HomeMy WebLinkAboutFS 2015-07-21 Item 2D - Review - General Revenue Sources: Levy Lid Lift, Voted Debt, B&O Tax, Transportation Benefit District, etcTO:
City of Tukwila
Jim Haggerton, Mayor
INFORMATIONAL MEMORANDUM
Mayor Haggerton
Finance & Safety Committee
FROM: Peggy McCarthy, Finance Director
BY: Vicky Carlsen, Deputy Finance Director
DATE: July 15, 2015
SUBJECT: Option to Enhance Revenues
ISSUE
Review various options available to the City to increase revenues.
BACKGROUND
At the May 19, 2015, Finance and Safety Committee meeting, a request was made to bring
additional revenue options to Committee. The request was to review levy lid lifts, voted debt, and
business and occupation (B &O) taxes. This has been expanded to include other potential
revenue sources as well.
DISCUSSION
Levy Lid Lifts
A levy lid lift allows the City to levy up to our maximum levy rate, which is $3.32 (depending on
what the King County Library levies). For 2015, the City's levy rate is $2.84. For 2015, a levy lid
lift could have increased property tax revenue by $2.4 million. Levy lid lifts require a simple
majority to pass.
There are 2 options for lid lifts; single -year or multi -year:
• Single -year (or basic lift) can be for any amount of time and can be for any purpose. The
purpose can be stated in the ballot title but it's not required. Additionally, proceeds can
be used for debt service. For debt service, the maximum time period is nine years. To
make the lift permanent requires language in the ballot title expressly stating that it is
permanent. If it is not permanent, at the end of the time period, the base for future levies
will revert to what the dollar amount of the levy would have been if no lift had ever been
done.
• Multi -year lifts can be done for any purpose but the purpose must be stated in the title of the
ballot measure. New funds raised may not supplant existing funds used for the purpose
of the lid lift. Existing funds mean actual operating expenditures for the year in which the
ballot measure is approved by voters. The lid may be bumped up each year for up to 6
years. At the end of the specified period, the levy in the final period may be designated
as the base amount for the calculation for all future levy increases.
Voted Debt
The City can issue general obligation (voted) debt for capital purposes. Voters must approve the
bonds with a super majority (60 %) and the total number of voters must be no less than 40% of
the voters who voted in the last preceding general state election.
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If approved, the property tax levy would be in excess of the City's regular levy and would be
outside the 101% limit and can exceed the City's regular levy cap of $3.32. The levy would be
used to repay principal and interest of bonds and are levied for the duration of the bond.
The City's voted debt capacity is 2.5% of total assessed valuation less outstanding debt. For
2015, the City's voted debt limit is just over $103 million.
Business and Occupation (B &O) Tax
B &O taxes are levied at a percentage rate on the gross receipts of a business, less some
deductions. It is measured on the value of products, gross proceeds of sale, or gross income of
the business. Businesses are put in classes such as manufacturing, retail, services, and
wholesale. Within each class, the rate must be the same. However, it can differ among classes.
The maximum rate that can be imposed by a city without voter approval is 0.2% (0.002), however
a city may levy a rate higher than 0.2% if approved by a majority of voters. All ordinances that
impose this tax for the first time, or raise rates, must also provide for a referendum procedure.
A model ordinance, drafted by Association of Washington Cities, must be adopted by all cities
imposing a B &O tax. If the ordinance deviates from the non - mandatory provisions of the model
ordinance, a description of the differences must be available to the public in written and electronic
form.
A uniform, minimum small business tax threshold of at least $20,000 in gross income annually
must be established. However, a city may establish a higher threshold before the tax is owed.
It is estimated that the City could bring in approximately $4 million annually.
Transportation Benefit District (TBD)
TBDs are quasi - municipal corporations with independent taxing authority, including the authority
to impose property taxes and impact fees for transportation purposes. The purpose of a TBD is
to finance construction of, and operate, improvements to roadways, high capacity transportation
systems, public transit systems, and other transportation management programs.
Creation of a TBD requires a public hearing and a finding of public interest for formation. The
ordinance establishing the TBD must specify the functions and transportation improvements to
be exercised or funded and establish the boundaries of the district.
The most viable funding options include a $20 car tab, which would generate approximately $500
thousand or a sales tax increase of 0.2 %, which would generate roughly $3.6 million annually.
