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051-22 - Ordinance - Utility TaxesDocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 ORDINANCE NO.051-22 AN ORDINANCE OF THE CITY OF PORT ORCHARD, WASHINGTON, REGARDING UTILITY TAXES, AMENDING CHAPTER 5.84 OF THE PORT ORCHARD MUNICIPAL CODE TO RENAME THE CHAPTER "WATER, SEWER, STORM BUSINESS AND OCCUPATION TAX", AND ADOPTING NEW SECTIONS 5.84.005, 5.84.008, 5.84.015, 5.84.020, 5.84.030, 5.84.040, 5.84.050, 5.84.060, 5.84.070, 5.84.080, 5.84.090, 5.84.100, 5.84.110, 5.84.120, 5.84.130, 5.84.140, 5.84.150 TO THE PORT ORCHARD MUNICIPAL CODE TO CREATE PROCEDURES FOR ADMINISTERING THE CHAPTER, AMENDING SECTION 5.84.010 OF THE PORT ORCARD MUNICIPAL CODE EXPAND THE IMPOSITION OF BUSINESS AND OCCUPATION TAXES FOR WATER AND SEWER UTILITIES TO ALL SUCH UTILITIES THAT OPERATE WITHIN THE CITY OF PORT ORCHARD, REDEFINING THE BUSINESSES SUBJECT TO THE FIVE PERCENT TAX TO INCLUDE ALL WATER AND SEWER BUSINESS PROVIDING SERVICE IN PORT ORCHARD; PROVIDING FOR REFERENDUM FOR CERTAIN PORTIONS OF THIS ORDINANCE; PROVIDING FOR IMPLEMENTATION, SEVERABILITY AND CORRECTIONS; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, in accordance with RCW 35A.82.020 the City of Port Orchard has the authority to levy utility taxes; and WHEREAS, under Washington law the City may levy utility tax upon Cable TV, electricity, gas, sewer, stormwater, solid waste, steam, telephone services, and water; and WHEREAS, the City's utility tax on water and sewer was first enacted in 1970 and has not been expanded or increased since that time; and WHEREAS, POMC 5,84.010 imposes an excise tax on the gross incomes of municipal water and sewer utilities; and WHEREAS, POMC 5.84.010 has not historically imposed an excise tax on the gross incomes from water services or sewer services provided by other than the municipal utilities operated by Port Orchard which had led to only a portion of the City's residents being subject to this tax; and WHEREAS, in addition to the City of Port Orchard providing water and sewer services to properties in Port Orchard, Bremerton and West Sound Utility District also serve some customers inside the jurisdictional boundaries of Port Orchard; and WHEREAS, in order to create equity across the City, all customers who receive water and sewer services inside the Port Orchard jurisdictional boundaries should be subject to the same city taxes; and DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 2of11 WHEREAS, the Washington Supreme Court held in Lakehaven Water & Sewer Dist. v. City of Fed. Way,195 Wn.2d 742, 466 P.3d 213 (2020), that RCW 35A.82.020 gives cities the authority to impose excise taxes on utility districts, and the governmental immunity doctrine does not shield utility districts from excise taxes because the utilities perform a proprietary function by providing utility services to ratepayers; and WHEREAS, more than 150 cities and towns in Washington impose an excise tax on the gross incomes from water services and/or sewer services provided by public and private utilities; and WHEREAS, the City Council intends that the business activities of all public and private water services and sewer services in Port Orchard to be subject to an excise tax according to POMC 5.84.010; and WHEREAS, the City Council finds it necessary to expand the types of excise taxes levied by Port Orchard to create equity across the city and to pay for municipal services and expenses which are enjoyed by all residents in the city; and WHEREAS, the City Council must balance Port Orchard's need for new revenue sources to pay for basic municipal services with the burden of an excise tax on public and private water and sewer utilities; and WHEREAS, the City Council has determined that it is in the public's best interest that Port Orchard impose an excise tax on public and private utilities engaged in or carrying on the business of providing water and sewer services in Port Orchard; now, therefore, THE CITY COUNCIL OF THE CITY OF PORT ORCHARD, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: Section 1. Findings. The findings and recitals set forth above are hereby adopted and incorporated herein by this reference. Section 2. Chapter 5.84 of the Port Orchard Municipal Code is hereby retitled "Water, Sewer, Storm Business and Occupation Tax". Section 3. A new section 5.84.005 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.005 Power to license for revenue. The provisions of this chapter shall be deemed to be an exercise of the power of the City to license for revenue. Section 4. A new section 5.84.008 is hereby added to the Port Orchard Municipal Code to read as follows: DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 3 of 11 5.84.008 Definitions. In construing the provisions of this chapter, except when otherwise plainly declared or clearly apparent from the context, the following definitions shall apply: (1) "Gross income" is the value preceding or accruing from the sale of tangible property or service, and receipts (including all sums earned or charged, whether received or not) by reason of the investment of capital in the business engaged in, including rentals, royalties, fees or other emoluments, however designated (excluding receipts or proceeds from the use or sale of real property or any interest