Bill Would Provide Dedicated Funding for Small Cities Assistance Account

February 28, 2022

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The bill dedicates a portion of the auto parts sales tax to the Small Cities Assistance Account, which provides street funding to cities with populations below 5,000.

A bill passed by the Senate Transportation Finance and Policy Committee on Feb. 22 would provide dedicated funding for the Small Cities Assistance Account, a formula-based program that provides street funding to cities with populations below 5,000.

The measure, SF 3086, authored by Sen. Jeff Howe (R-Rockville), dedicates 100% of the sales tax on auto parts to transportation, and carves out 12% of the proceeds for the Small Cities Assistance Account.

The bill was passed unanimously to the Taxes Committee. The House companion, HF 3646, authored by Rep. Chris Swedzinski (R-Ghent), has not been scheduled for a hearing.

The League testified in favor of dedicating a portion of the funds to cities with populations below 5,000. It is needed since these cities do not receive direct funding from the Highway User Tax Distribution Fund (HUTDF).

Funding estimates

According to estimates provided by legislative staff, the sales tax on motor vehicle parts currently generates approximately $160 million annually. If SF 3086 passes in its present form, the Small Cities Assistance Account would receive just over $19 million per year.

Another 12% would go to townships and the remaining 76 percent would be deposited into the HUTDF. Existing law provides that the first $12.137 million per month (approximately $145.6 million per year) in revenues from the sales tax on auto parts must be deposited into the HUDTF.

See Senate Research summary of SF 3086 (pdf)

History of the account

Since its creation in 2015, the Small Cities Assistance Account has only been funded four times: $12.5 million in 2015, $8 million in 2017, $8 million in 2018, and $18 million in 2021.

The League has consistently requested that funding for the program be made a permanent part of the state’s transportation budget, so cities can plan for spending the funds.

Learn more about the Small Cities Assistance Account from a House Research memo (pdf)

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