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HomeMy WebLinkAboutAgenda Report - May 18, 1994 PH (4)� �OP CITY OF LODI COUNCIL COMMUNICATION AGENDA 'TI Public Meeting Pursuant to Government Code 954954.6 to Set a Public Hearing for July 6, 1994 and Receive Public Testimony on Proposed Amendment to the Business License Tax Ordinance MEETING DATE: May 18, 1994 PREPARED BY: City Attorney RECOMMENDED ACTION: Set public hearing for July 6, 1994 and hear public testimony on proposed amendment to business license tax ordinance. BACKGROUND INFORMATION: Pursuant to Government Code 554954.6, if a City proposes to increase any general tax, it is first necessary to hold a public meeting, at least 45 days prior to such enactment, at which time a date must be not for public hearing and opportunity given for public testimony. If the Council wishes to even have the option of considering an increase to the business license tax, this is a procedural condition which must be complied with. Since there has been a great deal of discussion on this topic recently, and several meetings previously held, it may be advisable to now set a definite day for further consideration of introducing an amendment to the business license tax ordinance. Government Code 854954.6(2) also requires that at the public meeting, certain information on the proposed increase must be provided to the public. This information includes: A. The amount or rate of the tax. B. The activity taxed. C. Estimated revenue to be raised annually by the tax. D. The method and frequency for collecting the tax. E. The date, time and location of the required public hearing. F. Telephone number and address of the person or agency where additional information can be received concerning the proposed tax. This information is contained in the report and description of the tax prepared by Finance Director Dixon Flynn, which is provided under separate cover to this Council Communication. APPROVED: THOMAS A. PETERSON ,•crcaa POW City Manager J CC -1 FMING: Not applicable Ptespectlully submitted, Bob,Oki ltfatt City Attorney SM:pn cc: City Manager Finance CCSIIS.LIC/TXTA.OIV MEMORANDUM May 17, 1994 TO: City Council FROM: Dixon Flynn, Finance Director SUBJECT: Amendment of the Business License Tax Ordinance PURPOSE This report provides the final recommendations of staff to amend the Business License Tax Ordinance set for public hearing on July 6, 1994 as provided in the Council Communication prepared by the City Attorney for the Council meeting on May 18, 1994. GOALS OF THE PROPOSED ORDINANCE • Equity. Similar businesses are to be treated similarly, should reflect their ability to pay and profitability, and all legitimate businesses will be required to pay a business license tax # Revenues. To raise $1 million for General Fund purposes • Administration. Tax collection and payment are to be as easy and simple as possible BACKGROUND The staff is recommending that the current Business License Tax Ordinance be amended with an effective date of January 1, 1995 to raise City revenues needed to maintain current City services and to promote economic development and business retention. Ralph Anderson Study In October 1993, the Hutchins Street Square Foundation contracted with Ralph Anderson to review the City's Business License Tax Ordinance and to recommend appropriate changes. The current ordinance was adopted in 1948 after several weeks of discussion and controversy to raise City revenues needed to balance the City budget at that time. This tax became effective January 1, 1949 and has remained unchanged for forty-six years. The tax rate agreed to at that time was a tax rate based on number of employees and provided the City with annual revenues of $19,300. The rates adopted by the City are listed below and remain the same to this day: $15 for the first employee $3 per employee for the next nine employees $1 per employee for the next forty employees $.50 per employee, over fifty employees As a flat rate tax, the current business license tax has not kept pace with inflation and the rising cost of providing City services. Today, the revenues are approximately $90,000 and contribute only .596 of the total general fund tax revenues. This is significantly Iess than the Statewide average of 5.8%. The current tax revenues do not reflect changing economic conditions nor reflect business volume or ability to pay. In reviewing the current business tax ordinance, the Ralph Anderson consultant concluded that the current business license tax ordinance., * Places a heavier tax burden on businesses with fewer employees * Places an unfair tax burden on labor intensive businesses * Treats "outside city" businesses differently than businesses providing the same services * Treats similar business differently * Does not provide a business classification system * Does not require all businesses in Lodi to pay a tax Chamber of Commerce Survey In March the Chamber of Commerce conducted a random