local government partnership agenda - washington...local government partnership agenda 9:00 – 9:10...

Local Government PartnershipAgenda

9:00 – 9:10 Welcome and Introductions Vikki Smith, Director

9:10 – 9:40 Forecast Council presentationSteve Lerch, PhD., Executive Director & Chief Economist

9:40 – 10:00 Protecting confidential tax & licensing informationCliff Magness, Privacy Officer

10:00 – 10:15 Break

10:15 – 11:00 Marketplace FairnessPatti Wilson, Marketplace Fairness Project ManagerValerie Torres, Tax Policy Specialist

11:00 – 11:45 2018 LegislationPete Levine, Tax Policy SpecialistTrice Konschuh, Tax Policy Specialist

11:45 – 12:00 Partnering with Business Licensing ServiceKatie Early, BLS Partnership Services Manager

WASHINGTON STATEECONOMIC AND REVENUE FORECAST COUNCIL

Washington State Economic Outlook & Revenue Collection Experience

Presented toLocal Government Partnership

Steve LerchExecutive Director

June 13, 2018Tumwater, Washington

Local Govt. Partnership

June 13, 2018

Slide 2WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL

Summary

• The preliminary economic forecast for the U.S. is similar to the February forecast; GDP growth and inflation are slightly higher for 2018 and 2019

• The preliminary economic forecast for WA has slightly higher personal income in 2018 but is generally similar to the February forecast

• Downside risks to the baseline include uncertainty regarding trade and fiscal policy, geopolitical concerns and higher oil prices

• Revenue collections since the February forecast are $85.4 million (2.0%) above expectations


June 13, 2018


Forecast risks

Upside• Elevated consumer, business confidence could

translate into stronger growth

• Stronger global economic growth

Downside• International trade and fiscal policy uncertainty

• Geopolitical risks: North Korea, Russia, Iran, Venezuela

• Higher oil and gasoline prices

• Maturing economic expansion


June 13, 2018


Consumers remain confident about economic prospects

0

25

50

75

100

125

150

2005 2007 2009 2011 2013 2015 2017

Index Mich: 1966Q1 = 100, SAConf Board: 1985 =100, SA

U. Michigan Conf Board

Sources: University of Michigan, Conference Board; data through May 2018


June 13, 2018


Global GDP forecasts have strengthened compared to last year

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2016 2017 2018 2019 2020 2021 2022

Real global GDP growth

Apr. 2018 Apr. 2017

Source: International Monetary Fund, World Economic Outlook; April 2017 and April 2018


June 13, 2018


Oil and gasoline prices appear to be heading higher

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$0

$10

$20

$30

$40

$50

$60

$70

$80

2015 2016 2017 2018

Oil (WTI, per barrel) Gasoline (U.S. regular, per gallon)

Source: U.S. Dept. of Energy, data through May 2018


June 13, 2018


As of 2018, our GDP forecast is essentially equal to “potential GDP”

14,500

15,000

15,500

16,000

16,500

17,000

17,500

18,000

18,500

19,000

19,500

20,000

2015 2016 2017 2018 2019 2020 2021 2022 2023

Bill

ion

s 2

00

9 d

olla

rs

Actual & forecast GDP Potential GDP

Potential GDP is defined as the economy’s maximum sustainable output

Source: CBO, BEA, ERFC June 2018 preliminary forecast


June 13, 2018


Capacity utilization is typically at or above 80% before the start of a recession

65

70

75

80

85

90

1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

Capacity utilization, 12 mo. moving average

Source: Federal Reserve Bank of St. Louis, data through April 2018


June 13, 2018


At the start of the last three recessions, Philadelphia Fed leading index was below 1.0% and declining

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

1983 1987 1991 1995 1999 2003 2007 2011 2015

Per

cen

t ch

ang

ePhiladelphia Federal Reserve leading economic index

Source: Federal Reserve Bank of Philadelphia, data through April 2018


June 13, 2018


Probability of recession by year, May 2018 WSJ Survey of Economists

0%

10%

20%

30%

40%

50%

60%

70%

2019 2020 2021 2022 after 2022

Macroeconomic Advisors recession probabilities:

1 year = 20%5 years = 80%

Source: Wall Street Journal, May 2018


June 13, 2018


Household financial obligations as share of disposable income below levels in last three recessions

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

1980 1986 1992 1998 2004 2010 2016

Per

cen

tFinancial obligations as % disposable personal income

Source: Federal Reserve System Board of Governors, data through 2017Q3

Financial obligations include mortgage payments & other required debt payments, rent, auto lease payments, and property taxes.


