Form revised April 10, 2006

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Executive Administration	Mel McDonald/3-0071	Carolyn Iblings/4-5211

Legislation Title:

AN ORDINANCE relating to taxation; adopting certain penalty and interest provisions of the Revised Code of Washington into the City’s tax administrative provisions as required by state law; amending penalty, interest, and refund calculation provisions; and adding and amending sections in Chapters 5.30 and 5.55 of the Seattle Municipal Code.

· Summary of the Legislation:

Chapter 35.102 RCW requires that any Washington city that imposes a gross receipts business and occupation (B & O) tax impose penalties and interest consistent with the state’s B&O tax provisions contained in Chapter 82.32 RCW.  The proposed legislation amends the City’s B&O tax interest and penalty provisions to comply with the provisions of Chapter 35.102 RCW.   

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

In 2003, the Washington State Legislature adopted the Model Ordinance (Chapter 79, Session Laws of 2003), codified in Chapter 35.102 RCW, establishing mandatory provisions to be implemented by all Washington cities imposing gross receipt B & O taxes by December 31, 2004.  The intent of the Model Ordinance is to promote uniformity and fairness in the imposition of B&O taxes throughout Washington State.  In anticipation of the Model Ordinance, the City amended its B & O tax code in December 2001 through Ordinance 120668.  The City subsequently adopted Ordinances 121266 and 121679 to incorporate mandatory provisions of the Model Ordinance not previously adopted through Ordinance 120668. 

Two years ago, the state added a 5% deficiency penalty for the underpayment of taxes.  As required by RCW 35.102.090, the City adopted the state’s new deficiency penalty provision, which resulted in annual revenue increases of approximately $200,000.  This year, the Washington State Legislature passed Chapter 256, Session Laws of 2006, amending the deficiency assessment penalty provisions of Chapter 82.32 RCW (Chapter 256, Session Laws of 2006).  The new provision changes the method for computing the deficiency penalty.  The City is required by RCW 35.102.090 to adopt the revised penalty provisions contained in RCW 82.32.090, which will eliminate most of the penalty and its resulting revenues.

To keep the City consistent with state interest and penalty provisions as required by RCW 35.102.080 and RCW 35.102.090, this legislation will provide a mechanism to codify by reference any future changes to the provisions of Chapter 82.32 RCW. 

· 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*	2006 Appropriation	2007 Anticipated Appropriation
TOTAL

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

Notes:  There are no appropriations associated with this legislation.

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	2006 Revenue	2007 Revenue
General Fund 00100	Department of Executive Administration	Business and Utility taxes	($100,000)	($200,000)
TOTAL			($100,000)	($200,000)

Notes:  The change in the method used to compute interest on underpaid taxes will likely result in an additional small loss in City revenue; however, our analysis indicates that the effect will be immaterial.  The State’s interest provisions have generally been more favorable to taxpayers with a historically lower interest rate on assessments in the late 1990s through 2001, and a high interest rate on refunds during the same period and during 2002-2004. 

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	2006 Positions	2006 FTE	2007 Positions**	2007 FTE**
	TOTAL

*   List each position separately

** 2007 positions and FTE are total 2007 position changes resulting from this legislation, not incremental changes.  Therefore, under 2007, please be sure to include any continuing positions from 2006

Notes:  There are no position changes associated with this legislation.

· 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*	2006 Expenditures	2007 Anticipated Expenditures
TOTAL

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

Notes:  Not applicable.

· What is the financial cost of not implementing the legislation?  The financial cost of not implementing the legislation is not known.  This legislation is intended to ensure the City’s tax code is consistent with state law.

· 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.  The City of Seattle is mandated by the State of Washington to adopt business and occupation tax penalty provisions consistent with Chapter 82.32 RCW. 

· Is the legislation subject to public hearing requirements: 

No special public hearing requirements. 

· Other Issues:  None.

Please list attachments to the fiscal note below:  None.