10.H.
City Council Meeting - FINAL
- Meeting Date:
- 04/02/2013
- From:
- Andy Wagemaker, Revenue Director
Information
TITLE:
Consideration / Adoption of Ordinance No. 2013-02: An ordinance amending the Flagstaff City Code, Title 3, Business Regulations, Chapter 3-05, Privilege and Excise Taxes, Division 3-05-004, Privilege Taxes, by amending Section 3-05-004-0430 Timbering and Other Extraction, by deleting a tax exemption for felling, producing or preparing timber for sale or commercial use; amending Section 3-05-004-0475, Transporting for Hire, by deleting tax exemptions related to transporting by motor vehicle outside the City, towing and transportation by railroad, all in an effort to achieve a more uniform Model City Tax Code; and amending Section 3-05-006-0600, Termination, Approval and Authority to Amend Chapter, by making clerical revisions to clarify the history of tax code changes; providing for penalties, repeal of conflicting ordinances, severability, authority for clerical corrections, and establishing an effective date.
RECOMMENDED ACTION:
1) Read Ordinance No. 2013-02 by title only for the final time on April 2, 2013
2) City Clerk reads Ordinance No. 2013-02 by title only for the final time (if approved above)
3) Adopt Ordinance No. 2013-02
2) City Clerk reads Ordinance No. 2013-02 by title only for the final time (if approved above)
3) Adopt Ordinance No. 2013-02
Policy Decision or Reason for Action:
By adopting the proposed ordinance, the City is doing its part to help in the Governor's efforts to make the Model City Tax Code more uniform. Subsidiary Decisions Points: None.
Financial Impact:
It is anticipated that the proposed changes will have a nominal effect on City transaction privilege tax revenues.
Connection to Council Goal:
Effective governance.
Has There Been Previous Council Decision on This:
Yes. The items referenced in this Staff Summary and Ordinance were discussed at the November Council retreat, and a public hearing and first reading of the Ordinance was held at the March 19, 2013, Council meeting.
Options and Alternatives:
1) Adopt the proposed ordinance. If the City adopts the proposed ordinance, the City of Flagstaff will do its part to make the Model City Tax Code more uniform.
2) Do not adopt the proposed ordinance. If the City chooses to not adopt the proposed ordinance, the City will continue to enforce the current tax code. Please note: If the City chooses this option, the City may still be forced to remove these specific items by the Model Tax Code Commission at some point in the future.
2) Do not adopt the proposed ordinance. If the City chooses to not adopt the proposed ordinance, the City will continue to enforce the current tax code. Please note: If the City chooses this option, the City may still be forced to remove these specific items by the Model Tax Code Commission at some point in the future.
Background/History:
Model City Tax Code
In 1987 the City of Flagstaff and other Arizona cities and towns adopted the Model City Tax Code. The Model City Tax Code enables businesses to be taxed uniformly. Cities have the option of establishing the rate (%) of tax applied to gross income, and there are model and local options under the Model City Tax Code which cities may adopt. The City’s base tax rate is currently 1.721% and there is an additional voter approved 2% BBB tax levied on the restaurant/bar and the hotel/motel classifications.
The City of Flagstaff is required to adopt all changes to the Model City Tax Code issued by the Model Tax Code Commission.
Governor's TPT Simplification Task Force
In May, 2012, Governor Jan Brewer issued Executive Order 2012-01 calling for the creation of a Transaction Privilege Tax Simplification Task Force. The Task Force was charged with:
...reviewing, identifying, or developing proposals that would simplify the TPT code and TPT practice in order to alleviate taxpayer frustration, improve compliance, and avoid redundancies. Specific areas of focus shall include, but not be limited to:
a. options for a single point administration to avoid redundancies;
b. identification of differences between state statute and the Model City Tax Code; and
c. standardization of definitions of taxable transactions between taxing authorities.
In conjunction with the creation of the Task Force, the Arizona League of Cities and Towns asked all municipalities to eliminate all unique tax code provisions. City staff reviewed the adopted code and discussed recommended cleanup items with Council at the November Council retreat. The proposed ordinance is an attempt to eliminate tax code provisions unique to the City of Flagstaff, in an effort to further make the Model City Tax Code more uniform.
