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HomeMy WebLinkAboutCOW 2009-10-12 Item 5J - Ordinance - Water Sewer and Surface Water Utility Tax COUNCIL AGENDA SYNOPSIS V ILA 'W �J` .Q� Irritialr ITEM No. A /leetiizo Date 1 Prepared by 1 [Majors rerueo' Connalf/-eri w' 0 10/12/09 SH 1 A^ a ::s., 10/19/09 SH 290 ITEM INFORMATION Cas number 09-150 ORIGINAL AGI ;ND.\ 1), \"1'l OCTOBER 12, 2009 ;N D.\ 1'rl?\I TITLE, An ordinance establishing new regulations regarding water, sewer and surface water utility taxes. :(;OltY Discussion U Motion 1 1 Resolution Ordinance Bic! Award Public Hearin; 1 1 Other blltg Date 10/12/09 Mtg Date Mtg Date Mtg Date 10/19/09 Mtg Date Altg Date Mtg Date SPONS( )R I I Council I Mayor dm Sva DCD Finance Fire I Legal P /rR Police 1 1 Plt'' Si )NSOR's This ordinance creates new regulations in new TMC Chapter 3.54 implementing a utility SI I:\I\I\Itl' tax on the water, sewer and surface water funds. The utility tax would be on the gross revenue of the utility funds, rather than on the utility customers. The Council is being asked to approve the ordinance creating a utility tax on the water, sewer and surface water funds. RI:\'I!AiK'IAD BY I COW Mtg. I CA &P Cmte F &S Cmte P1 Transportation Cmte I I Utilities Cmte I 1 Arts Comm. Parks Comm. Planning Comm. DATE: 10/6/09 RECOMMENDATIONS: Sl'()NS()R /ADMIN. Finance Department COMMITTEE Unanimous Approval; Forward to C.O.W. COST IMPACT FUND SOURCE ExPI ?ND11'URI R! T uIRI?D AMOUNT B UDGETED APPROPRIATION REQUIRED Fund Source: Comments': MTG. DATE RECORD OF COUNCIL ACTION 10/12/09 10/19/09 MTG. DATE I ATTACHMENTS 10/12/09 Informational Memorandum dated 10/2/09 Ordinance in draft form Minutes from Finance and Safety Committee meeting of 10/06/09 10/19/09 1 I TO: FROM: DATE: SUBJECT: ISSUE BACKGROUND DISCUSSION City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM Mayor Haggerton Rhonda Berry Finance and Safety Committee Shawn Hunstock, Finance Director October 2, 2009 Draft Utility Tax Ordinance The City is in need of funding for emergency planning and response costs in the event of a flood. Such planning directly relates to conditions at the Howard Hanson Dam. The City recently declared an emergency due to conditions at the Howard Hanson Dam, and the likelihood given those conditions that the U.S. Army Corps of Engineers, which operates the dam, could release large amounts of water to prevent further damage to the dam in the event of high rainfall. The City's Emergency Management Coordinator, Hillman Mitchell, is recommending specific measures be taken to prepare for a possible flood during the coming flood season. Such measures include placement of sandbags and other materials on top of publically owned levies throughout the City. The initial cost estimate of purchasing the necessary materials and equipment, and placement on those materials on top of the levies, exceeds $2.1 million. The City will also incur costs related to completion of an emergency response plan in the coming weeks, as well as other planning costs. The exact cost of these other items is unknown at this time, but could exceed a few hundred thousand dollars. The City received information very recently indicating the materials placed on top of the levy could stay in place for up to five years with appropriate maintenance. The large sandbags will need to be covered to protect them from UV rays, and a few bags may need to be moved if placed in or near the public right -of -way, but most of the bags will be able to stay were they are initially placed. The costs identified above will be necessary regardless of whether there is an actual flood event or not. These estimates do not include the cost of response to an actual event, which would obviously be significant, not to mention the potential cost of repairs to City infrastructure. The administration is recommending a utility tax on the water, sewer and surface water funds to pay for the cost of preparedness and possible response over the next several INFORMATIONAL MEMO Page 2 months. The expectation at this time is that the tax would not be passed on to customers of these utilities. The tax rate would initially be 35% due to the cost over the coming four to six weeks of raising the level of the levies, as well as the cost of completion of planning efforts. A utility tax of 10% would remain in place to fund on -going planning and possible response costs for such natural disasters in the future. The 10% utility tax is scheduled to expire as of December 31, 2012, but could be