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<br />e Ms. Ehrman asked if the one-time start-up costs for administration applied to <br /> the City or to the industry. Mr. Rutan said that there were start-up costs <br /> included for both the City and industry. The committee estimated a $55,000 <br /> start-up cost for the City. Discussions with the industry indicated a range <br /> of start-up costs. <br /> Responding to a question from Mr. Boles, Mr. Rutan clarified that the estimat- <br /> ed industry administrative costs of from two to five percent of gross tax <br /> revenues were similar to the percentages paid the hospitality industry for <br /> administration of the Transient Room Tax. Mr. Boles asked if the committee <br /> had considered backing costs associated with administration out of the yield. <br /> Mr. Rutan said that the yield was projected on gross revenues; administrative <br /> costs would be taken from the gross revenues. Mr. Boles said it would be <br /> helpful to know the yield that remained after both two and five percent were <br /> deleted, as well as the start-up costs. Mr. Rutan said that those figures <br /> could be secured, but he cautioned that to do so would require some prelimi- <br /> nary decisions by the council regarding the percentage and whether start-up <br /> costs would be paid by the City. <br /> Mr. Boles asked if the estimated two- to five-percent administration costs <br /> were predicted on the costs of individual sales transactions. Mr. Mounts said <br /> no. He added that the City currently allows five percent of gross revenues to <br /> hotels and motels to collect the room tax. Those businesses report gross <br /> sales. <br /> Mr. Robinette asked why the restaurant tax was considered in the analysis to <br />e be moderately stable while the business income tax was termed unstable. Mr. <br /> Nicholson said that one tax was based on income, while the other was based on <br /> receipts, and receipts fluctuate less as a percentage than income. Mr. <br /> Robinette asked why, in that case, the personal income tax was not considered <br /> more unstable. Mr. Rutan said statistics indicate that expenditures for out- <br /> of-home meals is a static number as a percentage of income over time. There <br /> is a direct correlation between the two. Mr. Mounts agreed, adding that the <br /> levels of expenditures on restaurant meals is tied directly to personal income <br /> levels. A relatively small shift in gross receipts can have a major impact on <br /> the net income of business; Mr. Mounts pointed out that the State corporate <br /> income tax demonstrates significant shifts, whereas personal income fluctua- <br /> tions are much milder over time, and restaurant sales are directly related to <br /> personal income. <br /> Responding to a question from Ms. Ehrman, Mr. Mounts said there are cities in <br /> Colorado, Kentucky, and New Hampshire that levy restaurant taxes, as well as <br /> from Virginia, the state about which staff has the most information. <br />e <br /> MINUTES--City Council Work Session September 21, 1992 Page 2 <br /> 5:30 p.m. <br />