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HomeMy WebLinkAbout2009-11-23 10-019 RESOLVECOUNCIL ACTION Item No. - - 0 019 Date: November 23, 2009 Item/Subject: Resolve,, Calling Upon our Congressional Delegation to Support Repeal of Section 511 of the Tax Increase Prevention and Reconciliation Act which Requires Certain Local Governments to Withhold 3% from Payments to Vendors and Contractors. Responsible Department: Finance Commentary: In 2005, Section 511 was added to the Tax Increase Prevention and Reconciliation Act requiring any federal, state, or local government that makes annual payments for goods and services in excess of $100 million to withhold 3% from those payments and remit that withholding to the Internal Revenue Service. This requirement poses a number of significant problems for both the City and its vendors. Our current payable software is not capable of tracking such withholding. To do so, we will either have to upgrade our software at a potentially significant cost or devote considerable staff time to manual tracking. Our vendors will also be impacted since it is unlikely that their accounting systems will recognize this withholding, resulting in overdue notices resulting from the 3% discrepancy between what they bill the City and what we pay. This will result in both confusion and additional cost to both vendors and the City. This will create a particular hardship for smaller local businesses that may experience cash flow issues that would negatively impact their ability to do business with the City. This proposal unfairly targets only those who do business with government. As a result, we anticipate that many vendors will either increase their pacing to offset the withholding requirement or cease doing business with governments, thus limiting competition and increasing costs. Proposals have been Introduced in the House and Senate that would repeal Section 511 which is now scheduled to go into effect on January 1, 2012. The attached resolve seeks the support of our Congressional delegation in repealing Section 511. Department Head Manager's Comments: This has been reviewed and is recommended by thelfinaancce' Committee. I 1j�K4 City Manager Associated Information: Budget Approval: Legal Approval: Introduced for X Passage First Reading Referral Finance Director City Solicitor Page _of_ i0 0 L9 Assigned tQ Councilor - Hawes November 23, 2009 CI`T"Y OF BANGOR (TITLE.) Resolve, Calling Upon our Congressional Delegation to Support Repeal of Section 511 of the Tax Increase Prevention and Reconciliation Act which Requires Certain Local Governments to Withhold 3% from Payments to Vendors and Contractors. WHEREAS, in 2005, Section 511 was added to the Tax Increase Prevention and Reconciliation Act requiring any federal, state, or local government that makes annual payments for goods and services in excess of $100 million to withhold 3% from those payments and remit that withholding to the Internal Revenue Service; and WHEREAS, the current payable software used by the City of Bangor is not capable of tracking such withholding, requiring either an extensive and expensive software upgrade or devoting significant staff time to manual tracking; and WHEREAS, the City's vendors will also be impacted since reducing payments by 3% will result in their accounting systems showing a balance due from the City; and WHEREAS, this will particularly impact smaller local businesses that may experience cash flow issues that would negatively impact their ability to do business with the City; and WHEREAS, since this proposal unfairly targets only those who do business with government, we anticipate that many vendors will either increase their pricing to offset the withholding requirement or cease doing business with governments, thus limiting competition and increasing costs; and WHEREAS, proposals have been introduced in the House and Senate that would repeal Section 511 which is now scheduled to go into effect on January 1, 2012; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BANGOR THAT We urge the members of our Congressional Delegation to work toward the repeal of Section 511 of the Tax Increase Prevention and Reconciliation Act by joining in cosponsoring either House Resolution 275, introduced by Representative Kendrick Meek, or Senate Bill 292, introduced by Senator Arlen Specter and taking such other actions as may be appropriate to ensure that this section does not go into effect. IN CITY COUNCIL November 23, 2009 Motion Made and Seconded for Passage Passed TY CLERK (TITLE,) _Callint; UPori our Congressional neleeati.on to Support Repeal of Section 511ofthe Tag Increase Prevention and Reconvillation Act which Requires Certain Local Governments to withold 3Z from Payments and contractors. Assigned to Councilor_ [ _