Special Purpose Districts
Forming a new or annexing to an existing special purpose district allows the City to eliminate that
service from its budget. Two relevant examples include the creation of the Metropolitan Park
District, which removed the cost of the pool from the budget, and the annexation of fire service
into the Kent Regional Fire Authority, which would remove approximately $11 - $13 million in
operating and capital expenses annually. Additionally, a portion of property tax revenue currently
received by the City would transfer to the RFA. If the City annexes to the Kent Regional Fire
Authority, the reduction in expenditures would be greater than the loss of property tax revenue.
This would increase the City's revenue capacity between $3 and $6 million. City Council will need
to make a policy decision regarding the use of the additional capacity.
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To annex to the Kent Regional Fire Authority, voters would need to approve the measure with a
simple majority.
Admission Tax
Admission tax is limited to not more than 5% paid by the person who pays an admission charge.
The only exemptions stated in RCW 35.21.280 are admissions for activities of elementary or
secondary schools or any public facility of a public facility district.
The Tukwila Municipal Code levies the maximum 5 %, however, the City currently exempts non-
profit endeavors. The City has identified one business that has non - profit status. If the City no
longer exempts this business, the City could receive an additional $300 thousand in admission
tax revenue. The estimate provided is based on annual attendance posted on its website and
taking into account that memberships account for a certain percentage of the attendance
reported. Further analysis would be required to calculate a better estimate.
Parking Tax
The parking tax is a local option transportation tax and as such, the taxes collected must be used
for transportation purposes. The Tukwila Municipal Code states that the taxes must be used for
transportation purposes within the Tukwila Comprehensive Transportation Plan. The City
currently levies a 5% fee on gross revenues, generating approximately $150 thousand a year on
five businesses that charge for parking. The parking tax was imposed in 1998 and has never
been adjusted.
There is no limit on the tax rate and many ways of assessing the tax are allowed. If the City
increased the tax to 10 %, revenues could be doubled to $300 thousand. If the tax were changed
to a flat fee rather than a percent, revenue collection could be even higher.
Revenue Generating Regulatory License (RGRL)
There is flexibility in how the RGRL fee is designed. The fee can be applied based on FTE, as
the City currently does, or it can be based on number of employees or the square footage of the
business. The fee can also vary based on the type of business.
The City currently charges a business license fee of $12 and an RGRL fee of $55 for a combined
fee of $67 per FTE, which generates over $2 million a year. The RGRL fee was first implemented
in 2011 and last time the fee itself was amended was in 2011. Every $1 increase in fee would
generate an additional $30 thousand in new revenue.
Impact Fees
Cities that plan under the Growth Management Act can assess impact fees for fire, parks, open
spaces, recreation facilities, and transportation needs. The fees are to be used to pay for system
improvements that are reasonably related to the new development and that will reasonably benefit
the new development.
Current park and fire impact fee schedule is as follows:
(GFA = Gross Floor Area)
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Park Impact Fee
Fire Impact Fee
Land Use
Per Residential
Unit
Per 1,000 Sq.
Ft GFA
Per Residential
Unit
Per 1,000
Sq. Ft GFA
Single Family
$922
$1,426
Multi - Family
$1,200
$1,398
Office
$1,624
$837
Retail
$580
$419
Industrial
$127
$262
(GFA = Gross Floor Area)
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INFORMATIONAL MEMO
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Traffic impact fees are calculated based on a number or variable including zone, type of structure,
and land use. A chart showing all traffic impact fees has been included as an attachment. Any
increase in rates would increase revenue. However, the increase in revenue is dependent on
development.
Local Improvement District (LID)
LIDs are financing tools that are a means of assisting benefiting properties in financing capital
improvements through the formation of a special assessment district. They allow improvements
to be financed and paid for over a period of time through assessments against the benefiting
properties.
LIDs could be used to finance roadway improvements, adding sidewalks, or other infrastructure
capital needs. Costs can be shared by both the property owner and the City or borne entirely by
the property owner. The revenue that could be generated from an LID would depend on the
project.
There are two types of LIDs; Councilmanic and petition. Councilmanic is self- imposed by the City
while the petition method is when property owners request the improvement.
Utility Tax
A 6% utility tax, which is the maximum allowed by law without a vote, is currently imposed on
businesses within the City selling electric energy, gas, telephone, cable television, and solid
waste.
