HomeMy WebLinkAboutFS 2011-09-07 Item 2B - Discussion - Business License and Revenue Generating Regulatory LicenseCity of Tukwila
Jim Haggerton, Mayor
INFORMATIONAL MEMORANDUM
TO: Mayor Haggerton
Finance and Safety Committee
FROM: Jennifer Ferrer -Santa Ines, Sr. Fiscal Coordinator
DATE: September 1, 2011
SUBJECT: Business License and RGRL Fees
Many customers as well as staff in Finance and other departments have given feedback
that the current business license and Revenue Generating Regulatory License (RGRL)
fee structures are overly complex and difficult to understand.
BACKGROUND
The following business license fees were adopted by Council on November 15, 2010
with Ordinance No. 2315:
of Emplovees
Fee
0 to 10
$100.00
11 to 20
$150.00
21 to 50
$300.00
51 to 100
$400.00
101 and up
$600.00
Home Occupation
$50.00
On July 19, 2010 Council adopted Ordinance No. 2297 which implemented an RGRL
fee of $55 per full time equivalent employee. Staff has attempted to resolve some
differences between the two ordinances that have caused unforeseen issues since
implementing both fees. One of the concerns expressed by customers is that because
the two fees are calculated differently, completion of the renewal or application form is
unduly burdensome. Finance staff has noted that businesses frequently pay one fee or
the other, whichever is lower. Well over half the renewal and application forms that have
come in since December 2010 have been completed incorrectly. The number of
renewals or applications completed online that are incorrect is at least as high.
DISCUSSION
In an attempt to simplify the business license and RGRL fee calculation process, staff
looked at ways to change the fee structure of one or both. Some cities in Western
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INFORMATIONAL MEMO
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Washington that have an RGRL fee charge one combined fee per full time equivalent
employee. The fee is split by the Finance department, after being receipted in, into the
business license and RGRL components. This split is a relatively easy process given
modern automated cash receipting systems.
Below is a comparison of what a business with 10 full -time employees (FTE) would pay
for a business license in the cities below.
Base License Fee -flat amount
Base License Fee- head count
RGRL Fee -per FTE
Combination Rate Fee
Total Business License Fees
Kirkland Lynnwood Redmond Renton Tukwila
100.00 122.50
100.00
1,000.00 850.00 550.00
910.00 550.00
$1,100.00 972.50 910.00 550.00 650.00
From the information above, cities are either charging a combined rate or a flat amount
for the base fee plus RGRL for business licenses. Only Tukwila has a base license fee
based on head count and an RGRL fee based on a separate method, by full -time
equivalent (FTE).
An analysis of Tukwila's current fee structure, as compared to what a combined fee
might look like, reveals the City could charge a combined fee of $67 per full time
equivalent employee. This combined fee of $67 would replace the current separate
business license and RGRL fees, and the overall revenue collected would be revenue
neutral in comparison to the revenue that is currently coming in for business licenses
and RGRL fees.
A combined fee of $67 would result in a lowering of fees for many small businesses.
This is because a business with one employee currently pays a business license fee of
$100, equivalent to $100 per employee plus an RGRL fee of $55. A business of 10
employees also pays $100, or $10 per employee, plus an RGRL fee of $550. The
overall average business license fee per employee is just under $5. However, smaller
businesses are paying a proportionately higher fee per employee. For instance, a
business with 100 employees pays a business license fee of $400, or $4 per employee.
Below is a chart showing what the current fee structure costs for employers of 1 -10
employees, what the new fee structure would cost those businesses, and the proportion
of businesses in each category:
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INFORMATIONAL MEMO
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As you can see, the new fee structure would result in lower total fees for employers with
1 -8 employees. This group represents 65.72% of the businesses in Tukwila. Total fees
would be lower for some other larger employers too. In total, fees would go down for
71.08% of employers in the City.
These lower fees would be supplemented by somewhat higher fees for the City's largest
employers. We have 25 businesses in the City with 100 or more employees. Under the
current fee structure, these businesses pay about $588,000 in business license and
RGRL fees. Under the new fee structure, these 25 businesses would pay $698,000 in
total fees. The average increase for this group would be 15.61
Following are the advantages of implementing a combined business license and RGRL
fee:
A combined fee is much easier for businesses to understand, and makes the
renewal and application forms easier to complete. There would be one fee
calculation. The business would just enter their number of full time equivalent
employees, and the combined fee would be calculated based on that number.
