Loading...
HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/01/2005 - FIRST READING OF ORDINANCE NO. 022, 2005, AMENDING ITEM NUMBER: 29 AGENDA ITEM SUMMARY DATE: February 1, 2005 FORT COLLINS CITY COUNCIL STAFF: Alan Krcmarik SUBJECT First Reading of Ordinance No. 022, 2005, Amending Section 25-49 of the City Code, Increasing the Annual Income Limits for the Determination of Eligibility for the Sales Tax Rebate on Food to Sixty Percent of the Median Income. RECOMMENDATION The Finance Committee and staff recommend adoption of the Ordinance on First Reading. FINANCIAL IMPACT Based on statistics about the income of households in the City, staff estimates that the recommended changes in the income levels will allow 2,400 additional households to qualify for the rebate of sales tax paid on grocery food. The cost to the City will increase from about $36,000 in 2004 to over $200,000 in 2005. The increased amount of cost will need to be appropriated later in the year. In the event that the sales tax on grocery food is repealed at the April 5, 2005 election, the rebate program for tax paid on grocery food would be reduced or repealed by subsequent ordinance, eventually eliminating any cost to the City. EXECUTIVE SUMMARY The City has included grocery food as part of the sales tax base since the inception of the tax in 1969. Tax on grocery food has been an integral part of the tax base, accounting for about $5,645,189 of $44.3 million of tax collected for the general government uses. This is 12.7% of the total tax collected. The City has operated a rebate program for sales tax paid on grocery food since the early 1980s. The program provides that households which meet the income level guidelines (now set at 30% of the area median income and updated annually) may apply for taxes paid in the prior year. Approximately 640 households qualify for the program. For each member of the eligible household, the City rebates $40. Ordinance No. 022, 2005, would increase the income eligibility levels to 60% of area median income. This would vastly increase the number of households eligible for the program. Under the new guidelines, staff estimates about 3,000 households would apply and be eligible for the program. The Finance Committee reviewed the staff's proposed amendment on January 14, 2005, and approved this increase. The briefing memo is attached for more information. The February 1, 2005 -2- Item No. 29 Ordinance also provides for rounding to the nearest $50 for household income eligibility and increases the maximum members in a household from four to eight. ATTACHMENTS 1. Briefing Memo to Council Finance Committee ATTACHMENT MEMORANDUM Date: January 10, 2005 To: Council Finance Committee Through: Darin A. Atteberry, City Manager Wendy Williams, Administrative Services Director From: Alan Krcmarik, Financial Officer Subject: Possible Changes to the City's Sales Tax Rebate Program SUMMARY: The City of Fort Collins has operated a rebate of sales tax program (along with property tax and utility rebate programs) since the 1980s. The program's purpose is to offset the amount of sales tax that low-income households pay on grocery food. This program reduces the regressive nature of the sales tax on low-income households that participate in the program. Currently, the program has the income eligibility levels set at 30% of area median income. This level is slightly higher than the official poverty level set by the U.S. government. Under the current income levels, about 640 households (representing about 884 people) apply for and are determined to be eligible for the program. The cost to the City is about $43,500 per year. Other communities in the area, most notably Loveland, set the income levels and the per person compensation levels higher than Fort Collins. At the January 4, 2005, Council meeting, Councilmember Hamrick asked for options to increase the income levels. Options Considered Staff has prepared the attached table to show estimates of what higher income levels might mean to participation levels and total cost. Staff has provided four options for new income limits: 50% of median income, 60% of median income, 80% of median income, and 100% of median income. A final option, rebating $40 to all residents of the City has also been provided for comparative purposes. The table shows that participation and costs rise significantly as the income levels are increased. This is due to the number of households increasing and assumes that participation rates remain about the same as they are in the current program. It is probable that participation rates could increase above current levels and the total costs would be higher. Recommendation: Staff recommends that the new income levels be set at 60% of median income. Participation in the program would increase by a factor of six. This income level would match the levels used by Loveland. Staff further recommends that the level be revisited in two years to determine if the additional benefit of reducing the cost to low income households is in line with the costs. By that time, the City will have enough program participation and cost data to make a more conclusive recommendation to Council. Estimated Cost of Sales Tax Rebate Program At Selected Levels of Area Median Income Number of 30% of 50%of 60% 80%of 100% of People in Median Median Median Median Median Household income Income Income Income Income 1 $ 13,950 $ 23,300 $ 27,960 $ 37,250 $ 46,600 2 15,950 26,600 31,920 42,550 53,200 3 17,950 29,950 35,940 47,900 59,900 4 19,950 33,250 39,900 53,200 66,500 5 21,550 35,900 43,080 57,450 71,800 6 23,150 38,550 46,260 61,700 77,100 7 24,750 41,250 49,500 65,950 82,500 8 26,350 43,900 52,680 70,200 87,800 Estimated Participation through Application Program Households 640 2,400 