There are two ways that the City could increase utility tax revenue. The City could ask voters to
approve a utility tax that exceeds 6 %. Every 1 % of utility tax could generate approximately $600
thousand in additional utility tax revenue. The second option would be to extend the tax to water
and sewer districts serving Tukwila property owners. Currently, these customers do not pay any
utility tax, though utility customers served by the City's utilities do pay this tax. Extending the tax
to these entities could generate over $250 thousand annually in additional utility tax revenue.
Alternatively, the City could negotiate a franchise fee with the water and sewer districts serving
Tukwila property owners. A franchise fee provides flexibility in how the fee is calculated, whereas,
a utility tax is calculated on usage.
Reduce Operational Costs
Another option to change the financial picture of the City would be to reduce operational costs by
enacting a 10% reduction in costs in all departments. A 10% cut in expenditures across the board
would result in approximately $4.9 million savings. However, a 10% reduction in costs would
decrease services, programs, and staff in all departments. Administration and City Council would
need to determine what programs, services, and staff would be reduced and /or eliminated.
Future Anticipated Expenditures
The City has identified $98 — 139 million in facility needs. Annual debt service per year is
estimated to be $2 million for a criminal justice facility, $1 million for a public works campus
(general fund share), and $2 million for City Hall.
If the City does not annex to the Kent RFA, there would be additional facility needs for the fire
stations. Estimated annual debt service is estimated to be between $800 thousand and $1.3
million.
Additionally, a list of unfunded CIP projects is also included in the attached Revenue matrix.
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INFORMATIONAL MEMO
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RECOMMENDATION
For Information only.
ATTACHMENTS
Revenue Matrix
Traffic Impact Fee Schedule 2007
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86
Revenue Vehicle
Levy Lid Lift
Bond
B &O Tax
Transportation
Benefit District
Transportation
Benefit District Car
Tab
Regional Fire
Authority
Annexation
Reexamining
existing taxes and
fees
Local Improvement
District
Utility Tax
Reduce Operational
Costs
Amount Available
$2,400 000
$103 million
$4,000,000 annually
$3,600,000 annually
$ 500,000
$3,000,000 -
$6,000,000
Unknown
Depends on project
$600,000 per 1 %,
$100,000 if
extended to other
districts
$4,900,000
Finance & Safety July 21, 2015 Attachment
Mechanism
Voter approved @
50%
Voter approved @
60% plus validation
Councilmanic
Voter approved @
50%
Councilmanic
Voter approved @
50%
Councilmanic
Councilmanic and
petition
Voter Approved
Councilmanic
Type and payee
Property tax —
property owners
Property tax —
property owners
Tax on gross
receipts —
businesses
Sales tax — largely
out of town visitors
Car tab — car owners
and fleets
Fire benefit charge —
property owners
based on fire
suppression needs
Varies
Property tax —
properties around
the specific project
Utility tax —
everyone on Tukwila
utilities
Reduction in
services
Notes
Tukwila's current rate is $2.84 per 1,000; the cap is $3.32.
Bonds largely used for capital projects.
.2% available to cities. B &O tax can be sized to exempt small
businesses via an employee or gross receipts threshold. Can also
be targeted for specific industries and vary by industry type. Could
exceed .2% if voter approved.
.2% sales tax available to cities.
$20 car tab available councilmanic, up to $100 if approved by a
public vote at 50 %.
Annexation to the Kent RFA would free up banked capacity in the
City's property tax revenue. The City has the option of retaining all
capacity, no longer levying the difference or a mix of the two. The
City could also use the banked capacity to reduce other taxes or
fees.
Includes:
• Admissions tax
• Parking tax
• RGRL
• Fire, Traffic and Park Impact fees
Could be used for a variety of capital infrastructure projects if
nearby property owners are supportive.
The City is currently at 6 %. Must be voter approved to go higher.
However, opportunity to extend current utility tax to other
agencies serving Tukwila residents.
10% reduction across the board would result in these savings;
Administration and Council to determine what programs and
services would be cut.
