1 local government partnership meeting may 18, 2010
TRANSCRIPT
1
Local Government Partnership Meeting
May 18, 2010
2
Welcome and IntroductionsTrim Smith, Deputy Director
Department of Revenue
3
Announcements & Housekeeping Items
Miki Gearhart, Local Government Partnership Facilitator
4
Panel: Drew Shirk and Mark Mullin
Highlights of 2010 Legislation
5
Minimum Nexus Standards
• Out-of-state businesses that currently do not pay any Washington taxes, but engage in significant business here may have tax liability under economic nexus standards.
• Establishes minimum nexus standards and apportionment requirements for the B&O tax on services and royalties.
• Special rules included that benefit financial institutions.
Revenue Tax Package2ESSB 6143
Revenue Tax Package2ESSB 6143
Minimum Nexus Standards (cont.)
• Changes the apportionment of income from the current cost apportionment or three-factor formula for financial institutions to a single sales factor formula. This will generally reduce tax for in-state businesses and increase tax for out-of-state businesses doing business in Washington.
• Effective June 1, 2010.
6
Revenue Tax Package2ESSB 6143
Corporate Board of Directors Fees
• Compensation received by members of corporate boards of directors is taxed under the service and other activities B&O tax classification at a rate of 1.8 percent.
• Effective July 1, 2010.
7
Revenue Tax Package2ESSB 6143
Tax Avoidance
• Clarifies that the Department has the power to impose tax on some specific transactions where taxpayers have tried to avoid taxes by elevating the form of the transaction over the substance of the activity.
• Closes several current legal loopholes that have been used by tax practitioners to avoid the payment of use tax and real estate excise tax.
• Effective May 1, 2010.
8
Agency or Governor Request Bills
E2SHB 1597 Improving the administration of state and local tax programs
• Updates and clarifies the confidentiality of taxpayer information.
• Incorporates the Streamline Sales and Use Tax Agreement’s definition of “retail sale” into Washington law.
9
Agency or Governor Request Bills
E2SHB 1597 Improving the administration of state and local tax programs (cont.)
• Allows sellers of direct mail the choice of sourcing their in-state sales of advertising and promotional direct mail to the place where the mail is delivered or to the location of the printer.
• Numerous other clarifications and technical corrections to the excise tax and property tax statutes.
• Effective July 1, 2010 - Chapter 106, Laws of 201010
11
Panel: Drew Shirk , Mark Mullin, Joanne Gordon, Alyson Fouts and Matthew Bryan
Impacts to Local Government Revenues
Revenue Tax Package2ESSB 6143Sales Tax on Candy and Gum and B&O Jobs Credit
• Sales of candy and gum are subject to the retail sales or use tax.
• Bill directs Department to compile a list of taxable candy and nontaxable candy-like products and post to web site.
• Candy manufacturers may receive a B&O tax credit of $1,000 for each employment position maintained for a calendar year.
• Effective June 1, 2010.12
Revenue Tax Package2ESSB 6143
Repeal Bottled Water Exemption
• Repeal Bottled Water Exemption Sales of bottled water are subject to the retail sales or use tax.
• Includes bottled water that is delivered to the buyer in a reusable container.
• Sales of bottled water for medical reasons or where consumers lack a potable water source are exempt from the retail sales and use tax.
• Effective June 1, 2010; Expires June 30, 2013.13
Agency or Governor Request Bills
ESHB 3014 Qualifying County Deferral & Credit
–This bill modifies the existing Rural County Sales/Use Tax Deferral/Waiver Program by:
•Changing the expiration date from July 1, 2010 to July 1, 2020
•Limiting “qualifying” counties to those with an unemployment rate 20 percent higher than the statewide rate
•Changing employment requirement for businesses locating in a CEZ
•Allowing continuation of the deferral during periods of temporary shutdown
14
Agency or Governor Request Bills
ESHB 3014 Qualifying County Deferral & Credit (cont.)
– This bill modifies the existing Rural County Sales/Use Tax Deferral/Waiver Program by:
•Retroactively clarifying the definition of manufacturing in both programs (Sales/Use Tax Deferral/ and Rural County B&O Credit for New Employees)
•Prospectively eliminates computer programming and computer related services from the manufacturing definition in both programs.
