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Home My WebLink AboutAgenda Report - May 18, 1994 (43)or CITY OF LODI c�lir � COUNCIL COMMUNICATION AGENDA TITLE: Public Meeting Pursuant to Government Code 554954.6 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 set 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 554954.6(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. PO I APPROVED ------ --- ------ — L1�/ THOMAS A PETERSON ,e„c,+a P.Pe. ` City Manager CC IJ FUNDING: Not applicable Respectfully submitted, OF -0-Ai VC44&It-- Bob McNatt City Attorney BM:pn CC: City Manager Finance CCBUS.LIC/TXTA.01V a MEMORANDUM May 17, 1994 TO: City Council FROM: Dixon Flynn, Finance Director SUBJECT: Amendment of the Business License Tax Ordinance r) 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 woks 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 .5% of the total general fund tax revenues. This is significantly less 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 like 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 conducted 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 r,eetings, 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. K 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, nterprises;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 �exon Flynn Finance Director f -I Ctty of Lodt — — --------------- Tx..wc3 BUSINESS LICENSE TAX RATES Table 1 Business Classification Minimum Option 1 Option 2 Option 3 Tax Public Utilities $40 S.40 $35 $30 Administrative Headquarters Note 0 1 Automobile Dealers S40 S.25 S.20 S.15 Recreation and Entertainment Hotel/Motel Services Note s 1 In—City Contractors S4(! f S.60 S.55 S.5() Rental of Residential Property ( ` f Rental of Non—Residential Property _ Note 0 1 Professions S40 ` SM) S.75 S.60 Note -0 1 ff ! Retail and Services Flat Rates Gross Receipts $0 to $200,000 540 S40 530 $20 Gross Receipts $200,001 to 5500,000 SIX) SW 1 S70 i S50 ' Gross Receipts $500,001 to $900,0W ; S 1 SO S150 I j S110 580 Gross Receipts Rate Gross Receipts $900,00; to $5 million 5540 I 5.60 S.55 S.SU Gross Receipts $5 million plus S4,5(X) 1 S.% ! 5.75 S.60 Notc / 1 Manufactures S40 I S.02 ! S.015 S.01 Wholesalers Notc 12 and 0 3 Notes #t 1: Rates apply per $1,000 of gross receipts # 2: Rates apply per square foot of building space occupied #t 3: Not to exceed $3,000 per business City of Lodi TR.WKJ BUSINESS LICENSE TAX REVENUES Table 2 Business Classification Businesses Estimated Option i Option 2 Option 3 Public Utilities I 5 iS51,000,0001 ` 520,4001 $17,8501 $15,300 Administrative Headquarters Automobile Dealers ; 94 1 51(X5,040,000 $26,510 $21.208 $15,906 Recreation and Entertainment I ` Hotel/Motel Services Notes #( 1: Rates apply per 51,00(10[ gross receipts #t 2: Rates apply per square foot of building space occupied #t 3: Not to exceed $3,006 per business In—City Contractors i 1025 5170,406,000 5102,240 593,720 585,200 Rental of Residential Property f Rental of Non—Residential Property I I I 1 1 ' Professions { 331) S 160,000,000 S 144,0001 5120,000 S96,000 i Retail and Services Flat Rates Gross Receipts $0 to $200,000 i 1660 I 566,4(X) I 549,8(X) 533,200 Gross Receipts $200,001 to $500,000 ! 475 i 5.12,750 ` 533,250 $23,750 i Gross Receipts $500,001 to $900.000 221) i j ; ! 1 S33$XX) I 524,210 I 517,6W Gross Receipts Rate j Gross Receipts $900,001 plus 158 5.348.(XX),(XX) S208,8(X) 5191,400 S174,OW Gross Receipts 35 million plus 12 5123.(XX),((X) 5110,7(X), S92,250 S73,8(X) _..... --....