Expense
Facilities
Amount Needed
$5,000,000 annually
Finance & Safety July 21, 2015 Attachment
Total
$98,000,000 -
$139,000,000
Notes
$2,000,000 per year debt service on criminal justice facility
$1,000,000 per year debt service on the Public Works campus (assumes enterprise funds
covering half the cost of the campus)
$2,000,000 per year debt service on City Hall and 6300 short term /demolition
Fire Department $800,000 - $17,500,000 - If the City does not annex into the RFA, new fire facilities must be constructed, as well as
$1,300,000 annually $21,500,000 renovation of one station.
Unfunded CIP Projects; dwindling state and federal dollars
Residential Streets Unknown
and Sidewalks
Fully install sidewalks and safety improvements city -wide. Current CIP puts $750,000
annually away for program beginning in 2018.
Strander Extension $40,000,000 Currently going for a $20,000,000 TIGER grant; have other potential sources. City
commitment in the $2,000,000 range.
Allentown Truss $20,000,000 Likely the next bridge that will need to be completely replaced; nearing the end of its
Bridge useful life.
168th Extension $23,000,000 Southcenter Parkway to Andover Park East.
Southcenter $20,000,000 1-5 to 615` Avenue Bridge.
Boulevard
BNSF Access $10,000,000 to City currently doing a joint study with BNSF to determine new access point. Once
$20,000,000 complete, will need to be funded.
Four new traffic $3,000,000 Signals nearly $1,000,000 each.
signals
Potential parks Unknown May include Tukwila Pond, Duwamish Preserve Phase 3 and more.
projects
Figure 9 -1
Traffic Impact Fee Schedule 2007
Land Uses
Unit of
Measure
Zone 1
Zone 2
Zone 3
Zone 4
Cost per Trip All Other Uses $1,736.80 $1,357.77 $1,061.201 $819.38
Residential
Single Family
dwelling
$1,659.35
$1,297.22
$1,013.88
$782.84
Multi Family
dwelling
$712.09
$556.69
$435.09
$335.95
Retirement Community
dwelling
$722.89
$565.13
$441.69
$341.04
Nursing Home /Convalescent Center
bed
$289.15
$226.05
$176.68
$136.42
Assisted Living
dwelling
$289.15
$226.05
$176.68
$136.42
Commercial - Services
Drive -in Bank
sq ft/GFA
$23.14
$18.09
$14.14
$10.92
Walk -in Bank
sq ft/GFA
$18.67
$14.60
$11.41
$8.81
Day Care Center
sq ft/GFA
$9.28
$7.25
$5.67
$4.38
Library
sq ft/GFA
$4.24
$3.32
$2.59
$2.00
Post Office
sq ft/GFA
$6.46
$5.05
$3.95
$3.05
Hotel /Motel
room
$1,107.80
$866.04
$676.87
$522.63
Service Station
VFP
$3,203.13
$2,504.10
$1,957.14
$1,511.17
Service Station /Minimart
VFP
$3,203.13
$2,504.10
$1,957.14
$1,511.17
Service Station /Minimart/Car Wash
VFP
$3,203.13
$2,504.10
$1,957.14
$1,511.17
Carwash (Self - Serve)
stall
$2,826.58
$2,209.72
$1,727.06
$1,333.51
Movie Theater
screen
$64.24
$50.22
$39.25
$30.31
Health Club
sq ft/GFA
$4.42
$3.46
$2.70
$2.09
Racquet Club
sq ft/GFA
$1.99
$1.56
$1.22
$0.94
Marina
berth
$247.38
$193.39
$151.15
$116.71
Commercial - Institutional
Elementary School /Jr. High School
student
$195.27
$152.66
$119.31
$92.13
High School
student
$131.43
$102.75
$80.31
$62.01
University /College
student
$267.56
$209.17
$163.48
$126.23