survey of its members to determine whether their membership would support an increase in the business license tax and the tax rate they would Iike to see. This table reflects the results of the survey taken in March. * Gross receipts tax: 27% in favor * Flat rate tax: 61 % in favor * No fee increase: 10% in favor * Combination: 2% in favor When the survey was conducted by the Chamber, a number of businessmen and women decided that the survey was not being conducted objectively by the Chamber. Accordingly, they condu.;ted an independent survey by circulating a petition to other businessmen and women. Approximately 350 signatures were obtained opposing an increase in the business tax. Public Workshops The City staff has conducted three public workshops with the business community and at least three meetings with interested business groups to review the proposed tax rates and ordinance. Based on these meetings, several changes have been made to the tax rates to reflect the concerns of the business community. Accordingly, the proposed rates are different than the rates proposed in the Ralph Anderson study. 2 C7 PROPOSED ORDINANCE Under the proposed amendment to the Business License Tax Ordinance the following issues are considered: Tax rates (Table 1) The City Council is provided with an option of selecting one of three tax rate options in Table 1. Estimated revenues (Table 2) The estimated revenues for each option is provided in Table 2. Estimated revenues range from $887,000 under Option 1 to $539,000 under Option 2. Businesses subject to the business license tax Business taxes will be imposed on all businesses, professions, trades, vocations, enterprises, establishments, occupations or callings conducted in the City of Lodi to which a business tax may be lawfully applied using the tax rates in Table 1. New businesses will not pay more than the minimum tax in their first year of business whether located in or outside of the City. The tax will be due and payable annually in January for the prior calendar year except for new businesses which will pay the minimum tax at the time issued. Businesses exempt for the business license tax * Minors under the age of 18 with gross receipts of less than $3,000 per year. * Home occupations with gross receipts of less than $3,000 per year. * Charitable, religious and nonprofit organizations * Businesses exempt by Federal or State statues, laws, franchise agreements, or other contractual agreements. This includes banks, insurance companies, their agents and other financial institutions, cafe musicians, real estate auctioneers, businesses that manufacture, sell, purchase, possess or transport alcoholic beverages Excluded from the calculation of gross receipts is the following * All taxes * Discounts, refunds and credits * Passive income from investments, dividends and the occasional sale of property * Bad debts * Amounts received by one party and paid to another party by persons acting as agents, brokers and trustees Attachments /�/ixAy4nn Finance Director 3 • cin of Lodi sRMn BUSINESS UCENSB TAX RATES Table 1 B>tsiaess Ondfiattaa Minimum Option i Option 2" Optios 3.... Tax Public Utilities S40 $AO $35 S.30 Administrative Headquarters dotes 1 Automobile Dealers S40 S.2.' S.20 S.15 Recreation and Entertainment Hotel/Motel Services wrote to r In -City Contractors $40 $.60 $SS SS0 Rental of Residential Property Rental of Non—Residential Property Nate * 1 Professions $40 S.90 $35 S.60 Note * 1 Retail and Services Flat Rates Gross Receipts $0 to $200.000 S40 $40 $30 $20 Gross Receipts S200,001 to $500,000 $90 $90 $70 $50 Gross Receipts $500,001 to $900,000 $150 5150 $110 S80 Gross Receipts Rate Gross Receipts $900,001 to $5 million 5540 S.60 SS5 5.50 Gross Receipts 35 million plus $4,500 $.90 S.75 S.60 Nate i 1 Manufactures S40 S.02 5.015 S.01 Wholesalers Note 0 2 sod i 3 Notes * 1: Rates apply per $1,000 of gross receipts * 2: Rates apply per square foot of building space occupied * 3: Not to exceed $3,000 per business Ci of Lodi tte.�w BUSINESS LICENSE TAX REVENUES Table 2 $,inose: Clds=ification Businesses Estimated 00tion:1 Optititr VOplifioi 3t Reteiots Public Utilities 5 5511000;000 $20,400 $17,850 $15,3W Administrative Headquarters Automobile Dealers 94 $106,040;000 526,510 521,201; $15,906 Recreation and Entertainment Hotel/Motel Services In -City Contractors 1025 $170,400,000 5102,240 593,720 585,200 Rental of Residential Property Rental of Non -Residential Property Professions 330 $160,000,000 $144,000 5120,000 S96,000 Retail and Services Flat Rates Gross Receipts SO to $200,000 1660 566,400 $490800 533,200 Gross Receipts 5200,001 to $500,000 475 $42,750 $33,250 $23,750 Gross Receipts $500,001 to 5900,000 220 $33,000 S"4,..00 S17,600 Gross Receipts Rate Gross Receipts $900,001 plus 158 $348,000,000 $208,800 $191,400 $174,000 Gross Receipts 35 million plus 12 $123,000,000 $110,700 $92,250 $73,800 Manufactures 3.30 20,000 Sq Ft $132,000 $99,000 566,000 Wholesalers