HomeMy WebLinkAboutFS 2013-11-05 Item 2D - Ordinance - Revenue Generating Regulatory License (RGRL) FeeCity of Tukwila
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Jim Haggerton, Mayor
INFORMATIONAL V��U�^�������U�
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Mayor Haggerton
Finance and Safety Committee
FROM: Community Development
Finance Department
DATE: October 16, 2013
SUBJECT: Revenue Generating Regulatory License (RGRL) fee on Residential Rental
Business Licenses
ISSUE
F7eviG8TK4C 5.04.02 to exempt residential rental properties with 1-4 units from the Revenue Generating
Regulatory License (RGRL) fee; eliminate the existing RGRL exemption applicable to residential rental
properties with gross annual receipts of Iess than $12.000.
BACKGROUND
In 3010. the City Clerk's Office processed and issued all business licenses. Residential rental property
owners were required to have a business Iicense if they had five or more rental units. No RGRL fees were
assessed at that time.
In 2011. business licensing was transferred to the Finance Department and the RGRL was adopted as a
new fee, the RGRL fee was assessed to all businesses licenses including residential rental business
licenses regardless of how many units there were. In general, the RGRL fee is based on a calculation of
employee hours worked with a minimum fee of $55. However, a residential rental property with less than
$1 2,000 of annual gross receipts was exempted from the RGRL fee.
The Code Enforcement Staff administers the residential rental license program, and the RGRL fee as it
pertains to the residential rental licenses. As of January 1, 2011. an applicant was subject to a base
license fee of either $50 or $100 depending on the # units in the property plus the RGRL fee based
DO full-time equivalent employees. If gross annual revenue is $12.000 or more the RGRL fee of
$0.034896 x annual FTE hours must be calculated and paid. This dual fee structure creates
confusion to the applicant and requires staff explanation of the RGRL fee and time to address
inquiries on how to calculate the amount due.
AdditiVno||y, because of the complexity and time required, verification of eligibility for the $12'000 gross
receipt exemption has not been undertaken. Of the 050 rental properties on record in 2012. 60Y6 or 393
claimed the exemption and paid no RGRL fee.
DISCUSSION
Changing the RGRL fee exemption from those residential rental properties with gross receipts of less
than $12,000 to those residential rental properties with 1-4 units would reduce the Code Enforcement
administrative efforts required to explain and follow-up on the fee and will also provide an exemption
criterion that is easier to verify. A precedence was set before the RGRL fee was established whereby
residential properties of 1-4 units were not treated as businesses. Of the 650 residential rental units
on record in 2012, 590 units would fall underthis exemption.
INFORMATIONAL MEMO
Page 2
# of
Units
Count of
Properties
FEES
Total License RGRL Inspection
1 510 $ 36,113 $ 25,400 $ 7,920 $ 2,800
2 17 1,650 850 660 140
3 21 3,020 1,050 990 980
4 42 4,410 2,100 1,925 385
Sub -total 590 45,193 29,400 11,495 4,305
5+
60 11,980 6,000 4,895 1,085
TOTAL
650 $ 57,173 $ 35,400 $
16,390 $ 5,390
Of the 590 properties with 1 -4 units, 387 or 66% claimed exemption to the RGRL fee and 198 or 34%
paid the minimum RGRL fee of $55.
FINANCIAL IMPACT
Based on the 2012 results, an exemption of properties with 1 -4 units from the RGRL fee would reduce
annual RGRL fee revenue by approximately $11,495.
RECOMMENDATION
Staff recommends omitting the RGRL fee on 1 -4 units and continuing to collect the RGRL fee on 5 or
more units. This would reduce code enforcement staff time needed to explain the fee and assist with
calculations and free up time to focus on the program's intent to protect the public health, safety and
welfare, and proper maintenance of rental housing.
