Shadow Revenue: Where Is It and How to Find It

Revenue is an increasingly important topic for cities and counties, especially since 61 municipalities have declared bankruptcy since 2010. And in 2017, the General Fund growth for cities slowed to 0.9% with expenditures up 2%. New funding is imperative to supply the expected level of municipal programs and services.

 

Lisa Varalli, Vice President, Avenu

Uncollected revenue is hiding in several places.

There are critical revenue streams available now that jurisdictions are not taking advantage of. Transient or mobile businesses, unlicensed contractors providing services outside the boundaries of the municipality, and short-term rental income that’s subject to business tax — these all contribute to the revenue gaps and non-compliance issues that municipalities face.

 

Antonio Banuelos, City of Richmond, CA

Richmond, California’s story.

In this East Bay suburb of the San Francisco Bay area, the rise in rents and the growing number of rental units were obvious. Garages and in-law units were being converted into full rental living spaces. But, owners were not going through the proper permitting process or paying the corresponding taxes.
The city received little to to no response when it contacted delinquent property owners about the tax. The few respondents claimed they were not aware of the requirements. So Richmond got together with Avenu to make a plan.

Avenu identified rental property owners and short-term rentals and developed an outreach plan to the owners. Nearly 2,800 unlicensed businesses were discovered, which allowed the city to collect more than $2.2 million in new revenue. Through ongoing efforts, Richmond anticipates a $360,000 annual increase in business tax revenue.

 

A Model for All Local Governments

The Discovery & Recovery Program is a customized, three-phase process that includes preparation, testing, and active monitoring. Each program is designed with the best interests of the municipality in mind and through a collaborative approach with city staff, problems are identified, plans for recovery are developed and solutions are implemented within the first 90 days. The Discovery & Recovery program is self-funding or budget neutral; there are no out of pocket costs to the municipality.

 

Sign up for the FREE assessment to discover how much shadow revenue your jurisdiction may be missing. To hear more about how to recover shadow revenue for your city using Avenu’s Discovery/Recovery program, download and watch the webinar for free here.