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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
From: Fred Wilson, City Administrator
Subject: AN ORDINANCE OF THE
CITY OF SAN BERNARDINO
AMENDING SECTION 3.64.020 OF THE
SAN BERNARDINO MUNICIPAL CODE
RELATING TO AREA TAX RATES
Dept: Administration 0 R J C ; " v' A L
Date: June 12,2001
Synopsis of Previous Council Action:
6/7/2001
Legislative Review Committee approved the Mayor's recommendation that the
Parking and Business Improvement Tax be reduced by 50% beginning July 1,
2001 through June 30, 2002 and eliminated completely thereafter.
Recommended motion:
That the ordinance be laid over for final adoption.
lifm
Contact person: Teri Baker
Phone: 5122
Supporting data attached: Staff Report and Ordinance
Ward:
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FUNDING REQUIREMENTS: Amount: $54,700 FY 01 /02 - General Fund
Source: (Accl. No.) 109-000-4302
(Accl. Description) Parking DistricUBusiness
Improvement Fund revenues
Finance:
Council Notes:
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Agend
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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
STAFF REPORT
Subiect:
An Ordinance of the City of San Bernardino amending Section 3.64.020 of the San Bernardino
Municipal Code relating to Area Tax rates.
Backaround:
One of the Mayor's long standing goals is the revitalization of the downtown area. The Mayor
has recognized the fiscal impact on downtown businesses that pay the Area Tax as well as a
Parking District Assessment. To address the issue, she asked City staff to identify some options.
The following three options were developed:
OPTION 1:
First Year: Reduce the Area Tax rate to businesses by 50%. This would reduce the rate
that professional and manufacturing businesses pay from 25% to 12.5% and for all other
types of businesses, from 100% to 50%.
Second Year: Eliminate the remaining Area Tax when the Parking Assessment District
expires. The City would have to pick up certain security, maintenance and decoration
costs.
OPTION 2:
Eliminate the Area Tax when the Parking Assessment District expires on June 30, 2002.
OPTION 3:
Maintain the Area Tax in its current structure or consider reducing the rate. Establish a
Downtown Business Advisory Commission to develop recommendations regarding the
expenditure of funds.
Attached is a report on the Downtown Area Tax and the Parking District. The report explains
that the Area Tax was established by Ordinance in 1965. Although the Parking District
Assessment will expire in 2002, the Area Tax Ordinance has no sunset clause; therefore, it would
continue indefinitely.
At the June 7'h meeting of the Legislative Review Committee, the three options were considered.
After some discussion, the Committee recommended that Option 1 be forwarded to the full
Council for approval.
Downtown businesses pay Area Tax along with their business registration fees which is on a
continuous basis. Since the 50% reduction in area tax will be effective July 1, 2001, the
Business Registration Division will not have time to correct the billing for those payments due in
July. Therefore, those businesses that paid the prior tax rate amount before being notified of the
change will have that amount credited toward future payments. When the tax is eliminated
completely in July of 2002, the Business Registration Division will have time to make the billing
change in advance.
Attachment A describes 3 scenarios for various businesses should the tax be reduced by 50% and
when the tax is eliminated completely.
Fiscal Impact:
Based on the asswnption that the area tax will be reduced by 50% for FY 01-02, the cost to the
General Fund is estimated to be $54,700.
Based on the asswnption that the area tax will be eliminated for FY 02-03; and asswning the
expenditure levels will remain the same, the additional cost to the General Fund is estimated to
be $47,000.
Recommendation:
That said ordinance be laid over for final adoption.
March 22,2001
One of the Mayor's long standing goals is the revitalization of the city of San
Bernardino's downtown area and reducing taxes where applicable. In working to
accomplish this goal, the Mayor has recognized the impact on downtown businesses that
pay an additional tax known as Area Tax as well as a Parking District Assessment. At
the request of the Mayor, the following report has been prepared which outlines the
issues involved in providing some form of relief to these downtown businesses.
DOWNTOWN AREA TAX
In 1965, the City enacted Chapter 3.64 of the City Municipal Code, which established the
Parking and Business Improvement Area (Area Tax) and provided the authority for the
collection of this tax. The Area Tax is collected from all businesses in the downtown
area between Second Street and Sixth Street and between the 215 Freeway and
Arrowhead Avenue (see Map Attachment 1). Since the original Area Tax ordinance did
not contain any sunset clause, the collection of this tax contiunues and will continue until
the City amends or repeals the Municipal Code.
The amount of Area Tax paid by a business is based upon a percentage of its business
registration tax. If the business is classified as professional or manufacturing, it pays an
Area Tax of 25% of the business registration tax. All other businesses in the Area Tax
boundaries pay an Area Tax of 100% of the business registration tax. Currently, there are
approximately 364 businesses paying the Area Tax with 188 of these businesses in the
100% category and 176 businesses in the 25% category.
Revenues generated by the Area Tax are deposited into the City's Area Tax Fund. As
part of the City's budget process, approximately 75% of the Area Tax revenues are
transferred out of the Area Tax Fund into the Parking District Assessment Fund to lower
the parking assessments to businesses. The remaining 25% of the revenues are used to
pay for new holiday decorations for the downtown. The annual installation of these
decorations and administrative costs are provided by the General Fund. Summarized
below are the fiscal activities of the Area Tax Fund for FY99-00 and FYOO-Ol:
FY 99-00
FY 00-01
Beginning Fund Balance 7/1
Revenues
Total Available
$ 32,100
141.307
$173,407
$ 16,200
131.000
$ 147,200
Expenditures
Transfers Out
Total Deductions
$ 53,578
103.605
$157,183
$ 32,200
98.200
$ 130,400
Ending Fund Balance 6/30
$ 16,224
$ 16,800
Downtown Area Tax and Parking District Assessement
Page 1 of3
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PARKING DISTRICT ASSESSMENT
The Central City Parking District was formed in 1977 to provide for the acquisition and
improvement of three downtown City parking lots and to provide for the on going
maintenance, operation and security of the three lots. The Parking District is defined as
the area between Second Street and Fifth Street and "G" Street and Arrowhead Avenue
(see Attached Map I).
Bonds were sold in the amount of $1,950,000 with a 25 year repayment (final bond
payment will be made in 2002). Annually since 1977, parcels within the Parking District
have had an assessment included on their property tax bill to generate the revenue needed
to repay the bonds and cover the costs of on going maintenance and security. In
calculating each parcel's assessment, credits were given for on-site parking spaces as
well as 75% of the area tax generated by each parcel. EDA was responsible for paying
the assessments on EDA owned parcels.
In 1979, it was determined that additional parking facilities were needed. Funds for the
expansion of two parking lots were loaned to the District from the City's General Fund in
the amount of $812,763, with a 28 year payback at 7% interest (final payment will be
made in 2008). Parcels in the Parking District were assessed an additional $30,300 to be
used along with revenues generated from parking space rentals and any interest earnings
to repay the General Fund loan.
In November 1996, the voters approved Proposition 218, which required that all existing
assessment districts that do not fall into one of the various exemption categories be
approved by a majority of the property owners. It was determined that the parcel
assessment to cover the bond debt service payment was exempt from the requirements of
Proposition 218 and, therefore, could continue. However, the assessments to cover the
maintenance, security, and General Fund loan repayment were not exempt and, therefore,
would need property owner approval for them to continue. During the FY 97-98 budget
process, the City determined that property owners would probably not give approval to
continue these assessments and, therefore, lowered the Parking District Assessments on
parcels in the District. For FY 97-98, FY 98-99, and FY 99-00, EDA budgeted to pay the
City for these costs. In FY 00-01, the City began to cover these costs. The chart below
summarizes the fiscal activities of the Parking District Assessment Fund for FY 99-00
and FY 00-01:
FY 99-00 FY 00-01
Beginning Fund Balance 7/1 $ 29,700 $ 28,400
Revenues 223,891 64,200
Transfer from General Fund 0 106,500
Transfer from Area Tax 103.605 98.200
Total Available $ 357,196 $297,300
Downtown Area Tax and Parking District Assessement
Page 2 of 3
2
Expenditures
Transfer to General Fund
Total Deductions
$ 262,194
66.600
$ 328,794
$214,200
66.600
$280,800
Ending Fund Balance 6/30
$ 28,402
$ 16,500
Of the $214,200 expenditures budgeted for FY 00-01, over $150,000 is for the bond debt
service payment. For FY 01-02, the last bond debt service payment in the approximate
amount of$170,000 will be budgeted and assessed to parcels in the Parking District.
