01-26-2019 Revenue
Council Retreat 2019
Sustainable Revenue Options
Presented by:
Ade’ Ariwoola, Finance Director
January 26, 2019
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Items That Will Be Covered
A – Background
B – FEDRAC Sustainable Revenue Options
C - Council Direction
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Background
A – Council Retreat - 2018
(i) Sustainable Revenue
B – FEDRAC
(i) Special Meeting
(ii) Sustainable Revenue Options
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Sustainable Revenue Options
A – Marijuana
B – Transportation Benefit District (TBD)
C – Sales Tax
D – Property Tax Lid Lift
E – Business & Occupation (B&O)
F – Fees on Apartments & Storage
A - Marijuana
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A. RCW 69.50.54(2)(g)(i) - State share distribution: Not to exceed $15 Million in 2018 and 2019, and $20 Million in 2020 and thereafter.
(1) 70% distributed based on per capita
(i) 60% of the 70% to Counties based on population
(ii) 40% of 70% to Cities
(2) 30% distribution based on physical location of the retail. Shared by proportional share of the total revenue
B. Sales tax. (City’s portion of sales tax rate 0.85%)
Gross sale of $1 Million = $8,500
Gross sale of $10 Million = $85,000
A – Marijuana (Cont’d.)
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C. Projected Revenue
(1) State projects about $100,000 through the States share
(2) We project about $8,500 from a gross sale of $1 Million
(3) Total projected revenue of $108,500 on $1 Million gross sales, or $185,00 on $10 Million gross sales.
D. Other factors like public opinion and prior Council decisions.
E. Not restricted, no voter approval, and about $185,000.
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B - TBD
A. RCW 36.73 - TBD revenue may be used for transportation improvements included in a local, regional, or state transportation plan.
B. TBD may impose a vehicle license fee up to $50 without a public vote subject to the following conditions:
(i) $15 as proposed in the budget – no condition.
(ii) $20 – no condition.
(iii) $40 – The first $20 has been in effect for 24 months.
(iv) $50 – The first $40 fee has been in effect for at least 24 months.
(v) Above $50 and up to $100 – must be approved by simple majority of voters.
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B - TBD (Cont’d.)
C. As of December 31, 2018 there were 68,957 vehicles that may qualify for TBD. The State charges 1% for administrative fees.
Fee _Revenues_ Administrative Fee Net Revenue to City
$15 $1,034,355 $10,344 $1,024,011
$20 $1,379,140 $13,792 $1,365,348
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B - TBD (Cont’d.)
D. The City may include TBD as part of its rebate program to assist financially disadvantaged with the following conditions:
(i) Car licensed in the City of Federal Way.
(ii) Meets the income guideline for the household.
(iii) Has purchased the new car tab.
(iv) Submits a complete application for rebate.
E. It takes a minimum of 6 months from the time the TBD is enacted before the City receives any revenue.
F. Restricted, requires no voter approval, and about $1 Million.
C - Sales Tax
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1. Basic Sales Tax – RCW 82.14.030(1) – 0.5% - First Half Cent. If both the City and the County are levying this first half, then the 15% of the first half must be distributed to the
County. City of Federal Way and King County have levied this.
City’s portion - 0.5% x 85% = 0.425%
2. Optional 0.5% Sales Tax – Second Half Cent
RCW 82.14.030(2). Similar rule applies.
City’s portion - 0.5% x 85% = 0.45%
3. Both Basic Sales Tax 0.425% and Optional Sales Tax 0.425% are unrestricted.
The total net tax to Federal Way - 0.85%.
C - Sales Tax (Cont’d.)
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4. Additional Local Sales & Use Tax Options
A. 0.9% Transit Sales Tax – Voter approval required.
B. 0.2% TBD Sales Tax – Voter approval required.
C. 0.1% Public Safety Sales Tax – Voter approval required.
D. 0.1% Affordable Housing Sales Tax – Voter approval required.
* Available to the City only if County has not levied the tax.
* If King County has not imposed an affordable house sales tax by October 9, 2018, any city or town within the County may submit such proposition to voters.
C – Sales Tax (Cont’d.)
