TITLE
Adopt resolution authorizing City Manager, or designee, and MuniServices, LLC, to examine records relating to the Transactions and Use Tax, collected by the BOE. (Citywide)
DISCUSSION
With the adoption of Resolution 16-017 on February 23, 2016, the City placed a 1 percent Transactions and Use Tax measure (Measure A) and a Budget Stabilization (Rainy Day) Fund measure (Measure B) on the June 7, 2016 ballot. On March 1, 2016, the City Council adopted Ordinance 1516, adding Chapter 3.62 to the Long Beach Municipal Code, to impose a Transactions and Use Tax and establish a Budget Stabilization Fund subject to the outcome of the June 7, 2016 election.
Measure A, and the accompanying Measure B, were approved by a majority of City of Long Beach voters on June 7, 2016.
The California State Board of Equalization (BOE) administers and collects the Transactions and Use Taxes for all jurisdictions within the State. Accordingly, they will also be responsible for the administration and collection of Measure A. In order to allow the BOE to complete these tasks and complete appropriate preparations for collection of the new tax beginning January 1, 2017, the BOE requires adoption of the attached Resolution authorizing a City official to execute the following two agreements:
1. Agreement for Preparation to Administer and Operate City’s Transactions and Use Tax Ordinance.
2. Agreement for State Administration of City’s Transactions and Use Taxes.
Additionally, since 1983, the City has contracted for services of revenue recovery firms to provide sales and use tax auditing, projection and recovery services. The City has retained MuniServices, LLC (MuniServices), since 2007 to provide technical expertise to perform these services, which are not available within the City. These services include the examination of sales and use tax records to ensure that these taxes are properly attributed to the City and facilitating the process of correcting misallocations by the BOE so that revenue is remitted to the City.
State law requires that local jurisdictions adopt a Resolution authorizing consultants to review BOE records in order to perform revenue recovery services. Accordingly, in a separate action, staff is recommending that the City Council adopt the attached Resolution authorizing an agreement with MuniServices for the provision of these services for Measure A.
This matter was reviewed by Deputy City Attorney Amy R. Webber and by Assistant Finance Director Lea Eriksen on July 1, 2016.
TIMING CONSIDERATIONS
City Council action is requested on July 19, 2016, so that the BOE can promptly begin their preparation for Measure A’s implementation.
FISCAL IMPACT
The passage of Measure A is projected to generate approximately $48 million annually in additional transactions and use tax revenue for the City at the 1 percent level. Pursuant to Section 7272 of the State Revenue and Taxation Code, the City must reimburse the BOE for its preparatory and administration costs. The BOE charges approximately 0.53 percent of the revenue collected for transactions and use taxes, and an additional one-time setup fee of approximately $150,000. These costs will be netted out of the revenue remitted to the City; as a result, no appropriation is needed.
MuniServices currently provides sales and use tax audit services to the City, and it is anticipated that additional revenue auditing services related to Measure A will commence in FY 17. The net cost of the additional scope of work cannot be determined until the tax has been fully implemented. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
BODY
[Enter Body Here]
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER