City Of Los Angeles Geographic Revenue Analysis For Fiscal Year 1998-1999

Note this file was converted to html from a word document provided through the Harbor Study Foundation from LA City 12-18-00 and Indexed

Preliminary data was released December 2000 and the final report in February 2001. The changes between the Draft and the final version as marked green strikeout for deletions and red for insertions. Grammatical and layout changes are ignored

TABLE OF CONTENTS

1 Introduction

2 Methodology

3 General Fund Revenues
Property Tax
Utility Users Tax
Business Tax
Sales Tax
State Motor Vehicle License Fees
Transient Occupancy Tax
Municipal Court Fines
Parking Users Tax
Interest
Franchise Income
Civic Center Parking Income
Transfer from Telecomm. Dev. Account
Transit Shelter Income
Residential Development Fee
Los Angeles Mall Rental Income
Grants Receipts
General Fund Revenues Not Yet Analyzed

4 Special Purpose Revenues

5 Additionally Budgeted Funds

6 References

Summary of General Fund Revenues by Source Region, FY 1998-1999
Property Tax Revenue, Estimated Regional Source, FY 1998-99
Electrical Tax Revenues, FY 1998-99
Estimated Telephone Tax, by Source Region, FY 1998-99
Utility Tax Summary, by Region, FY 1998-99
Estimated Business Taxes, FY 1998-99
GRIP Sales Tax Data, FY 1998-99
Business Tax Revenues, Retail Only, FY 1998-99
Estimated Sales Tax Revenues, FY 1998-99
Projected State Motor Vehicle License Fee Revenues
1998 Transient Occupancy Tax Revenues
Variable Used in the Methodology for Citation Revenue Estimation
Municipal Fines, Allocated by Region, FY 1998-99
Parking Users Tax by Region, FY 1998-99
Interest Revenues, FY 1998-99
Cable Franchise Fee Revenues
Sewer Service Fee, FY 1998-99 and Associated Regional Source for the Sewer Service Franchise Fee
Official Police Garage Franchise Fee Revenues, FY 1998-99
Franchise Income Summary, FY 1998-99
Civic Center Parking Income, FY 1998-99
Cable Franchise Fee Revenues, FY 1998-99
Transit Shelter Income, FY 1998-99
Residential Development Tax Revenues, FY 1998-99
Residential Development Tax Revenues, FY 1998-99
General Fund Revenues Not Yet Analyzed

LIST OF MAPS

Geographic Study Areas The report failed to include a map, we have linked the map from the petition.

SECTION 3

GENERAL FUND REVENUES

General Fund revenues are receipts not restricted by law or Charter to a special purpose. Table 4 shows a summary of General Fund revenues by source area for fiscal year 1998-1999. Revenues were distributed based on the methodology most appropriate for that source of funds. Following Table 3, a detailed discussion is provided for each General Fund budget line item. The discussion includes a description of the revenue source, a description of the methodology used to allocate these revenues regionally, and analysis of the regional source of revenues. In some cases, additional issues arise regarding the distribution of revenues. These issues are intended to suggest further areas of investigation.

Table 3 also shows revenues that could not be allocated geographically. Explanation is provided throughout the section when a geographic determination is not possible. Grants receipts, for example, cannot be allocated geographically because they are reimbursements for expenses from previous years. These grant receipts could not be allocated without additional detailed research required to determine each grant reimbursement, source of funds, year funds were allocated, and other variables required to fully allocate these grant receipts.

Table 3 also shows a summary of the methodology used to analyze each revenue source. In addition, a percentage showing the proportion of that particular fund to the entire General Fund is provided for reference. The table accounts for the revenues reported in the City of Los Angeles Budget for the Fiscal Year 2000-2001 as "Actual" revenues for fiscal year 1998-1999, the last year for which complete actual data are available.

1 This column indicates the methodology that was used to determine the source of this revenue geographically. Geocode indicates that data were geocoded as described in the introduction. Population indicates that population data described in the introduction were used. Alternate indicates that an alternate methodology was developed to allocate these revenues. Various indicates that several methodologies were used to allocate these revenues.

2 These are grant reimbursement revenues. Please see the Grants Receipts section of this chapter for an explanation of why they cannot be allocated geographically.

3 In FY 1998-99, some revenues were transferred from the Reserve Fund to the General Fund. This is a line item in the budget that needs to be accounted for in this table that does not have a geographic source.

4 Refunds and adjustments is a line item in the budget related to the Utility Tax. Extensive analysis by the Controller would be required to determine the geographic source of these revenues.

