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HomeMy WebLinkAbout2003-10-14 - AGENDA REPORTS - SC COC TAX AGMT (2)Agenda Item: CITY OF SANTA CLARITA AGENDA REPORT CONSENT CALENDAR City Manager Approval: Item to be presented by: Barbara Boswell DATE: October 14, 2003 SUBJECT: CITY OF SANTA CLARITA/COLLEGE OF THE CANYONS PROPOSED USE TAX SHARING AGREEMENT DEPARTMENT: Administrative Services RECOMMENDED ACTION City Council approve the proposed City of Santa Clarita/College of the Canyons Use Tax Sharing Agreement, and direct the City Manager to execute this Agreement, subject to City Attorney approval. BACKGROUND In late 2002, College of the Canyons (COC) approached staff and indicated their desire to partner with the City in the development of a program designed to increase Use Tax revenue as a means to help fund COC's future University Center. The development of this potential program represents an opportunity for the City and local private sector businesses to jointly help the College construct their University Center through the generation of new Use Tax revenue the City does not currently receive. As background for the City Council, in 1997 Senate Bill (SB) 110, which amended California's Revenue and Taxation Code, was signed into law by the Governor changing the way use tax revenue could be disbursed by the State Board of Equalization. Prior to SB 110, use tax collected by the State Board of Equalization was exclusively placed in State and County Revenue Pools and distributed on a percentage basis to all counties and cities in California. Much like the one percent of local sales tax that the City receives, one percent of all use tax flows back to local agencies. However, once these revenues are disbursed through the state or county pool, Santa Clarita receives an extremely small portion of this revenue. � n b Li.,.a t=L:; ' The most significant benefit of the SB 110 is that local agencies such as Santa Clarita have an opportunity to recover the full one percent of locally generated use tax revenue. For example, if a business within the City purchased one million dollars worth of capital equipment that was subject to state use tax, the one percent of local use tax generated by this transaction would equal $10,000. In this instance, through the various use tax pools, the City currently recovers 3% of the $10,000 generated in local use tax revenue, which is approximately $300. However, SB 110 would allow participating local businesses to direct the full one percent of use tax ($10,000) back to the City. In previous years, City staff has tried to work with local businesses to implement a use tax program without any success. It is the College's belief that a coordinated effort among both the City and COC, specifically designed to benefit the future University Center, represents an ideal approach to develop a use tax program that will be supported by the local business community. During the past six months, City staff and representatives of COC have met on several occasions to discuss the development of a Use Tax Sharing Program. During the course of this process, COC and the City have developed a conceptual Use Tax Program that, if approved by both the City Council and Community College District Board, will entail the following: • Four-year agreement whereby the City agrees to share fifty percent (50%) of all new Use Tax Revenues generated by this program with COC in support of their future University Center. • The City agrees to a maximum contribution of $2.0 million in new Use Tax Revenue. • The City and COC agree to revisit this issue in twelve months and determine if it is appropriate to make any changes to the terms of this agreement. ALTERNATIVE ACTIONS 1. Do not approve proposed Santa Clarita/College of the Canyons Use Tax Sharing Agreement. 2. Modify the terms of this proposed Agreement. 3. Other action as determined by the City Council. FISCAL IMPACT Under the terms of this proposed Agreement, the City will share 50% of all future, new Use Tax Revenue generated as a result of this program with College of the Canyons. Shared Use Tax Revenues will go towards supporting the College's ongoing efforts to fund their future University Center. The City's maximum contribution towards the University Center during the duration of this Agreement will not exceed $2.0 million. ATTACHMENTS Proposed Agreement between the City and the College of the Canyons available in the City Clerk's Reading File Use Tax Deal Points City/COC Proposed Use Tax Program Overview of Significant Proposed Deal Points Length of Agreement 4 Year Agreement between the City & COC to share New Use Tax Revenue to be capped at a maximum City contribution of t to be revie!Ke—dafter the Pt vear. P Campaign 4 Year1Capital CampaI lion. ngn Period during wh ch time COC will Capital Period be able to identifyand recruit partici atin local business Business Outreach COC will be solely responsible for recruiting business participation. The City's Economic Development Manager will attend and represent the City at all Business Outreach meetings scheduled by COC to discuss the Joint Use Tax Rha.;,,.. u..,........� Assistance of and City to retain and manage the day to day efforts of Municipal Oversight of Use Tax Revenue Advisors to oversee this Consultant program Breakdown of Shared City to: Revenues 1. Retain its current 3% share of use tax revenues generated through the County Pool (These revenues come off the top of any new use tax revenues generated as a result of this program) 2. City to provide compensation in the amount of 15% of all future/new use tax revenue to use tax Consultant 3. City to assess an administration fee to process and remit 50% of all remaining use tax revenue derived from local businesses participating in this COC program to Remittance of Uae Tax City will remit 50% of all new use tax on a quarterly basis upon receipt of such funds from the State E ualization Board of Remittance of Revenues City to remit all use tax revenues directly to the Community Colle a District Compensation to City COC to internally review, discuss and recommend possible opportunities to provide the City with some tangible benefit/compensation in return for sharing use tax revenues (i.e. use of facility meeting City Use Tax Program rooms namingy rights, etc.) City reserves right to consider the development and coordination of a Internal Use Tax program designed to capture use tax revenues generated from initiated city capital type projects — City to retain 100% of revenues from these projects generated City also agrees that it will not undertake any effort to compete with COC in their efforts to recruit local business participation COC representatives request the right to retain all use tax revenue der;vcd r - a....__