HomeMy WebLinkAboutCOW 2010-04-12 Item 5J - Budget - Revenue OptionsCAS NUMBER: 10-046
Meeting Date Prepared by
04/12/10 CO
AGENDA ITEM TITLE Budget Revenue Options
MTG DATE
1 04/12/10
MTG. DATE
04/12/10
COUNCIL AGENDA SYNOPSIS
Initials
1
1 1
ITEM- INFORMATION
review
1 ORIGINAL AGENDA DATE: APRIL 12, 2010
CATEGORY Discussion Motion Resolution Ordinance Bid Award Public Hearing Other
Mtg Date 04/12/10 Mtg Date Mtg Date Mtg Date Mtg Date Mtg Date Mtg Date
SPONSOR Council Mayor Adm Svcs DCD Finance Fire Legal P&R Police Ply
SPONSOR'S During its February 2010 annual retreat, the City Council discussed a wide range of
SUMMARY options for addressing the long -term gap between anticipated revenues and expenditure
forecasts. Council identified a number of revenue and expense options it would like to
explore further, and requested that staff research these items and report back to the
Committee of the Whole in coming months. The attached memo identifies revenue options
for consideration by the Council.
RI',VIEWED BY COW Mtg. CA &P Cmte F &S Cmte
Utilities Cmte Arts Comm. Parks Comm. I Planning Comm.
DATE: N/A
RECOMMENDATIONS:
SPONSOR /ADMIN. Review and provide direction
COMMI 1'1'1 E
COST-IMPACT FUND SOURCE
EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
$N /A $N /A $N /A
Fund Source: N/A
Comments:
.RECORD. OFCOUNCIL ACTION
ITEM No.
Transportation Cmte
ATTACHMENTS
Informational Memorandum dated 04/09/10, with 4 attached revenue options
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TO:
ISSUE
BACKGROUND
City of Tukwila
INFORMATIONAL MEMORANDUM
Mayor Haggerton
Committee of the Whole
FROM: Shawn Hunstock, Finance Director
DATE: April 9, 2010
SUBJECT: Revenue Options
Increase utility tax on City run utilities
Increase business license fees
Revenue generating regulatory license
Transportation Benefit District license fee
Jim Haggerton, Mayor
The City Council requested that administration follow -up on several revenue enhancement
options as part of their retreat on February 27 and 28 The items presented for discussion at
the April 12 Committee of the Whole meeting include the following:
Other revenue enhancement options will be presented at future COW meetings, as well as
service or program reduction options.
To address the decline in sales tax revenue and limitations on growth of property tax revenue,
the City implemented a 3% across the -board budget reduction in 2009. The reduction resulted
in a savings of just under $1.4 million. This reduction was accomplished with no impact on the
City's staffing level or employee benefits. Later in 2009, as it became apparent that the
downturn in the economy would be a protracted one, departments were asked to identify
additional cuts that could be made to further reduce City expenses. This effort resulted in
another $392,000 reduction of the General Fund budget.
Administration also looked for other ways to reduce expenses, such as placing restrictions on
out -of -state travel. When staffing positions became vacant, the City implemented a minimum
three month recruitment period, with few exceptions, in order to generate some savings on
salaries and benefits. Opportunities for efficiency were also investigated, such as consolidating
the City's cellular phones within the Information Technology department for purchasing,
maintenance of the phones and monitoring of expenses.
In addition to all the efforts mentioned above for the General Fund, the City also implemented
cost savings measures for other funds. In the arterial street fund and capital projects funds the
City chose to delay certain projects that were funded through sales tax receipts, allowing this
revenue source to be allocated to the General Fund instead. We were also able to identify
resources in the debt service funds that have accumulated over several years. These
resources, originally from sales tax receipts, were allocated back to the General Fund.
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INFORMATIONAL MEMO
Page 2
To the extent possible, the City attempted to utilize previously untapped revenue sources,
delayed or cancelled certain items of expenditure, and took advantage of one -time savings
where available in an effort to not impact the level of staffing within the City.
The City Council at its retreat requested that administration bring specific options back to future
COW meetings regarding various revenue enhancements. The revenue enhancements are one
part of a three part approach to address the City's current budget shortfall. The other items
being considered are program reductions and the cost of compensation.