Church
sq ft/GFA
$1.15
$0.90
$0.70
$0.54
Hospital
sq ft/GFA
$2.22
$1.73
$1.35
$1.05
Commercial - Restaurant
Restaurant
sq ft/GFA
$9.56
$7.48
$5.84
$4.51
Fast Food Restaurant w/o drive - through
sq ft/GFA
$12.27
$9.60
$7.50
$5.79
Fast Food Restaurant w /drive - through
sq ft/GFA
$16.26
$12.71
$9.94
$7.67
Industrial
Light Industry/High Technology
sq ft/GFA
$2.06
$1.61
$1.26
$0.97
Industrial Park
sq ft/GFA
$2.06
$1.61
$1.26
$0.97
Warehousing /Storage
sq ft/GFA
$1.15
$0.90
$0.70
$0.54
Mini Warehouse
sq ft/GFA
$0.50
$0.39
$0.31
$0.24
GLA= Gross Leasable Area
GFA= Gross Floor Area
VFP= Vehicle Fueling Positions (Maximum number of vehicles that can be fueled simultaneously)
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Figure 9 -1
Traffic Impact Fee Schedule 2007
Land Uses
Unit of
Measure
Zone 1
Zone 2
Zone 3
Zone 4
Cost per Trip All Other Uses $1,736.80 $1,357.77 $1,061.201 $819.38
Commercial - Retail
Shopping Center:
up to 9,999 sq ft
sq ft/GLA
$4.18
$3.27
$2.55
$1.97
10,000 sq ft- 49,999 sq ft
sq ft/GLA
$3.51
$2.75
$2.15
$1.66
50,000 sq ft- 99,999 sq ft
sq ft/GLA
$3.03
$2.37
$1.85
$1.43
100,000 sq ft- 199,999 sq ft
sq ft/GLA
$2.61
$2.04
$1.59
$1.23
200,000 sq ft- 299,999 sq ft
sq ft/GLA
$2.38
$1.86
$1.45
$1.12
300,000 sq ft- 399,999 sq ft
sq ft/GLA
$2.82
$2.21
$1.72
$1.33
over 400,000 sq ft
sq ft/GLA
$3.17
$2.48
$1.94
$1.49
Miscellaneous Retail Sales
sq ft/GFA
$3.17
$2.48
$1.94
$1.49
Supermarket
sq ft/GFA
$7.73
$6.04
$4.72
$3.64
Convenience Market
sq ft/GFA
$14.39
$11.25
$8.79
$6.79
Nursery/Garden Center
sq ft/GFA
$2.62
$2.05
$1.60
$1.24
Furniture Store
sq ft/GFA
$0.22
$0.17
$0.13
$0.10
Car Sales - New /Used
sq ft/GFA
$4.56
$3.57
$2.79
$2.15
Auto Care Center
sq ft/GLA
$2.62
$2.05
$1.60
$1.24
Quick Lubrication Vehicle Shop
Service Bay
$2,899.10
$2,266.42
$1,771.37
$1,367.73
Auto Parts Sales
sq ft/GFA
$3.34
$2.61
$2.04
$1.58
Pharmacy (with drive - through)
sq ft/GFA
$3.44
$2.69
$2.10
$1.62
Pharmacy (without drive - through)
sq ft/GFA
$3.36
$2.63
$2.05
$1.58
Free - Standing Discount Store
sq ft/GFA
$3.13
$2.44
$1.91
$1.47
Hardware /Paint Store
sq ft/GFA
$2.66
$2.08
$1.62
$1.25
Discount Club
sq ft/GFA
$3.13
$2.44
$1.91
$1.47
Video Rental
sq ft/GFA
$4.88
$3.82
$2.98
$2.30
Home Improvement Superstore
sq ft/GFA
$1.33
$1.04
$0.81
$0.63
Tire Store
Service Bay
$1,938.32
$1,515.31
$1,184.33
$914.45
Electronics Superstore
sq ft/GFA
$3.11
$2.43
$1.90
$1.46
Commercial - Office
Administrative Office:
up to 9,999 sq ft
sq ft/GFA
$8.10
$6.33
$4.95
$3.82
10,000 sq ft- 49,999 sq ft
sq ft/GFA
$8.10
$6.33
$4.95
$3.82
50,000 sq ft- 99,999 sq ft
sq ft/GFA
$4.70
$3.67
$2.87
$2.22
100,000 sq ft- 199,999 sq ft
sq ft/GFA
$3.56
$2.78
$2.17
$1.68
200,000 sq ft- 299,999 sq ft
sq ft/GFA
$3.10
$2.43
$1.90
$1.46
over 300,000 sq ft
sq ft/GFA
$2.91
$2.27
$1.78
$1.37
Medical Office /Clinic
sq ft/GFA
$6.29
$4.91
$3.84
$2.97
GLA= Gross Leasable Area
GFA= Gross Floor Area
VFP= Vehicle Fueling Positions (Maximum number of vehicles that can be fueled simultaneously)
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