shadow revenue: where it is and how to find it · avenu set up a program that identified all rental...

An Avenu Webinar Series

Shadow Revenue:Where It Is and How to Find It

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Lisa VaralliVice President, Avenu

Antonio BanuelosCity of Richmond, CA

Today’s Speakers:

Patrick ScottSenior Vice President, Avenu

Presentation Agenda

• Who is Avenu?

• The Need for Funding in Communities

• How Revenue Goes Uncollected

• Case Study: Richmond, CA

• Discovery & Recovery: The 3-Phase Process

• Other Case Studies

• Ongoing Benefits

• Q&A Session

• Special Offer

Who is Avenu Insights & Analytics?

Revenue Enhancement

• Discovery Recovery

• Compliance Auditing

• Misallocation

• Data & Analytics

• Finance & Revenue Solutions

Administration

• License & Tax Administration

• Records Solutions

• Justice Solutions

• IT Managed Solutions

• Property Tax Solutions

• Pension Administration

The Need for Funding in Communities

• 61 municipal bankruptcies since 2010*

• Cities have seen slowed growth of the General Revenue Fund to only 0.9% in 2017, with expenditures up to 2.0%**

*Data from Governing Magazine / **Data from the National League of Cities

How Revenue Goes Uncollected

• Transient nature of some businesses

• Unlicensed contractors provide services outside their municipality

• Home-based businesses that aren’t licensed

• Rental income activity that’s subject to business tax

• Lack of jurisdictional resources to track non-compliance

How much is yourmunicipality losing tononcompliance?

Case Study:Richmond, California

Case Study: Richmond, CA

City Statistics

Population: 105,000

Government employees: 750

Annual budget: $372M

General fund: $168M

Property Tax22%

Sales & Use Tax25%

Utility Tax29%

Other Taxes11%

Other Revenue13%

2018-2019 FY GENERAL FUND REVENUE BUDGET: $168M

*CHART DATA FROM 2018-2019 OPERATING BUDGET

Case Study: Richmond, CA

The Situation

Rents were rising in

the San Francisco

suburbs, but

licensing fees did not

Increasing

number of

complaints on

conditions of

rentals

City reached out to

property owners about

rental conditions and

paying license fee, but

received minimal/no

response

Rolled out rental

control and inspection

programs to find that

most owners weren’t

aware of rental

requirements

Case Study: Richmond, CA

What Changed

Avenu set up a program that identified all rental property owners and

short-term rentals.

Avenu was able to get the attention of the unresponsive property

owners, along with new non-compliant prospects

Property owners were now educated about proper

licensing and the law

Data collection Analysis Outreach

Case Study: Richmond, CA

Results

2,795 unlicensed businesses identified

More than $2.2M in new revenue collected

$360,000 anticipated annual increase in business tax revenue

Only 24% compliant prior to Avenu vs. 70% compliant post-Avenu

Incremental increases in new revenue from additional taxes,

penalties, and interest

Discovery & Recovery

Preparation

30 days

Testing Phase

60 days

Active Phase

(ongoing)

Three-Phase Process

Discovery & Recovery: Phase 1

Preparation (30 days)

Acquire jurisdiction’s

registry of businesses

Obtain 3rd party data on

businesses within a

jurisdiction

Research ordinances, taxes,

and license fees

Analyze and compare data

sets

Compile list of non-

compliant businesses

Discovery & Recovery: Phase 2

Testing Phase (60 days)

Outreach to select businesses to

encourage compliance

Manage incoming license

applications & payments

Taxpayer support

Submit funds to city

Discovery & Recovery: Phase 3

Active Phase (ongoing)

Expand mailing to all non-compliant businesses

Manage incoming license applications & payments

Submit funds to city

Regular reporting

Discovery & Recovery Cycle

Build business inventory & identify

non-compliant prospects

Outreach; mail compliance forms to

businesses & taxpayer consultations

Receive/reconcile filings and payments, perform compliance

review

Distribute funds and detailed reporting to

municipality

Data collection & analysis

A Model for All Local Governments

Warren County, KY

• $140,000 recovered in first 90 days

• 4% of total annual program revenue

• 528 applications/returns received

• 296 accounts paid in full

A Model for All Local Governments

City of Vestavia Hills, AL

• $1,669,750 recovered since 2004

• 2,927 previously unregistered businesses

now pay required taxes and fees

• Creation of level playing field —

where all businesses pay fair share

• Credible and uniform enforcement

of compliance

“Well-run cities need sustainable revenue, and Avenu’s tools and expertise enable us to identify and take advantage of new revenue opportunities.”

— Jeff DownesCity Manager

Vestavia Hills, Alabama

Ongoing Benefits

Fund projects that otherwise wouldn’t have been possible

Enrich your community

Decrease the burden on honest taxpayers who pay more with higher tax rates to cover shortfall

Level the playing field

Recovering lost revenue is only part of your story.

Questions?

Free Assessment of Shadow Revenue

Know how much you’re not collecting in two steps:

• Give us a few data points

• Meet within 30 days to get results

Send your inquiry to webinars@avenuinsights.com

What can Avenu do for your city?

webinars@avenuinsights.com