HomeMy WebLinkAboutAgenda Report - December 15, 1993 (65)r
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CITY OF LODI COUNCIL COMMUNICATION
AGENDA TITLE: Recommendations Concerning Potential Revenue Sources
MEETING DATE: December 15, 1993
PREPARED BY: City Manager
RECOMMENDED ACTION: That the City Council hear the presentation of the
representatives of the Old Lodi High School Site
Foundation and take action as deemed appropriate.
BACKGROUND INFORMATION: Representatives of the Old Lodi High School. Site
Foundation will be in attendance at Wednesday night's
meeting to deliver a presentation addressing
potential new revenue sources for the City of Lodi.
Mr. Dennis Bennett, Foundation Chairman will make the presentation and a copy
of his prepared remarks is attached (Exhibit A).
The Foundation will make no specific recommendations at this time as to
allocation of whatever additional revenue may be raised by action of the City
Council.
FUNDING: Not applicable
Respectfully submitted,
-,a Q.
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Thomas A. Peterson
City Manager
TAP:br
Attachment
CCCOMS76/7XTA.07A
APPROVED. &Vi
THOMAS A. PETERSON racro4d POW
city MWM0W
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Lodi City Council
December 15,1993
Opening Remarks & Business License Introduction
Mr. Mayor and members of the Council, my name is Dennis Bennett,
Chairman of the Old Lodi High School Site Foundation. The {
Foundation Board of Directors have for some time been studying ways
to fund and complete the master plan at Hutchins Street Square. It
seems at this same time it has become very evident that there are
many, many needs in the community Including completion of the
Boys and Girls Club facility that just recently had a ground breaking
for the construction of the shell of their building; Dowatown and
Cherokee Lane revitalization, as well as other infrastructure needs
like future repair or replacement of eastside sewer, water and storm
drain trunk lines; future park land acquisition; adequate future
funding for the parks and rec master plan; and potential future water
filtration systems, not to mention increased future Police and Fire
personnel.
We are here tonight not to discuss any specific project, but due to the
City's dwindling income, we are here to discuss methods to increase
the general fund and try to make the City of Lodi financially healthy, so
that the Council in the future can fully act on the various needs
previously stated.
We have sought the advice of the City's Finance Director, Mr. Dixon
Flynn and we have some specific suggestions for the City Council.
The first would be updating the current City Business License Tax
Ordinance which was first introduced in 1948. It is well known that
this tax is extremely outdated and has many inequities to small
business.
The Foundation Board felt so strongly about the need to at least
review this funding source that the Board hired the consulting firm of
Ralph Anderson and Associates to do a full review for the City. Ms.
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Suzanne Bragdon of Ralph Anderson is here tonight to go through the
report when 1 complete my comments.
The second suggestion is to create a citywide Lighting and Landscape
district which would include maintenance for all street lighting and
park maintenance. This has become very common in Cities
throughout California, and even San Joaquin County has Street
Lighting Districts and Community Service Districts for park
maintenance as in Woodbridge and Morada that pay for these
services.
The next suggestion would be to investigate the feasibility of
increasing the real property transfer tax. This tax is paid to the County
Recorder upon the close of escrow on the sale of a property with a
portion going to the City. The City of Stockton and the City of
Sacramento have increased Real Property Transfer Taxes and is
substantial income to those cities. Ms. Bragdon's report contains
some basic statistical information regarding this tax.
The next suggestion would be to consider the implementation of a
utility users tax that affects all utilities provided with the City. It could
be structured so that there would be no net gain in the cost of city
utilities, but even a very, very small tax on the other utilities could
greatly help the Citv's General Fund.
This concludes my comments and after the presentation 1 would urge
the Council to direct the Staff to review the City of Lodi Business
License Ordinance and incorporate the suggested changes in the
report to bring it in line with reality. Also the Council should have staff
look into the feasibility of the other suggestions mentioned and
explore their implementation so that Lodi can survive the state budget
cuts and continue to serve its citizens.
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TO: Lodi City Camcilmembers
FROM: Lodi District Chamber of Commerce GTRC Committee
SUBJECT: Resolution Concerning Proposed Business License Fee Increase
DATE: December 15, 1993
At our committee meeting December 3, 1993, the following resolution was adopted:
RESOLUTIONOFTHEGOVERNME TTANDTRANSPORTATIONREVIEWCObSETTEE
OF THE LODI DISTRICT CHAMBER OF COMMERCE.
