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BILL # SB 1116 |
TITLE: TPT; exemption; public safety equipment |
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SPONSOR: Borrelli |
STATUS: As Introduced |
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PREPARED BY: Jordan Johnston
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This bill exempts a law enforcement agency, fire district, fire department, volunteer fire department or emergency medical services provider from paying retail sales or use tax levied by the state on purchases of public safety equipment pursuant to A.R.S. § 42-5061 and A.R.S. § 42-5159. Under current law, the previously outlined entities must pay a 5.6% tax to the state for such purchases.
SB 1116 would reduce General Fund revenues by an estimated $(8.0) million and Proposition 301 revenues by $(1.3) million annually starting in FY 2021. Due to the 5.6% reduction in TPT paid, there would be offsetting savings of about $1.8 million annually on state level public safety expenditures starting in FY 2021.
SB 1116 would also reduce sales tax revenues by $(1.8) million annually for counties and $(1.1) million annually for cities starting in FY 2021. Due to the 5.6% reduction in TPT paid, there would be offsetting savings of about $3.6 million annually for counties and $6.8 million annually for cities on local level public safety expenditures starting in FY 2021.
The bill states that public safety equipment purchased for public safety purposes, by law enforcement agencies, fire districts, fire departments, volunteer fire departments or emergency medical services providers, is exempt from the Transaction Privilege Tax (TPT). The term "public safety equipment" is not defined under the bill. For the purpose of this analysis, the JLBC Staff assumes "public safety equipment" means any capital equipment purchased and utilized by peace officers, firefighters, and emergency medical personnel for any public safety related task.
The JLBC Staff used FY 2019 expenditure data from the Department of Public Safety (DPS), Arizona Department of Corrections (ADC), Department of Juvenile Corrections (DJC), and Department of Forestry and Fire Management (DFFM), as well as from estimates provided to us by the County Supervisors Association of Arizona (CSA) and the Arizona League of Cities and Towns (AZ League). The analysis assumes the total FY 2019 expenditures from state and local entities on public safety equipment will represent the FY 2021 impact.
The equipment estimates provided by entities reflected the 6 largest expenditures on public safety equipment in FY 2019, which were for vehicles, radios, computers, ammunition, weapons, and uniforms/vests. In FY 2019, DPS expended approximately 78% of their total equipment expenditures on these 6 items. This analysis assumes all equipment expenditures by public safety agencies will be defined as public safety equipment. We used the 78% of total equipment expenditures to derive estimates for all equipment expenditures by other agencies.
CSA provided expenditure data on the 6 largest public safety equipment expenditures for 11 different counties. Using the data provided and the population of the reporting counties, we estimate total county spending on all public safety equipment to be $64.1 million.
The AZ League provided expenditure data on the 6 largest public safety equipment for 15 different cities in the state. Using the data provided and the population of the reporting cities, we estimate total city spending on all public safety equipment to be $120.5 million.
(Continued)
For FY 2019, DPS reported $20.5 million in equipment expenditures, ADC reported $10.2 million, DJC reported $500,000, and DFFM reported $400,000. The four state public safety agencies account for a total of $31.6 million in public safety equipment expenditures. With the $31.6 million in state equipment expenditures, the state agencies would save $1.8 million annually on public safety equipment purchases with the TPT exemption.
Combined across all state, county, and city expenditures, the total expenditures on all public safety equipment in FY 2019 is estimated to be approximately $216.3 million.
There are 2 components of the state retail sales tax rate: 1) 5% is distributed among the state, counties, and cities and 2) 0.6% is the Proposition 301 surcharge dedicated to education and not shared by the counties or cities. Under statute, the state retains approximately 73.8% of state retail sales tax revenues and distributes 16.2% to counties and 10% to cities. Based on these percentages and FY 2019 expenditures, the bill would reduce the state-retained portion of state retail sales taxes by an estimated $(8.0) million in FY 2021. SB 1116 would also reduce Proposition 301 revenue by an estimated $(1.3) million.
This analysis does not account for any public safety expenditures on equipment from private or federal entities. Although private and federal expenditures on public safety equipment may apply, the JLBC Staff is not able to estimate their expenditures at this point. Such expenditures would result in additional revenue losses to the state and local governments. This analysis also does not account for local municipal and county TPT taxes on public safety equipment. Exempting these taxes would increase offsetting savings for state purchases on its $31.6 million of public safety equipment.
Based on the assumptions above, SB 1116 would result in an estimated sales tax loss of $(1.8) million annually for counties starting in FY 2021. Due to the 5.6% reduction in TPT paid, the counties would save about $3.6 million annually on public safety equipment expenditures starting in FY 2021.
SB 1116 would also result in an estimated sales tax loss of $(1.1) million annually for cities starting in FY 2021. Due to the 5.6% reduction in TPT paid, the cities would save about $6.8 million annually on public safety expenditures starting in FY 2021.
As previously stated, this analysis does not account for local municipal and county TPT taxes on public safety equipment, which would modify the estimates. The JLBC Staff cannot estimate how these changes would affect individual cities. In addition, to the extent that local jurisdictions tax public safety equipment, those taxes should not affect local purchases since any foregone taxes would result in expenditure savings, but local jurisdictions would lose taxes on the $31.6 million of state public safety expenditures.
2/5/20