In response, Gov. Jon Huntsman Jr. joined with Senate and House leaders Monday to call for a moratorium on local government borrowing against sales tax revenues (Senate Bill 166) until the issue can be sorted out.

The move left some lawmakers befuddled and a bit cynical about politics on the Hill. "Before we'd leap, we'd look," said Rep. Merlynn Newbold, R-South Jordan, the sponsor of a grocery tax removal proposal (House Bill 109).

But House members who want to give Utah citizens and businesses a tax cut of $230 million or more say any tax changes or reforms would be crafted to protect the state's borrowing rating and the ability of local governments to pay off existing loans. The fuss about the state's credit rating is just a smokescreen, they say.

"It's a cheap political stunt," said Rep. John Dougall, R-Highland. "There are a few things we have to work out yet, but this is not an issue."

Two state bonding counsels, Ballard Spahr Andrews & Ingersoll and Chapman and Cutler, warned the state Friday that any elimination or reduction in the local sales tax could downgrade the local government borrowing power and raise interest rates. The counsels said at least 28 cities, eight counties and the Utah Transit Authority have borrowed money against sales tax revenues.

"It's a warning that if the sales tax on food is removed or a lot of business sales tax cuts pass this session, the bond rating could be affected," said Senate President John Valentine, R-Orem. "It goes to what the Senate has been talking about. We've got to be careful here. "

The Senate has endorsed a smaller tax cut of about $100 million and leans toward offering a grocery tax credit to low-income families instead of elimination of the food levy.

Murray Mayor Dan Snarr fears lawmakers keen on slashing sales taxes could undercut the cities' best borrowing source. "What they [lawmakers] don't understand is we have to run the city and they keep pecking away at our resources. What they're creating is another law of unintended consequences."

There are questions; for example, what effect might a moratorium might have on Utopia, a consortium of 14 cities attempting to build and operate a high-speed fiber optic network serving every household and business within their boundaries?

Chief Operating Officer Roger Black said some of the cities involved use sales tax revenue to fund the project. He had no immediate answer about what the moratorium would do - if anything - to Utopia's schedule.

Many think the House's huge tax cut proposal, and the grocery tax removal in particular, is the primary target of the moratorium uproar. Newbold's bill, which has the support of Huntsman - but not the Senate - is expected to be debated in the House today(Tuesday, Jan. 24).

"[The warning] is going to add additional fuel to the [Senate's] refundable tax credit plan," Valentine acknowledged.

Huntsman spokesman Mike Mower also questioned the timing of the bond counsel's warning, saying government leaders have discussed removing the sales tax from food for months.

"We are confident we can work together to find a good solution," Mower said of the moratorium. "We are still very focused on getting the complete removal of the sales tax on food at the checkout counter."

The elimination of the food tax would cost the state $167 million in revenues, but includes a provision to increase local sales tax on nonfood items. A distribution formula would hold local governments harmless. The bill, however, has yet to include a similar protection for Utah Transit Authority, which would otherwise lose 10 percent of its revenues.

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Tribune reporter Cathy McKitrick contributed to this report.