 Welcome everybody to this preception on the sales tax on groceries. There will be no public invited to be here tonight. This is information only. And we, let's do a roll call for council members. Shawn McCoy, the city council. Mayor Brotette, Z-Lowman-Pairing. Councilwoman Diana Criss. Mayor John Keck, Chiquiti-Narvo City Council. Marcia Martin, City Council. Aaron Rodriguez, City Council. So we have staff here as well, so I'm going to just pass it over to our city manager. Mayor and council, as you all have asked in questions regarding the sales tax on groceries, what that looks like impact. We wanted to have a pre-session today because there are a lot of different living pieces in this. And what you will see from Jim is there's legal issues involved in it as well. Our issues related to our bonds. So this is a pre-session. We wanted to give this to you. Have a chance for a conversation. Our plan is to then bring this back again for a public conversation in a study section environment on the road to give you a chance to digest and then provide us with questions and then bring it back in in a study session. Great. Jim. Good evening. Mayor and members of council, so I'm the Golden Chief Financial Officer. Don DePennum has also been making this presentation with me. We have a couple of members from our bond council here tonight on teams. Maria Howard and Dalby Kelly. And then also a quick judicious, the sales tax administrator is here. We'll be part of potentially help answer some questions as it comes up. It's kind of a detailed issue. So I've got a presentation to go through. But feel free to stop me and ask questions along the way as we need it. So we'll go ahead and get started. So the first slide would say sales tax on groceries, kind of changing the conversation to sales tax on food for home consumption. Because that is the exemption that the state has. Is food for home consumption next? You're defined by the state. And I'll get into a little bit of that in a minute or two. But what other cities that use food tax food for home consumption means that they follow the state's lead on that. So front range counties also exempt food for home consumption. The state collects their tax. Most front range northern Colorado cities do tax food for home consumption. The exceptions are Firestone, Frederick, Moon, and Lovewood. Four colonies in Greenland have different tax rates. And I think what that means is I think what happened is they started out by taxing food for home consumption. And they've had tax increases where they didn't apply the tax increase to food for home consumption. So they have two different rates. Go ahead and change that. That was just for front range northern Colorado. So for the metro area, it's pretty split up. The cities that exempt it from the metro area are Denver, Aurora, Lakewood, Commerce City, Greenland Village, Englewood, Glendale, and Sheridan. And those that tax include Nevada, Westminster, Thornton, Broomfield, Littleton, Wheat Ridge, Parker, Golden Edgewater, Federal Heights, and Castle Rock. I'll let anybody out. I just missed them. You can do it on purpose otherwise. And North Plain, again, is another city that has two different rates. So this is the allocation of our sales and use tax. And I'm pointing this out to you all. I think it's important to look at the allocation. I'll be coming back to talking about the allocation to the funds of our sales tax. Our total sales tax is 3.53%. And it goes to five different funds. The general fund and the public improvement fund get the initial base 2% that is the first historical amount of the rate, sales tax rate. And then the next three are portions that are earmarked by voter designation for the street fund, the open space fund, and the public safety fund. So they all have, get revenue that has to go specifically for those purposes. It goes 3.53% and in 24, it's a hundred and four, almost $105 million of projected tax revenue budget. So the general fund has total ongoing revenue of almost $113 million in 24's budget. 50.38 million of that is from sales and use tax. 27.17 million is from property tax. So neither of those taxes in the general fund are earmarked for specific use. But other revenue, there are services in the general fund that have some offsetting revenues, things like recreation, development services and things like that. And then we have other services in the general fund that have hardly any offsetting revenues. And so by nature, that would mean that most of the taxes that we're receiving in the general fund are going to offset those services. 73% of ongoing expenses in the general fund are employee related this year. So this is just taking a look at some of the net costs for some general fund services that do not have any, or after their offsetting revenues. So in other words, these amounts are being coming from sales and use tax or property tax. Public safety is 45.7 million. Parks and natural resources is 6.75 million. 