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The Lodi District Chamber of Commerce is, in general, supportive of the idea of a Business
License Fee review, but requests that the City Council delay action on a specific formula for �
License foes until after the pending Froposal for Cherokee Lase and Downtown redevelopment
is available, so that the nerds of such projects can be determined and such information be used
in formulating any new ordinance dealing with Business License Fees.
It is the prevailing opinion of Chamber members that any new revenues that may be generated
by Business License Foes should be used for projects that will directly benefit business within
the City and not for projects that are generally considered Community Service or Social Benefit
ProJects.
1330 S. HAM LANE • P.O. BOX 386 0 LODI, CA 95241 • PHONE (209) 367.7840 • FAX (209) 334-0528
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Ssemmento ■ Dallat ■ Newport Beach
Ralph Anderson
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1416FAM WOASufft101
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(916) M5575
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November 2Z 1993
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RzcomMENDED FRAmEwORK
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TAX ORDINANCE
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RESULTS OF THE LODI BUSIl M TAX STUDY:
AN OVERVIEW
�» Ralpb Andersen & Associates was retained by the Old Lodi High School Site
Foundation to look at opportunities for increasing revenue generation capabilities
of the City's current business license tax ordinance while improving equity and
administration of the tax. General findings and recommendations from the analysis
+�• follow.
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�+ ■ The taxing structure and rates have not been adjusted since 1948
■ Revenue generation as a percentage of general fund revenues is S%, as
reported in the 1991-92 State Controller's Report, is significantly behind
�•: the Statewide average of 5.8915 and the practices of area cities
"' ■ Because the basis of taxation is number of employees, revenues generated
do not reflect changing economic conditions
■ Related to the above, annual growth of business license tax reveunes have
averaged only 2.5% during the past five years, which is significantly below
Statewide and area averages
"' ■ In terms of equity, the use of number of employees as a taxing base does
not accurately reflect business volume or ability to pay.
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THE PROPOSED ORDINANCE
■ Classifies all business activity into 11 broad categories of business to allow
for the application of varying tax rates and taxing measures
S a c r a m e r t 0 • u a N e w f: o r 1 8 e a c h
hof the odiBudness T= Swdy.-ew
Page 2
• Relies on gross receipts as the primary basis of taxation to ensure equity
and to ensure revenues reflect changing economic conditions
• Includes a raying tax rate structure to reflect variations in profitability
and ability to pay
• Includes tax rates to generate (1) SM million In revenue consistent with
Statewide averages, (2) 5900,000 and (3) 5700,000.
For more detailed information on the results of this analysis, please refer to the
body of our report dated November 22, IM.
TABLE OF CONTENTS
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+�; 1♦rr; i 1 Mr 1
Equity of the CWyew B=burs Lima T= S
AbrTttp of the Tax to Gm ate Revouu 9
Administrative Compkxuy of the Tar 14
Summary 18
IM
Business Ck=TwadDn Symm 19
TW&W Meawn 22
Taxing Ratios 26
Other Consideratiom 29
Summary 29
I Ir\ I I � / r t r • I
r re ru r, I • r r � . • • i - r
I
31
33
35
35
37
39
39
40
41
42
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TABLE OF CONTENTS (Coed
AppmcaA —Rate Smote in C}uma Ordb m m
Appendix B — Cmpwisan _WM
Appadk C—Busbun Cat ion Defmidons
Appwdir D — DefbMm of Ta bq Meawa
Appmdfr E —Profit Margin Decor? by SIC
A,ppmft F — Tar Rate Options
Appendix G — Sampk Tar Bills
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TABLE OF EXMnS
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Exhibit I A — Specialty Business Categories
4
Fxh%it I B — Tax Paymients for Businesses Inside and Outside
of the City
4
Bdubit II - A — Regressive Nature of Current Taxing Structure
and of Bracketed Per Employee Charge
6
Exhibit IIB — Similar Businesses that are not Treated Similarly
7
Exhibit 11 -Cl — Business License Tax as a Percentage of General
Fund Revenue
10
Exhibit II -C2 — Survey Agency Trends Business license Tax as a
Percentage of General fiend Revenue
11
Exhibit IID — Business License Tax Growth Trends: City of Lodi
and Comparable Cities
11
Exhibit U -BI — Survey Agency Trends: Primary Basis of Taxation
13
Exhibit 11-132 — Business License Tax as a Percentage of General
Revenue Compared to Basis of Taxation
13
Exhibit II -F — Comparison of Local Tax Structure
15
Exhibit III Al — Recommended Business Categories
21
Exhibit III A2 — Merging of Specialty Business Categories into
Recommended Business Classifications
21
Exhibit M -B — Summary Analysis of Alternative Taxing Measures
23
Exh%it M -C — Recommended Taxing Measure
25
Exhibit IIID — Minimum and Maximum Profit Margin Figures by
Business Classification
27
Exhibit III E — Taxing Ratio
28
Exhibit IV -A — Estimated Taxable Base
32
Exhibit IVB — Tax Rate Alternatives
33
Exhibit IV -C — Sample Tax Bills City of Lodi
34
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CHAPTER I
}
INTRODUCTION
s„ Ralph An&r= & Assocwa was retained by the Old Lodi High School Site
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Foundation to develop and provide gnideiines forimplementing a revised business
license tax ordinance for the City of Lodi.: -The eurrent buses license tax
ordinance for. the City has not been reviewed or revised since 194& --As a result,
there are signify opportunities to i Vwm the ordinance in terms of equity,
revenue generation capabiilitiea, and administrative ease. Based on the .City's
objectives, and practices and trrsds statewide in this field, we have prepared a
suggested framev=k for the revised ordinance. This Report presents our findings
and recommendations.
