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Revenue Sources Chapter 8. Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts.

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Presentation on theme: "Revenue Sources Chapter 8. Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts."— Presentation transcript:

1 Revenue Sources Chapter 8

2 Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts

3 Compulsory Income Secured by government organizations Collected through taxing & regulatory powers at different government levels Why do commercial agencies care?? Types of taxes…??

4 Compulsory Income Real property tax Personal property tax Sales tax Excise tax Income tax Local option tax

5 Question… How is an individual’s property taxes determined?

6 Compulsory Income Real 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

7 Compulsory Income Real property taxes ◦ 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

8 Fair market value = $180,000 listing Assessed Value = $60,000 ($180,000 / 3)

9 Compulsory Income Real property taxes ◦ Tax abatement  Exemption from paying taxes  Specific time period  New business incentive

10 Compulsory Income Real property taxes ◦ Tax base  Total assessed property value of all taxable property in a community  Bloomington vs. Hudson  Exemptions – NPOs, churches, universities, museums….

11 Compulsory Income Real property taxes ◦ 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?

12 Compulsory Income Real property taxes ◦ Tax rates formula 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

13 Compulsory Income Real property taxes ◦ Tax rates formula Required taxes/net assessed valuation=tax rate $5,000,000 / $400,000,000 = (1.25%) Also read as $1.25 per $100 assessed value

14 Compulsory Income Real property taxes ◦ Tax rates formula Tax rate = AV: $100,000 home x = $1,250 tax bill AV: $150,000 home x = $1,875 tax bill

15 Town of Normal Eg Taxing BodyTax Rate% of Total60,000 AV; 180,000 FMV Town of Normal % $449 Normal Library % $203 McLean County % $541 Township % $89 Road & Bridge % $49 Water Reclamation District % $95 Airport Authority % $65 Unit 5 School District % $2,720 Community College % $267 Total % $4,477

16 FYI… Monday – meet in ITDC 103B Read one of the linked articles

17 Compulsory Income Real property taxes Personal property taxes Sales taxes Excise tax Income tax Local option tax

18 Compulsory Income Personal Property taxes ◦ Allowed in 41 states (not IL) ◦ 1. Household tangible property  Autos, $, livestock, furniture ◦ 2. Business tangible property  Inventory, business fixtures, furniture, equip ◦ 3. Intangibles  Stocks & bonds

19 Town of Normal Eg 0.75% Use tax on titled items ◦ cars, boats, motorcycles ◦ Supports General fund

20 Compulsory Income Real property taxes Personal property taxes Sales taxes Excise tax Income tax Local option tax

21 Compulsory Income Sales 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

22 Compulsory Income Sales 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…

23 Tourism Town Comparisons Normal, ILHonolulu County Tax rates$7.46/$100 AV$0.33/$100 AV Taxes paid on AV $60,000$4,476$ 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

24 Town of Normal Eg The 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.

25 Compulsory Income Real property taxes Personal property taxes Sales taxes Excise tax Income tax Local option tax

26 Compulsory Income Excise 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?

27 Illinois Sports Facilities Hotel 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.

28 Compulsory Income Excise 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

29 Town of Normal Eg Tax%Supports Hotel & motel tax12%6% to the state; 2% to CVB; 4% city (Interstate Center & Uptown Normal) Food & Beverage (for immediate consumption) 2%General fund Liquor tax4%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

30 Compulsory Income Real property taxes Personal property taxes Sales taxes Excise tax Income tax Local option tax

31 Compulsory Income Income 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?

32 Compulsory Income Real property taxes Personal property taxes Sales taxes Excise tax Income tax Local option tax

33 Compulsory Income Local 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)

34 Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts

35 Gratuitous Income Received without expectation of return ◦ Grants, bequests, sponsorships Most often giver does not receive a direct benefit or compensation

36 Gratuitous Income Grants ◦ LWCF – development of outdoor rec resources ◦ OSLAD - Open Space Land Acquisition and Development ◦ Illinois Transportation Enhancement Program

37 Gratuitous Income Bequests ◦ Life insurance ◦ Wills  ELM fund Sponsorships & Donations ◦ $$, land, equipment, stocks, bonds ◦ See examples….

38 Gratuitous Income Nonprofit agencies ◦ Rely on gratuitous Public agencies ◦ Rely on some forms of gratuitous ◦ Grants & the need for a foundation Commercial ◦ Gives gratuitous income

39 Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts

40 Earned Income Cash resources generated from fees & charges ◦ Impacts all sectors

41 Earned Income Entrance fees ◦ Well-defined but not necessarily enclosed areas ◦ Botanical gardens, zoos Admission fees ◦ To enter a building, structure, designated area ◦ Show, performance

42 Earned Income Rental fees ◦ Pavilions, equipment

43 Earned Income User fees ◦ Activity fees ◦ Showmobile user fees…

44 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)

45 Earned Income Sales ◦ Goods & services through pro shops, concessions, etc. ◦ Eg  Kentucky State Parks restaurants - $14.4 m/year  Tennessee – $8.5 m/year

46 Earned Income License & permit fees ◦ Boat permits, snowmobile license,

47 Earned Income Special service fees ◦ Handling fees ◦ Lottery funds Attingham Park – Heritage Lottery Fund Colorado Lottery

48 Earned Income Special service fees ◦ Luxury suite ($100,000 per) ◦ Personal seat licenses 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

49 Income – IL State Parks SourceRevenue Entrance Fees- Camping fees5,863,987 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

50 Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts

51 Investment 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 ….

52 Income Sources Compulsory Income Gratuitous Income Earned Income Investment Income Contractual Receipts

53 Revenue generated from contractual agreements ◦ Concessions ◦ Golf pro shop All sectors use this Eg….

54 Contractual Receipts Austin 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

55 Overview by Sector Sector/ Income CompulsoryGratuitousEarnedInvestmentContractual Market Sector NoneMinimalMajor source Can be a major source NPONoneMajor source Limited, based on available cash Growing importance Public Sector EssentialGrowing importance Major source Limited, based on available cash Growing importance


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