4.7 million for the library, 2.75 for new service agencies. And then senior services at 1.43 million. And now we have some more services at lower amounts here, but another five or six different services that we've identified. And there may be some smaller ones as well, but these are the ones that I've pulled out that would have amounts over 100,000, that's saying. So Jim, real quick, on the offsetting revenues of the contacts for council, so. I should, yeah, do you want to eat yet? Is that too late? Yeah, so I was going to say, so for example, let's just take Jim and myself. There's a significant portion of our salary that while we're in the general fund, the other enterprise funds pay for connected to what we do. So we allocate my time across water, wastewater, electric, broadband. And that comes in through the ATF, which is then offsetting that cost. And what we talk about in a lot of positions have that within the general fund. So that's a piece that I wanted to clarify to give you a practical example of Jim. So yeah, it's my city manager, city attorney, shared service type divisions. They all have some sort of an offset of administrative transfer fee. So about half, in general, about half of those dollars are coming from taxes and the other half are coming from other funds within the city. So let's sort of point is when you reduce the cost that you put in towards our positions, you only save 50 cents on the dollar. All right, so this is the projections that we have. I've got 2025 up here because 2024 is already on the way. If this were to take place at 25, we're projecting it's a $14 million total impact how much revenue we would receive in 25 from food for home consumption. This is as it breaks down across those five funds. We did it mostly based on information from our major tax collectors that sell food, including our groceries and discount stores. Smaller entities, we didn't try to get because we had to work with the state to get some of this information because we do not have this type of information in our records because we don't exempt it. So we don't ask our vendors to give us that information. They just tell us their total sales. But at the state level, they tell them what their total sales are. And then they say, here's how much our exemptions are for food for home consumption. So that's how we're able to get the data to identify the potential impact. But we only work with the larger ones. So we do want to buck the state for every account for me to think of. So this is, I think, a reasonable projection that could be higher. And again, this is for 2025. I'm next. You're next. Go for it. I'm in the middle. All right, so some residents, there are more chairs here. We have a few more chairs. We have a couple to see that. There were questions from residents about initiating a petition to change this in our ordinances. So this requirement for what those signatures are comes from the city's charter, section 5.2, and says that not less than 10% of the number of persons who were registered electors of the city as of the date of the last regular city election would be the number of signatures required. So what is that number? Check with the county clerk, who keeps the voter records. We don't keep those, of course. The county clerk provided me the number of 72,788 registered electors among us. Longmont has grown as of November 7th, 2023. So that is the date of our last regular election. So for a citizen initiative petition, 7,278 signatures would need to be collected and more because typically you over-collect because so many of them are not now for what are many reasons. State statute requires 5%. That was one of the questions. What is that? How do we compare the statute? Our charter says 10%. So we would go with what our charter says because we are home ruled. And then one of the other questions was, I'm hitting our button. What do other cities do? It is all over the board. I just picked a few that are within our size range along the front range. Castle Rock requires 10% of the total number of electors. On the date the form of the petition is approved. In Leveland, 5% of the registered electors registered on the date of the filing of the statement on intent. So different time markers and different percentages. Boulder requires 10% of the average number of registered electors who voted in the two previous municipal candidate elections. Again, different. Pueblo, 5% of the total vote cast in the last general city election. Fort Collins, 10% or 15% of total ballots cast in the last regular city election depends if you're going for a regular special election with that ballot question and really 10% of total vote cast in the last election sort of like us. So kind of the gamut. Do I have a question? In regards to, maybe this has no bearing on it at all. I'm just curious. We've heard that sometimes people will pay to have somebody collect signatures. Is there any copy out in there that directs how that can be done? Those rules are provided by the state and the first petition gather would be provided by those. And so they can pay for that? They don't have to be residents of Longmont, for example, to collect signatures. So the process can be lengthy. I laid out here what would be, I call it a vanilla petition timeline. So somebody would submit an intent to circulate a petition to the clerk. Within five days we would respond with an approval or a denial of that petition form. That can be iterative until approval is achieved. So depending on what I'm