Page 36 - Hurst FY19 Approved Budget

multi-year financial planning process is projecting future sales tax revenues given the
unclear impact of future economic development and redevelopment efforts in Hurst and
surrounding cities, uncertain economic conditions, e-commerce, regional competition,
and impactful legislation. Staff is cautious in planning for this revenue. Due to the
sales tax sharing agreements that are in place, the city only budgets revenues that will
remain after our obligations under economic development agreements are fulfilled.
The Shops at North East Mall agreement with Simon started January 2002 and the North
East Mall agreement began in April 2003. The city reached an early payoff of the Shops
portion of the agreement in fiscal year 2008-2009. While the North East Mall agreement
is scheduled to end in 2023 the city is not planning for that specific increase in sales
tax revenue and the Council anticipates the need to reinvest in the mall to ensure its
continued success.

The city has been proactive in informing state and federal congressional delegations
of the need to allow local control over tax policy and the need for an Internet sales
tax. An important issue is that local sales tax revenues could be adversely affected in
future years should Texas not remain origin-based in collection of sales taxes for “brick-
and-mortar” sales. In Texas, taxes are collected at the point-of-sale regardless of where
goods are delivered (for most non-Internet based sales). As such, local taxing units,
not the state, can lose tax revenues under a scenario where taxable sales delivered
out of a taxing unit’s jurisdiction exceeds the value of taxable sales delivered into their
jurisdiction. Hurst has been a member of a coalition of Texas cities that are protesting
destination-based collections. Recent decisions by the U.S. Supreme Court now allows
states to force online retailers to collect sales tax. Some estimates project an additional
$1.1 billion in sales tax for the State of Texas. Fortunately, an agreement between the
State of Texas and Amazon.com will set a precedent for collection of internet sales tax
in a destination-based manner. According to the Texas Municipal League, “State and
local officials will likely be awaiting some guidance from Texas Comptroller Glenn Hegar,
whose office administers state and local sales taxes. A distinct possibility is that statutory
changes will be necessary in the 2019 legislative session to conform Texas sales tax laws
on remote sales”. Staff will continue to monitor the state’s decision regarding collection
of on-line sales tax.

Multi-Year Financial Overview

To this point, the Budget Message has focused mainly on financial policies and goals
that guide the development of the annual budget. Long-term financial goals and issues
are examined each year through the preparation of the Multi-Year Financial Overview,
which covers ten years. Decisions for the upcoming year are made with consideration
of the long-term financial effects.

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