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Senate advances revised local-option sales tax distribution, sparking debate over city impacts
Summary
Senators debated and passed the first substitute to SB 35, revising the 1983 'hold harmless' local-option sales tax distribution formula with a phased phase-down; supporters framed it as tax equity while some lawmakers warned of hardships for cities like Riverdale; vote 25-2, 2 absent.
The Senate on Jan. 26 adopted the first substitute to Senate Bill 35, a measure that changes the way local-option sales and use tax distributions are calculated and phases out older "hold harmless" arrangements from 1983.
Sen. Bell, sponsor of the substitute, described the measure as correcting an unintended long-term inequality that froze some cities at a revenue high-water mark. The substitute replaces the decades-old distribution formula with a phased reduction that, sponsors said, will restore equity among municipalities. The first substitute provides phased mitigation (a seven-year phase-out with potential extensions to ten years for qualifying outliers) compared with an earlier task-force recommendation of a five-year straight-line phase-out.
Sen. Jenkins and other senators representing affected cities warned the change could create hardships for municipalities that have structured budgets around the older hold-harmless amounts, citing examples such as Riverdale and South Salt Lake. Proponents, including Sen. Bramble, said the task force and revenue study supported moving toward a more equitable distribution and that the substitute includes mitigation for cities that qualify under specified criteria.
Floor debate reviewed historical background and local fiscal impacts. After debate, Sen. Bell moved final passage of the first substitute; roll call recorded 25 yes, 2 nay, with 2 absent. The bill was referred to the House for its further action.
Supporters framed SB35 as correcting a longstanding inequity in state tax policy; opponents urged caution about the near-term fiscal stress on some municipalities and noted the phased approach and optional extensions intended to reduce shocks.
