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HomeMy WebLinkAboutCC AG PKT 2007-06-25 #V AGENDA REPORT e DATE: June 25, 2007 TO: Honorable Mayor and Council Members THRU: David N. Carmany, City Manager FROM: Greg Beaubien, Interim Director of Administrative Services/Treasurer SUBJECT: Business Licenses SUMMARY OF REQUEST: Staff requests Council receive and file the business license tier system update report and extend the two tier business license system up through June 30, 2008 BACKGROUND: e At the August 8, 2005 the City Council approved the attached City Council Policy on business license administration that converted the business license system into a two tier system for a one year trial period. At the end of the one year trial period, the City's 2006-2007 fiscal year had already commenced and the present City Manager, approved the extension of the trial period up through June 30, 2007. The City Council Policy had the following advantages: The one year trial period allowed the City to try the tier system without permanently committing to the change. This study eliminated the need for a fiscal study and the costs associated with completing such a study. If the City Council determines the fiscal impact not to be significant or greater than anticipated then Council could consider making the change permanent. Staff gained experience with the impacts of this type of tiered system and is better able to provide City Council with a report regarding the fiscal and administrative implications to the City. e Agenda Item~ June 25, 2007 Business Licenses e The two tier system required a business with gross revenues in Seal Beach above $25,000 to pay the full amount of the business license tax. Businesses with gross revenues less than $25,000 paid no business license tax. This applied to all classifications within the business license ordinance, except for contractors, who were still required to pay for a contractor's business license regardless of the size of the job and the amount of time the contractor spent in Seal Beach completing the job. The businesess proved their gross receipts/revenues by providing to the City a copy of its tax return for the prior calendar year. For example for the City's 2006-2007 fiscal year, the business cycle was from July 1, 2006 through June 30, 2007 and business were required to submit a copy of it's 2005 federal income tax return it f1led with the Internal Revenue Service (IRS) and or a copy of the businesses audited financial statements for its fiscal year ending in 2005. With the implementation of the tiered system 40 hours a week of a full-time staff persons's time was required to process and monitor the business licenses throughout the entire fiscal year. The 40 hours a week included an additional 10 hours a week from before the implementation of the tiered system. The additional 1 0 hours a week was previously spent by staff on other accounting and utility billing functions. FISCAL IMPACT: e For both fiscal years 2005/2006 and 2006/2007 the average number of businesses that have benefited from the license fee exemption have been 235 per year, with an average 65 low income senior businesses included in the total businesses. The fiscal impact on the General Fund for fiscal years 2005/2006 and 2006/2007 was $35,000 and $36,500, respectively. If the two tier business license policy is extended through the fiscal year 2007/2008 the fiscal impact on the General Fund is estimated to be $38,000. RECOMMENDATION: Council receive and f1le the business license tier system update report and extend the two tier business license system up through June 30, 2008. Staff at this time does not recommend that the two tier system be made permanent because, it may preclude the City from changing back to the previous system in the future. )\~~~~,._o.. 6' Greg Beau . en Interim Director of Administrative Services/Treasurer, NOTED AND APPROVED: ~'I - 1 David N. Carmany City Manager Agenda Item e e e e CITY OF SEAL BEACH COUNCIL POLICY SUBJECT BUSINESS LICENSE ADMINISTRATION SECTION INDEX NO. ISSUE DATE REVISION DATE COUNCIL. crrv MANAGER APPROVAL. APPROVAL. 100- 8 08/08/05 08/08/05 1. SCOPE This Council Policy applies to the business license administration for the City of Seal Beach. 2. PURPOSE AND INTENT The purpose and intent of this policy is to establish a temporary alternative for the administration of the City's business license system. Based on public input the existing system may place a burden on the business community that can be mitigated by experimenting with an alternative business tax system. Policy 100-7 shall sunset one year after adoption of this policy. DUring this one-year period staff will monitor the new policy and determine its fiscal and a~mlnlstrative impacts on the City. A report will be prepared for City Council prior to the sunset date so that Council can determine whether to permanently enact the changes, modify the tiered system, or retum to the current system. 3. POLICY Effective with the approval of the Seal Beach City Council the business license system will be modified to a tiered system. The first tier will exempt a business operating in Seal Beach from the current business license fee if their annual gross revenue is less than $25,000. The second tier will require a business operating in Seal Beach with an annual gross revenue of/or over $25,000.01 to pay the full amount of the appropria~ business license tax. The tiered system snail sunset one year from the approval of the adoption of this policy. Should this policy conflict with the business license tax code the existing code shall prevail until the conflict is resolved by either the Director of Administrative Services or the City Council. This policy still requires an exempt business (a business with gross revenue equal t%r less than $25,000 in annual gross revenues) to complete the necessary paperwork to verify the license fee exemption and be issued a business license (SBMC 5.10.015 & 5.10:545). e e e 4, PROCEDURE The Director of Administrative Service shall develop procedures to implement the Purpose and Intent and Policy sections of this report. DUring the development of the procedures the goal shall be to make the tiered system as streamlined as possible. The income verification process shall ensure that any tax information is correct and that verification can promptly be determined. The development of the new procedures does not eliminate the need to comply with SBMC 5.10.045 (issuance of license). By: A ved by Seal Beach City Council - August 08, 2005 (2004 Seal Beach Municipal Code - 5.10 - Business License Tax) - 2 (l00-0B) ( ( (