DISCUSSION
The attached pages describe each individual revenue enhancement option, the service impact,
if any, the estimated revenue that could be generated, and the alternatives to changing or
implementing each option. Should Council decide to further pursue any of these options, staff
and administration will bring specific proposals, along with any necessary ordinances or
resolutions, to future Committee of the Whole and Council meetings.
RECOMMENDATION
For each revenue option, provide staff direction on the following:
Should this revenue option be pursued?
1. Request more information from staff (please be specific).
2. Reject this revenue option
3. Ask staff to prepare action necessary to implement this revenue option.
Timing of Implementation: (Should this revenue option be implemented)
a) Immediately?
b) As part of 2011 -2012 budget process?
c) At some other time?
If immediate implementation is desired, staff will schedule a public hearing, if necessary, for the
earliest opportunity.
ATTACHMENTS
A. Revenue Option: Utility Tax on City -Owned Utilities
B. Revenue Option: Increase Business License Fees
C. Revenue Option: Revenue Generating Regulatory License
D. Revenue Option: TBD License Tabs
300 w: \2010 infomemos \budget april 12_1.docx
PROPOSAL: Increase tax rate on city -run utilities to accomplish a $280,000 increase in
utility tax revenue.
DESCRIPTION: The City adopted Ordinance 2258 on October 19, 2009, enacting a utility tax
of 15% from December 31, 2008 through April 30, 2010, and a rate of 10%
from May 1, 2010 through December 31, 2012. The tax is on the City's water,
sewer and surface water funds. An increase of three percent from May 1,
2010 on would generate approximately $300,000. If the sunset provision is
removed from TMC 3.54.030, the tax would need to be included in cost
assumptions for annual utility rate setting purposes.
SERVICE
IMPACT: Because the utility tax is a tax on the enterprise utility fund itself, and not on
the customers, implementation of the tax, and changes to it, can be
accomplished with minimal administrative burden. When the utility tax was
originally adopted, the goal was to not pass the tax along to customers, but
rather reduce the fund balance in the utility funds. Extension of the utility
tax beyond the sunset period, if Council chooses to do so, will necessitate
building this cost into the rate model for future years that utility customers
pay.
BUDGET
IMPACT:
CITY OF TUKWILA
REVENUE ENHANCEMENT
PROPOSAL AND ASSESSMENT
ANNUAL REVENUE INCREASE
LESS: COST OF PROGRAM
ADMINISTRATION
ANNUAL NET INCREASE
2010 2011+
$150,000 $300,000
$150,000 $300,000
ALTERNATIVES: The City could chose to not implement an increase to the existing tax on city
run utilities and make up this difference either through other revenue
enhancements, or additional expenditure reductions.
c: \temp \xpgrpwise \revenue enhancement proposal utility tax.docx /sdh Page 1
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PROPOSAL:
DESCRIPTION:
SERVICE
IMPACT:
BUDGET
IMPACT:
CITY OF TUKWILA
REVENUE ENHANCEMENT
PROPOSAL AND ASSESSMENT
Increase the fee for business licenses in Tukwila to accomplish a $160,000
increase in business license revenue.
The City last updated its business license fee amounts with Ordinance 2179
on October 15, 2007. Below is a table that illustrates the current and
proposed fee amounts:
of businesses Current Fee Proposed Fee
Home Occupation 172 $50 $100
0 to 20 Employees 1,898 $100 $150
21 to 50 Employees 222 $150 $300
51 to 100 Employees 67 $200 $400
101+ Employees 63 $300 $600
Total 2,422
The above proposed fees would generate approximately $150,000 of
additional revenue per year. All fee categories would double, with the
exception of the 0 to 20 employee category, which would go from $100 per
license to $150. This is the single largest category of business licenses that the
City issues.
Implementation of a business license fee increase would be minimal by way
of process and staff time. New forms and correspondence are printed each
year with updated information, and the new fees would be included at that
time. It is anticipated we would experience an increase in phone calls, at
least initially, due to the fee increase.
ANNUAL REVENUE INCREASE
LESS: COST OF PROGRAM
ADMINISTRATION
ANNUAL NET INCREASE
2010 2011+
$75,000 $150,000
$75,000 $150,000
The City could chose to not implement an increase to the existing business
ALTERNATIVES: license fees and make up this difference either through other revenue
enhancements, or additional expenditure reductions.
