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APA Citizen’s Academy. Presentation on Local Resources Paul Casey, Assistant City Administrator October 18, 2013. Overview. Summary of Key Revenue Sources Property Taxes Sales Taxes Transient Occupancy Taxes Other Fees and Taxes (business, UUT, Fees and Service Charges)

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Apa citizen s academy

APA Citizen’s Academy

Presentation on Local Resources

Paul Casey, Assistant City Administrator

October 18, 2013


Overview

Overview

  • Summary of Key Revenue Sources

    • Property Taxes

    • Sales Taxes

    • Transient Occupancy Taxes

    • Other Fees and Taxes (business, UUT, Fees and Service Charges)

  • Voter Approved Funding

  • Enterprise Funds

  • Transportation Funding

  • Redevelopment

  • State Involvement in Local Revenue

  • Land Use Wars


Government funding 101

Government Funding 101

  • Government Funding is Complex

    • Multiple Funds

    • Multiple Revenue Sources

  • General Fund

    • Police, Fire, Library, Planning, Admin

  • Enterprise Funds

    • Dedicated, fee based funds


General fund main sources of revenue

General Fund Main Sources of Revenue

  • Property Tax

  • Sales Tax

  • Transient Occupancy Tax

  • Other Fees and Service Charges


Apa citizen s academy

PROPERTY TAX

City of Santa Barbara • Community Development Department


Property tax

Property Tax

  • Historically Primary Source of Local Government Funding

  • Applied to residential and commercial properties – Value-Based Tax

  • Exemptions for Non-Profit, Religious, Educational, Hospital, Government Owned

  • Revenue Collected by County – Distributed Per State Law


Property tax breakdown

Property Tax Breakdown

  • Typical Breakdown of Property Taxes Statewide

    • Schools 46%

    • County 27%

    • City 21 %

    • Special Districts 7%


Property tax breakdown city of santa barbara

Property Tax Breakdown City of Santa Barbara

  • Breakdown Property Taxes for City of Santa Barbara

    • County 26%

    • Elementary School District 23%

    • High School District 17%

    • City 13%

    • City College 6%

    • Other County Special Districts 6%

    • ERAF 9%


Proposition 13

Proposition 13

  • Statewide Initiative in 1978

    • Approved by Voters -- 63 %

    • Changed Property Tax Approach

    • Changed Voting Requirements on Taxes


Key proposition 13 components

Key Proposition 13 Components

  • Decreased Property Taxes to 1975 Level

  • Limits Annual Tax Assessment to 1% of it’s Assessed Value

  • Restricted Annual Increases of Assessed Value to Not Exceed 2 % per year

  • Reassessment can occur at Change of Ownership – or Improvement to Property

  • Requires 2/3 majority in Legislature for increases in state tax rates

  • Requires 2/3 vote in local election for special taxes


Effect of proposition 13

Effect of Proposition 13

  • Authority to Allocate Property Taxes Shifted to State

  • Provided Predictability for Property Owners

  • Differing Tax Rates for Similar Properties Receiving Similar Services Based upon Purchase Date

  • Harder to approve tax increases in Legislature, and at ballot Box


Effect of proposition 131

Effect of Proposition 13

  • Local Government Revenue Reduced by 60%

  • Cities and Counties Raised User Fees and Local Taxes in Response

  • Commercial Properties Don’t Change Ownership as Frequently – Leads to Lower Assessments Over Time


Property tax summary

Property Tax Summary

  • Remains Valuable Local Revenue Source

  • May Not Keep up with Inflation, but Generally Doesn’t Fall as Fast in Hard Times Either


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SALES TAX

City of Santa Barbara • Community Development Department


Sales tax

Sales Tax

  • Collected by State Board of Equalization

  • Statewide Tax is 7.5%

  • Localities May Add Additional Sales Tax

    • Measure A ½ Cent as an example


Sales tax1

Sales Tax

  • 7.5% Sales Tax Broken Down:

    • 6.5% to State

      • General fund

      • Public Safety

      • Education

    • 1% - Uniform Local Tax


Sales tax2

Sales Tax

  • Strong Revenue Source

  • Can Grow with Increase in Economic Activity

  • Auto Dealers, High Volume Retail Desirable


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TRANSIENT OCCUPANCY TAX

City of Santa Barbara • Community Development Department


Transient occupancy tax

Transient Occupancy Tax

  • Also Known As Bed Tax

  • Generally a Percentage of Charged Hotel Room Rate

  • Over Time, Has Become Many Cities Best/Favored Revenue Source

  • Least Likely to be Interfered with by State, but can be Volatile


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OTHER FEES AND SERVICE CHARGES

City of Santa Barbara • Community Development Department


Other fees and service charges

Other Fees and Service Charges

  • Utility User Taxes

  • Business License Fees

  • Direct Service Charges (Recreation Programs, Planning and Building Fees)

  • Development Impact Fees (Traffic, Schools, Parks and Open Space)


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VOTER APPROVED REVENUE

City of Santa Barbara • Community Development Department


Voter approved revenue

Voter Approved Revenue

  • Used for General Fund Services, Large Capital Projects, Infrastructure Financing, Special Needs

