SALT LAKE CITY - Utah credit unions were calling themselves "energized for combat" against the banking lobby last week as the opening skirmishes began in the state legislature over a punitive tax bill on large CUs which the Utah League of Credit Unions claims, if enacted, would cripple the entire...
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SALT LAKE CITY – Utah credit unions were calling themselves “energized for combat” against the banking lobby last week as the opening skirmishes began in the state legislature over a punitive tax bill on large CUs which the Utah League of Credit Unions claims, if enacted, would cripple the entire industry. League officials were warning that the outcome of the bank/CU duel in Utah could well be a harbinger of things to come in other states as hard-pressed legislatures across the land grapple with huge budget shortfalls. In Utah the state bankers association has managed to grab the public’s attention with a carefully crafted bill, due for a vote perhaps this week in the House Business and Labor Committee. The bill calls for the imposition of a corporate franchise tax on CUs of more than $100 million in assets, as well as a 30% tax on net incomes of CUs that operate in more than one county. Although the League has prepped for weeks for the bank attack in the legislature, the League put its grassroots campaign of e-mails and letter writing to lawmakers, particularly those on the committee, into high gear with the League estimating its members in two days sent 5,000 e-mails urging defeat of the bill introduced by the House Majority Whip Jeff Alexander, R. Provo, on Jan. 20. America First CU, of Riverdale and the state’s largest, reportedly sent out 7,000 e-mails. In his public utterances, Alexander has maintained his bill would bring “competitive equity and tax fairness” by singling out those large CUs which “have gone outside their market and their charter” and therefore are undeserving of the tax breaks they receive as financial cooperatives. Alexander maintains these CUs should be paying taxes which would then help ease a budget crunch impacting Utah schools. The League as well as America First and the other two large CUs impacted by the bill-Mountain America CU, Salt Lake City; and Goldenwest CU, Ogden-have tried at great lengths to counter the Alexander pitch in a series of newspaper, TV and radio ads as well as web sites, all explaining the non-profit financial structure of CUs. Small Utah CUs, warning “they would be next” if the Alexander bill is enacted, have also actively joined the fray to defend their larger brethren as well as press the case that the Alexander bill represents a power grab by the banks and is harmful to the Utah economy. “Look, we would not be immediately affected by this bill, but you know we’re at $41 million and we’ve doubled in six years which means it wouldn’t be long before we would reach that $100 million cap. Besides what’s to stop them from going in next year and dropping it to $50 million,” declared Brad Barber, president of the $41 million Members First Credit Union in Brigham City. The 1999 law limiting CU expansion to domiciled counties and restricting business loans was “supposed to be a compromise and we were promised that kind of crap would not come back again, and here we are,” said Barber. Like scores of other Utah CUs, Barber says he has been sending out postcards to members of the House Committee, and “I’ve talked personally to two of them” including those representing his north Utah district. One was “positive and a friend of credit unions” and the other was noncommittal adding “he has relatives in the banking industry.” Wilma Howa, president of the $5.5 million Balance Rock Credit Union in Helper, said that while the Alexander bill targets only the top CUs “this time, what is stop them from taxing all credit unions in the future.” Howa said the loss to small CUs in Utah would be severe since the large CUs stand as benefactors to Balance Rock and others which would not survive “without the kind of support we receive in funding and financing of our projects.” She said her CU in serving low and middle income residents would be unable to offer the kind of debit and loan products without the back-up help extended by America First and Mountain America. “We would have never launched our debit card without them,” she said. Ann Brinkerhoff, president of the $5 million C U P Federal Credit Union, Provo, said federal CUs in Utah also see the threat from the Alexander bill as very real since “the bankers have done a very good job of clouding the issue and raising a lot of half truths” about CUs. “Their attempt to penalize non-profits amazes me,” said Brinkerhoff, and “once the foot is in the door on taxing” state chartered CUs, the “bandwagon would be rolling” on federals like hers, she said. One big problem for the Utah industry in trying to defeat the bill, observed Barber of Brigham City, is that “we are going against a figure who pulls a lot of clout” in the legislature – House Speaker Martin Stephens (R-Provo), who also is senior vice president of Zions Bank, the state’s largest. Stephens, who is considered an ally of the UBA, “has had an account at a credit union and done business with them,” said Barber noting also that Stephens, who reportedly deals in the insurance area at the bank, “says he is a friend of credit unions.” His boss, Harris Simmons, chairman of Zions, has reportedly long held a personal vendetta against CUs in his state and has vowed to make a case of the banking’s ability to curb their growth before the American Bankers Association leadership. A hint of that came on Jan. 28 before a special fact-finding legislative symposium called by Senate and House leaders to discuss the ramifications of the 1999 bill and attended by a packed audience of lawmakers, CU executives and bankers in the Capitol building. The president of the UBA, Howard Headlee, suggested other states should prepare for the type of bank/credit union clash now roiling Utah adding what is occurring here shows Utah is “20 years ahead of the curve” in dealing with CU expansion. In presenting its case before the panel, the Utah League maintained the banking industry has not been hurt by CU growth since 1999 and is now exerting a power grab in Utah. In comments seen as bolstering the League view on CU growth, state Commissioner of Financial Institutions G. Edward Leary said there has been no evidence state CUs are operating illegally “or in unsafe manner” because of their expansion, a point raised in literature issued by the Utah BA. Meanwhile, Utah League officials maintained they are determined to fight the Alexander measure with one lobbyist adding “there will be no negotiating on this bill.” -
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