As an introduction, this chapter contains:
1 • The bacArwnd for undataUq the study
ra • Study Boats and objectives
• Summary of current business license tax ordinance
:+s
6: The current business license tax structure is suirimarized at the end of this chapter
to provide a basis of comparison between the existing and the proposed business
license tax framework
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Cities in California have had the authority to levy business license taxes for many
yearn. In the past, cities used a business license tax primarily for regulatory
Purposes. As such, the amount of the tax was low and was primarily designed to
cover the cost of regulating certain business activities. Considerations regarding
internal equity of tax rates and taxing measures were not a concern. Neither were
issues regarding revenue generation or administrative simplicity.
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Inaio�ctiora
In recent years, and particularly under the current budget constraints, cities in .,
California are utilizing the business license tax as a general revenue raising
measure. This trend reflects the interest of cities in developing a broader and
more secure revenue base. It also reflects basic changes that have occurred in the
State and lose.'. tax structure, including elimination of the business knntory tax.". .
the inability o adjustlocal property- and sales taxes, and the loss of state. and
federal subvcr 'ons.
Given that the City of Lodi has not reviewed or revised its business license tax ...
ordinance since 1948, tax rates are low, thus negatively impacting revenue
generation capabilities. One of the objectives of the Foundation, supported by the
Chamber of Commerce and the city, is to use additional fiends generated through .•
rovisiag the business license tax ordinance to improve public facilities: = The end
result of this objective is beneficial both to the City and to businesses. In addition,,,
the revised ordinance would create a'lvin win" for the business community and the M
City by improving equity, through treating similar businesses similarry, and
developing guidelines to make the ordinance easier to administer and monitor
compliance. For all of these reasons, Ralph Andersen do Associates has been
retained to evaluate and revise the current business license tax ordinance.
STUDY GOAIS AND OBJECTIVES
Recognizing that maccasing business license tax rates without revising the basic
structure of the tax could compound inherent weaknesses in the ordinance, all `~
components of the ordinance have been revised. In developing the framework for
the ordinance, three key eljectives were identified nm include:
■ Improve the equity of the business license tax including amuM (I) that
similar businesses are treated similarly, (2) that the taxing sbuctune refects
general profatabMV and ability to pay, and (3) that all kegitbWe businesses
are clearly subject to the tax
■ Evaluate akernative revenue capabilities
■ Enhance admbdsbrtttiv ease and compliance.
To facilitate review of the findings and recommendations contained herein, this
Report is organized into the following chapters:
Inba�ra8on
■ Chapter I — Inrvadaetion
■ Chapter H —Asseu new of the Curet Business License Tax OAtinance
■ Chapter III — Key Components of die Revised Ordinance
■ Chapter IV — Recommended Frmnework for the Business License Tax
Ordinance
■ Chapter V —Administrative Co nsideradmu
�..
■ Chapter VI —Assessment of the Propased Ohibwnce
5
These end -products resulted from the completion of a aeries of different work
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tesla, indutfin an initial meeting with Members of the Old Lodi High School Site
Formation and numerous contacts with City staff to confirm revision goals and
objectives. In addition a r c 1 F ehensive review and anabysis was conducted of the
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City's current business license tax ordinance, supporting doeimcntation was
evaluated, and a comparison survey of business license tax rates and total tax
structure wu also conducted.
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To provide a basis of comparison, a summary of the key components of the current
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business license tax ordinance follows.
