Budgeting Sales Tax Revenue

Local governments can fine-tune their budget forecasts by understanding the tremendous impacts that and state and federal programs have had on Sales Tax Revenue over the past year.

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In this episode, we talk with Mark Bryson, Senior Economic Analyst at Avenu, who works with California jurisdictions and is an expert in helping them navigate the changes COVID has brought to revenue forecasts. Our discussion delves into:

  • Key concepts relevant to understanding and properly budgeting for future Sales Tax Revenues
  • Why these basic Sales Tax concepts are important to the budgeting process
  • 5 things that occurred in California that have never happened before that impact Sales Tax Revenue
  • What jurisdictions throughout the country should be thinking about when they are budgeting Sales Tax Revenue these days

This discussion was taken from our show Local Government Insights. If you want to hear more episodes like this one, check us out on Apple, and all your other favorite podcast platforms. Take a moment listen on your favorite platform. We would appreciate your reviews and feedback as we continue to release upcoming episodes.

Business License Administration and Compliance

For the City of Rolling Hills Estates in California, the adoption of new technology has already paid off with a unique approach to administering and maximizing compliance of business license tax revenues.

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In this episode, we talked with Mike Whitehead, Administrative Services Director and City Treasurer for the City of Rolling Hills Estates in California. We covered:
  • Challenges faced with business license administration and overall compliance
  • Finding solutions tailored to the unique needs and problems cities are facing
  • Responsibilities of staff and the shifting priorities with the use of new technology
  • Cost savings with technology partnerships and client facing portals

This discussion was taken from our show Local Government Insights. If you want to hear more episodes like this one, check us out on Apple, and all your other favorite podcast platforms. Take a moment listen on your favorite platform. We would appreciate your reviews and feedback as we continue to release upcoming episodes.

UCLA Anderson Forecast January Economic Outlook

Avenu in partnership with the UCLA Anderson Forecast collaborates to provide both micro and macro level views of the economic health of California at the state and local levels. The following economic information has been provided by our colleagues at UCLA Anderson Forecast.

Please mark your calendars for our next quarterly joint economic presentation which will take place on February 23rd at
9:00 AM Pacific. Meeting invitations will go out the first week of February.

Read the full January Economic Forecast Here.

January California Legislative Update

The January California Legislative Update provides an overview of Gov. Newsom’s recently released budget proposal.

Governor Gavin Newsom introduced his $227 billion 2021-22 Budget Proposal on Friday with fairly positive news. Although California’s revenues have experienced a moderate slowdown, thus far it has impacted the State’s revenues far less than anticipated by the 2020-21 Budget Act. The difference in projections is the result of a less severe economic downturn than expected wage losses in
large part impacting low-wage earners, and a stronger stock market than projected.

The Budget Proposal contains $34 billion in Reserves and Surplus
● $15.6 billion in the Proposition 2 Budget Stabilization Account (Rainy Day Fund)
● $450 million in the Safety Net Reserve
● $3 billion in the Public School System Stabilization Account
● $2.9 billion in the State’s operating reserve

Our full analysis will provide your jurisdiction the information needed to plan for the year.

Read the full January California Legislative Update Here.

October California Legislative Update

The October California Legislative Update provides a broad review of bills that were signed into law by Califonia’s Governor, Gavin Newsom.

Avenu Co-sponsored Pre-Paid Wireless Bill Signed by the Governor: On October 08, 2019, the Governor passed the Local Prepaid Mobile Telephony Services Collection Act.

Governor’s Office of Business and Economic Development: The Legislature’s budget approves a total of $100 million to support the California Infrastructure and Economic Development Bank’s loan guarantee program that provides financial assistance to small businesses.

Clean Cars by 2035: The executive order requires that all new cars and passenger trucks sold in California must be zeroemission vehicles by 2035.

Medicaid Fiscal Accountability Regulation: Medicaid Director Seema Verma announced that, concerns that have been raised and they will be removing the Medicaid Fiscal Accountability Regulation from the regulatory agenda.

Read the full October California Legislative Update Here.

