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Flat-rate tax plan may lift transit $

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The latest incarnation of a "single-rate sales tax" plan to remodel Utah's sales tax structure would provide significant new monies for transit projects in Utah's most populous counties.

While that might be good news for Salt Lake City leaders who generally favor transit, there is some concern the flat-rate system would injure Utah's capital city by taking away sales tax generated by the LDS Church's downtown mall development.

The latest plan is making the rounds in city halls across the state as the Utah League of Cities and Towns presents it to many of the state's 217 municipalities.

Thursday, the ULCT's legislative team will be at Salt Lake City Hall to provide details.

"We have been working with Rep. Harper, (Wayne Harper, R-West Jordan) to develop an approach that, if it were adopted, we could live with," said Roger Tew, ULCT's legislative lobbyist.

The plan would be a "huge coup for vendors," added Lincoln Shurtz, ULCT's legislative coordinator.

Those vendors would no longer have to calculate different sales tax figures based on where the sales were occurring, Shurtz said.

While the idea once was to cut Utah's 96 different sales tax rates to 29 rates, Harper, who is sponsoring a single-rate bill, now wants to use one simple rate, according to a ULCT report to the City Council. Currently, that rate is being determined but likely will be between 6.3 and 6.4 percent, Shurtz said.

The majority of current sales tax rates around the state typically range from 6 percent to 6.6 percent, although rural places like Castle Dale and Delta go as low as 5.75 percent and resort areas like Alta go as high as 8.1 percent.

Many of the components of the plan are still under consideration, Harper said. He expects to have a bill drafted in about 10 days.

Under the current plan, a half of 1 percent of that sales tax would be dedicated to transit projects in several counties, including Weber, Davis, Salt Lake, Utah, Cache, Tooele, Box Elder and Summit. Weber and Davis already have a half-cent transit tax while Salt Lake County has a 7/16th-cent tax. In Utah County, some cities have a one-quarter-cent transit tax while other cities have no such tax. Cache, Tooele and Box Elder counties also have some cities that have transit taxes and some that don't.

The plan would put all cities in those counties under a half-percent tax, Shurtz said. In more rural counties, that half-percent would be set aside for road projects.

Other "boutique" taxes like ZAP/RAP taxes, resort community taxes and rural hospital taxes would be eliminated after the bonds that support those taxes were paid. Those bonds would be paid off by an increase in the rates cities that have such taxes can charge. Those rates would be increased from the current 1 percent city sales tax to 1.1 or 1.2 percent, Harper said.

Once the bonds are paid, the money that went to those unique funds would likely be transferred to a city's general fund to be disbursed as the city wishes, Shurtz said.

But the sticking point for Salt Lake City may be a provision that calls for sales taxes from new "large retail" development to be disbursed throughout the state, based on population. Currently, sales taxes are disbursed on a 50-50 basis with the city where the sale occurs getting 50 percent of the tax and the other half going into a pot to be distributed to all cities, based on population.

Salt Lake City is worried that The Church of Jesus Christ of Latter-day Saints' $500 million redevelopment of the Crossroads Plaza and ZCMI Center malls would fall under new development and therefore the city wouldn't benefit as much from the new sales tax revenue the project will produce.

Deputy city attorney Lynn Pace, who serves as the city's legislative counsel, said he has been assured redevelopment projects, like the two malls, would remain under the 50-50 system. But city leaders want to make sure.

"They don't think that's going to be a problem but don't bank on it," Pace told the council.

It "better not include redeveloped shopping malls," Councilman Eric Jergensen said.

Harper said Tuesday his plan is that existing buildings, even if they are redeveloped, would not be affected.

The single-rate tax needs to be passed this legislative session because the state is implementing the Streamline Sales Tax System (SST) on July 1 of this year so it can charge for Internet and catalog sales taxes, Tew said. Utah's sales tax system needs to be simplified in order to make way for the SST.

"The league was an early and strong supporter of the Streamline Sales Tax concept," Tew said. "We understand if it is going to work, some administrative simplicity has to happen."

E-mail: bsnyder@desnews.com