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OFA Fiscal Note

State Impact:

Agency Affected


FY 10 $

FY 11 $

Department of Revenue Services

GF - Revenue Loss

See Below

See Below

Department of Revenue Services

GF - Cost



Note: GF=General Fund

Municipal Impact:



FY 10 $

FY 11 $

Various Municipalities

Revenue Gain

See Below

See Below


The bill allows two or more municipalities that belong to the same federal economic development district to enter into mutual agreements to (1) promote regional economic development and (2) share the real and personal property tax revenue from new economic development.

This could result in a revenue impact to certain municipalities who are eligible to enter into such an agreement and choose to share property tax revenue with their partner municipality. The revenue impact is dependent on the stipulations of the agreement and the location and extent of new economic development in the participating municipalities.

In addition, the bill requires the Department of Revenue Services (DRS) to enter into a memorandum of understanding (MOU) with each municipality participating in an approved agreement to segregate up to one-sixth of 1% of the sales and use tax derived in the participating municipalities. This may result in a significant annual revenue loss to the General Fund from the sales and use tax. The revenue loss to the General Fund will coincide with an equal revenue gain to municipalities participating in these agreements. The revenue loss to the General Fund will depend on the number of municipalities choosing to participate in the agreement but could be as much as $90 million per year.

Section 4 of the bill creates a fundamental change in the way sales and use tax is collected by both the DRS and retailers. DRS would have to make significant changes in their Integrated Tax Administration System (ITAS), their collection methods, and their audit procedures. The total cost to DRS is indeterminate but it is estimated to be significant.

The bill also requires each municipality choosing to enter into an agreement to meet various requirements including participation in at least two cooperative programs with their partner municipality. These provisions may result in an impact on the costs incurred by the municipalities.

It is anticipated that the Office of Policy and Management can approve regional economic development plans and determine whether towns that enter mutual agreements are consistent with provisions of the bill within the agency's normal budgetary resources.

Section 6 of the bill allows municipalities that are parties to an approved agreement to adopt an ordinance to impose a 1% tax on the gross receipts from sales by any hotel or lodging house located within the municipality's boundaries. The total potential revenue gain to all municipalities is $6 million to $6. 5 million per year beginning in FY 10.

Section 6 of the bill will require DRS to make significant changes to their ITAS and their collection methods that would cost approximately $430,000 in FY 10.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

Source: Department of Revenue Services Annual Report 2008