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Revenue Sources. Chapter 8. Income Sources. Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts. Compulsory Income. Secured by government organizations Collected through taxing & regulatory powers at different government levels

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income sources
Income Sources
  • Compulsory Income
  • Gratuitous Income
  • Earned Income
  • Investment Income
  • Contractual Receipts
compulsory income
Compulsory Income
  • Secured by government organizations
  • Collected through taxing & regulatory powers at different government levels
  • Why do commercial agencies care??
  • Types of taxes…??
compulsory income1
Compulsory Income
  • Real property tax
  • Personal property tax
  • Sales tax
  • Excise tax
  • Income tax
  • Local option tax
question

Question…

How is an individual’s property taxes determined?

compulsory income2
Compulsory Income
  • Real property taxes
    • Land & whatever is developed or growing on the land
    • Different rates for different levels
      • Personal home, business, undeveloped land, farm
    • 96% of property taxes stay locally
compulsory income3
Compulsory Income
  • Real property taxes
    • Understand assessed value, tax abatement, tax base
    • Value defined by a realtor/appraiser/tax assessor
      • Fair market value
      • Assessed value – 30-50% lower than FMV (1/3 in IL)
        • A.V=Taxable worth
slide8
Fair market value = $180,000 listing
  • Assessed Value = $60,000 ($180,000 / 3)
compulsory income4
Compulsory Income
  • Real property taxes
    • Tax abatement
      • Exemption from paying taxes
      • Specific time period
      • New business incentive
compulsory income5
Compulsory Income
  • Real property taxes
    • Tax base
      • Total assessed property value of all taxable property in a community
      • Bloomington vs. Hudson
      • Exemptions – NPOs, churches, universities, museums….
compulsory income6
Compulsory Income
  • Real property taxes
    • Tax rates formula

Tax rate = Required taxes / net assessed valuation

Required taxes = * Set from budget (ie. $5,000,000)

* Expenditures – revenues (excluding taxes)

* Where does a city get revenue?

compulsory income7
Compulsory Income
  • Real property taxes
    • Tax rates formula

Tax rate = Required taxes / net assessed valuation

Net assessed valuation=

Total assessed valuation of com. 410,500,000

Tax exempt property (abatements)- 10,500,000

Net assessed valuation $400,000,000

compulsory income8
Compulsory Income
  • Real property taxes
    • Tax rates formula

Required taxes/net assessed valuation=tax rate

$5,000,000 / $400,000,000 = 0.0125 (1.25%)

Also read as $1.25 per $100 assessed value

compulsory income9
Compulsory Income
  • Real property taxes
    • Tax rates formula

Tax rate = 0.0125

AV: $100,000 home x 0.0125 = $1,250 tax bill

AV: $150,000 home x 0.0125 = $1,875 tax bill

slide16
FYI…
  • Monday – meet in ITDC 103B
  • Read one of the linked articles
compulsory income10
Compulsory Income
  • Real property taxes
  • Personal property taxes
  • Sales taxes
  • Excise tax
  • Income tax
  • Local option tax
compulsory income11
Compulsory Income
  • Personal Property taxes
    • Allowed in 41 states (not IL)
    • 1. Household tangible property
      • Autos, $, livestock, furniture
    • 2. Business tangible property
      • Inventory, business fixtures, furniture, equip
    • 3. Intangibles
      • Stocks & bonds
town of normal eg1
Town of Normal Eg
  • 0.75% Use tax on titled items
    • cars, boats, motorcycles
    • Supports General fund
compulsory income12
Compulsory Income
  • Real property taxes
  • Personal property taxes
  • Sales taxes
  • Excise tax
  • Income tax
  • Local option tax
compulsory income13
Compulsory Income
  • Sales taxes
    • Largest source of state tax revenue
    • Second largest for cities
    • Imposed on the sale of tangible goods
      • At-home food & drugs exempt
      • DE, MT, NH, OR – no sales tax
    • Range 4-10%
      • 1-2% stays with local government
compulsory income14
Compulsory Income
  • Sales taxes
    • Dedicated sales tax
      • MO State Parks (1/10 of ea. Cent)
      • Have no entrance fees
    • Used to fund Bank One Ballpark & renovate Packer Stadium
    • Rural towns vs. tourism towns
      • Boulder, CO & Wal-Mart
      • Normal vs. Honolulu…
tourism town comparisons
Tourism Town Comparisons
  • Honolulu County gives $80,000 credit to FMV. Rest is taxed.
  • Must pay a minimum of $100 in taxes
  • $180,000-$80,000=$100,000 AV
town of normal eg2
Town of Normal Eg
  • The State of Illinois collects a sales tax at a rate of 7.5%, which is distributed as follows:
    • 5% to the State of Illinois
    • 0.25% to McLean County
    • 1.00% to the Town of Normal
    • 1.25% B-N home rule tax
      • Used for General Fund with a small % to support the Uptown Renewal Program.
compulsory income15
Compulsory Income
  • Real property taxes
  • Personal property taxes
  • Sales taxes
  • Excise tax
  • Income tax
  • Local option tax
compulsory income16
Compulsory Income
  • Excise taxes
    • Imposed on specific goods, services
    • Hotel-Motel tax
      • CVB’s
      • Sports facilities
        • 2% toward Spurs’ SBC Arena
        • Georgia Dome (3.7%)
        • Comiskey Park (2%)
          • IL Sports Facilities Hotel Tax…

