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Home My WebLink AboutMTC - Final Report 1-22-10 Meeting the Challenge Final Report January 22, 2010 Meeting the Challenge Task Force Members John Barofsky Merle Bottge Dave Funk Gerry Gaydos Jared Mason-Gere Gretchen Pierce Michael Redding David Tam Jean Tate Meeting the Challenge For the last several years, the City of Eugene’s General Fund has been projected to have large deficits beginning in July of 2012. Four major factors are causing this deficit. 1.The City’s General Fund will be responsible for paying the cost of library operations that are currently paid by a local option levy when it expires in June 30, 2011; 2.The cost of employee wages, benefits and retirement continue to increase; 3.Previously, the City has used one-time money to pay for on-going services that will need to be paid for by the General Fund; and 4.The economic downturn, which began in 2008, has reduced the amount of money the City will be adding to the General Fund. The City Manager’s goal is to resolve this General Fund challenge by looking at a number of different solutions. This could include ways to reduce spending or increase City revenue. Gathering citizen input on service priorities as well as possible revenue sources is critical to this effort. A special committee, the Meeting the Challenge Task Force, was appointed to recommend new revenue sources that, together with existing revenues, would help balance General Fund budget. A description of the Meeting the Challenge process is included in the Appendix. The Task Force developed one recommendation as well three options for revenue. The Task Force also had several considerations they felt should be taken into account as the City moves forward to solve this challenge. Recommendation The Meeting the Challenge Task Force recommends a Restaurant Tax of 5.0%, which would generate about $14 million annually for the City. After filling the General Fund gap, any remaining funds could be used to assist restaurants in covering the costs to implement the tax, to market and promote Eugene as a destination, and to increase high priority services such as public safety. Considerations Economic development and growth will provide the City with an ongoing opportunity for more revenue. City policies and procedures should stay consistent throughout different economic cycles and should encourage economic development and growth to maximize resulting property tax revenue to the General Fund. The Task Force recognizes that this is not a short-term solution, but believes it will bring results over the long-term. The Task Force is sensitive to the efforts of the State to raise revenue by changing the tax rates on personal income and increasing the minimum tax for corporations. The Task Force members acknowledge that an income tax would be a broad-based and equitable alternative for funding City services. In addition, the Task Force recognizes that other state and local governments are discussing new ways to generate revenue. Individual and businesses will be more likely to support additional payments if they know what will be achieved with the money. To maintain the public’s trust, when revenue is associated with services and the revenue is not generated because it lacks public support, the services associated with the revenue should be scaled back or eliminated. The income from the revenue source should naturally grow with the growth of the City without the need for a rate adjustment, corresponding to the additional need for services. Review existing fees for services regularly and make predictable, periodic adjustments to reflect the increased cost of doing business. Some revenue opportunities might be worthwhile, but by themselves would not be sufficient to fill the entire General Fund revenue shortfall. It may not be possible to get all the way to a sustainable new revenue source immediately; a strategy that uses a local option property tax levy might beappropriate as a bridge until the new revenue source is in place. Any new revenue measure needs a comprehensive campaign designed to give voters a complete understanding of why the money is needed, who will pay the tax, fee or charge and what it will buy. A list of cuts in services that would be made if no new revenue source is identified should be provided. Options Restaurant Tax – This tax is paid by residents of Eugene as well as others who use City services but do not live here. Since the payer of the tax can afford to eat out, this tax may not be considered as much of a burden. A tax of 3 to 5% would generate approximately $8-$14 million and would be a small addition to a restaurant bill. While a Restaurant Tax is the recommended option for new revenue, the Task Force also identified two other options that might be further considered. The Task Force felt these alternatives are of interest but problematic and would require more thorough and careful examination. Utility Consumption Tax – This is a tax that would be paid by both individuals and businesses. A tax of 1.5% would generate at least $2 million annually after administrative costs and adjustments for low-income and high volume users. It would be optimal to work collaboratively with the Eugene Water & Electric Board (EWEB) to identify any potential problems with this option early on. Piggy- backing this tax on an existing billing system such as the one used by EWEB would be the most cost- effective way to implement it. City-wide Monthly Fee for Service – This is a per unit fee that is used to pay for certain services. The fee should not be for a service that is deemed to be essential, such as public safety services. The amount of the fee is important. Recognizing that the fee needs to generate enough to cover the administrative costs, $5 a month is considered acceptable whereas $10 a month would be too much. The fee would be paid by both individuals and businesses and the basis for the fee could be used to encourage other types of desired changes. Revenue Options That Were Not Recommended Initially, a list of 15 revenue sources was considered. The appendix includes a description of each option and the recommended action of the Task Force. Attachments 1.Templates for All Revenues Sources That Were Considered. 