HomeMy WebLinkAboutAGENDA REPORT 2015 0506 CCSA REG ITEM 09C ITEM 9.C.
MOORPARK CITY COUNCIL
AGENDA REPORT CITY OF MOORPARK,CALIFORNIA
City Council Meeting
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TO: Honorable City Council ACTION: Qp1p r ytue✓ atm
FROM: Ron Ahlers, Finance Director G(JlAT
DATE: April 23, 2015 (City Council Meeting of May 6, 2015)
SUBJECT: Consider Revenue Enhancement Measures
SUMMARY
The Finance, Administration and Public Safety (FAPS) Committee met on March 4,
2015 and April 15, 2015 to discuss revenue enhancement measures. These measures
require a vote of the citizenry of Moorpark. The various measures discussed include:
Sales Tax, Parcel Tax, Assessments, Business License Tax, Transient Occupancy Tax
and Utility Users Tax. The FAPS Committee discussed these measures and is
recommending the City Council consider pursing a city-wide Parks Assessment along
with a Business License Tax.
BACKGROUND
The City's General Fund revenues come from a variety of sources, most notably:
property taxes (22%); sales taxes (21%); property taxes in lieu of motor vehicle license
fees (19%); cost plan revenues from other funds (18%); franchise fees (7%);
investments and use of property (4%); all other revenues (9%).
The top two sources of revenue the City relies on, property taxes and sales/use taxes
are economy driven. Property taxes, while currently showing "no-growth" in the 2014-
15 budget, in reality have increased by 2.9% from the high reached in 2008-09. That is
just 2.9% growth cumulatively in six years. In order to generate an additional $1 million
in property tax revenue the assessed value would have to increase approximately $1.1
billion. For example: 2,000 new homes constructed with an initial AV of$550,000 each.
A new commercial or multi-family development, valued at $40 million, would generate
an additional $36,000 in property tax revenue for the City.
Sales tax revenues have shown a slight increase over the past few years. The fourth
quarter of 2014 saw a decrease of four percent from the prior year. The decrease is
primarily attributable to internet sales and the gasoline price decline. On a per capita
basis the City is very much below the average for Ventura County. Even the build-out
of current approved commercial development will not produce adequate increases in
this source. In 2014 a few businesses closed, including Albertsons, Do-it-Center and
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Staples. The remaining revenue sources are largely dependent upon a prosperous
economy. Given the volatility of almost all of the City's revenue sources, the FAPS
Committee discussed different ways in which the City can diversify and enhance its
revenue stream.
Interest income has declined dramatically since the "Great Recession" began in 2008.
In FY 2007-08 the General Fund earned interest revenue of $784,124. The City's
portfolio earns about 1.2%, which is estimated to earn about $425,000 in FY 2014-15
for the General Fund. The General Fund Interest revenue history is listed below:
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
784,124 719,611 304,989 299,920 381,145 80,574 338,740 425,000
The City has long-term needs for additional General Fund revenue to address the
following:
• The ongoing utilities and maintenance costs of the Police Services Center,
Moorpark Public Services Facility and within three to five years a new city
hall and possibly a new library.
• Long-term street maintenance needs since the Gas Tax and
Transportation Development Act (TDA) provide only for staff and basic
maintenance. The City currently spends about $800,000 of TDA funds per
year for street purposes. The City's street projects are beginning to
require support from the General Fund. In addition, there are a number of
potential capital projects that could individually or collectively, require the
use of a significant portion of the General Fund reserve. For example,
maintenance of a splash pad costs about $60,000. In addition, the annual
operating costs of a city pool is estimated to be $250,000 or greater.
• If the City spends the reserves on capital projects then there is a reduction
in interest revenue for the General Fund. Current reserves in the General
Fund and Special Projects Fund equal about $24 million.
• The cost allocation plan, while appropriate, does transfer dollars from
other funds. The goal should be to have enough General Fund to fund
this cost ($2 million in 2014/15).
• Assessment district subsidies are projected to be approximately $335,000
for FY 2014/15. The Gas Tax Fund and General Fund split these deficits;
however, additional General Fund support has been required, since the
Gas Tax Fund has a very small reserve.
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• Continuing cost increases for law enforcement services that exceed the
Consumer Price Index (CPI) and growth in General Fund Revenues.
• The Community Development Fund has not been self-sufficient for several
years. The Council needs to determine an appropriate amount of General
Fund revenue to be available for City Planning and Engineering programs.
This fund is expected to receive a $778,000 transfer from the General
Fund in 2014/15.
• Staff has developed strategies to balance the General Fund budget for
each of the past five years. The strategies include:
1. Reduction in services, including reducing staff by eight positions;
2, Operational efficiencies;
3. Fee adjustments; and
4. Deferred maintenance and capital projects.
New and enhanced revenues such as Business License Tax, Sales/Use Tax, Utility
Users Tax, General Property Tax, and updated assessments for park maintenance,
street lighting and landscaping have been discussed but would require a public vote.