therein, and proceeds from the sale of notes, bonds, mortgages, or other evidences of indebtedness, or stock and the like) and without any deduction on account of the cost of the property sold, the cost of materials used, labor costs, interest or discount paid, or any expense whatsoever, and without any deduction on account of losses, but allowing a deduction for the amount of credit losses sustained by the taxpayer during the period covered. (2) "Taxpayer" is any person liable to the license fee or tax imposed by this chapter. (3) "Tax period or taxable period" are the quarters ending on March 31st, June 30th, September 30th, and December 31st. (4) "Person" or "persons" mean persons of either sex, firms, co- partnerships, corporations and other associations of natural persons, whether acting by themselves or by servants, agents or employees. (5) "Sewerage system business" means and includes: (a) Sanitary sewage disposal sewers and facilities, including without limitation on -site or off -site sanitary sewer facilities consisting of an approved septic tank or septic tank systems, or any other means of sewage treatment and disposal; (b) Combined sanitary sewage disposal and storm or surface water drains and facilities; (c) Storm or surface water drains, channels and facilities; (d) Outfalls for storm drainage or sanitary sewage and works, plants, and facilities for storm drainage or sanitary sewage treatment and disposal; (e) Any combination of or part of any or all of such facilities. (6) "Water distribution business" means and includes every person engaged in the business of distributing, furnishing, or selling water services for commercial or domestic use or purpose. DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 4 of 11 Section S. Section 5.84.010 of the Port Orchard Municipal Code is hereby amended to read as follows: POMC 5.84.010 Rate — Payment — Purpose. There is levied upon and there shall be collected from every person firm or corporation engaged in or carrying on the business of furnishing, for a monetary consideration, water distribution or sewerage system services, within or partly within the corporate limits of the City. an annual tax for the privilege of so doing equal to five percent (5%) of the total gross revenue from such business in Port Orchard during the period for which the tax is due. -u„u whirch amounts shall be paid monthly 4E)FA the wateF and Utility fuRds te the euFFeRt expeRse fund. This taxis imposed to c;eveF tke r + f d ist the ateF a .�. d e „tilitin hirh am net eFiRg lJirnn+h. n4+-.rrTn-+6+In +horn+n_ Section 6. A new section 5.84.015 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.015 Use and accountability of tax proceeds. All Revenues collected under this chapter shall be deposited into the general fund and shall be used to fund municipal programs, services, or capital projects as the council shall direct through its annual budget process. Section 7. A new section 5.84.020 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.020 Occupation license required. (1) No person shall engage in or carry on any business, occupation, pursuit or privilege for which a license fee or tax is imposed by this chapter without having first obtained, and being the holder of, a valid and subsisting license known as an occupation license. (2) Any taxpayer who engages in or carries on any business subject to the tax imposed by this chapter without having a valid occupation license is guilty of a violation of this chapter for each day during which the business is engaged in or carried on, and any taxpayer who fails or refuses to pay the license fee or tax on any part thereof on or before the due date shall be deemed to be operating without a license. DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 5 of 11 Section 8. A new section 5.84.030 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.030 License period. All occupation licenses shall be for the calendar year for which issued and shall expire at the end of that year. Section 9. A new section 5,84.040 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.040 Payment of tax. Effective January 1, 2023, the tax due under this chapter shall be paid quarterly during the year, to be based upon gross income received during each quarter ending March 31st, June 30th, September 30th and December 31st. The tax shall be an amount equal to the percent of the gross income from the business of the taxpayer in the city during the previous quarter as set forth in POMC 5.84.010, and shall be due within 45 days after the end of the quarter. Section 10. A new section 5.84.050 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.050 Exceptions and deductions. (1) In computing the annual tax there shall be deducted from the gross operating revenues the following items: (a) The amount of credit losses and uncollectibles actually sustained by the taxpayer whose regular books are kept on an accrual basis, provided, that to be eligible for said deduction the taxpayer must provide proof of such credit losses and uncollectibles; (b) Amounts derived from transactions in interstate or foreign commerce or from any business which the City is prohibited from taxing under the Constitution of the United States or the Constitution of the State of Washington. (c) Charges by a taxpayer engaging