Town Council Regular Session


Print

Return to the Search Page Return to the Agenda
  Item # 4.       
Meeting Date: 05/04/2011  
Requested by: Stacey Lemos Submitted By: Stacey Lemos, Finance
Department: Finance  

Information
SUBJECT:
PUBLIC HEARING - ORDINANCE NO. (O)11-14, AMENDING THE TAX CODE OF THE TOWN OF ORO VALLEY, ARTICLE IV, CHAPTER 8A, SECTION 480, RELATING TO THE UTILITY SERVICES TAX RATE
RECOMMENDATION:
Staff recommends approval of Ordinance No. (O)11-14, increasing the utility sales tax rate to 4% (current rate is 2%) to enhance the diversity and stability of Town revenues and to provide needed resources to maintain Town service levels.
EXECUTIVE SUMMARY:
Future budget forecasts for the General Fund indicate annual deficits each year for the next five years, with an estimated deficit of $2.6 million in FY 2011/12 due to further declines in State shared revenues and construction sales taxes. General Fund services and programs have been reduced by $6 million, or 20%, over the past two fiscal years. Staffing levels have been reduced by over 40 positions, or 13%, during that timeframe.  Further budget cuts of another $2.6 million to close the forecasted deficit for FY 2011/12 would require large-scale layoffs and significantly reduce core services provided to the community in the areas of public safety, parks, recreation and library, development services, and other areas supporting these functions.  Service level impacts can be mitigated by balancing new permanent revenue sources, such as the utility sales tax, with less pervasive budget cuts that have long-term implications.

The Town Council indicated at the January 29, 2011 budget retreat, and most recently at the March 23, 2011 budget study session, a desire to close the projected deficit by considering revenue increases in addition to further expenditure reductions. An increase to the utility sales tax is the option preferred by a number of Councilmembers. If enacted and effective by August 1, 2011 this increase will generate an additional $1.3 million in revenue for FY 2011/12. 

The balanced Town Manager's Recommended Budget delivered to Council April 20, 2011 includes $1.3 million in additional revenues that would be generated by increasing the utility tax rate from 2% to 4%. 
BACKGROUND OR DETAILED INFORMATION:
The Town Council approved an increase to the utility sales tax rate effective April 1, 2007, raising it from 0% to 2% (see Attachment A - Ordinance No. (O)06-23). This 2% tax is applied to the utility bills of those Oro Valley residents and businesses that receive water service from the City of Tucson, Metropolitan Water Company and the Oro Valley Water Utility, electric power service from Tucson Electric Power Company, and natural gas service from Southwest Gas.

Ordinance No. (O)06-23 included a 2-year sunset clause which stated that, “on the second anniversary of the effective date, the utility services sales tax enacted through this Ordinance shall terminate and the amendments to the Town of Oro Valley Tax Code set forth in Section 1 and Section 2, above, shall be repealed by operation of law unless extended by a majority vote of the Council prior to that date.”

The Council voted to extend the utility sales tax on March 4, 2009 (see Attachment B - 3/4/09 Council Communication and meeting minutes).

In order to enact a new or increased tax, State law requires cities and towns to provide public notification on the home page of the town’s website 60 days prior to Council approval of the new or increased tax. Staff provided this notification on our website beginning Thursday, February 24, 2011. This evening, the Council will consider taking action on this item, and if approved, the tax increase would become effective August 1, 2011.

Most Arizona cities and towns charge both a utility sales tax and earn utility franchise fee revenue through voter-approved franchise agreements between the municipality and the utility companies. As shown in ATTACHMENT C - Tax Rate Matrix Comparison, Oro Valley currently has one of the lowest utility sales tax rates and does not have approved franchise fees for any utilities other than cable TV services.
FISCAL IMPACT:
If enacted and effective by August 1, 2011 this increase will generate an additional $1.3 million in revenue for FY 2011/12.

For a homeowner with monthly utility bills for water, natural gas and electricity totaling $300, the estimated monthly impact of a 2% utility sales tax increase would be $6. For a business with monthly utility bills totaling $5,000, the estimated monthly impact would be $100.
SUGGESTED MOTION:
I MOVE to approve Ordinance No. (O)11-14, AMENDING THE TAX CODE OF THE TOWN OF ORO VALLEY, ARTICLE IV, CHAPTER 8A, SECTION 480, RELATING TO THE UTILITY SERVICES TAX RATE.

or

I move...
Attachments
Ordinance 11-14
Attachment A-Ord.(O)06-23
Attachment B-March 4 2009 CC and Min
Attachment C-Tax Rate Matrix


    

Level double AA conformance,
                W3C WAI Web Content Accessibility Guidelines 2.0

AgendaQuick ©2005 - 2020 Destiny Software Inc. All Rights Reserved.