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Home My WebLink AboutFS 2011-12-06 Item 2C - Discussion - Revenue Generating Regulatory License (RGRL) AuditCity of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety Committee FROM: Jennifer Ferrer -Santa Ines, Senior Fiscal Coordinator DATE: November 29, 2011 SUBJECT: Revenue Generating Regulatory License (RGRL) Audit ISSUE The City implemented the Revenue Generating Regulatory License (RGRL) fee effective with its 2011 business license applications and renewals. An annual audit of the number of employees and or annual hours worked in Tukwila reported by businesses determines the accuracy of revenue received through RGRL fees. BACKGROUND On July 19, 2010 Council adopted Ordinance No. 2297 which implemented an RGRL fee of $55.00 per full -time equivalent employee. The RGRL was a fee in addition to any license fee paid to the City. Every person engaged in business within Tukwila is to pay a Revenue Generating Regulatory License fee based upon the current number of employees or number of employee hours worked in the City in the previous year. The amount of RGRL due can be determined using the standard method of taking the current number of employees and multiplying that by $55.00. A business can also use an alternative method of taking all annual hours worked in Tukwila the previous year and multiplying those hours by the RGRL multiplier of .028646. This multiplier is equivalent to one full -time employee working 1,920 hours or more. DISCUSSION Staff contacted the largest businesses in Tukwila employing greater than 200 employees to conduct routine fee verification to determine whether or not hours and or employees were being reported accurately for RGRL purposes. The process used to conduct the verification is as follows: 1) A list of selected Tukwila businesses with number of employees greater than 200 were contacted either by telephone, email, or both in order to conduct routine fee verification as mandated by Ordinance No. 2297. 2) It was explained to each business contacted that the City is conducting a routine verification of the RGRL business licensing fee calculation method. As a part of this verification process, the City asked the business entity to submit copies of its prior year quarterly Labor and Industries (L &I) reports. 71 INFORMATIONAL MEMO Page 2 3) For larger business entities with multiple locations throughout Washington State, the quarterly L &I reports are usually filed on a consolidated basis (i.e., the L &I reports are inclusive of all the entity's business locations and filed as an aggregate in which information is not readily available). Should this be the case, the City has been requesting that the business provide internally generated worksheets or documentation in support or in lieu of the L &I filing that would only be specific to the City of Tukwila. 4) Total number of worker hours divided by 1,920 hours per year for one full -time employee (FTE) equivalent results in the total number of RGRL FTEs multiplied by $55.00 per employee. An employee working 1,920 or more hours per year is counted as one full time employee for RGRL purposes. 5) Under reporting of employees by an error factor of more than 15% will be billed including a 20% penalty on the amount due. From the list of businesses verified, there was one organization that under reported total actual hours worked in Tukwila. This resulted in over $12,000 in RGRL fees that were not paid at the time of license renewal. This business has fully paid all outstanding RGRL fees as of October 24, 2011. RECOMMENDATION For information only. ATTACHMENTS 2011 RGRL Routine Verification Business Listing 72 CUST_NO ` - BUS_NAME ACCT_NO #`off,Employees FEE_AMT Notes /Comments /Findings as of 10/30/2011: American Medical Left voice msg to Mr. Gostelli to provide 4 of worker hours for RGRL business license fee portion. EDEN shows 68,459 hrs. Further investigation 00032708 Response 00001818 442 1,961 showed that AMR had reported additional hours above what they reported to the City causing an underpayment of 512,009. This was paid on 10-24-11 00034112 Boeing Co. 00001668 3797 208,835 00034109 Boeing Co. 00001665 1804 99,220 On 09/02/11, Ryan faxed their internal reports showing total worker hours of 12,366,708.50/1,920 = 6,441 FTE x $55.00 = $354,255 adj RGRL fee. EDEN shows 00034108 Boeing Co. 00001664 552 30,360 $352,935; diff = (0.37%). 