2009-10 Adopted Budget - City of Hoquiam

Currently 18 states are members of the SSUTA. Although the state of Washington isnot a member, Washington businesses may register to collect sales and use tax onsales into member states and receive certain benefits.The biggest change by adopting the SSUTA will be a move from applying sales tax atthe origin of the purchase to the destination of the purchase. This move, if adopted bythe State of Washington, will have a negative impact on the City of Hoquiam. However,the State has offered full mitigation to negatively impacted cities.Budget Assumptions: Estimated sales tax receipts are $694,445 and $717,155 for2009 and 2010 respectively. The 2009 amount is a decrease of -8.4% from actual 2008amounts. While we do not perceive a decrease in economic activity, staff wants to beconservative based upon the large increase in 2008 over 2007. Also, retail sales arevery vulnerable to swings in consumer behavior and the City does not want to beoverextended in a downswing. Since 2000, sales tax receipts have grown at anaverage annual rate of 6.9%. For 2010, this number was discounted at 50% to come upwith an increase of 3.4% over comparable 2009 amounts.5. Business and Occupation Tax% IncAmount (Dec)2007 Actual $993,882 20.6%2008 Forecast $836,000 -15.9%2009 Budget $830,882 -0.6%2010 Budget $858,053 3.3%The City levies a Business andOccupation (B&O) tax on gross receiptsfor the act or privilege of engaging inbusiness activities within the city. Statelaw permits up to a 0.2% B&O Tax. TheB&O Tax is unpopular with some$1,000,000$900,000$800,000$700,000$600,000$500,000$400,000B&O Tax2007 2008 2009 2010businesses as it does not take into account the profitability of the business. The B&OTax is imposed by 25 of the 288 cities in Washington.The B&O Tax is the City's second largest single revenue source next to property taxes.However, the bulk of the City's B&O Tax collections come from a relative few number oflarge manufacturers including a paper company, two lumber companies, and a shipbuilder. The City's dependency upon a relatively few number of businesses is a causeof concern and leaves us highly vulnerable if one of these manufacturers experiences amarket downturn, moves or closes.Budget Assumptions: Estimated B&O Tax receipts are $830,882 for 2009 and$858,053 for 2010. The 2009 amount represents a -0.6% decrease from forecasted2008 amounts. Alternatively, the forecasted increase for 2010 over 2005 is 3.3%. TheB&O tax is not always paid when it is due and can be skewed from year to year if alarge business pays their taxes late. Therefore, we have budgeted B&O Tax revenue at34