in any water or sewer occupation activity subject to this chapter for sales of water or sewer services to any purchaser engaged in the same utility occupation activity that the purchaser buys for the purpose of resale. (2) Any person subject to the payment of a license fee or tax under the provisions of any ordinance of the City, other than this chapter, on account of engaging in any activity for which such person is liable to tax under this chapter may deduct the amount of such fee or tax imposed by this chapter on account of DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 6 of 11 such activity, but such person shall nevertheless, in the manner herein provided for, apply for and procure an occupation license. (3) Nothing in this chapter shall be construed as requiring a license, or the payment of a license fee or tax, or the doing of any act which would constitute an unlawful burden or interference in violation of the Constitution or laws of the United States or which would not be consistent with the Constitution or laws of the State of Washington. Section 11. A new section 5.84.060 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.060 Application or return for license. (1) On or before the first day of each year, every taxpayer shall apply to the city finance director for an occupation license upon blanks or forms of returns to be prepared and provided by him, requesting such information as may be necessary to enable him to arrive at the lawful amount of the fee or tax. The taxpayer shall write in a legible manner in such blank or form of return the information required and shall sign the same, and by affidavit at the foot thereof shall swear or affirm that the information given is full and true and that he or she knows the same to be so. (2) Every such application or return shall be filed not later than 45 days after the last day of each year. (3) If the applicant is a partnership, the application or return must be made by one of the partners; if a corporation, by one of the officers thereof; if a foreign corporation, co -partnership or nonresident individual by the resident agent or local manager of said corporation, co -partnership or individual. Section 12. A new section 5.84.070 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.070 Sale or transfer of business. Upon the sale or transfer during any tax year of a business on account of which a fee or tax is hereby required, the purchaser or transferee shall, if the fee or tax has not been paid in full for the year, be responsible for its payment for that portion of the year during which such purchaser or transferee carried on such business. Section 13. A new section 5.84.080 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.080 Income records — Returns. DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 7 of 11 (1) It shall be the duty of each taxpayer taxed upon the taxpayer's gross income to keep and enter in a proper book or set of books or records an account accurately reflecting the amount of the taxpayer's gross income, which account shall always be open to the inspection of the city finance director or duly authorized agent, and from which the officer or agent may verify the return made by the taxpayer. (2) To the extent permitted by Chapter 42.56 RCW and other applicable statutes, the applications, statements or returns made to the finance director according to this chapter shall not be made public, nor shall they be subject to the inspection of any person except the mayor, the city attorney, the finance director, and anyone working on the finance director's behalf. Section 14. A new section 5.84.090 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.090 Investigation of returns. If any taxpayer fails to apply for license or make the return, or if the city finance director is dissatisfied with the correctness of the statements made in the application or return of any taxpayer, the finance director or authorized agent may enter the premises of such taxpayer at any reasonable time for the purpose of inspecting the taxpayer's books or records of account in order to ascertain the amount of the fee or tax or to determine the correctness of such statements, as the case may be. The finance director or authorized agent may examine any person under oath, addressing the matters inquired into, or may fix a time for an investigation of the correctness of the return and may issue a subpoena to the taxpayer or any other person, to attend upon such investigation and there testify under oath administered by the finance director or agent, in regard to the matters inquired into and may, by subpoena, require the taxpayer or any person to bring such books, records and papers as may be necessary. Section 15. A new section 5.84.100 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.100 Over or Under payment of tax. (1) Overpayment, if the city finance director upon investigation or upon checking returns finds that the fee or tax paid on any of them is more than the amount required of the taxpayer, the finance director shall refund the amount overpaid upon the written request of the taxpayer. Any refund request not submitted within three years of an alleged overpayment shall be forever barred. (2) Underpayment. If the city finance director finds that the fee or tax paid