Why do this?

illinois sports facilities hotel tax
Illinois Sports Facilities Hotel Tax
  • The Illinois Sports Facilities Authority imposes a tax on gross receipts from hotel operators within the City of Chicago. Receipts from permanent guests (occupants of 30 days or longer) are not taxed. Proceeds are used for the corporate purposes of the authority, including construction costs for the Comisky Baseball Park.
compulsory income17
Compulsory Income
  • Excise taxes
    • Car Rental tax
      • American Airline Center in Dallas
      • Atlanta Hawks Philips Arena
    • Sin taxes
      • Alcohol, cigarettes
      • Cleveland’s Jacob’s field, Gund Arena & Browns Stadium
compulsory income18
Compulsory Income
  • Real property taxes
  • Personal property taxes
  • Sales taxes
  • Excise tax
  • Income tax
  • Local option tax
compulsory income19
Compulsory Income
  • Income taxes
    • Municipal, state & federal levels
      • IL = 3% flat tax with 1/11 going to municipalities
      • Suggested 4.5% - 50% increase
        • $50,000 - $1500 to $2250 ($750 or $62 per month)
    • IL = no state property taxes, rely on income taxes

Which is more fair, property or income tax?

compulsory income20
Compulsory Income
  • Real property taxes
  • Personal property taxes
  • Sales taxes
  • Excise tax
  • Income tax
  • Local option tax
compulsory income21
Compulsory Income
  • Local option taxes
    • Applied at the local level
    • Legislatively enabled at the state level
    • Ie. Local home rule sales tax added to the state sales tax (1.25% in B-N)
income sources1
Income Sources
  • Compulsory Income
  • Gratuitous Income
  • Earned Income
  • Investment Income
  • Contractual Receipts
gratuitous income
Gratuitous Income
  • Received without expectation of return
    • Grants, bequests, sponsorships
  • Most often giver does not receive a direct benefit or compensation
gratuitous income1
Gratuitous Income
  • Grants
    • LWCF – development of outdoor rec resources
    • OSLAD - Open Space Land Acquisition and Development
    • Illinois Transportation Enhancement Program
gratuitous income2
Gratuitous Income
  • Bequests
    • Life insurance
    • Wills
      • ELM fund
  • Sponsorships & Donations
    • $$, land, equipment, stocks, bonds
    • See examples….
gratuitous income3
Gratuitous Income
  • Nonprofit agencies
    • Rely on gratuitous
  • Public agencies
    • Rely on some forms of gratuitous
    • Grants & the need for a foundation
  • Commercial
    • Gives gratuitous income
income sources2
Income Sources
  • Compulsory Income
  • Gratuitous Income
  • Earned Income
  • Investment Income
  • Contractual Receipts
earned income
Earned Income
  • Cash resources generated from fees & charges
    • Impacts all sectors
earned income1
Earned Income
  • Entrance fees
    • Well-defined but not necessarily enclosed areas
    • Botanical gardens, zoos
  • Admission fees
    • To enter a building, structure, designated area
    • Show, performance
earned income2
Earned Income
  • Rental fees
    • Pavilions, equipment
earned income3
Earned Income
  • User fees
    • Activity fees
    • Showmobile user fees…
user fees eg
User Fees Eg.
  • Michigan DNR generated:
  • $24.9 million in camping revenues
  • $12.2million in gate receipts.
  • Accounts for almost 96% of their total revenue of $38.6 million
  • (NASPD, 2008)
earned income4
Earned Income
  • Sales
    • Goods & services through pro shops, concessions, etc.
    • Eg
      • Kentucky State Parks restaurants - $14.4 m/year
      • Tennessee – $8.5 m/year
earned income5
Earned Income
  • License & permit fees
    • Boat permits, snowmobile license,
earned income6
Earned Income
  • Special service fees
    • Handling fees
    • Lottery funds

Attingham Park – Heritage Lottery Fund

Colorado Lottery

earned income7
Earned Income
  • Special service fees
    • Luxury suite ($100,000 per)
    • Personal seat licenses (@$1000 per)
      • Pay for right to buy season tickets
      • Forfeit when you no longer buy season tickets
      • Transfer by gift, bequest or sale to third party
income il state parks
Income – IL State Parks
  • Other sources:
  • Motor fuel tax
  • Snowmobile, ATV, boats, hunting license registration
  • Taxes on tobacco, sporting goods
  • Sales tax on tourism
income sources3
Income Sources
  • Compulsory Income
  • Gratuitous Income
  • Earned Income
  • Investment Income
  • Contractual Receipts
investment income
Investment Income
  • Invest unneeded revenue
    • Stocks, mutual funds, money markets
  • All sectors do this
  • NRPA earned $1,287,643 from investments = 10% of their overall budget ….
income sources4
Income Sources
  • Compulsory Income
  • Gratuitous Income
  • Earned Income
  • Investment Income
  • Contractual Receipts
contractual receipts
Contractual Receipts
  • Revenue generated from contractual agreements
    • Concessions
    • Golf pro shop
  • All sectors use this
  • Eg….
contractual receipts1
Contractual Receipts
  • Austin PARD
    • $200,000 in revenue annually from contracts
    • Barton Springs Food and Beverage in Zilker Park
      • Commission Paid– $90,000 annually ($7,500 per month) +
      • 8% of gross annual sales up to $265,000 and
      • 8.5% of gross annual sales exceeding $265,000
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