With the 2015 Legislative Session just over a third complete, the front lines of the budget battles are beginning to be drawn. The legislature is struggling with how to address the shortfall and where any additional funds can be found. You may be surprised to learn that in addition to some of the more talked about sources of revenue, there are sources that hit much closer to home for the housing industry.

 

Governor Bentley discusses budget crisis with HBAA Board in February

Although the Governor has called for $700 million to "fix" Alabama's budget woes once and for all, it is much more likely that the Legislature will try to fund the $250 million to address the immediate needs of the state. Regardless, it will be difficult. Over the past several years, the Legislature has been successful in finding new sources of money that didn't require talk of increased taxes or fees. Those sources appear to have dried up and with it, the hope for finding a painless solution. Having campaigned on a pledge of no new taxes, legislators find themselves in an unenviable position. What will they do?

 

Since general taxes are considered poison at this juncture, focus on "sin" taxes may materialize. An increase in tobacco/cigarette taxes is fair game. Currently, the tax on cigarettes is 42.5 cents per pack. Raising that tax to $1.25 per pack is expected to increase revenue by roughly $200 million.   Another "sin" tax being tossed around is a potential gaming compact with the Poarch Creek Indians. Grossing over $600 million a year with a profit of $300 million, some see Indian gaming as a new source of revenue that would be less objectionable than a broad-based tax that would hit the populace. Consideration of a state lottery is also on the table.

 

These sources of revenue enhancements will prove controversial. That being the case, legislators are looking for easier, quieter, less visible ways of generating money. That's where we begin to see the potential hit to the housing industry. Senate Bill 76 is one of the first. The bill is called a consolidation measure that its proponents say will save the state money by transferring all leases and ownership of real property held by various boards and commissions to the state finance department. How does this affect the industry? Let's look at a few examples.

 

The Alabama Home Builders Licensure Board was granted authority a few years back to build its own building. The construction was paid for out of the fees generated by licensing. No state funds were used. Under the provisions of SB 76, ownership would be transferred to the finance department which would then determine whether the board can stay at that property or whether they should lease space in another state building. If they decided the latter, then the building could be sold and the proceeds transferred to the general fund. This would constitute an unfair tax on the licensed builders in Alabama.

 

The Alabama Housing Finance Authority is an instrumentality of the state. Under the provisions for SB 76, this public corporation that does not receive one dime of general fund appropriated funds would be subject to the finance department's oversight of its property. Known as one of the best run Housing Finance Authorities in the country, the Alabama Housing Finance Authority services loans for numerous other states, the revenue from which goes to support Alabama's housing industry. This bill could jeopardize their mission.

 

The Alabama Board of Heating, Air, and Refrigeration Contractors leases space from a private entity at the rate of $15/sqft. Previously, the board had resided in one of the Retirement Systems of Alabama properties, paying a lease of over $26/sqft. The reduced rent meant that the board wasn't forced to raise their fees. Senate bill 76 would allow the finance department to send the board back to the RSA space or other facilities, increasing their cost and requiring an increase in the fees paid by contractors.

 

The HBAA strongly opposes SB 76 as written and has taken steps to ensure that if it passes, it will be amended to carve out these agencies. The legislative intent is obvious. By forcing these entities and those like them to come under the finance department, the state will have access to their operating funds and, in the case of the Alabama Home Builders Licensure Board, their reserve and recovery funds.

 

Thanks to the strong support of Senators Gerald Allen, Paul Bussman, Steve Livingston, Clay Scofield and others, the HBAA feels confident it can amend the bill to pull these agencies out. It is shaping up to be a long session filled with these types of measures. It is clear that some legislators believe that the fees, paid by licensees, should be treated like tax dollars and used accordingly.  The HBAA will continue to oppose any effort to make those beliefs a reality in Alabama.

House Bill 231 has been placed on the House Calendar for next Tuesday. The HBAA will be working with the House membership to answer any remaining questions in an effort to move the bill forward. The HBAA would like to thank Rep. Ron Johnson and Rep. Oliver Robinson for their efforts to get the bill assigned to Tuesday's calendar.

 

The HBAA would encourage all members to contact your House representative and ask that they support HB 231 on Tuesday.

The HBAA has worked closely with Rep. Mac McCutcheon to draft a bill that would address the concerns that have been raised with the creation and operation of HOAs in Alabama. Along with the Alabama Association of Realtors and the Alabama Bankers Association, the HBAA has worked in good faith throughout the process to create legislation that will not negatively affect development, but will address the issues of transparency that HOA advocates have requested.

 

Rep. McCutcheon has asked the HBAA and its partners to take the lead in pushing the legislation this session. The final draft is expected to come before the House State Government committee on Wednesday.