Finance Committee Agenda and Packet 2021 03 15

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SUBJECT: DISPOSABLE BAG TAX IMPLEMENTATION AND PROGRAMMING DATE: MARCH 15, 2021 PAGE 7 OF 8 See staff's attachments for comparison of peer communities that adopted a similar fee and how that revenue is used. 101194Z111/_104*Ci6*1W_11IICkiF A statewide ban on plastics has been discussed by the Colorado General Assembly in the past few years and has been brought up again in 2021. If this were to occur in 2021 or a future year, plastic bags may no longer be taxable. However, the City's bag tax is also applied to paper bags. Per the City Attorney, Council may eliminate the bag tax by ordinance under any of the below scenarios. Voter approval is only required for a new tax, extension of an expiring tax or a tax policy change that results in a net revenue gain. Council could always reduce the amount of the tax (even to zero) rather than eliminating it, if there were some reason to preserve the ability to impose the tax in the future without going back to the voters. The first full fiscal year of the tax is the most important under TABOR. If the tax is eliminated, there are no TABOR issues. If plastic bags are banned by the state, there would be no tax base, and thus no tax. There would not be the issue of refunding excess tax revenues or reducing the tax if the estimate was exceeded. The two important estimates are the amount of revenue to be raised in the first full fiscal year of the tax ($2,000,000) and the first full year of spending without the tax ($55,000,000). If revenue exceeds either of these amounts, the City would have to refund the excess and reduce the rate of the tax (potentially to 0%). The $55,000,000 estimate is based on the January 1, 2022 effective date. RECOMMENDATION: Staff is seeking feedback from the Finance Committee on the proposed use of tax revenue based on the rate of behavior change the City experiences. Staff is also requesting a budget amendment of $50,000 for 2021 to administer and implement the bag tax in anticipation of collection starting in 2022. FISCAL IMPACT: Staff is requesting a budget amendment of $50,000 for 2021 to administer and implement the bag tax in anticipation of collection starting in 2022. Additional funding may be required for future years based on the rate of behavior change the City experiences and programming/resource needs. Staff will bring back future budget amendments if needed. PROGRAM/SUB-PROGRAM IMPACT: The disposable bag tax supports the Solid Waste, Recycling, and Composting Sub - Program with the objective to enable residents to dispose of their solid waste in a convenient, environmentally responsible, cost effective manner. Through the proposed FINANCE COMMITTEE COMMUNICATION 13