The Council is being asked to approve the ordinance and consider this item at the November 12,
2013 Committee of the Whole meeting and subsequent November 18, 2013 Regular Meeting.
ATTACHMENTS
Ordinance in draft form
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DR FT
AN ORDINANCE OF THE CITY COUNCIL OF THE
CITY OF TUKWILA, WASHINGTON, AMENDING
VARIOUS ORDINANCES, AS CODIFIED AT TUKWILA
MUNICIPAL CODE SECTION 5.04.020, "APPLICATION
AND FEES REQUIRED," TO AMEND THE FEE
STRUCTURE ON RESIDENTIAL RENTAL BUSINESS
LICENSES; PROVIDING FOR SEVERABILITY; AND
ESTABLISHING AN EFFECTIVE DATE.
WHEREAS, the City desires to eliminate the Revenue Generating Regulatory License
(RGRL) fee on residential rental business licenses for properties with fewer than five units;
and
WHEREAS, this policy change would reduce the administrative time spent managing
the fee structure for residential rental business licensing and allow more time for the
inspection component of the program;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY ORDAINS AS FOLLOWS:
Section 1. TMC Section 5.04.020 Amended. Ordinance Nos. 2381 §3, 2356 §2,
2333 §3 and 2315 §1 (part), as codified at Tukwila Municipal Code (TMC) Section
5.04.020, "Application and fees required," are hereby amended to read as follows:
5.04.020 Application and fees required
A. Application Required. Any person desiring to establish or conduct any
business enterprise or undertaking within the corporate limits of the City shall first apply
to the Finance Department for a license to conduct such business. The application shall
be upon a form furnished by the Finance Department on which the applicant shall state
the company name and address; the nature of the business activity or activities in which
he desires to engage; the place where the business will be conducted; the number of
employees, whether full or part-time, on the payroll as of January 1, or, if a new
business, the number to be employed on the opening date; the Washington State
Unified Business Identifier (UBI) number; and other information pertaining to the
business as required by the City. Owners of residential rental property are not subject
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to the application requirements in this chapter but shall adhere to the application
requirements in TMC Chapter 5.06.
B. Fee - General.
1. The application must be accompanied by payment for the amount of the
license fee. The license fee for the annual license issued under this chapter shall be
$67.00 per full -time equivalent (FTE) employee, which consistsing of a $12.00 per FTE
business license fee plus a $55.00 per FTE Revenue Generating Regulatory License
(RGRL) fee. The annual license fee shall be calculated by multiplying the number of
full -time equivalent employees that worked in Tukwila during the previous calendar year
by the license fee.
2. For owners of residential rental properties with 5 or more units, the annual
license fee shall be calculated by combining the total amounts from:
a. Multiplying the number of full -time equivalent employees that worked in
Tukwila during the previous calendar year by the RGRL fee, and, -
b. The annual Residential Rental Business fee shall include a License fee
as set forth in TMC Chapter Section 5.06.040.
3. It will be the responsibility of the business or residential rental property
owner to determine the total number of FTE employees and, if required, demonstrate to
the satisfaction of the Finance Director or his /her designee that the calculation and
information is -are accurate. Employers without a full year of operating history shall
estimate the number of FTE employees that will be employed in a 12 -month period.
C. Minimum Fee. There shall be a minimum fee for an annual license of $67.00,
which consistsing of a $12.00 business license fee and a $55.00 RGRL fee, except for
an entity defined in TMC Section 5.04.090.
1. A business with less than $12,000.00 of annual gross receipts shall pay the
minimum license fee.
2. A residential rental property with less than $12,000.00 of annual gross
rcceipts fewer than 5 units shall be exempt from the RGRL fee, but shall be subject to
the Residential Rental Business License fee requirements as set forth in TMC Section
5.06.040.
23. An entity engaging in some activities or functions that are exempt from the
combined business license fee and some that are not exempt shall pay a license fee
based on the number of full -time equivalent employees involved in the functions or
activities that are not exempt.