changed before then, or extended at any time. It is anticipated that a Tong -term fix for the dam could take several years, and the City would incur significant costs each year during the flood season to prepare for a possible event. It should be noted that the City continues to pursue any and all external funding for the steps now being considered. It is not known at this time if these expenses will be reimbursable absent an actual flooding event. Should such expenses be reimbursed, according to the draft ordinance the water, sewer and surface water funds will be replenished for the utility taxes collected to pay for such expenses. A utility tax on the water, sewer and surface water funds is considered appropriate to preserve, protect, and if necessary repair, such utility infrastructure throughout the City. The cost of not taking such measures now and potentially repairing this infrastructure later would greatly exceed the cost of measures now being planned, not to mention the health and safety issues that would result if the City were to not prepare as now planned for a possible flood. RECOMMENDATION The Council is being asked to approve the attached ordinance adopting a utility tax on the water, sewer and surface water funds. This item is scheduled to be discussed at the October 5, 2009 Finance and Safety Committee meeting, the October 12, 2009 Committee of the Whole meeting and at a Special Meeting that same evening. ATTACHMENT Draft Ordinance C: \temp\XPg rpwise \lnfoMemoUtilityTaxREV.doc AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, ESTABLISHING NEW REGULATIONS, TO BE CODIFIED AT TUKWILA MUNICIPAL CODE CHAPTER 3.54, REGARDING WATER, SEWER AND SURFACE WATER UTILITY TAXES; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, the City Council has determined the Financial Planning Model demonstrates there is projected to be a deficit balance in the General Government Funds by 2011; and WHEREAS, the City has availed itself of all appropriate revenue sources currently authorized and has reduced expenditures by 3% in the General Fund; and WHEREAS, the basic City service levels could suffer a reduction without a new source of revenue; and WHEREAS, implementation of a tax on the City's water, sewer and surface water utilities measured by gross earnings is expected to generate sufficient revenue to maintain current levels of City services; and WHEREAS, the City Council has determined the public interest is best served by the implementation of a tax on the City's water, sewer and surface water utilities; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY ORDAINS AS FOLLOWS: Section 1. Regulations Established. Tukwila Municipal Code Chapter 3.54, "City Utility Tax," is hereby established to read as follows: W\Word Processing Ordinances \Utility Tax.doc SH.ksn 10/07/2009 CHAPTER 3.54 CITY UTILITY TAX Sections: 3.54.010 City Utility Tax 3.54.020 Definitions 3.54.030 Tax Rate 3.54.040 Tax Year 3.54.050 Exceptions and Deductions 3.54.060 Finance Director to Make Rules 3.54.010 City Utility Tax There is hereby imposed a tax to be levied on and after October 1, 2009, against and upon the gross earnings of the water, sewer and surface water utility funds and on all water, sewer and surface water utilities at the rates set forth in this chapter. The tax shall, however, be subordinate to any payments required to be made by any of said utility funds from said gross earnings into any fund or funds heretofore or hereafter created for the payment of and interest on revenue bonds of the City heretofore or hereafter issued. Page 1 of 3 3.54.020 Definitions As used in this chapter, unless the context or subject matter clearly requires otherwise, the words or phrases defined in this section shall have the indicated meanings. 1. "Finance Director" means the Finance Director of the City of Tukwila, Washington, or his or her designee. 2. "Gross earnings" means the consideration, whether money, credits, rights or property expressed in terms of money, proceeding or accruing by reason of the transaction of business and includes gross proceeds of sales, compensation for rendition of services, gains realized from interest, rents, royalties, fees, commissions, dividends and other emoluments, however designated, all without any deduction on account of cost of property sold, materials used, labor, interest, losses, discount and any other expense whatsoever. 3. "Sewer service" means any connection to the City sewer system and shall be further defined by customer class. 