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Res 74-99RESOLUTION NO. 74-99 A RESOLUTION OF THE COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA, SUPPORTING A LEGISLATIVE INITIATIVE TO REFORM THE MUNICIPAL REVENUE SHARING PROGRAM AND THE MUNICIPAL FINANCIAL ASSISTANCE TRUST FUND. WHEREAS, the Municipal Financial Assistance Trust Fund and the Municipal Revenue Sharing Program were created in 1971 and 1972, respectively, for the purpose of providing a minimum level of revenue padty, a reliable and bondable revenue source, and to reduce the need for increasing revenues at the ;ocar level; and WHEREAS, the aforementioned municipal revenue sharing programs have suffered from a substantial decline in revenues; and WHEREAS, an examination of the historical pattern of these cigarette tax based revenue sharing distributions, adjusted for inflation and population growth, indicates that between fiscal years 1972-73 and 1996-97, municipal revenue sharing distributions decreased by a total of 76% or 3.~% annually, and WHEREAS, the aforementioned municipal revenue sharing programs rely heavily on net cigarette tax collections which account for approximately seventy and one-half percent (70.5%) or 157.4 million of municipal revenue sharing dollars; and WHEREAS, the State government of Florida and the federal government of the United States of America are implementing policies to reduce the use of tobacco related products; and WHEREAS, the decline in use of tobacco related products would improve the health of many Florida and U.S. citizens; and WHEREAS, the decline in the sale of tobacco related products will result in the continuing decline in revenues for Florida's 401 municipalities; and WHEREAS, the Florida Legislature is the only entity authorized by the Constitution of the State of Florida to replace such revenues, NOW THEREFORE, BE IT RESOLVED BY THE CITY OF DELRAY BEACH, FLORIDA: SECTION 1. That the City of Delray Beach, Florida does hereby encourage the Flodda Legislature to approve the following changes to the financial structure of the Municipal Financial Assistance Trust fund and the Municipal Revenue Sharing Program. Replace the cigarette tax as a primary dedicated funding source with a reliable and stable revenue source providing adequate growth to enhance our municipal governments' ability to meet the needs of our community. Res. No. 74-99 Provide a financial commitment to the Municipal Financial Assistance Trust Fund and the Municipal Revenue Sharing Program equivalent to the per capita funding level established in fiscal year 1989-90. SECTION 2. That a copy of this resolution shall be made available to the Florida League of Cities, the Florida Legislature and interested parties. adoption. SECTION 3. That this Resolution shall be effective immediately upon its PASSED November 1999. A'I-rEST: and ADOPTED in regular session on this 16th day of City Clerk Res. No. 74-99 MEMORANDUM To: From: Subject: Date: City Commission David T. Harden, City Managery/ Support - Municipal Revenue Sharing Reform November 9, 1999 In the early 1970's, the Florida Legislature created two programs, the Municipal Financial Assistance Trust Fund and the Municipal Revenue Sharing Program. These programs were initiated in order to provide a stable and bondable revenue source to municipalities and to reduce the need for increasing property taxes at the local level. Both programs rely significantly on cigarette tax collections for funding. Over the past 15 years, municipalities have experienced a substantial decline in these program revenues. This is due to, in part, a more educated and healthier citizenry that purchase less tobacco-related products. Additionally, the state and federal governments are implementing policies to reduce the use of tobacco related products. Such trends create a significant financial burden on municipalities. The Florida League of Cities ask that we support their effort in requesting that the Florida legislature change the financial structure of these programs so that cigarette taxes are replaced with a more reliable source. If approved, the attached proposed resolution will be sent to our legislators as well as the Florida League of Cities. I recommend City Commission approval of this resolution. [S,O00 NI $~ s=~nN=~^:~I 666~ 866~ Z66~ 966~ ~66~ ff66~ ~66~ E66~ ~66~ 066~ 886 I, /..861, 9861, (g,O00 NI $~ g:::lrIN:::l^::ll::l / Z66L 966~ ~66~ ~66 ~ S66~ ~66~ ~66~ 066~ 8861, Z86 I, 986 I, 666~ 866~ RESOLUTION NO. 74-99 A RESOLUTION OF THE COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA, SUPPORTING A LEGISLATIVE INITIATIVE TO REFORM THE MUNICIPAL REVENUE SHARING PROGRAM AND THE MUNICIPAL FINANCIAL ASSISTANCE TRUST FUND. WHEREAS, the Municipal Financial Assistance Trust Fund and the Municipal Revenue Sharing Program were created in 1971 and 1972, respectively, for the purpose of providing a minimum level of revenue parity, a reliable and bondable revenue source, and to reduce the need for increasing revenues at the local level; and WHEREAS, the aforementioned municipal revenue sharing programs have suffered from a substantial decline in revenues; and WHEREAS, an examination of the historical pattern of these cigarette tax based revenue sharing distributions, adjusted for inflation and population growth, indicates that between