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_ [ _