June 13, 2018


Mortgage debt is slightly above its previous 2008 peak

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2000Q1 2003Q1 2006Q1 2009Q1 2012Q1 2015Q1

Mill

ion

s $

Mortgage debt outstanding

1-4 family residences Multifamily Nonfarm, nonresidential Farm

Source: Federal Reserve System Board of Governors, data through 2017Q4


June 13, 2018


U.S. retail sales continue to grow

200

220

240

260

280

300

320

340

360

380

300

320

340

360

380

400

420

440

460

480

500

2004 2005 2006 2008 2009 2010 2012 2013 2014 2016 2017

$Billions, SA U.S. Retail Sales and Food Services

Retail Trade and Food Services (L) Excluding Auto and Gas (R)

Preliminary U.S. retail trade and food services sales (SA) increased 4.8% YOY in March and 4.8% in April.

Excluding autos and gas, sales were up 4.2% YOY in March and 4.1% in April.

Retail sales at gas stations were up 10.9% YOY in March and 11.8% in April.

Source: U.S. Department of Commerce, Census Bureau; Data through April 2018 advance


June 13, 2018


WA residential construction activity is at pre-housing boom levels

0

10

20

30

40

50

60

70

80

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Thou

san

ds

Thou

san

ds

U.S., WA residential building permits (SAAR)

U.S. WA

Source: U.S. Census Bureau, ERFC; data through April 2018


June 13, 2018


WA employment has grown much faster than for the U.S. as a whole

0.95

1.00

1.05

1.10

1.15

1.20

1.25

2005 2006 2007 2009 2010 2011 2013 2014 2015 2017

Ind

ex,

Jan

. 2

00

5 =

1.0

U.S. WA

Source: U.S. Bureau of Labor Statistics, Employment Security Dept., ERFC; data through May 2018


June 13, 2018


WA personal income growth continues to outpace the U.S.

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2005 2006 2008 2009 2011 2012 2014 2015 2017

Ind

ex,

20

05

Q1

= 1

.0

U.S. WA

Source: U.S. Bureau of Economic Analysis; data through 2017 Q4

WA personal income grew by 4.8% in 2017 compared to a 3.1% growth rate for the U.S.


June 13, 2018


After 10 quarters of decline, exports have grown slightly in the last two quarters

-60%

-40%

-20%

0%

20%

40%

60%

80%

2011 2012 2013 2014 2015 2016 2017 2018

Year over year growth, quarterly WA exports

All Other Transp Equip Ag Products

Source: WISERTrade, data through 2018 Q1


June 13, 2018


Real GDP is very similar to the February forecast

14,000

14,500

15,000

15,500

16,000

16,500

17,000

17,500

18,000

18,500

19,000

19,500

20,000

2007 2009 2011 2013 2015 2017 2019 2021 2023

Bill

ion

s of

20

09

Dol

lars

Real GDP

June preliminary February

Source: ERFC June 2018 Preliminary forecast; data through Q4 2017


June 13, 2018


Oil prices are higher compared to the February forecast

25

35

45

55

65

75

85

95

105

115

125

2007 2009 2011 2013 2015 2017 2019 2021 2023

Do

llars

Per

Bar

rel

Average Price of Crude Oil

June Preliminary February

Source: DOE, ERFC June 2017 Preliminary forecast; historical data through Q1 2018


June 13, 2018


The U.S. nonfarm payroll employment forecast is very similar to the February forecast

