09/21/1992 Meeting - Laserfiche WebLink

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