– Effective July 1, 201015
Agency or Governor Request Bills
ESSB 6789 Data Center
–Provides a retail sales tax and use tax exemption for qualifying data centers purchasing:
•New server equipment installed (including installation) on or after April 1, 2010 in a computer data center.
•Replacement server equipment.
•Power infrastructure required to operate the exempt server equipment, including charges for construction, installation, repair, alteration, and improvement.
16
Agency or Governor Request Bills
ESSB 6789 Data Center (cont.)
–Data centers must meet certain location, square footage, and hiring requirements to qualify.
–Construction must commence after March 31, 2010 and before July 1, 2011.
–Effective April 1, 2010; Expires April 1, 2018.
–Chapter 1, 2010 Laws 1st Special Session
17
Revenue Tax Package2ESSB 6143
PUD Privilege Tax Clarification
• The public utility district privilege tax applies to all amounts received from the sale of electric energy, including any regularly recurring charge to customers as a condition of receiving electric energy, and excluding any tax levied by cities.
• Effective May 1, 2010.
18
19
Local Sales Tax Increases From Bottled Water, Candy Legislation
Calendar Year 2011
Calendar Year 2012
Calendar Year 2013
Candy Sales Tax
$11.2 mil $11.8 mil $12.0 mil
Bottled Water Sales Tax
$11.6 mil $13.1 mil $13.7 mil
20
BREAK
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Panel: Miki Gearhart, James Petit, and David Saavedra
Local Taxes
Highlights of 2010 LegislationLocal Excise Taxes
• EHSB 3179 (Chapter 127, Laws of 2010) Local excise tax provisions for counties and cities
• E2SHB 1591 (Chapter 105, Laws of 2010) Use of certain transportation benefit districts funds
• SSB 6271 (Chapter 19, Laws of 2010) Annexations by cities and code cities located with in the boundaries of a regional transit authority
• SSB 6846 ( Chapter 19, Laws of 2010 1st Special Session) Enhanced 911 emergency communications services
22
ESHB 3179 - Local Excise TaxesEffective June 10, 2010
• Public Safety Tax (Local sales and use tax used for public safety purposes)
• Mental Health Tax (Local sales and use tax used for mental health purposes)
• Brokered Natural Gas Tax (Use tax on Natural or manufactured gas that is consumed with the state)
• Criminal Justice Tax (Local sales and use tax used for criminal justice purposes)
• Local Gambling Tax (Local excise tax imposed and administered by the cities and counties on various gambling activities)
23
Public Safety Tax (PST)Current Law, RCW 82.14.450
•With voter approval, counties can impose a local sales/use tax up to 0.3%.
•One third of the money must be used for criminal justice purposes, fire protection, or both.
•60% of PST receipts are retained by the county and 40% are distributed to cities within the country on a per capita basis.
24
Public Safety Tax (PST)ESHB 3179, Section 1
City PST
• Cities can impose the PST beginning January 1, 2011, if:
1. The tax is approved by voters; and
2. The county in which the city is located has not imposed the PST at the full 0.3% rate.
• The maximum rate a city can impose is 0.1% if:
1. The county in which the city is located has not impose the PST; or
2. The county in which the city is located has imposed the PST but at a rate of 0.2% or lower.
25
Public Safety Tax (PST)ESHB 3179, Section 1 (Cont.)
26
City PST continued
• The rate a city can impose must be lower than 0.1% if:
1. The city adopts an ordinance/resolution for ballot proposition to the voters to impose the PST after (or at the same time) the county has adopted an ordinance/resolution for ballot proposition; and
2. The total city and county PST rate would exceed 0.3%. (e.g. If the county has a PST at 0.25%, then the city can impose the PST at a rate no greater than 0.05%)
Public Safety Tax (PST)ESHB 3179, Section 1 (Cont.)
County PST
• Counties may continue to impose the PST at a rate up to 0.3% with voter approval.
• A county must allow a credit for a city’s PST if:
1. The county’s tax is greater than 0.2%; and
2. The date the county adopted its ordinance/resolution to submit the ballot proposition to the voters to impose the PST (at the rate greater than 0.2%) is after the date the city adopted its ordinance/resolution to submit the ballot proposition to the voters.