--_.._... _.._.. _..... .. t � - - — .._._ __._._.. I ' Manufactures 330 i 20,(XX)Sq Ft 1 S132,(M 599,000 $66,(XX) Wholesalers j Note #)2and #31 J` TOTAL REVENUES S8R6,R00 _S742L67R 56()0,756 Notes #( 1: Rates apply per 51,00(10[ gross receipts #t 2: Rates apply per square foot of building space occupied #t 3: Not to exceed $3,006 per business CITY OCIODI NOTI��OF PUBLIC HEARING Date: Jul 6 1994 Carnegie Forum y ' 305 West Pine Street, Lodi Time: 7:00 p.m. For information regarding this notice please contact: Jennifer M. Perrin City Clerk Telephone: (209) 333-6702 NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Wednesday, July 6, 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 License 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 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 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 less than $3,000 per year, • Home occupations with gross receipts of less than $3,000 per year, • Charitatte, 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: • 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. j V_-1rYCLRKtFORMSWonCE2DOC 5/19/94 PUBLIC HEARING TICE PROPOSED BUSKS LICENSE TAX JULY 6, 1994 Table 2 (attached) shows the estimated revenue for each of the three options, and it ranges from $887,00 to $539,000. All interested persons are invited to present their views and comments on this matter. Written statements may be filed with the City Clerk at any time prior to the hearing scheduled herein, and oral statements may be made at said hearing. By Order of the Lodi /City Council: ai er mn � 1 • i'�t:v7� ity Clerk Dated: May 18,1994 Ap to fo , , Bobby W. McNatt City Attorney JICITYCLRKIFORMS%WTICE200C 5118/81 City of Lodi TV_Wn BUSINESS LICENSE TAX RATES Table 1 Business Classification Minimum Option 1 Option 2 Option 3 Tax Public Utilities $40 5.40 S35 330 Administrative Headquarters Note 0 1 Automobile Dealers $40 $25 S.20 $.15 Recreation and Entertainment HOW/Motel Services Note f 1 In—City Contractors $40 SAO $35 S50 Rental of Residential Property Rental of Non—Residential Property Note 0 t Professions $40 S.90 $35 3.60 Note I 1 Rcoh 4ervices Flat Rates Gross Receipts SO to $200,000 S40 S40 $30 S20 Gross Receipts $200,001 to $500,000 $90 S90 $70 $50 Gross Receipts $500,001 to $900,000 SIM $150 Si10 S80 Gross Receipts Rate Gross Receipts $900,001 to $5 million S540 SAO $55 350 Gross Receipts $5 million plus 54,500 $.90 S.75 S.60 Note 0 1 Manufactures $40 3.02 $.015 S.Oi Wboicsalcrs Note ! 2 mod l 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 City of Lodi '1 TR.w BUSINESS LICENSE TAX REVENUES Table 2 Business Classification Businesses Estimated Option 1 Option 2 Option 3 Receipts Public Utilities 5 551,000,000 S20,400 517,850 S15,300 Administrative Headquarters Automobile Dealers 94 5106,040,000 $26,510 521,208 S15,906 Recreation and Entertainment Hotel/Motel Services In -City Contractors 1025 S170,400,000 $102,240 $93,720 585,200 Rental of Residential Property Rental of Non-Resldeotial Property Professions 330 5160.000,000 S144,000 S120,000 S96,000 Retail and Services Flat Rates Gross Receipts SO to 5200,000 1660 566,400 549,800 $33,200 Gross Receipts 5200,001 to $500,000 475 542,750 S33250 $23,750 Gross Receipts $500,001 to $900.000 220 $33,000 $24,200 517,600 Gross Receipts Rate Gross Receipts $900,001 plus 158 5348,000,000 5208,800 $191.400 5174,000 Gross Receipts S5 million plus 12 $123,000,000 S110,700 $92,250 S73,800 Manufactures 330 20,000 Sq Ft $132,000 $99,000 566,000 Wboicsalcrs Note#2and*3 TOTAL REVENUES Notes # 1: Elates 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 $742,078 _S600756