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STR_UC ME OF THE CURRENT BUSINESS LICENSE TAX ORDINANCE
As of Q-tober 1993, the City of Lodi recorded only 3,900 active business licenses.
For Mposes of taxation, the current ordinance does not identify specific business
categories, with the exception of specialty categories shown in Exhibit I a
The primary fee schedule currently in place charges most businesses on the basis
_
of a bracketed ave -rage number of employees structure. This structure applies to
all businessca except those listed in Exhibit I -A, which are taxed based on a flat
fee. In addition, there are businesses listed in Section 5.04.090 of the ordinance
that are exempt from paying a business license tax, iaduding the following:
-"
■ Delivery busineues without a fixed place of business in the City
■ Charities
■ Religious; educadona4 fratemud, and gm namental orlgankations
--
■ Garbage collators under contract or aVeemau wuh the City
■ Utilide , banks and bmura ce companies.
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MW M — SPECIALTY KMIM as CATEGORIES
Anne wtwet ON and ainelr aonouMoer, delldwl's
AnawetMeet do" and ea. adeps
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Chows" and We akoew
Canadb-r or Oak etesdeinas
Dumas
Do or acrd 9mm
Jar* dunk 1aa11 4
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Pwl dxe ,
Paddlei w wo6fters
Paddlas aM so0drors. personally wdm� chmM goods and pmcb
Swkmwq pods
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(to The Omwe F*Wm d N aho fs.d on a ON 6% but A dmee fled t, Sreekm s n#DWV of to comm oedtw m
Currently, the City takes businesses with fixed places of business in the City, and
those with fuoed places of business outside of the City differently. F�clnbit I B
tilustrates the tax payments due for businesses inside and outside of the City.
EGO=AVUEM !OR NOW AM OUTSIDE OF TM CITY
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Sections of the City's current business license true ordinance that present the
various taxing schwules are contained in Appendix A
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OwWewAUO=W9 of toe CkwW OAftnee
As the basis for revising and improving the City's existing business license tau
ordinance, a comprehensive overview assessment of the current business license tax
^: ordinance was completed. The objective of the assessment was to identify the
areas of the current ordinance that could be improved in terms of equity, revenue
generation capabilities, and ease of administering and enforcing compliance.
'Ibis chapter presents an assessment of the current business license tax ordinance
relative to each of the concerns mentioned previously. To facilitate review, the
r" findings from this assessment are presented in the following sections:
s Equity of the Current Biab= Li cense Tax
€ '"" • Abay of the Tar to Generate Remme
`�' • Adi motive Contpkxity of the Tar.
The overview assessment provides the foundation for the subsequent analysis
presented in the remainder of the report.
EQUITY OF THE CURRENT BUSINESS LICENSE TAX
As previously indicated, special attention has been given to analyzing the general
equity of the City's current business license tax. In evaluating this element of the
ordinance, the consultants have assessed whether or not similar businesses are
treated in a him fashion under the ordinance, whether or not tax rates reflect a
general ability to pay and whether or not all viable businesses are clearly subject
to the tax.
In analyzing the general equity of the current business license tax ordinance, the
following factors have been considered:
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Ow"m XAW of ft 0~ Organa
• Naam of the current rate nwure, bxW* = ma meet of the extent to
which it may be rrg M&e
• Vp&a&n of the rate sauMune to businesses generally, bschaft an
assessment err to whether wngw bus'v =es are &tested diffaauly
• Natant of the eument classifke m sduct w4 incWft at asse=&V as to
**ether simr7ar businesses ane derated &f fernntlj►
• G3wnaK tax nates including at arsetsment as to whether taxing natiosand/or
M rates nef ect the variations w gme al pmfkabOy among bmad classes of
&min=
` Application of the c=M ordinance to classes of business g 4
bs& d fg an rises:&& as to whether s4rtafk" business categories = riot
pe"* subject to or we mmspt farm payment of business 1"= taxes
General weakness of the current business license tax in terms of equity that have
been identified are presented below and on the following pages.
The Qty s bracketed employee taxing structure is regressive, and results in placing
a greater tax burden on smaller businesses with fewer employees. As indicated in
Fibibit II -A, as the number of employees increase, the tax rate per employee
declines, thus reflecting the regressive nature of this taxing structure. As indicated,
this type of taxing structure places a heavier tax burden on smaller businesses, with
fewer employees.
oauerr nes►
OpoWewAnownaK of the Ckurm OHS1Qrles
THE CURRENT BUMNM LiCENISE_TAX SrRUCTURE_PLACES AN IWAM_Tit=
' BUR EN ON A R h�'>1Ew: m BC- tNtEsm --
.. The primary taxing structure used in the Guy's current ordinance is number of
employees With respect to equity, it is difficult to relate number of employees to
IM ability to pay. The result of this We of taxation is that businesses that are labor
intensive are penalized while those bum having high profit margins but fewer
employees contribute marginally to the Guy's business license tax revenues.
