House approves change to 'hold harmless' sales-tax phase-out after debate over resort communities

The Utah House of Representatives on March 1 amended and passed First Substitute Senate Bill 35, a measure that changes how cities receive local-option sales-tax distributions under an existing ’hold harmless’ arrangement. Representative Adams, the bill sponsor, said the bill "allows for a phase out of that hold harmless" statute and preserves a transition for affected cities.

The debate focused on two proposed changes. Representative Harper moved to substitute a figure in the bill, deleting 0.70 and inserting 0.90 as the threshold for hold-harmless eligibility. Representative Urquhart offered a substitute amendment that would also prevent cities that collect a resort community tax from simultaneously receiving hold-harmless payments — a practice several speakers called "double dipping." "This is double dipping," Representative Urquhart said, arguing that communities with resort taxes already collect extra revenues and should not also get hold-harmless subsidies.

Supporters of retaining some protection for resort communities said the change to 0.90 gives those cities time to adjust. Representative Adams described the amendment as "clarify[ing] what was agreed to over the summer" and said it "actually helps the hold harmless cities" by giving additional transition time. Opponents warned that the Verkhart substitute would harm small resort- and tourism-dependent communities. Representative Adams said the amendment would exclude Alta, Brian Head, Park City and Springdale from continued protections.

The House divided the motion on the two-part substitute. The first part (Urquhart’s language and related language) failed on a division vote, 19–47; the Harper amendment changing the numeric threshold from .70 to .90 passed, and the bill as amended passed final House action, 63 yes to 10 no. The bill will be transmitted back to the Senate for further consideration.

What’s next: the House action sends the amended SB35 to the Senate. The adopted numeric change (0.70→0.90) sets a higher qualification threshold for hold-harmless payments; whether the Senate keeps or further amends that threshold will determine final impact on the named resort communities.

Votes at a glance: the amendment on line 2-19 (0.7→0.9) passed; the broader substitute that would have excluded resort-tax communities failed on division, 19–47; final passage of the amended bill was 63–10.

Sources: Floor debate and roll-call votes, March 1, 2006 House Floor session (Representative Adams, Representative Urquhart, Representative Harper).