4. "Surface water service" means any connection to the City surface water or storm drainage system and shall be further defined by customer class. 5. "Water service" means any connection to the City water system and shall be further defined by customer class. 3.54.030 Tax Rate There is levied upon water, sewer and surface water utilities, taxes in the amount to be determined by the application of rates given against gross earnings as follows: 1. Upon the City water, sewer and surface water funds, a tax equal to 35% of the total gross revenue from such business from all customers in the City during the period for which the tax is due. Such tax shall be effective from October 1, 2009 through April 30, 2010. 2. Upon the City water, sewer and surface water funds, a tax equal to 10% of the total gross revenue from such business from all customers in the City during the period for which the tax is due. Such tax shall be effective from May 1, 2010 through December 31, 2012. 3.54.040 Tax Year The tax year for purposes of this water, sewer and surface water utility tax shall commence October 1, 2009 and end December 31, 2009 and thereafter shall commence on January 1 and end on December 31 each year. 3.54.050 Exceptions and Deductions In computing the gross earnings tax due under the provisions of this chapter, there shall be deducted from the measure of the tax the following items: 1. Uncollected accounts, if the books of the utility are on an accrual basis as distinguished from a cash basis. 2. Amounts received through contemplated or actual condemnation proceedings or in account of any federal, state or local public works project. 3. Amounts received as compensation or reimbursement for damages to or protection of any property of the utility. W: \Word Processing \Ordinances \Utility Tax.doc SH:ksn 10/07/2009 Page 2 of 3 4. Contributions for or in aid of construction. 5. Amounts collected as sales tax. 6. Amounts received from surcharge to water rates charged outside City- limits users for system improvements necessary to meet City standards. 3.54.060 Finance Director to Make Rules The Finance Director shall have the power to adopt and enforce rules and regulations not inconsistent with this chapter or with the law for the purposes of carrying out the provisions thereof. Section 2. Severability. If any section, subsection, paragraph, sentence, clause or phrase of this ordinance or its application to any person or situation should be held to be invalid or unconstitutional for any reason by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of the remaining portions of this ordinance or its application to any other person or situation. Section 3. Effective Date. This ordinance or a summary thereof shall be published in the official newspaper of the City, and shall take effect and be in full force five days after passage and publication as provided by law. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Special Meeting thereof this day of 2009. ATTEST/ AUTHENTICATED: Christy O'Flaherty, CMC, City Clerk APPROVED AS TO FORM BY: Office of the City Attorney W: \Word Processing \Ordinances \Utility Tax.doc SH ksn 10/07/2009 Jim Haggerton, Mayor Filed with the City Clerk: Passed by the City Council: Published: Effective Date: Ordinance Number: Page 3 of 3 FINANCE AND SAFETY COMMITTEE Meeting Minutes October 6, 2009 5:00 p.m.; Conference Room #3 PRESENT Councilmembers: Pam Linder, Chair; Joe Duffie and De' Sean Quinn Staff: Shawn Hunstock, Bob Giberson, Nick Olivas, Mary Miotke, Bruce Fletcher and Kimberly Matej Guests: Chuck Parrish CALL TO ORDER: Chair Linder called the meeting to order at 5:03 p.m. Due to time constraints (a Council Shoreline Master Program Work Session beginning at 6:00 p.m.), agenda items were discussed in an order different from that presented in the original meeting agenda. Additionally, there was not ample time to discuss all items scheduled. I. PRESENTATIONS No presentations. II. BUSINESS AGENDA A. Resolution Regarding Annual Cancellation for Accounts Receivable, Staff is seeking full Council approval of an annual resolution to cancel (write -off) account receivables deemed uncollectible. This year's annual account receivable write -off totals $185,450.81. A significant amount of this write -off ($183,086.31) is related to the previous golf course concessionaire, Gordon's on the Green, who filed bankruptcy on June 1, 2009. Although the City has filed a claim for reimbursement of the outstanding amount owed, for accounting purposes it is best for the City to cancel this