saying, great form submitted five days later and you would have approval. And then once signatures are started, once you start collecting signatures, you have 21 days to get that petition filed with the city clerk's office. So only a 21 day time period for signature collection. Once submitted, we have 15 days to verify those 7,300 signatures. Come on down, we'll take volunteer. And that can also, if insufficient, there's a cure period of additional 15 days. That would extend this time frame longer. If we found the petition to be sufficient, then we're obligated to submit that to the council at the next regular session. And then the council would then, within 30 days, adopt or repeal, just take action or set that for the next election. Set that by the question for the next election. Also noted, from the date of the petition filing, there's a 40 day time clock that starts for protest of that petition. So it's a very long and complicated time clock. That's my point. And the notes that I have collected from previous police to the alumnus, you better start reading before you get going if you're hitting a November ballot. Because that time clock is gonna be so long and complex. Because the drop dead date for putting something on the ballot. Is August, because we certified the ballot in September, first weekish. Yeah, that date moved, I think they'll let you feel like you made that. Right, it moves quickly. Once you start adding 40 days here and 15 days there, that all adds up. So the question also was posed, what was the last successful citizen initiative in Longmont? It was the quote unquote fracking ban in 2012. They had to obtain 10% of the registered electors. At that time, it was 6,609 signatures and they met that bar. We've had two other completed, I will say approved petitions submitted but not, they didn't take the process to fruition. Since then, one was in 2018 to repeal sales tax on food in 2020 regarding airport funding. Neither submitted petitions, those just didn't make it all the way through. And then most of interest perhaps through this conversation is Loveland's recent ballot measure 300. They reached out to their clerk. Again, they had to collect 5% of registered electors signatures as the date of filing the statement of intent. So that was 3,126 signatures. They had a 90 day window to collect those. They did collect those, they were successful. That ballot measure was number 300 on the November ballot and passed by a very large margin, 18,729 for and 9,650, I guess, don't go through it. So coming back to me and I thought I had a slide about defining food for home consumption, but I did not. So I want to just go back to that real quickly, although I will say that since we don't examine food for home consumption, we're not experts on this. So all we have is the state's information and it's an interesting definition of hard follow. So I think what I'm going to read to you here is what we have from it. Food for home consumption is generally defined as groceries and other foods that are not prepared prior to purchase and foods that are not consumed on premises. So if a food purchase can be consumed right after the purchase, it's not food for home consumption. So there's a, you know, I was talking to Times Call reporter about this a little earlier and he threw a lot of different, what about this, what about that? I can't answer the what about this question here. Every time one comes up I'm like, I don't know, go check that one. So, but in general it's, if it's food for a meal that you can prepare at home, it's generally exempt. But if they're preparing that meal for you, it is task-based though. We can move now into the, so we've got, we're going to talk about some of the municipal bond issues related to this. So we have two bond issues that are backed with sales and use tax as a credit on those bonds. One is the open space bond issues, should have had more than two. We have two types of bond issues I should say. We have two open space bond issues backed by the 0.20 open space sales tax. And then we have the 2019 sales and use tax bonds that were issued for the facility rehabilitation and replacement. They're backed by the 2% non-EMR sales and use tax from the general fund and the public improvement fund. And by the way, if I say something that I'm wrong on here, Dalton or Maria, just jump right in if I've misstated things. Just okay, real fast question. You bet. So the general fund has food tax dollars in it. Yes, okay. Right, so we have all five funds that receive sales tax receivess. Because what we do is every sales tax dollar is splitting up in these percentage directions. So when I say that these bonds are backed by the tax, we do use the tax to make the debt payments, but we pledge the full amount of the tax that is generated by the 0.20 open space and the 2.0 of the general fund and public improvement fund, we use them as a backing for the bonds. So it's the purchase of the bonds, we're looking towards them. If for some reason our revenue with it to go in the negative direction, they're looking at these revenue sources as we pledge we would use those towards repaying these bonds. So we can go to the next page. So within the city ordinances that we adopted to sell