5 This item involves an adjustment required to balance actual FY 1998-99 revenues reported in the Revenue Outlook against actual FY 1998-99 revenues reported in the Budget. The utility tax and franchise income line items actually consist of revenues from several sources. The Budget reports one total for all utility tax revenues and one total for all franchise income. Since detailed analysis of these revenues requires a review of each revenue source, actual figures for each individual source were drawn from the Revenue Outlook. This document, however, reports revenues rounded to the thousandths, not the actual revenue received to the dollar. The result is a small discrepancy between the Budget and the Revenue Outlook. The value on this table represents the difference and is included to balance this report with the budget.

6 These revenues are still under study. A future version of this report may include an analysis of these revenues. This includes the Licenses, Permits, Fees, and Fines line item, as well as the Water Transfer, Power Transfer, Documentary Transfer Tax, and components of the Utility Tax, Franchise Fee Income, and Municipal Court fines. To index

Property Tax

The Property Tax line item includes the 1% tax on real property, the unsecured property tax, and other property taxes charged by the County of Los Angeles. The 1% tax accounts for approximately 90% of the revenues in this fund. The County assessor is responsible for the analysis of property tax data with regard to the various secession efforts. The Assessor has not yet completed their study. In FY 1998-99, the City received $501,292,122 in property tax. Property tax accounts for 18% of the general fund and 13% of the total budget.

Methodology

Actual property tax assessment data were unavailable for this study, so a proxy was developed to estimate the geographic source of property tax revenues in the City. The City receives a monthly dataset from the County assessor that includes a wide range of property tax information. Address, land value, improvement value, and tax credit data were extracted from this dataset for FY 1999-2000 because this was the only year for which data were available. Property value and improvement value assessments, minus tax credits for homeowner occupancy and veteran status, were used to create a total taxable amount per property. These values were then totaled for the City and by zip code. Zip code data were then summed for the three study areas and proportions of the City total were calculated. Those proportions were then used to show the proportion per area of the total property tax revenues of $501,292,122 received by the City in FY 1998-1999.

Analysis

Table 4 shows the estimated source of property tax revenues by geographic area of the City. The County Tax Assessor’s analysis will provide an analysis of the geographic source of property tax revenue using actual tax assessment data. The County’s data, however, should closely match these results. Variables that could produce different results between this analysis and the County’s are poor zip code information in the County tax assessor data, use of tax payment data as opposed to tax assessment data, and the geographic source of unsecured property tax assessments.

To index

Issues

The Charter of the City of Los Angeles requires that not less than 0.035% of the property tax be appropriated to support the Department of Recreation and Parks and not less than 0.0175% be appropriated to support the Library Department. These sums are a very small portion of the total General Fund appropriations for each of these departments and a small portion of the property tax receipts. Resultant cities, however, would not be required to appropriate these funds for these purposes. To index

Utility Users Tax

Taxes are collected for three types of utilities: electrical, telephone, and natural gas. Taxes are not collected for water usage. Electrical use tax is collected by the Department of Water and Power and the natural gas use tax is collected by the Southern California Gas Company. The various telephone companies operating in the City collect telephone taxes. Utility users tax accounts for 18% of the general fund and 13% of the total operating budget.

The Gas tax is an important component of the total utility users tax. The City, however, cannot release data on the gas tax. Provisions of Revenue and Taxation Code §7056 prohibit the City from providing data obtained from private utilities.

Electrical Methodology

Fiscal year 1998-99 data showing the address and electrical tax paid for every account in the City of Los Angeles were obtained from the Department of Water and Power. Addresses for all accounts were geocoded with Code 1 software as described earlier. One study geographic region was then assigned to each account based on the geocoding process. Tax data were summed for each study area and proportions of the Citywide total were calculated.

Electrical Analysis

Table 5 shows the source of electrical tax revenues by region.

To index

Telephone Methodology

Telephone service providers do not release data regarding service due to issues related to competition. As such, there is no means to identify actual telephone usage and taxes paid on that usage in the subregions of the City of Los Angeles. Thus, alternative methodologies are used to estimate the geographic source of these revenues.

One approach would be to assume that telephone usage is roughly equivalent to the usage of other utilities. Electricity is a utility that is widely used and electrical use data are available for analysis at the smallest geographic area. This is a flawed proxy by itself, however, in that certain land uses consume power in ways that are significantly different than telephone usage. In particular, industrial facilities use large quantities of power compared to telephone usage. Likewise, retail and commercial land uses have electrical consumption patterns that may not correlate to their telephone usage.

