Food-tax foes hit snag

The task force was told that if some other revenue stream were legally adopted to meet those bond payments, the bonds would not be in jeopardy. The Utah League of Cities and Towns has been working on a compromise to the House bill removing sales tax from food.

That bill, HB109 from Rep. Merlynn Newbold, R-South Jordan, would remove the state's 4.75 percent sales tax on food at the cash register, while raising the current 1 percent local city sales tax to 1.1 percent to make up for lost revenue, and boosting the current quarter-cent county option sales tax from 0.25 percent to 0.28 percent.

While removing the food tax would have a big impact on some cities, it would essentially be balanced out by those cities that benefit from the increase in the local option sales tax, said Lincoln Shurtz, the league's legislative analyst.

Cities with "a diversified tax base" that includes big ticket items, such as cars, would make out particularly well, he said, while those smaller communities that rely on grocery stores to generate sales taxes would be hard-hit.

To prevent cities from getting hurt, the league has worked out a distribution system for the increased sales tax revenue which would guarantee every city the same amount of sales tax revenue they collected last year.

Any additional revenue would be split 50-50 under the proposal, with cities keeping half of the extra money they collect and turning over the rest to be distributed to communities statewide based on population.

The distribution system, which House leaders said last week was needed to move the bill forward, is part of a compromise with legislators to help reduce the impact on cities.

"Cities have already dealt with this problem — we struck our deal," Shurtz said.

But political subdivisions, transit districts, and Zoo, Arts and Parks organizations that collect sales tax revenues will still be hurt, Shurtz said, especially when coupled with the proposed moratorium on sales tax bonds.

That moratorium could "pose a big problem" — and even stall expansion efforts — for projects like the municipally-funded fiber optic system known as UTOPIA, Shurtz said.

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Contributing: Bob Bernick Jr.

E-mail: lisa@desnews.com