2.Criteria for Evaluating Revenue Alternatives – September 21, 2009 Memo. 3.Previously Identified General Fund Revenue Alternatives – October 22, 2009 Memo. 4.Meeting the Challenge Background and Process. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 RestaurantTaxʹRecommended DescriptionTaxonsalesoffoodandnonalcoholicbeveragesservedby restaurantsinEugeneandpaidbythecustomersbasedontheirbill. MeetingtheChallengeActionTheTaskForcerecommendeda5%RestaurantTax. LegalAuthority&RestrictionsUnderhomeruleauthority,Oregoncitieshavethepowertoenacta salestaxwithoutstateenablinglegislation. PrecedenceCurrently,therearetwocitiesinOregonthatcollectthistax.The CityofYachatscollectsa5.0%taxthatappliestomostprepared foodsanddispensedbeverages,notincludingalcoholicbeverages. YachatsCityCouncilvoted41infavorofthetaxonNovember6, 2006;collectionofthistaxstartedinJulyof2007.Taxproceedsare dedicatedtodebtpaymentsonthewastewatertreatmentplant. Theordinancethatimposedthetaxdoesnothaveasunsetclause, andcontainsaprovisionallowingtheCityCounciltoincreasethe taxrateinthefutureafterapublichearing. TheCityofAshlandcollectsa5.0%taxonallpreparedfood. Currently,80%ofthetaxgoestowardsdebtpaymentsforpast upgradestothesewagetreatmentplantand20%goesforparkland purchases.Thetaxwastosunsetin2010.On November3,2009,Ashlandvotersvotedtoextendthe5%taxto 2030,58.8%to41.2%infavor.Oneofthefactorsinthisvotewas thatthewastewaterrateswouldhavegoneupby55%hadthetax notbeenrenewed. InMarch1993,theCityofEugeneproposeda3.0%restauranttax tobeusedasageneralrevenuesource;theproposalfailedatpublic votewith60%opposedand40%infavor. RevenueYield&StabilityBasedonestimatesdevelopedforthe1993proposedrestauranttax andassuming4%averagegrowth,a1.0%restauranttaxwould generateapproximately$2.8millionin2009.Ifleviedat5.0%rate, thistaxwouldraiseapproximately$14millionannually. Determininghowmuchofthisamountwouldbepaidbyoutof townvisitorsvs.Cityresidentswouldrequireadditionalresearch,as thisinformationisnotimmediatelyavailable. Revenueswouldfluctuatewithchangesinpersonalincomeandthe economicenvironment. RevenueAdequacyBasedupontheestimatedannualyield,thisrevenuesourcewould meetsome,butnotalloftheCityofƵŐĞŶĞ͛ƐGeneralFundneedif imposedat1.0%level.Ifimposedatahigherrate,thistaxmay meetalloftheGeneralFundneeds,dependingontherate. AdministrativeEffortIfpatternedafterƐŚůĂŶĚ͛ƐprocessandtheŝƚǇ͛Ɛ TelecommunicationsTax,businesseswouldremitthetaxquarterly totheCity.Aftertheinitialregistrationofalleligiblebusinesses, stafftimewouldberequiredtopostpayments,workwithbusiness ownersandenforcethetaxuniformly.Dedicatedstaffwouldbe neededtoperformthisfunction.Aneffortwillneedtobemadeto clearlyidentifyfoodsandbeveragesthataresubjecttothistaxto makecomplianceeasierforlocalbusinesses.Aportionofthe proceedsmayberetainedbytherestaurantstohelpdefraythe costsassociatedwithcollectionsandremittanceactivities. TimelineThistaxcouldbeimplementedbyFY12.Thetaxwouldmostlikely bereferredtothevotersforapproval.Leadtimewouldalsobe necessarytoestablishadministrativeandenforcement mechanisms. Incidence&EquityDesignedtobeasingle,proportionalrate.Inthepoliticalcampaign of199293,itwasarguedthatthistaxisregressivebecauselow incomehouseholdsspendahighproportionoftheirincomeon ͞ĨĂƐƚĨŽŽĚ͘͟However,accordingtotheEconomicResearch Service/USDA,͞dŚĞwealthiesthouseholdstendtospendagreater shareoftheirfoodbudgetoneatingawayfromhomethantheleast wealthyhouseholds:47%versus36%in2008ʹalmostdoublethe shareoflowincomehouseholds." Arelativelylargeproportionofthistaxwouldbepaidbyvisitors, similartothetransientroomtax. NexusThistaxwouldbepaidbybothresidentsandnonresidentsofthe City.Bothresidentsandnonresidentsuseandbenefitfromawide varietyofcityservicesincludingpublicsafety,parksandcultural services. ConsistencywithCouncilGoals&ArestauranttaxwouldbeconsistentwithCityCouncilgoalsand Policiespolicies. Fairness&PoliticalFeasibilityInthecurrenteconomicenvironment,anadditionaltaxonfoodand beveragesmaybeseenasunfairbysomesegmentsofthelocal community,includingbusinessesandthoserepresentinglow incomepopulations.Oppositiontothistaxislikelyfromindustry groupssuchastheOregonRestaurantAssociation. SustainabilityImpactArestauranttaxwouldnotcreateanundueburdenonfuture generations. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 UtilityConsumptionTaxʹRecommendedasSecondChoice DescriptionAtaxonutilityservicesusedbyresidentsofthe City;leviedontheamountofconsumptionor establishedasaflatfeeperaccount. MeetingtheChallengeActionAsanalternativetotheRestaurantTax,aUtility ConsumptionTaxof1.5%thatwouldnet$2 millionannuallyafteradministrativecostsand adjustmentsforlowincomeandhighvolume users,wasrecommendedbytheTaskForce. LegalAuthority&RestrictionsUnderhomeruleauthority,Oregoncitiescan enactaconsumptiontax. PrecedenceTheCityofAshlandimposesanElectricUtilityUser Tax.Thetaxisdesignedasasurchargeof25%on monthlyenergyuse.Thistaxgeneratesrevenue tofundgeneralCityservicessuchasPolice,Fire, Planning,BuildingandSeniorPrograms,offsetting propertytaxes.Thistaxgeneratesapproximately $2.6millionannually. InMarch1996,theCityofEugeneproposeda1% utilitytaxtofundlowincomehousingwhichfailed atpublicvote;61%noto39%yes. RevenueYield&StabilityIfthetaxwerestructuredasapercentage surchargeontheuseofelectricity,naturalgas, water,stormwaterandwastewaterarough estimateforpotentialyieldsareasfollows: 1.0%=$2.2million 1.5%=$3.3million 2.0%=$4.5million Themonthlyimpacttotheaverageresidentialuser ofelectric,water,stormwaterandwastewater servicesisestimatedbelow: 1.0%=$1.25 1.5%=$1.87 2.0%=$2.50 Impacttocommercialusersisnotprovidedas commercialconsumptionvariesgreatlyby business.Residentialconsumptionaccountsfor approximately60%oftheelectricretailrevenue collectedbyEWEB. Aportionofthetaxrevenuewouldbeneededto offsetadministrativecostsfortheutilitiesto collectandremitthetax. Anannualallocationcouldbesetasidetohelp mitigatethefinancialimpactsofthetaxonlow incomehouseholds.Implementationofthese itemswouldreducetheyieldestimatesgiven. RevenueAdequacyBasedontheestimatedannualyield,thisrevenue sourcewouldmeetsome,butnotalloftheCityof