is less than required, the finance director shall send a statement to the taxpayer showing the balance due, together with a penalty of 10 percent of the amount DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Palle 8 of 11 due, and the taxpayer shall, within 30 days, pay the amount shown thereon. If payment is not received by the finance director by the due date specified in the notice, the finance director shall add a penalty of an additional 25 percent of the amount of the additional tax found due. If the balance due, including all penalties, is not paid in full within 30 calendar days from the date specified, the penalty shall be increased by 15 percent of the amount due and the total amount due shall accrue interest at the rate of 12 percent per annum. If the finance director finds that all, or any part of, the deficiency resulted from an intent to evade the tax payable hereunder, a penalty of 50 percent of the additional tax found to be due shall be added and the amounts due, including penalties, shall accrue interest at the rate of 12 percent per annum from the date the tax became due and the date payment is actually made. Section 16. A new section 5.84.110 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.110 Failure to pay tax; liability and penalties (1) If any taxpayer fails to apply for license, or to make the return or to pay the fee or tax or any part thereof within 30 days after the tax is due, the city finance director shall ascertain the amount of the fee or tax or installment due and shall notify the taxpayer who shall be liable therefor in any suit or action by the city for the collection of the tax. The city finance director shall also notify the city attorney in writing of the name of the delinquent taxpayer and the amount due from such taxpayer and the city attorney shall, with the assistance of the city finance director, collect the same by any appropriate means or by suit or action in the name of the city. (2) If a person subject to this tax fails to pay any tax required by this chapter within 15 calendar days after the due date thereof a penalty of 10 percent of the amount of such tax shall be added to the tax, and any tax due under this chapter that is unpaid and all penalties thereon shall constitute a debt to the city and may be collected by a collection agency or court proceedings, which remedy shall be in addition to all other remedies. If the City of Port Orchard prevails on any claim that a taxpayer is in noncompliance with the terms of this chapter, Port Orchard shall be entitled to an award of its attorneys' fees, court costs and fees, and other professional expenses associated with prosecuting the action. Section 17. A new section 5.84.120 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.120 Appeals to city council. (1) Any taxpayer aggrieved by the amount of the fee or tax found by the city finance director to be required under the provisions of this chapter, may appeal to the city council from such finding by filing a written notice of appeal DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 9 of 11 with the city clerk within 30 days from the time the taxpayer was given notice of the amount. If the determination being appealed is the amount of the tax or fee due, the amount determined by the finance director must be paid to Port Orchard under protest before filing an appeal. The clerk shall, as soon as practicable, fix a time and place for the hearing of the appeal, which time shall be not more than 30 days after the filing of the notice of appeal, and shall cause a notice of the time and place thereof to be delivered or mailed to the appellant. At such hearing the taxpayer shall be entitled to be heard and to introduce evidence in his or her own behalf. The city council shall thereupon ascertain the correct amount of the fee or tax by resolution and the city clerk shall immediately notify the appellant. The amount of the tax, together with costs of the appeal if appellant is unsuccessful therein, must be paid within 30 days after such notice is given. (2) The mayor may, by subpoena, require the attendance of any person at the hearing of the appeal and may also require the production of any pertinent books and records. Any person served with such subpoena shall appear at the time and place stated therein and produce the books and records required, if any, and shall testify truthfully under oath administered by the mayor as to any matter required of such person pertinent to the appeal, and it shall be unlawful for such person to fail or refuse to do so. Section 18. A new section 5.84.130 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.130 Finance director to make rules. The city finance director shall have the power and the duty, from time to time, to adopt, publish and enforce rules and regulations not inconsistent with this chapter or with law for the purpose of carrying out the provisions thereof. It shall be unlawful to violate or fail to comply with any such rule or regulation. Section 19. A new section 5.84.140 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.140 Licenses posted — Nontransferable. (1) All licenses issued pursuant to the provisions of this chapter shall be kept posted by the licensee in a conspicuous place in the licensee's principal place of business. (2) No