HomeMy WebLinkAboutCC AG PKT 2004-08-09 #S AGENDA REPORT
DATE: August 9, 2004
TO: Honorable Mayor and City Council
THRU: John B. Bahorski, City Manager
FROM: Pamela Arends -King, Director of Administrative Services/Treasurer
SUBJECT: Business Licenses Report
SUMMARY OF REQUEST:
Staff requests Council direction of the proposed Municipal Code changes regarding Business
License Tax.
BACKGROUND:
During the readings of the revised Municipal Code Council requested staff to explore the possibility
of basing business license tax on gross receipts versus a flat tax based on the type of establishment.
Currently the City's business license is a flat tax based on the type of establishment and
manufacturers are charged based on gross receipts. The flat tax increases each fiscal year according
to the consumer price index.
According to information provided by the City Attorney an amendment to the business license
ordinance that tied business license taxes to gross receipts would be subject to Proposition 218.
Because the business license tax is used for general municipal purposes it is a general tax and
require a majority vote by the electorate. The City's current business license tax is pre- Proposition
218.
Staff surveyed over twenty -five cities in the surrounding areas and found every city determined the
City's business license tax differently such as per employee, gross receipts, application fees,
processing fees and flat tax amounts. We noted the City's business license tax was comparable to
what those Cities were charging and we do not charge a processing fee as many cities do.
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Proposed Changes to the Business License Municipal Code:
• Because the flat business license tax increases each year according to the Municipal Code by
the Consumer Price Index it will in time no longer be comparable to what other cities charge
for business license tax therefore Council may wish to reevaluate this section of the
Municipal Code and change it to state the business license tax will increase each year based
on the Consumer Price Index at the discretion of the Council. G
Agenda Item 5
August 9, 2004
Agenda Report — Business Licenses
• Staff receives many calls from seniors who do not qualify for the discounted senior citizen
business license tax because they make a little over the qualifying gross income yet the
amount of the business license tax is still a burden for them. To address these concerns the
qualifying gross income for senior citizen discounted business license tax could be increased
to $10,000 instead of $5,000.
• Staff has received calls from individuals who are disabled and living on subsidies that have
also been concerned about the price of the business license tax. A provision for disabled
persons could be added to the Municipal Code that stated individuals who are disabled and
living on subsidies that are operating a business would only pay half of the flat business
license tax based on the type of establishment they are operating if their gross income is
$10,000 or less.
• Currently the Municipal Code states residential rentals of six or more units are required to
pay a business license tax and commercial rentals are required to pay a business license tax
regardless of the number of units. To align the property rental business license requirements
for both residential and commercial rentals without Proposition 218 issues staff suggests
commercial rentals of two units per property or less pay 50% of the business license tax and
commercial rentals with three or more units per property pay 100% of the business license
tax. The current business license tax for commercial rentals is $178, therefore 50% of that
tax would be $89.
FISCAL IMPACT:
Any change to the business license tax will have an effect on the General Fund revenues and could
potentially be a Proposition 218 issue. The proposed changes to the Municipal Code staff has
suggested will have a minimal effect on the business license revenues based on the number of
licenses issued that fall under the categories discussed.
RECOMMENDATION:
Council direct staff regarding proposed Municipal Code changes regarding Business License Tax.
Pamela Arends -King
Director of Administrative Services/Treasurer
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Joh F Z . Bahorski
C . , Manager