Note # 2 and # 3 TOTAL REVENUES Notes * 1: Rates apply per $1,000 of gross receipts * 2: Rates apply per square foot of building space occupied * 3: Not to exceed $3,000 per business 5886,800 $742,678 5600,756 CITY OdMir305 West Pine Shve4 Lodi 1 1 C2rnegie Foram NOTI OF PUBLIC HEARING Date: JulM 1994 Time: 7:00 p.m. For Information regarding this ratios phase contact: Jennifer M. Perrin City Clerk Telephone: (209) 333-6702 NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Wednesday, July 8, 1994 at the hour of 7:00 p.m., or as soon thereafter as the matter may be heard, the City Council will conduct a Public Hearing to consider the following matter. a) To consider and hear public testimony on proposed amendment to the Business Ucense Tax Ordinance. Business taxes will be imposed on all businesses, professions, trades, vocations, enterprises, establishments, occupations or callings conducted in the City of Lodi to which a business tax may be lawfully applied using the tax rates in Table 1 (attached). New businesses will not pay more than the minimum tax in their fust year of business whether located in or outside of the City. The tax will be due and payable annually In January for the prior year except for new businesses which will pay the minimum tax at the time issued. Businesses exempt from the business license tax: • Minors under the age of 18 with gross receipts of fess than $3,000 per year, • Home occupations with gross receipts of less than $3.000 per year, • Charitable, religious and non-profit organizations; • Businesses exempt by Federal or State statutes, laws, franchise agreements, or other contractual agreements. This includes banks, Insurance companies, their agents and other financial institutions, cafe musicians. real estate auctioneers, businesses that manufacture, sell, purchase, possess or transport alcoholic beverages. Excluded from the calculation of gross receipts is the following: • AN taxes; • Discounts, refunds and credits; • Passive income from investments. dividends and the occasional sale of property; • Bad debts; • Amounts received by one party and paid to another party by persons acting as agents, brokers and trustees. JX:"YCLAK 0RMs"onGE2.0oC SnWN PROPOSE I •• ••.LASE TAX . JULY so 1994 Table 2 (attached) shows the estirnated revenue for each of the three options. and it ranges from $887,00 to =539,000. All interested persons aro Mvited to present their views and comrnents on this matter. Written statements may be filed with the City Cleric at any time prior to the hearing scheduled herein, and oral statements may be made at said hearing. By Order of the Lodi CRy Councik er ( � 1-(P44 . 4---' ity Cierk Dated: May 18, 1994 40 to toytn: �t � Bobby W. McNatt City Attomey J %0TVCLRKW0RMS%%0TWEZWC SM"4 City brLodi Ah Aft TLW0 1w qW BUSINBSS LICENSE TAX RATBS Table I Ntieidtnttt +Optio6l Op '3 0 Moil.. Notes # is Rates apply per 51,000 of gross receipts # 2: Rates apply per square root or building space occupied # 3: Not to exceed $3,000 per business Public Utilities $40 SAO S35 5.30 Administrative Headquarters Nose * I Automobile Dealers SO S25 S20 Us Recreation and Batertalument Hotel/Motel Services Note 0 1 In—City Contractors S40 S-60 Sm S30, Rental of Residential Property Rental of Non—Residential Property Note 0 1 1 1 1 Professions S40 S-90 S.75 SAO Note 0 1 Retail and Services Flat Rates Own Receipts So to 5200,000 so S40 $30 S20 Gross Receipts $200,001 to 5500.000 S90 $90 S70 S50 Gross Receipts S500,001 to $900,000 S150 5150 silo S80 Gross Receipts Rate Gross Receipts 5900,001 to S5 million 5540 S.60 S.55 3.50 Gross Receipts S5 million plus 54,500 S.90 S.75 S.60 Note # I Manufactures $40 S.02 S-015 SAl Wholesalers Note 0 2 and # 3, Notes # is Rates apply per 51,000 of gross receipts # 2: Rates apply per square root or building space occupied # 3: Not to exceed $3,000 per business City df Lodi Ah Am 7XVIS BUSINESS LICENSE TAX REVENUES MkMs 2 _Opd"-2--OpdbM-3-. Public Utilities 5 SSIIOW.OW SMAW 317AS0 313.300 Administrative Headquarters Automobile Dealers 94 $106,040,O00 SM10 $21,2011 SIS,906 Recreation and Entertainment HoteWotd Servitxs In—City Contractors 1025 5170,400O00 3102.740 $93,720 585.200 Rental of Residential Property Rental of Non—Residential Property Professions 330 $160,000,000 S144,O00 $120,000 596,000 Retail and Services Flat Rates Gross Receipts $0 to $200,000 1660 S66.400 549.800 533,= Gross Receipts 5200,001 to $500,000 475 $42,750 533,250 523,750 Gross Receipts $500,001 to $900,000 220 $33.000 $24,200 S17fi00 Gross Receipts Rate Gross Receipts $900.001 plus 158 $348,000,000 $MXO $191,400 5174,00 Gross Receipts $5 million plus 12 $123,000,000 $110,700 592,250 Sn,= Manufactures 330 20,000 Sq Ft $132A00 $99,000 $66,000 Wbolesaters Note # 2 and # 3 TUI -AL REVENUES Notes # 1: 'Rates apply per $1,000 of gross receipts # 2: Rates apply per sqU2fC foot of building space occupied # 3: Not to exceed $3,000 per business 5886.800 $742.678 $600.756