EugeneGeneralFundneeds. AdministrativeEffortIfthetaxwereimposedonutilitycompaniesbased ongrossreceiptswiththepresumptionthatthe taxispassedontothecustomer,theongoing administrativeeffortwouldbeminimal. Anadministrativefeeforcollectingandremitting thetaxtotheCitywouldbenegotiatedwithEWEB andNWNG.Asanexample,ifanadministrative feeof5%ofthenettaxduewereinstituted (similartotheadministrativefeeinplacefor transientroomtax)theforegonerevenuewould beapproximately$110,000atthe1%taxlevel. TheCityhastalkedwithEWEBintherecentpast aboutbeingthebillingagentfortheStreetUtility Fee.IfboththeStreetUtilityFeeandtheUtility ConsumptionTaxmoveforward,CityandEWEB staffwouldneedtoagreethatbothchargeswould beplacedontheEWEBbill. TimelineThistaxcouldbeimplementedbyFY12.Itis assumedthatsuchataxwouldbereferredtothe voterspriortobeingimplemented. Incidence&EquityAllutilityusersinthecitywouldpay.Anincrease wouldbeagreaterfinancialburdentolowincome householdswhohavelittletonodiscretionary income. Additionally,whenthetaxisestablishedasa percentofconsumption,largeutilityusersare affectedmorethanotherusersinthecommunity. Developingaprogramtorebatesomeportionof thetaxtolargeuserscouldmitigatecreatinga barriertoeconomicdevelopment. NexusAnenergyconsumptiontaxwouldbeleviedacross thecommunity.Thecommunityasawhole benefitsfromthefullrangeofservicesprovidedby GeneralFundRevenues. ConsistencywithCouncilGoals&PoliciesAUtilityConsumptionTaxwouldbeconsistent withCouncilgoalsandpolicies. Fairness&PoliticalFeasibilityInthecurrenteconomicclimate,giventhe unemploymentrateinourregionʹtheremaynot becommunitysupportorthepoliticalwilltotax energyconsumptioninourcommunityʹ particularlyasthistaxwouldhaveagreaterimpact onlargebusinesses,lowincomeresidentsorthose whoareoutofwork. SustainabilityImpactAutilityconsumptiontaxwouldnotcreatean undueburdenonfuturegenerations.Thetax couldleadtoreducedconsumption,asustainable practicewhichisahighpriorityvaluefortheCity. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 (XYZ)PublicServiceFeeʹRecommendedasSecondChoice DescriptionApublicserviceutilityisadefinedgroupofrelatedservicesthatare generallyavailabletoandarebroadlyaccessedbyoccupantsof propertyinacity.Utilityfeesaretypicallysettorecoverpartorallof thecostsoftheservice,andarebilledtopersonswhooccupyorhave useofdevelopedproperty,nottheownersofproperty.Unlike electricity,water,stormwaterandsewerutilityservices,thisfeewould fundservicesthatarenotdelivereddirectlytothepropertyandarenot directlymeasurable.Thepurposeofthefeeistoprovidestablefunding toensuretheserviceremainsavailabletothecommunity. MeetingtheChallengeActionAfteraRestaurantTax,theTaskForcerecommendedaPublicService Feeofbetween$5and$10amonthtopayforservicesthatarenot deemedhighpriorityservicessuchaspublicsafety. LegalAuthority&RestrictionsUnderKƌĞŐŽŶ͛ƐHomeRuleprinciplemunicipalitymaychargefeesfor services.Revenuesarenotrestricted.InJanuary,2007,theOregon SupremeCourt,in<ŶĂƉƉǀ͘ŝƚǇŽĨ:ĂĐŬƐŽŶǀŝůůĞ͕upheldtheCityof :ĂĐŬƐŽŶǀŝůůĞ͛Ɛpublicserviceutilityfee.Thiscaseclarifiedthatcityfees forutilityservicesmaybechargedtoapersonwiththerighttooccupy oruseproperty,buttheymaynotbebasedonpropertyownershipor valueofproperty. PrecedenceTheCityofEugenecurrentlydoesnotchargeanypublicserviceutility fees.Autilityfeeforstreetoperationsandmaintenance,withrevenue goingtotheRoadFund,hasbeenunderdiscussionforanumberof yearsbuthasnotbeenimplemented. SeveralmunicipalitiesinOregondochargepublicserviceutilityfeesfor parks,streetoperationsandmaintenance,policeand/orfireservices. Jacksonvillecurrentlychargesautilityfeeof$20permonthon theoccupantofeachunitofdevelopedproperty.Thisfee providesabout50%ofthefundingneededfor:ĂĐŬƐŽŶǀŝůůĞ͛Ɛfire services. Medfordcharges$2.60persinglefamilyhomepermonth, producing$1millionannuallyforpoliceandfireservices. Medfordalsochargesaparksutilityfeeof$2.87permonthper singlefamilyhome. Newbergcharges$3perresidentialunitpermonthforpublic safetyservices. ShadyCovechargesautilityfeeof$15permonthper residentialornonresidentialunit,dedicatingtherevenueto policeservices. NumerousOregoncitieschargeutilityfeesforstreetoperation andmaintenance. RevenueYield&StabilityYieldwillvarywiththefeelevel.Publicserviceutilityfeerevenue usuallysupplementsotherresources.Feesaresetwithconsiderationof theimpactonthecustomeraswellasthetargetrevenueyield.Utility feerevenuesarestablebecausethefeeisleviedbroadlyacrossthe communityandthetypicalbasisforthefee(occupancyanduseof property)isfairlyinelastic. RevenueAdequacyApublicserviceutilityfeecouldproduceadequaterevenuetoreplace netGeneralFundexpendituresforselectedpublicservice.GeneralFund serviceareasmostsuitableforapublicserviceutilityfeearethosethat arebroadlyavailabletoallresidents,forwhichindividualconsumption oftheservicesisnoteasilymeasurableandthathavethegreatest incidenceofuseaccordingtotheŝƚǇ͛ƐCommunitySurvey. InEugenetheseinclude: Parks&OpenSpace:(includesaquatics)netFY10GeneralFund supportis$7.2million;theCommunitySurveyshowsthatparks &openspaceserviceareusedby78%ofcityresidents. Library:netFY10GeneralFundsupportis$7.1million,andan additional$2.8millionisfundedbytheLibraryLocalOption LevywhichwillexpireinFY11;theLibraryisusedby70%ofcity residentsaccordingtotheCommunitySurvey. InFY09inEugenethereareroughly58,000developedpropertyunits (53,000residentialand5,000nonresidentialunits).Ifaflatutilityfeeof $1permonthwereimposedonallunitsand100%collectionis assumed,itwouldprovideabout$700,000grossrevenueannually.If thefeewasleviedonaperunitbasisandwasincludedonEWEB customerbills,thecollectionratewouldbehighandannual administrativecostscouldbeintheneighborhoodof$200,000.With theseassumptions,thefeewouldneedtobeabout$10.60perunitper monthtofullyreplaceGeneralFundsupportforParks&OpenSpace servicesincludingaquatics.TofullyreplaceGeneralFundandthesoon toexpireLOLevysupportforLibraryservices,themonthlyfeewould needtobeabout$14.50perunit. AdministrativeEffortMostcitiescollectutilityfeesaspartofasewer,stormwaterorwater utilitybillingforapropertyunit.InEugene,thiswouldrequire cooperationbyEWEB.Iftheutilityfeeisleviedonaperunitbasisandis includedonexistingEWEButilitybillsannualcostsofadministration, billing,collectionandenforcementcouldberelativelylowatabout $200,000.TheCityhastalkedwithEWEBintherecentpastaboutbeing thebillingagentfortheStreetUtilityFee.IfboththeStreetUtilityFee andthePublicServiceUtilityFeemoveforward,CityandEWEBstaff wouldneedtoagreethatbothchargeswouldbeplacedontheEWEB bill.Administrativecostscouldbemuchhigherandthecollectionrate loweriftheCityhadtodevelopandimplementabillingprocess separatefromEWEB.Inaddition,administrativecostswouldlikelybe higherifthebasisofthefeerequiresdevelopmentandmaintenanceof propertyspecificdataonwhichtobasethefee. TimelineBecausethisfeewouldbeanew,unfamiliarapproachforfunding GeneralfundedservicesinEugene,substantialtimewouldbeneeded toallowforfullreviewanddiscussionbytheCityCouncilaswellasby membersofthecommunity.Itwouldbereasonabletoexpectareferral ofautilityfeeproposaltotheballot.Additionaltimewouldbeneeded todeterminebilling,collectionandenforceprocesses.Itwouldlikely takeatleasttwoyearstoimplementanewpublicserviceutilityfee. Incidence&EquityAlloccupantsofdevelopedpropertywillbenefitfromcontinued availabilityofthepublicservices,andallcouldbeequitablychargedthe utilityfee.Publiclyownedornonprofitownedfacilitiesincluding dormitoriesandgrouphousingwouldsubjecttothefee.TheCitycould negotiatewhatfeelevelisappropriateratherthanapplyingastandard rate,orthesefacilitiescouldbesubsidizedthroughanexemptionwhich wouldshifttheirsharetootherpayers. NexusThetypicalbasisforexistingpublicserviceutilityfeesinOregonisthe occupancyoruseofadevelopedproperty,andthefeeistypicallylevied asaflatfeeonresidentialandnonresidentialunits,oronresidential unitsonly,dependingontheservicefunded.Thecostofthefunded serviceisdistributedasasimpleaverageamongalloccupiedunits.This basisrecognizestwokeypoints:(1)thegeneralityofthenexusbetween thepublicservicefundedbythefeeandthecommonbenefitsprovided bytheavailabilityandbroadusageoftheservicebyoccupantsof developedpropertyacrossthecommunity,and(2)thelackofpractical waystobasethefeeonactualmeasuredusageofthepublicservice. Otherpossiblebasisforlevyingthefeebesidestheperunitbasis includefloorareaorstreetfrontageofunits,numberoragesof occupants,typeofunit,etc.Butthesewouldbearbitrarymeasures unrelatedtoactualusageofthefundedservice,andwouldnotincrease equity.Developingandmaintainingthiskindofpropertyspecificdata maybedifficultandwouldlikelyhaveahigheradministrativecost withoutachievingagreaterdegreeofequityinrelatingthefeeto individualusageofthefundedservice. ConsistencywithCouncilThisfeeisconsistentwithCouncilgoalsandpolicies. Goals&Policies Fairness&PoliticalFeasibilityThesuccessesofcitiesthathaveimplementedutilityfeesforpublic servicesdemonstratesthatsuchfeescanbeseenasfairandcanbe politicallyfeasible.However,asanewideafortheCityofEugene,itis likelythatsubstantialdiscussionwouldberequiredbeforeaconsensus onfairnessemergesandpoliticallyfeasibleisdetermined. SustainabilityImpactThefeewouldhavenoadverseimpactonsustainabilitygoals. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 Expanded/IncreasedChargesforServiceʹNotRecommendedasMajorRevenueSource DescriptionThesearechargestocustomerswhopurchase,useordirectlybenefit fromaspecificgoodorserviceprovidedbytheCity.Thechargeis usuallyimposedasafeeatthetimeandlocationagoodorserviceis delivered.Somechargesforservicearecontractual.Revenue reimbursestheCityforpartorallcostsforprovisionofthegoodor service.Businessprivilegelicenses,finesandusepermitsarenot consideredchargesforserviceandarenotincludedinthisdiscussion. MeetingtheChallengeActionTheTaskForcerecommendedreviewingexistingfeesforservices regularlyandmakingpredictable,periodicadjustmentstoreflectthe increasedcostofdoingbusiness. LegalAuthority&RestrictionsUnderKƌĞŐŽŶ͛ƐHomeRuleprincipal,amunicipalitymaychargeforthe provisionofgoodsandservices.Revenuesarenotrestricted. PrecedenceMostcitiesimposeawiderangeofcharges.TheCityofEugene currentlyimposeschargesformorethan120specificGeneralfunded goodsandservices,providingestimatedrevenueofabout$10.4million fortheGeneralFundinFY10.Itispossibletoestablishnewchargesfor goodsandservicesnotcurrentlychargedfor. RevenueYield&StabilityChargesmayprovideallbutmoretypicallyyieldonlypartofthedirect costofprovidingtheservices.Overheadcostsmayalsobeincludedin thecostrecoverycalculationforservicecharges. Feesareusuallysetwithconsiderationoftheimpactonthecustomer aswellastherevenueyield.Someconsiderationsthatmightinfluence governmentalpricingpracticesaretheneedtoregulatedemand,the desiretosubsidizeacertainproduct,administrativeconcernssuchas thecostofcollection,andthepromotionofothergoals. ConsumptionofsomeCitygoodsandservicesiselasticandifcharges aresettoohigh,customervolumeandeventuallyrevenuemaydecline. SomefeerevenueswillvarywitheconomicconditionsasŝŶĚŝǀŝĚƵĂů͛Ɛ incomeincreasesordecreases.Changesinbuildingactivitywillimpact revenuefromchargesforplanningservices.Theseconcernsaretaken intoaccountbydepartmentswhenfeesaresetorcontractsare negotiated. SummaryofFY10budgetedrevenuesforchargesforservice: RentalRevenue:$90,000 CentralBusinessFunctions:$20,500 Cultural/LeisureServiceRevenues:$5.1million InfrastructureandPlanningServicesRevenue:$1.1million PublicSafetyServiceRevenues:$4.1million Largestindividualchargesforserviceinclude: AmazonPoolFees:$318,000 HultConcessionsRevenue:$275,000 HultHallRental:$415,000 HultPatronCharges:$329,000 HultReimbursementCharges:$732,000 DowntownServiceDistrictFees:$308,000 Zoning&VacationCharges:$485,000 AnimalSurgeryCharges:$210,000 FireContractswithRuralFireDistricts:$1.5million FireDispatchingCharge:$696,000 PoliceChargestoUO:$509,000 Revenueyieldfromnewchargesarelikelytovarybytypeandlevel. RevenueAdequacyRevenuefromexpansionorincreaseofindividualchargeswouldbetiny comparedtotheneedsoftheGeneralFund.Totalrevenue improvementfrombroadlyreviewingchargeswouldlikelyraisemore revenue,butstillsmallcomparedtotheanticipatedfundinggap.The totalrevenuepotentialcannotbeestimatedaccurately,butwouldlikely beinadequatetocontributemuchtowardsasustainablebudget. AdministrativeEffortToupdateexistingindividualcharges,ananalysisofcosts,customer demandfortheservice,economicconditionsandotherconsiderations mayormaynotbenecessary.Developmentofnewchargesforservice mayrequiremoresubstantialadministrativeeffort.Oncesetor