PILCAMM THE SAM SEMCES
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The current ordinance taxes businesses headquartered outside of the City
differently than similar businesses headquartered inside the City. This practiceis
�., extremely inequitable. While some variations may be warranted in certain
circumstances, generally similar business activities should be treated similarly to
+R promote equity.
ON SBWM TYLE$ OF BMDMSSn ARE TREAIMD DiYFERENRI.Y
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There are many instances in which similar businesses are treated differently with
respect to the basic tax rates that are levied. For example, there is a $5/month flat
r -N fee charged for amusement rides for children, while businesses pay a $10/month
flat fee for amusement rides for adults. The table in Exhibit II -B illustrates cases
where these type of inequities exist, i.e. variations in tax rites despite the similarity
' of business activity. The table is not intended to identify all uses where these
types of inequities exist.
It should be noted, however, that variances between similar businesses in some
areas may be warranted and encouraged, especially when regulation of a specific
business activity is necessary. However, such variances are not always justified and
raise concerns of equity.
EMBIT N S - SIMRAR BUSRIESSES THAT ARE NOT TREATED SWLARLY
r=
�n"Ut""" . ..�:. ""�i�':y.Swr lwfnw Tr�+erd` �.�r<
A rAmwrwn Rd". Affmwnw* MM for Ch§W % (N6/Ow.). AmummeM rld"s for eduh'" (S10/mo4
eewww sowing 0411) a. eowinp sed Poe w 8iiard" CM/yW vL Pool. ONWA s 04M
Jul* o."I.r .A.rr o..wr-..@id�nte (t,s/vu.rrr) n ,kr+k o..Mr-++on...la.rWr (qo/ear)
P"ddla" PeddlM" a SoN F I' , 4110/d h vs. PMdNrs a Sokhom perwrutlly m�ewl�cI I g
goods a product" "/p wWl
C"re4val" and C"mlvN" (1100/d"y), Clrarw aid Sid" Show. (s30/drA v.. Lod chap. Fee" .nd
Oreo.." NatlorW win. Show (125/dM
Ovavkw AWWXMW of dw OVF9 t OAOUNN .
LAC[ OF BUSDSS CLASMnCATIONS DOLS NOT PROMOM TRE USE OF TAXING
RA370S
Business license tax ordinances typically group similar or related businesses into
logical categories or classifications for purposes of taxation. From the standpoint
of equity, classifications are used because they permit a different tau rate or basis of taxation to be applied according to the profitability or nature of a particular We
or classification of business.
In Lodi, there are no business categories to reflect major business activities in the _.
City, thus the (Sty does not have the finibility. to apply differing tax rates based
on profitability and ability to pay. This potentially places a higher tax burden on -
those businesses that have lower profit margins than might otherwise be warranted.
BUSDUM AC BM NOT SUWECr TO THE BUSINESS LICENSZ TA7C
Although engaged in profitable business activities within the City, some businesses
are not clearly subject to the payment of a business license tax. Because there are +�
no specific business categories outlined in the ordinance, some businesses may
obtain the impression that they are not subject to the business license tax.
Fmunples of businesses operating in the City that presently pay no business license
tax include the rental of residential and non-residential property.
SOME BUSUMM ARE EXEMFMD FROM PAYING A BUSINESS LICENSE TA7C
In the current ordinance, public utilities, garbage collectors, and delivery businesses
are exempt from paying a business license tax. Because these are viable business
activities, this raises concerns of equity. There are no legal stipulations that refrain
these business from paying a business license tax.
In summary, opportunities clearly exist for improving the overall equity of the tax w
by modifying the current classification system, taxing measures and tax rate
structure.
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Own6wAssgtanait of she CkwAmt OrgSu ce
A second issue that has been explored in reviewing the effectiveness of the current
business license tau ordinance is the ability of the business license tax to generate
revenue for the City and reflect changing economic conditions. Other issues
involve the basic competitiveness of the tax with selected cities for comparison
Purposes.