• The amount of credit that a county must allow against its PST for a city PST is equal to the amount that exceeds the combined total of city and county PST of 0.3%. (Example: city imposes PST at 0.1% and county imposes the PST at 0.25%, then only 0.05% of the city tax will credit against the county tax collected within the city location.)
27
Public Safety Tax (PST)ESHB 3179, Section 1 (Cont.)
Distributions of PST
• County PST receipts must be shared with the cities in the county, as stated in current law: 60% retained by the county; 40% distributed to the cities within the county based on population.
• City tax receipts must be shared with the county in which the city resides: 85% retained by the city; 15% distributed to the county.
Non-supplant language
• Non-supplant language pertaining to the use of funds was removed from the PST.
28
Mental Health TaxCurrent Law, RCW 82.14.460
• A county can impose a local sales/use tax up to 0.1% without voter approval.
• Revenues from the tax must be used for operation or delivery of chemical dependency or mental health treatment programs and operation or delivery of therapeutic court programs and services.
• A specified portion of revenue from the Mental Health Tax can be used to supplant other funds depending on the year.
29
Mental Health TaxESHB 3179, Section 2
City Mental Health Tax
• A city may impose the mental health tax if:
• The city has a population over 30,000 in a county with a population over 800,000; and
• The county in which the city is located has not imposed the tax by January 1, 2011.
• The rate of tax for the city is 0.1% (Same as the county rate)
• Cities of Puyallup, Lakewood, Tacoma, and University Place would qualify if Pierce County does not impose the tax by January 1, 2011
30
Mental Health TaxESHB 3179, Section 2 (Cont.)
County Mental Health Tax
• Counties may continue to impose the Mental Health Tax under current law.
• If a city imposes the mental health tax, the county in which the city resides may still impose the tax after January 1, 2011, but it must provide a credit for the full amount of the city’s tax.
Non-supplant restrictions
• The non-supplant restrictions on the use of funds remain for the county and pertain as well to the city use of funds.
31
Brokered Natural Gas (BNG)Current Law
• The state imposes a BNG use tax on the use of natural gas and manufactured gas, if the person who sold the gas to the consumer has not paid the state public utility tax.
• Cities may also impose a local BNG use tax.
• BNG use tax rates are identical to state and local utility tax rates on the sale of natural gas and manufactured gas.
32
Brokered Natural Gas (BNG)ESHB 3179, Sections 4 & 5
• Effective June 10, 2010, “use,” means the first act within this state by which the taxpayer consumes the gas by burning it or storing it in the taxpayer’s own facilities for later consumption by the taxpayer.
• For periods before June 10, 2010, the place of first use for purposes of the BNG use tax will depend on the outcome of the G-P Gypsum litigation. Depending on the holding of the Supreme Court in the G-P Gypsum appeal, refunds of local BNG tax may be required. Additional information will be made available when the G-P Gypsum decision is final.
• The credit against the local BNG use tax for certain taxes paid to another state is narrowed so that it only applies to taxes paid to another municipality or other unit of local government.
33
Criminal Justice Tax & Gambling TaxESHB 3179, Sections 3 & 6
Criminal Justice Tax
• Regarding use of these revenues, definition of “criminal justice purposes” is expanded to include human services.
• The non-supplant restriction is removed.
• The definition of “criminal justice purposes of mutual benefit” is expanded to include “services with ancillary benefits to the civil justice system.”
Gambling Tax
• Can be used for “public safety”
34
E2SHB 1591 Transportation Benefit District (TBD) Funds
Current Law
• TBDs may impose a sales and use tax up to 0.2% for up to 10 years
• The 10 years can be extended with voter approval
E2SHB 1597
• TBDs that first impose a voter-approved sales and use tax after July 1, 2010, may impose the tax for a longer period than 10 years, if the revenue is dedicated to repayment of general obligation bonds.
