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HomeMy WebLinkAboutCC AG PKT 2008-07-14 #J• AGENDA STAFF REPORT DATE: July 14, 2008 TO: Honorable Mayor and Council Members THRU: David N. Carmany, City Manager FROM: Robbeyn Bird, CPA Director of Administrative Services/Treasurer SUBJECT: BUSINESS LICENSE TIER SYSTEM SUMMARY OF REQUEST: Staff requests Council receive and file the business license tier system update report and direct staff to permanently implement the extension of the two tier business license system. BACKGROUND: • At the August 8, 2005 the City Council approved City Council Policy 100-08 addressing 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 City Manager approved an extension of the trial period up through June 30, 2007. At that time, an additional one year extension through June 30, 2008 was approved by the City Council. 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, 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. • Agenda Item J July 14, 2008 Business Licenses • 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 business owners are required to prove their gross receipts/revenues by providing a copy of the tax return to the City for the prior calendar year. For example, for the City's 2007-2008 fiscal year, the business cycle was from July 1, 2007 through June 30, 2008 and the business owners were required to submit a copy of their 2006 federal income tax return filed with the Internal Revenue Service (IRS) and or a copy of the business audited financial statements for its fiscal year ended 2006. Currently, 40 hours a week of a full-time staff person's time is required to process and monitor the business licenses throughout the entire fiscal year. During the past three fiscal years, the implementation of the tiered system did not require any additional staff time. FISCAL IMPACT: For the last three fiscal years, 2005/2006, 2006/2007 and 2007/2008, the average number of businesses that have benefited from the license fee exemption has been approximately 235 per year, with an average of 65 low income senior businesses included in the total. The fiscal impact on the General Fund has been approximately$35,000. RECOMMENDATION: Council receive and file the business license tier system update report and direct staff to permanently implement the two tier business license system. Robbey Bird, CPA Director of Administrative Services/Treasurer NOTED AND APPROVED: a-,o David N. Carm ny City Manager • CITY OF SEAL BEACH • COUNCIL POLICY SUBJECT BUSINESS LICENSE ADMINISTRATION SECTION INDEX NO. ISSUE DATE REVISION DATE COUNCIL CITY MANAGER APPROVAL APPROVAL 100 08 08/08/05 07/14/08 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 Xwo tiered system 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 ~mplementin4 an alternative business tax 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 appropriate business license taxti_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 to/or 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 & 5.10.045). 1 of 2 (100-08) Deleted: temporary Deleted: alternative Deleted: experimenting Deleted: with Deleted: Policy 100-8 shall sunset one year attar adoption of this policy. During this one-year period staff will monitor the new policy and determine its fiscal and administrative impacts on the City. A report will be prepared for City Couneil prior to the sunset date so that Council can deterrme whether to permanently enact the changes, modify the tiered system, or return to the current system. ¶ Deleted: The tiered system shall sunset one year from the approval of the adoption of this policy. • 4. PROCEDURE The Director of Administrative Services 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). 5. ISSUANCE Approved by City Council: ,lulu 14. 2008 Delerea: nuaust e. Zoos Date (2004 Seal Beach Municipal Code - 5.10 -Business License Tax) 2 of 2 (100-08) •