3'1. An individual person operating more than one business as sole
proprietorship or owning more than one residential rental property within the corporate
limits of the City shall pay only one RGRL fee, at an amount equal to the highest RGRL
fee for any one of the multiple businesses, if not otherwise exempt from paying the
license fee pursuant to this chapter. TMC Section 5.04.020.C.34 shall not apply if any
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one of the businesses or properties owned by the sole proprietor has three or more full -
time equivalent employees.
45. If a business has more than one location in Tukwila, the license fee
calculation shall include at least the minimum fee for each location.
56. The license fee for a business required to be licensed under this chapter
and not located within the City's corporate limits shall be calculated by multiplying the
license fee by the number of FTE employees working within the City, but in no event
shall the license fee be less than the minimum license fee set forth in this chapter. If the
number of FTE employees is not known at the time of renewal, the business shall
estimate the maximum number of FTE employees they anticipate working in Tukwila for
the 12 -month period subject to licensure.
67. Businesses doing business in the City that have no employees physically
working within the City shall pay the minimum fee required under this chapter.
78. Businesses or organizations eligible for a temporary business license
pursuant to TMC Section 5.04.010 will be required to pay the minimum $67.00 business
license fee unless the applicant is participating at a City- sponsored event or as part of
an event held at the Tukwila Community Center. If an applicant is participating at a
City- sponsored event or as part of an event held at the Tukwila Community Center, they
will be required to complete all application requirements and approvals required by the
City's Parks and Recreation Department.
D. New Businesses. The license fee for a new business shall be based on the
estimated number of FTE employees that will work in Tukwila for a 12 -month period. If,
during the license year, the City determines the actual number of employees is
significantly different than estimated, the amount of the license fee will be recalculated
for the new business. If the revised annual license fee is higher, the business must pay
the difference within 30 days after notification is sent by the City.
E. Over - Reporting Number of Employees. A business may request that the
City refund the license fee overpaid on the basis that the business miscounted the
number of FTE employees by an error factor of more than 15 %. The request must be in
writing and the City must receive the request and all supporting documentation no later
than 60 days after the end of the calendar year in which the error was made. If the City
is satisfied the licensee paid an excess business license fee, the City will refund the
excess license fee paid by the licensee.
F. Under - Reporting of Employees. If the City determines the number of
employees was under - reported at the time of application or renewal by an error factor of
more than 15 %, the business shall pay the balance of the applicable license fee
together with a penalty of 20% of such balance due. The business shall also reimburse
the City for any accounting, legal, or administrative expenses incurred by the City in
determining the under - reporting or in collecting the additional amounts. The Finance
Director shall mail written notice of the amount to be paid and the business shall pay
said amount to the City within 30 days of the date written notice is mailed by the City. If
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the City does not receive timely payment, an additional penalty shall be added, applying
the schedule for late payments in this chapter.
G. Payment by Draft or Check. Payment made by draft or check shall not be
deemed a payment of the license fee unless and until the same has been honored in
the usual course of business, nor shall acceptance of any such check or draft operate
as a quittance or discharge of the fee unless and until the check or draft is honored.
Any person who submits a license fee payment by check to the City pursuant to the
provisions of this chapter shall be assessed an NSF fee set by the Finance Director if
the check is returned unpaid by a bank or other financial institution for insufficient funds
in the account or for any other reason.
Section 2. Corrections by City Clerk or Code Reviser. Upon approval of the
City Attorney, the City Clerk and the code reviser are authorized to make necessary
corrections to this ordinance, including the correction of clerical errors; references to
other local, state or federal laws, codes, rules, or regulations; or ordinance numbering
and section /subsection numbering.
Section 3. 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 4. 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 Regular Meeting thereof this day of , 2013.
ATTEST /AUTHENTICATED:
Christy O'Flaherty, MMC, City Clerk
APPROVED AS TO FORM BY:
Office of the City Attorney
Jim Haggerton, Mayor
Filed with the City Clerk:
Passed by the City Council:
Published:
Effective Date:
Ordinance Number:
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