Report on revenue generation
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10300 TOfT. Av....
Cupertino, Colifomio 95014
SUMMARY
(408)252-4505
AGENDA ITEM NUMBER
AGENDA DATE
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SUBJECT AND ISSUE: Survey of Revenue generating options.
BACKGROUND:
State law provides that general law cities can generate revenue
in four ways: taxes, fees, assessments and franchises. within
each of these categories there are limitations.
Attached is a matrix which identifies various revenue generating
options within the first three categories. Franchises were not
addressed since the current rates are fixed for the near
future. The exception may be to increase the franchise fees for
cupertino Water. Staff will evaluate this potential and return
to the Council with a recommendation.
Each option enumerated has been evaluated in terms of the new
dollars generated annually, whether a vote is required, whether
the revenue increases with inflation, the length of time the
revenue will be produced and the reliability of the revenue
option.
Assumptions about the rate to be levied in the case of new
monies or the amount of the increase for current revenue sources
are in parenthesis.
The assumptions about
illustrative only and
Council desires.
rates or the amount of increases are
it can be raised or lowered as the city
If a tax or assessment is being levied for a specific reason, it
requires a sixty-seven percent vote while a tax which goes to
the general fund would require a fifty percent vote.
Survey of Revenue Generating Options
Page two
In the business license tax options, the assumptions are not
shown. The amounts generated for the gross receipts form assume
a rate of $.50/$1,000 of retail sales with all other businesses
based on per employee rate with a minimum of $50.00. The per
employee form has a rate of $.35/employee with a minimum of
$50.00.
In the parcel tax option, it was assumed that each residence
would pay the same amount of $50 per household, and
commercial/industrial parcels would be at a rate of $.25 per
square foot.
A general obligation tax is based on assessed value in a manner
similar to that proposed by Measure K.
Revenue bonds can only be sold in an amount equivalent to at
least the amount of revenue generated from a project for the
duration of the debt service obligation.
Mello-Roos refers to a specific legislation which provides for
the creation of a district to fund for specified services or
projects. Those people in the district must vote in favor of it
by a two-thirds margin because it is for specified benefit or
project. It would generate revenue for the period of time that
the debt service is obligated.
Benefit assessment districts are created to generate
an amount equal to the benefit received. Therefore,
could pay at a lower rate than residential if
received a lesser benefit.
revenue in
commercial
commercial
Reliability of each option is a very important consideration.
Those options which received "YES" for reliability can be
anticipated at a certain level for at least a predictable amount
of time. The options which received a "NO" are viable options,
but how much revenue will be received at any given time cannot
be predicted. For example, the city will receive all the
construction tax and park fees by the time of full build out.
Staff is assuming build out at the year 2,000 and then
annualizing the anticipated revenue over the next ten years.
However, when the revenue will actually be received is unknown
The options listed on the matrix as "OTHER" do not have the
predictability to be labeled "YES".
Survey of Revenue Generating options
Page three
A final factor to be considered in evaluating the revenue
generating option is the concept of equity. Equity, as used
here, means the fee/tax/assessment levied is fair to those who
are paying it. Those taxes or fees which are levied against
both commercial/industrial and residential on a similar basis
are considered equitable, such as a utility tax and a parcel
tax. Mello-Roos and benefit assessments are equitable in that
those who receive the services are those who pay.
Park fees would
create a demand
equitable.
be levied against those new developments which
and receive the service and so are considered
The general obligation tax which is based on assess value rather
than market value can create inequities when newly purchased
property would pay much more than like property which had been
held since before 1978 (Proposition 13).
other equity issues may arise if only one segment of a community
is assessed.
Finally, staff has indicated under "OTHER" methods to share some
of the costs and revenues which has the effect of saving revenue
and thereby not needing to generate it. These options are not
deemed reliable since no contracts or memoranda of understanding
are predictable at this time.
memrevenue(c)
SUMMARY OF REVENUE GENERATING OPTIONS
Annual Vote CPI
Option Dollars Factor Duration Reliability
Generated Special General
in Tax Tax
Thousands
TAXES:
Utility 67% 50% Yes on going Yes
P-G & E (3%) 1,200
Other Utilities (3%) 400
Construction Tax 270 --- 50% Yes limited No
(Increase $1./sf)
Business License --- 50% Yes on going Yes
Gross Sales 360
Per Employee 160
Parcel Tax ($50./ Res.) 1,200 67% 50% No on going Yes
General Obligation 1,600 67% --- Yes limited Yes
(Measure K level)
FEES:
Park Fees No No Yes limited No
Residential (note 1) 4,000
Indust./Comm. (new) 900
Revenue Bonds 500 No No No limited Yes
ASSESSMENTS:
Mello-Roos (note 2) 950 67% --- No limited Yes
Benefit Assessment 50% No limited Yes
(note 3)
OTHER:
In-Lieu Services minimum No No Yea on going No
Joint Use/Purchase No
DeAnza ----- limited
Mid Penisula ----- limited
County ----- limited
Private Joint Venture No
Hotel ----- on going
Retail ----- on going
Development Agreement ----- limited No
NOTES:
1. Build out would be $14 million: assumption is a 30 % increase
2. Voters of the District
3. Revenue generated equivalent to the cost of improvements