FROM:
Finance
SUBJECT:
Title
Adopt Resolutions for the Administration and Examination of Records of the Local Transactions and Use Tax (Measure T)
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RECOMMENDATION:
Recommendation
1. Adopt Resolution No. 2024-131, authorizing the City Manager to execute agreements with the California Department of Tax and Fee Administration to implement a local transactions and use tax.
2. Adopt Resolution No. 2024-132, rescinding Resolution No. 2024-102 and authorizing examination of sales or transactions and use tax by city officials and an independent contractor.
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COUNCIL GOALS:
• To practice sound fiscal management by producing timely and accurate financial information.
• To practice sound fiscal management by emphasizing capital formation.
• To practice sound fiscal management by living within our means while investing in the future.
• To practice sound fiscal management by fully funding liabilities and reserves.
• To practice sound fiscal management by developing long-term funding and debt management plans.
• To concentrate on inter-government relations by pursuing financial participation from county, state, and federal governments.
DISCUSSION:
On Tuesday, November 5, 2024, the voters of the City of Fontana approved a local sales tax increase (Measure T). This 1% sales tax measure is a general-purpose tax taking effect on April 1, 2025, and will generate approximately an average of $46 million in annual revenues for the City's General Fund, with dollars that legally cannot be taken by the State or other regional agencies. With the passage of Measure T, the City’s overall sales tax rate will increase to 8.75% on April 1, 2025, and will apply to general consumer goods and merchandise. Unprocessed foods (such as groceries from a grocery store or farmer's market), prescription medications, real estate transactions, and services are exempt from the tax. This additional local revenue could be used to fund, or help fund, many general City services including maintaining 911 response, fire/police protection; recruiting/retaining well-trained police officers; helping prevent property crimes/thefts/burglaries; keeping public areas/parks safe/clean; addressing homelessness; protecting local drinking water sources; repairing streets/potholes.
Pursuant to Revenue and Taxation Code Section 7265, the new tax is scheduled to become operative on April 1, 2025, and will be administered by the California Department of Tax and Fee Administration (CDTFA). The CDTFA requires that the City Council certify the results of the election by December 12, 2024, in order for CDTFA to implement the tax on April 1, 2025. If the certification date falls after December 12, 2024, the next implementation date would be July 1, 2025.
Additionally, CDTFA requires that the City Council approve a resolution authorizing the City Manager to execute an agreement with the CDTFA for implementation of the local transactions and use tax. The CDTFA is requesting that the City, in addition to the resolutions, also complete and return all required documents as soon as possible, but not later than December 27, 2024.
To ensure the continued confidentiality to sales, transactions and use tax records, as mandated by the California Revenue and Taxation Code Section 7056, the City will restrict access to collections and receipts to those positions requested in Resolution No. 2024-132. It is also recommended to include Hinderliter de Llamas & Associates dba HdL Companies, as this firm is contracted by the City to provide sales, transactions and use tax consulting services for economic analysis, web-based data, auditing, and staff training when it pertains to local sales taxes.
FISCAL IMPACT:
The annual fiscal impact associated with the approval of this item is an increase in General Fund revenue of approximately $46 million with the implementation of the one percent (1%) local sales tax, effective April 1, 2025. The estimated revenue to be collected from this additional local sales tax for Fiscal Year 2024-25 is estimated to be $11.5 million for the period of April through June 2025. Additionally, there are estimated costs from the California Department of Tax and Fee Administration for preparatory expenses in the amount of $175,000 that will be included in the next quarterly budget update.
MOTION:
Approve staff recommendation.