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HomeMy WebLinkAbout05/16/2002 BAKERSFIELD (~~~ ~/~ Mike Maggard, Chair /~lan-Tandy~ City Maf{ager Harold Hanson Darnell Haynes, Assistant to the City Manager Mark Salvaggio AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, May 16, 2002 4:00 p.m. City Manager's Conference Room 1501 Truxtun Avenue - Suite 201 1. ROLL CALL Call to Order at 4:03 p.m. Present: Councilmembers Mike Maggard, Chair; Harold Hanson and Mark Salvaggio 2. ADOPT APRIL 18, 2002 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. Discussion and Committee recommendation regarding application of the business license ordinance to commercial and residential rental property businesses Committee Chair Maggard explained since the Committee's last meeting, he has acquired a new client and this may create a conflict of interest, so he excused himself and requested Committee Member Hanson to chair in his absence on this item. City Manager Alan Tandy explained this is not a new tax. The tax has been in place since the 1960s. There has not been a rate increase since the early 1990s and there cannot be a rate increase under California law without a referendum. The majority of California cities, both large and small, usually impose the tax at a rate many times higher than does Bakersfield. This issue has surfaced because new technology is available that is identifying ADOPT]II) AS SUBHI~ ON JUNE 20~ 2002 AGENDA SUMMARY REPORT · BUDGET AND FINANCE COMMITTEE Thursday, May 16, 2002 Page -2- more property owners who were unaware of the existence of the tax and have not paid it, so from their perception it is a new tax, although technically it is not. The revenue collected from this tax is typically $25, so the City has not aggressively enforced the tax, which left many individuals not aware of it. The only Budget and Finance Committee discussions on this subject have been on exempting some groups from the tax who technically have been subject to it for over 30 years. In March the Committee sent reports to the City Council. The majority report recommended those who rent four or fewer residential units should be exempt from the tax. The minority report recommended a broader application of the exemption to the tax based on the passive income criteria contained in IRS rules and regulations. Several groups, including the Chamber of Commerce, Board of Realtors and others, expressed concerns, so the City Council took no action and referred the issue back to the Committee. Due to concerns in the community about this tax, using the passive income criteria for exemption may be the best remaining alternative. Staff has devised a form and is willing to recommend that those who claim their real estate investment as passive income under Section 469 of the Internal Revenue Code, be exempted from the business license tax. This would allow prospective payers of the tax an opportunity to identify on the form whether it is passive income under the IRS Code. (The form was displayed using an overhead projector.) It was further recommended if an ordinance is adopted along this line, an educational campaign be conducted to increase awareness about both the tax and the exemption. It was clarified that once the exemption is enacted, it cannot be removed under Proposition 218 without a vote of the citizens of Bakersfield. Chris Frank, Chamber of Commerce, stated the Chamber of Commerce does not have an official position. She expressed the proposal as outlined by the City Manager, does seem to be a workable solution to their concerns, but wanted assurance'that there is not an exclusion for a sector of businesses in the community. Leo Hinds, CPA and Attorney at Law, stated in principle he agrees with the direction taken by staff to recognize realty investments as passive activity, but expressed concerns regarding the form: (1) the wording on the form refers to Section 469 of the IRS Code and there are people who do not know what is in it, (2) Congress makes changes to the IRS Code, and (3) the way the form is worded requires the signer to make legal conclusions. City Manager Alan Tandy responded staff is amenable to making the wording more understandable. However, the City does not have a set of standards to identify passive income, so it would be necessary to use the reference to the IRS definition. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, May 16, 2002 Page -3- Greg Bynum, speaking on behalf of the Bakersfield Associations of Realtors, expressed opposition to using the reference to Section 469. He suggested other wording, "Owners of real property are exempt because the rental or leasing of real property is considered a passive investment activity." He expressed everybody that performs services and are in business in real estate pays a business license tax now, so the person who owns the property should not also pay a tax. Chandler Wonderly, Kern County Apartment Association, spoke in opposition to the wording on the form. Richard Watson, apartment owner, spoke in opposition to the business license tax on owners of rental property, but would like to check with his CPA as to whether he is exempt under staff's proposal to exempt passive property investment. Committee Members Hanson and Salvaggio requested staff to meet with Leo Hinds, Greg Bynum and Chris Frank to work out the details and agendize the item for the June 20th Budget and Finance Committee meeting. (Committee Chair Maggard absent for this item) B. Staff report and Committee recommendation regarding four items deferred at the last meeting from the Cost Recovery Program (This item heard first) Staff provided overviews of the four fees, which were removed from the Master Fee Schedule for further review at the Committee level. B-23 Fire Suppression-Permit Processin¢j - Fire Prevention Oversight- Darnell Haynes explained often contractors and engineering companies request the Fire Department to review their fees prior to getting a building permit. The Fire Department review often results in changes being made to the plans. In the past the City has not charged for providing this review prior to their submittal for a building permit although it is a direct benefit to the requestor. This new fee would recover the cost for providing this service. B-26 Minor Land Division Review - Owner Initiated Parcel Merger, Marian Shaw explained this fee resulted from the efforts of the Development Streamlining Task Force. Local developers had concerns when they wanted to create a single lot from two or three lots, which would require going through a parcel map waiver. This new Lot Merger process is much faster. It is equivalent to the Lot Line Adjustment process, so the same fee is being proposed. This new fee would recover the cost to review the application request, prepare the environmental determination, notice of decision and to record a certificate of merger. D-61 Business Regulation- Public Convenience and/or Necessity Approval. Darnell Haynes explained the State passed legislation requiring the local governing agency on some types of Alcoholic Beverage Control licenses to indicate the issuance of the license meets with the Community's public convenience and/or necessity. This new fee would recover the cost for the City's review of the application by several departments, including City AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Thursday, May 16, 2002 Page -4- Manager's Office, Planning, Public Works, and Police Department background checks and district reports for overeaturation of similar types of establishments. B-34 Concurrent Applications - Maps. This is an increase to an existing planning fee. Stan Grady explained this fee was created for zone changes and general plan amendments when they are combined. The current fee is not recovering the cost to provide this service. The Building Industry Association requested the fee be increased in stages. There have been no objections frem the community and staff is recommended moving forward with the fees. The Committee unanimously approved forwarding the fees to the Council for adoption. 5. NEW BUSINESS A. Discussion and Committee recommendation regarding request forfunding from the Bakersfield Museum of Art Charles Meyer, Bakerefield Museum of Art, thanked the Council for underwriting the Russell and Remington Exhibit last year. They are here today to formally request a $25,000 contribution. The City Manager read a portion frem the Council Policy regarding applications for contributions from nonprofit organizations: "Council will not consider assistance to nonprofit groups for ongoing operation and maintenance with the exception of the following groups with which the City has had an ongoing relationship: Bakersfield Senior Center, Bakerefield Museum of Art and the Bakersfield Symphony Orchestra. The sources and amounts of funds to be contributed annually to these three organizations is to be recommended by the City Manager as part of the City's Annual Budget, subject to City Council review and approval." The City Manager further stated the application frem the Bakerefield Museum of Art does fit within the Council's policy. There was discussion regarding the budget cuts being preposed by the Governor and if implemented by the legislature, there will need to be matching cuts in the City's proposed budget. Committee Chair Maggard and Member Salvaggio both expressed that the Council had approved a $25,000 a year contribution to be included in the budget for the Bakersfield Museum of Art. The Museum's request is subject to review each year and requires appreval by the City Council. Committee Member Hanson made a motion to support the request