persons to whom a license has been issued pursuant to this chapter shall allow any other person chargeable with a separate license to operate under or display his or her license, nor shall such other person operate under or display such license. DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 10 of 11 Section 20. A new section 5.84.150 is hereby added to the Port Orchard Municipal Code to read as follows: 5.84.150 False returns, etc. It shall be unlawful for any person liable for taxes hereunder to fail or refuse to make application or return for a license or to pay the fee or tax or installment when due, or for any person to make any false or fraudulent application or return or any false statement of representation in, or in connection with, any such application or return. It shall be unlawful for any person to aid or abet another in any attempt to evade payment of the fee or tax, or any part thereof, or for any person to fail to appear and/or testify in response to subpoena issued pursuant hereto, or to testify falsely upon any investigation of the correctness of a return, or upon the hearing of any appeal, or in any manner to hinder or delay the city or any of its officers in carrying out the provisions of this chapter. Section 21. Portion of Ordinance Subject to Referendum. The provision of this Ordinance which imposes taxes, namely Section 5, is subject to the referendum procedure as follows: 1. A referendum petition seeking to repeal this ordinance shall be filed with the City Clerk who shall be designated the person to receive petitions of all types within seven (7) days of the passage by the City Council of this ordinance or publication thereof whichever is later. 2. Within ten days the City Clerk shall confer with the petitioner concerning the form and style of the petition issue an identification number for the petition and cause to be written a ballot title for the measure. 3. The ballot title shall be posed as a question so that an affirmative answer to the question and an affirmative vote on the measure results in the tax or tax rate increase being imposed and a negative answer to the question and a negative vote on the measure results in the tax or tax rate increase not being imposed. The petitioner shall be notified of the identification number and ballot title within this ten (10) day period. 4. After notification of the identification number and ballot title the petitioner shall have 30 days in which to secure on petition forms the signatures of not less than 15 percent of the registered voters of the City and to file the signed petitions with the City Clerk. 5. Each petition form shall contain the ballot title and the full text of the measure to be referred. The City Clerk shall verify the sufficiency of the signatures on the petitions. If sufficient valid signatures are properly submitted the City Clerk shall cause the referendum measure to be submitted to the City voters at the next election within the City or at a special election as provided pursuant to RCW 35.17.260(2). DocuSign Envelope ID: 366C41B6-39C0-4829-969D-29AB17BB7F42 Ordinance No. 051-22 Page 11 of 11 Section 22. Implementation and Authority. The Mayor, Finance Director, City Clerk, and City Attorney are directed and authorized to take such actions as necessary to implement this Ordinance consistent with state and local laws. The Finance Director is authorized to adopt administrative policies/rules to implement this Ordinance. In addition, during the first year of implementation of this Ordinance, the Finance Director has the authority to provide, at a taxpayer's request, up to a one -quarter year delay in applicability of the taxes contained herein if that taxpayer was not previously included as a taxpayer under Chapter 5.84 POMC as it existed prior to this Ordinance's adoption. Section 23. Severability. If any section, sentence, clause, or phrase of this ordinance should be held to be invalid or unconstitutional by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity of constitutionality of any other section, sentence, clause, or phrase of this ordinance. Section 24. Corrections. Upon the approval of the city attorney, the city clerk is authorized to make any necessary technical corrections to this ordinance, including but not limited to the correction of scrivener's/clerical errors, references, ordinance numbering, section/subsection numbers, and any reference thereto. Section 25. Effective Date. This ordinance shall be in full force and effect five (5) days after publication as provided by law. However, Section 5 of this ordinance shall not be in full force and effect until 12:01 AM on January 1, 2023. A summary of this ordinance in the form of the ordinance title may be published in lieu of publishing the ordinance in its entirety. PASSED by the City Council of the City of Port Orchard, APPROVED by the Mayor and attested by the City Clerk in authentication of such passage this 13th day December 2022. Er DcuSigned by: bp4aA A SWA, 'tRQA4A9F'1F5114711 Robert Putaansuu, Mayor ATTEST: Brandy Wallace, MMC, City Clerk APPROVED AS TO FORM: SPONSOR: D/ocuSigned by: 203701F25520457... Charlotte A. Archer, City Attorney Jo n Clauson, Council Member PUBLISHED: December 16, 2022 EFFECTIVE DATE: December 21, 2022 1, IN I I l III tit,,/ ,,QR cs,.F. AL