the bonds, we have bond covenants and in those we have covered in that that we would not amend our sales and use tax ordinances in any way that would adversely affect the amount of pledged sales and use taxes which would otherwise be collected. So if we would amend the sales and use tax ordinance to exempt the food for homes assumption from the 2.2% tax pledged for general fund public improvement fund and open space fund to back these bonds, that would be prohibited as it would reduce the amount of available pledged revenue. Only way we could do that is if we were to receive consent from the majority of the bond holders who have purchased these bonds or hold these bonds so that we leave the majority of their permission to amend the bond ordinance. Any questions on that? Go ahead. Do we have an estimate or do we have a roster of how many bond holders we have and where they are? We can have that information. We have trustees that do have that. We don't have that at our fingertips. Okay, yeah, just as an estimate, is it due to dozens, is it due to thousands, is it due to tens of thousands? I would say it could be to the thousands. Do you have a guess on that? Don't? Maria, you are muted, Maria. Thanks, Jim. These bonds are registered under what is called a book entry regime. So that means there is a depository company in New York that is the registered owner already bonds. What happens when the bonds are registered with DTC? That's the depository. Is that all of the investment banks whose customers have purchased bonds, they are the ones that maintain those bonds. So we don't really have a way of knowing until we start some research with the depository trust company and have them try to get us the list. But I would say the city's bonds are very similar in the market. And so I would say somewhere between the tens of thousands. Okay, it's a corner range. Yeah, it's a helpful range. It's a helpful range. Yeah, two questions. Are these services that our registration service provides to us, or is it going to cost the city money? Well, as a general rule, it costs the city some money. DTC will provide us maybe, depending on what the investment bank or the other thing is, they may provide us the list of the banks that are holding positions in the bond. And then we have to go to each of the investment banks and see if they will share the actual holder data with us. Which they are not obligated to do? They're not obligated to do it. There are some services out there that are pretty useful in tracking down bonds. And the bank that leads your trustee slash A agent likely has some resources to accomplish that as well. But it's not an easy process. It's not a straightforward process. And the other question is, does this affect the city's credit rating, bond rating, how our bonds trade? Is it going to have an adverse effect on the city's finances to do it? So I can't answer the question about finances, but I think Jim has a good idea about that. However, if you get consent from the majority of your bond holders, then we just have to do a notice to the market that says that this has happened and that the security has been reduced. And then we will have to tell the bond holders what the impact on their security is. So basically what percentage reduction they can expect over time. It could impact the bond rating depending on how much of a hit that is against the each tax. So I also, the city has a financial advisor that deals with the radiative disease on a regular basis. And so I don't know what the threshold is for a downgrade, but it's going to impact the downgrade. And I guess I'll jump in here and say that, it's not like every dollar that we're getting from the sales taxes and that's backing the bonds is being used to pay the debt. With the 2% bonds for the sales and use tax bonds for the buildings, we're getting $58 million or something or more than that. Actually that was just for the general fund. So we're getting combined, yeah actually $58 million of that money for our $2 million payment. I don't think that would make a difference. With the open space bonds, we're getting, we have $5.9 million of open space bonds and I should say of sales tax revenue. And the bond payment is $2.4 million or so per year. The impact of this would be about $793,000. We just got a bond rate upgrade on open space bonds about six, seven months ago. My guess is we would lose that upgrade. Now that doesn't cost the city money. That costs those bondholders whose names are if they try to go out and resell those bonds, they're not quite as valuable as they are right now at the higher rate. That's the impact of that. If we go out and try to sell more open space bonds, which we do have authorization to do, but we only have a limited number of years left of that tax, then that would probably get a lower rating and theoretically that would be costing our citizens more dollars in interest. So can Jim, based on slide 16 and what you just explained on slide 17, the idea that the city council could just go and hold the vote and change that is that it would be in violation of that, that's understanding here, this general understanding of how we. For those three funds, so for that portion, the 2.2% of our total 3.53% of