FIN 2018-08-21 Item 2A - Discussion - Business and Occupation (B&O) Tax Revenue

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DRAFT Potential B&O Implementation Communications Plan Key Messages The City of Tukwila is committed to developing and adopting a fiscally -sound, balanced 2019/2020 biennial budget. • The Mayor will formally present his budget to the City Council on Monday, October 1, following Council review of each departments' preliminary budget during August and September committee meetings. • The City Council will deliberate on the Mayor's budget and ultimately pass a balanced budget prior to the end of the year. The City's ongoing revenues are not keeping up with ongoing expenditures due to a number of factors. • As a matter of course, more than one-third of the City's overall revenues come from sales tax, but sales tax growth has flattened and not keeping pace with the cost of ongoing expenditures. • On top of this, the State funding of sales tax mitigation, which was established to compensate cities like Tukwila hard-hit by the change to destination -based sales tax, will end by 2020, resulting in a $2 million shortfall to the 2019/2020 biennium. • All governments are limited as to what revenues are available, and property tax increases are restricted to 1% annually, leaving little tools to address the natural rise in the cost of delivering general government services. Tukwila's proven performance history of financial management and policies ensures a good foundation for the upcoming biennial budget. • The City is exploring all available tools to continue to provide a high level of services for the broader Tukwila community. • The City enjoys a strong bond rating of AA by S&P, which was just affirmed in mi-July due to its "very strong financial management and policies." The City is exploring a two -pronged approach to address the 2019/2020 budget shortfall that includes identifying both potential expenditure reductions, as well as additional revenue tools. • Departments have been asked to undergo an exercise to determine options available to the city utilizing a 5% underspend in 2019 and 2020. • The City is also exploring revenue options, including ensuring that taxes and fees are in line with regional standards, as well sustainable revenue options such as a Business and Occupation Tax (B&O) on large businesses. DRAFT B&O Implementation Communications PlanIIII 5