,•, in analyzing these issues and concerns, the following factors have been reviewed:
t ■ Cornparism of the relative importance of the business hfcetse tax as a
•• revenue sogum to the City int compwbon with gown d f u2d rev==
f ;
■ A historuxtl review and compwison of nCvenue gmwtlt under the czWVd
+'► busimxs license = ordinance and in rdlationship to selected Compolson
y PNa
+� ■ Nature of the anent rate struchv4 bwh& ft an assessment of the stent to
>., which it is or is not kkely to nflw economic Vvwth and chmtM in the
{ econom 8ena+ally
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+w ■ Nature of aanw business licetse tax rater, bwbdbW an assessment of their
abgUy to gmerote mww for the City
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The following cities have been selected jointly with City staff for purposes of
evaluating the City's competitiveness:
■ Davis ■ Sacramento
■ Galt ■ Stockton
■ Manteca ■ Tracy
■ Modesto ■ Woodland
_. ■ Roseville ■ Yuba City.
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To facilitate review, analysis of the ability of the City's business license tax to
generate revenue is presented in the following subsections:
■ Busb= License Tax Revenue In Relationship To City General Fund
Revenue
_
is Business Licetse Tax Revenue Growth
_ Comparison of Lodi's Business License Tax Rate Smxtrure with Comparable
Cities
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Ovffvuw Assemnau of the Oume Or&wme
• Comparison of Total Tar Svucmm of the OY With That in Comparable
Ckies
■ Revenue Gam7ruion CapabRities.
Tables and graphs have been prepared, as appropriate, to illustrate the findings in
each of these areas.
Based an City records, revenues generated from the business license tax in the City
of Lodi represented 0.5% of the City's total general fund revenues. This is based
on total business license tax revenues of $94,692 against a general fund of
517,524,313- In comparison, business license tax revenue as a percentage of
general fund revenues represents nearly 5.8% on a statewide basis.
Exhibit II -CI provides information on business license tax revenue relative to
general find revenue for the comparison cities noted previously. In that the most r
recent State CoarrolWs Report available is for 1991-92, this year was selected for
comparison purposes. As indicated in Exhibit Cl and presented graphically in
Exhibit II -Q business license tax revenues as a percentage of general fund --
revenue in the City of Lodi falls significantly behind the survey average (3.2%) and
the survey median'(2.89/o)-
tfCE118E T/lx AS A PEACEIRAGE Of GEIIERAL RAID REVEIQIE
�✓u y $ti '�<(i411N�17��
530.124 14,222.604
ki?
3.3%
&11%
y077.5�N �3.15544,9�0
283,253 6.%70.303
31%
4,806,001 56,565,772
67%
242.290 25,306.307
A%
SmOrM rto 3,901,599 157.100.902
2.5%
8lookfon 4,733,390 8%132,2"
69%
Tnoy 24SAM 12,050.70.3
1A%
Wloodmd 73.341 13,75052
.6%
Yabs CMy 200.0.77 10,021437
1.9%
ShdmAde 606,303,182 10,070,140,441
5.5%
(a) S"m A WWW Tmmcl m a m". sob CMDO Wo Arpo+c
(b) TN+ ADurfa w povlded Aon ft My and 1neAod" 7n MW W" ON 40 Wo pM of Of OnbrprAM hmd.
a]
Ownww Assas nent of dx Qrarvlt Oh vmw
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" s%
ne am
han s.�%
Based on this one piece of information, the City has significant opportunities for
increasing business license tax revenues. If the C irfs business license tax as a per-
centage
ercentage of general fund revenues was brought up to the Statewide average, the City
could raise approodmately $1.1 mtilion in business license tax revenue.
BUSUMS LICENSE TAX REVENUE GROMH
Exhibit IID shows that business license tax revenue growth in Lodi was slower
than all of the survey agencies between 1986/87 and 1991/92, with an average
annual growth rate of 2.5%. The data compiled from the State Controller's report
indicates that the average annual growth rate of the survey agencies ranged from
6.1% in the City of Davis to over 41% in the City of Manteca. Excluding the
Statewide average annual growth, the survey average business license tax revenue
affival growth rate over five years was 16% and the survey median average anmual
growth rate was 13.4%.