• Effective June 10, 2010
35
SSB 6271 City Annexations & RTA boundaries
Current Law
• If a city within a regional transit authority (RTA) annexes, then another annexation to the RTA is required in order to expand the boundaries of the RTA
SSB 6271
• Annexations by cities located within a RTA are simultaneously annexed to a RTA and subject to all RTA taxes, liabilities, and obligations applicable in the city.
• Effective June 10, 2010
36
SSB 6846 - Enhanced 911 Tax
Current Law
• The state and counties are authorized to impose an E-911 excise tax on switched access lines and on radio (wireless) access lines.
• County tax up to 50 cents per line.
• County tax is collected from customers by the telecommunication companies and remitted directly to the counties.
SSB 6846
• Beginning January 1, 2011, county E-911 tax rate increases up to 70 cents per line
• The telecommunication companies will remitted funds to the Department of Revenue who will distribute the funds to counties in the same manner as county sales and use taxes.
• Counties will need to contract with DOR for the administration of the tax (admin fee of up to 2% of revenues is authorized) 37
38
June 2009
•Local Infrastructure Financing Tool (LIFT)
•Local Revitalization Financing (LRF)
39
What is LRF and LIFT?
•Essentially a form of tax increment financing
• Estimates the growth of certain state and local tax revenues from economic development in a specified area as a result of local public improvements
• Allows use of incremental local tax revenues to pay for local public improvements
• Provides a limited amount of state funding to pay for public improvements as long as there is a local match and anticipated growth in state revenues that equal or exceed the state contribution
40
LIFT
•7.5 Million per state fiscal year awarded by the Community and Economic Revitalization Board to nine projects
The projects awarded, Bellingham, Bothell, Everett, Federal Way, Mount Vernon, Puyallup, Spokane County, Vancouver and Yakima
•Puyallup is implementing the LIFT state shared tax July 1
41
LIFT Legislative Change Second Substitute Senate Bill (SSSB) 6609
• Prior to 2010 legislation to receive the state award the state had to realize a benefit equal to award amount
• Legislative change – project can receive less then award amount equal to the amount of the estimated state benefit
• Amount of state contribution increases up to the full award amount as the state benefit increases
42
LRF
• The department in 2009 approved 7 demonstration projects with a total award amount of $2.2 million
• Demonstration projects – Auburn, Bremerton, University Place, Tacoma, Whitman County, Vancouver, Spokane (city)
• September 1, 2009, 12 projects were submitted on a first come basis applying for a total of $2.5 million in annual award
• The first 6 applications were funded with available funds
• First come basis projects funded – Wenatchee, Clark County Bellevue, Kennewick, Federal Way, partially funded Renton (Port Quendall)
• Auburn is implementing the state shared tax July 1
43
LRF 2010 Legislative Changes
• Provides $1.95 million in annual funding for the six first come basis projects not funded in 2009
• Projects – Richland, Lacey, Mill Creek, Puyallup, Renton (South Lake Washington), New Castle
• Applications must be updated and resubmitted by September 1, 2010
• An economic review of applications by the Department of Economics (University of Washington) to confirm there is an 85% reliability of jobs created and increased tax receipts
• Allows taxing districts to partially participate
44
DOR Contacts
General Program Questions:
• James Petit, DOR Tax Account Administration, [email protected], (360) 902-7037
Property Tax Questions:
• Leslie Mullin, DOR Property Tax Division, [email protected], (360) 570-5865
• Diann Locke, DOR Property Tax Division, [email protected], (360) 570-5885
Questions about estimating incremental tax revenues:
• Diana Tibbetts, DOR Research Division, [email protected], (360) 570-6085
45
•Farmer’s Markets,
•Community Facilities Districts,
•Electronic Bill Presentment and Payment
Property Tax Legislation
Questions?