Proposed City Tax Code Changes
The City of Flagstaff has adopted the Model City Tax Code, but has a few provisions that are unique to the City. The proposed ordinance will have the effect of eliminating tax code provisions unique to the City. In particular, the following tax exemptions will be eliminated:
Proposed City Tax Code Changes
The City of Flagstaff has adopted the Model City Tax Code, but has a few provisions that are unique to the City. The proposed ordinance will have the effect of eliminating tax code provisions unique to the City. In particular, the following tax exemptions will be eliminated:
•Timbering and Other Extraction: tax exemption for felling, producing or preparing timber for sale or commercial use;
•Transporting for Hire: tax exemptions for: (1) transporting by motor vehicle outside the city; (2) towing and storage; (3) transportation by railroad.
In addition, clerical changes to Section 3-05-006-0600 Termination, Approval and Authority to Amend Chapter are being proposed to clarify the history of the tax code.
Notice of the proposed tax code changes were posted on the City website homepage on December 28, 2012.
Staff Outreach and Business Impacts
Staff attempted to contact all businesses affected by the proposed changes. The following section summarizes the outreach and impacts.
•Timbering and Other Extraction:
One current taxpayer is affected by the removal of this exemption. The taxpayer was contacted and does not feel that the removal of the exemption will affect the business in any way. Therefore, eliminating this exemption will not increase taxes on any current taxpayers within the City of Flagstaff. However, eliminating this exemption may affect future taxpayers.
•Transporting for Hire: (1) transporting by motor vehicle outside the city and (2) towing and storage
No current taxpayers are affected by the removal of these exemptions. Over the past few years, City staff has advised existing and new taxpayers that state regulations preempt the City from levying specific taxes under the transportation classification. However, these taxpayers are required to obtain an occupational business license with the City of Flagstaff. City staff will continue to advise taxpayers within this classification to obtain an occupational business license with the City and coordinate other requirements with the State of Arizona. Therefore, eliminating these exemptions will not increase taxes on any current or future taxpayers within the City of Flagstaff.
•Transporting for Hire: (3) transportation by railroad.
No current taxpayers are affected by the removal of this exemption. City staff contacted the Arizona Department of Revenue and other Cities throughout the state. No other jurisdictions levy a tax for transportation by railroad. Therefore, eliminating this exemption will not increase taxes on any current or future taxpayers within the City of Flagstaff.
No current taxpayers are affected by the removal of these exemptions. Over the past few years, City staff has advised existing and new taxpayers that state regulations preempt the City from levying specific taxes under the transportation classification. However, these taxpayers are required to obtain an occupational business license with the City of Flagstaff. City staff will continue to advise taxpayers within this classification to obtain an occupational business license with the City and coordinate other requirements with the State of Arizona. Therefore, eliminating these exemptions will not increase taxes on any current or future taxpayers within the City of Flagstaff.
•Transporting for Hire: (3) transportation by railroad.
No current taxpayers are affected by the removal of this exemption. City staff contacted the Arizona Department of Revenue and other Cities throughout the state. No other jurisdictions levy a tax for transportation by railroad. Therefore, eliminating this exemption will not increase taxes on any current or future taxpayers within the City of Flagstaff.
Key Considerations:
A complaint of some businesses operating in Arizona is the complexity of filing tax returns at the State and local level. A uniform Model City Tax Code makes it easier for those businesses which engage in taxable business activities in multiple Arizona cities and towns to file tax returns.
Expanded Financial Considerations:
None.
Community Involvement:
Inform.
Specific businesses that could possibly be affected by the proposed tax code changes were contacted. At this point in time, none of those business feel that the proposed changes will affect them in any meaningful way.
Specific businesses that could possibly be affected by the proposed tax code changes were contacted. At this point in time, none of those business feel that the proposed changes will affect them in any meaningful way.
Council Action:
04/02/2013 - EAB - Council read for final time by title only and adopted unanimously.