Form revised March 16, 2004

 

FISCAL NOTE FOR NON-CAPITAL PROJECTS

 

Department:

Contact Person/Phone:

DOF Analyst/Phone:

Executive Administration

Mel McDonald/3-0071

Tyler Running Deer/4-8075

 

 

Legislation Title:

AN ORDINANCE relating to business licensing; adding exemptions for rental income and utility revenue taxed under SMC Chapter 5.48; providing for a two-tier business license fee structure; providing a grace period before assessing penalties to licensees that file annual business license renewals late; increasing the cost of annual and half-year business licenses and abolishing the surcharge on those licenses; adding Section 5.45.076; and amending Sections 5.30.20, 5.30.25, 5.30.030, 5.30.035, 5.30.040, 5.30.050, 5.30.060, 5.45.050, 5.45.070, 5.45.075, 5.45.076, 5.45.090, 5.55.030, 5.55.040, and 6.20.050, respectively, of the Seattle Municipal Code.

 

·        Summary of the Legislation:

 

Sections 1 through 12 of the proposed legislation would amend various provisions of the City’s business and occupation (B&O) tax code to comply with the State of Washington’s Model Ordinance governing B&O taxes, codified in chapter 35.102 RCW.  Adoption of the State’s definitions and other provisions is mandatory for cities that collect B&O taxes.  The City must adopt the state provisions by December 31, 2004 or it may lose its tax-collection authority.  Revenues from B&O taxes amount to $130 million annually for the City.  The majority of these changes are slight wording changes to clarify definitions and do not represent a material change in position or interpretation. 

 

In addition to adoption of state Model Ordinance provisions, the proposed legislation would add exemptions for certain types of rental income and utility revenue.  These revisions codify existing procedures and do not constitute new policy.  The City would grant a one-month grace period to licensees who file their annual business licenses renewals late.  The proposed legislation clarifies business license requirements and B&O tax rules for trade show activities. 

 

Section 13 of the Council Bill proposes abolishing the business license surcharge authorized by Ordinance 120966, and increasing the costs of annual and half year business licenses would be increased for businesses grossing more than $20,000 worldwide.  New lower license fees, covering only adminstrative costs, would be established for businesses with worldwide gross revenues of $20,000 or less.

 

·        Background: (Include brief description of the purpose and context of legislation and include record of previous legislation and funding history, if applicable):

 

In 2001, the City of Seattle drafted and subsequently adopted a model tax ordinance with a view towards promoting uniformity and consistency among the various cities in Washington who maintain a business and occupations tax code.  In 2003 the Washington State Legislature passed the Municipal Business and Occupations Tax Statute codified in Chapter 35.102 of the Revised Code of Washington.  This legislation was enacted to respond to the concerns of Washington businesses regarding multiple taxation and lack of uniformity among various jurisdictions. 

 

Cities that maintains a business and occupations tax code are required to adopt the mandatory provisions of chapter 35.102 RCW by no later than December 31, 2004.  Failure to do so could result in the City losing its right to impose taxes on business activities in Seattle.  The City’s annual revenues from business and occupation taxes amount to $130 million. 

 

·        Please check one of the following:

 

____    This legislation does not have any financial implications. (Stop here and delete the remainder of this document prior to saving and printing.)

 

_X__   This legislation has financial implications. (Please complete all relevant sections that follow.)

 

 

Appropriations:  This table should reflect appropriations that are a direct result of this legislation.  In the event that the project/ programs associated with this ordinance have appropriations that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below.

 

Fund Name and Number

Department

Budget Control Level*

2004

Appropriation

2005 Anticipated Appropriation

N/A

 

 

 

 

TOTAL

 

 

 

 

*See budget book to obtain the appropriate Budget Control Level for your department.

 

Notes:  None.

