Thursday, September 3, 2009
When A Fee is A Tax
We said through some 9 hours of the Omaha City Council's budget hearing on Tuesday and we've finally just recovered. Thus the delay in writing this. When someone said that watching government work is akin to watching sausage made, they were really right on. We were nauseated by the end of the evening.
Although there are lots of issues to comment on, we were disturbed by the last minute 'compromise' that added Councilman Jerram's satellite tax, excuse us, satellite permit fee to the budget revenue to offset Junior Commissar Mayor Suttle's entertainment tax deletion. Deleting the satellite tax was a no-brainer, especially if you wanted to avoid having your name on the upcoming mayoral recall petition. But let's face it, Jerram's satellite permit fee is just a tax. In fact, there was public discussion with the City Attorney Paul Kratz regarding how the bill was drafted so it didn't cross the line with federal regulations that prohibit taxes on satellite dishes. Jerram made sure his tax wouldn't be defined as a tax so he created a permit that will be applied to all future as well as all past satellite dish installations. Unfortunately, Jerram and colleagues didn't do their homework or exercise their fourth grade math skills. Here is what we sent to the council members yesterday morning in this regard:
"Your arithmetic last night was very bad or your faith in government workers was optimistic. On the addition to your satellite tax to the budget, you showed $2,042,415 for your revenue. If you base that on $50 fees and divide $50 into $2,042.415 you get 40,848 units or homes/businesses with satellite dishes. First of all that sounds like an whole lot of homes and businesses with satellite dishes in Omaha. Even if you accept the 40,848, and try to figure how many dishes you will have to inspect on a daily basis, and use 237.5 work days a year (52 x 5=260 days less 10 days for holidays and 10 days for vacation, oh and 2 1/2 days for voluntary leave) that means you would have to do 172 satellite inspections a day! And you divide that by 2 (inspectors) you expect each inspector to do 86 inspections a day! From our experience in government, that's not only optimistic, it's crazy. If you think that any hard working employee can do more than two inspections an hour (driving, paperwork, etc) in an eight hour day you are deceiving yourselves. Even if you expect them to do 20 a day, you'll need 9 inspectors or you won't get your revenue, unless you just collect the money up front and don't really care if you ever do the inspections (which really just makes it a tax which is apparently not legal). If you intend to collect the tax and do inspections in some term proximate in time, you have 9 inspectors at a cost of about $56,500 each (your numbers last night were $113,000 for two inspectors) or $508,500 to inspect 40,848 homes a year (unless this is a tax and you are just going to inspect over a three year period before restarting the process, in which case you would still need three full time inspectors at a cost of $169,500 a year over three years. If you plan on doing all the inspections the first year, then you won't need anywhere near 9 full time employees in the following two years so you'll have to lay most of them off or you just add a whole bunch of employee expense. We think your numbers are optimistic and at best your net revenue is at least $400, 000 less than you figured."