Public Hearing, Consideration and Possible Adoption of Resolution No. 2014-23 and Ordinance No. 2014-15:  A Resolution of the City Council of the City of Flagstaff, Arizona, Declaring that Certain Document Known as "The 2014 BBB Tax Re-Codification Amendments as a Public Record, and Providing for an Effective Date; and an Ordinance of the City Council of the City of Flagstaff, Amending the Flagstaff City Code, Title 3, Business Regulations, Chapter 3-06, Privilege and Excise Taxes, Chapter 3-06, Lodging, Restaurant and Lounge Tax, are Hereby Amended by Adopting "The 2014 BBB Tax Re-Codification Amendments" as Set Forth in that Public Record on File with the City Clerk; Providing for Penalties, Repeal of Conflicting Ordinances, Severability, Authority for Clerical Corrections, and Establishing Effective Dates. (Recodification of BBB Tax)

The Model City Tax Code is the City of Flagstaff’s guiding tax document.  By adopting the proposed ordinance, the City is doing its part to help in the Governor's Transaction Privilege Tax Simplification Task Force's efforts to simplify municipal tax collections.  The recommended action re-codifies portions of Chapter 3-06 of the City Code and will not establish new taxes or increase taxes on any taxpayer. The recommended action will also aid in the transition to tax collections performed by the State of Arizona's Department of Revenue, set to begin on January 1, 2015.

None.  The proposed ordinance does not make any changes to City policies and or practices.  The proposed ordinance merely consolidates the tax rate in the City Tax Code to be more uniform with the Model City Tax Code.  This consolidation makes it easier for the taxpayer to understand the City Tax Code and increases compliance.

Effective governance

No

1) Adopt the proposed resolution and proposed ordinance and re-codify Chapter 3-06 of the Flagstaff City Code.
2) Do not adopt the proposed resolution and proposed ordinance and do not re-codify Chapter 3-06 of the Flagstaff City Code.

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.

City of Flagstaff Bed, Board, and Beverage (BBB) Tax

In 1987, the City of Flagstaff adopted a lodging, restaurant, and lounge tax, often referred to as the Bed, Board, and Beverage, or BBB, tax.  The tax was adopted as an additional 2% tax levied on the restaurant/bar and the hotel/motel classifications.  The details of the 2% tax are outlined in Chapter 3-06 of the City Code.  In general, the Chapter allocates the 2% tax into separate funds (Section 3-06-001-0003 Distribution) and creates commissions and establishes uses of the revenues (Section 3-06-001-0004 Financial Control).  Chapter 3-06 is attached to this summary for more detail.

Proposed Bed, Board, and Beverage Tax Code Changes

The attached ordinance consolidates and re-codifies the additional 2% tax approved by voters and levied on the restaurant/bar and the hotel/motel classifications and incorporates the additional 2% tax into the Model City Tax Code.  Currently, the City levies the additional 2% tax outside of the Model City Tax Code in a separate ordinance.  The 2% tax is levied as an additional line item on taxpayer transaction privilege tax returns for those businesses that report under the restaurant/bar or hotel/motel categories.  In essence, taxpayers reporting under the previously mentioned categories pay a total of 3.721%  (1.721% + 2%) on two lines of the tax return.  The proposed ordinance will allow the City to collect the 3.721% on one line and aid in the Governor's Transaction Privilege Tax Simplification Task Force's efforts to make the Model City Tax Code simpler to follow. 

The consolidation and re-codification of the additional 2% tax will not result in new or increased tax on any taxpayer, nor will it change how revenues are distributed for Tourism, Beautification, Economic development, Parks and Recreation, and Arts and Sciences.  It will simplify the City's Tax Code by locating the total restaurant/bar and hotel/motel tax rates in one place.

The City of Flagstaff and other Cities in the State of Arizona abide by the rules and regulations found in the Model City Tax Code.  The proposed re-codification is another part of the Governor's Transaction Privilege Tax Simplification Task Force's efforts to make the Model City Tax Code more uniform.  If the City chose not to adopt the ordinance, the City's Tax Code would continue to include a separate section with an additional 2% tax rate for restaurants/bars and hotel/motel categories.  The separate code section has worked for the City in the past as City staff was able to enforce the code.  However, with the takeover of transaction privilege tax collections by the State of Arizona on January 1, 2015, there is no guarantee the separate code section would be as fastidiously enforced.  The re-codification will make enforcement by the State of Arizona much simpler, ensuring the continued collection of revenues vital to the City of Flagstaff.

None.

The proposed re-codification of Chapter 3-06 of the City Code will make it much easier for the Arizona Department of Revenue to collect transaction privilege taxes and to enforce the City of Flagstaff Tax Code.   In turn, the City will continue to receive important BBB revenues that the voters have approved.

Inform.