HomeMy WebLinkAboutAgenda Report - May 1, 1991 (79)OR
CITY OF LODI
COUNCIL COMMUNICATION
AGENDA TITLE: Contract for Technical Assistance to Review Cost of Services and
Business License Tax Formula
MEETING DATE: May 1, 1991
PREPARED BY: Assistant City Manager
RECOMMENDED ACTION: The City Council authorize the City Manager to enter into a
contract with Ralph Andersen b Associates to identify,
document and develop user fees and charges to recover the
City's direct cost for providing public services and to assess and develop a
business license tax program that will result in a reliable revenue source that will
reflect changing economic conditions.
BACKGROUND INFORMATION: Prior to Proposition 13 local governments were not overly
concerned with recapturing the costs of providing public
services. The solution was simple; property tax rates were
adjusted to provide the needed dollars to balance the budget. The reality of the
situation was that property assessments grew and expanded to the extent that tax
rate increases were not necessary and if so the change was slight. Many cities
provided certain services without charge. Los Angeles, for instance, provided free
refuse pick-up.
With the passing of Proposition 13 the rules of the game changed. It became
necessary to begin to to charge for services. Lodi behaved much like other cities.
We tightened our belt, reestablished priorities, relied on the State to provide
revenues, and lived on reserves. Lodi was and is unique in that we have three
well-run and profitable Enterprise Funds which have provided needed additional
revenues.
We have reviewed and increased some of our fees and charges for services in an
effort to recapture our costs. However, costs continue to increase as inflation
takes its toll, and as the City grows.
In past budget messages the City Council has been advised that General Fund revenues
do not meet the cost of providing services. It must be reiterated strongly and
indelibly that the Council has little control over its revenue stream. It cannot
set property tax rates; it cannot increase assessments; it cannot change the sales
tax. State subventions are not determined by local action. Interest rates are set
by the market. The only General Fund revenues controlled locally are charges for
services and those licenses and fees a General Law city can impose.
THOMAS A. PETERSON
City Manager
Contract for Technical Assistance to Review Cost of Services and Business License
Tax Formula
May 1, 1991
Page Two
One facet of good public monetary policy is to recapture the cost of direct services
that are unique to the person, the property or time. For instance, the general
public should not pay for the direct costs of issuing a variance or changing the
zoning of a piece of property. Those services are a direct benefit to an individual
or the owner of a piece of property. General tax revenues should not be used for
those purposes. By the same token, the cost of maintenance of traffic lights,
trimming street trees, fire protection, police patrol, library services, for
instance,- benefit the entire community and should be paid for from general tax
revenue.
In order to maintain our levels of service, the City must undertake a program to
identify the costs of providing services and develop fees to recapture all or a
portion of those costs. The amount to be recaptured certainly is, and appropriately
so, the province of the City Council. However, to make an intelligent decision the
costs must be known.
The present City staff does not have the expertise nor the time to do a proper job
of identifying the costs and develop appropriate fee schedules. If we were to
assign this task in-house we could not complete this project in a timely manner but
most importantly, we would spend a great deal of time spinning our wheels and most
likely could not do the same quality job as experts in the field.
Our present business license fees were put into effect in 1948 and have not been
revised since that time. A business license fee is not regulatory in nature but a
revenue source. If our business license fees are to be revised (and they should be)
any new formula analyzed with an eye toward being reasonable, equitable, understood,
and justified. It should assist in meeting the City's revenue needs, and be easily
administered. Such a tax should not be regressive, but rather be responsive to the
business cycle.
This likewise is a specialized study and requires special knowledge and above all
the time to complete such a study.
The cost of this study if approved will be:
Cost Recovery - $41,000
Business License Review - 22,480
63,480
Contract for Technical
Tax Formula
May 1, 1991
Page Three
Assistance to Review Cost of Services and Business License
We strongly urge the Council to authorize these studies. We presently are in the
process of putting together an operating budget for 1991-92 and it is becoming
increasingly clear we must take action to ensure an adequate revenue stream to
support our present levels of service.
Representatives of Ralph Andersen & Associates and David M. Griffith & Associates,
LTD, will be in attendance at Wednesday night's meeting to provide any additional
information Councilmembers may request.
FUNDING SOURCE: Capital Improvement Program
Respectfully submitted,
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(J,4ry L. Glenn
—Assistant City Manager
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CCCOM194/TXTA.07A