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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
From: Fred Wilson, City Administrator Subject: Ordinance of the City of San
Bernardino adding Section 3.44.131(B) of
Dept: City Administrator's Office the San Bernardino Municipal Code and
establishing a Utility User's Tax Rebate
Date: July 17, 2000 Program for Existing Businesses
Synopsis of Previous Council Action:
October 25, 1999 - Legislative Review Committee recommends that the business recruitment
and retention incentives be referred in concept to the full Council
December 22, 1999 - Council adopts resolution implementing impact fee modifications
March 7, 2000 - Council adopts Ordinance MC-1065, adding Section 3.44.131 of the
Municipal Code and establishing a UUT rebate program for new
businesses
May 8, 2000 - Legislative Review Committee recommends the proposed program for
existing businesses be presented during budget deliberations
Recommended motion:
Waive the first reading and lay the ordinance over for final adoption.
Signature
Contact person: Lori Sassoon Phone: 384-5122
Supporting data attached: Staff report Ward: All
FUNDING REQUIREMENTS: Amount: Unknown; estimated $85,000 for both UUT
Rebate programs
Source: (Acct.No.)001-092-5502
(Acct.Description)General Government
Finance:
Council Notes:
Agend,
STAFF REPORT
Subject
Ordinance of the City of San Bernardino adding Section 3.44.131(B) to the San
Bernardino Municipal Code and establishing a Utility User's Tax rebate program for
existing businesses.
Background
On March 7, 2000, the Mayor and Council adopted Ordinance No. MC-1065 establishing
a Utility User's Tax Rebate Program for new businesses. As part of that action, the
Mayor and Council directed staff to develop a similar program for existing San
Bernardino businesses that choose to expand.
The Legislative Review Committee met several times this spring to consider versions of
the proposed program. On May 8, the Committee reviewed a final outline of the
proposed ordinance, and directed that this matter be considered during the FY 2000-01
budget process. As was discussed during the budget workshops, $85,000 was
appropriated in this year's budget for both Utility User's Tax rebate programs. In
accordance with the Committee direction, the ordinance establishing a program for
expanding businesses is now being presented for adoption by the Council.
Summary of UUT Rebate Program for Expanding Businesses
In order to encourage the physical expansion and/or creation of significant numbers of
higher-wage jobs by existing San Bernardino businesses, this second Utility User's Tax
Rebate Program will complement the program recently adopted for new businesses.
Under this program, an expanding business may qualify for a UUT rebate by one of three
(3) methods:
♦ Part 1: Expansion/Job Creation/Sales tax combination
Any business currently operating in San Bernardino would qualify for a UUT rebate if it
meets the criteria in at least two of the three categories below:
Category A: Expansion Criteria
1. The business expands by completing a permitted expansion at its current
location, resulting in an increase of at least 25% of the current construction
valuation of the existing building; or
2. The business relocates within the city of San Bernardino, and the relocation is
to a facility with at least 25% more square feet than the previous location.
Category B: Job Criteria
The business creates and maintains at least 5 new, permanent full-time jobs (50%
of which pay at least $25,000 per year in wages and/or commissions) in addition
to the jobs already existing at the current location(s) within the city, and sustains
that job increase over the previous 12 month period prior to application for the
rebate.
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Category C: Sales Tax Criteria
The business generates at least $10,000 more in sales or use tax revenues to the
City than was generated in the previous 12 month period prior to application for
the rebate.
If qualified,the business would receive a rebate of UUT paid on the following scale:
1 St year—75%rebate
2nd year—50%rebate
3rd year—25% rebate
4t" and subsequent years—no rebate
♦ Part 2: Significant Job Creation
Any business currently operating in San Bernardino, and not qualified under Part 1 above
or Part 3 below, would qualify for a UUT rebate if it creates and maintains at least 50
new, permanent full-time jobs (50% of such new jobs shall pay at least $25,000 per year
in wages and/or commissions) in addition to the jobs already existing at the current
location(s) within the city, and sustains that job increase over the previous 12 month
period prior to application for the rebate. If qualified, the business would receive a rebate
of UUT paid on the following scale:
1 St year—75%rebate
2nd year— 50% rebate
3rd year—25% rebate
4th and subsequent years—no rebate
♦ Part 3: New Additional Location
For purposes of this program, the additional location will be considered "new business"
and would qualify for rebates in accordance with the program already established for new
businesses (Chapter 3.44.131 of the Municipal Code). The business must continue to
operate the previously existing location or locations within the city for the previous 12
month period prior to application for the rebate.
