Failure to comply with reporting law could end police jurisdictions in 128 cities

Nearly 130 Alabama towns and cities will soon have to stop collecting taxes and fees in the police jurisdictions around their boundaries after failing to comply with a 2021 reporting law.

The law to restrict police jurisdictions’ growth said that by the end of 2021, municipalities had to notify the state Examiners of Public Accounts that they collect licensing fees and taxes within the jurisdictions outside their corporate limits. 

Starting in March of 2022, the cities were to report annually fee and tax revenue collected within the police jurisdictions and the services provided. They were given 12 months to provide those reports.

The Alabama Department of Revenue confirmed to Alabama Daily News it is in the beginning process of notifying the mostly small and mid-sized municipalities of their non-compliance with the law that says they now “may not collect any further license revenue or any other taxes or fees in the police jurisdiction outside the corporate limits.”

Depending on the town, that could mean the loss of upward of $1 million dollars.

What happens next may vary by town, but it is likely that many of the municipalities will rescind the one-and-a-half mile or three-mile borders around their corporate limits and stop providing services in them, including police protection.

Sen. Chris Elliott, R-Josephine, sponsored the 2021 bill to rein in police jurisdiction growth and require the reporting. Elliott has long argued police jurisdictions equate to taxation without representation.

“We were looking for whether or not municipalities were compliant with the existing statute, which required money raised through taxes and fees in the police jurisdiction be spent in the police jurisdiction for the benefit of the people who were paying the taxes and fees,” Elliott told Alabama Daily News.

“We asked for some accountability and some transparency on that,” he said. “And a large number of municipalities either did the calculation that indicated that maybe they were not truly expending those funds as required by the statute and accordingly decided simply not to respond. Or you have municipalities who simply did not want to or simply overlooked the transparency and accountability portion of the legislation; that has some consequences, and we’re seeing those now.”

According to a letter from Examiners, two cities — Alexander City and Winton — in 2021 submitted notice that they collected fees and taxes, but did not later submit the reports. And 126 cities did not file notices or reports for 2021.

While nearly 200 towns and cities with police jurisdictions have complied with the law, those that didn’t represent nearly one-quarter of Alabama municipalities. Greg Cochran, Alabama League of Municipalities executive director, said his office isn’t sure why so many didn’t comply.

“I hate it for these cities because if you look on that list, for the most part, it is the smaller rural communities,” Cochran said. “And even though we did everything we think we could do (to advise of the law); websites, social media, newsletters… I’m just really concerned that they put themselves in a bad spot and unfortunately, it’s indefinite.” 

There’s no provision in the law to allow cities to begin reporting — or resume collecting taxes and fees — once they’ve missed the deadline.

Between business and motor fuel license fees and sales taxes, the revenue for many of the municipalities is significant, Cochran said. 

“This could be very harmful for them,” he said.

Except for sales tax revenue, all money collected in police jurisdictions had to be spent on services within them, Cochran explained. The league has argued for years that police jurisdictions allow for more seamless growth of cities and provide important services to those who live and work within them. Residents and businesses can get municipal services like fire and police protection at a reduced tax rate.

The city of Saraland in Mobile County did not comply with the reporting law because city officials were not aware of it until recently, Mayor Dr. Howard Rubenstein told Alabama Daily News on Monday. It has since submitted its report.

“We never got directly contacted by anyone to say, you’re late with this report,” Rubenstein.

He also said they didn’t know that failure to comply means they can’t collect revenue in their police jurisdiction.

“But for us, it would be negligible,” he said. “We collect almost zero income from our police jurisdiction, there are almost no businesses out there.”

The mayor said it would have been nice if someone at the state level had reached out to delinquent cities prior to the deadline. 

Now, Cochran expects some municipalities to rescind their police jurisdictions. He describes the jurisdictions as “buffers” between cities and rural areas. As cities grow, those police jurisdictions are often annexed.

A former Baldwin County Commission member, Elliott had previously sponsored other police jurisdiction bills, including one to eliminate the zones altogether.

“I do expect that the consequence of that is a significant reduction in the number of municipalities around the state that exercise a police jurisdiction,” Elliott said. “But it is important to note that that is of their own doing.”

Elliott said it’s now up to the municipalities whether they continue to maintain the police jurisdictions, though he expects many will end the zones.

“I’m not dissatisfied with what I think will be the eventual result here,” he said.

A third group of six municipalities have filed 2022 reports this year, but didn’t file the 2021 reports. Examiners is working with Altoona, Harpersville, Kinston, Lynn, New Brockton and Reece City to get the previous reports and they are not immediately in jeopardy of losing their ability to collect revenue.

According to the Examiners’ office, nearly 200 municipalities did file their 2021 reports. Those will be reviewed, Elliott said, and towns that appear to be collecting an inordinately high amount of revenue in police jurisdictions could face more questions.