00054576 BOEING COMPANY 00003194 264 14,520 00034115 BOEING EMPLOYEES CREDIT UNION 00000358 466 25,338 Based on BECU's actual 2010 L &I reports for Tukwila, only, the highest month with emp 4 shows 440 and for RGRL purposes, they reported 460.68876 emps under alt method with RGRL fee paid of $25,337.88; so, they have actually remitted in excess of actual L &I. 00034187 Carlisle Interconnect 00001677 600 27,885 Per L &I reports, total 2010 worker hrs = 1,055,466, or 549.722 FTEs x $55 = $30,234.71. EDEN RGRL shows 507 emps with fee paid of $27,885; diff of <7.7 %> or Techn. <52,350 >. 00034234 Cheesecake Factory 00002102 252 6,620 Spoke with Kevin Mounce on 09/19/11: For Tukwila location 2010 total 4 of L &I worker hrs reported = 270,243/1,920 = 140.7515625 FTEs x $55 = $7,741.34; EDEN shows 231,088.11 hrs /1,920 = 120.3583906 x $55 = $6,619.75; diff = (14.49%). This is COSTCO Optical Lab which is a separate bldg that manufactures the lenses for Optical Sales. Per telecon with Jackie Bacon, as of 12/29/10, there were 415 00034335 Costco Optical 00001883 401 16,694 emps at this location vs 401 they provided for the base lic fee. Have left a message on 8/30/11 for Michael Lynch to call me back with RGRL hrs info. Mr. Lynch is out of office until 09/07/11. As of 9/15/11: Contact is now Ben Kaiser, 425- 313 -6386; he is working with me on this. Optical division had 319 emps reported to L &I for 2010, they actually reported 303.53 FTEs to City; RGRL diff = (4.85 %) This is COSTCO Wholesale & Optical Sales. Per telecon with Ann Loonam, as of 12/29/10, there were 320 emps for this division vs 274 they provided for the base 00034337 Costco Wholesale 00002580 274 14,745 tic fee. Have left a message on 8/30/11 for Michael Lynch to call me back with RGRL hrs info. Mr. Lynch is out of office until 09/07/11. As of 9/15/11: Contact is now Ben Kaiser, 425 - 313 -6386; he is working with me on this. Wholesale division had 301 emps reported to L &I for 2010, they actually reported 268.08 FTEs to City; RGRL diff = (10.94 %) 00034790 Hartung Glass Industries 00000989 252 13,860 Per 2010 L &I reports for Tukwila, total worker hrs = 516,136/1,920 = 268.821 FTEs x $55 = $14,785.16; Per EDEN RGRL: 252 FTEs x $55 = $13,860; dill of Inc <6.25 %> 00034819 Highline Med Ctr Spec Campus 00001829 200 9,910 Rec'd HMC's faxed info of total 212 employees EDEN shows 200 = (5.66 %) diff and total worker hours of 340,014; EDEN shows 345,955 diff = 1.75% 00032572 J.C. Penney Co. 00001268 350 11,583 Rec'd faxed info from Christy on 9/15/11. This was just copy of email dated 01/17/2011 she had recd from her HR Team with 404,354.10 productive emp hours worked which agrees to EDEN RGRL. 00032812 Macy's ( 408) 00001270 327 17,985 Rec'd fax info from Lisa Price on 9/19/11. The highest # of emps for 12 -month period was 370 (some might have been PTs), lowest was 291. Macy's used all method in calculating their RGRL fee at 327 FTEs: 327/370 = 88.3783783 %; diff = (11.62 %) 00032978 Nordstrom, Inc. ( 45) 00001266 268 14,740 Rec'd info from Komny on 9/01/11: Total 2010 hours worked shows 533,219/1,920 = 277.72 FTEs x $55 = $15,274.50; EDEN shows 268 FTEs and $14,740.00; diff = (3.50 %). Spoke with Mr. Boman on 09/19/11 as follow up to request 2010 L &I reports for their Tukwila location. He asked for City's requirements in order to do so. Emailed 00033277 Red Dot Corp. 00001598 286 15,774 copy of Ord. No. 2297 to him and requested that the 2010 L &I reports be faxed to my attention on or before Friday, 09/23/11. Recd L &I info from Mr. Boman: Total 2010 Worker Hours as reported to L &I for Tukwila business location = 640,759/1,920 = 333.7286458 FTEs x $55 = $18,355.08; EDEN = 286.8 FTEs x $55 = $15,774; diff = (14.062 %) 00056402 Things Remembered ( #840) 00001749 217 174 Pass on contacting this business. New cust #00056402 and new activity #00003992. This business only has 3 emps with # of RGRL FTE of 3.16. As per EDEN system, this is still in "pending" status as of 08/31/11. Previously had incorrect # of employees. N/A 00033864 Unified Grocers 00001435 200 4,992 Recd from Steve Johnson on 09/12/11 via email: For 2010 they showed total worker hours of 145,658.25/1,920 = 75.86367187 FTEs x $55 = $4,172.50; Per EDEN RGRL hours = 174,276/1,920 = 90.76875 FTEs x $55 = $4,992.28; Percentage diff: 16.42% over 00033870 United Parcel Service 00001937 294 4,568 Per UPS' 2010 internal reports for Tukwila rec'd 9/01/11, total worker hrs = 159,448.78/1,920 = 83.05 FTEs x $55 = $4,567.54 (This agrees to EDEN); Additionally, UPS' 2010 internal reports show correct 4 emps of 294 for base business license fee. 00033878 University of Phoenix 00001331 204 4,036 Rec'd info from both Joanne Hollera.n & Emily Gonzalez. Per EDEN: 2010 RGRL worker hrs = 140,888/1,920.= 73.37916666 FTEs x $55 = $4,035.85; Per Licensee actual worker hrs = 140,150.70/1,920 = 72.99515625 FTEs x $55 = $,4,014.73; Diff = +0.53 %.