adjusted,chargesarerelativelysimpletoimposeandcollectatthetime andplaceofdeliveryofthegoodorservice. TimelineChargesforservicearesetadministratively.Adjustmentofexisting chargesmaybedonewithinafewweeks,whileestablishingnew chargesmaytakeseveralmonthsorlonger. Incidence&EquityMostchargesforservicecanbeavoidedbecausetheservicestheyfund areoptionaltothecustomer.Onlypeoplewhousethegoodorservice arecharged,sotheincidenceofpaymenttoconsumptioncorresponds exactly.Equitycanbeaconcernifchargesaresetsohighthatsome peoplecannotaffordtopay,eventhoughtheydesiretheservice.City policytowardsmaintainingaffordablechargelevelsmaycomeintoplay toaddressequityconcerns. NexusThereisaveryclosenexusbetweenthegoodorserviceandwhopays; thosewhodirectlyusethegoodorservicearecharged. ConsistencywithCouncilChargesforservicearegenerallyconsistentwithCouncilgoalsand Goals&Policiespolicies.However,Citypolicytowardsmaintainingaffordablecharge levelsmaycomeintoplaytoaddressequityconcerns. Fairness&PoliticalFeasibilityPerceptionoffairnesswillvarydependingonthegoodorservice involvedandthelevelofthecharge.ExistingCitychargesareseenby Councilandcommunityasafairwaytogeneraterevenueforthe particularserviceprovided. SustainabilityImpactThereisnoadverseimpactonCitysustainabilitygoals. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 BusinessLicenseFeeʹNotRecommended DescriptionAbusinesslicensefeeisafeefortheprivilegeofconductingbusiness withintheCityofEugenelimits.Itcouldbeimposedonanyperson, partnership,corporationorsimilarentitydoingbusinessintheCityof Eugene.Thefeecalculationcouldtakeseveraldifferentforms:afixed amountperbusiness,aflatpercentageofincomeearnedintheCityof Eugene,afixedfeeleviedonbusinessaccordingtothenumberofits employees.Itistypicallypaidpriortoengaginginbusiness,paidonan annualbasis,anddoesimplyaregulatoryrelationship. MeetingtheChallengeTheBusinessLicenseFeewasdroppedfromconsiderationsincetheeffort Actionrequiredtoimplementthefeewouldnotresultinasubstantialrevenue source,lessthan$2millionannuallyandtheadministrativecostswould likelybesubstantial.Therevenuestreamwouldbemoreappropriatefor newCityservices. LegalAuthority&Oregonhomeruleprincipledoesnotprecludetheimpositionofabusiness Restrictionslicensefee.TheCityhasthelegalauthorityunderthestatelawto implementthisfee,andtherearecurrentlynolegalrestrictionsontheuse ofthissourceofrevenue. PrecedenceTheCityofPortlandbusinesslicenserateis2.2%ofthenetincomeafter allowabledeductions.Theannualminimumfeeis$100.00.Business licensesarerequiredfromtheopeningdateofbusiness.Multnomah ŽƵŶƚǇ͛Ɛbusinessincometaxrateis1.45%ofthenetincomeafter allowabledeductions;thereisnominimumtax.Businessincometaxesare dueaftereachtaxyearend. ManyotherOregonmunicipalitiesalsocollectbusinesslicensefees,with amountsvaryinggreatlybyjurisdiction.Somejurisdictions,suchasthe CityofSpringfield,restrictbusinesslicensefeestocertaintypesof businesses,whileothers,e.g.Portland,GreshamandBeavertoncollectthis feefromallbusinessesoperatingwithintheircitylimits.Anumberof otherOregonmunicipalities,e.g.theCityofSalem,donotimposea businesslicensefee. RevenueYield&StabilityBasedontheOregonEmploymentDepartmentrecords,therewere approximately5,800businessesregisteredinEugeneareazipcodesasof 2001.Accordingtothe2005studybyChastainEconomicConsulting,the numberofprivatefirmsinLaneCountyhasgrownbyanaverage1.7%per yearbetween1990and2004;however,itislikelythatthistrendhas reversedduringthe200709recession.Aflatfeeof$100peryearwould generateapproximately$580,000inbusinesslicenserevenue,assuming noincreaseinthenumberofbusinessessince2001. ThestabilityofthisrevenuesourcewouldpresumablyfluctuatewithĂƌĞĂ͛Ɛ economicconditions. RevenueAdequacyBasedontheestimatedannualyield,thisrevenuesourcewouldonlymeet asmallportionoftheCityofEugeneGeneralFundneeds.Thefeeamount wouldneedtoberaisedannuallytokeepupwiththegrowthinŝƚǇ͛Ɛ GeneralFundexpenditures. AdministrativeEffortTherearecurrentlynospecificestimatesofthecostofadministration, collectionandenforcementassociatedwiththisrevenuesource.Asthere iscurrentlynoexistingsimilarprogram,administrationcostsassociated withabusinesslicensefeeprogramwouldbesignificant.Startupcost estimateswouldalsoneedtoincludethecostofimplementingan automatedtrackingsystem. TimelineAreasonabletimelineforimplementationofabusinesslicenseprogram wouldbeaminimumof812months.Ifadecisiontoimposethisfeewas madetoday,FY12wouldlikelybethefirstyearinwhichthisprogram wouldbefullyimplemented. Incidence&EquityWhilethisfeewouldbepaidbybusinesses,someportionofitwouldlikely bepassedontothecustomers.Theequityofthisfeewouldlargely dependonitsstructure.Aflatfeeperbusinesswouldbeagreaterburden onsmallerbusinesses.Thisfeewouldnotberelatedtobusiness profitability.Itwouldbeadeductiblebusinessexpenseforfederaland statetaxpurposes. NexusBusinessesoperatingintheCityofEugenewouldbenefitfrombeneficial andfavorablebusinessclimateassociatedwithadequateprovisionof generalgovernmentservices,suchaspoliceandfireprotection,parksand libraries. ConsistencywithCouncilThisrevenuesourcewouldbeconsistentwithadoptedCityCouncilgoals& Goals&Policiespolicies. Fairness&PoliticalCityCouncilandcommunityacceptanceofthisrevenuesourcehasnot Feasibilitybeenassessed.Itwouldbereasonabletoexpectthatthisrevenuesource wouldbeopposedbythebusinesscommunitythatwouldbeaffectedby thebusinesslicensefees. SustainabilityImpactThisfeewouldnotimposeaburdenonfuturegenerations.However,it wouldincreasethecostofdoingbusinesswithintheCityofEugeneand wouldmakethecityaslightlymoreexpensiveplacetodobusiness. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2009 LocalOptionPropertyTaxLevyʹNotRecommended Description Alocaloptionlevyisapropertytaxthatispaidbyallpropertyowners withintheCitylimits.TheCitycouldimposealocaloptionlevyfor capitalprojectsforupto10years,orforotherpurposesforamaximum offiveyears. MeetingtheChallengeLocaloptionlevyisnotrecommendedbecausebystatutethefundingis Actionlimitedto5yearsforoperatingpurposes.Therevenuefromthelevyis notongoingandshouldnotbeusedtopayforongoingexpenses. LegalAuthority& Neworadditionalpropertytaxesmustbeapprovedbyamajorityofthe Restrictions peoplevotinginaprimaryorgeneralelection. Precedence Propertytaxesareusedextensivelybylocalgovernmentsacrossthe UnitedStates.TheCitycurrentlyimposesafouryearlocaloptionlevy, forlibraryserviceimprovements.TheCityhasnotproposedanycapital localoptionleviesinthepast. RevenueYield&StabilityTofund$5,000,000ofoperatingcostswithafiveyearlocaloptionlevy, theCitywouldhavetolevyapproximately$5,664,000peryear.The typicalsinglefamilyhomewithataxableassessedvalueof$158,447 wouldpayabout$0.49/$1000ofAV,or$77.67peryearoverthefive yearperiod. Localoptionleviesaresubjecttothe$10/$1000ofrealmarketvaluetax ratecapforallgeneralgovernmentsunderMeasure5.UnderMeasure 50,localoptionleviesarethefirsttobereducedintheeventoftaxrate compression.Thismeansthatifthecombinedtotalleviesforthe overlappinggeneralgovernmentsexceedtheMeasure5cap,anylocal optionlevieswouldbeproportionallyreduceduntilthetaxratelimitis satisfied. RevenueAdequacyAsubstantialportionoftheŝƚǇ͛Ɛrevenueneedscouldbemetinthe shorttermviaalocaloptionlevyʹifpassedbyvoters. Alocaloptionlevyisnotnecessarilyalongtermsolutionasfuture fundingwouldbecontingentuponvotersrenewingthelevyinfuture yearstocontinuetherevenuestream. AdministrativeEffortPropertytaxesareadministeredbytheCounty.TheCountypreparesthe taxbills,collectsthefunds,andremitstheappropriateamounttothe Cityonaregularbasis.EnforcementisperformedbyboththeCounty andtheCityintheforeclosureprocess. TimelineAlocaloptionlevycouldbeplacedontheballotinMayof2010tobe implementedinFY11. Incidence&EquityThetaxispaidbyallpropertyownerswithinCitylimits.Propertyowners includebusinessandresidences.Businessesmaychoosetopassthetax ontotheircustomers. NexusThelocaloptionlevyisabroadbasedtaxacrossallpropertyownersin thecommunity,andnonresidentpropertyowners.Membersofthe communitybenefitfromandenjoyabroadrangeofservicesprovidedby GeneralFundresourcesincludingpublicsafety,parks,andcultural services. ConsistencywithCouncilTheCityCouncilhasseveralfinancialpoliciesstatingthat,totheextent Goals&Policiespossible,nonrecurringresources,suchasalocaloptionlevy,shouldbe usedfornonrecurringexpensesʹnottofundongoingservices. Councilgoalsalsoincludeadesiretofosteraffordablehousing.An additionalpropertytaxlevywouldbecontrarytothatgoal,asitwould raisethecostofhousing. Fairness&PoliticalThepropertytaxisaproportionaltaxonthevalueofrealandpersonal Feasibilitypropertyforbothbusinessesandresidences.Itdoesnottakeinto accounttheabilityofthetaxpayertopaythetax.Therearenumerous exemptionsfromthepropertytaxdesignedtopromoteavarietyof policygoals,includingsomedesignedtolessentheimpactonlow incomeownersandtenants. Thepropertytaxisunderstandabletothevoters(asopposedtoanew formofuserfeeortaxes),makingitpoliticallyfeasiblefromthat standpoint. LocaloptionlevyproposalshavehadmixedsuccessintheEugenearea inrecentyears.Therehavebeensixlocaloptionlevyproposalsonthe ballotfromEugeneorLaneCountysinceMeasure47passed,andthree ofthosehavebeensuccessful.Councilmembershaveexpressed dissatisfactionwithheavyrelianceonpropertytaxesinvariousforumsin recentyears. SustainabilityImpactAlocaloptionlevywouldnotcreateanundueburdenonfuture generations. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 PayrollTaxʹNotRecommended DescriptionAtaxonwagesandsalariesearnedwithintheCity.Whencollected viaapayrolldeduction,itiscommonlycalledapayrolltax;when collectedfromemployerbasedontotalpayroll,itiscommonlycalled aheadtax. MeetingtheChallengeActionAlthoughthistaxwouldcapturerevenuefromindividualsliving outsidetheCitywhouseCityservices,thetaxwasnotrecommended becauseitisnotpaidbyemployersoftheStateandthemethodof chargingperheadisdifficultonsmallbusinessesandlowincome jobs. LegalAuthority&RestrictionsCitiesinOregonhavethelegalauthoritytoimposeapayrolltaxunder theOregonhomeruleprinciple,asthereisnopreemptionunderthe currentstatelaw.However,itisunlikelythattheOregonDepartment ofRevenuewouldagreetocollectthistaxonbehalfoftheCityof Eugeneunlessitiscompelledtodosobythestatelegislature. PrecedenceTheStateofOregoncollectsataxongrosspayrollwithintheLane TransitDistrictinEugene/SpringfieldareaandtheTriCounty MetropolitanTransitDistrict(TriMet)inthePortlandareatoprovide partialfundingforthosedistricts.Transitdistrictsdonothavethe homeruleauthorityandmaynotimposethesetaxesunlessallowed bythestatestatute. EffectiveJanuary1,2009,LTDpayrolltaxratewasincreasedto0.65%. In2003,OregonlegislatureprovidedLTDwiththeauthorityto increasetherateannuallyuntilitreaches0.7%in2014.Certain wages,suchasthosepaidbythefederalgovernmentunitsandpublic schooldistrictsareexemptfromthetaxunderthestatelaw.A numberofotheremployers,suchascitiesandCountyareexempted fromthistaxbyanLTDordinance. RevenueYield&StabilityAccordingtoananalysiscompletedin2001,a1%payrolltaxin Eugenewouldraiseanestimated$29.6millionperyearifappliedto allpayrolls.Thisamountwouldneedtobereducedinordertoadjust forpayrollsthatarelikelytobeexemptfromthistax,suchasthatof federalandstateagencies.Amoreuptodateestimateofthe amountofpayrolltaxesthatcanbecollectedannuallyiscurrentlynot availableduetolackofbreakdownofpayrolltaxcollectedwithinthe LTDserviceareabyjurisdiction. Theamountofrevenuecollectedislikelytomirroremploymentand wagetrendsandthereforecorrelatestronglywiththecurrent economicconditionsinthearea. RevenueAdequacyThisrevenuesourcewouldgenerateaverysignificantamountof revenueandwouldprovideasustainablesourceofrevenueforthe GeneralFundfortheforeseeablefuture. AdministrativeEffortTheeffortassociatedwithadministration,collectionandenforcement ofthisrevenuesourcewouldbebornprimarilybytheStateofOregon andwouldbesimilartotheeffortassociatedwithcollectingpayroll taxesonbehalfofLTDandTriMetbytheDepartmentofRevenue.If theCityofEugeneweretocollectthistaxonitsown,the administrativecostsofdoingsowouldbeveryhigh. TimelineAreasonabletimelineforimplementationofthisrevenuesource cannotbeestimatedatthispoint. Incidence&EquityEvenwhenestablishedataflatrate,thistaxisoftenregressiveinits nature,becauseitignoresnonwageincomesuchasselfemployment earnings,investmentincome,rentsanddividends.Thistaxmayaffect householdrelocationdecisionsandthishaveanegativeimpacton populationgrowth.Anemployerpaidoptionwouldcreatea disincentiveforjobcreation. NexusCitizensemployedwithintheCityofEugenelimitswouldbenefitfrom