June California Legislative Update

The June California Legislative Update covers the passage of the state budget and a number of bills related to the CARES Act. staff is currently monitoring 15 bills that seek to modify existing local taxes and impose new fees. This update provides the latest information on this legislation as well.

On June 15th, the Legislature passed the State Budget Act for the 2020-21 fiscal year. Our understanding is that the Legislature and Administration have not yet reached a final agreement; however, they have agreed to continue discussions and keep working on a compromise. The Budget Act and two trailer bills were sent to the governor and are further described in this report.

Governor’s Office of Business and Economic Development: The Legislature’s budget approves a total of $100 million to support the California Infrastructure and Economic Development Bank’s loan guarantee program that provides financial assistance to small businesses.

Revenues: The provisions of AB 85 include a total General Fund benefit of approximately $4.4 billion in the 2020-21 fiscal year.

Read the full June California Legislative Update Here.


June California COVID-19 Update

CLIENT UPDATE #1: Sales and Use Tax: Avenu has been hard at work developing economic assumptions on which to build revenue projections for each of our clients. For many of our clients, Sales and Use Tax is a primary revenue source and one that currently is in a state of flux. The pandemic has caused reduced economic activity, business closures, and uncertainty about the future.  The recent Sales Tax Executive Order from Governor Newsom also impacted sales tax cash flows. This communication is intended to explain the lower than normal first quarter 2020 allocations to local governments resulting from the pandemic and the Governor’s Executive Order.

Sales and Use Tax Liabilities Deferred by CDTFA:

Extension Program: On April 2, 2020, Governor Newsom issued Executive Order N-40-20 that allowed businesses with under $1M in tax liability to delay their first quarter sales and use tax filings for 90 days. This action means that first quarter filings for these businesses, normally required by the end of April, could be delayed until the end of July.

Deferral Program: Another state program allows small businesses ($5M or less in taxable sales) to defer up to $50,000 of their sales and use tax liabilities until next fiscal year. For those who request the deferral, the owed amount would be payable in twelve equal installments over the following year and would not be subject to interest or penalties as long as these payments are made. The payments will start in August 2020 and they will not extend beyond July 31, 2021.

Learn more about what is happening in California, and read the full June COVID-19 update here.

WEBINAR: Financial Impacts of PG&E’s Delay in New Time of Use Rate Structure

A recent decision by the California Public Utilities Commission (CPUC) approved the delay in the New Time-of-Use rate structure for Pacific Gas & Electric (PG&E) until March 2021. These new rates are based off changes to what are considered “peak” hours and were originally due to take effect November 1, 2020.

Due to the different implementation deadlines, PG&E are enabling customers the ability to “opt-in and opt-out” on either the old rate structure or under the new rate structure, from now until March 2021, on a meter by meter basis (one time).  This accommodation will provide government agencies with an opportunity (over the next 12 months) to strategically select rates for period of time on a meter by meter basis that could result in significant savings.

Avenu Insights & Analytics partnered with Procure America (PA) to assist our California communities with better understanding the financial ramifications of the recent announcements related to the upcoming changes. In a recent webinar, we outlined the steps you should be taking NOW to ensure your City, County, or Agency receives the greatest utility savings under the new plan.

We discussed:

  • Overview or Old vs. New Time-of-Use Rate Structure
  • Financial Implications of the delay in PG&E’s “New” Time-of-Use structure
  • PG&E online and customer service rate analysis
  • Approach to determine and deploy the most efficient rate structures
  • Timetable for “opting-in and opting-out” of the rate structures
  • Estimated savings based on your jurisdiction

Take a moment to view the presentation, and watch the webinar.

Discovery and Recovery: Identifying Unrecovered Revenue

Maximizing compliance is growing more difficult for local government agencies — and local governments lose vital revenue when taxes and business license fees go uncollected. Is there a seamless solution that can both increase tax revenue for local agencies without overloading the current staff?

Millions of dollars in escaped taxes and business licenses go unrecovered every year.  Since local government funding is inextricably tied to proper taxation, this means that governments are missing out on funding for important public programs. Unfortunately, with small staffs and ever-mounting responsibilities, local governments are often not staffed to perform discovery and recovery on this uncollected revenue.

