1. Urban Revenue Sharing and State Shared TPT By Elaine Smith Arizona Department of Revenue Office of Economic Research and Analysis October 21, 2011

2. Revenue Sharing to Cities and Counties Components of the Revenue Sharing Bases Trends for Revenue Sharing

3. Revenue Sharing to Cities and Counties For FY12, the official Estimate of Revenue Sharing to cities was: TPT:$382.5 million ($76 per capita) URS:$424.4 million($84 per capita) Note: The population used is the 2010 Decennial Census. The URS is subject to a minimum population of 1,500.

4. Revenue Sharing to Cities and Counties For FY12, the official Estimate of Revenue Sharing to counties was: TPT:$619.8 million ($97 per capita) Note: The population used is the 2010 Decennial Census.

5. Revenue Sharing to Cities and Counties My current estimate for FY12 for TPT revenue sharing to cities is $400 million. The URS estimate is unchanged. For counties, my current estimate for FY12 is $645 million.

6. Components of Revenue Sharing What makes up the pool of money that is shared with the counties and the cities?

7. Components of TPT Revenue Sharing Using the Retail category as an example, the current state tax rate for retail is 6.6%. Of that: 2% goes to the Distribution Base pool 3% is Non-shared 0.6% goes to Education Tax 1.0% goes to the Temporary Tax

8. Components of TPT Revenue Sharing Of the Distribution Base, 25% goes to the Cities 40.51% goes to the Counties 34.49% goes to the state general fund

9. Components of TPT Revenue Sharing The percentage each category contributes to the Distribution Base differs. For the larger contributors: Utilities, Communications and Contracting contribute 1% to the Distribution Base. Restaurants & Bars, Amusements, Retail, Personal Property Rentals contribute 2% to the Distribution Base.

10. Components of TPT Revenue Sharing Mining Severance contributes 2% of it’s 2.5% rate to the Distribution Base. Hotel/Motel contributes 2.75% to the Distribution Base.

11. Components of TPT Revenue Sharing Of course, the volume of activity in each category factored by the percentage contributing to the Distribution Base is ultimately what dictates the pool of money available for revenue sharing to cities, towns and counties

13. Components of TPT Revenue Sharing In FY11, the Retail category component comprised 61.5% of the Distribution Base pool. In FY05 it was 61.6%; in FY10 it was 60.1%. It is safe to say that the Retail category is, and will continue to be the largest contributor to the Distribution Base Pool.

14. Components of TPT Revenue Sharing In FY11, the Contracting category component comprised 6% of the Distribution Base pool. In FY05 it was 10.6% and in FY10 it was 6.5%. It is safe to say that the Contracting category has diminished it’s role as a strong contributor to the Distribution Base pool.

15. Components of TPT Revenue Sharing The other strong contributors to the Distribution Base during FY11: Mining Severance 2.2% Utilities 6.3% Restaurant & Bars 12.5% Rental of Personal Property 4.1% Hotel/Motel 3.8%

16. Components of Urban Revenue Sharing Urban Revenue Sharing (URS) is comprised of 15% of the Net* Income Tax collections from two years prior. So, for FY12, the URS base is the net income tax collections from FY10. The income tax collections from FY12 will be distributed in FY14. *after refunds

18. Components of Urban Revenue Sharing Components of Net Income Tax Revenue SourceFY05FY10FY11 Withholding 73.9%106%94.1% Individual* 6.2%(20.6%)(10.4%) Net Individual 80.2%85.4%83.7% Corporate 19.8%14.6%16.3% * final payments minus refunds

19. Components of Urban Revenue Sharing What to watch to in order to anticipate Urban Revenue Sharing? Withholding Corporate Credits

20. Components of Urban Revenue Sharing The impact of credits on Urban Revenue Sharing: Tax YearCorp Credit IndividualTotalReduction in URS 2006$87 m$286 m$373 m$56 m 2007$92 m$264 m$356 m$53 m 2008$82 m$246 m$328 m$49 m Credit amounts for tax year 2009 have not yet been established. Tax year 2008 should be considered preliminary.

21. Trends for Revenue Sharing Preliminary estimates of future revenue sharing

22. Trends for Revenue Sharing Preliminary estimates of future revenue sharing for counties

23. Questions?

24. Contact Information Elaine Smith – Senior Economist Arizona Department of Revenue Office of Economic Research & Analysis Email: esmith@azdor.govesmith@azdor.gov Phone: 602-716-6924

25. Additional Contact Information Department of Revenue website: www.azdor.gov www.azdor.gov County and city revenue sharing: Elaine Smith esmith@azdor.gov; Diane Sosinski dsosinski@azdor.gov ; Karen Jacobs kjacobs@azdor.gov esmith@azdor.gov dsosinski@azdor.gov kjacobs@azdor.gov Program Cities: Audrey McGhee amcghee@azdor.gov amcghee@azdor.gov TPT Licenses: DOR License and Registration www.azdor.gov, 800-843-7196 www.azdor.gov

26. Additional Contact Information Tax base estimates: Elaine Smith esmith@azdor.gov ; Diane Sosinski dsosinski@azdor.gov esmith@azdor.gov dsosinski@azdor.gov Levy Limits: Darlene Teller dteller@azdor.gov@azdor.gov Expenditure Limits: Diane Sosinski dsosinski@azdor.gov dsosinski@azdor.gov

27. Additional Contact Information Bonded Indebtedness Cities Darlene Teller dteller@azdor.gov dteller@azdor.gov

28. Additional Contact Information License Compliance Services: Peggy Creamer pcreamer@azdor.govpcreamer@azdor.gov Property tax services:Property Tax Division602-716-6843