Historically, approximately 50% of the telephone tax can be attributed to business accounts and 50% can be attributed to residential accounts, according to a telephone company spokesperson. In this case, the methodology would equally weight business tax and property tax data to approximate the telephone tax.

In this analysis, electrical use, business tax, and property tax, were equally weighted to generate an average per study area that was then applied to the telephone tax paid to the City in fiscal year 1998-99. Each of these data sources is evaluated elsewhere in this study.

Telephone Analysis

Table 6 shows the results of the methodology used to distribute telephone tax revenues.

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Utility Tax Summary Analysis

Table 7 provides a summary of the three utility tax components, and a total per region for utility tax generated in each area.

1 A correction of $-381 is included in Table 7 to balance between the City Budget and the Revenue Outlook. This study uses budget data for actual revenues in FY 1998-99. The budget, however, does not provide revenues for each of the utility tax components: telephone, electricity, and gas. Actual data for FY 1998-99 for each of the three components is provided in the Revenue Outlook, but those data are rounded to the nearest thousandth. This rounding results in a $-381 difference in actual fiscal year utility tax data between the budget and the Revenue Outlook. This line item simply balances that difference. To index

Business Tax

In 1998, the City of Los Angeles charged a tax on the gross receipts or payroll of all businesses active within the City. This includes businesses that are based outside the City that conduct business within the City limits. Business taxes are collected annually by the City’s Office of Finance (by the City Clerk under the previous City Charter), with payments due by January 1 of each year and delinquent by March 1 of each year. New businesses are required to pay the minimum tax for their business type and to follow up with complete payments if their business activity is greater than the minimum tax.

The City has revised its business tax program and is currently considering additional changes. The City Council recently enacted a tax exemption for small businesses and new businesses. This resulted in a reduction of approximately $5 million in revenues annually beginning in FY 2000-2001. Additional reforms may reduce the amount of revenues collected, although no specific proposals have been presented to the City Council. Business tax accounts for 11% of the general fund and 8% of the total operating budget.

Methodology

The City Clerk provided business tax data for FY 1998-1999. Data included information on every account, including situs address, zip code, and total amount of taxes paid, including fines, late fees, and back taxes. Situs address was used to geocode each account using the Thomas Brothers street file, as described above in Section 2. One geographic area was assigned to each address with the GIS, data were summed by area, and proportions were calculated for each area.

Businesses based outside the City of Los Angeles provide a challenge with regard to distributing revenues since there are no data available that describe where within the City these businesses conducted their work. Since these revenues are generated from over 46,000 individual businesses, the time and cost associated with surveying each of these businesses to determine the geographic location of their work efforts, for both the businesses and the City, would be excessive. Instead, revenues generated from business located outside the City for their activity within the City were apportioned to each geographic region based on the same proportions that business tax revenues generated within the City are generated.

Analysis

Table 8 shows the geographic source of business tax revenues for FY 1998-1999. The table shows the amount of revenue by study area generated by businesses located within the City and the proportion of the area totals to the Citywide total. These proportions were used to calculate the proportion of business tax from each of the study areas in FY 1998-99.

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Issues

The City of Los Angeles recently settled a group of lawsuits challenging the combination of the gross receipts and payroll components of the City’s business tax program on the basis that it discriminates against intercity and interstate commerce. As a result of the settlement, the payroll component of the tax program has been suspended pending an appellate case in San Francisco. Depending on the outcome in San Francisco, the City may permanently eliminate the payroll component of the business tax. The immediate effect is a reduction of business tax revenues collected in FY 2000-2001, with the potential permanent loss of the payroll-based component of these revenues. The reduction or loss of business taxes is approximately $3 million.

Within the next few years, business tax revenues from those accounts located in the Empowerment Zone will increase. Businesses were offered a number of local, state, and federal incentives to locate in the Empowerment Zone and Enterprise Communities, including a short- term exemption from paying City business taxes. When those exemptions expire, these businesses will again be required to pay business taxes. Most of the Empowerment Zone is located in South Central Los Angeles, with a smaller portion in Pacoima. The Enterprise Community is located entirely within the Los Angeles study area.

Finally, if the City were to split into several independent cities, many businesses could be required to pay business taxes to multiple cities. If the provisions concerning business taxes in the existing Municipal Code transfer to any new cities, area businesses would be required to determine the geographic area of their business activity and pay taxes to the other cities based on those activities. To index

Sales Tax

The State of California collects a 7.25% tax on all retail sales within the State. In Los Angeles County, the sales tax rate is 8.25%, 7.25% for the state sales tax plus 1% dedicated to local transportation. A portion of the state sales tax revenues are returned to the jurisdiction where the sales transaction occurred. On October 26, 2000, the Governor announced that the state sales tax would be reduced by .25%. This will only affect the amount of sales tax received by the state. Local sales tax collections should not be affected by this reduction. Sales tax accounts for 11% of the general fund and 8% of the total operating budget.