from the Bakerefield Museum of Art for a $25,000 contribution. The Budget and Finance Committee unanimously approved the motion. Staff will include the $25,000 contribution in the fiscal year 2002-03 budget for Council review and approval. AGENDA SUMMARY REPOR'I' BUDGET AND FINANCE COMMITTEE Thursday, May 16, 2002 Page -5- B. Discussion and Committee recommendation regarding request for funding from the Golden Empire Gleaners Phil Zander, Golden Empire Gleaners, stated the Gleaners put their application in for City CDBG funds too late for consideration in the current Action Plan. They have a desperate need for two trucks, which will cost approximately $40,000 each. They have a request in at the County for HUD money for one truck and would like the City to consider funding for the other one. Staff explained the time is closed for CDBG applications for this cycle and CDBG funding is not available. Staff indicated the City has reached its cap under federal regulations for funding to nonprofits for operation and maintenance costs of public services, which is 15% of the total budget allocations. Committee Chair Maggard expressed the Gleaners organization is a beacon in the community and performs a very worthy function. However, the Committee did not want to make an exception to the City's relatively new policy for contributions to nonprofits, and therefore, did not recommend supporting the Gleaners' 'request. It was explained to Mr. Zander that the Gleaners could submit an application in the next CDBG funding cycle. The Committee requested the City Manager to have Community Development Coordinator George Gonzales respond to the Gleaners in writing regarding the time lines and process for submitting an application for the next funding cycle. C. Discussion and Committee recommendation regarding request for funding from the Bakersfield Symphony Orchestra Milt Younger spoke regarding the significance of the symphony as a community asset that helps attract people to the City. He requested an outright contribution of $50,000 and not to take it back in the form of rent for the Centennial Garden/Convention Center. John Farrer, Bakersfield Symphony Music Director, clarified how the $46,000 contribution from the City was allocated last year. The Centennial Garden/Convention Center received $19,035 directly for concert rental and rehearsal rental days and the Symphony received the balance of $26,965. However, the Convention Center bills them for items above the rent. They would like to perform two more concerts this year by performing the Saturday night concert again on Sunday afternoon so others could attend who do not drive at night. Jim Foss spoke about the importance of having a broad brush of entertainment for the community and the Symphony performing at the Convention Center is a vital part. Committee Member Salvaggio made a motion to recommend to the Council to increase the contribution from $46,000 to $50,000 to cover the cost of the two extra concerts. The Committee unanimously approved the motion for the contribution and staying with the past practice of the rent being paid out of that amount to the Centennial Garden/Convention Center with the balance being paid to the Bakersfield Symphony Orchestra. AGENDA SUMMARY REPORT .~ '~"~ ~'~ BUDGET AND FINANCE COMMITTEE Thursday, May 16, 2002 Page -6- D. Discussion and Committee recommendation regarding a long-term financial plan for the City This item was deferred to the next meeting. 6. COMMrl'rEE COMMENTS 7. ADJOURNMENT The meeting adjourned at 6:10 p.m. Staff present: Mayor Harvey Hall; City Manager Alan Tandy; Assistant City Manager John Stinson; City Attorney Bart Thiltgen; Assistant to the City Manager Darnell Haynes; Public Works Director Raul Rojas; Finance Director Gregory Klimko; Public Works Civil Engineer Marian Shaw; Assistant Finance Director Nelson Smith; Deputy City Attorney Michael AIIford; City Treasurer Bill Descary; Planning Director Stan Grady; Jim Foss, Ed Dorsey, and Steve Womack from the Centennial Garden and Convention Center. Others present: Chris Frank, Chamber of Commerce; Peter J. Rudy, KUZZ News; Ken Takahashi, KGET-TV; Greg Bynum, Bynum and Associates; Milt Younger, Esq.; John Farrer, Bakersfield Symphony Orchestra; Al Engstrom; Charles Meyer, Bakersfield Museum of Art; Greg Hardin, Bakersfield Museum of Art; Douglas R. Hanson, Landmark Real Estate Group; Richard Earl Watson; Leo Hinds, CPA and Attorney at Law; Greg Hanvey, Bakersfield Association of Realtors; Michael' Freedman; Kern County Apartment Association; Cassie Daniel, Bakersfield Association of Realtors; and James Burger, reporter, The Bakersfield Californian; Chandler Wonderly, Kern County Property Association; and Phil Zander, Golden Empire Gleaners. cc: Honorable Mayor and City Council S:~Damell~2002Bud&FinanceCommlttee~bf02may16summary.wpd