Revenue Sources Chapter 8. Income Sources Compulsory Income Gratuitous Income Earned Income...

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Revenue SourcesRevenue Sources

Chapter 8

Income SourcesIncome SourcesCompulsory IncomeGratuitous IncomeEarned IncomeInvestment IncomeContractual Receipts

Compulsory IncomeCompulsory Income

Secured by government organizations

Collected through taxing & regulatory

powers at different government levels

Why do commercial agencies care??

Types of taxes…??

Compulsory IncomeCompulsory IncomeReal property taxPersonal property taxSales taxExcise taxIncome taxLocal option tax

Question…Question…

How is an individual’s property taxes determined?

Compulsory IncomeCompulsory IncomeReal property taxes

◦Land & whatever is developed or growing on the land

◦Different rates for different levels Personal home, business, undeveloped

land, farm

◦96% of property taxes stay locally

◦Understand assessed value, tax abatement, tax base

◦Value defined by a realtor/appraiser/tax assessor Fair market value Assessed value – 30-50% lower than FMV

(1/3 in IL) A.V=Taxable worth

Fair market value = $180,000 listingAssessed Value = $60,000 ($180,000 / 3)

◦Tax abatement

Exemption from paying taxes Specific time period New business incentive

◦Tax base Total assessed property value of all

taxable property in a community

Bloomington vs. Hudson

Exemptions – NPOs, churches, universities, museums….

◦Tax rates formula

Tax rate = Required taxes / net assessed valuation

Required taxes = * Set from budget (ie. $5,000,000)

* Expenditures – revenues (excluding taxes)

* Where does a city get revenue?

Tax rate = Required taxes / net assessed valuation

Net assessed valuation=

Total assessed valuation of com.410,500,000

Tax exempt property (abatements) - 10,500,000

Net assessed valuation $400,000,000

Required taxes/net assessed valuation=tax rate

$5,000,000 / $400,000,000 = 0.0125 (1.25%)

Also read as $1.25 per $100 assessed value

Tax rate = 0.0125AV: $100,000 home x 0.0125 = $1,250 tax bill

AV: $150,000 home x 0.0125 = $1,875 tax bill

Town of Normal EgTown of Normal Eg

Taxing Body Tax Rate % of Total 60,000 AV; 180,000 FMV

Town of Normal 0.00749 10.0% $449 Normal Library 0.003391 4.5% $203 McLean County 0.00901 12.1% $541 Township 0.001486 2.0% $89 Road & Bridge 0.000809 1.1% $49 Water Reclamation District 0.001587 2.1%

$95 Airport Authority 0.001078 1.4% $65 Unit 5 School District 0.045325 60.7% $2,720 Community College 0.004442 6.0% $267

Total .074618 100.0% $4,477

FYI…FYI…Monday – meet in ITDC 103BRead one of the linked articles

Compulsory IncomeCompulsory IncomeReal property taxesPersonal property taxesSales taxesExcise taxIncome taxLocal option tax

Compulsory IncomeCompulsory IncomePersonal Property taxes

◦Allowed in 41 states (not IL)

◦1. Household tangible property Autos, $, livestock, furniture

◦2. Business tangible property Inventory, business fixtures, furniture,

◦3. Intangibles Stocks & bonds

Town of Normal EgTown of Normal Eg0.75% Use tax on titled items

◦cars, boats, motorcycles ◦Supports General fund

Compulsory IncomeCompulsory IncomeSales taxes

◦Largest source of state tax revenue◦Second largest for cities◦Imposed on the sale of tangible

goods At-home food & drugs exempt DE, MT, NH, OR – no sales tax

◦Range 4-10% 1-2% stays with local government

Compulsory IncomeCompulsory IncomeSales taxes

◦Dedicated sales tax MO State Parks (1/10 of ea. Cent) Have no entrance fees

◦Used to fund Bank One Ballpark & renovate Packer Stadium

◦Rural towns vs. tourism towns Boulder, CO & Wal-Mart Normal vs. Honolulu…

Tourism Town Tourism Town ComparisonsComparisons

Normal, IL Honolulu County

Tax rates $7.46/$100 AV $0.33/$100 AV

Taxes paid on AV $60,000

$4,476 $197.40

HA property tax on same home*

$7490 $329

•Honolulu County gives $80,000 credit to FMV. Rest is taxed. •Must pay a minimum of $100 in taxes

•$180,000-$80,000=$100,000 AV

Town of Normal EgTown of Normal EgThe State of Illinois collects a sales tax

at a rate of 7.5%, which is distributed as follows:

◦5% to the State of Illinois ◦0.25% to McLean County ◦1.00% to the Town of Normal◦1.25% B-N home rule tax Used for General Fund with a small

% to support the Uptown Renewal Program.

Compulsory IncomeCompulsory IncomeExcise taxes

◦Imposed on specific goods, services◦Hotel-Motel tax

CVB’s Sports facilities

2% toward Spurs’ SBC Arena Georgia Dome (3.7%) Comiskey Park (2%)

IL Sports Facilities Hotel Tax…

Why do this?