Methodology

Detailed sales tax data for every sales location in the City were not available for this analysis. As a result, several alternative approaches were used to assess the source of sales tax revenue.

Sales tax data for the study year were extracted from the GRIP system, a proprietary database developed by MBIA for the City of Los Angeles. GRIP contains sales tax data for all accounts that reported sales within the City of Los Angeles. Addresses for all accounts were then geocoded against the Thomas Brothers street map using both street address and zip code to geographically locate each account, as described earlier. Once addresses were matched, one geographic area was then assigned to each address. Summary data were then generated for each geographic area.

One significant problem is inherent to the GRIP system as a result of the way the State of California collects and reports sales tax data. Of the more than 78,000 businesses paying sales tax in the City of Los Angeles, approximately 9,000 are businesses with multiple locations. The state does not report sales tax data by individual retail location. Data are only available for the aggregate amount of sales tax paid by the business. Though the state requires each business to report their location, they are not required to report the amount of sales tax collected at each location. The result is that the GRIP system shows the location of each individual business location in the City, but the state does not provide data for all of these locations.

MBIA has compensated for this problem by distributing the total reported sales tax payment for an account evenly among its reported business locations. The problem is that all sites do not generate the same level of sales, and subsequently, the same level of sales tax. Short of conducting a full survey of the approximately 9,000 businesses with multiple locations, the MBIA data offer the primary option available to evaluate the source of sales tax within the study regions of the City at the address level.

As a proxy, gross receipts data were extracted for all retail sales businesses that pay City business taxes. Businesses paying the City’s business tax do so based on specific fund classes, and retail sales is a specific fund class that generally correlates to those businesses that collect sales taxes. Situs address data were geocoded as described in the introduction to this report for all business tax accounts where gross receipts were assigned to retail sales activity. The total tax paid was then calculated by study area and proportions of the Citywide total were calculated.

Analysis

As discussed above, the GRIP system data include potentially significant problems with regard to accounts with multiple sites. Table 9 shows the regional source of sales tax revenue contained in the GRIP system. GRIP data were incomplete in that they under report the amount of actual sales tax received by the City in FY 1998-99 by $27 million. One explanation for this data gap is that the GRIP system does not contain the State pool payment. Each year, the State is unable to determine the geographic source of a small portion of the sales taxes received. The Franchise Tax Board distributes these revenues to cities and counties based on the same proportion as those sales taxes that could be identified geographically. This gap may include those pool payments. The percentage of the sales tax per region for those businesses that could be geocoded was used to distribute the actual revenues received as shown in Table 9. These data conform to a report prepared by MBIA (formerly MRC) for the City of Los Angeles. Since both the MBIA and City evaluations of sales tax data used the GRIP system, the correspondence of results is not surprising.

To index

In January 1998, the State Board of Equalization released a report on the proportion of the City’s sales tax collected from the Valley. The Board’s report stated that the Valley accounted for 42% of the City’s sales tax revenues, or $128,671,040 in FY 1997-98. The Board was able to refine their analysis by using detailed data available on the hard copy tax return for each account. Using more refined data shows that the MBIA methodology might slightly attribute more sales tax revenues to the Valley than is actually collected in that area. The Board did not conduct a similar analysis for the Harbor area.

Table 10 shows that the retail sales business taxes account for 43% of the total business taxes collected from retail sales stores. Business tax data more closely reflect the result of the Board of Equalization’s study than results from the MBIA report.

To index

Since the best data available were used in the State Board of Equalization study, this analysis uses the Board’s results to distribute sales tax revenue. The analysis of business tax data closely aligns with the Board’s results, as both data sets include detailed sales activity locations for all accounts, as opposed to the GRIP data which provides summary data for all accounts. As the Business tax data are a proxy and the Board likely includes more accurate data and a more complete set of tax payers, the Board’s results are based on better data. Business tax data corroborate the Board’s results. The Board did not study sales tax revenues from the Harbor, so an average of the Business tax and MBIA results was used. Table 11 shows the source of sales tax revenues received by the City in FY 1998-99.

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State Motor Vehicle License Fees

The State of California distributes revenues from the State Motor Vehicle License Fees to local jurisdictions on an annual basis. Funds are distributed strictly on the basis of population figures provided by the State Department of Finance. The state allocates funds separately based on whether a city is able to collect property taxes or not. Once the State takes their share of the total revenues, they allocate 81.25% of the available revenues to counties, cities that collect property taxes, and all newly incorporated cities, and 18.75% to cities incorporated before 1978 that do not collect property taxes. The State Motor Vehicle License Fee accounts for 6% of the general fund and 4% of the total budget.