In addition to the rebates outlined in Parts 1 — 3, the ordinance allows businesses to
receive an additional rebate of 1% on the amount of UUT paid for each San Bernardino
resident that is hired to fill the new, permanent full-time jobs created within the City that
meet the wage criteria. This provides an additional incentive for businesses to hire San
Bernardino residents.
The ordinance establishes the same administrative mechanisms as the ordinance
applicable to new businesses. The ordinance will apply to businesses that qualify after
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January 1, 2000, which is also consistent with the ordinance applicable to new
businesses.
Financial Impact
As staff indicated to the Legislative Review Committee, the cost of the program for
expanding businesses has a more direct financial impact than the program for new
businesses. Since new businesses have not been paying UUT, the cost to the General
Fund is an opportunity cost and only affects the rate of UUT revenue growth; the
expenditure is offset by new revenue to the General Fund. In contrast, expanding
businesses may or may not generate enough additional General Fund revenues (such as
sales tax or property tax) to offset the cost of their rebates. Although difficult to quantify,
if the program is successful in encouraging job creation by existing businesses, then
revenues may rise as the "multiplier effect" impacts purchasing power and property
values.
$85,000 has been included in the FY 2000-01 Budget to fund both UUT rebate programs.
However, it is virtually impossible to estimate the rebate program costs for expanding
businesses, since each will have different utility costs, and each will hire varying
numbers of San Bernardino residents to fill newly-created jobs. Additionally, some of
these expanded businesses may bring additional revenues to the General Fund, while
others will not do so in a direct manner. Because of these factors, it must be noted that
the cost of this program cannot be accurately projected. The actual cost may vary
significantly from the budgeted amount.
Given this information, the Mayor and Council may wish to consider ways by which the
program cost could be managed. As one alternative, the maximum annual rebate to any
single business could be capped at a maximum dollar amount. Such a cap was not
recommended by LRC and has not been included in this ordinance.
Recommendation
It is recommended that the first reading of the Ordinance be waived, and it be laid over
for final adoption.
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1 ORDINANCE NO. _
2 ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTION
3.44.131(B) TO THE SAN BERNARDINO MUNICIPAL CODE AND ESTABLISHING A
3 UTILITY USER'S TAX REBATE PROGRAM FOR EXISTING BUSINESSES.
4 THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN AS FOLLOWS:
5
6 SECTION 1. Section 3.44.1)1(B)is hereby added to the San Bernardino Municipal Code
7 to read as follows-
8 "B. Not withstanding any other provision of this Chapter, in order to encourage the
9 physical expansion and/or creation of significant numbers of higher-wage jobs by existing San
10 Bernardino businesses, the following Utility User's Tax Rebate Program is hereby established to
11 complement the program recently adopted for new businesses.
12 1. Any business currently operating in San Bernardino shall be eligible for a Utility
13 User's Tax rebate if, after January 1, 2000, it meets the criteria in at least two of the categories
14 below:
15 a. Cateiory A: Expansion Criteria
16 (I) The business expands by completing a permitted expansion at its
17 current location, resulting in an increase of at least 25% of the
18 current construction valuation of the existing building; or
19 (ii) The business relocates within the city of San Bernardino, and the
20 relocation is to a facility with at least 25%more square feet than
21 the previous location.
22 b. Category B: Job Criteria
23 The business creates and maintains at least 5 new, permanent full-time jobs
24 (50% of such new jobs shall pay at least $25,000 per year in wages and/or
25 commissions) in addition to the jobs already existing at the current
26 location(s)within the city, and sustains that job increase over the previous
27 12 month period prior to application for the rebate.
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HE/dcmCord.uut1 1 v
1 ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTION
3.44.131(B) TO THE SAN BERNARDINO MUNICIPAL CODE AND ESTABLISHING A
2 UTILITY USER'S TAX REBATE PROGRAM FOR EXISTING BUSINESSES.
3 C. Category C: Sales Tax Criteria
4 The business generates at least $10,000 more in sales or use tax revenues
5 to the City than was generated in the previous 12 month period prior to
6 application for the rebate.
7 d. If qualified under this section, the business shall be eligible for a rebate on
8 the amount of paid Utility User's Tax paid by such business on electrical,
9 gas, video, and telephone communication services, imposed by this Chapter
10 according to the following schedule:
11 (I) 1 st year- 75% rebate
12 (ii) 2nd year- 50% rebate
3rd year- 25% rebate
13 (iv) 4th and subsequent years - no rebate
14 e. In no case shall any qualified business receive a rebate that exceeds the
15 amount of additional sales or use tax revenues received by the City during
16 the previous 12 month period prior to application for the rebate.
