SENATE BILL REPORT

                   SB 6294

              As Passed Senate, February 7, 1996

Title:  An act relating to the distribution of motor vehicle excise taxes to cities.

Brief Description:  Increasing a distribution of motor vehicle excise taxes to cities.

Sponsors:  Senators Bauer and Prince.

Brief History:

Committee Activity:  Ways & Means:  1/30/96, 1/31/96 [DP].

Passed Senate, 2/7/96, 49-0.

SENATE COMMITTEE ON WAYS & MEANS

Majority Report:  Do pass.

  Signed by Senators Rinehart, Chair; Loveland, Vice Chair; Bauer, Drew, Hargrove, Hochstatter, Johnson, Kohl, McDonald, Moyer, Roach, Sheldon, Snyder, Spanel, Strannigan, Sutherland, West, Winsley and Wojahn.

Staff:  Terry Wilson (786-7433)

Background:  In 1982, 35 percent of the state motor vehicle excise tax (MVET) that was distributed to cities based on population for health and public safety was diverted to an account for city sales and use tax equalization.  The agreement was that cities not imposing the second one-half cent sales tax would get their contribution back.  This is the first distribution under city sales and use tax equalization.  This distribution is equal to 35/65 of the population distribution.

Under city sales and use tax equalization, cities that impose the sales and use tax are eligible to receive moneys that, when added to their previous year's per capita sales and use tax revenues, equal 70 percent of the statewide average.  The distribution is doubled if the city is imposing the second one-half cent sales tax.  If any moneys remain after these distributions, the excess is distributed to cities imposing the second one-half cent sales tax based on population.

In 1993 under health care reform, one-third of the MVET that was distributed to cities based on population for health and public safety was diverted to county public health departments, and the cities were relieved of the obligation to fund these services, effective July 1, 1995.  The first sales and use tax equalization distribution to cities not imposing the second one-half cent sales tax was not considered.  Because the population distribution was reduced by one-third, the first sales and use tax equalization distribution to cities not imposing the second one-half cent sales tax, which is based on the population distribution (35/65), was inadvertently reduced.

Summary of Bill:  The first city sales and use tax equalization distribution to cities not imposing the second one-half cent sales tax is increased to 45/55 of the population distribution.

Appropriation:  None.

Fiscal Note:  Not requested.

Effective Date:  The bill takes effect on July 1, 1996.

Testimony For:  The Legislature made a conscious decision to fund city sales tax equalization with revenues that were already being distributed to cities.  The decision was made that those cities that couldn't impose the second 1/2 cent sales tax should not have to contribute.  This provides equity because those cities that do not benefit should not pay.

Testimony Against:  None.

Testified:  Stan Finkelstein, AWC (pro).