HEALTHY CITIES HEALTHY OKLAHOMA We’re all in this together

77% of all Oklahomans live in municipalities 91% of STATE sales tax is generated from sales within municipalities 80% of Oklahoma citizens & businesses receive water from municipal sources Virtually all commerce, government, education & healthcare occurs inside a city Cities are the Economic Engine for the State

Number of Municipalities by Size Oklahoma has 585 municipalities  319 have population under 1,000  200 have population between 1,000 & 5,000  58 have population between 5,000 & 50,000  5 have population between 50,000 & 100,000  3 have population over 100,000

Major Sources of Operating Revenue STATE - 5 Income Tax Sales Taxes Gross Production Taxes Motor Vehicle Taxes Misc. Taxes COUNTY - 3 Ad Valorem State Apportionment Sales Tax SCHOOL DISTRICT - 3 Ad Valorem State Appropriation Federal Appropriation MUNICIPALITY - 1 Sales Tax

6 states provide 3 sources of revenue from appropriations, ad valorem, income tax and sales tax 27 states provide 2 sources of revenue 17 states provide only 1 source of revenue How Do Other States Fund Municipalities?

Only in Oklahoma is that 1 source sales tax

Sources of Oklahoma Municipal Revenue

Compare US vs. Oklahoma US Municipal Revenue Sources Okla. Municipal Revenue Sources

In Search of the Big Box For fiscal survival, municipalities are forced to pursue retail sales over jobs or rooftops New jobs generate income tax New rooftops, after construction, generate only ad valorem tax

The “Wal-Mart” Effect Sales Tax Revenue Per Person Per Penny Makes comparisons possible regardless of size of city or rate of tax The average PPPP in a Wal-Mart City is $139 The average in a non Wal-Mart is $72

Do retail sales generate NEW revenue? When Glenpool adds a Wal-Mart, where do the shoppers come from? Drains revenue from one locality to benefit another, or Shifts revenue from one retailer to another within the same locality Pursuit of retail sales has limited benefit for the state.

Problems with relying solely on Sales Tax  Sales tax is a volatile source of revenue  Consumer switch to Internet sales  Loss to Oklahoma municipalities projected to be $106 mil. annually by 2010  State and counties crowd out the ability for cities to increase sales tax

Not Every Transaction Generates Sales Tax

Inside City Hall Voter-approved sales tax is often dedicated to a specific purpose CityPortion DedicatedGeneral Fund Broken Arrow 1.5% Claremore 3.0%0% Collinsville 1.0%2.0% Jenks 1.0%2.0% Mannford 1.5%2.0% Owasso 1.0%2.0% Sand Springs 1.5%2.0% Sapulpa 2.2%1.8% Skiatook 1.0%2.0% Tulsa 1.0%2.0%

Operating Revenue (2 ¢ ) Public Safety Neighborhood Planning Economic Development Recreation & Culture Administration Streets & Transit

Operating Revenue (2 ¢ ) Public Safety Neighborhood Planning Economic Development Recreation & Culture Administration Streets & Transit

Public Safety Consumes Most Available Sales Tax Revenue

Municipal Street Funding  Municipal Roads Vital to Economic Development 54% of miles driven in Oklahoma are driven on municipal streets  Motor Vehicle Apportionments Municipalities $24 mil. statewide Counties $235 mil. statewide

How to balance the city budget?

Consequences  Robbing utility revenues means: Systems go without maintenance 54% of Oklahoma’s Water Treatment Facilities are under DEQ consent order. Compare 4% in Kansas EPA estimates $5.4 billion to bring municipal water and sewer up to standard statewide Higher Utility rates for customers

 First Do No Harm Learn the cost of new state mandates placed on cities prior to passage  CTAG will request a bill requiring Municipal Fiscal Impact Statements No more sales tax exemptions that don’t pay for themselves Fully fund Disaster Relief obligation each year Healthy Cities Healthy Oklahoma Remedies

HEALTHY CITIES HEALTHY OKLAHOMA Remedies  Consider the solutions Diversify the tax base, giving access to ad valorem for operations  Municipal Fire Districts Increase motor vehicle apportionment Repeal sales tax exemptions that don’t provide a benefit Return to cities a portion of the state sales tax generated in its area  Half-cent for roads

Proposals for Next Session  No unfunded mandates Require municipal fiscal impact statements on legislation

Proposals for Next Session  Office of Emergency Management reporting Require semi-annual report to legislature on outstanding payments to municipalities

Proposals for Next Session  Allow counties to help once again Remove population limitations on county’s ability to assist with street building and repair

Proposals for Next Session  Expand retail opportunities Allow municipal public trusts to participate in retail operations

Proposals for Next Session  Interim Study on municipal funding structure

QUESTIONS & COMMENTS