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Home My WebLink AboutItem 3a - Ordinance No. 2311 - Utility Users Tax RatesROPER MINA 21192 DATE: June 18, 2013 TO: Mayor and City Council STAFF REPORT Administrative Services Department FROM: Hue C. Quach, Administrative Services Director SUBJECT: INTRODUCE ORDINANCE NO. 2311 AMENDING ARTICLE II, CHAPTER 6, PART 7 OF THE ARCADIA MUNICIPAL CODE BY REPEALING SECTION 2671.5 AND AMENDING SECTION 2671.6 RELATING TO GAS, WATER AND ELECTRIC UTILITY USERS TAX RATES Recommendation: Introduce SUMMARY Since 1980's the City Council has collected utility users taxes (UUT) at a rate significantly lower than the amount authorized in the City Code. In response to growing pressures on the General Fund Budget, and in order to maintain the City's infrastructure and service levels to the community, the City Council during the budget adoption process directed staff to bring forward an action to return the UUT to its fully authorized levels. Adoption of this ordinance would return the UUT to 7% on water, gas, and electric utility bills and provide the City Council with the flexibility to lower it on an annual basis, if desired. BACKGROUND The UUT rate of 7% was set by Ordinance No. 1645 on June 30, 1978, for gas, electricity, and water. Following this Ordinance, on May 15, 1979, the City Council opted to fully suspended the UUT on water. On June 3, 1980, the City reduced the gas and electricity UUT rate to 5 %. The amounts collected have remained the same since that time. Ordinance Regarding Utility Users Tax Rates June 18, 2013 Page 2 of 3 At the first Budget Study Session in April, staff raised concerns of near and long -term budget pressures on the General Fund that are caused by annual inflationary costs, CalPERS policy changes, the continued decline of pari - mutuel revenues, and declining balances in the Equipment Replacement Fund. Without addressing these pressures, service levels to the community may be compromised. At the subsequent Budget Study Session, staff presented several alternatives to enhance revenue streams in order to address and manage these impending pressures without affecting services levels in the community. Based on the available options, it was generally agreed by the City Council to pursue the return of the UUT to its City Code - authorized tax rate of 7% for gas, electricity, and water bills. This direction was incorporated into the proposed Budget, which was adopted on June 4. Based on an opinion provided by the City Attorney, UUT can be reverted to the maximum rate of 7% simply with City Council approval and are exempt from the requirements of Proposition 218. The attached Ordinance No. 2311 is presented to repeal Section 2671.5 and amend Section 2671.6 of the current Ordinance. Repealing Section 2671.5 reestablishes water UUT to the originally- approved rate of 7% and amending Section 2671.6 reinstates the UUT to 7% for gas and electricity. The Ordinance has also been written to provide the City Council with the discretion and flexibility to review the UUT annually and adjust the rate below the maximum of 7% as appropriate. This Ordinance fixes the rate of taxation within the City and, therefore, takes effect immediately upon adoption. Telecommunications are exempt from the increase as that 5% rate was set by Measure A when it was approved by the voters in June 2009. FISCAL IMPACT As the reinstatement of UUT becomes effective, a full year's annual revenue is projected to provide approximately $2 million to General Fund operations and allow for additional funding support to the Capital Improvement and Equipment Replacement Funds. The projected revenues for FY 2013 -14 are set at $1.675 million to account for the expected timing and arrangement in implementing the UUT rates. It is expected that the average homeowner in Arcadia will experience an increase of approximately $6.98 per month in their total utility bills as a result of this action. Ordinance Regarding Utility Users Tax Rates June 18, 2013 Page 3 of 3 RECOMMENDATION It is recommended that the City Council find that this action is exempt under the California Environmental Quality Act; and introduce Ordinance No. 2311 amending Article II, Chapter 6 Part 7 of the Arcadia Municipal Code by repealing Section 2671.5 and amending Section 2671.6 relating to gas, water, and electricity utility users tax rates. Approved: Dominic Lazza City Manager Attachment: Ordinance No. 2311 ROPER MINA 21192 DATE: June 18, 2013 TO: Mayor and City Council STAFF REPORT Administrative Services Department FROM: Hue C. Quach, Administrative Services Director SUBJECT: INTRODUCE ORDINANCE NO. 2311 AMENDING ARTICLE II, CHAPTER 6, PART 7 OF THE ARCADIA MUNICIPAL CODE BY REPEALING SECTION 2671.5 AND AMENDING SECTION 2671.6 RELATING TO GAS, WATER AND ELECTRIC UTILITY USERS TAX RATES Recommendation: Introduce SUMMARY Since 1980's the City Council has collected utility users taxes (UUT) at a rate significantly lower than the amount authorized in the City Code. In response to growing pressures on the General Fund Budget, and in order to maintain the City's infrastructure and service levels to the community, the City Council during the budget adoption process directed staff to bring forward an action to return the UUT to its fully authorized levels. Adoption of this ordinance would return the UUT to 7% on water, gas, and electric utility bills and provide the City Council with the flexibility to lower it on an annual basis, if desired. BACKGROUND The UUT rate of 7% was set by Ordinance No. 1645 on June 30, 1978, for gas, electricity, and water. Following this Ordinance, on May 15, 1979, the City Council opted to fully suspended the UUT on water. On June 3, 1980, the City reduced the gas and electricity UUT rate to 5 %. The amounts collected have remained the same since that time. Ordinance Regarding Utility Users Tax Rates June 18, 2013 Page 2 of 3 At the first Budget Study Session in April, staff raised concerns of near and long -term budget pressures on the General Fund that are caused by annual inflationary costs, CalPERS policy changes, the continued decline of pari - mutuel revenues, and declining