  • Increases to Existing Fees (Sales Tax, T.O.T., UUT, Property Tax, G.O. Bonds, Parcel Tax etc)

    • Requires Voter Approval

      • 2/3 Special Tax

      • 50% General Tax

      • 55% School District Bond

  • Dictated by Proposition 13, Proposition 218, Proposition 26, State Legislature


Voter approved revenue1

Voter Approved Revenue

  • Local Examples:

    • Measure A ½ Cent Sales Tax Countywide

    • Creeks Measure City of SB – 2% TOT Increase

    • TOT Increase in City of Goleta and Carpinteria – General Tax

    • School District Bond Measure

    • Santa Barbara City College Bond Measure


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ENTERPRISE FUNDS

City of Santa Barbara • Community Development Department


Enterprise funds

Enterprise Funds

  • Separate Accounting For Municipal Service Functions

  • Revenues and Expenditures in Completely Separate Fund from General Fund

  • Most Often Utilities – Water, Wastewater, Refuse – ratepayer based utilities

  • Other Examples Locally-- Airport, Harbor, Golf Course


Enterprise funds1

Enterprise Funds

  • Allows Public/Government to See Program Stand on its Own

  • Newly Funded Programs Often Created as Enterprise Fund

  • Some Legally Required, Others Used as Public Trust Approach

  • Often Confusing in Tough Budget Times to General Public


Apa citizen s academy

TRANSPORTATION FUNDING

City of Santa Barbara • Community Development Department


Transportation funding

Transportation Funding

  • Multiple Sources – Federal, State, Local

  • Federal and State Gas Taxes

  • Local Self Help Counties = Increase to Sales Tax

  • More Fuel Efficient Cars Leads to Effectively Declining Revenue


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REDEVELOPMENT

City of Santa Barbara • Community Development Department


Redevelopment

Redevelopment

  • Tax Increment Financing – Around Since 1950s

  • Powerful Tool to Improve Downtowns Throughout California

  • State Took RDA Money to Address Budget in 2000’s

  • Voters Passed Prop 22 to Close RDA Loophole November 2010

  • State Eliminated Redevelopment in 2011


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STATE INVOLVEMENT

City of Santa Barbara • Community Development Department


State involvement in local revenue last 35 years

State Involvement In Local Revenue Last 35 Years

  • Prop 13 (1978)

  • ERAF (1992) – Education Revenue Augmentation Fund

    • State diverted local property tax to Schools to Meet Prop. 98

    • $2 - $3 million per year for City of SB

  • Redevelopment (2000 to 2011)

    • Money from RDAs to Balance State Budget –eventually eliminated RDAs for Revenue

  • Vehicle License Fee (2004) – First a Convoluted Swap of Funds, but Over Time Essential Elimination


Local government response

Local Government Response

  • Proposition 1A (2004)

  • Sponsored by California League of Cities

  • Passed with 84% Support

  • Prohibits State From:

    • Reducing Sales Tax to Cities

    • Reducing VLF without Replacement Funding

    • Shifting Property Taxes from Cities

    • Borrowing Money from Cities, unless paid back in 3 years and can only borrow twice in 10 years


Local government response1

Local Government Response

  • State Takings of Local Revenue and Proposition 1A Created Distrust between Legislature and Cities

  • Led to Further Voter Initiatives, and Eventual Elimination of Redevelopment


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LAND USE WARS

City of Santa Barbara • Community Development Department


Land use wars

Land Use Wars

  • Proposition 13 Led to a Chase for Revenue other than Property Tax

  • Most Often Sales Tax

  • Drive for Retail Centers, Auto Malls

  • Ineffecient Regional Planning – See Ventura/Oxnard and Palmdale/Lancaster


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FUTURE TRENDS

City of Santa Barbara • Community Development Department


Trends in ca city revenues statewide

Trends in CA City Revenues Statewide

  • State and Federal Aid to Cities Declining

    • 21% on average in 1975

    • 10% on average today

  • Property Tax Controlled by State and Limited per Prop 13

  • Sales Tax Base is Declining – trend to Service Economy, Internet Retail Uncertainty

  • Limitations/Restriction on Taxes and Fees that Cities Can Impose

  • Infrastructure Improvements and Maintenance are Lagging Statewide and Nationally


Trends in santa barbara city financing

Trends in Santa Barbara City Financing

  • Broad Tax Base

    • TOT, Sales, and Property Taxes are Strong and Relatively Stable

  • County Seat, Vibrant Downtown, Other Strong Commercial Areas, and Desirable Location All Help

  • Tourism Supports TOT and Sales Tax

  • Infrastructure Improvements and Maintenance are Long Term Challenge, Especially Without RDA

  • Demand for Services and Citizen Expectations Remain High


Resources

Resources

  • California Local Government Finance Almanac:

    • Californiacityfinance.com

  • League of California Cities:

    • cacities.org

  • Institute for Local Government:

    • ca-ilg.org

  • “Guide to California Planning” by Bill Fulton


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