The business would not have to calculate two separate fees and add them
together, as they are doing now.
The fee is more equitable for smaller businesses. Now the fees paid by the City's
smallest businesses, those with 1 -8 employees (66% of businesses in Tukwila),
are proportionately higher per employee than the fees paid by larger employers.
In total, approximately 71% of businesses in Tukwila would pay lower fees with
the new fee structure.
A simplified fee structure would result in fewer businesses paying incorrect
amounts and therefore being subject to late penalties and multiple handling of
accounts by Finance staff.
Business licenses would be issued much faster if we had a higher percentage of
businesses that calculate and pay the correct amount due the first time they send
something in to Finance.
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Current Fee Structure
Proposed
Bus.
Current
Bus License
License
Business
Fee Per
55.00
Total Fee
67.00
#of EE
License Fee
Employee
RGRL
Now
Combined Fee
Difference
#of Businesses
1
100
100.00
55.00
155.00
67.00
(88.00)
431
24.59%
2
100
50.00
110.00
210.00
134.00
(76.00)
195
11.12%
3
100
33.33
165.00
265.00
201.00
(64.00)
120
6.85%
4
100
25.00
220.00
320.00
268.00
(52.00)
106
6.05%
5
100
20.00
275.00
375.00
335.00
(40.00)
101
5.76%
6
100
16.67
330.00
430.00
402.00
28.00)
85
4.85%
7
100
14.29
385.00
485.00
469.00
(16.00)
56
3.19%
8
100
12.50
440.00
540.00
536.00
(4.00)
58
3.31%
9
100
11.11
495.00
595.00
603.00
8.00
36
2.05%
10
100
10.00
550.00
650.00
670.00
20.00
45
2.57%
As you can see, the new fee structure would result in lower total fees for employers with
1 -8 employees. This group represents 65.72% of the businesses in Tukwila. Total fees
would be lower for some other larger employers too. In total, fees would go down for
71.08% of employers in the City.
These lower fees would be supplemented by somewhat higher fees for the City's largest
employers. We have 25 businesses in the City with 100 or more employees. Under the
current fee structure, these businesses pay about $588,000 in business license and
RGRL fees. Under the new fee structure, these 25 businesses would pay $698,000 in
total fees. The average increase for this group would be 15.61
Following are the advantages of implementing a combined business license and RGRL
fee:
A combined fee is much easier for businesses to understand, and makes the
renewal and application forms easier to complete. There would be one fee
calculation. The business would just enter their number of full time equivalent
employees, and the combined fee would be calculated based on that number.
The business would not have to calculate two separate fees and add them
together, as they are doing now.
The fee is more equitable for smaller businesses. Now the fees paid by the City's
smallest businesses, those with 1 -8 employees (66% of businesses in Tukwila),
are proportionately higher per employee than the fees paid by larger employers.
In total, approximately 71% of businesses in Tukwila would pay lower fees with
the new fee structure.
A simplified fee structure would result in fewer businesses paying incorrect
amounts and therefore being subject to late penalties and multiple handling of
accounts by Finance staff.
Business licenses would be issued much faster if we had a higher percentage of
businesses that calculate and pay the correct amount due the first time they send
something in to Finance.
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INFORMATIONAL MEMO
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A simplified fee would mean less time that it takes for staff to answer questions
about how to calculate the fee, less staff time for following up with businesses in
writing or over the phone if they have paid incorrect amounts, and faster
depositing of payments received.
Staff will continue to investigate other ways to improve and simplify the business license
and RGRL fee processes. We have encountered many technical issues since
implementing the new fees, and these issues continue to this day but remain a high
priority for resolution. We also have a number of much needed improvements in the
works for the forms that are used for renewals and applications. These changes will be
made regardless of whether the fee structure is changed or not.
Options
There are a few options to consider in how we can restructure the calculation of
business license fees. The alternatives are:
1) adoption of a combined business license and RGRL fee of $67 per full -time
equivalent employee, and or
2) modify calculation of the base license fee from number of employees to full -time
equivalent (FTE) similar to that of calculating RGRL, or
3) Do nothing -leave fee structure and calculation as is.
RECOMMENDATION
Select an option from above. If option 1 and or 2 is selected, Staff will return with a draft
Ordinance for Finance Safety Committee to review on the 9/20 F &S meeting.
ATTACHMENT
Business License and RGRL Fee Analysis spreadsheet
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