balances in the Equipment Replacement Fund. Without addressing these pressures, service levels to the community may be compromised. At the subsequent Budget Study Session, staff presented several alternatives to enhance revenue streams in order to address and manage these impending pressures without affecting services levels in the community. Based on the available options, it was generally agreed by the City Council to pursue the return of the UUT to its City Code - authorized tax rate of 7% for gas, electricity, and water bills. This direction was incorporated into the proposed Budget, which was adopted on June 4. Based on an opinion provided by the City Attorney, UUT can be reverted to the maximum rate of 7% simply with City Council approval and are exempt from the requirements of Proposition 218. The attached Ordinance No. 2311 is presented to repeal Section 2671.5 and amend Section 2671.6 of the current Ordinance. Repealing Section 2671.5 reestablishes water UUT to the originally- approved rate of 7% and amending Section 2671.6 reinstates the UUT to 7% for gas and electricity. The Ordinance has also been written to provide the City Council with the discretion and flexibility to review the UUT annually and adjust the rate below the maximum of 7% as appropriate. This Ordinance fixes the rate of taxation within the City and, therefore, takes effect immediately upon adoption. Telecommunications are exempt from the increase as that 5% rate was set by Measure A when it was approved by the voters in June 2009. FISCAL IMPACT As the reinstatement of UUT becomes effective, a full year's annual revenue is projected to provide approximately $2 million to General Fund operations and allow for additional funding support to the Capital Improvement and Equipment Replacement Funds. The projected revenues for FY 2013 -14 are set at $1.675 million to account for the expected timing and arrangement in implementing the UUT rates. It is expected that the average homeowner in Arcadia will experience an increase of approximately $6.98 per month in their total utility bills as a result of this action. Ordinance Regarding Utility Users Tax Rates June 18, 2013 Page 3 of 3 RECOMMENDATION It is recommended that the City Council find that this action is exempt under the California Environmental Quality Act; and introduce Ordinance No. 2311 amending Article II, Chapter 6 Part 7 of the Arcadia Municipal Code by repealing Section 2671.5 and amending Section 2671.6 relating to gas, water, and electricity utility users tax rates. Approved: Dominic Lazza City Manager Attachment: Ordinance No. 2311 ORDINANCE NO. 2311 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, AMENDING ARTICLE II, CHAPTER 6, PART 7 OF THE ARCADIA MUNICIPAL CODE BY REPEALING SECTION 2671.5 AND AMENDING SECTION 2671.6 RELATING TO GAS, WATER AND ELECTRIC UTILITY USERS TAX RATES THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DOES ORDAIN AS FOLLOWS: SECTION 1. Section 2671.5 of Article Il, Chapter 6, Part 7 of the Arcadia Municipal Code relating to Suspension of the Water Tax is hereby repealed in its entirety. SECTION 2. Section 2671.6 of Article li, Chapter 6, Part 7 of the Arcadia Municipal Code relating to gas and electric utility users tax is hereby amended to read as follows: 2671.6. -- INDEFINITE ADJUSTMENT TO OR SUSPENSION OF A PORTION OF THE UTILITY USERS TAX RAT-€. 1 - • -- - - - - IF w - N - • - r-T. • . . 1 r . .• r. . • r SeGtie A shall be °P�iv the duty to G-01!ent the tax .. rate shall - - Conor3tely fer each billing remind ....... .- .��u a..e.vv vvNuiuw�r Zvi a-: The utility users tax shall be reviewed annually by the City Council and the City Council may, by ordinance or resolution, adjust the rate or temporarily suspend all or a portion of the tax, as appropriate to the financial condition of the city. No adjustment to the rate or temporary suspension of the tax shall constitute a decrease in a tax, or an increase in a tax requiring voter approval under California Constitution Article XIl1C (Proposition 218); provided the City Council's action does not increase the tax beyond the maximum rate or methodology set forth in this voter - approved ordinance. To the extent that any aspect of a rate adjustment or temporary tax suspension is found to invoke such a requirement under Proposition 218, the entire City Council action shall be deemed null and void ab initio, and there shall be no entitlement to adjustment or suspension for any service user." SECTION 3. Pursuant to Section 419(c) of the City Charter, this Ordinance fixes the rate of taxation within the City and, therefore, takes effect immediately upon adoption. 2 SECTION 4. Pursuant to Arcadia Municipal Code, Section 2671.6, because this Ordinance makes adjustments to gas, water and electric utility users taxation rates within the 7% maximum rate previously approved by Arcadia voters in 2009, no further voter approval or other action is required to make the adjustments set forth herein. The City Council hereby reserves the authority to make future adjustments to utility users taxation as provided in Section 2671.6. SECTION 5. Pursuant to Public Utilities Code, Section 799(a)(5), the City Council hereby directs staff to provide to affected utility suppliers written notice of the rate adjustments made by this Ordinance along with all requisite supporting information. Under Section 799(a)(5), affected utility suppliers are required to collect utility users tax from utility users /customers at the newly adjusted rate not earlier than 60 days from the date on which the affected utility suppliers receive the written notice and information from the City, or if the 60th day is not the first day of a month, on the first day of the month following the month in which the 60th day occurs. SECTION 6. The City Clerk shall certify to the adoption of this Ordinance and shall cause a copy of same to be published in the official newspaper of the City within fifteen (15) days upon its adoption. [SIGNATURES ON THE NEXT PAGE] V Passed, approved and adopted this day of , 2013. City Clerk APPROVED AS TO FORM: CtWAK� 1 �t� Step en P. Deitsch City Attorney 4 Mayor of the City of Arcadia