125

130

135

140

145

150

155

2007 2009 2011 2013 2015 2017 2019 2021

Mill

ion

sU.S. Nonfarm Payroll Employment

June Preliminary February

Source: ERFC June 2017 Preliminary forecast; data through Q1 2018


June 13, 2018


Washington personal income is slightly higher than in February

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Bill

ion

s of

US

DWashington personal income


Source: ERFC June 2018 Preliminary forecast; historical data through 2017


June 13, 2018


Washington employment forecast is slightly lower than in February

2,6002,7002,8002,9003,0003,1003,2003,3003,4003,5003,6003,7003,800

2007 2009 2011 2013 2015 2017 2019 2021 2023

Thou

sand

sWashington Nonfarm Payroll Employment

June preliminary FebruarySource: ERFC June 2018 Preliminary forecast; historical data through Q1 2018

A slightly lower population forecast revision has reduced the employment forecast. The nonfarm employment forecast is 42,000 jobs lower (1.1%) by 2023 compared to February.


June 13, 2018


Washington housing permits forecast is higher this year, about the same for 2019 - 2023

20

25

30

35

40

45

50

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Thou

san

ds

Washington Housing Permits


Source: ERFC June 2018 Preliminary forecast; historical data through 2017


June 13, 2018


Revenue Act growth relative to personal income has rebounded since 2017Q3

-15%

-10%

-5%

0%

5%

10%

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Year-Over-Year Revenue Act* Growth Less State Personal Income Growth

YOY Rev Act Less Income Growth Long-Term Average

Source: ERFC; Quarterly revenue data through Q1 2018, February 2018 income estimates

Adjusted Revenue Act growth YOY:

17Q2: 5.6%17Q3: 6.4%17Q4: 8.3%18Q1: 8.2%

February personal income YOY growth estimates:

17Q2: 5.3%17Q3: 5.3%17Q4: 5.7%18Q1: 4.3%

*Adjusted for large one-time payments and refunds and payments under the amnesty program


June 13, 2018


Cannabis revenue continues to be volatile

10

15

20

25

30

35

Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18

Mill

ion

sRetail Cannabis Collections

Actual February Forecast

Source: LCB, ERFC; data through April 2018

Collections were 2.7% below forecast in April

Collections are 6.9% below forecast since February


June 13, 2018


Large commercial property sales slowed in 2018Q1 while residential sales increased

0

1

2

3

4

5

6

7

8

9

10

1996 1999 2002 2005 2008 2011 2014 2017

$Billions

Seasonally Adjusted Taxable Real Estate Excise Activity

Total Total excl. sales >$10M

Source: ERFC; Monthly data through April 2018 preliminary

Large commercial sales (>$10 million) totaled $3.5 billion in the 4th quarter of 2017 and $2.6 billion in the first quarter of 2018

April large commercial sales were weak


June 13, 2018


Revenue collections to date

Estimate Actual Difference Pct.

Dept. of Revenue $4,258,020 $4,340,611 $82,590 1.9%

All other agencies $15,957 $18,785 $2,828 17.7%

Total GF-S $4,273,977 $4,359,395 $85,418 2.0%

Collections Variance Since February Forecast (February 11, 2018 – May 10, 2018)

dollars in thousands


June 13, 2018


Legislation from the 2018 session with revenue impacts

Bill # Bill Title 2017-19 2019-21 2021-23

6614 Funding for common schools (206.2) (184.0) -

2998 Accountable communities (9.9) (9.8) (2.5)

2444 Low-income housing/REET (1.0) (2.3) (2.3)

6007 Electrolytic processing tax (0.3) (1.4) (1.4)

Other* (0.3) (0.9) (1.3)

Total (217.7) (198.4) (7.5)

Other Transfers GF-S

6614 Funding for common schools (935.0)

ELTA

6614 Funding for common schools 935.0

Millions of dollars

* Bills 1783, 2269, 2580, 5143, 5746, 6058


June 13, 2018


Conclusion

• The U.S. and Washington economic forecasts are similar to February; we continue to expect moderate growth

• As has been the case for some time, Washington’s economy is continuing to outperform the nation

• Threats to economic expansion include geopolitical risks and concerns about international trade and fiscal policy

• The next monthly revenue collection report will be available on June 15th and the revenue forecast will be presented on June 19th


June 13, 2018


Questions

Economic & Revenue Forecast CouncilPO BOX 40912Olympia WA 98504-0912

www.erfc.wa.gov360-534-1560

Ten Things You Need to Know about Protecting Confidential Tax

& Licensing Information

Cliff MagnessPrivacy Officer &

Data Share Administrator

Most information from Revenue is confidential and cannot be re-disclosed

Before giving out information ask yourself:

“Is this confidential taxpayer (CTI) or licensing Information (CLI)?”

