City Council Agenda Report
Meeting Date: June 20, 2023
From: Scott Williams, Director of Finance
Department: Finance
Submitted by: John Lau, Accountant
Subject
Warehouse Special Parcel Tax Rate for Fiscal Year 2023-24 Recommendation
A. Adopt Resolution No. 2023-14 determining the Warehouse Special Parcel Tax levied for Fiscal Year (FY) 2023-24 pursuant to Municipal Code Section 3.20.010; and B. Approve and authorize the Director of Finance to execute an Agreement for Billing of Direct Assessments (Warehouse Special Parcel Tax) with the County of Los Angeles AuditorController’s Office, in substantially the same form as submitted, for the collection and distribution of the Warehouse Special Parcel Tax for FY 2023-24.
Background
Ordinance No. 1057 was submitted to the electorate and duly approved at the April 14, 1998 Municipal Election, authorizing a special parcel tax be levied on all parcels improved with a warehouse, truck terminal, freight terminal, and other distribution facilities at $1.00 per 100 square feet of gross land area. On November 16, 1999, the electorate duly approved Ordinance No. 1076 establishing a new maximum tax rate for the warehouse special parcel tax at $20.00 per 100 square feet of gross land area, adjusted annually based upon increases in the Consumer Price Index for All Urban Consumers (CPI-U), All Items Index, Los Angeles-Anaheim-Riverside Area (1982-84=100) (CPI) for the twelve-month period ending March 31 of each year. Proceeds of the warehouse special parcel tax may be expended only on: (i) construction, improvement and maintenance of streets, bridges and other public rights-of-way, including acquisition of land, and; (ii) police and fire protection services. The electorate expanded the use of the proceeds to include police and fire protection services at an election on August 31, 2010, which was adopted and ratified by Resolution No. 2010-133. The provisions for the Warehouse Special Parcel Tax imposed by the aforementioned Ordinances are codified in Vernon Municipal Code (VMC) Section 3.20.010.
The Warehouse Special Parcel Tax (Warehouse Tax) is collected annually for each parcel or part of a parcel in Vernon that is subject to the Warehouse Tax as an Assessment in the Los Angeles County Property Tax Bill. However, the City Council sets the rate of the Warehouse Tax each year at a rate that does not exceed the maximum tax rate for the fiscal year. For FY 2022- 23, Resolution No. 2022-19 set the Warehouse Tax rate at $35.716 per 100 square feet of gross area of land.
FY 2023-24 MAXIMUM WAREHOUSE TAX RATE CALCULATION
Applying the CPI (Attachment 3) in the manner required by Section 3.20.010(d)(2) of the VMC, staff calculated the maximum Warehouse Tax rate for FY 2023-24 to be $38.53 per 100 square feet of gross area of land.
The calculations are as follows:
Multiply the tax rate ($20.00) by a fraction, the numerator of which is the CPI on the adjustment date and the denominator of which is the CPI for the period ending March 31, 1999.
CPI March 31, 1999 = 165.00
CPI March 31, 2023 = 317.873
$20(317.873/165.0) = $38.530 per 100 square feet of gross area of land or $0.38530 per square foot of gross area of land. The maximum Warehouse Tax rate for FY 2023-24 is an approximate increase of 92.65% over the 1999 rate and approximately 3.65% over the FY 2022-23 maximum rate. For FY 2023-24, staff recommends that City Council impose a rate of $37.020 per 100 square feet of gross area of land, an increase of approximately 3.65% over the previous year’s rate.
Pursuant to VMC Section 3.20.010(j), the tax is collected on the County of Los Angeles Property Tax Bill. An agreement is required by the County of Los Angeles Auditor-Controller's Office for the City of Vernon to use the County's collection services. Pursuant to VMC Section 3.32.110 et seq., competitive bidding and competitive selection are not required because the services are provided by a government entity, and because the entity is the sole service provider. The Agreement for Billing of Direct Assessments (Warehouse Special Parcel Tax) was reviewed and approved as to form by the City Attorney's Office.
Staff recommends that the City Council adopt the resolution setting the Warehouse Tax at the rate of $37.020 per 100 square feet of gross area of land for FY 2023-24 and approve and authorize the Director of Finance to execute an Agreement for Billing of Direct Assessments with the County of Los Angeles Auditor-Controller's Office for the collection and distribution of the Warehouse Special Parcel Tax for FY 2023-24.
Fiscal Impact
Based on the proposed CPI-adjusted rate of $37.020 per 100 square feet of gross area of land, implementing the recommended action would increase the City's Warehouse Tax revenue from approximately $13.3 million to approximately $13.9 million, providing an additional $600,000 for the FY 2023-24 budget.
The County of Los Angeles Auditor-Controller charges $0.25 per assessment per parcel, plus a $50 processing fee for FY 2023-24. Corrections of direct assessments will be charged at a rate of $13 per parcel. Direct Assessment billing charges are deducted from revenues forwarded by the County to the City on the December 20th advanced distribution. The estimated total cost, based upon the parcels subject to the Warehouse Tax is $173.75.
Attachments
1. Resolution No. 2023-14
2. Agreement for Billing of Direct Assessments
3. Bureau of Labor Statistics Data