sales tax, we can't do that. But we do have a difference of 1.33% of sales tax that is for the streets fund, that is for the streets fund, yes, and the public safety fund. And that does not get restricted because it is not being used to back any bonds. So that could be done for that portion of the sales taxes. And that impact, the amount of revenue that I get from home consumption is projected here, the ones in yellow streets fund is almost $3 million a year, public safety fund is 2.3 million. And the next few slides will talk about how much of an impact that is for those funds. Is it possible, if we're gonna exempt the food for home consumption, could we replace it with a different tax or a direct tax or tax on a different item, maybe? Any tax that we would replace it with would be subject to a vote or a vote. Again, so it would have to go to a vote, both. Okay, continue, please. Okay, next. So I said the street impact would be about 30 million, just to give you a sense, the street fund for 2024 is almost a $30 million budget, 22.2 million of it is from sales and use tax. And the way it would break down the expenses in that fund is 6.1 million is personal services that salary and benefits 8.4 million for all and an expense and 15.8 million for capital. And then the public safety fund impact is 2.3 million. And in that fund, it's a total budget this year of 18 and a half million of ongoing revenue and 17.2 million of that is from sales and use tax dollars. 83.4% of the public safety fund budget ongoing revenues are for employee-related expenses. That really mostly is FTE in those funds and then the difference is really just like their O&M, their equipment and vehicles and stuff. And then finally, the city does already exempt purchases of food that is with food stamps and or under the SNAC program. When this came up in 2018, the city did initiate a grocery sales tax rebate program. Rebates are granted to individuals that qualify for assistance under REAP or under any other city-approved meetings tested program with an equivalent or lower income requirement. In this past year, we rebated $148,000 to 927 applicants. And this year, the rebate dollar amounts will be for individuals, $86.21. A couple is $172.43. Family or three or more are $225.48. So that's about 1% of the population of Longmont that is getting this rebate or no, it's more than that because there's two or three or more people in each of these, some of these destinations. So it's several percent of the population of Longmont is already getting this exemption. My question is, do we believe that most of the people who are eligible are getting it or is this, if not, do we know how many more could be eligible? We think that there are more that are eligible that could be getting it. I don't know if we have an estimate of how many of them. Now, part of what we're seeing in this and this actually started, this actually hit me ahead of the whole conversation regarding food for home consumption. So as part of the housing authority work we were doing so we worked with voucher holders and other things. And so what we were, what I saw a few months ago or a couple months ago was that we had somebody coming in on voucher work and they had the application for the exemption and the CARES program generally which is not just reduction in grocery sales tax or rebate but it's also a utility for that. So we started actually working internally in terms of putting together a process because it takes you back to the definition in the qualifying program. And so we started a process that anybody who qualifies that has a housing choice voucher automatically qualifies for this and anybody that's in an affordable housing program automatically qualifies for this. So we're gonna go through and see duplication but then start moving all of those folks into it. And by for the work and taking on the housing authority we didn't see that. So we saw that. We've also had conversations with, had a conversation with Del Comente the other day about working and this opportunity and working with dirt client base. And because all of those organizations are doing an income qualifying as part of this and so that was really something that hit us via that HCB discussion that I had of how we can really make this more robust. So just if you think about housing choice vouchers and people in affordable housing that we own it's about 900 different units and or vouchers that we have that we're probably gonna start moving into the rebate program pretty quickly and then obviously talk to our other housing partners because we know that Boulder County Housing and Boulder Housing Partners have voucher applicants that do live in the bottom line as well. So they're a really condensed databases that we can get in terms of ensuring that we're getting as many people into the program who income qualify for it. So just piggybacking on that. Is there any way we can automatically put families who through the school district are on free and reduced vouchers? That's changed and we did, we did do that. It's not, it's pretty much anymore. It doesn't exist anymore. Because everybody, well no, everybody in the school gets free, you don't have to build the paperwork. So that's, even before the