Projects

OOF Revenue Forecasting

Sponsor: Office of Finance

University:

Status: Completed

Link:

The Office of Finance (OOF) is responsible for the collection of over $3 billion in revenue from various sources including taxes, licenses, fees, and permits. About $500 million is generated from business taxes as any company doing business in the CIty of Los Angeles is required to obtain a Business Tax Registration Certificate (BTRC) and renew it annually. The Office is also responsible for the collection of monthly hotel and parking occupancy taxes as well as sales taxes. The BTRC renewal season starts on the first business day of the new calendar year and Mayor budget document are submitted by the first week of March.

The goal is to analyze tax receipts by industry classification and build a tax revenue forecast model

• Recommend a business tax stratification/market segmentation strategy based on available tax payers characteristics such as industry classification, business maturity/age, and gross receipts information.

• Assess industry variables, macroeconomic forecasts, and early tax receipts as leading indicators of the total tax collection.

• Estimate the weight/coefficient of predicting macroeconomic variables and monthly use tax receipts -- such as sales, utilities, and hotel and parking occupancy taxes - on business tax revenue.

• Estimate the forecast error.

Outcome:

A predictive modeling tool was created to estimate future tax revenue collections based on past actuals and revenue patterns realized over a 10-year period.