3,000 5,750 8,500 Individuals 884 4,320 5,400 14,950 22,100 Annual Cost $ 35,360 $ 172,800 $ 216,000 $ 598,000 $ 884,000 Automatic Rebate to All City Residents Assumes that the City would rebate to all residential utility customers within the City. Total Households 51,000 Total Population 132,600 Total Cost $5,304,000 ORDINANCE NO, 0229 2005 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING SECTION 25 -49 OF THE CODE OF THE CITY OF FORT COLLINS, INCREASING THE ANNUAL INCOME LIMITS FOR THE DETERMINATION OF ELIGIBILITY FOR THE SALES TAX REBATE ON FOOD TO SIXTY PERCENT OF THE MEDIAN INCOME WHEREAS , the City of Fort Collins has operated a sales tax rebate program (the "Program") , along with property tax and utility rebate programs since the 1980s for the purpose of offsetting the amount of sales tax that low-income households pay on grocery food; and WHEREAS , approximately 640 households, representing about 884 people, apply for and are determined to be eligible for the Program at a cost to the City of approximately $36,000 per year; and WHEREAS , the Program currently sets the income eligibility levels at 30% of area median income which is slightly higher than the official poverty level set by the U. S . government; and WHEREAS , communities in the Northern Colorado with similar rebate programs currently set their income levels and the per person compensation levels higher than Fort Collins ; and WHEREAS , City staff has reviewed five options for increasing eligibility for the sales tax rebate program, and has recommended that: (a) the new income levels be set at 60% of median income, rounded to the nearest $50 increment, which would result in an increase in participation by a factor of six, and (b) the size of an eligible household be increased to include up to eight members from the current limit of four; and WHEREAS , the Council Finance Committee also recommends that the new income level be set at 60% of median income, rounded to the nearest $50 increment, and the household members be increased to eight; and WHEREAS , staff further recommends that the level be reviewed in two years to determine if the additional benefit of reducing the cost to low income households is in line with the costs to the City; and WHEREAS , the Council has determined that Chapter 25 of the Code of the City of Fort Collins should be amended by the modification of Section 25 -49 to allow the rebate for eligible families to be increased to sixty percent (60%) of the area median income, rounded to the nearest $50 increment, for the applicable household size. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows : Section 1 . That Section 25 -49( 1 ) of the Code of the City of Fort Collins is amended to read as follows : Sec . 25-49 . Qualifications. In order to qualify for the rebate, the following requirements must be met: ( 1 ) All members of an applicant household must have resided within the city prior to the commencement of the calendar year for which application is made and at the time the application is made. The applicant household shall have an annual income which shall not exceed sixty percent (60%) of the area median income for the applicable household size in the Fort Collins-Loveland metropolitan statistical area, rounded to the nearest two-hundred--fifty-dollar increment, up to a maximum household income of sixty percent (60%) of the area median income for a household of four (4) eight (8), as most recently published by the United States Department of Housing and Urban development as of August 1 of the rebate year. Section 2 . That, on or before February 15 , 2007, the City Manager review the income levels for eligibility established by this ordinance to determine if the additional benefit of reducing the cost to low income households is in line with the costs to the City, and to submit a written report and recommendation to the Council regarding that question. Introduced, considered favorably on first reading, and ordered published this 1 st day of February, A.D. 2005 , and to be presented for final passage on the 15th day of February, A.D . 2005 . Mayor ATTEST : City Clerk Passed and adopted on final reading this 15th day of February, A.D . 2005 , Mayor ATTEST : City Clerk NOW,THEREFORE,BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That Section 25-49(1) of the Code of the City of Fort Collins is amended to read as follows: Sec. 25-49. Qualifications. In order to qualify for the rebate, the following requirements must be met: (1) All members of an applicant household must have resided within the city prior to the commencement of the calendar year for which application is made and at the time the application is made. The applicant household shall have an annual income which shall not exceed this sixty percent (60%) of the area median income for the applicable household size in the Fort Collins-Loveland metropolitan statistical area, rounded to the nearest mod=fifty-dollar increment, up to a maximum household income of thirty percent(30%)sixty percent(60%)of the area median income for a household of fbat`(4)eight(8),as most recently published by the United States Department of Housing and Urban development as of August 1 of the rebate year. Section 2. That, on or before February 15, 2007, the City Manager review the income levels for eligibility established by this ordinance to determine if the additional benefit of reducing the cost to low income households is in line with the costs to the City, and to submit a written report and recommendation to the Council regarding that question. Introduced, considered favorably on first reading, and ordered published this 1st day of February, A.D. 2005, and to be presented for final passage on the 15th day of February, A.D. 2005. Mayor ATTEST: City Clerk