard estimated the city and the school system will lose, respectively, about $110,000 and $230,000 each year. Councilman Phil Black and Pritchard also said this was indirectly subsidizing the REIT.
Both Faulkner and Carns said what Pritchard was presenting made sense to them, but they had never heard of the exception for the REITs.
To try to mitigate any financial loss in the future, Pritchard asked legislators to consider including an amendment or bill that would solve two problems: the first regarding “a more aggressive stance” on how the state determines a property’s value, and the second that would allow the city to have standing to participate in the process so it might be able to appeal discrepancies.
“We need to have a seat at the table, is where I’m going,” Pritchard said. “There’s a lot of money in Jefferson County that’s being lost. A lot.” This loss of money is also affecting local school systems, he said, which benefit from ad valorem taxes.
“I know the cities are the losers here, but every school board … receives property taxes in the state, they’re going to the big losers in this and they don’t even know,” City Attorney Whit Colvin said.
David Carrington, Jefferson County Commission president, said as chairman of the finance committee he would be sending the state a letter asking about the valuation of REIT property.
General legislative priorities for 2018
Waggoner said because it was an election year, he expects fewer bills and fewer controversial bills to be introduced. The two main items, he said, will be budgets and the prison system.
“As all of you know, we’re under federal court order … We’ve got to do something about the Department of Corrections,” Waggoner. The system is both understaffed and over occupied, and a federal judge said there is a deficiency in mental health care for inmates. This is expected to be expensive but is something the state must handle.
“We’ve got to do it, not let the federal court do it,” he said.
Faulkner also said he will also be introducing a ride-share bill for the state supporting a uniform state transportation network for companies such as Uber and Lyft. Both of these companies are already permitted to work within Mountain Brook city limits.
Sales tax simplification for online filers
As the second greatest source of revenue for the city, sales tax is an important factor for Mountain Brook’s income, representatives agreed at the breakfast. Representatives do not foresee a simplification or change in filing for sales tax for online companies, such as Amazon, but council members did express concern that online purchases don't necessarily give full sales tax back to the city.
“Just because you paid tax doesn’t mean Mountain Brook is going to get it,” City Clerk Steve Boone said. Carns said that of the state’s 8 percent sales tax, 4 percent goes to the state, while the city and the county get 2 percent each. Boone said this is better than what it was, but Mountain Brook is still being penalized through this system since the city has a 3 percent sales tax.
Council members and the mayor called for more specificity in determining where the sales tax should go and how it should be distributed, but representatives noted that would be a more complex and costly expense.
“I agree it’s an issue and it’s been … talked about the last four years, I just don’t see it coming up,” Blackwell said.
RSA pension system
As of Sept. 16, Boone said the city has an unfunded liability pension of $31 million, and the annual budget is about $37 million. “I don’t see it turning around any time soon,” he said. In the next year, the city’s maximum contribution to the fund is going to be 15 percent with employees putting in 7.5 to 8.5 percent.
“If you can save 23 percent of your payroll over your working period, you can retire a multimillionaire,” Boone said. “This plan, something’s wrong with it.”
People are living longer, as well, and Pritchard said legislation will need to be passed that designates a later retirement age. This was last done in 2013.
He also said employee contributions may have to be raised as well. “You’re just going to have to do it again. It’s not going to be politically appealing,” Pritchard said.