1. Most DOR Information is Confidential

Public Records

o RCW 42.56.230(4)

Excise Tax

o RCW 82.32.330

Business Licensing Service

o RCW 19.02.115

Property Tax

o RCW 84.08.210o RCW 84.40.020o RCW 84.40.340

2. Tax and Licensing Information is exemptunder Public Records Act

* List not for commercial purposes

3. Limited Information is Public

• RCW 82.32.330

• Know and understand limitations on use of information

• Do not share (re-disclose)

• Safeguard the information at all times

4. Data-sharing or Partnership Agreements Protect Confidentiality

5. Confidentiality Agreements Are Required

• Agree to keep confidential information confidential

• Assure understanding of laws and penalties for violation

• Signed byo Each employee authorized to access confidential informationo Authorized by: Finance Director, Treasurer, City Manager, or

Mayor

• Complete before getting access to confidential information

• Keep it on file at local jurisdiction and send copy to DOR so our staff know who can access confidential information.

6. Process for Confidentiality Agreement

• Maintain system and network security, data integrity and confidentiality

• Common security standards help ensure an effective and secure environment

• Remember:

o Print only information you need

o Copy or download electronic data onlyas needed

o Do not communicate confidential information via e-mail

o Secure all data – electronic or paper – while in transit, in use, “at rest” and during disposal

7. Data Security Requirements Apply

8. Let us know if there’s a breach

• Information about taxpayers is sensitive

• Businesses may need to know if there is a breach in order to protect themselves

• Data Sharing Agreement requires notice of a breach to DOR

• State law requires notification of breaches of personal informationheld by government agencies in RCW 42.56.590

• Better to report than to find out the wrong way

RCW 82.32.330 & RCW 19.02.115

o Misdemeanor sanctions include:

Up to $1,000 fine

Up to 90 days in jail

Loss of job

Barred from employment by state or local government for two years

9. Penalties for Breach of Confidentiality Are Severe

DOR Information Governance Office

(360) 534-1624

[email protected]

10. Help is available!

mailto:[email protected]

Questions?

42

Marketplace FairnessPatti WilsonValerie Torres

2017 Engrossed House Bill (EHB) 2163 Part II

Remote Sellers, Referrers, and Marketplace Facilitators

• Beginning January 1, 2018, marketplace facilitators, remote sellers, and referrers meeting certain receipts thresholds must choose to:

– Collect and remit retail sales or use tax

OR

– Comply with sales and use tax notice and reporting requirements

Marketplace Fairness

Marketplace Facilitator

Definition

• Facilitates sales; and

• Engages in specified activities bringing buyer and seller together; and

• Engages in activities related to seller’s products

Facilitator deemed to be agent of marketplace seller making retail sales through facilitator’s marketplace

*Example – Amazon, eBay, Etsy, Walmart

Marketplace Seller

Definition

• Makes retail sales through physical or electronic marketplace operated by marketplace facilitator;

or

• Makes retail sales directly resulting from referral by a referrer

*Example – Companies that sell on Amazon, etc.

Remote Seller

Definition

• Does not have physical presence in this state, and

• Makes retail sales into this state

*Example – Hilo Hattie (Hawaiian store)

Referrer

Definition

• Contracts with seller to advertise items for sale

• Receives a commission from seller for the advertisement

• Transfers purchaser to seller to complete the sale

• Does not collect receipts from the purchaser for the transaction

*Example: Google Shopping

Threshold

2017

• Marketplace facilitator or remote seller (who does not have a physical presence in WA) with $10,000 or more in retail must make an election