housing choice conversation Sandy was talking to me about what are the other options to use because that program's no longer in existence. I think they have something though in existence because of kids that need assistance for sports and other activities. I'm gonna check. So Jimmy, you have more? I have one last slide. Go ahead. And that is that, so when we put together the program for the rebates five years ago, we modeled it after Boulder and Nevada so they had those types of programs and so we kind of used similar dollar amounts as they did and we've been increasing each year by CPI index. We'll pose and take a look at, I did look at what Boulder is gonna have for their upcoming years programs and we've gone off quite a bit compared to what we have. So we talked about, we would take a look at these programs or we talked about the eligibility requirements and looking at those, but we also took a look at the amount of the rebate and tried to benchmark those closer to what those other two entities are doing currently. So saying that obviously would be a budget impact if you somebody would try to work into a term by budget. Yeah, and that's the question that I have, this is where would the money come from if we increase this program and increase, we're talking about reaching more people and increasing the amount of the rebate per person. Right, we've been funding the grocery tax rebate as a general fund, so we have to look at that money and it's ongoing, we've been using it for years. Okay, we have about five minutes. You're fast, are there any more questions for council? I have one. So on the rebate list of 8621, 172, 43, 225, 48, when are those rebates with them? We're doing it all year long, so the other entity is actually just doing it during certain months of the year. We're taking the applications all year long, we'll do it once a year for any applicant, but it's based on the prior year, so like I said up there, we're doing a rebate for 23 during 24 and we do monthly and we usually will do it as utility bill credit, but if they don't have a utility bill, we'll also cut the check. Okay, so my question is, for clarification, when they apply, then they get that check yearly? Or did you just say credit? Credit I meant yearly. They need to apply each year to get it, but yes, they do that. And my concern is what if the family moves, but they, before that year's up, do they not get that rebate? We've definitely made partial near credits because we're also, this is the CARES program and it's not just for the grocery tax rebates, it's also for utilities as well. And so we do them all as a utility bill credit. So as long as they have the utility bill to credit it to, we'll do it against that bill when it's still outstanding, when it's still in place. So they don't have to come to us if they've left to ask for it, but otherwise they're gonna get it once a year. What if a renter does not pay the utility bill? Then like I said, they can still apply and get a check yearly. Okay. Is it the standard amount or do they have to keep receipts for their groceries? No, it's the standard amount. It's the dollar amounts that are showing up all the time. Are there any more questions or what's going to keep from council? What's the eligibility? You know, it's like the LEAP program's eligibility limits. So it really depends on the family size and things like that. Any of those things qualify. So if you have SNAP, LEAP, if you have any WIC, any of those kinds of things announced and now we're adding section 8 housing vouchers or LIG properties, any of those programs, any of those programs, you show us that application in your profile. I can tell you the LEAP amounts right now that you're interested in. There's like eight different family size levels that you got. Yeah. Think about when we look at the affordable housing and the affordable housing limits, similar to that in terms of family size and income and how it changes by number of people in the family. There are a couple for LEAP, it's 48,360. It increases by the number of family sizes. As far as getting consent from the bond holders, is there a difference whether it's a ballot initiative that passes versus the city just saying we will remove the grocery caps? Yeah, you know, I'm sorry, I missed that, but I shouldn't try to be clear on that. So the city council is unable to do that because of the bond ordinance. Okay. And a citizen initiative can not, I'll be out here now. Okay, I'm ready. Yeah. Because I was looking for the email on this one, but it was a verbal conversation. But the citizen initiative cannot do anything that the council can't do. So the citizen initiative also would not be able to reduce it in those areas. Oh, okay. It's a good thing that came out. Yeah, I'm sorry, I missed that over that. Yeah, that's huge. Okay, seeing no other comments, thanks for the discussion. So think about this. No problem. Do you have any questions? Yeah. Pull them together. We're going to come back in a study session to present this. Okay. But what did you, let you start thinking about it. Thank you. This is a lot of discussion, it's good. Thank you. Beth. Thank you very much. We're going to end this one here. Thank you. Yeah, thanks for being here.