A N     A C T

RELATING TO TAXATION

Introduced By: Reps. Pires, Russo, Voccola, Cambio and Smith

Date Introduced : February 9, 1999

It is enacted by the General Assembly as follows:

SECTION 1. Preamble.

WHEREAS, In 1998, State and Johnston town officials became aware that the Town of Johnston's financial position had significantly deteriorated, resulting in a fiscal crisis; and

WHEREAS, The state Director of Administration evaluated the need to invoke Rhode Island general law 45-9-3 to create an involuntary state budget and review commission; and

WHEREAS, The state Director of Administration offered Johnston officials the option of creating a voluntary local financial review commission composed of town and state officials, and the town accepted this option; and

WHEREAS, The commission's findings resulted in dramatic tax increases in Johnston in fiscal year 1999; and

WHEREAS, The Town of Johnston would be significantly and negatively impacted under Rhode Island general law 44-34.1 if reimbursements were based on Johnston's 1998 tax rate, instead of its 1999 tax rate.

The general assembly finds that the Town of Johnston's exceptional circumstances warrant that the Town of Johnston's reimbursements under Rhode Island general law 44-34.1 be based on its 1999 tax rate.

SECTION 2. Sections 44-34.1-1 and 44-34.1-2 of the General Laws in Chapter 44-34.1 entitled "Motor Vehicle and Trailer Excise Tax Elimination Act of 1998" are hereby amended to read as follows:

44-34.1-1. Excise tax phase out. -- (a) Notwithstanding the provisions of chapter 34 of title 44 or any other provisions of the general laws to the contrary, the motor vehicle and trailer excise tax established by section 44-34-1 shall be phased out by the fiscal year 2005. The phase out shall apply to all motor vehicles and trailers, including leased vehicles.

(b) Pursuant to the provisions of this section, all motor vehicles shall be assessed a value by the vehicle value commission. Said value shall be assessed according to the provisions of section 44-34-11(c)(1).

(c) (1) The motor vehicle excise tax phase out shall commence with the excise tax bills mailed to taxpayers for the fiscal year 2000. The tax assessors of the various cities and towns and fire districts shall reduce the average retail value of each vehicle assessed by using the prorated exemptions from the following table:

(2) The excise tax phase out shall provide increased levels of assessed value reductions until the tax is eliminated. (3) Current exemptions shall remain in effect throughout the phase out period. (4) The excise tax rates and ratios of assessment shall {DEL be fixed at DEL} {ADD not be greater than ADD} fiscal year 1998 levels {DEL , DEL} {ADD for each city, town, and fire district, provided, however, in the Town of Johnston the excise tax rate and ratios of assessment shall not be greater than fiscal year 1999 levels ADD}and in no event shall the final taxable value of a vehicle be higher than assessed in the prior fiscal year.

44-34.1-2. City and town and fire district reimbursement. -- (a) During the vehicle excise tax phase out in fiscal years 2000 through 2006, cities and towns and fire districts shall receive advance reimbursements from state general revenues equal to the amount of lost tax revenue due to the phase out of the excise tax. Upon elimination of the tax and beginning in fiscal year 2006, cities and towns and fire districts shall receive a permanent distribution of sales tax revenue pursuant to section 44-18-18 in an amount equal to any lost revenue resulting from the excise tax elimination. {ADD Lost revenues shall be determined using a base tax rate fixed at fiscal year 1998 levels for each city, town, and fire district except that the Town of Johnston's base tax rate shall be fixed at a fiscal year 1999 level. ADD}

(b) (1) The Director of Administration shall determine the amount of general revenues to be distributed to each city and town and fire district for the fiscal years 1999 through 2005 such that every city and town and fire district is held harmless from tax loss resulting from this chapter, assuming that tax rates are indexed to inflation. The Director of Administration shall index the tax rates for inflation by applying the annual change in the December consumer price index -- all urban consumers (CPI-U), published by the Bureau of Labor Statistics of the United States Department of Labor, to the indexed tax rate used for the prior fiscal year calculation. The Director shall apply the following principles in determining reimbursements.

