Posted on March 6, 2015 in Government Operations
(Accurate as of February 6, 2015)
State and local governments rely on an assortment of fees and charges to help fund services. The information request posed whether there were instances where certain fees were automatically adjusted based on a fixed number of metrics or inputs without the intervention of the legislative body, either state or local government. One such example of a fee or a charge automatically adjusting without legislative intervention involves the Motor Fuel Tax (MFT) in North Carolina. While the MFT is added to the cost of each gallon of gasoline and diesel sold in the state, North Carolina's MFT rate springs from two sources: a fixed portion and a variable portion. While the fixed portion remains unchanged, unless modified by state law, the variable portion is automatically adjusted and is based on the wholesale price of gasoline every six months, on January 1st and July 1st.
There are several examples of uniform fee adjustment policies within state agencies even though no blanket policies that crossed state agencies were discovered. Some statewide guidelines exist, such as those issued by the Massachusetts Department of Revenue and guidelines for local government user fees issued by the Wisconsin Legislative Audit Bureau. In addition, the Government Finance Officers Association has best practice guidelines for establishing government charges and fees, including recommendations for periodic review and updates.
Examples of statewide, departmental fees adjusted according to changes in certain inputs or metrics are outlined. Because fees usually are based on the cost of service provision, inputs or metrics can be highly specific to the service provided and adjustments typically incorporate inflation indirectly. For example, and as noted previously, North Carolina adjusts the MFT biannually, according to the wholesale price of gas; as changes in the wholesale price captures changes in inflation, so, too, does the adjusted motor fuel tax rate. Two examples of non-fee rates adjusted directly to inflation are state salaries and minimum wages.
State Best Practices/Reviews
Massachusetts: http://www.mass.gov/dor/docs/dls/mdmstuf/technical-assistance/best-practices/userfees.pdf; http://www.mass.gov/dor/docs/dls/publ/misc/costing.pdf
Examples of Fees
Business License Fees:
Proposed changes for the 2015-17 Executive Budget that would charge larger businesses more, with different rates for different industries
Rate matrix based on Texas's model (not automated, but a uniform policy on fee increases)
“The I-85 Express Lanes are dynamically priced and range from .01 cent to .90 cents per mile. As demand for use of the Express Lanes increases, the toll amount rises to ensure that motorists using the Express Lanes experience more reliable trip times. Motorists can see the posted toll amount before they enter the Express Lanes, so decisions can be made whether or not use them. Tolls on the I-85 Express Lanes are collected electronically, with no toll booths requiring drivers to slow down or stop.”
This model also is standard practice in other settings. The amount charged as a toll to ride in a designated (or Express) lane varies; in some instances, it varies based on the number of motorists at a given time and in other instances, it varies on the time of day. The cost of riding at peak times is higher than at non-peak times.
Variable Gas Taxes:
“The state Motor Fuel Tax (MFT) is added to the cost of each gallon of gasoline and diesel sold in North Carolina. The state MFT rate, under state law, has a fixed portion and variable portion that is based on wholesale prices that can adjust every six months, on January 1st and July 1st. The North Carolina Department of Revenue calculates and sets the state gas tax. For a historic look at state gas tax rates, visit http://www.dornc.com/taxes/motor/rates.html. The state MFT rate for the period of July 1st 2013 through June 30, 2013 was established by the General Assembly at 37.5 cents per gallon.”
In response to Kentucky's depleted revenues, Kentucky Senate Transportation Chair Ernie Harris has a proposed bill (SB 29) that would lock the average wholesale price where it sits at present, at $2.35 a gallon, rather than let it drop to the statutory floor of $1.78. Senator Harris acknowledged that some lawmakers have pledged to never vote for a tax increase, no matter the impact on public services. But, in his opinion, “technically, this plan wouldn't raise the gas tax,” he said, “it just wouldn't let the tax drop any further.”
Voters eliminated part of a 2013 law designed to help gas taxes keep up with inflation.
