State Shared Revenue

• Generic term used to identify the five revenue sources that the State shares with the Cities and Towns.
• Urban Revenue Sharing (Income Tax)
• State Transaction Privilege tax (Sales Tax)
• Highway User Revenue Fund (HURF)
• Local Transportation Assistance Fund (LTAF)
• Vehicle License Tax (VLT)

Urban Revenue Sharing (Income Tax)

• As a result of a 1972 general election ballot citizen’s initiative, incorporated cities and towns have received a share of total net income tax collections since FY 1974. 
• The original ballot initiative required 15% of income tax collections to be shared with cities and towns.  (85% State, 15% Cities).
• In exchange cities and towns are not allowed to levy income and luxury taxes.
• There are no restrictions on what the urban revenue funds can be used for.

State Transaction Privilege Tax (State Sales Tax)

• Incorporated Cities are entitled to receive a portion (25% of the distribution base) of the states sales tax collections.
• When a business reports transaction privilege tax collections to the Arizona Department of Revenue, it is required to report the amount of transaction privilege tax collected in each county. At the close of each month, the computer totals the distribution base portion of all transaction privilege taxes reported during that month and multiplies the total by 25% to determine the amount returned to the cities.
• Distributions made according to population.
• There are no restrictions on what the transaction privilege tax funds can be used for.

Highway User Revenues (HURF)

• HURF is commonly referred to as the “gasoline tax”, but there are other fees including VLT included in this fund.
• Cities receive 27.5% of the highway user revenues.
• 50% of the monies a City receives under the HURF formula is distributed on the basis of population of the City in proportion to other Cities in the State.  The other 50% is distributed on the basis of “County of origin” of gasoline sales and the relation of the City’s population to other Cities in that County.
• HURF funds may only be used for street and highway purposes.
• HURF funds are a frequent target of the Legislature, which they divert from us and directly into the State’s general fund to pay for DPS.

Local Transportation Assistance Fund (LTAF)

• LTAF revenue is generated by the State Lottery.
• Distribution is based on population (all Cities receive at least $10,000).
• A maximum of $23 million (if generated) is distributed each year to Cities.  The minimum guaranteed is $20.5 million.
• Use of these funds is restricted to public transportation purposes.
• If fund doesn’t reach $23 million, 10% of LTAF funds can be used for a variety of other purposes.

LTAF II

• In 1998 the Secondary LTAF fund (LTAF II) was established from Powerball Lottery revenue.
• After the State general fund has reached $31 million in lottery revenue, $18 million is deposited in the LTAF II fund.
• Funds are distributed as “grants” in Maricopa County and require a one to one match from local funds.
• LTAF II funds can only be used for public transit. 
• In the FY 2009 State budget, over $9 million was authorized for distribution to Cities. 

Vehicle License Tax (VLT)

• Cities receive a portion of money collected from tax payments for registering vehicles. 
• Cites receive 20.45% of the net revenue collected within their respective counties.
• Revenues are distributed based on population in proportion to the other Cities in the County.
• VLT monies have no restrictions on what they can be used for.