(i) Exemptions granted by cities and towns and fire districts in the fiscal year 1998 must be applied to assessed values prior to applying the exemptions in section 44-34.1-1(c)(1). Cities and towns and fire districts will not be reimbursed for these exemptions.

(ii) No city or town or fire district shall be reimbursed for more than would have been levied had the exemptions contained in section 44-34.1-1(c)(1) not been applied, and the average retail prices determined by the Rhode Island Vehicle Value Commission been set as the average retail price in Rhode Island using retail sales prices determined for Rhode Island state sales tax purposes as they had been for fiscal year 1999, prior to the passage of this chapter.

(iii) Inflation reimbursements shall be the difference between:

(a) The levy calculated at the tax rate used by each city and town and fire district for fiscal year 1998 after adjustments for personal exemptions but prior to adjustments for exemptions contained in section 44-34.1-1(c)(1), {ADD provided, however, that for the Town of Johnston the tax rate used for fiscal year 1999 shall be used for the calculation ADD} and

(b) The levy calculated by applying the appropriate cumulative inflation adjustment to the tax rate used by each city and town and fire district for fiscal year 1998 {ADD ; provided, however, that for the Town of Johnston the tax rate used for fiscal year 1999 shall be used for the calculation, ADD} after adjustments for personal exemptions but prior to adjustments for exemptions contained in section 44-34.1-1.

(c) (1) Funds shall be distributed to the cities and towns and fire districts as follows:

(i) On October 20, 1998 and each October 20th thereafter through October 20, 2004, twenty-five percent (25%) of the amount calculated by the Director of Administration to be the difference for the upcoming fiscal year.

(ii) On February 20, 1999 and each February 20th thereafter through February 20, 2005, twenty-five percent (25%) of the amount calculated by the Director of Administration to be the difference for the upcoming fiscal year.

(iii) On June 20, 1999 and each June 20th thereafter through June 20, 2005, fifty percent (50%) of the amount calculated by the Director of Administration to be the difference for the upcoming fiscal year.

(2) Funds distributed to the cities and towns and fire districts for fiscal year 2006 shall be calculated as the funds distributed in fiscal year 2005 adjusted by the change in the consumer price index -- all urban consumers (CPI-U) published by the Bureau of Labor Statistics of the United States Department of Labor from June 2004 to June 2005. Twenty five percent (25%) of the amounts calculated shall be distributed to the cities and towns and fire districts on October 20, 2005, twenty five percent (25%) on February 20, 2006, and fifty percent (50%) on June 20, 2006. The funds shall be distributed to each city and town and fire district in the same proportion as distributed in fiscal year 2005.

(3) Prior to October 20, 2006, the Director of Administration shall calculate to the nearest tenth of one cent the number of cents of sales tax received for the fiscal year ending June 30, 2005 equal to the amount of funds distributed to the cities and towns and fire districts under this chapter during fiscal year 2006, and the percent of the total funds distributed in fiscal year 2006 received by each city and town and fire district, calculated to the nearest one-hundredth of one percent. The Director of Administration shall transmit those calculations to the Governor, the Speaker of the House, the President of the Senate, the Chairperson of the House Finance Committee, the Chairperson of the Senate Finance Committee, the House Fiscal Advisor, and the Senate Fiscal Advisor. The number of cents, applied to the sales taxes received for the prior fiscal year, shall be the basis for determining the amount of sales tax to be distributed to the cities and towns and fire districts under this act for fiscal year 2007 and each year thereafter. The cities and towns and fire districts shall receive that amount of sales tax in the proportions calculated by the Director of Administration as that received in fiscal year 2006.

Twenty five percent (25%) of the funds shall be distributed to the cities and towns and fire districts on October 20, 2006 and every October 20 thereafter; twenty five percent (25%) shall be distributed on February 20, 2007 and every February 20 thereafter; and fifty percent (50%) shall be distribute on June 20, 2007 and every June 20 thereafter.

SECTION 3. This act shall take effect upon passage.