In The Godfather, Part III, Michael Corleone uttered that now famous lament with respect to his apparent inability to retire from organized crime – “Just when I thought I was out, they pull me back in.” Long weary of the Jefferson County occupational tax situation, I retired from blogging on the subject almost a year ago. However, having spent the last 10 or 11 months constantly answering questions regarding the new authorizing legislation, the most recent Alabama Supreme Court case, whether Jefferson County has the right to the taxes ordered to be held in escrow by Judge Rains, the new occupational tax and business license ordinance, etc., I’ve allowed myself to be pulled back into the mire of the Jefferson County occupational tax. This is first of multiple blogs that will discuss the occupational tax developments over the past several months.
My last blog on the Jefferson County business license and occupational tax debacle reported that Democrat and Republican members of Jefferson County’s local delegation and other key legislators were resuming meetings on July 27, 2009 in Birmingham in an effort to finalize proposed legislation to replace Jefferson County’s invalid occupational tax. Agreement among the members of the local delegation was necessary as Governor Riley had indicated that no special session for replacement legislation would be called without consensus among the local delegation. On July 30, 2009, Representative John Rogers, (D)-Birmingham, and Senator Steve French, (R)-Mountain Brook, emerged from these meetings and told The Birmingham News that a bill drafted by Rep. Rogers represented the best chance for passing a replacement tax. Republicans other than Rep. French indicated they would support Rogers’ bill, but noted that they would like to have legislation requiring a county manager for Jefferson County passed in the same special session.
On Saturday, August 1, 2009, the Jefferson County legislators finally reached a deal on the proposal set forth by Rep. Rogers and a meeting was set for Tuesday, August 4 to seek approval of the entire Jefferson County delegation. The proposed legislation contained the following provisions:
•A 0.5% occupational tax rate
•Tax based on a net income concept rather than gross receipts
•No exemptions from occupational tax
•County residents vote in 2012 to continue the occupational tax
•If voters reject the tax, the tax will be phased out 20%/year over a five-year period
•Require the Jefferson County Commission to hire a professional county manager in 2011
•Require the Jefferson County Commission to hire a county comptroller in 2011
The Saturday meeting including an audience with Governor Riley regarding the possibility of convening a special session of the Alabama Legislature by end of the week. When asked about this quick timetable for calling a special session, Governor Riley told The Birmingham News on August 2 that while the legislators appear “closer to a deal than at any other point since I’ve been involved,” he would have to “wait and see what they do on Tuesday.” Legislative relief could not come soon enough as the lack of occupational tax funding was about to seriously affect its delivery public services — orders for the closing of the satellite courthouses and the placement of 965 county workers on administrative leave having been issued on that same day.
It should be noted that some Legislators and legal experts expressed the opinion that the above proposal and earlier proposals (see my last blog for discussion of earlier proposals) violate various provisions of the Alabama Constitution. For example, some of these persons expressed the opinion that the Alabama Constitution does not permit counties to levy a net income tax. Accordingly, legislation utilizing some form of a net income tax base would seem to be unconstitutional. Furthermore, section 212 of the Alabama Constitution prohibits the delegation of the power to tax — which the 2012 referendum seem to do. Despite these concerns, the Jefferson County delegation charged ahead toward the August 4, 2009 meeting albeit under the intense pressure of gaining consensus on some kind of legislation to get the Governor to call a special session.
On Tuesday, August 4, 2009, the Jefferson County delegation voted to support Rep. John Rogers proposed legislation to replace the occupational tax. Thirteen legislators voted to support the tax, four voted against it and one abstained. It was tough to gage whether this strong showing of support was genuine given that some “yes” votes were actually just in favor of the accountability/county manager bill that would accompany the occupational tax legislation. Rep. Jabo Waggoner, (R)-Vestavia Hills, described the apparent support for the bill to Birmingham News as being “fragile” and noted that there was no guarantee of special session. At that time, a spokesman for Governor Riley told The Birmingham News that the governor was reviewing the legislation and determining if it had enough support among the local delegation. It did not help Jefferson County’s case that many legislators outside the Jefferson County delegation were expressing their doubts to the media that a special session could be successful. Charles Bishop (R) even went so far as to say he would do everything in their power to see the occupational tax legislation defeated — a clear violation of legislative courtesy (a practice of not voting on the local matters of other county delegations).
Governor Riley ordered a special session of the Alabama Legislature to convene at 6:00 p.m. on Monday, August 10, 2009. The session began with the introduction of H.B. 13 by Rep. Rogers, dealing with the business license and occupational tax, and H.B. 16 by Rep. Paul DeMarco, (R)-Homewood, dealing with the appointment of a county comptroller and a county manager. The occupational tax provisions contained in H.B. 13 were very similar to Rep. Roger’s earlier proposals with the exception that the rate was lowered to 0.45% and there was no provision for a referendum on the tax. A substitute H.B. 13 was quickly offered by Rep. Rogers that included a 2012 referendum to phase out the occupational tax.
The occupational tax bill passed the Alabama House of Representatives on August 12, 2009. The 17-15 vote was largely along party lines, with all eight Jefferson County Democrats and one Republican voting for the bill. Some House members outside the Jefferson County delegation breached legislative courtesy and voted on the bill. Consistent with legislator frustration with the County Commission, the comptroller and county manager bill passed in a 25-1 vote. While no one foresaw any problems for the accountability legislation, most of the House members seem to indicate that the occupational tax legislation faced significant obstacles in passing a Senate vote. However, the very next day, a committee of Jefferson County Senators approved the bill that passed the House by voice vote. Yet, it was the accountability legislation that encountered some problems, as this same committee approved a version of a bill that did not provide for the hiring of a comptroller.
On August 14, 2009, the Alabama Senate passed H.B. 13 (Act 2009-811), which provides for a Jefferson County occupational tax. Like the House, the Senate vote was largely along party lines, with ten Democrats and two Republicans voting for the bill. The Senate version of the accountability legislation, providing only for the county manager (and not a comptroller), passed 30 to 0. The Governor signed both bills on August 15. Legislators almost immediately began expressing concerns that the occupational tax legislation would quickly become the subject of court challenges. However, Rep. John Rogers told The Birmingham News on August 16, 2009 that his consultations with attorneys and judges made him confident that the tax was valid and that “if they want to litigate, let’s go.” Rep. French similarly stated that he believes “absolutely” that the legislation is constitutional. Representatives Rogers and French seem rather confident given that known experts on the Alabama Constitution and state & local taxation — and their fellow legislators — have expressed serious reservations regarding the legislation.
Part II of this blog series will discuss in detail the alleged legal problems with Act 2009-811.
Russell M. Cunningham, IV
Cunningham Firm, LLC