2008/10/15 Council Agenda Packet

CITY OF EVERETT FISCAL ANNEXATION ANALYSIS Of the 8.6% sales tax currently collected in the City and the potential annexation area, a 10/0 "local option" accrues to local jurisdictions. In the unincorporated area, the full 1% local sales tax accrues today to Snohomish County (with the exception a small portion that is retained by the State Department of Revenue to cover collection and distribution costs). If the transaction location is within a city like Everett, the city receives 85% of the 10/0 local sales tax and the County receives 15%. This tax is levied not only on businesses in the area, but also on construction activity and some transactions that are related to housing, such as certain online purchases. Business and Occupation Taxes (B&O) The City of Everett levies a B&O Tax on businesses located within the City boundaries at a rate of 0.1% of gross business income (GBI). For projections of GBI, a State average of GBI per employee was applied to the total estimated jobs projected by the model each year for the current City and study areas. Jobs within the model are estimated based on land use and development assumptions which vary annually. Utility Taxes The City of Everett imposes utility taxes on telephone services (including cell phone services), electricity, and natural gas, all at a rate of 4.5%. The utility taxes for cable television are levied at 5.0%, and 6% for water and sewer. Because these taxes are paid by both residences and businesses, revenues are projected based upon a per capita number for population and employment. Other Revenues Emergency Medical Services (EMS) Levy. The City of Everett is currently authorized by voters to levy a permanent Emergency Medical Services tax. The maximum levy allowed is $0.50. In 2008, the current levy rate is $0.32 per 1,000 of assessed value. Based on the conversations with the City of Everett staff, the analysis projects that the City will ask the voters to reset the levy to $0.50 in 2010, and continue to reset the levy every six years throughout the planning period. Similar to the situation discussed under the Property Tax section, because of lags associated with annexation and levying the tax, the City would receive the County's EMS levy revenue from the annexation area for 2009 assuming annexation on January 1, 2009. This is estimated to be approximately$1.1 million for the year. Internal Charges for Service. The City charges its fee-based funds (including Utilities, Transit, Golf, and a parking facility) for goods and services provided by the City. This allows for an accounting of the full cost of providing the fee-based services to the public. Revenues to the City include charges for financial services, legal services, labor services, information technology support, and purchases from the City's Stores facility. Revenues in this category are projected on a per capita basis. For the annexation areas these revenues are projected at 20% of the current City's per capita revenues. As more people use the fee-based services, the departments will have some additional need for City services, but not on a one-to-one basis. The current per capita rate is $31.26 based on the City's 2008 budget, which is expected to increase with inflation. FL Final Report:October 2008 Page 30