FUND(S):

Rainy Day Fund

Sources of Revenue:

Other Fund Rainy Day Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The stated purpose of this bill is to provide for the financing to complete Route thirty-five without the constructing or establishing of toll booths on the road.
    
    As written, this bill proposes the use of $65 million from the State’s Rainy Day Fund as financing for the completion of Route thirty-five (i.e., US35). The bill proposes a methodology for repaying the $65 million from the difference in income tax revenue collected in Mason and Putnam counties if the road is completed compared to the income tax collected in the two counties if the road is not completed. The bill requires the Department of Revenue to project the income taxes to be collected in Mason and Putnam counties over the next 25 years for both the completion and non-completion scenarios.
    
    The provisions of this bill provide funding of a proposed highway through Putnam and Mason counties out of future General Revenue Fund collections. Future collections of Personal Income Tax revenues would be pledged as collateral for a loan from the State’s Revenue Shortfall Reserve Fund. The fiscal impact of a complex tax increment financing plan is unknown because the Tax Department does not currently forecast income tax collections by county. Since we do not have the required projections, we cannot determine if the proposed 25 year repayment schedule will be sufficient to repay the $65 million. While the bill appears to provide for the payback of the original loan amount, there may be some revenue reduction due to the removal of the loan money from interest-bearing accounts. However, we are unable to currently determine the potential revenue impact of the proposal
    
    Additional administrative costs of the Department of Revenue cannot be determined without further study.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    As written, this bill proposes the use of $65 million from the State’s Rainy Day Fund as financing for the completion of Route thirty-five (i.e., US35). The bill proposes a methodology for repaying the $65 million from the difference in income tax revenue collected in Mason and Putnam counties if the road is completed compared to the income tax collected in the two counties if the road is not completed. The bill requires the Department of Revenue to project the income taxes to be collected in Mason and Putnam counties over the next 25 years for both the completion and non-completion scenarios.
    
    The provisions of this bill provide funding of a proposed highway through Putnam and Mason counties out of future General Revenue Fund collections. Future collections of Personal Income Tax revenues would be pledged as collateral for a loan from the State’s Revenue Shortfall Reserve Fund. The fiscal impact of a complex tax increment financing plan is unknown because the Tax Department does not currently forecast income tax collections by county. Since we do not have the required projections, we cannot determine if the proposed 25 year repayment schedule will be sufficient to repay the $65 million. While the bill appears to provide for the payback of the original loan amount, there may be some revenue reduction due to the removal of the loan money from interest-bearing accounts. However, we are unable to currently determine the potential revenue impact of the proposal
    
    Additional administrative costs of the Department of Revenue cannot be determined without further study
    



Memorandum


    The stated purpose of this bill is to provide for the financing to complete Route thirty-five without the constructing or establishing of toll booths on the road.
    
    While the bill proposes to use growth in income taxes in Mason and Putnam counties to repay the $65 million from the Rainy Day Fund, it is not clear if any interest that would be earned on the $65 million if it remained in the Fund would be repaid.
    
    The use of Rainy Day Fund moneys could impact the State’s bond rating, which could impact many projects that use the issue of bonds for financing. Additionally, rather than a generic reference to “Rainy Day Fund,” a more specific statutory identification of the source of the $65 million may be necessary.
     Person submitting Fiscal Note: Mark Muchow
     Email Address: kerri.r.petry@wv.gov