OR

2018

• Requires election when threshold met

Use Tax Notice Option

• Provide platform (consumer) notice; and

• Invoice/receipt notice; and

• Annual report to purchasers; and

• Annual report to DOR

* Referrers have different use tax notice requirements

Questions

• No change to Annual Gain/Loss

• Effective July 1, 2017, transportation authorities, public transportation benefit areas, and regional transit authorities no longer receive SST mitigation payments

• Beginning with March 2018 distributions, jurisdictions may see additional revenue from Marketplace Fairness

o Any additional revenue will reduce SST Mitigation payments starting with the June 30, 2018 payment

• Effective October 1, 2019, cities, counties, and public facility districts no longer receive SST mitigation payments

Changes SST Mitigation Payments

• Using the identified taxpayer’s local sales and use tax data

• Apply local tax components rates as done for the voluntary compliance offset to calculate marketplace facilitator and remote sellers revenues which includes tax reported by consumers

• Quarterly payment is one-quarter annual loss offset

o First by voluntary compliance revenues, and

o Then by Marketplace facilitator/remote seller revenues

SST Mitigation – New Offset Calculation

This June 2018 payment information is preliminary.

Final data will be posted to the Department website the week of June 18th.

June 2017 compared to June 2018

Questions

2018 Tax & Administration LegislationTrice KonschuhTax Policy Specialist

Bills Passed – Tax & Administration

ESSHB 1570 Concerning access to homeless housing and assistance

2SHB 2015 Modifying the lodging excise tax to remove the exemption for premises with fewer than sixty lodging units and to tax certain vacation rentals, short-term home-sharing arrangements, and other compensated use or occupancy of dwellings

EHB 2444 Providing a real estate excise tax exemption for certain transfers of low-income housing


SHB 2448Increasing the availability of housing for developmentally disabled persons

SHB 2538 Exempting impact fees for low-income housing development

HB 2858 Allowing excess local infrastructure financing revenues to be carried forward


E4SSB 5251 Relating to Tourism Marketing

ESB 5288 Authorizing certain public transportation benefit areas to impose a sales and use tax increase approved by voters.

2018 Property Tax LegislationPete LevineTax Policy Specialist

Bills Passed – Property Tax

HB 2479Concerning Washington's property assessment appeal procedures

SHB 2576Allowing fire protection district annexations and mergers within a reasonable geographic proximity

ESHB 2580Promoting renewable natural gas


SHB 2597 Extending the existing state property tax exemption for residences of senior citizens and disabled persons to local regular property taxes

SHB 2627 Concerning authorizations of proposals for emergency medical care and service levies


SSB 6475Prohibiting the imposition of regional transit authority property taxes on less than a whole parcel

ESSB 6614Concerning funding for the support of common schools

Questions? / More Information

Summary of 2018 Tax Legislation

https://dor.wa.gov/sites/default/files/legacy/Docs/Reports/2018/2018_Summary_of_Tax_Legislation.pdf

BLS UpdatePartnership Services Manager Katie Early

June 2018

RCW 35.90

• 2017 House Bill

o Combined Licensing

o New requirements

• 2018 Operating Budget

67

BLS Partnerships

• CY 2017 priority

• CY 2018 Ramp-up

o Alternates added

• Plan Change to FiscalYear

o 22 cities – FY19

o 32 cities – FY20

Cities joining BLS by January 2020

• Airway Heights

• Bainbridge Is*

• Blk Diamond*

• Burlington

• Cashmere

• Castle Rock

• Centralia

• Chehalis

• Cheney

• Darrington*

• Edmonds

• Federal Way

• Friday Harbor

• Grandview

• Granger

• Kirkland

• Medical Lake

• Medina

• Mercer Is*

• Moses Lake

• Mountlake Terr.

• Napavine

• Normandy Park

• Orting

• Othello

• Quincy

• Ridgefield

• SeaTac

• Shelton*

• Snohomish

• Tenino

• Toppenish

• Tukwila

• Yelm*

• & 1 TBD

Partnership Planning

281 WA cities

230 with licenses

77 in BLS

5-year plan

140+ new city partners

December 31, 2022

Contact

Partnership Services (360) 705-6777

citypartners.dor.wa.gov

73

Questions?

local government partnership agenda - washington...local government partnership agenda 9:00 – 9:10...

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