Illinois Sports Facilities Illinois Sports Facilities Hotel TaxHotel Tax

The Illinois Sports Facilities Authority imposes a tax on gross receipts from hotel operators within the City of Chicago. Receipts from permanent guests (occupants of 30 days or longer) are not taxed. Proceeds are used for the corporate purposes of the authority, including construction costs for the Comisky Baseball Park.

Compulsory IncomeCompulsory IncomeExcise taxes

◦Car Rental tax American Airline Center in Dallas Atlanta Hawks Philips Arena

◦Sin taxes Alcohol, cigarettes Cleveland’s Jacob’s field, Gund Arena &

Browns Stadium

Town of Normal EgTown of Normal Eg

Tax % Supports

Hotel & motel tax 12% 6% to the state; 2% to CVB; 4% city (Interstate Center & Uptown Normal)

Food & Beverage (for immediate consumption)

2% General fund

Liquor tax 4% Police

Utility tax (ie. cable, gas, elec)

5% General fund (one of largest revenue sources)

Motor Fuel Tax ?? Collected by state to fund local roads

Compulsory IncomeCompulsory IncomeIncome taxes

◦Municipal, state & federal levels IL = 3% flat tax with 1/11 going to

municipalities Suggested 4.5% - 50% increase

$50,000 - $1500 to $2250 ($750 or $62 per month)

◦IL = no state property taxes, rely on income taxes

Which is more fair, property or income tax?

Compulsory IncomeCompulsory IncomeLocal option taxes

◦Applied at the local level◦Legislatively enabled at the state

level◦Ie. Local home rule sales tax added

to the state sales tax (1.25% in B-N)

Gratuitous IncomeGratuitous IncomeReceived without expectation of

return◦Grants, bequests, sponsorships

Most often giver does not receive a direct benefit or compensation

Gratuitous IncomeGratuitous Income

Grants

◦LWCF – development of outdoor rec

resources

◦OSLAD - Open Space Land

Acquisition and Development

◦Illinois Transportation Enhancement

Program

Gratuitous IncomeGratuitous IncomeBequests

◦Life insurance

◦Wills

ELM fund

Sponsorships & Donations

◦$$, land, equipment, stocks, bonds

◦See examples….

Gratuitous IncomeGratuitous IncomeNonprofit agencies

◦Rely on gratuitous

Public agencies◦Rely on some forms of gratuitous◦Grants & the need for a foundation

Commercial◦Gives gratuitous income

Earned IncomeEarned IncomeCash resources generated from

fees & charges◦Impacts all sectors

Earned IncomeEarned IncomeEntrance fees

◦ Well-defined but not necessarily enclosed

◦ Botanical gardens, zoos

Admission fees

◦ To enter a building, structure, designated

◦ Show, performance

Earned IncomeEarned Income

Rental fees

◦Pavilions, equipment

User fees

◦Activity fees

◦Showmobile user

fees…

User Fees Eg.User Fees Eg.Michigan DNR generated: $24.9 million in camping

revenues$12.2million in gate receipts. Accounts for almost 96% of their

total revenue of $38.6 million(NASPD, 2008)

◦Goods & services through pro shops,

concessions, etc.

Kentucky State Parks restaurants - $14.4

m/year

Tennessee – $8.5 m/year

License & permit fees

◦Boat permits, snowmobile license,

Earned IncomeEarned IncomeSpecial service fees

◦Handling fees

◦Lottery funds

Attingham Park – Heritage Lottery Fund Colorado Lottery

Earned IncomeEarned IncomeSpecial service fees

◦Luxury suite ($100,000 per)

◦Personal seat licenses (@$1000 per)

Pay for right to buy season tickets

Forfeit when you no longer buy

season tickets

Transfer by gift, bequest or sale to

third party

Income – IL State ParksIncome – IL State ParksSource Revenue

Entrance Fees -

Camping fees 5,863,987

Cabins 83,419

Lodges 175,831

Concessions 154,485

Pools/beaches 11,459

Golf 75,000

State budget (0.092%) 57,121,100

Other sources:-Motor fuel tax-Snowmobile, ATV, boats, hunting license registration-Taxes on tobacco, sporting goods-Sales tax on tourism

Investment IncomeInvestment Income

Invest unneeded revenue

◦Stocks, mutual funds, money

markets

All sectors do this

NRPA earned $1,287,643 from

investments = 10% of their

overall budget ….

Contractual ReceiptsContractual ReceiptsRevenue generated from

contractual agreements◦Concessions◦Golf pro shop

All sectors use this

Eg….

Contractual ReceiptsContractual ReceiptsAustin PARD

◦$200,000 in revenue annually from contracts

◦Barton Springs Food and Beverage in Zilker Park Commission Paid– $90,000 annually

($7,500 per month) + 8% of gross annual sales up to

$265,000 and 8.5% of gross annual sales exceeding

$265,000

Overview by SectorOverview by SectorSector/ Income Compulso

ryGratuitous Earned Investme

ntContractual

Market Sector

None Minimal Major source

Major source

Can be a major source

NPO None Major source

Major source

Limited, based on available cash

Growing importance

Public Sector

Essential

Growing importance

Major source

Limited, based on available cash

Growing importance

Revenue Sources Chapter 8. Income Sources Compulsory Income Gratuitous Income Earned Income...

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