Translate[Archived] Question #67: If there is Council interest in increasing the restaurant meals tax from 4% to 5% and to fund affordable housing with it, what are some of the options on how this could be budgeted?
Question:
If there is
Council interest in increasing the restaurant meals tax from 4% to 5% and to
fund affordable housing with it, what are some of the options on how this could
be budgeted?
Response:
Council has a number of options in regard to budgeting any increased restaurant meals tax and funding affordable housing. Under any option, the revenues from the added meals tax would be budgeted as a General Fund revenue. That revenue could then be transferred either to the Housing Trust Fund as an operating expense or to the CIP as a capital expense. In addition, Council could decide to:
- not dedicate the restaurant meals tax,
adopt a non-dedicating resolution “pairing” the decision to raise the meals tax to the decision to increasing the City’s investment in affordable housing and declaring Council’s commitment to affordable housing, or
- dedicate the restaurant meals tax via ordinance
While City Council has discussed whether or not to dedicate the meals
tax, there is a middle ground of pairing Council’s action on the meals tax
simultaneous with the decision to increase the amount of funds budgeted for
affordable housing, but such an action could be done without hardwiring the two
actions together for future budget years.
Then in future budget years the decision on what to budget for
affordable housing would be made based on need, available resources and
priorities. This would be somewhat
similar to when Council last raised the hotel tax and at the same time approved
the funding to start the King Street Trolley.
While both of these actions have remained in place, both the hotel tax
revenue changes and expenses of the trolley have operated independently of each
other since then.
Operating or CIP:
While
monies for investing (generally via loans to non-profits) in affordable housing
have been traditionally
handled as an operating expense in a separate Housing Trust Fund, that has been largely due to the nature
of the
affordable housing voluntary contributions which over multiple fiscal years accumulate unevenly in that Fund. If any significant amount
of new
affordable
housing monies were added to the City’s budget, the CIP may be the best way
over the long term to budget and account for affordable housing monies. This is because
the
CIP can better accommodate larger dollar items than can the operating
budget. The City may find itself in a situation where a one-time large
increase or acceleration in the affordable housing investment budget is needed
(such as was the case last year for the AHC / Church of the Resurrection
project). The City General Fund operating budget could not have likely absorbed or funded such an increase.
The CIP’s 10-year planning timeframe, and order of magnitude of funding CIP
projects, allows for more flexibility, better planning and
increased certainty for project planning.
The attached diagram illustrates the choices available to Council.
Attachments:
Attachment
1 – Affordable Housing: Budget Options