Ohio Franchise Permit Fee:
Ohio annually assesses each intermediate care facility serving individuals with intensive behavioral needs a franchise permit fee equal to $11.98 multiplied by the product of the following:
The number of beds certified under Title XIX of the "Social Security Act" on the first day of May of the calendar year in which the assessment is determined pursuant to division (A) of section 5112.33 of the Revised Code;
The number of days in the fiscal year beginning on the first day of July of the same calendar year.
Beginning July 1, 2009, and the first day of each July thereafter, fees are determined under division (A) of this section in accordance with the composite inflation factor established in rules adopted under section 5112.39 of the Revised Code.
New Mexico Agricultural Leasing Fee:
The current fee calculation for agricultural leases was implemented in 1988. The fee formula takes into account a wide variety of factors which include the previous year's rates by western livestock ranchers, beef cattle prices, and the cost of livestock production. When cattle prices decline and the cost associated with livestock production increases, the grazing fee will decrease in response to these market conditions. Also, when forage is in demand by ranchers, it will tend to increase the grazing fee index resulting in a higher grazing fee. These price rates are used to determine the fee formula.
Formula: $0.0474 (Base Value) x Carrying Capacity (CC) x Acreage x Economic Variable Index (EVI)
California Waste Discharge Fee:
Fees for waste discharge are indexed to acreage.
(1) Tier I: If a discharger is a member of a group that has been approved by the State Water Board to manage fee collection and payment, then the fee shall be $100 per group plus $0.75 per acre of land.
(2) Tier II: If a discharger is a member of a group that has been approved by the State Water Board, but does not manage fee collection and payment, then the fee shall be $100 per farm plus $1.27 per acre of land.
(3)(A) Tier III: If a discharger is not a member of a group that has been approved by the State Water Board, the following fee schedule applies:
|Acres||Fee Rate||Min Fee||Max Fee|
|0-10||$404 + $13.50/Acre||$404||$538|
|11-100||$1,084 + $6.70/Acre||$1,084||$1,756|
|101-500||$3,033 + $3.40/Acre||$3,033||$4,715|
|501 or More||$6,733 + $2.70/Acre||$6,733||No Max Fee|
Pennsylvania state officials' salaries
Hundreds of top elected and appointed officials in Pennsylvania state government received a 1.6 percent increase in pay in November 2014, authorized by a 1995 law designed to counter the effect of inflation. The pay raises are an automatic, annual cost-of-living adjustment.
State-based minimum wage
In nine states, the increase in the minimum wage was automatic on January 1, 2015, an adjustment made to keep the minimum wage in line with rising inflation.
Posted on March 6, 2015 in Fiscal Affairs
(Information Compiled on February 4, 2015)
The New Markets Tax Credit Program (NMTC Program) was established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities. The NMTC Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years (5 percent for each of the first three years, and 6 percent for each of the remaining four years). The investment in CDEs cannot be redeemed before the end of the seven-year period.
In 1994, the Community Development Financial Institutions Fund, or CDFI Fund, was created under aegis of the U.S. Department of the Treasury to promote economic revitalization and community development through investment in and assistance to community development financial institutions (CDFIs). The CDFI Fund achieves its purpose by promoting access to capital and local economic growth through initiatives such as the NMTC Program. Since its inception, the CDFI Fund has made 836 awards allocating a total of $40 billion in tax credit authority to CDEs through a competitive application process. This $40 billion includes $3 billion in Recovery Act Awards and $1 billion of special allocation authority to be used for the recovery and redevelopment of the Gulf Opportunity Zone.
Importantly, when President Barack Obama enacted the Tax Increase Prevention Act of 2014 (the “Act’) in mid-December 2014, many programs that expired at the end of 2013, including the New Markets Tax Credit Program, were reauthorized. Specifically, the Act authorizes $3.5 billion in allocations for the New Markets Tax Credit Program and these allocations must be used by December 31, 2019. Many states have programs similar to the federal New Markets Tax Credit Program.
Along with the overview of the Program presented below, the following links remain of interest: