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, CITY OF SAN BERNARDINO. REQUEST FOR COUNCIL ACTION
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From: Fred Wilson, City Administrator
~(Q)~W
Subject: An ordinance of the City of San Bernardino
amending Title 3 of the San Bernardino Municipal
Code relating to Utility Users' Taxes for telephone,
electric, gas, and video service
Dept: City Administrator's Office
Date: February 14, 2000
Synopsis of Previous Council action:
January 10, 2000:
January 24, 2000:
January 31,2000:
February 7, 2000:
February 14, 2000:
Proposed UUT rebate ordinance is laid over for final adoption
Mayor and Council refer the proposed ordinance to Legislative Review
Committee, and continue the item until February 7
Ordinance is discussed by LRC; the Committee requests additional information
Item is continued until February 22
Revised ordinance is presented to LRC; Committee recommends approval by the
Mayor and Common Council
Recommended motion:
That 'm "'ding of..~ 0""",,",,, be waNed. aod . be Ia~ "'" fo< 'OaJ'1!I<-
Signature
Contact person: Fred Wilson
Phone: 5122
Supporting data attached: Staff report Ward: All
FUNDING RIlQUIRIlMIlNTS: Amount: None for FY 99-00; FY 00-01 costs will be offset by
increased UUT revenues
Source: (Acet. No.)
fAcet. Description)
Council Notes:
Finance:
NJenda Item ;jdj17 OD
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STAFF REPORT
Su~ject:
Ordinance adding Section 3.44.131 to the San Bernardino Municipal Code to establish a
Utility User's Tax Rebate Program for new businesses.
Bael(voDDd:
On October 28, 1999, the Legislative Review Committee recommended that a set of
business recruitment incentives be referred in concept to the full Council, along with the
requested modifications and business demographics. These incentives consisted of a
development impact fee program that reduces these fees when a business proposes to
occupy a previously-developed property, and a Utility User's Tax (UUT) rebate program.
On November 15, the Council directed the City Attorney to prepare the appropriate
resolutions and ordinances implementing these incentives. On December 22, the Council
adopted a resolution implementing the development impact fee portion of the incentive
package.
The proposed UUT rebate ordinance was first presented to the Mayor and Common
Council on January 10, 2000. On January 24, the Mayor and Council referred the
ordinance to Legislative Review Committee after some issues were raised concerning
residency requirements for jobs created, and payment of rebates to businesses that are no
longer located in San Bernardino. The Committee met twice to discuss the matter, and
approved a revised ordinance on February 14. Because the original ordinance has been
revised, it must now have a new first reading.
Overview of Prqposed OrdlDaDce
The revised ordinance will grant UUT rebates to new businesses that meet the following
criteria:
· Part 1 applies to businesses creating between 5 and 49 new, permanent full-time jobs.
At least 50010 must pay at least $25,000 per year in wages and/or commissions.
· Part 2 provides a larger rebate to businesses creating 50 or more new, penuanent full-
time jobs. Again, at least 50% must pay at least $25,000 per year in wages and/or
commissions.
· Part 3 grants rebates to new businesses that do not qualify under Part 1 or Part 2, but
bring other valuable benefits to the City in tenus of increased property tax valuations
and/or significant sales tax revenues.
The ordinance defines "significant sales tax" as at least $40,000 in sales tax remitted to
the City. Since the City receives I % of the sales tax, a business would need to have at
least $4 million in sales to meet this requirement. This sales volume would place the
business in the top 100 sales tax generating businesses in San Bernardino.
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· Part 4 gives an additional incentive to encourage the hiring of San Bernardino
residents.
Some had suggested a requirement that new jobs be filled by San Bernardino residents.
To address this issue, a new section has been added to the ordinance which grants an
additional rebate to new businesses that choose to hire San Bernardino residents. For
each new position filled by a resident, an additional 1 % rebate would be granted per year.
This idea was suggested at the Committee meeting and upon review seems to be a viable
means of granting the additional incentive desired by the Committee.
The new language will likely increase the dollar amounts ofUUT rebates granted to new
businesses. The following chart shows a scenario under which a new business brings 40
new jobs to the city that meet the wage criteria, and fills 15 of those positions with San
Bernardino residents. This business would qualify for the basic rebate under Part (1) of
the ordinance, as well as the additional incentive under Part (4):
Basic Rebate Additional Rebate Total Rebate
Year 1 75% 15% 90"10
Year 2 50% 15% 65%
Year 3 25% 15% 40%
If a larger employer were to move into San Bernardino and hire largely San Bernardino
residents, the amount of the rebate could be even more substantial. The following chart
shows a scenario under which a major new business moves to the city and creates 100
new jobs, 60 of which are filled by San Bernardino residents. The business would
qualify under Part (2) of the ordinance, as well as qualify for the additional incentive in
Part (4):
Basic Rebate Additional Rebate Total Rebate.
Year 1 80% 60% 100%
Year 2 60% 60% 100%
Year 3 40% 60% 100%
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Since the total ",bate cannot exceed the total amount ofUUT paid, the maximum
total ",bate is 100010.
As these scenarios indicate, the additional rebate amounts could be a substantial
inducement for businesses to fill new positions with San Bernardino residents.
· Part 5 broadly outlines the administrative process that will be used to qualify
businesses and issue rebates.
The UUT rebate program will be administered in partnership between the Economic
Development Agency and the City's Finance Department. Following adoption of this
ordinance, a set of administrative procedures will be developed so that consistent,
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objective criteria are used to determine eligibility for the rebates, and to ensure that the
.program is administered as required by the ordinance.
· Part 6 includes language that would grant rebates only to businesses that have
remained in San Bernardino.
The Committee expressed a concern that businesses might qualify for rebates, then leave
San Bernardino. During the Committee meeting, it was suggested that rebates only be
paid if the subject business is still located in the city. New language to that effect has be
incorporated into the ordinance.
All provisions of the ordinance apply to new businesses that locate in San Bernardino
after January 1,2000.
UUT Rebate Profram for Enslin, Businesses
On January 31, the Legislative Review Committee had a lengthy discussion concerning
the draft UUT rebate program for existing businesses that expand. Based on that
discussion, staffhas begun analysis concerning the options discussed by the Committee,
which included a number of possible eligibility criteria. In the meantime, it is
recommended that this proposed rebate program for new businesses be moved forward.
The challenge is that a rebate program for existing businesses will have a direct impact
upon the City's current revenues. Since new businesses have not been paying UUT, the
cost to the General Fund is an opportunity cost and only affects the rate ofUUT revenue
~wth. In contrast, rebates to existing business may have significant impacts on existing
General Fund revenues.
For example, GE Capital is planning to expand and add 300 jobs at its current location.
Under the proposed rebate program for expanding businesses, GE Capital would qualify
for a three year rebate. Assuming that at least one-third (100) of these additional jobs are
filled by San Bernardino residents, the company would qualify for the following rebate:
Basic Rebate Additional Rebate Total Rebate*
Year 1 80% 100% 100%
Year 2' 60010 100% 100%
Year 3 40% 100% 100%
· Since the tolaI rebate cannot exceed the tolal amount ofUUT paid, the maximum
tolaI rebate is 100"10.
As the chart above indicates, the City would be required to rebate all of the company's
UUT paid for three years. Since we are currently receiving this revenue, the rebate
would be a hard dollar cost to the City's General Fund. The GE Capital example shows
that the cost of this program is potentially significant. Thus, further research and
cost/benefit analysis is recommended before this proposed program is adopted by the
Mayor and Council.
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Financial Impact:
The UUT rebate program will impact the growth of General Fund revenues, but the
amount of impact cannot be calculated until the program is in place for some time. The
amount of impact would be based on the number of rebates granted. There will also be
administrative costs in terms of staff time to administer and monitor this program.
Since rebates will be paid beginning in FY 2000-01, funds will need to be included in the
FY 2000-01 budget for this purpose. Costs will be offset by increased UUT revenues.
Recommendation:
It is recommended that the Mayor and Common Council waive the first reading and lay
the ordinance over for final adoption.
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ORDINANCE NO.
ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECl'ION
3.44.131 TO THE SAN BERNARDINO MUNICIPAL CODE AND ESTABLISHING A
UTILITY USER'S TAX REBATE PROGRAM.
