Alabama cities opposing state legislation prohibiting tax on ...

"Time after time, they have overlooked the local government." - Prichard City Council President Earline Martin-Harris.

PRICHARD, Alabama ? Cities throughout the state of Alabama are voting on resolutions opposing proposed legislation prohibiting them from issuing a business license tax on rental residential properties.

But proponents of the two proposals ? SB217 and HB257 ? claim there is some confusion from these communities and that many would not even be affected.

"It's the greatest confusion of any bill I've seen," state Sen. Vivian Figures, D-Mobile, said. "It's amazing."

The proposals, both slated for either a full House or Senate vote, prohibit any new business licenses from being imposed by cities or counties on the rental of residential real estate on a per unit basis.

The change would only take place by amending the state's constitution. If the legislature approves any one of the two measures, voters could face the issue during the next statewide election in 2014.

The measures are being pushed by the statewide Realtors association, which is concerned about "excessive taxation" and what they view could be a needless trickling down of the business license fees to renters.

"This bill would prohibit the municipalities from forcing owners of several rental properties or multi-unit properties to purchase a separate license for each unit or property," Butch Blum, president-elect of the Mobile Area Association of Realtors, said. "If property owners would be forced to purchase a license for each unit, then the potential is there to pass this fee on."

State Rep. Barry Moore, R-Enterprise, who is sponsoring HB257, said the proposals would reduce the bureaucracy Realtors sometimes have to maneuver whenever renting out multiple units.

Moore said one of his concerns is that cities with universities or military bases could withhold the issuance of a business license until an inspection takes place, thus creating more obstacles for the property owner to rent out the unit.

"In Fort Rucker, there is a lot of turnover," Moore said. "We are preparing this long-term, down-the-road to prevent an inspection (of rental units) every time it becomes vacant."

Cities Oppose

For cash-strapped cities like Prichard, which is currently embroiled in federal bankruptcy proceedings, the concerns about a potential loss of much-needed revenue was enough to spark outrage among council members.

"Time after time, they have overlooked the local government," Prichard City Council President Earline Martin-Harris said.

Their concerns surfaced after information was sent to them by the Alabama League of Municipalities, which informed cities around the state about the potential for lost revenue.

"We are looking to protect the big (concern) that municipalities have local control and determination on the method that they can calculate their business license," Lori Lein, general counsel for the League of Municipalities, said.

Prichard has a business license that collects around $300,000 a year, though a significant amount is outstanding. Almost 50 percent of the city's properties are considered residential real estate.

"We know for a fact that this particular bill, if passed, will have a negative impact on the city of Prichard," Martin-Harris said shortly before the City Council on March 21 with a 4-1 vote, approved a resolution opposing the legislation. "The city of Prichard is 48 percent rental. That's a lot of money we use to operate the city."

Prichard isn't alone. Trussville's City Council recently endorsed a similar resolution out of concern that the legislation's language is "vague." In Calera, the mayor ? who offers homes for rent ? said he doesn't mind paying a business license.

Along the Gulf Coast where the rental of residential units is common, Orange Beach and Gulf Shores have concerns.

Prichard and Sen. Vivian Figures butt heads
PRICHARD, Alabama -- The Prichard City Council had invited state Sen. Vivian Figures, D-Mobile, to their March 21 meeting, but she could not attend.

Figures said she called Prichard Mayor Troy Ephriam on the phone that week and left him a voice message to let him know of her absence because she was out of town.

?What I told him in that message is they would not be affected (by the legislation),? she said, referring to SB217, which the city of Prichard opposes.

Some council members, though, blasted the senator for the no-show.

?We have representatives who are supposed to be representing the city,? Councilwoman Ossia Edwards said. ?There is no respect from them to come to the city. It?s a shame. Something is very wrong with that.?

Added Council President Earline Martin-Harris: ?We need to hold our legislators accountable for the bills they present.?

Figures said those comments might also stem from leftover animosity over her push to get a statewide constitutional amendment approved that ultimately led to the dissolution of the Prichard Water Works and Sewer Board. That board was officially dissolved last month after a Mobile County Circuit judge ruled that the Mobile Area Water and Sewer System would take ownership of the water utility for approximately 11,000 Prichard customers.

The end of the Prichard Water Board has caused concerns among Prichard city officials who fret that $1.6 million in municipal service and franchise fees could be lost with the transfer of the water system to MAWSS. Officials with MAWSS are working with Prichard city officials on how best to avoid those losses.

"They are upset with me over the Prichard Water Board situation," Figures said. "That's their problem, not mine."

Ken Grimes, the city administrator of Orange Beach, said the business license generates about $1.5 million each year.

"That goes straight to the general fund," Grimes said, adding that Orange Beach generates about $22 million in revenue each year with the business license being the city's fourth largest revenue stream. "We don't want anything on the state level to ever hinder our ability to pass on that."

Gulf Shores Mayor Robert Craft said his concern is that the law could create an auditing nightmare.

"In this law, (the owner) would only have to buy one business license," Craft said. "It would be hard for us to understand what they are paying on a per unit basis. It's a major impact to monitor and audit."

Grandfathered or not?

Figures and Moore are adamant that cities with a business license already in effect will not be impacted by the legislation. They both said that if cities and counties in Alabama had a business license in effect before Jan. 1, the legislation would not apply.

The cities aren't so sure.

Like Trussville, Prichard Mayor Troy Ephriam said the language in the bill is "vague" and that the resolution the city approved opposing the measure stands.

Grimes agreed.

"We're not comfortable that this won't turn into something that won't hinder, across the state, smaller cities that don't have many rentals," he said. "We're trying to protect one of our revenue streams."

Craft said Gulf Shores would not be opposed to the legislation as long as an entire city is grandfathered, and not the actual units that are already taxed.

"If more (rental units) are sold, then they would not fall under (the restrictions of the legislation)," Craft said. "If we're able to do what we're doing now, that's an acceptable modification we can deal with."

Moore said he's met with lobbyists representing Gulf Shores and that the legislative language is being tweaked to reflect the concerns raised by cities that already have a business license in place.

"I think it's already clear," Moore said. "We will make sure they have a specific language that covers them."

Figures said she contacted Ephriam late last week to inform him about the grandfather clause.

"If the (licensing) process is already in place before Jan. 1, 2013, they will continue to do business as they already have with new developments and with new rental houses and whatever," she said. "They will do business as usual."

Figures also defended her sponsorship in the proposal, saying she has not owned residential rental units since 2007.

"It doesn't affect me whatsoever," she said.

John Sharp, Press Register

Source: http://blog.al.com/live/2013/04/cities_around_alabama_opposing.html

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