EXHW LRD - OUSNUM UCENSE TAX GROWN TRENDS:
WY Of LOM AND COMPARABLE CMES (a)
^1r75+aab `h z�y 2 >
M�Rw Yww.�w
it9'�
D" 400,148
5306124
0.1%
Oak 58.413
?1,660
13.4%
Mwdo= 92 30
283,263
41A%
ModNEo 3.210.016
4,000.601
10.0%
Ro"WOO 146.598
242.290
13.3%
Page 1.1
I�
I
r
Oan*w,Caes=au of des CWmw Ord www
r
�:'e?�°Lil 7:x4 a'< r r .0 r •.c.,�r; ,Y q�r'!r' t .Y F'�'�,'9ry'kF "'f^'."."7
1 .�1 �..� � �i .1 � i 1},yl�l�+A q�f�t�7• i. 1" ��: �!l l: ' �1�1i1
The nature of an agencys business license tax rate structure directly impacts the
ability of the tax to reflect cbanging economic conditions. This is clearly reflective
of an analysis of the City's tax rate structure as compared with the practices of the
ten selected survey agencies. Four of the survey agencies tax their major business
categories based on gross receipts, while two agencies, City of Sacramento and
Modesto, use both gross receipts and average number of employees as their taxing
measure. The City of Galt and the City of Tracy primarily tax businesses based
on average number of employees. The City of Woodland taxes businesses based
on a fiat fee and the City of Roseville uses varying taxing measures including flat
fees, average number of employees, and gross receipts. Tbese results are depicted
in Exbibit II El, with the detailed survey results presented in Appendix B.
As is shown in Exhibit II E2, with the exception of Yuba City, all of the survey
ageneses who tax their businesses based on a gross receipts taxing structure are at
or above the comparison survey average of 32% regarding business license tax as
a percentage of general fund revenue. The City of Yuba City currently taxes
businesses based on gross receipts, but the figure reported in the 1991/92
Controller's Report is based on a bracketed Gross Receipts/Flat Fee tax structure.
Page 12
r
OwnkwAstssmunt of the CWXW OrrftMM
9Lvkww Lba T= w a Paf, ap
of Geowd Face/ Nove rra 11!1/12
fbtb of Ttsaten
Lod AME
Gj%
Daub ANE
3.3%
Oak OR
3.1%
MWAM AR
32%
Modem ANE/OR
&7%
RoMrM ANSIGNIN
A%
8aorawrrb GR/ANE
2.5%
Al -W OR
bA%
TOW ANE
12%
YWodtnd Rd Foo
.6%
Yuba Cay (y GK4W F«
1.9%
ANE—AtiarfGa aunwrdaniplb�tat
GR—Gros Atca�
(a) b 11p1/1214ft CAy oWnd MrJo td pwt
mwor*,odttd eft oraltatot, and prop moslpfs b
,as
0 0
at�cr
uw
w
r..
®M ®• OrVw ffliw��
,ocwpb d n r ftt u w welt of fu ftL 7At Cly rw
a,. pinwy etta or f UMM
In revising the business license tax ordinance, careful attention is being paid to the
impact that the current business license tax bas on encouraging or discouraging
new businesses from coming into the area or influencing existing businesses to stay.
Recognizing that other taxes also have the potential of impacting growth and
development in the City, the comparable cities previously referenced were
contacted and information was collected on other local tax sources utilized and the
respective rates applied. The specific tax sources surveyed include:
■ Prope ny Transfer Tax
• Utility Users Tax
• Transient Occupancy Tax
age 13
OwrviewAua mmt of die tbaW Ohbmw
In reviewing the local tau sauces other than the lousiness license tax, th- (qty's tax
burden is competitive with the comparison. 2gencies regarding the property transfer
tax. Regarding the uffq- user tax, half of the surveyed agencies levy the tax,
ranging fromn 5% in the City of Roseville to 10% in the City of Manteca, and half
of the agencies do not levy the tax. The transient occupancy tax ranges from 6%
to IL59L These results are summarized in Firht'bit 11-F.
In summary, based on the analysis presented in this section, the City's current
business license tax structure is not an effective revenue 'generating source. In
crating the CWs revenue generation capabilities with neigliboring cities, the -
following observations can be drawn:
• Resulting businm license tax paymaus due are gcnarrlly low in rek or sho �.
to the cornparisors a vay agmdes due to the repushv per motber of
anplayra tamp m=m and due to the fact that the rates have not beat
adjusted since 1948
• Busihm if=m tax revenue as a paaattp of Arend fund IeNGw bs Lodi
in 1991/42 was sign Ykw* kss than the ovtraU sunV avmW and the
Sauey median.