There are different ways the City can enhance its revenue streams. The most common
methods are through increasing taxes and special assessments. In order to increase
these revenue sources, State law requires that certain steps be taken before the
increase can occur.
Taxes
Voting on Taxes
Staff has gathered information regarding voting. State law requires that if a tax
measure is consolidated with a regularly scheduled election of members of the City
Council, it would require a two-thirds vote by the Council. Therefore, four out of five
Council members would need to vote for the tax measure proposal to be placed on the
ballot. If not consolidated with a Council election, unanimous declaration of
"emergency" is required by the City Council. Therefore, the City can really only have a
tax measure on a November ballot in the even numbered years. The November 2016
election is the next ballot to place a tax measure before the voters.
General and Special: General tax revenues may be used for any purpose. General tax
revenues include sales tax, property tax, utility users tax and business license tax.
Special tax revenues are levied for a specific purpose. In order to adopt a new or
increase an existing general tax, a majority of those voting in the City must approve the
tax in the same election in which City Council members are elected. For a special tax, a
two-thirds affirmative vote of those voting in the City must approve the tax. The earliest
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the City might place a tax increase measure on an election ballot would be November
2016. Several of these tax measures are summarized below:
Sales Tax: Municipalities may adopt additional increments of local sales tax
with the approval of two-thirds of voters for revenue for specified services such as police
and fire. A simple majority vote would be required for general purpose revenues. An
additional 1/4% tax would produce approximately $925,000 per year.
For Sales Tax, staff has gathered the following information. In 2003, Governor Gray
Davis signed SB566 (Scott) which gave every county and every city the ability to seek
voter approval of local transactions and use tax increase under the following conditions:
1. the transactions and use tax may be imposed at a rate of 0.25% or a multiple
thereof,
2. the ordinance proposing the tax must be approved by a two-thirds vote of all
members of the governing body,
3. if for general purposes, the tax must be approved by a majority vote of the voters
in the city or county,
4. if for specific purposes, the tax must be approved by a two-thirds vote of the
voters in the city or county, and
5. Maximum combined rate of transactions and use taxes in any location may not
exceed 2%.
Of the 99 cities that currently impose a transactions and use.tax, only eight do so under
special legislation from prior to 2003. Altogether, there are currently 80 cities with
general purpose rates and 22 with special purpose transactions and use taxes. The
table below shows the frequency of rates and the uses of the 22 special taxes.
Number of currently approved taxes; effective as of April 1, 2013
0.250 % 0.375 % 0.500 % 0.750 % 1.000 %
General 14 1 59 6 20
Special 6 17 2
Special Tax Uses
Police and/or Fire 4 9 2
Streets/Roads/Transit 5
Hospital/Medical 1
Parks/Rec/Open Space 2
Libraries 1
Wastewater 1
Some cities have two rates: Capitola, El Cajon, El Cerrito, Eureka, Ft Bragg, Nevada
City, Placerville, Santa Rosa, Sebastopol, Woodland.
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Ventura County cities with add-on sales taxes:
City County Rate Effective End Purpose Authority in State Law
Oxnard Ventura 0.50% 4/1/2009 3/31/2029 General Rev & Tax Code § 7285.9
Port Hueneme Ventura 0.50% 4/1/2009 None General Rev & Tax Code § 7285.9
Business License Tax: This tax is imposed on businesses for the privilege of
doing business in the City. It is most commonly based on gross receipts or levied as a
flat rate. The adoption of a business license tax also requires voter approval with a
simple majority. The City currently collects a Business Registration Fee that is limited to
the recovery of administrative costs for its collection and generates about $125,000
annually. A Business License Tax enacted with a typical formula could generate
approximately $500,000 annually.
Property Tax: There are 9,627 single family homes with a total assessed value
of $4 billion. This includes condominiums and excludes mobile homes and multi-family
dwellings. In October 2007, a Voter Opinion Poll revealed varying levels of support for
a property tax increase levied at between $9 and $32 per $100,000 of assessed
valuation. Revenues from such tax increases on residential parcels would be as follows:
RESIDENTIAL PARCELS ONLY
$/ 100,000 of Revenue % of Voters Polled
Assessed Value Generated that would vote YES*
$ 9.00 $ 360,000 64
15.00 600,000 60
21.00 840,000 52
27.00 1,080,000 48
32.00 1,280,000 42
2/3 or 66.6% vote required for adoption
Parcel Tax: A parcel tax is a special tax on a parcel or unit of real property.
