Recently concerns were voiced regarding two issues on the Proposition 419 also known as the Jail District Tax. The first being as to the definition used in a recent article by The Tribune that it was a county-wide tax and the second being how much money will actually be generated by this tax.
Regarding the first issue, Navajo County Assistant Manager Bryan Layton said, “Under state law, sales tax does not apply to business activities performed by businesses owned by an Indian tribe, a tribal entity or an individual tribal member if the business activity takes place on the reservation.”
Tribal lands are considered sovereign nations and within that is a complication of a government within a government that can be difficult to understand. In simplicity, sales tax cannot be collected from a Native American on reservation lands or from a business owned by a tribe or Native American on a reservation. Layton shared that if the Navajo Generating Station (NGS) were to be purchased and operated in the future by the Navajo Nation, the sales tax currently received by the county from the Kayenta Mine would cease as well in that scenario due to that law.
Navajo County is a mixture of reservation, non- reservation, federal and state lands. Within that, the county has the unique opportunity of being part of the largest Indian reservation in the US, that being the Navajo Nation, which incorporates 16 million acres of land in Arizona, New Mexico and Utah.
The Navajo Nation along with the Hopi and the White Mountain Apache tribes, comprise 67 percent of the land in the county. Private land ownership, which includes corporate, municipal and private, account for 17 percent, while federal and state lands comprise nine percent and six percent respectively.
The jail district tax would only affect goods and services sold on the non-reservation lands of the county, where anyone, tribal or non-tribal, resident or visitor, would pay the additional third of a cent. For a $3 cup of coffee that would add one cent to the bill. A $120 hotel room for a visitor would cost an additional 40 cents and a purchase of $30,000 on a vehicle would be an additional $100.
If Proposition 419 passes, the Navajo County Sheriff’s Office (NCSO) will be able to use the funds for the daily operation and maintenance of the jail system. Currently, the jail is the largest, single expense for public safety in the county, accounting for $5.3 million of the county’s general fund budget.
“County residents who do not live on the reservations have benefited for years from revenues generated by the sale of coal from the Kayenta Mine on Hopi tribal land to the NGS. If we look at just the past 10 years, you can estimate that the county’s general fund has received in excess of $10 million from sales tax transactions on coal from tribal lands in the county,” Layton noted.
It is the loss of the $1.6 million in sales tax from the Kayenta Mine with the closure of the Navajo Generating Station at the end of 2019, as well as the looming loss of property tax from the impending closure of the Cholla Power Plant near Joseph City that has the county pursuing a jail district tax known as Proposition 419 on the November ballot to cover the $2.5 million loss from these revenues.
A story in the Aug. 22 edition of The Tribune cited a quote by Tom Poscharsky, former mayor of Snowflake, who indicated the county would actually get more than $2.5 million from this one-third of a cent sales tax. “If the jail district can take away the jail fees of $425,000 being charged to the municipalities, it will also provide $4.25 million a year in sales tax. The sales tax base for Navajo County is $1.3 billion dollars.”
Layton agreed that Poscharsky’s numbers for the sales tax base were correct for today’s figures but they did not subtract out the upcoming loss of sales revenue from the Kayenta Mine. “Poscharsky was looking at the figures based on what is happening today,” said Layton. “We estimate that after the Kayenta Mine ceases production, the revenue generated by the jail district tax will be closer to $3.5 million and of that we need to then subtract out the $425,000 in jail fees that will no longer be collected as well as the $600,000 in higher state retirement costs, which brings the figures down to the $2.5 million net benefit that we need to generate.”
Layton went on to say, “If Proposition 419 passes, there will likely be a short period of time when the county would collect the revenues while Cholla Power Plant is still in operation. This would allow us to keep building up our reserves. We all know the economy goes up and down, so having sufficient financial reserves allows us to manage those down years and keep providing services to residents.”
This last year was a good year for the county based on the state economy performing well resulting in the county receiving more than anticipated in state shared sales tax. Layton said, “As a county, we saved those additional revenues and ended the year with $6.8 million in reserves, which is 15 percent of our general fund budget. At a minimum, the county needs to keep 10 percent of its budget in reserves to cover expenses and make payroll during the normal tax cycle, so we are in a much more financially responsible position now.”
On the November ballot a yes vote for Proposition 419 will instate a one-third of a cent sales tax to the non-reservation lands of Navajo County for 20 years. The Navajo County Board of Supervisors can lower or repeal the tax at any time during those 20 years. However, they cannot raise the tax beyond the one-third of a cent. A yes vote will also cause the jail fees currently paid by the cities and towns of the county to stop, and will maintain public safety and county services that are provided to residents today.
