Present law authorizes local governments to levy a local option transit surcharge for use in accordance with certain requirements. A surcharge must be a separate charge in addition to local taxes. Subject to the maximum rates or amounts, a surcharge levied must be limited to local option sales and use tax, business tax, motor vehicle tax, local rental car tax, tourist accommodation tax, and residential development tax. This bill provides that a local government is eligible to collect, receive, and administer proceeds of a local tax surcharge only if it appropriates and allocates funds for road purposes from local revenue sources in an amount not less than the average of the five preceding fiscal years; except, that bond issues, federal revenue sharing proceeds, and local tax surcharges must be excluded from the five-year average computation. If, after July 1, 2025, a local government fails to so appropriate and allocate at least such average amount for road purposes, this bill requires the amount of revenues that would otherwise be allocable to such local government to be reduced by the amount of the decrease below such average. The amount of the funds not allocated to the local government because of the decrease must be allocated to the state highway fund, to be used by the department of transportation for the improvement of state highways in the local government's jurisdiction, and the state funds are in addition to the funds otherwise allocated for improvements in the local government's jurisdiction in that fiscal year. ELIGIBLE LOCAL GOVERNMENTS Present law provides that a "local government" for purposes of local surcharge taxes means Blount, Davidson, Hamilton, Knox, Montgomery, Rutherford, Shelby, Sullivan, Sumner, Washington, Williamson, and Wilson counties. It also includes Chattanooga, Clarksville, Knoxville, Memphis, and Nashville. A city that meets the definition of local government must not adopt a surcharge if its county has adopted and is collecting a surcharge. This bill changes "local government" to mean any county in this state, including any county having a metropolitan or consolidated form of government, and any incorporated city or town in this state. USE OF SURCHARGE REVENUE Present law requires the revenue from a surcharge to be used for costs associated with the planning, engineering, development, construction, implementation, administration, management, operation, and maintenance of public transit system projects that are part of a transit improvement program. This bill changes "transit improvement program" to "transportation improvement program," which means a program consisting of specified transportation system projects and services, including, but not limited to, public transit system, highway, and bridge projects. IMPLEMENTING AGENCY Present law authorizes revenue from the surcharge to be directed or transferred to implementing agencies to carry out a transit improvement program. An implementing agency is a public transit agency, state-authorized regional transportation authority, or other local government department, agency, or designated entity that is responsible for planning or implementing a transit improvement program. This bill changes an implementing agency to be responsible for planning or implementing a transportation improvement program. BONDS Present law prohibits the proceeds of any bonds issued for the purposes of financing a transit improvement program to be used for operations of any public transit system projects or services that are part of the program. This bill revises this provision so that proceeds must not be used for operations of any transportation projects. ADOPTION OF TRANSIT IMPROVEMENT PROGRAMS Before a surcharge may be imposed, present law requires a transit improvement program to be developed and adopted in accordance with certain requirements. This bill revises this provision so the requirements pertain to the adoption of transportation projects and transportation improvements, instead of public transit systems and transit improvements. GAS TAX ALLOCATION Subject to certain exemptions, present law requires a privilege tax be imposed upon all gasoline or such substitutes imported into this state and levied when the product first comes to rest in the state. The rate of the tax imposed is 26¢ per gallon. The commissioner of revenue or the commissioner's designated subordinate official must apportion for distribution all of the taxes collected in a certain order, including to counties to fund roads. A county is eligible to receive revenues from certain specified tax increases if it appropriates and allocates funds for road purposes from local revenue sources in an amount not less than the average of the five preceding fiscal years, except bond issues and federal revenue sharing proceeds shall be excluded from the five-year average computation. This bill adds to the list of amounts to be excluded in the five-year average any local tax surcharges levied by a local government for transportation projects.

Statutes affected:
Introduced: 67-3-901, 67-4-3201, 67-4-3205, 67-4-3206