Form revised February 20, 2008

2009-2010 BUDGET LEGISLATION FISCAL NOTE

Note: This fiscal note template may be used for most pieces of budget legislation.  Certain legislation submitted with the budget (e.g., the Supplemental Ordinance) requires that the standard fiscal note template be used with some modification.  Please work with your Budget Analyst so that your fiscal note provides the information that is required during the budget process. The standard template can be found on the Legislation Tracking Page on the inweb at http://inweb/legislationtracking/

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Office of Economic Development	James Keblas/4-5030	Janet Credo/4-8687

Legislation Title:

AN ORDINANCE relating to the admission tax; providing for an exemption from the admission tax for qualifying music venues and adding a new Section 5.40.028 to the Seattle Municipal Code.

· Summary of the Legislation:  The proposed legislation provides an exemption from the admission tax imposed under SMC Chapter 5.40 for certain music venues.  Music venues that wish to qualify for this exemption must file for a certificate of exemption and meet certain criteria, including, but not limited to, obtaining a certificate of occupancy for less than 1,000 people, hosting or presenting live music at least three times a week, and hiring one or more musicians to perform the equivalent of at least 16 individual performances per week. 

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

Live music is at the cultural and artistic core of every great American city, allowing musicians to hone their craft and establish themselves with an audience. Live music venues bring large groups of people into diverse areas of the city, enriching local communities and serving to bolster economic development.  Seattle’s vitality and culture is greatly enhanced by its ability to attract and retain local music venues.

Live music venues are subject to more regulatory oversight and face greater liability risks than the average business.  Operating a live music venue is an expensive operation with very little profit margin compared to simple DJ entertainment establishments.  Live music venues must designate a significant amount of their physical space to a performance stage, pay more performers, hire more technical staff and offer more elaborate sound and lighting systems than non-live music venues.  All this gives very little incentive for investors to open live music venues in the city and drives current business owners toward DJ entertainment establishments that simply use prerecorded music.

Late last year in Seattle, the Crocodile Café became the latest in a long line of vaunted live venues, from the OK Hotel to RCKCNDY to the Fenix Underground, that closed its doors. Others, such as the Showbox, Comet, and Chop Suey either have been purchased by out-of-town investors or continue to exist only precariously, threatened by increased residential and commercial development.  The admission tax exemption proposed by this Bill represents minimal risk and cost to the City, yet will be a valuable tool to provide incentive for investors to open live music venues in Seattle.  This exemption, along with other pro-music policies, will support a healthy business environment and leverage Seattle’s competitive advantage in this industry.

· 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.

Summary of Changes to Revenue Generated Specifically From This Legislation:  For budget legislation that changes revenue (e.g., fees, taxes, etc.), please provide detail on each revenue-producing item that is being changed, when it was last changed, and how the item’s new overall cost compares with similar costs charged elsewhere in the region.

This measure addresses the current lack of private investment in new live music venues, the closing of established venues, and the trend of live music venues changing into DJ entertainment establishments in Seattle.  This measure would assist Seattle’s live music industry to become more competitive with other northwest cities such as Vancouver and Portland that do not impose admission taxes.  In the past two years Seattle has lost six live music venues, and has had only one new music venue open, while dozens of new DJ establishments have opened across the city. 

	Revenue Source	2009 Proposed	2010 Proposed
Total Fees and Charges Resulting From Passage of This Ordinance	Unrealized admission taxes as a result of this music venue exemption.	($300,000)	($300,000)

Notes:  20% of the admission tax revenue is appropriated to the Office of Arts and Cultural Affairs (OACA).  The 2009-2010 budget reflects $60,000 of additional general fund contributions to OACA.

Anticipated Total Revenue from Entire Program, Including Changes Resulting From This Legislation:

Fund Name and Number	Revenue Source	Total 2009 Revenue	Total  2009 and 2010 Anticipated Revenue from Entire Program
General Fund 00100	Admission Tax (SMC 5.40.020)	$7,300,000	$14,600,000
TOTAL		$7,300,000	$14,600,000

What is the financial cost of not implementing this legislation?

There are no direct financial costs to the City for not implementing this legislation.  However, Seattle could stand to lose tax B&O and sales tax revenue that would result from the closure of more music venues, and an increased preference of touring musicians to perform in nearby cities other than Seattle.   If more businesses open as a result of this exemption, there will be corresponding increase to B&O Tax and Sales Tax revenue to the City. 

· What are the possible alternatives to the legislation that could achieve the same or similar objectives?  None. 

· Is the legislation subject to public hearing requirements? No public hearing requirement.

· Other Issues:

Please list attachments to the fiscal note below:

None.