46
WASHINGTON STATEECONOMIC AND REVENUE FORECAST COUNCIL
State of the Economy
Presented toSpring 2010 Local Government Partnership Meeting
Eric SwensonSenior Economist
May 18, 2010Tumwater, WA
Eric Swenson
State of the Economy
May 18, 2010
Slide 48
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Summary
• We are coming out of the “Great Recession”– The recovery is gaining traction
– Private spending – both consumer and business – is firming
– Job growth has finally returned
– Probability of a double-dip is receding
• Headwinds– Financial markets – volatility; credit to small business
– Construction
– Greek sovereign debt crisis’ impact on WA will be minimal, if contagion is avoided
• WA outperformance still on track– Exports
– Stable aerospace and software publishing
Eric Swenson
State of the Economy
May 18, 2010
Slide 49
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
We have had 3 consecutive quarters of GDP and consumer spending growth
Source: BEA, data through 2010 Q1
-8
-6
-4
-2
0
2
4
6
8
2006 2007 2008 2009 2010
20
05
$Percent growth, SAAR
Real GDP Real Consumer Spending
Eric Swenson
State of the Economy
May 18, 2010
Slide 50
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
We have had job growth in 5 of the last 6 months
Source: BLS; data through April 2010
-1000
-800
-600
-400
-200
0
200
400
2008 2009 2010
Net change in jobs, 000
Eric Swenson
State of the Economy
May 18, 2010
Slide 51
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
ISM indices for both services and manufacturing indicate growth
Source: Institute of Supply Management; data through April 2010
An index greater than 50, implies growth
30
35
40
45
50
55
60
65
70
1998 2001 2004 2007 2010
Diff
usio
n I
nd
ex
Manufacturing Services
Eric Swenson
State of the Economy
May 18, 2010
Slide 52
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Increasing yield curve spread points to growth
Source: Federal Reserve Board, ERFC; data through March 2010
An inverted yield curve typically precedes a recession while a steepening yield curve signifies a recovery
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Yield Curve Spread10-Year minus 3-Month U.S. Treasuries
Eric Swenson
State of the Economy
May 18, 2010
Slide 53
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Large bank lending appears to be easing
Source: Federal Reserve Board, Senior Loan Officers Quarterly Survey; data through April 2010 survey
Survey includes 60 large domestic banks
and 24 U.S. branches of foreign banks
-40
-20
0
20
40
60
80
100
2000 2002 2004 2006 2008 2010
Net Tightening minus EasingPercent
For large and medium firms For small businessesCredit cards Commercial Real Estate
Eric Swenson
State of the Economy
May 18, 2010
Slide 54
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
But credit conditions remain tight for small business
Source: National Federation of Independent Business; data through March 2010
-18
-15
-12
-9
-6
-3
0
2004 2005 2006 2007 2008 2009 2010
Availability of LoansNet Percent ("Easier" minus "Harder"), 3mma
Eric Swenson
State of the Economy
May 18, 2010
Slide 55
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Unemployment is still high
It is normal for this rate to continue to rise even after the economy is in recovery
Source: WA ESD, BLS; data through March 2010
2
4
6
8
10
12
14
1980 1984 1988 1992 1996 2000 2004 2008
Unemployment Rate, Percent, SA
U.S. WA
Eric Swenson
State of the Economy
May 18, 2010
Slide 56
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Consumer confidence is improving, but slowly
Source: University of Michigan; Conference Board, data through April 2010
25
50
75
100
125
150
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
I ndex Mich: 1966Q1 = 100, SAConf Board: 1985 =100, SA
U Mich Conf Board
Eric Swenson
State of the Economy
May 18, 2010
Slide 57
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Home prices appear to be stabilizing
Seattle Home Prices
Source: S&P/Case-Shiller; data through February 2010
100
125
150
175
200
225
250
01 02 03 04 05 06 07 08 09 10
Jan 2
000 =
100
Case Shiller Seattle House Price Index, SA
Composite 10 Seattle
Eric Swenson
State of the Economy
May 18, 2010
Slide 58
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
WA single family housing isimproving; first time homebuyer tax credit may have helped
