title
COMMUNICATION SERVICES TAX RATE INCREASE (B)
Ordinance No. 0-07-38
An ordinance of the City of Gainesville, Florida, amending section 25-81 of the Code of Ordinances of the City of Gainesville relating to the communication services tax rate; increasing the local communication services tax rate in accordance with Chapter 202.20(2) Florida Statutes; providing directions to the codifier; providing a severability clause; providing a repealing clause; and providing an immediate effective date.
recommendation
The City Commission adopt the proposed ordinance.
explanation
FINANCE DEPARTMENT STAFF REPORT
When the Communications Services Tax became effective in October 2001, it replaced a number of revenue sources including a portion of municipal utility tax revenues and certain franchise fees previously received by local governments. Inherent in the law was a promise to local governments that their revenues, at least in the year of adoption, would be unaffected by the change in the law. Local governments were permitted to measure their revenues in the first fiscal year 2002 and make adjustments to their rates, including an adjustment for the revenues that should have been received.
The City of Gainesville originally adopted the rate that had been estimated as a proper replacement rate by the Department of Revenue. After the first six months of the new tax, City staff estimated the underpayment that had been received and adjusted its rates accordingly. Looking back, however, and using a full year's revenue from October 2001 through September 2002, it is clear that even our previous adjustment was underestimated. Now that we have complete information from that first year, and because this particular type of emergency rate-setting is anticipated to sunset July 1 of this year under a recently adopted bill, staff has proposed this ordinance.
Using the provisions of Chapter 202.20(2) Florida Statutes, staff is requesting a one-year catch-up rate of 7%, which would become effective September 1, 2007, and a new permanent rate of 5.57% which would become effective September 1, 2008, absent any additional necessary changes due to further Department of Revenue audits. The rates cited above are the calculated rates plus the .12% additional rate to which the City is entitled because it does not charge construction permit fees to communications services taxpayers.
Fiscal Note
Staff estimates the additional revenue in FY08 would be in excess of $1 million and additional revenue beginning in FY09 would approximate $200,000 annually.
CITY ATTORNEY MEMORANDUM
At its meeting of May 14, 2007, the City Commission authorized the City Attorney to draft and the Clerk of the Commission to advertise an ordinance increasing the local communication services tax rate ordinance in accordance with Chapter 202.20(2) Florida Statutes.
The City Attorney requested technical advice from the Florida Department of Revenue to confirm that the City is not prohibited from adopting a second emergency rate setting ordinance. In an informal letter of technical advice dated May 25, 2007, Vincent C. Aldridge, Deputy Director of Technical Assistance and Dispute Resolution for the Florida Department of Revenue, confirmed that the City's proposed adoption of a second emergency rate setting ordinance appears to be based upon a reasonable reading of applicable law. A copy of the letter is attached hereto.
This ordinance requires two public hearings. If adopted on first reading, the second and final reading will be held on Monday, June 25, 2007.