Methodology

State Motor Vehicle License Fees are distributed to local jurisdictions based on population. This analysis distributes these revenues based on population, as discussed in the methodology section of this report. Since the State Department of Finance does not provide population data at a geographic level smaller than existing cities, population estimates generated by the City Planning Department based on State Department of Finance figures were used. The methodology for population distribution is described in Section 2 of this report.

Analysis

Table 12 shows the estimation of State Motor Vehicle License Fee revenues by study region. The City received a total of $163,859,000 from the state in FY 1998-1999 as reported in the budget. Since population figures were determined elsewhere, this table simply shows how that population figure distributes the actual revenues received.

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Other Issues

State law requires the State Controller to allocate Motor Vehicle License Fees based on population. For cities that incorporate after January 1, 1990, the population for a new city is determined as either the actual population for the area based on U.S. Census data or three times the number of registered voters in the new city, whichever is greater. Using this formula, the secession areas could have a calculated population using voter registration as much as 300,000 over the actual population in those areas, resulting in a reduction of Motor Vehicle License Fee revenues distributed to cities statewide, including Los Angeles.

In 1998, the State legislature approved a measure to reduce the Motor Vehicle License Fee charged and to offset the loss of revenues to local jurisdictions with other revenues. This offset is a yearly appropriation as a statutory requirement. If State revenues drop in the future, however, the legislature could revise this statutory requirement to either reduce or eliminate the offset. The effect would be a reduction in the State Motor Vehicle License Fee received by local jurisdictions. To index

Transient Occupancy Tax

The City of Los Angeles collects a 14% tax on all hotel and motel rooms for the General Fund. Of the amount collected, an amount equivalent to that which would be generated by a Transient Occupancy Tax of 1% is dedicated to the Los Angeles Convention and Visitor’s Bureau Trust Fund. Analysis of the trust fund can be found elsewhere in this report. The total transient occupancy tax collected is 14% on all hotel and motel rooms. Transient Occupancy Tax revenues are driven by the health of the economy, as tourism and convention activity are primary causes for high hotel and motel occupancy. The Transient Occupancy Tax accounts for 3% of the general fund and 2% of the total operating budget.

Methodology

Actual Transient Occupancy Tax revenue data for every account in the City were obtained from the City Office of Finance, including the address of every account and the amount of revenues collected, for FY 1998-99. Addresses for all accounts were geocoded against the Thomas Brothers street map using both street address and zip code to locate each account geographically. One study area was then assigned to each account through the GIS. Tax data were then summed by study area and proportions of the City total were calculated.

Analysis

Table 13 shows the actual source of transient occupancy tax revenues by geographic area. This revenue source is highly determined by geographic area. Hotels and motels are concentrated in the downtown, airport, and westside areas of the City of Los Angeles. There are very few large hotels operating in the San Fernando Valley, and no large hotels operate in the Harbor area. As a result, transient occupancy tax revenues generated within the Los Angeles area are significantly higher than revenues generated in other areas.

To index

Municipal Court Fines

Municipal Court fines consist of revenues from parking violations, juvenile traffic court fines, red light violation fines, misdemeanor fines not related to traffic, and laboratory fees charged in connection with drunk driving arrests. Parking violations account for nearly 90% of the total municipal court fine revenues. Data reflect the amount of revenues actually collected by the Courts, not the amount ticketed by the Department of Transportation. This was 3% of the general fund and 2% of the total operating budget.

Methodology

Actual citation payment data that indicates the location where the citation was issued is not available. The Department of Transportation has developed a methodology to estimate parking violation fine revenues based on the number of citations written.

The Department conducted a random sample of the number of citations written over 24 working days in the San Fernando Valley and the Harbor area. Two days were selected at random every month for one year and the average number of citations per day was determined. The average number of citations collected was then multiplied by 250.5 (the number of working days in a year) to determine the estimated total number of citations written per year in the Valley and the Harbor. To estimate revenues collected per area, the Department multiplied the estimated number of citations written in the study area by the average amount collected per paid citation. This was then multiplied by 78%, the collection rate for parking violations.

The Department conducted this revenue estimation in the Valley for fiscal years 1998-99 and 1999-2000, and in the Harbor for fiscal year 1999-2000. This analysis uses the1998-99 estimation for the Valley and the 1999-2000 estimation for the Harbor. Table 14 shows the values used to arrive at the estimated parking citation revenues for the Valley and Harbor. The difference is assigned to the Los Angeles study area.

