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