adequatelyfundedgeneralgovernmentservices,suchaspoliceand fireprotection,parksandlibraries.CitizenswhoworkintheCityof Eugeneandliveelsewhere,butuseCityserviceswhilewithintheCity limits,wouldcontributetotheŝƚǇ͛Ɛtaxbase. ConsistencywithCouncilGoalsThisrevenuesourcewouldnotbeinconsistentwithadoptedCity &PoliciesCouncilgoalsandpolicies.Itwouldstronglysupportthegoalof achievingfair,stableandadequatefinancialresources. Fairness&PoliticalFeasibilityOppositiontoapayrolltaxfrombothbusinessandlaborgroups,as wellascityresidentsingeneral,wouldbelikely.Whenthistaxis withheldfromthewagesofonlynoncityresidents,itissometimes calledaworkprivilegetax;itwasconsideredandrejectedbythe EugeneCityCouncilin2004. TheEugeneDecisionssurveysidentifiedthisrevenuesourceasoneof thethreeleastfavoredtaxationchoices.Itislikelytofaceopposition atthestatelevelaswell. SustainabilityImpactThisrevenuesourcewouldnotimposeanundueburdenonfuture generations.However,itwouldreducetheamountofdisposable incomeavailabletoCityresidents,andmaythereforehaveanegative impactoneconomicactivityintheCityofEugene. MeetingtheChallengeTaskForce ReviewofGeneralFundRevenueAlternatives January22,2010 PersonalIncomeTaxʹNotRecommended DescriptionAtaxonincomeofresidentsofEugeneandnonresidentsearningincomein Eugene. MeetingtheChallengeTheTaskForceagreedthatthePersonalIncomeTaxwasthebest,mostfair ActiontaxtopayforabroadrangeofGeneralFundservices,butitispolitically unfeasibleatthecurrenttime.Measure66whichraisesthepersonalincome taxesStatewideandisontheballotinJanuary2010wasthereasonfornot consideringthetaxanyfurther. LegalAuthority&UnderKƌĞŐŽŶ͛ƐHomeRuleprinciple,amunicipalityhastheauthorityto Restrictionsassessapersonalincometaxonresidentsandnonresidentsearningincome inEugene. PrecedenceThereisapersonalincometaxprecedentinOregon.In2003Multnomah CountypassedathreeyeartemporarypersonalincometaxonCounty residentstofundpublicschools,healthcare,seniorservicesandpublicsafety. Thetaxraisedabout$128millionperyear. InNovember1985therewasanincometaxmeasureontheEugeneballot.It failed89%to11%. Inthesummerof1994theCityClubofEugeneissuedareportsuggestingthe CityCouncilconsiderapersonalincometaxbutataxwasnotconsideredin thatyear. Apersonalincometaxonincomesabove$100,000tofundpublicsafety serviceswasconsideredandrejectedbyCityCouncilinJulyof1996. IntheFallof1997,CityCouncilformedtheCouncilCommitteeonFinanceto reviewmultiplerevenuesourcesthatwouldstabilizetheGeneralFundafter theimpactofMeasure50.Thecommitteereviewedmultiplerevenue sourcesandultimatelyrecommendedthatCouncildirectstafftodevelopan implementationplanforabusinessandpersonalincometax.Although Counciltooknoactionontherecommendation,thiseffortcontributedtothe allocationofUrbanRenewalfundstothenewlibraryandthesuccessful passageoftheParksandOpenSpacesBondMeasure. InNovemberof1999,LaneCountyproposedan8%incometaxsurchargeto supportpublicsafetyneeds.Themeasurefailed,74%no26%yes;inEugene, itfailed68%no32%yes. InMayof2007,LaneCountyproposeda1.1%incometaxmeasuretosupport publicsafetyneeds.Itfailed71.1%to28.9%inLaneCounty. TheCityCouncilhasundertakenadditionalalternativerevenuestudyefforts whichincludedconsideringapersonalincometaxin1992,2002andmost recentlyin2007fortransportationneeds. RevenueYield&Assumingthatapproximately68%ofLaneCountyincomeisearnedwithin StabilityEugeneorbyEugeneresidents,a1percenttaxonAdjustedGrossIncome wouldgenerate$51million.Alternatively,aEugeneincometaxcouldbe leviedasapercentageoftheƚĂǆƉĂǇĞƌ͛Ɛstateincometaxliability.AEugene surchargeof10percentwouldhaveraisedabout$28millionforfiscalyear 20078. Taxrevenueswouldfluctuatewithchangesinpersonalincomeandmirror economicconditions. RevenueAdequacyApersonalincometaxcouldmeettherevenueneedsofthecityʹhowever therecouldbeahighadministrativecostassociatedwithcollection. AdministrativeEffortTherearenospecificestimatesofthecostofadministration,collectionand enforcementassociatedwithadministrationofthisrevenuesource.Itis assumedinhouseadministrationcostswouldbesignificant. Analternatecollectionpossibilitycouldbeto͞ƉŝŐŐǇďĂĐŬ͟onthestate incometaxmuchlikemunicipalitiesdowithalocalsalestaxwithstatesthat collectastatesalestax.Thestatecollectstheentiresalestaxandremitsthe localsharebacktothemunicipality.Theresponsibilityforcomplianceand collectionthenrestswiththestate.Itispossiblethatasimilarmechanism couldbeusedforalocalpersonalincometaxiftheStatewerewillingto collectthelocalshare. TimelineApersonalincometaxwouldmostlikelybereferredtotheballotʹthe earliestopportunitytogobeforethevoterswouldbeinMayof2010.The Citywouldhavetoestablishacollectionmechanismʹeitherinhouseorin coordinationwiththeDepartmentofRevenuetoestablishproceduresaround thedistributionofthetax.Theearliestcollectionsfromapersonalincometax wouldstartbeingreceivedwouldmostlikelybeApril2012fortaxyear2011. Incidence&EquityAllEugeneresidentsearningincomewouldpaythetaxregardlessofemployer orsourcelocationandpotentiallynonresidentsthatareearningincomein Eugeneaswell. Generallyanincometaxisdesignedtobeprogressive,butthestructureof thetaxcanincreaseordecreaseprogressivity.Thistaxwouldmirrorthe progressivityofOregonstateincometaxesifestablishedasasurchargeto stateincometaxliability. NexusApersonalincometaxisageneraltaxthatwouldsupportawiderangeofCity services. ConsistencywithThisrevenuesourcewouldbeconsistentwithadoptedCityCouncilgoals& CouncilGoals&Policiespolicies. Fairness&PoliticalInthecurrenteconomicenvironment,apersonalincometaxmaybeviewed Feasibilityasunfairespeciallygiventhehighunemploymentrateintheregion.Lane Countywasunabletopassapersonalincometaxinamorestableeconomic environment.ItisexpectedtherewouldbelimitedCouncilandcommunity supportforsuchameasureatthistime. SustainabilityImpactApersonalincometaxwouldnotimposeanundueburdenonfuture generations. Central Services Finance Division City of Eugene th 100 West 10 Ave, Suite 400 Eugene, Oregon 97401 (541) 682-5022 MEMORANDUM (541) 682-5802 FAX www.eugene-or.gov Date: September 21, 2009 To: Meeting the Challenge Task Force From: John Huberd, Sr. Budget Analyst, 541-682-5386 Subject: Suggested Criteria for Analysis of Revenue Alternatives Listed below are suggested criteria for selecting revenue alternatives. An evaluation of each revenue alternative using this criterion would provide a balanced approach in selecting revenue options. Due to the short timeline for the Task Force each initial analysis would be kept simple while allowing for the selection of the most feasible revenue alternatives. 