Legislation that would give Wyoming’s cities and towns the ability to tax themselves could very well find its way onto the Wyoming Legislature’s agenda in next year’s session.
What such a proposal might look like — or whether it even survives in committee long enough to make it to the floor — remains to be seen, however.
Under Wyoming’s existing system, cities and town receive a certain share of tax money from the state. However, if additional needs arise, they lack the ability to raise their own revenues, relying instead on county-wide taxes that must be approved by voters. That can leave larger municipalities hostage to rural voters, who might not benefit from the projects that higher taxes might pay for.
A local option tax has been discuss for years by state lawmakers, who have long sought a means to move away from the current system.
As a hearing on the latest proposal came to a close Tuesday in Cheyenne, the Legislature’s Joint Committee on Revenue found itself saddled with a plethora of concerns remaining to be addressed from small towns and counties around the state, many of whom fear changing the system could cut them off from critical flows of local funding from an already dwindling spring of tax dollars from the state.
But facing a tightening budget scenario, state lawmakers are under pressure to find a replacement for tens of millions of dollars in direct distribution funding for small towns, many of which — with no sales tax base and sparse property tax bases — rely on heavily on state and county funds to balance their budgets.
“Money’s tight,” said David Fraser, director of the Wyoming Association of Municipalities. “It’s tight for us, it’s tight for you. We rely a lot on the state for our own funding, and anything we can do to take this issue on our own hands in a way that is beneficial to you.”
Efforts to provide communities with the tools they need to raise their own revenues over the past few years have yielded little fruit, with revenue bill after revenue bill failing in the Legislature.
“I think out of all eight bills we had last year that could have helped you, none of those made it,” said Rep. Dan Zwonitzer, R-Cheyenne. “We have done nothing as a Legislature recently to bail you out of these problems.”
Groups like the Wyoming Association of Municipalities, which have endorsed local option taxes, want the ability to rely not on the Legislature – which has a statewide focus – but the voters most directly affected by the taxes they’re voting for, to decide for themselves whether or not a new fire station or freshly paved roads are worth a 1 percent increase in their taxes.
“We’re not asking you to raise a tax,” said Fraser. “We’re asking you to enable city councils to go to the voters, to let their voices be heard, and if the issues they’re voting for are important enough, to tax themselves over.”
For lawmakers — whose policies affect the entire state and all its communities — this solution could actually create new problems, and could further wedge a divide between Wyoming’s large towns and small communities, leaving some, like Zwonitzer, seeking a different answer.
For larger cities and towns, their ability to raise money for large, expensive municipal projects through the county-specific optional sales tax system are often hindered by rural voters, who, in theory, receive less benefit from those projects. To solve this, large municipalities want the ability for their voters to decide whether to levy an additional tax on themselves — independent of rural voters — to offer themselves greater flexibility in improving their communities.
The state’s smallest towns, however, stand to lose a lot under that proposal. With local option taxes, the majority of voters in more urban areas will have little incentive to vote for county-wide taxes that benefit everyone, causing additional harm to communities whose funding from the state has been cut. Additionally under those terms, residents of those small towns — who purchase a majority of their goods in larger communities — could receive a smaller proportion of the money they spend in sales tax, creating additional inequities between large and small towns.
“This legislation might benefit 10 municipalities, and may have no benefit — or cause harm — to 89 municipalities,” said Ralph Bartels, the mayor of Burns.
But, as Fraser noted, if the state had not yet found a creative solution to the problem, its leaders “haven’t been creative enough yet, and Tuesday’s discussions yielded a number of potential solutions that could eventually lead to some sort of improved local option.
Though the Wyoming County Commissioners Association — which opposed the tax — remained open to discussions on a creative solution, it doesn’t consider the local option tax a suitable replacement for direct distribution funding, maintaining that it leaves too much to chance in a taxing environment that is already uncertain.
This scenario, the association has argued, presents too much risk, particularly as revenue bills at the state level continue to fail and budgets grow even tighter. According to numbers the association released last year, state funding and property tax collections have decreased 25 percent and 22 percent, respectively, since 2015 — leaving small towns pushing for solutions that don’t carve them out of the picture.
“This is not a replacement for that $105 million,” WCCA director Jeremiah Rieman said. “It can’t be. Under this, it becomes subject to the voters. We need some certainty.”
At the meeting’s close, the groups representing counties and municipalities agreed to work together on possible solutions, and draft legislation could be expected by the revenue committee’s final interim meeting in November.