 

Anticipated Revenue/Reimbursement: Resulting From This Legislation: This table should reflect revenues/reimbursements that are a direct result of this legislation.  In the event that the issues/projects associated with this ordinance/resolution have revenues or reimbursements that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Fund Name and Number

Department

Revenue Source

2004

Revenue

2005

Revenue

 

 

General Fund
00100

DEA

Business License Penalty1

$0

(27,000)

 

General Fund

00100

DEA

Business Licenses (Annual Worldwide Gross of more than $20,000)2

410,000

436,125

 

General Funds 00100

DEA

Business Licenses (Annual Worldwide Gross of $20,000 or less)3

(490,000)

(509,250)

 

TOTAL

 

 

(80,000)

(100,125)

 

Notes:  The proposed legislation imposes a new lower business license fee for businesses with annual worldwide gross revenues of $20,000 or less.  This will result in a net revenue loss for those fees, which is partly offset by an increase in the business license fee for businesses with annual worldwide gross revenues of more than $20,000. 

 

1  Revenue estimates based on an average of 5,400 penalties per year at $5.00 per penalty. 

2  The 2004 revenue is generated only from December 2004 and is based upon 41,000 annual licenses.  The 2005 revenue is based upon approximately 45,000 business licenses, of which approximately 2,775 are half-year licenses.  For these businesses, there is a net revenue increase of $10 per annual license (totaling $422,250) and $5 per half-year license (totaling $13,875). 

3  The 2005 revenue is based upon approximately 15,000 business licenses, of which approximately 900 are half-year licenses.  For these businesses, there is a net revenue decrease of $35 per annual license (totaling $493,500) and $17.50 per half-year license (totaling $15,750).  The revenue from the lower license fees for these small businesses is no more than the costs of administration.  

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact:  This table should only reflect the actual number of positions created by this legislation  In the event that positions have been, or will be, created as a result of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Position Title and Department*

Fund Name

Fund Number

Part-Time/ Full Time

2004

Positions

2004 FTE

2005 Positions**

2005 FTE**

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

 

 

 

 

*   List each position separately

** 2005 positions and FTE are total 2005 position changes resulting from this legislation, not incremental changes. Therefore, under 2005, please be sure to include any continuing positions from 2004

 

Notes:  No positions created.

 

·        Do positions sunset in the future?  (If yes, identify sunset date):  Not applicable

 

Spending/Cash Flow: This table should be completed only in those cases where part or all of the funds authorized by this legislation will be spent in a different year than when they were appropriated (e.g., as in the case of certain grants and capital projects).  Details surrounding spending that will occur in future years should be provided in the Notes section below the table.

Fund Name and Number

Department

Budget Control Level*

2004

Expenditures

2005 Anticipated Expenditures

 

 

 

 

 

TOTAL

 

 

 

 

* See budget book to obtain the appropriate Budget Control Level for your department.

 

Notes:

 

·        What is the financial cost of not implementing the legislation? (Estimate the costs to the City of not implementing the legislation, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the legislation is not implemented.)

 

Pursuant to RCW 35.102.140, all cities are required to comply with all requirements of the Municipal Business and Occupation Tax statute by December 31, 2004.  If the City fails to adopt the Model Ordinance, it could lose its right to impose a tax on the privilege of engaging in business activities in Seattle.  If the City is unable to impose and collect this tax, it stands to lose approximately $130 Million dollars annually in revenue.  

 

·        What are the possible alternatives to the legislation that could achieve the same or similar objectives? (Include any potential alternatives to the proposed legislation, such as reducing fee-supported activities, identifying outside funding sources for fee-supported activities, etc.)

 

None.  Pursuant to RCW 35.102.140, all cities are required to comply with all requirements of the Municipal Business and Occupation Tax statute by December 31, 2004.  If the City fails to comply with the statute, it could lose its right to impose a tax on the privilege of engaging in business activities in Seattle.

 

·        Is the legislation subject to public hearing requirements:  (If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future.)

 

None.

 

·        Other Issues (including long-term implications of the legislation):

 

None.     

 

Please list attachments to the fiscal note below:  None.