fiscal years 1972-73 and 1996-97, municipal revenue sharing distributions decreased by a total of 76% or 3.2% annually, and WHEREAS, the aforementioned municipal revenue sharing programs rely heavily on net cigarette tax collections which account for approximately seventy and one-half percent (70.5%) or 157.4 million of municipal revenue sharing dollars; and WHEREAS, the State government of Florida and the federal government of the United States of America are implementing policies to reduce the use of tobacco related products; and WHEREAS, the decline ~n use of tobacco related products would improve the health of many Florida and U.S. citizens; and WHEREAS, the decline in the sale of tobacco related products will result in the continuing decline in revenues for Florida's 401 municipalities; and WHEREAS, the Florida Legislature is the only entity authorized by the Constitution of the State of Florida to replace such revenues, NOW THEREFORE, BE IT RESOLVED BY THE CITY OF DELRAY BEACH, FLORIDA: SECTION 1. That the City of Delray Beach, Florida does hereby encourage the Florida Legislature to approve the following changes to the financial structure of the Municipal Financial Assistance Trust fund and the Municipal Revenue Sharing Program. Replace the cigarette tax as a primary dedicated funding source with a reliable and stable revenue source providing adequate growth to enhance our municipal governments' ability to meet the needs of our community. Res. No. 74-99 Provide a financial commitment to the Municipal Financial Assistance Trust Fund and the Municipal Revenue Sharing Program equivalent to the per capita funding level established in fiscal year 1989-90. SECTION 2. That a copy of this resolution shall be made available to the Florida League of Cities, the Florida Legislature and interested parties. adoption. SECTION 3. That this Resolution shall be effective immediately upon its PASSED and ADOPTED in regular session on this 16th day of November 1999. ATTEST: Mayor City Clerk Res. No. 74-99 FL League of cities 11/4/99 11:29 PAGE 3/5 RightFAX ISSUE BRIEF Munieipnl Revenue Shnring Reform Position: SUPPORT legislation that restructures thc fimding sources of the municipal portion of the state's revenue sharing program, and which ties municipal shared revenues to the growth of the state's general revenue fun& Key Points: The Florida Revenue Sharing Act of 1972 was enacted to reduce increases in local taxes; provide local governments with a bendable revenue source; and to provide a minimum level of revenue parity amongst local governments. In 1971, the Legislature erented the Municipal Financial Technical Assistance Trust Fund and financed it with a 2 cents per pack cigarette tax. The following year, the Municipal Revenue Sharing Program was enacted as part of the Florida Revenue Sharing Act. In FY 1998-99, it is estimated that the total distributions to municipalities through these programs will be $23.9 million and $199.3 million, respectively. Both of the municipal revenue sharing programs rely significantly on cigarette taxes for funding. Presently, the Municipal Financial Assistance Trust Fund receives 5.8 percent of net cigarette tax collections for a total of $23.9 million. The Municipal Revenue Sharing Program is funded by 32.4 percent of net cigarette tax collections which represems $133.5 million. (The Municipal Revenue Sharing Program also receives 12.5 percent of the state alternative fuel decal users fee and net collections from the one-cent municipal fuel tax.) In FY 1999-00, net cigarette tax proceeds represent $157.4 million or 70.5 percent of the total revenue sharing programs. The level of funding for municipal revenue sharing programs is gradually declining. Specifically, since FY 1985-86 distributions from the Municipal Financial Assistance Program have decreased in aggregate dollars by $3.0 million. Likewise, distxibutions from the Municipal Revenue Sharing Program have deerensed by $21.3 million during this same period. When comparing real dollars, an examination of the historical pattern of these cigarette tax based revenue sharing distributions, adjusted for inflation and population growth, indicates that between rise,al years 1972-73 and 1996-97, municipal revenue sharing distributions decreased by a total of 76 percent or 3.2 percent annually. In contrast, from 1970 to 1997 the population of the state of Florida has increased from 6.8 million to 14.7 million, or 116 percent. More specifically, from 1972 to 1997, the municipal population has increased from 4.6 million to 7.3 million. The federal and state governments have aggressively pursued policies to reduce the use of tobacco related products. In 1997, the courts awa_nted the state of Florida approximately $11.3 billion as enmpensatien for fiscal impacts to the state's health expenditures due to the use of tobacco related products. The financial structure of municipal revenue sharing needs to be reformed, taking into account both economic and social changes. During the next Session, the Legislature should replace cigarette taxes as a dedicated funding source for municipal revenue sharing with a revenue source that is more stable and reliable to meet bonded obligations and that provides adequate growth in order for municipalities to meet the needs of their communities.