Prepared by The University of Tennessee County Technical Assistance Service 2016

1. Current County Government Issues Fall 2016 Prepared by The University of Tennessee County Technical Assistance Service 2016

2. Increased State Aid Funding for County Highway Departments • Current fiscal year appropriation of additional $42,000,000 in State Aid Funds to county highway departments • One time additional funding to help offset backlog of needed local road projects • State Aid funding has a 2% local match requirement

3. What is needed from County Finance Departments • TCSA and TCHOA will be pushing for additional, desperately needed county highway funding in upcoming legislative session • Hard for them to push for more funding if counties do not expend/encumber the additional $42 million ASAP • If highway department is under centralized purchasing, help them expedite the purchasing process for these road projects this fall. • If the Highway Fund needshelp with local match, consider interest-free internal capital outlay note issue if adequate cash flow is available in other county funds. If not, consider short term note from financial institution

4. Internet Sales Tax on retailers that do not have a physical presence/nexus within the State of Tennessee • Tennessee officials estimate the state loses about $300 million to $450 million in sales tax collections annually due to internet commerce. • Proposed Tennessee Revenue Department rule that would require out-of-state retailers without a physical presence/nexus to begin collecting and remitting Tennessee sales taxes on items sold here. • Proposal has backing of the governor and major brick and mortar retailers in Tennessee. • At least a dozen other states have already passed similar rules or are proposing them.

5. What is needed from County Finance Departments • As this could have a significant impact on increased sales tax funding, keep an eye on this issue over the next few months • If the attorney general approves the proposed rule change, the rule will be filed with the Secretary of State and would be effective 90 days later. • Look for litigation to arise should this rule change happen and a push for a decision on the legality of this by Congress or the U.S. Supreme Court.

6. GASB 77, Tax Abatement Disclosures • Statement requires disclosure of tax abatement information about (1) a reporting government’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the reporting government’s tax revenues. • Statement takes effect this fiscal year

7. County needs to have the following information for financial statement disclosure this fiscal year for GASB 77 • Brief descriptive information such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients • The gross dollar amount of taxes abated during the period • Commitments made by a government, other than to abate taxes, as part of a tax abatement agreement.

8. What is needed from County Finance Departments • Check with your property assessors to see what tax abatements are on file in their office. • Ask county mayors to touch base with local IDB to be sure the list of tax abatements on file are complete and information is up to date • Stay awake and pay attention during the GASB update at this conference for more info on GASB Statement 77.

9. Remember…Tax Abatements must be in writing! “Gentleman’s Agreements” or “Hand-Shake Deals” violate State Statue…and common sense.

10. Internal Control Law Update: T.C.A. 9-18-102 (a) • CTAS provided implementation training to county officials and employees state-wide this spring and summer. • Huge success with over 4,000 class attendees state-wide and very positive feedback on classes. Other states have since looked at what CTAS did as a benchmark/template for their federal grant funding internal control training. • Majority of county officials took this law seriously and successfully implemented internal control systems that visibly and materially improved county government operations state-wide.

11. Going Forward… • CTAS is preparing a follow up internal controls class based on GAO guidance for recipients of federal grant funding. • The class will focus on risk management of county office operations utilizing proven risk management practices/tools that county management can tailor to fit their offices. • The objective of class will be to assist county officials with identifying, quantifying, and managing specific risks that management identified when they assessed/documented the internal control systems in their offices. • Look for this class to launch sometime in 2017.

12. BEP Funding Update Total additions to BEP in FY17: $223,065,000 • $104,600,000 –salaries for teachers and other LEA positions • $48,000,000 –ADM growth and inflationary unit cost increases • $29,480,000 –12th month health insurance premium • $15,000,000 –technology improvement • $13,901,000 –English Learner support • $4,801,000 –Special education funding options revised • 6,483,000 –Other formula adjustments

13. Questions/Comments? • CTAS website: http://www.ctas.tennessee.edu/ • Don’t forget to check out our on-line library “E-Li”. Everything you ever wanted to know about county government in Tennessee is there for you to search. • Your CTAS field consultant is always a call/email/text away. Give him a shout.