17 Additionally, if the business is receiving assistance from the Economic
18 Development Agency under an Owner Participation Agreement (OPA) or
19 Disposition and Development Agreement(DDA), and the combined annual
20 value of Agency assistance provided together with proposed Utility Tax
21 Rebate exceeds the amount of additional annual sales tax revenue to the
22 City, then the business shall not be eligible for the rebate.
23 2. Any business currently operating in San Bernardino, and not qualified under
24 Subsection (1) above or Subsection (3) below, shall be eligible for a Utility User's Tax rebate if it
25 creates, after January 1, 2000, and maintains at least 50 new, permanent full-time jobs (50% of such
26 new jobs shall pay at least $25,000 per year in wages and/or commissions) in addition to the jobs
27 already existing at the current location(s) within the City, and sustains that job increase over the
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HEMcmCord.uut] 2
1 ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTION
3.44.131(B) TO THE SAN BERNARDINO MUNICIPAL CODE AND ESTABLISHING A
2 UTILITY USER'S TAX REBATE PROGRAM FOR EXISTING BUSINESSES.
3 previous 12 month period prior to application for the rebate. If qualified, the business shall be
4 eligible for a rebate of Utility User's Tax paid on the following scale:
5 (I) 1st year- 75% rebate
6 (ii) 2nd year- 50% rebate
7 (iii) 3rd year - 25% rebate
8 (iv) 4th and subsequent years - no rebate
9 3. Any business currently operating in San Bernardino shall be eligible for a Utility
10 User's Tax rebate if, after January 1, 2000, it adds a new additional location within the city of San
11 Bernardino, and continues to operate the previously existing location or locations within the City
12 for the previous 12 month period prior to application for the rebate. For purposes of this program,
13 the additional location shall be considered "new business" and shall be eligible for rebates in
14 accordance with the program already established for new businesses (Chapter 3.44.131(A) of the
15 Municipal Code).
16 4. Any business currently operating in San Bernardino and qualified under Subsections
17 (1) or(2) above shall also be eligible for an additional rebate of 1% on the amount of Utility User's
18 Tax paid for each San Bernardino resident that is hired to fill the new, permanent full-time jobs
19 created within the City that meet the wage criteria. Eligibility for any such additional rebates shall
20 be established by determining the residency of the new employees at the end of each year of rebate
21 eligibility. This determination shall be verified by the Economic Development Agency with such
22 supporting documentation as may be required by the Economic Development Agency. In no case
23 shall the total rebate paid to any claimant exceed the total amount of Utility User's Tax paid for the
24 period claimed, nor shall rebates be paid for any term other than the schedule established by this
25 section.
26 5. To claim a rebate under this section, the claimant shall submit a completed verified
27 claim form to the Economic Development Agency with such supporting documentation as may be
28 required by the Economic Development Agency to determine claimant's eligibility and to establish
HE 11cm1ord.uut1 3
1 ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTION
3.44.131(B) TO THE SAN BERNARDINO MUNICIPAL CODE AND ESTABLISHING A
2 UTILITY USER'S TAX REBATE PROGRAM FOR EXISTING BUSINESSES.
3 the amount of utility user's tax paid by claimant on the period claimed, and the commencement date
4 of the "first year" as that term is used herein. A claim for a rebate shall be submitted annually to the
5 Economic Development Agency not later than three months after the close of the year for which
6 such refund is sought. The verified claim must be signed by an authorized officer of the claimant.
7 The rebate shall be paid at the recommendation of the Economic Development Agency and subject
8 to approval of the Finance Department.
9 6. No rebates shall be paid if the subject business is no longer in operation in the city
10 of San Bernardino.
11 7. "First year" as used in this section, shall mean for an existing business, the twelve-
12 month period immediately proceeding following the date the claim for rebate is filed."
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HIMcm[ord.uut] 4
1 ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTION
3.44.131(B) TO THE SAN BERNARDINO MUNICIPAL CODE AND ESTABLISHING A
2 UTILITY USER'S TAX REBATE PROGRAM FOR EXISTING BUSINESSES.
3 I HEREBY CERTIFY that the foregoing ordinance was duly adopted by the Mayor and
4 Common Council of the City of San Bernardino at a meeting thereof, held on
5 the_ day of , 2000, by the following vote, to wit:
6 Council Members: AYES NAYS ABSTAIN ABSENT
7 ESTRADA
8 LIEN
9 MCGINNIS
10 SCHNETZ
11 SUAREZ
12 ANDERSON
13 McCAMMACK
14
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16 City Clerk
17 The foregoing ordinance is hereby approved this— day of , 2000.
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19
Judith Valles, Mayor
20 City of San Bernardino
21 Approved as to
form and legal content:
22
JAMES F. PENMAN,
23 City Attorney
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25 By: �envw
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HEM cmCord.uut] 5