Source: U.S. Census Bureau; data through March 2010
0
10
20
30
40
50
1990 1994 1998 2002 2006 2010
Thousands, SA, 3MMA
Single Multiple
Eric Swenson
State of the Economy
May 18, 2010
Slide 59
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
REET activity increasing but distorted by tax credits
Source: ERFC; Monthly data through January 2010
0
1
2
3
4
5
6
7
8
9
10
1996 1998 2000 2002 2004 2006 2008 2010
$BillionsSeasonally adjusted taxable real estate excise
activityTaxable real estate activity was up 38% year-over-year in April
Eric Swenson
State of the Economy
May 18, 2010
Slide 60
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
This is the worst downturn in non-residential construction in 30 years
Source: McGraw-Hill Construction, data through December, 2009
-40
-30
-20
-10
0
10
20
30
40
50
1981 1985 1989 1993 1997 2001 2005 2009
Perc
en
t
Non-Residential Contract ValueAnnual Percent Change
Eric Swenson
State of the Economy
May 18, 2010
Slide 61
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Non-residential construction lagged residential on the way down, and has yet to find bottom
Source: McGraw-Hill Construction, ERFC; data through 2009 Q4
0
500
1000
1500
2000
2500
3000
1981 1985 1989 1993 1997 2001 2005 2009
Mil
lions o
f D
oll
ars
Value of Construction Projects Contracts, SA, 4Q MA
Nonresidentail Residential
Eric Swenson
State of the Economy
May 18, 2010
Slide 62
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
500
550
600
650
700
750
800
850
900
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
2002 2003 2004 2005 2006 2007 2008 2009
Construction Automotive dealers
Retail sales growth and fall-off largely due to construction and autos
Source: ERFC; Data through 2009 Q4
Retail sales tax receipts declined by $835 million in FY09. $429 million of the decrease was due to decreases in the construction and auto sectors
ConstructionAnnualized tax due, $millions
Automotive dealersAnnualized tax due, $millions
2007:1, $847m
2009:2, $571m
2007:4, $1,621m
2009:4, $1,085m
Eric Swenson
State of the Economy
May 18, 2010
Slide 63
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Automotive sales are improving
Source: Autodata Corporation, WA DOL; data through April 2010
National car sales were 2.1 million units (ann.) higher in March 2010 than in March 2009
0
6
12
18
24
30
0
5
10
15
20
25
1990 1993 1996 1999 2002 2005 2008
WA
New
Vehic
le R
egis
trati
ons,
Thousands, 3 M
MA
, SA
Mil
lion U
nit
s, SA
AR
US Light Trucks US Cars WA New Vehicle Registrations
Eric Swenson
State of the Economy
May 18, 2010
Slide 64
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Relative age of the car fleet indicates imminent turnaround in car sales
Source: Autodata Corporation, ERFC; data through March 2010
The percent of “old” cars on the road is at a historic high
0%
10%
20%
30%
40%
1976 1980 1984 1988 1992 1996 2000 2004 2008
U.S. LMV Sales: Ratio of 36/ 120 Months
Eric Swenson
State of the Economy
May 18, 2010
Slide 65
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
NAPM-WW index is indicating manufacturing growth
Source: National Association of Purchasing Managers – Western Washington (NAPM-WW); data through April 2010
30
40
50
60
70
80
2000 2002 2004 2006 2008 2010
I ndex (>50 = Growth), 3MMA
Overall Employment
Eric Swenson
State of the Economy
May 18, 2010
Slide 66
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Exports will help the state recover faster than the nation
Source: Wiser Trade Data; through 2010 Q1
Exports excluding transport equipment were up 30% in Q1
-40
-20
0
20
40
60
80
1998 2000 2002 2004 2006 2008 2010
ExportsPercent Change, year ago
Total Total excluding Transportation Equipment
Eric Swenson
State of the Economy
May 18, 2010
Slide 67
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Agricultural exports are most likely to be affected by a strengthening USD
Source: Wiser Trade Data
2009
Eric Swenson
State of the Economy
May 18, 2010
Slide 68
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
The vast majority of Washington agriculture exports go to Asia ... so not affected by a weaker EUR v USD
Source: Wiser Trade Data
2009
Eric Swenson
State of the Economy
May 18, 2010
Slide 69
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Revenue Act revenue is now up year-over-year
Adjusted receipts were up 2.3% year-over-year in the April 11-May 10 collection period.