receivable, and consider it uncollectible. UNANIMOUS APPROVAL. FORWARD TO OCTOBER 12 COW. B. Ordinance Establishing Water. Sewer and Surface Water Utility taxes Staff is seeking full Council approval of a draft ordinance which establishes a utility tax on the Water, Sewer and Surface Water Funds to pay for the cost of emergency preparedness and potential responses resulting from such. City of Tukwila Finance and Safety Committee Over the next several weeks, costs for emergency preparedness and responses specifically relating to the conditions of the Howard Hanson Dam are anticipated to cost the City between $2.1 to 2.5 million. Initially, it was believed these costs would be much higher. However, a significant costs saving was recognized when it was identified that flood response equipment will not have to removed and replaced at the beginning and end of each flood season, but can stay in place for up to five years with proper maintenance. Unfortunately, ongoing costs are still unknown. Taxing the City's Water, Sewer and Surface Water Funds will provide the City with sufficient monies to pay for these potentially significant costs and is allowed by state law. Most cities have imposed this type of tax for years. The draft ordinance calls for a 35% Utility Tax on the total gross revenue from each Fund for seven months (October 7, 2009 through April 30, 2010) generating approximately $2 million. The tax will then be reduced to a 10% tax on total gross revenues for a 32 -month period (May 1, 2010 through December 31, 2012), generating approximately $900,000 annually. These Utility Funds will still be self sustaining after the 35% tax. Finance Safety Committee Minutes October 6, 2009 Pape 2 Due to limited meeting time, the Committee did not determine a recommendation in support of or in opposition to the draft ordinance. The item will be forwarded to full Council for discussion. FORWARD TO OCTOBER 12 COW FOR DISCUSSION. C. Contract Amendment for Commercial Development Solutions Administration is seeking full Council approval for a contract amendment for Commercial Development Solutions (Lisa Verner, Tukwila South Project Manager). Earlier this year, Council approved a development agreement for the Tukwila South project. Implementation of the agreement triggered several significant tasks requiring completion. Those tasks include, but are not limited to: establishing an escrow account, initiating the annexation process, grant contract maintenance, development of reference materials, and monitoring and assistance for contractors and City Departments. Due to Commercial Development Solutions in -depth and on -going involvement in the project, as well as efforts to keep the continuity of work moving forward, Administration is requesting Council approval of a contract amendment that will extend the current Commercial Development Solutions contract through December 31, 2010. Additionally, increased project activity has required additional hours from Commercial Development Solutions and based on the previous three billing cycles, Administration recommends increasing the monthly contract rate to $11,000 from $8,000. It is anticipated that billable hours, in relation to this contract, will decrease as the project progresses. As a result of the current economic conditions and the potential effects of Initiative 1033, if passed, Committee Members expressed concern over the length of time for the contract extension. Committee Member Quinn stated that he is not opposed to returning to full Council multiple times for shorter, contract extensions. There was not unanimous Committee approval to recommend extending the contract through December 31, 2010. The Committee would like to discuss this item further after the results of the November 3 General Election, however, it was unclear when the current contract with Commercial Development Solutions expires. In the event the expiration is October 31, 2009, the Committee recommended extending the contract through November and returning to Committee meeting in November to discuss the contract extension. DETERMINE CONTRACT EXPIRATION. RETURN TO COMMITTEE OR FORWARD TO COW BASED ON CONTRACT EXPIRATION. D. Authorization to Transfer Funds for Additional 2009 Budget Reductions Limited meeting time, unable to discuss item. E. Sales Tax Report Limited meeting time, unable to discuss item. III. MISCELLANEOUS Meeting adjourned at 6:00 p.m. Next meeting: Tuesday, October 20, 2009 5:00 p.m. Conference Room #3 e c Committee Chair Approval Minutes by KAM.