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E. 0.1% Arts, Science & Culture Sales Tax
* Voter approval required.
* For seven (7) years.
F. 0.1% Mental Health & Drug Dependency
* Available to Counties
* Cities in Pierce County
5. Sales tax changes may take effect no sooner than 75 days after Department of Revenue receives notice.
It will take affect on January 1st, April 1st, or July 1st.
6. Restricted, requires voter approval, and amount depends.
D – Property Tax Lid Lift
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Levy Lid Lift – Taxing jurisdictions with a tax rate that is less than their statutory maximum rate may ask the voters to “lift” the levy lid by increasing the tax rate to some amount
equal to or less than their statutory maximum rate.
A simple majority vote is required.
A. Type of levy
i. “Single-year” lift or “one-year.”
ii. Multiple/multi-year lid lift.
B. “Single-year” lift.
i. “Basic” lift.
ii. “Original flavor” lift.
iii. “One-year” lift.
D – Property Tax Lid Lift (Cont’d.)
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B. “Single-year” lift (cont.d)
iv. “One-bump” lift.
v. RCW 84.55.050(1).
vi. It may be for any amount of time.
vii. If for bonds – 9 year’s maximum.
viii. If the lift is not permanent, the rate reverts to what it would have been without lid lift.
ix. Election date – Any time.
D – Property Tax Lid Lift (Cont’d.)
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C. Multiple/multi-year lid lift
i. Purpose – Anything, but must be stated in the title of the ballot measure.
ii. New fund may not supplant existing funds.
iii. Length of time – may be “bumped up” each year from 1 year up to six years.
iv. May be permanent or for a limited time.
v. If permanent – the levy in the future year’s after the last bump will be subjected to a 101% lid.
vi. If it is not permanent the base for future years will revert to what the dollar amount of the levy would have been if no lift had ever been done.
D – Property Tax Lid Lift (Cont’d.)
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C. Multiple/multi-year lid lift (cont’d.)
vii. The lift for the first year must be stated.
viii. The increase may not exceed the maximum amount allowed
by law.
ix. Election date – August Primary or November general election.
D. The City’s current maximum statutory levy limit amount is $19,921,438.
E. Current City levy amount is $11,900,000.
F. Unrestricted, requires voter approval, and up to $8 Million.
E – Business & Occupation (B&O)
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Business taxes and licenses coming in three forms:
1. Excise (percentage) taxes levied on different classes of businesses to raise revenue, commonly called general business and occupation tax.
2. Licenses for the purpose of regulation only.
3. License to regulate and raise revenue.
E – B&O (Cont’d.)
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1. Excise Tax (General B&O Tax)
i. Maximum 0.2%.
ii. 38 of 281 cities levy this tax.
iii. Requires ordinance.
2. Licenses for the purpose of regulation only
i. We used to have this.
ii. Usually a flat fee for all.
E – B&O (Cont’d.)
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3. License to regulate and raise revenue.
i. We converted from Regulatory license fees to Revenue – Generating regulatory licensing in 2017.
ii. Rather than charge single flat fee, some cities use one or more criteria to set the fees, like ranges of employees, square footage of the business and charging different fees depending
upon the range.
iii. City of Mountlake Terrace
- Rental business – flat + $1.50/rental unit
Other business – Flat $100 /year + % of excess of revenue over $12,000
4. Unrestricted, no voter approval, and amount depends.
F – Fees on Apartments & Storage
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1. Adjusting the business registration license fee for different group of businesses is ok.
2. If the City adopts the B&O tax it may take care of the discrepancy between the rental businesses and other businesses.
Conclusion
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A - Possible, Immediate, and less restrictive
(i) Marijuana
(ii) TBD
(iii) B&O
(iv) Fees on Apartment & Storage
B - Possible, not immediate, and restrictive
(i) Property Tax Lid Lift
(ii) Sales Tax
Decision
Council’s direction on which option(s) to work on and bring back to Council?
A - Marijuana
B - TBD
C - Sales Tax
D - Lid Lift
E - B&O
F - Fees on Apartment
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Questions?
Thank You!
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