For local governments, finding escaped taxes, improperly reported use taxes, and licensing errors is a tedious and manual process. However, city governments are experiencing a year-over-year slowdown in tax revenue and the growth in service costs and other expenditures outpacing it. It’s now more important than ever to stave off the impact of

  • Loss of funding
  • Incorrect reporting
  • Poor capability to project funding for future projects
  • An uneven playing field for the business community

It’s a catch-22 problem with real repercussions for the local community. Luckily, there’s a solution.

Revenue Recovery

The most effective solution for a government to secure lost revenue is to perform an analysis on the current state of compliance and take necessary steps to recover this lost revenue. The discovery piece of the solution means searching out businesses that have not paid one or more local tax or license fee. Then the next step is to work with these businesses to collect revenue owed, thus frequently securing new and recurring revenue.

By identifying anomalies in existing taxpayer fillings, these discovery tactics lead to recovered revenue for the city, which can lead to lasting benefits including:

  • Newly expanded tax base
  • Fair and uniform application of ordinances and ensured compliance
  • Uniform enforcement of compliance: level playing field for all businesses
  • Improved record keeping

The biggest downside to handling discovery and recovery internally is the time it takes. Is there another way?

Partnering with Avenu

Our team of experienced analysts identifies compliance issues, provides detailed reporting, and recovers lost taxes and licenses on governments’ behalf. As an added benefit, our approach is performance-based, therefore clients only pay once funds are successfully recovered.

We start by compiling an inventory of entities subject to taxation and compare them with your business registry. Our focused approach identifies these non-compliant entities with nexus based on local ordinance; general business, itinerants, contractors, home-based, rental income, short term rentals, and more.  With your approval Avenu takes next steps to notify the businesses and recover the tax revenue. This mix of technology and skills results in both immediate and future revenue because of better compliance from your taxpayers.

Avenu in Action

Case Study: Richmond, CA

When Avenu was brought in to access the situation in Richmond, licensing fees weren’t rising at the same rate as rent pricing, which led to an increasing number of complaints on the conditions of rentals. The city did the work of reaching out to these non-compliant landlords about conditions and licensing fees but they received little to no response.

Avenu joined to help discover all rental property owners and short-term rentals and created programs to educate them about current statutes and proper licensing. Through these efforts, Richmond was able to:

  • Identify 2,795 unlicensed businesses
  • Collect more than $2.2 million in new revenue
  • Anticipate a $360,000 annual increase in business tax revenue
  • See an increase from 24% compliance to 70% compliance with Avenu’s help
  • See incremental increases in revenue due to additional taxes, penalties, and interest

Discovery and recovery is no small job, but taking actionable steps towards establishing a level playing field can have major benefits for local governments. In Warren, Kentucky, Avenu was able to recover over $370,000 and more than 930 new registrations in the first 6 months. In Vestavia Hills, Alabama, 2,927 previously unregistered businesses now pay required taxes and fees and $1,669,750 has been recovered since 2004.

By revealing and claiming escaped revenue sources, cities can start adding more revenue to the General Fund.

Getting Started

Curious how much revenue your jurisdiction is missing out on? Avenu regularly provides jurisdictions with a FREE ASSESSMENT that identifies potential revenue that can be recovered. With a few basic data points, we can deliver an assessment within two weeks that will give your jurisdiction an estimate of the tax revenue that is going unrecovered. Knowing the additional and collectable amount is the first step toward making a difference in maintaining service levels, adding new services, and balancing the budget.

Ongoing Benefits

  • Enrich your community: Fund projects that otherwise wouldn’t have been possible
  • Level the playing field: Decrease the burden on honest taxpayers who pay more with higher tax rates to cover shortfall

This process offers local leaders an alternative to difficult and unpopular tax increases, giving them a powerful and practical tool for funding improvements to meet rising citizen expectations. Level the playing field today by decreasing burden on honest taxpayers who pay more with higher tax rates to cover shortfall. Request a free assessment today!