The sales tax break for mining companies stresses city budgets.
A Utah sales tax break for mining equipment has clobbered the Wellington City budget, so Mayor Ben Blackburn will join mayors of other impacted towns in pushing for a legislative fix.
Mr. Blackburn told the Wellington City Council Wednesday that he will explain the situation to the Legislature's Interim Committee on Revenue and Taxation in June. He said Rep. Christine Watkins (D-Price) and Sen. David Hinkins (R-Orangeville) are sympathetic to the plight of Wellington and many other small Utah cities.
When the Legislature decided to exempt the sales tax on certain mining equipment and materials, cities across the state had to absorb a loss in revenue. It is not just in coal mining regions, the mayor noted, because towns with sand and gravel operations or hard rock mining have been impacted as well.
He estimated that Wellington has lost about a third of its sales tax revenue, some $240,000, as a result. The effect of the sales tax loss has been magnified because taxable sales are also used as a gauge of how much should be collected from tolls on the Ridge Road industrial area.
City services have been curtailed this year as a result. The city did not replace one police officer who resigned and had to lay off one clerical worker. Now that may not sound like much, but it's the equivalent of a 20 to 25 percent reduction in force in a big city.
In presenting the city's proposed budget for fiscal year 2011, Mayor Blackburn and City Recorder Ken Powell told the council they have anticipated flat revenue for the coming year. Therefore, to be fiscally responsible, they have held the projected budget to only $687,000, which is what 2010 actual receipts will probably be.
"We didn't pull any figures out of the air" to try to make the situation look rosier that it is, Mr. Blackburn said to the council.
Although the budget won't increase, there is a sizable increase in health insurance expense looming. Mr. Powell said premiums are expected to increase by 10 percent next year.
Nevertheless, the mayor said the budget anticipates that the city will be able to meet its current payroll, bond obligations and public services.
There will be a public hearing on the budget before the council votes on adoption in June.
Mayor Blackburn went on to say that a potential remedy for the budget crunch would be a tax measure designed to allow cities to levy a one percent sales tax on their own which would include the now-exempted mining firms. That way, if the legislature continues to forego the tax revenue to the state budget from this particular segment, it won't drag the cities down with it.