FIN 2018-08-21 Item 2B - Discussion - Commercial Parking Tax Legislation

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City of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance Committee FROM: Peggy McCarthy, Finance Director BY: Vicky Carlsen, Deputy Finance Director CC: Mayor Ekberg DATE: August 15, 2018 SUBJECT: Revisions to Tukwila Municipal Code 3.48 — Commercial Parking Tax (Updated from August 6, 2018 Committee of the Whole meeting) ISSUE Recommendation for Council to modify Tukwila Municipal Code (TMC) 3.48 to: 1) Increase the Commercial Parking Tax Rate and 2) add a penalty for late payment. BACKGROUND In 1998, the Tukwila City Council adopted Ordinance 1852 which provided for a five percent tax to be levied on gross revenues generated by commercial parking lots in the City. Since the adoption of the Ordinance, the taxation rate has remained unchanged. A public hearing on proposed revisions was held on November 21, 2017 and the draft ordinance has been further revised based upon comments at the hearing. TMC requires that parking taxes be remitted on or before the last day of the month following the month during which the taxes were collected. However, the Municipal Code does not outline a penalty for late payments, and so there is no incentive for payments to be made on time. DISCUSSION The initial proposed revision included a rate change from 5% to 15%, with the new rate effective January 1, 2018. That Ordinance has been revised to include a more gradual schedule of increase, shown below. • January 1, 2019 8% tax • January 1, 2020 11 % tax • January 1, 2021 15% tax • This change alleviates most of the concerns heard from the business community. In addition, over 50% of parking taxes in Tukwila were paid late. Implementing a 10% late fee would encourage businesses to submit taxes on time, improving the predictability of cash flow, and bringing the parking tax penalty in line with penalties assessed for other City taxes. Follow up after August 6, 2018 Committee of the Whole Starfire Sports spoke at the August 6, 2016 meeting asking for relief from the proposed increase in parking taxes. Staff was requested to have a legal review associated with non-profit agencies and parking taxes. After legal review, it was determined that there is nothing that would prohibit the City from allowing for a different tax rate for non-profit agencies. Per RCW 82.80.030(2)(e) "The tax rate 53