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PROPOSAL:
CITY OF TUKWILA
REVENUE ENHANCEMENT
PROPOSAL AND ASSESSMENT
Enact a Revenue Generating Regulatory License (RGRL) fee, sometimes
known as a head -tax, on businesses operating within the City to accomplish a
$2.5 million increase in revenue in the General Fund.
DESCRIPTION: The RGRL is a supplemental fee, and is charged in addition to the basic
business license fee. Approximately twenty -seven cities in the state impose a
RGRL. State statute allows for a variety of options for implementing the fee,
including per employee, per hour worked, square footage of the business, or
a combination of these or other factors. The statute also allows for a different
fee based on the type of business, so long as every business within a
particular classification is charged the same fee. The City of Seattle last year
repealed their RGRL. The City of Renton imposes a fee of $55 per full time
equivalent employee. The City of Redmond imposes a basic fee of $35 per
employee, plus a surcharge of $55 per employee, for a total fee of $90.
The proposal is to implement a fee of $65 per full time equivalent employee.
The fee would generate approximately $2.5 million in gross additional
revenue each year in the General Fund, based on employee count data from
2009, as originally submitted on business license applications.
SERVICE
IMPACT: Implementation of a RGRL would have impacts to staff in facilitating the
program, including working with businesses and answering questions
regarding completion of forms, formulas, employee eligibility, compliance,
auditing of fee information as submitted by businesses, etc. It is expected that
administration of an RGRL would require the addition of one full -time
equivalent employee, plus typical supply and equipment costs. Additional
marketing materials, publications, forms and postage would be needed as
well. The projected annual cost of program administration is $150,000.
BUDGET 2010 2011+
IMPACT: ANNUAL REVENUE INCREASE $1,150,000 $2,500,000
LESS: COST OF PROGRAM
ADMINISTRATION
ANNUAL NET INCREASE
c: \temp \gwviewer \revenue enhancement proposal rgrl.docx /sdh
$75,000 $150,000
$1,075,000 $2,350,000
Page 1
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ALTERNATIVES: The City could chose to not implement a RGRL and make up this difference
either through other revenue enhancements, or additional expenditure
reductions. However, the available options for making up this amount of
revenue are very limited.
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PROPOSAL:
DESCRIPTION:
SERVICE
IMPACT:
BUDGET
IMPACT:
ALTERNATIVES:
c:
CITY OF TUKWILA
REVENUE ENHANCEMENT
PROPOSAL AND ASSESSMENT
Create a Transportation Benefit District (TBD) with funding through a $20
per vehicle license fee dedicated to transportation improvements.
Cities may create a TBD by ordinance after conducting a public hearing with
sufficient notification. There are many options available for funding a TBD,
including a 0.2% increase in the local sales tax rate and a per vehicle license
fee of up to $100 per car. A license fee of up to $20 per vehicle does not
require voter approval. This funding option mandates that the boundary of
the TBD be consistent with the boundaries of the City. Revenue collected
must be used for qualifying transportation improvements. These include any
transportation improvement contained in any existing state or regional
transportation plan that is necessitated by existing or reasonably foreseeable
congestion levels. Maintenance of existing and new facilities is an eligible
expense.
The proposal is to implement a fee of $20 per registered vehicle within
Tukwila. The fee would generate approximately $120,000 in revenue each
year in the General Fund and /or Arterial Street Fund, based on a very rough
estimate of approximately 6,000 registered vehicles within the city limits.
Implementation of a $20 per vehicle license fee could be accomplished with
relatively little administrative burden. The fee would be assessed and
collected by the Department of Licensing and remitted to the City by the
State Treasurer on a monthly basis. The fee will not be collected by DOL
until six months after authorization of the fee by the TBD governing body.
ANNUAL REVENUE INCREASE
LESS: COST OF PROGRAM
ADMINISTRATION
2010
2011+
$120,000
ANNUAL NET INCREASE $120,000
The City could decide to fund the TBD through another mechanism, such as
an increase in the local sales tax rate, an excess property tax levy or through
vehicle tolls. All of these options, though, require voter approval. The City
could also decide to not create a TBD at all, and continue to fund such
improvements through an allocation of sales tax receipts.
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