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Analysis

Consistent with other revenues related to parking, the majority of Municipal Court fine revenues are generated from the Los Angeles area. The nature of land use in downtown Los Angeles, Hollywood, the Wilshire Corridor, West Los Angeles, and the airport involves the need for parking areas, parking management, and parking enforcement. In the case of municipal fines, the vast majority of revenues are generated by parking violations. With the greatest demand for parking in the Los Angeles area, the greatest number of parking violations are also generated in this area. Table 15 shows that 86% of this revenue is generated from the Los Angeles area.

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Parking Users Tax

The City of Los Angeles charges a 10% tax on all commercial parking revenues, known as the Parking Users Tax (PUT). In addition, taxes on revenues from City-owned parking lots are also included in the PUT line item of the budget. This includes revenues from the airport parking lots. In FY 1998-99, the City received $54,684,395 in parking users tax. This was 2% of the general fund and 1% of the total operating budget.

Methodology

The address and actual tax paid for every PUT account in FY 1998-99 was obtained. Addresses for all parking tax accounts were geocoded against the Thomas Brothers street map using both street address and zip code to locate each account geographically. One study area was then assigned to each address and tax payment data were summed by study area. Proportions of the Citywide total were then calculated for each study area. The 27 city parking lots were also geocoded and revenue data were processed as with the PUT data.

Analysis

Commercial parking lots are largely located in the central Los Angeles area. The office towers downtown, along the Wilshire corridor, and on the westside are dominant locations for commercial lots. Several City departments also collect parking fees and pay the parking user tax. These revenues are collected and reported separately from commercial parking facilities. The primary source of parking user tax revenue among City departments is Los Angeles International Airport. These areas are also served by a large number of satellite commercial parking lots. Parking arrangements in the Valley and Harbor areas are significantly different, with many large employers and low-level commercial developments providing parking at no charge. There are very few City departments collecting parking fees in the Valley and none in the Harbor. Revenues from Van Nuys Airport parking lots are included in the San Fernando Valley line item. Table 16 shows the geographic source of parking tax revenues.

To index

Interest

Interest accumulates based on revenue sources in the General Fund. In FY 1998-99, the City received $32,910,989 in interest. This was 1% of the general fund and 1% of the total budget.

Methodology

Interest income is not generated as a direct result of any geographic activity in the City. However, since interest is generated off revenues that do have a geographic source, those data will be used to assign a geographic source to interest income. All general fund revenues, minus interest, were calculated regionally as discussed throughout this report. The proportional source of all these revenues was determined, then applied to interest revenue as an estimation of the regional source of interest income.

Analysis

As Table 4 earlier shows, each general fund revenue source has a distinct geographic base. The Transient Occupancy and Parking User taxes are largely generated in a few geographic areas, while property tax is generated relatively evenly across the City. The source of interest revenues in Table 17 reflects the sum of these distinct geographic origins since interest revenues are a direct result of revenue generation and not influenced by any other generation factor.

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Issues

Technically, this analysis may not accurately represent the actual generation of interest revenue within each region. Each revenue source is received by the City at different times of the year, then expended at varying rates. The result is that one revenue source may generate more interest revenue than another and revenues from one geographic area may generate more interest revenue than another. In addition, policies regarding reserve funds changes. Due to the difficulty involved in conducting the analysis required to address these variables, a less complicated methodology was selected for this analysis.

Franchise Income

Franchise income is received from several sources, including gas pipelines, cable television, wastewater, official police garages, taxi cabs, and several others. Each individual source is analyzed below and methodologies for each are provided. In FY 1998-99, the City received $9,934,000 in franchise fees. Franchise Income accounts for less than 1% of the general fund and less than 1% of the total operating budget.

Gas Franchise revenues are an important component of the total franchise income. The City, however, cannot release data on the gas franchise revenues. Provisions of Revenue and Taxation Code §7056 prohibit the City from providing data obtained from private utilities. Since franchise revenues are based, in part, on gas tax revenues, gas franchise revenues cannot be provided.