NOW, THEREFORE, THE MAYOR AND COMMON COUNcn.. OF THE CITY
OF SAN BERNARDINO DO ORDAIN AS FOLLOWS:
SECTION 1. Section 3.44. 131 is hereby added to the San Bernardino Municipal Code
to read as follows:
"3.44.131
Utility User's Tax Rebate Program
A. Notwithstanding any other provision of this Chapter, in order to attract new businesses that
provide significant numbers of higher-wage jobs, the following Utility User's Tax Rebate Program
is hereby established:
1. . Any new business that creates, after January I, 2000, between 5 to 49 new,
pennanent full-time jobs within the City (50% of such new jobs shall pay at least 525,000 per year
in wages and/or commissions) sha11 be eligible for a rebate on the amount of Utility User's Tax, paid
by such business on electrical, gas, video, and telephone communication services, imposed by this
Chapter according to the following schedule:
a. First year 75% rebate
b. Second year 50% rebate
c. Third year 25% rebate
d. Fourth and subsequent years -- No rebate.
2. Any new business that creates, after January 1,2000, 50 or more new, permanent
full-time jobs within the City (5oo/o of such new jobs shall pay at least 525,000 per year in wages
and/or commissions) shaI1 be eligible for a rebate on the amount of Utility User's Tax, paid by such
business on electrical, gas, video, and telephone communication services, imposed by this Chapter
according to the following schedule:
a. First year 8oo/o rebate
b. Second year 6oolo rebate
c. Third year 4oolo rebate
d. Fourth and subsequent years -- No rebate.
!IIII
IIIII
HE/dc.[Ord.UtilityRebate]
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3. Any new business not included under subsections (1) or (2) above, which provides,
after January 1,2000, at least a 25% increase in assessed valuation of the business' real property
over the previous tax year as shown by the County Tax Assessor's records, or which generates at
least $40,000 in sales tax revenues per year remitted to the City, sha11 be eligible for a rebate on the
ampunt of Utility User's Tax, paid by such business on electrical, gas, video, and telephone
communication services, imposed by this Chapter according to the following schedule:
a. First year 75% rebate
b. Second year 50% rebate
c. Third year 25% rebate
d. Fourth and subsequent years -- No rebate.
4. A new business qualified under subsections (1) or (2) above shall also be eligible
for an additional rebate of 1% on the amount of Utility User's Tax paid, for each San Bernardino
resident that is hired to fill the new, permanent full-time jobs created within the City. Eligibility for
any such additional rebates shall be established by determining the residency of the new employees
at the end of each year of rebate eligibility. This determination shall be verified by the Economic
Development Agency with such supporting documentation as may be required by the Economic
Development Agency. In no case shall the total rebate paid to any claimant exceed the total amount
of Utility User's Tax paid on the period claimed, nor rebates be paid for any term other than the
schedule estJlblished in subsections (1) or (2) above.
5. To claim a rebate under this section, the claimant shall submit a completed verified
claim form to the Economic Development Agency with such supporting documentation as may be
required by the Economic Development Agency to determine claimant's eligibility and to establish
the amount of utility user's tax paid by claimant on the period claimed, and the commencement date
of the "first year" as that term is used herein. A claim for a rebate shall be submitted annually to the
Economic Development Agency not later than three months after the close of the year for which
such refund is sought. The verified claim must be signed by an authorized officer of the claimant.
The rebate shall be paid at the recommendation of the Economic Development Agency and subject
to approval of the Finance Department.
6. No rebates shall. be paid if the subject business is no longer in operation in the City
of San Bernardino.
7. "First year" as used in this section, shall mean for a new business, the twelve-month
period immediately following the date of commencement of business at the location for which a
claim for rebate is filed."
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HE/dc.tOrd.Ut;l;tyReboteJ
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ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECl10N
3.44.131. . . AND ESTABLISHING A UTILITY USER'S TAX REBATE PROGRAM.
, I HEREBY CERTIFY that the foregoing ordinance was duly adopted by the Mayor and
Common Council of the City of San Bernardino at a meeting thereot: held on the
_ day of . 2000, by the following vote, to wit:
Council Members:
AYES
NAYS
ABSTAIN ABSENT
ESTRADA
LIEN
MCGINNIS
SCHNETZ
SUAREZ
ANDERSON
MILLER
Rachel Clark, City Clerk
The foregoing ordinance is hereby approved this _ day of
,2000.
Judith Valles, Mayor
City of San Bernardino
Approved as to form
and legal content:
JAMES F. PENMAN,
City Attorney
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