Unlike the property tax, a parcel tax is not based on the value of the property. Instead
parcel taxes are generally based on a flat per-parcel rate. Parcel taxes always require a
two-thirds majority voter approval and are imposed for any number of purposes
including funding police services, neighborhood improvement and revitalization and
open space protection. The Voter Opinion Poll did not test this measure. Based on the
number of parcels included in the City's General Taxing District (approximately 11,000)
a flat rate of $10.00 per parcel would only generate an additional $110,000 annually.
An increase to $20 would generate $220,000.
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Utility User Tax: Utility user taxes can be imposed with simple majority voter
approval (for general purposes) on the residential and commercial consumers of any
combination of electric, natural gas, cable television, water, cell phone, landline
telephone and trash services. Such taxes are imposed by ordinance as a percentage of
sales and typically collected by the utility provider. Staff has no current calculation for
this tax.
Transient Occupancy Tax: Municipalities may impose the transient occupancy
tax on persons staying 30 days or less in a room(s) in a hotel, inn, motel, tourist home,
non-membership campground or other lodging facility. The City has enacted a transient
occupancy tax that could generate an estimated $200,000 to $250,000 with the
approved 112-room hotel project. This project has recently submitted plans for plan
check but is not anticipated to open until at least FY 2016-17.
Assessments
The City has enacted benefit assessments for park maintenance and a lighting and
landscaping district (L&L) assessment for the maintenance of street and parkway
landscaping and for street lighting costs. In recent years these assessments have not
been enough to cover expenses and have been supplemented by the City's General
Fund and Gas Tax Fund. The City's 2014-15 Operating Budget includes a General
Fund appropriation of$1,522,000 to supplement the Park Maintenance Fund. The L&Ls
required actual transfers of $62,000 from Gas Tax and $67,000 from the General Fund
during FY 2014-15 to cover actual deficits for FY 2013-14. Staffs current projections for
these amounts for FY 2014-15 are $334,000 from the General Fund and ZERO from the
Gas Tax Fund. The Gas Tax Fund does not have the capacity to transfer money into
these districts anymore. A staff report was presented and approved by the City Council
on January 21, 2015.
In order to increase assessments or add a new district a City must follow a number of
steps. First, the City must determine if the property owners will receive a "special
benefit" from the project or service proposed to be financed by the assessment. The
special benefit must be a benefit to land and buildings or else it cannot be financed with
the assessment. Once it has been determined that the property owners will receive a
special benefit, then the City is required to use a professional engineer's report to
estimate the amount of special benefit landowners would receive from the project or
service, as well as the general benefit. If the split of special benefit to general benefit is
50/50 then the assessment can only pay for 50% of the total project cost. Once the
amount is set, the City must set individual assessment charges so that no property
owner pays more than their fair share of the total cost. This may require setting
assessment rates on a parcel by parcel basis.
The current, fiscal year (FY) 2014-15, single family assessment for parks is $56.97. A
new parks assessment at a single family rate of $30 per year would generate about
$397,000 in new revenue.
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Once all of this information has been calculated and completed, the City must mail
information regarding the assessments to all property owners. Each notice must contain
a mail-in ballot for the property owner to indicate approval or disapproval of the
assessment. After the notices are mailed, the City must hold a public hearing, at the
conclusion of which, the ballots will be tabulated and weighted based on the amount of
the assessment that each property owner would pay. An affirmative majority of property
owners is needed in order to impose the assessment.
Revenue Diversification
Diversification of the City's revenue sources will improve the City's ability to handle
fluctuations in revenues and help distribute the cost of providing services. As previously
discussed, State law does not allow for random levying of taxes and assessments and
imposes many requirements, including majority or two-thirds approval by voters.
In addition, the Voter Opinion Survey conducted in late 2013, showed that there would
be some support for a sales tax increase either at the 'A% or 1/2% level; however, none
of the tested tax rates reached the fifty percent plus one majority support level.
If the Council decides to proceed with a park assessment and or a tax measure an
opinion survey would need to be completed prior to December 2015. Staff would then
submit a schedule of actions and proposed costs for Council consideration. When this
was considered in early 2014 it was estimated to cost $20,000 for the opinion survey
and about $50,000 for the communications consultant services to the City. At that time
staff estimated a Citizen's Committee would need to raise $50,000 to $90,000 in private
funds to support a possible sales tax measure.
Conclusion
Based on the increased transfers from the General Fund to the landscaping and lighting
districts along with the continued low level of development activity which affects
Community Development Fund and General Fund revenues, preliminary projections
indicate the City will need to address an approximate $ one-half million gap between
operating revenue and expenses for FY 2015-16. This can be in the form of enhanced
revenue, use of general fund reserve, or reductions in services and staffing or any
combination of such.
STAFF RECOMMENDATION
Review and discuss various revenue enhancement measures. Direct staff to hire a
consultant and pursue establishing a city-wide Parks Assessment prior to July 2016 via
a city-wide mail ballot and to assess the possible inclusion of a Business License Tax
measure on the November 8, 2016 ballot.
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