Cable Methodology

There are 14 cable service areas in the City of Los Angeles. Cable service providers report tax payments based on these areas. Detailed account data at the address level were not available. Each cable service area was assigned to one of the study areas. Two of the service areas did not fit entirely within a single study area. The Sherman Oaks service area is split between the Valley and Los Angeles, and Harbor City/Wilmington is split between Los Angeles and the Harbor. The amount of area shared between each geographic region for both service areas is substantial, so simply assigning all revenue from each of these service areas to one or another geographic region would not be accurate. As a proxy, census data indicating the number of households for the Sherman Oaks and Harbor City/Wilmington service areas were used to distribute revenues within these service areas to the study regions. Census tracts within these two cable service areas were assigned to the three study areas. The number of households for these tracts was then summed and the proportion of total households for each area was determined. The revenues for the Sherman Oaks and Harbor City/Wilmington service areas were then distributed to the appropriate study areas based on these percentages.

Cable Analysis

Table 18 shows the regional source of cable franchise fees in the City.

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Sewer Methodology

Sewer franchise fees are a 2% charge against the sewer service fee. That fee is analyzed in the Special Purpose Revenues section of this report with data geocoded at the address level. The proportional source of the sewer service fee is used here as the proportional source of the sewer service franchise fee. Address level data were obtained form the Department of Water and Power billing system for sewer fees in FY 1998-99. Data extracted from the database were Sewer Service fee charges for each property and property address. Addresses were geocoded using the Code 1 software as described earlier. Study areas were assigned to each property and sewer fees were summed by area.

Sewer Analysis

Under the existing fee structure, revenues are regionally allocated as shown in Table 19.

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Official Police Garages Methodology

The Los Angeles Police Department has 17 Official Police Garage (OPG) franchises across the City, one for each police division. These garages are primarily involved with towing services. There are also Citywide towing franchises for oversized vehicles. Towing service providers pay a franchise fee to the City based on the number of vehicles towed.

OPG franchise fees are collected by contractor, which correlates to LAPD division. LAPD divisions in the Valley fall entirely within the San Fernando Valley study area. LAPD’s Harbor Division extends beyond the San Pedro/Wilmington area to include the Harbor Gateway and Harbor City areas, which are outside the proposed Harbor study area. All revenues from Valley divisions were assigned to the Valley and all revenues from Los Angeles divisions were assigned to the City. Even though the Harbor division extends beyond the Harbor study area, all revenues from this OPG area were assigned to the Harbor as detailed data were not available to split revenues from this area more precisely. As a result, Harbor data slightly overstate revenues that would be collected. Revenues from the two Citywide OPG franchises for oversized vehicles were split by the proportion of revenues assigned in the OPG LAPD Division analysis.

Official Police Garages Analysis

Table 20 shows the estimated revenues for each of the study areas. Many towing incidents are related to illegal parking and, as with other revenues related to parking, the Los Angeles area has a greater demand for parking services. OPG revenues reflect the higher incidence of towing in this part of the City, largely resulting from illegal parking.

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Franchise Income Summary

Table 21 provides a summary of all franchise income revenues described above.

1 A correction of $698 is included in Table 21 to achieve a balance between the City Budget and the Revenue Outlook. This study is using budget data for actual revenues in FY 1998-99. The budget, however, does not provide individual revenues for each of the utility tax components: telephone, electricity, and gas. Actual data for FY 1998-99 for each of the three components are provided in the Revenue Outlook, but those data are rounded to the nearest thousandth. This rounding results in a $698 difference in actual fiscal year utility tax data between the budget and the Revenue Outlook. This line item simply balances that difference.

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Issues

The amount of the Sewer Franchise Fee is subject to change based on Mayor and Council action. The percent of the franchise fee has fluctuated in the past and may do so in the future.

Civic Center Parking Income

This revenue source is generated by a City-owned parking lot beneath City Hall located downtown. As a result, all revenues from this fund are assigned to the City of Los Angeles. Actual revenues for FY 1998-1999 totaled $2,209,312. Civic Center Parking accounts for less than 1% of the general fund and less than 1% of the total budget. Table 22 shows these revenues by study area.

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Transfer from Telecomm Dev Account

Each year, the Mayor and Council transfer a portion of receipts in the Telecomm Development Account to the General Fund. This amount varies from year to year based on budgetary demands and priorities in the General Fund. This transfer is a very small portion of the General Fund, accounting for less than 1% of the general fund and less than 1% of the total budget.

Methodology

Receipts are distributed based on the amount of cable franchise fee paid to the City, as described earlier in the Franchise Income section of this report.

Analysis

Table 23 shows the geographic source of revenues by cable franchise area for FY 1998-99 and the proportion of the Transfer from Telecomm Dev Account that would accrue to each geographic area. In FY 1998-99, $1,708,000 was transferred from the Telecommunications Dev Trust Fund to the General Fund.

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Issues

The amount of this transfer varies as a matter of policy. Fiscal year 1998-99 revenues from this source may not reflect receipts that may be available in the future.