This was the first adjusted year-over-year growth since September 2008
Source: DOR and ERFC; monthly data through March 2010 Activity
* Adjusted for new legislation and large one-time transactions, current definition of Revenue Act
600
700
800
900
1000
2002 2004 2006 2008 2010
$millions SA
Revenue Act Revenue 3-Month Moving Average
Eric Swenson
State of the Economy
May 18, 2010
Slide 70
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
B&O taxes began to turn around before retail sales tax
Source: ERFC; Data through March 2010 preliminary allocation
B&O revenues began to turn around in early 2009, but growth remained flat until the fall
Retail sales and use activity bottomed out in November 2009; growth accelerated in 2010
150
200
250
300
400
500
600
700
2002 2004 2006 2008 2010
B&O$millions SA
Retail Sales and Use$millions SA
Retail Sales and Use Tax B&O Tax
Eric Swenson
State of the Economy
May 18, 2010
Slide 71
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
WA employment lagged the nation in the downturn and will recover a little stronger than the nation
Source: ERFC November 2009 forecast; actual through December 2009
-6
-4
-2
0
2
4
6
8
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Percent change, year ago
Washington U.S.
Eric Swenson
State of the Economy
May 18, 2010
Slide 72
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
The recovery in WA personal income growth is expected to be better than the nation’s
Source: ERFC February 2010 forecast; actual data through 2009Q3
-3
0
3
6
9
12
15
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Percent change, year ago
Washington U.S.
Eric Swenson
State of the Economy
May 18, 2010
Slide 73
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Revenue growth relative to income is starting to turn around
The difference between the growth rate of Revenue Act collections and state personal income began to shrink in the second quarter of 2009.
Source: DOR and ERFC; data through 2009Q4 estimated
* Adjusted for new legislation, current definition of Revenue Act
Forecast
-15%
-10%
-5%
0%
5%
10%
1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Y/ Y growth in net Revenue Act collections* minus growth in state personal income
RevAct Growth less I ncome Growth Average 1987Q1 - 2009Q4
Eric Swenson
State of the Economy
May 18, 2010
Slide 74
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
General Fund* forecast by fiscal year
(9.6%)
(2.8%)
8.8%
Source: ERFC forecast, February 2010
* General Fund & Related Funds for FY 07, 08, and 09
General Fund – new definition, for FY 10-13
5.4%
4.3%
GF-State
Eric Swenson
State of the Economy
May 18, 2010
Slide 75
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Conclusion
• Revenues have come in close to our November forecast, and are showing signs of improvement
• We expect 12.2% revenue growth in the 11-13 biennium compared to the current one
Pluses
•Recovery in progress
•Job growth has returned
•Car sales are improving
•Large banks able to extend credit
Minuses
•Credit still tight for small business
•Weak consumer confidence
•Slow recovery in construction
•Greece
Eric Swenson
State of the Economy
May 18, 2010
Slide 76
WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Questions
Economic & Revenue Forecast Council1025 E. Union Avenue, Suite 544Olympia WA 98504-0912
www.erfc.wa.gov360-570-6100
Issues of Interest
77
Panel: Alan Lynn, Don Gutmann and Matthew Bryan
Non-Resident Exemption & British Columbia
78
British Columbia and Ontario tax systems become “harmonized” effective July 1, 2010
What this means:Purchases of tangible personal property by residents of British Columbia and Ontario will be eligible for the sales tax exemption provided by RCW 82.08.0273.
The Department is amending ETA 3054 to recognize this change.
SST 2010 Annualization Calendar forMitigation Payments from
December 2010 to September 2011
79
April 30, 2010 Last day to receive businesses from local jurisdictions for review (from reviews of 2009 Annualization)
June 30, 2010 June Mitigation Payment Based on 2009 Annualized Mitigation Amounts
July 14, 2010 Initial 2010 Annualized Mitigation amounts and detail sent to local jurisdictions for review.
Sometime between August 16 and August 27
Mitigation Annual Meeting
September 15, 2010 Initial 2010 Annualized Mitigation amounts and detail information review by local jurisdictions due back to Department of Revenue.
September 30, 2010 September Mitigation Payment Based on 2009 Annualized Mitigation Amounts
December 31, 2010 December Mitigation Payment and Finalization of the 2010 Annualized Mitigation Payment Amounts
80
More Q&A and Feedback
Reseller Permit
Miki Gearhart
81
Closing Comments