1.Legal Authority & Restrictions: May the City legally implement the revenue alternative and are there legal restrictions on the use of the revenue? 2.Precedence: What is the prior history of the revenue alternative in Eugene? 3.Revenue Yield & Stability: What would be the magnitude of the estimated revenue yield and how would that likely change over time? 4.Revenue Adequacy: Would the yield meet a significant part of the City’s projected revenue needs? 5.Administrative Effort: How could administration, collection and enforcement be performed and would there be significant costs involved? 6.Timeline: What is a simple timeline for implementation of the revenue alternative and collection of revenue? 7.Incidence & Equity: Who would likely pay and could the revenue alternative be imposed impartially? 8.Nexus: What relationship would exist between the sources of the revenue, the services it would help fund, and who would pay? 9.Consistency with Council Goals and Policies: Would the revenue alternative be consistent with adopted goals and policies? 10.Fairness & Political Feasibility: To what extent would the revenue alternative likely be viewed as fair or unfair? How likely is Council approval and community acceptance of the revenue alternative? 11.Sustainability: Would the revenue alternative impose an undue burden on future generations? Central Services Finance Division City of Eugene th 100 West 10 Ave, Suite 400 Eugene, Oregon 97401 (541) 682-5022 MEMORANDUM (541) 682-5802 FAX www.eugene-or.gov Date: October 22, 2009 To: Meeting the Challenge Task Force From: Larry Hill, Senior Financial Analyst, 682-5722 Subject: Previously Identified General Fund Revenue Alternatives The City of Eugene has comprehensively reviewed new alternative revenue sources for the General Fund a number of times since the mid-1980s. In the past we have identified the following as possible revenue alternatives for the City’s General Fund. Amusement or Admissions Tax – An excise tax applied to the price of amusement fees or admissions to spectator events, performances, sporting events, festivals or other forms of entertainment or amusement. Annexation of Additional Property within the Urban Growth Boundary – Increase property tax revenue by annexing taxable property outside City limits but within the Urban Growth Boundary. Business License Fee – A fee imposed on a person, partnership, corporation or similar entity for the privilege of conducting business within the City of Eugene. May be a general business license or specifically targeted. Corporate/Business Gross Receipts Tax – A tax imposed on a person, partnership, corporation or similar entity for the privilege of conducting business within the City of Eugene, measured by gross income within the City of Eugene. Corporate/Business Net Income Tax – A tax applied to the net income of a person, partnership, corporation or similar entity doing business in the City of Eugene. Tax could be piggybacked on state income tax. Contribution in Lieu of Taxes (CILT) on City-Operated Sewer and Stormwater Utility Revenues - A percentage of gross revenues the City receives for provision of sanitary sewer and wastewater utility services. City code currently states that revenue derived from the above standard shall be used for the reconstruction, repair, maintenance, operation, and preservation of city-owned roads and streets. The Council can make this source available for general fund operations, but it would require a code change. Contribution in Lieu of Taxes (CILT) on EWEB Water Utility Revenues – A percentage of gross revenues EWEB receives for provision of water utility services. Expanded/Increased Fees for Service – Increase in the range of services for which the City charges fees and/or increase in the amount of fees charged. Head or Payroll Tax – A tax on wages and salaries earned within the City of Eugene, collected either from employers on total payroll or from employees via a payroll deduction. Retail Sales Tax – An excise tax levied on a broad range of or specific goods and services at the point of sale. Local Option Property Tax Levy – A limited-duration tax levied on all taxable property in the City. Personal Income Tax – A tax on income of residents of Eugene and on nonresidents earning income in Eugene. Tax could be piggybacked on state income tax. Private Sector Sponsorship of Certain City Facilities or Services – Negotiated term sponsorship by private sector individuals, organizations, business or corporations to support specific City facilities or services. Restaurant Tax – An excise tax on sales of food and beverages in the city paid either by customers on their bill or by the restaurant based on gross receipts. Utility Consumption Tax – An excise tax on utility services used by residents of the City, levied either on amount of consumption or as a flat per-account fee. MeetingtheChallengeProcess FiveTaskForcemeetingswereheld,includinganinitialmeetingwithstaffandtheCityManager toshareperceptionsofthefinancialconditionoftheCity.Theinitialmeetingincludedan overviewoftheGeneralFund,acomparisonofbenchmarkrevenuesandexpendituresfrom otherjurisdictions,apresentationofthebudgetsavingstrategiesputinplaceforFY09and FY10andareviewofcriteriatoevaluaterevenuealternatives. Next,twomeetingsfocusedonareviewofrevenuealternativesanddiscussionby TaskForcemembersoftheprosandconsofeach.Threeoptions,Utility ConsumptionTax,RestaurantTaxandXYZPublicServiceFeewerechosenon November11,2009. ThesubsequenttwomeetingswerespentdevelopingtheMeetingtheChallenge recommendation.DuringthemonthofDecember,TaskForcemembersrefined theirrecommendationforrevenuealternativesfocusingtheconversationon adequacy,equityandpoliticalfeasibility.TheTaskForceultimatelyrecommendeda RestaurantTax. AfinalmeetingisscheduledforJanuary26,2010fortheTaskForcetopresentthe resultsoftheirworkandrecommendationtotheCityManager.