Downtown Area Tax and Parking District Assessement
Page 3 of3
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Attachment A
Proposed Area Tax Fee Reductions
Impact on Businesses
Classification
Rate
Attorney
Current fee with 25% rate
Year 1 with proposed rate of12.5%
Year 2 Area Tax Rate 0%
*Assumes gross receipts of$200,000
Fee
$134.38*
67.19*
o
Restaurant
Current fee with 100% rate
Year 1 with proposed rate of 50%
Year 2 Area Tax Rate 0%
* Assumes gross receipts of $1 00, 000
$ 97.50*
48.75*
o
Retail
Current fee with 100% rate
Year 1 with proposed rate of 50%
Year 2 Area Tax Rate 0%
*Assumes gross receipts of $500,000
$ 423.75*
211.88*
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\
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING
SECTION 3.64.020 OF THE SAN BERNARDINO MUNICIPAL CODE RELATING TO
AREA TAX RATES
THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN AS FOLLOWS:
SECTION 1. Section 3.64.020 of the San Bernardino Municipal Code is hereby
amended in its entirety to now read as follows:
3.64.020 Rates.
A. The additional rate imposed upon each such classification shall be as follows:
1. An additional annual tax of twelve and one-half percent (12 1/2%) upon
those businesses conducted within the area classified as "professional" or
"manufacturing and wholesale" for the period of July 1,2001 through June
30, 2002.
2. An additional tax of fifty percent (50%) shall be imposed upon any other
business conducted within the area for the period of July I, 2001 through
June 30, 2002.
B. Effective July, 1,2002, the rates imposed in Section A.l. and A.2. of this section are
hereby repealed and are no longer in force and effect and no such further rates will be
assessed.
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ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING SECTION
3.64.020 OF THE SAN BERNARDINO MUNICIPAL CODE RELATING TO AREA
TAX RATES
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 thereof, held on the
_ day of
,2001, by the following vote, to wit:
Council Members:
AYES
NAYS
ABSTAIN ABSENT
ESTRADA
LIEN
MCGINNIS
SCHNETZ
SUAREZ
ANDERSON
MCCAMMACK
City Clerk
The foregoing ordinance is hereby approved this
day of
2001.
Judith Valles, Mayor
City of San Bernardino
Approved as to
Form and legal content:
JAMES F, PENMAN,
City Attorney
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. .'.,- CITY OF SAN BERNARDINO :C,'CITY CLERK'S OFFICE . '_-,\'~L..-';'-':L""!, . . -
'",. RECORDS & INFORMATION MANAGEMENT PROGRAM
AGENDA ITEM TRACKING FORM
Meeting Date/Date Adopted: 1-9-0 I Item No. /
Resolution/Ordinance No. /J1C-IP9 <; Ordinance Urgency: Yes c2
Effective Date: :fit -q -a I Termination/Sunset Date: /1~-,
Vote: Ayes: ~ /, ~ ~ '/ 7 Nays:
Abstai n; 'I Absent:
Date Sent to Mayor: 7-ltJ_i"J' Date Returned from Mayor: 7-11-01
Date of Mayor's Signature: 7- 9,01 Date of Clerk's Signature: 7- ( 2..- 01
Date Summary Sent to Attorney: 7-10 - 0 ( Date Summary Returned from Attorney: ?-I/-o/
Date Published: ?-/~ -/pI
,
Meeting Type: O"""-..i ~. Date Seal Impressed: 7-/2--0 /
Continued Frornrft & Item No.
Date Sent for Signature: To Whom:
Expiration Date: . I ----- V /"'Date Retu~ -; ..,,---- L--' ----
Cop;~D;..;b"",,T" vA oL~.i..!:~ir. ~~~ $~.11
Exhibits Complete & Attached to Resolution/Ordinance:
Reminder Letter Sent:
Reminder Letter Sent:
Reminder Letter Sent:
Request for Council Action & Staff Report Attached:
Notes: ~P';//d~- ~
{/
Yes
7-/2 -0 /
1dt No
Ready to File:
Date:
DOClJMfNT lOCAOON:
FOItMSfA8lflda 111m T..... Fomt .cc Famt No. 111 .I.M Updued: 12.-G411996