Transit Shelter Income

The City contracts with a private firm to place a fixed number of bus shelters around the City. These shelters include advertising space. The City receives a payment from the vendor that accounts for 50% of the advertising revenues. This income source is a very small portion of the General Fund, accounting for less than 1% of the general fund and less than 1% of the total operating budget.

Methodology

The location of each existing transit shelter as of October 1999 was geocoded by address against the Thomas Brothers street line file as described in Section 2. Each site was then assigned to either the San Fernando Valley, Los Angeles, or Harbor using GIS and the number of shelters in each area was determined. The City receives 50% of the advertising revenues for the sum of revenues from all shelters. Revenues are not received as a proportion of each individual shelter. The total actual transit shelter income revenues for FY 1998-99 was split proportionally based on the number of shelters in each study area.

Analysis

Table 24 shows the proportional source of revenues by study area.

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Issues

Since this service is contracted, the City of Los Angeles will most likely be required to renegotiate contracts for the provision of bus shelters if the City boundary changes. The resultant cities will likewise have to negotiate contracts for bus shelter services if they so choose. The City and the bus shelter contractor came to a new agreement in FY 1999-2000, resulting in the installation of more bus shelters across the City.

Residential Development Tax

The City collects a $300 per unit tax on the construction of every new housing unit. Collections under this fee vary based on the degree of activity within the housing market and on the types of housing constructed. In FY 1998-99, the City received $946,697 in residential development tax receipts. The Residential Development Tax accounts for less than 1% of the general fund and less than 1% of the total operating budget.

Methodology

Actual billing and payment data were unavailable for this revenues source, so a proxy was developed. Addresses for every housing unit constructed in FY 1998-99 were obtained from the Department of Building and Safety. These are the units that would have ben charged the Residential Development Tax of $300 per unit. This dataset included the number of units constructed at each address. The total number of units was multiplied by $300 to determine the amoun of the Residential Development tax at each address. Addresses were then address matched against the Thomas Bros. street file as described in Section 2 of this report. One geographic area was then assigned to each address using GIS and the Residential Development tax was then summed for each geographic

Analysis

This revenue source is directly affected by the strength of the housing market and the types of housing built. In FY 1998-99, two housing projects in West Los Angeles, each consisting of nearly 200 units each, heavily weight the revenues from this source toward the Los Angeles area. Likewise, a single project containing 57 units in the Harbor generated a large tax payment that produced a larger proportion of the total revenues in this fund compared to other funds. If single-family development predominates in the Valley and multi-family development in the City, more Residential Development Tax revenue will continue to be attributable to the City . Table 25 provides the results of this analysis.

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Issues

As with any revenue source dependent on the real estate market, revenues from the residential development tax will fluctuate with the health of the economy. In addition, revenues will fluctuate based on the types of housing built. Land use and zoning decisions will affect the types of housing built and the revenues will fluctuate as a result of these types of economic and policy changes.

Los Angeles Mall Rental Income

This revenue source is generated by the Los Angeles Mall beneath City Hall located downtown. As a result, all revenues from this fund are assigned to the City of Los Angeles. Actual revenues for FY 1998-1999 totaled $501,702. Mall income accounts for less than 1% of the general fund and less than 1% of the total budget. Table 26 shows these revenues by study area.

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Grants Receipts

Grants receipts included in the General Fund are short-term and one-time grants that are reimbursements for previous year expenditures. Because grant receipts are reimbursements from previous year’s expenditures , no geographic source was determined. These are not continuing sources of funds and they can fluctuate significantly from one year to another. This category includes disaster assistance grants and police-related grants. This does not include entitlement grants such as the Community Development Block Grant. Those types of grants are considered elsewhere in this report. In FY 1998-99, $41,189,400 in General Fund grant reimbursements were received. Grants receipts account for 2% of the general fund and 1% of the total budget.

These grants are reimbursements received by the City for expenditures related to past public safety and disaster events. When a disaster occurs, the City uses existing revenues from a department’s budget to pay for response and recovery costs, then seeks reimbursement from appropriate sources such as the Federal Emergency Management Agency (FEMA). Public safety grants work on a similar reimbursement process. Because grants receipts are based on reimbursements of previous year’s spending, the geographic origin of these revenues is obscured. These receipts are more like assets than revenues, and cannot be considered as having a geographic context.

General Fund Revenues Not Yet Analyzed

The following General Fund revenues are not currently included in this analysis because data were not immediately available to conduct a thorough analysis. Additional research is required to determine whether it is possible to assign a geographic origin to these receipts. Table 27 shows those revenues not analyzed yet.

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