Title
Recommendation to Accept the Quarterly Sales Tax Report for the Reporting Period Ending December 31, 2019 (Funds Collected During the Period July 1 to September 30, 2019). (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The California Department of Taxes and Fees Administration (CDTFA) allocates sales tax to the City of Alameda (City) on a monthly basis. This report provides information about the activity for the period ending December 31, 2019 (funds collected during the period of July 1 to September 30, 2019 and recognized as revenue in the current fiscal year).
BACKGROUND-
This report summarizes the sales tax receipts for the point-of-sales activity for the period of July 1 through September 30, 2019. This is the basis for sales tax revenues received by the City between October 1 and December 31, 2019. For the purpose of this report, sales tax revenues exclude Proposition 172 funds, the allocation from a statewide pool for public safety services.
DISCUSSION
Fiscal Year to Date (July 1 to December 31)
For the 2019-20 Fiscal Year (FY), sales tax shifted to be the third largest source of General Fund revenues for the City (behind property tax and transfer tax), representing approximately 11% of the total budgeted revenues. As of December 31, 2019, the General Fund has received approximately $5.7 million in sales tax receipts of which $3.4 million was recognized as revenue in the current FY. The General Fund received $5.5 million in sales tax receipts during the same period of the last fiscal year, of which $3.4 million was recognized as revenue as of December 2018. On a fiscal year basis over the same time period, sales tax revenue is flat.
3rd Quarter 2019 to 3rd Quarter 2018 Comparison
Alameda’s receipts from July through September 2019 were 8% below the 3rd quarter sales in 2018. However, excluding reporting anomalies as a result of CDTFA reporting system conversion, actual sales were up 1.5%. The following is a summary of sales tax performance by key economic categories in comparison to the same quarter of the prior year, based on numbers adjusted for aberrations.
The Building & Construction category experienced the highest percentage in growth due to increased costs of contractor labor and building materials. State and County Pools showed a gain due to higher online sales. Increase in new car prices affected auto sales. Fuel and service stations were affected by consumption increases, as well as by higher prices and refineries closing. Restaurants and hotels were affected by higher labor and food costs.
The following is a summary of sales tax collected by geographic area, in comparison with the same quarter of the prior year:
Harbor Bay Business Park and Harbor Bay Landing realized increases this quarter. However, North Waterfront experienced a decline due to reduced sales activity compared to the same period last year. The majority of the other geographic areas showed small, but steady growth.
This quarter’s report (Exhibit 1) includes a supplemental section containing the following information:
1. City of Alameda Sales Tax Update
2. Major Industry Groups - Current Quarter Comparison
3. Major Industry Groups - 13 Quarters History
4. Sales by Geographic Area - 13 Quarters History
5. Per Capita Sales Tax Surplus/Gap Comparison by Retail Category
6. Alameda County All Agencies Comparison
7. Seven Cities Per Capita Sales Comparison
8. City to State Comparison by Sector - 3rd Quarter 2019
Transactions and Use Tax (Measure F)
Measure F, the City’s voter-approved half percent transactions and use tax, became effective April 1, 2019. This is the second quarter of the new tax collection. The budget estimate for the transaction and use tax to be recognized in FY 2019-20 is being revised as part of the mid-year update to $5.4 million from $4.6 million. Between July 2019 and December 2019, the General Fund received approximately $3.6 million in transaction and use tax receipts of which $2.1 million is being recognized as revenue in FY 2019-20. The timing of revenue receipts is dependent on the State’s disbursement to the City and the timing of revenue recognition for accounting purposes is based on the period that sales tax is collected by businesses.
Alameda’s receipts from July through September 2019 (3rd Quarter of 2019) were $1.7 million adjusted for reporting aberrations (Exhibit 2). The Business and Industry group contributed the most to the City’s Measure F transactions and use tax. However, Hinderlighter de Llamas (HdL), the City’s sales tax consultant, cautioned staff about large transactions tax collections from this group, as this could be a result of businesses charging tax when they should not. The overcharges may result in future revenue adjustments.
With the implementation of the transactions and use tax increase (Measure F), the City’s sales tax rate increased to 9.75% effective April 1, 2019. Exhibit 3 provides a detailed breakdown of the rate.
ALTERNATIVES
• Accept the quarterly sales tax report.
• Do not accept the report and provide direction to staff.
FINANCIAL IMPACT
This is an informational item only. There is no financial impact from acceptance of the report.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378(b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities that do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACT
There are no climate impacts from the acceptance of this report.
RECOMMENDATION
Accept the Quarterly Sales Tax Report for the reporting period ending December 31, 2019 (funds collected during the period July 1 to September 30, 2019).
CITY MANAGER RECOMMENDATION
The City Manager recommends acceptance of the Quarterly Sales Tax Report.
Respectfully submitted by,
Elena Adair, Finance Director
Exhibit:
1. Quarterly Sales Tax Report
2. Quarterly Transactions Tax
3. Sales Tax Rate Breakdown