r
• B4dnez licmx tar revenue growth is fess than aU of the zPM agencies due •
pnimar4 to the low tar rata and rhe bled per employee taxiing
srnuctum
• ?Tie overall tar bwdm in Lod; excluding the busvuss li,mm tar, is less w,
than comparison swvey agencies in that the City does not levy a utr V users
I= and the base trouient oempancy tax is less than the majority of the ~"
comParim =ney qpwicLs:
Compounding the equity concerns with the revenue generation shortcomings, the
Carty bas significant opportunities to improve the ordinance. t ,
I
ADYAMS RATEM COMPIEXITY OF THE TAX 04
A final question that has been explored relative to the current business license tax t
ordinaLce is the question of administrative complexity. Concerns focus on the ease oft
of administering and complying with the provisions of the tax, as well as the cost
of administration and compliance for both the City and ti:e business community..
vas
M
._
/ __'----___--- of Ae 0~ OMkwmw
-
Hill
Oremm AnaWWW of On C?POW ardWna
In analyzing these components of the current business license tax ordinance, the
following factors have been considered.
• OWt&,adm and format of dseanent ordb=:ce
■ ixrWh and canplaity of the arum( ordbuvwe
■ Fatem to which the anent( orAw w bwhsdes aII provisions necessmy for
proper undestaP&OW and a&nbsisbutim of dw ordinance
• Extent to which application of the ordinw= to various classes of busi =
is doctonm d acrd coresistm* qWW
■ Extent to .which provisions srmplifft computation and p.vment of dw tax ~
are inchsdrd in the awmd adbumce r
■ E4brrrment of the cornet ordi uvwz .v
Although the ordinance is generally complete and the length of the document is • .
manageable, there are opportunities to enhance the ease of administering and
complying with the business license tax ordinance. These areas are highlighted
below and on the following pages .�
■
No Rusinen Qassttuadons — The current ordinance does not have
designated business categories for businesses taxed based on average
mimber of employees. Administratively, this may create enforcement
chaDenges because viable business may obtain the impression that they
are excluded from paying a business license tax. Development of business
classifications will not only improve the equity of the ordinance, but
lilwwise will improve administration of and compliance with the
ordinance.
■ —In some areas, key provisions
supporting otber components of the ordinance are excluded. Examples
include the following.
—While the ordinance includes a provision for examination of
records, there is no provision in the ordinance guaranteeing
confidentiality. Because the ordinance indicates that the City has
the authority to " ... examine any papers, records, and memoran-
da ... " (Section 5.04340), there should also be a. provision that
ensures that the Collector or designee, will not make known the _.
business affairs, operations or information obtained from the
examination, except as it relates to the business license tax paid.
Orm kw.venrrod of the OVnW Ordxmw
—The current ordinance does not include
By developing constitutional appornonmcnt guidelines, the City
would ensure that undue burden would not be placed upon
interstate commerce or be violative of the equal protection and due
process clauses of the C.o stitution of the United States and the
State. This provision would also alleviate inequities that currently
exist with taxing businesses with fixed locations in the City differ-
eptly than those with fixed locations outside of the City.
—There is no dear definition in the ordinance of the designated
"Collectee of the business license tax. In describing enforcement
powers, the Director of Finance is referenced (Section 5.04360),
however no specific section defines the Director of Finance as the
Collector. Should a business owner have questions or concerns, it
t — is not clear where they should be directed.
■ &AmWon forAre=NranberofRMRku—The definitionfor average
number of employees (Section 5.04.020) is cumbersome and would be
., difficult to administer and enforce. The formula described for determin-
ing average number of employees with businesses fixed in the City could
be more clearly defined by indicating the number of hours or days used
in the formula, rather than referring to • . customs or laws governing
such employment." For the businesses with no fixed location in the City,
the three days mentioned in the definition is not referenced in any other
-• place in the ordinance, therefore is confusing. With the language being
both confusing and cumbersome, businesses may not comply.
-■ Then Is No AdMdnist do Fee For Issuing Licenses — The business
r license tax ordinance does not include a provision for charging an
administrative fee for processing business license tax applications. For
`-- businesses that are exempt from paying a business license tax (Section
5.04.080) and home occupations whose annual gross receipts are less than
$1,000 (Section 5.04.080), a business license is required. Given that
processing the application and preparing the license takes staff time, an
administrative fee to cover these costs could be assessed.
• Gtneml Lgtl t of Ordinance — The general flow and layout of the
ordinance is cumbersome because administrative and revenue raising
sections are combined In order to make the ordinance easier to read,
thus easier to comply with, administrative and revenue raising provisions
should be separated. Each of these sections should be clearly highlighted.
Page 17
awWcwAnavncW of ft OwM &&ww
s.
SUA04ARY
Based an these findings and observations, the fiamework for a. revised business
license tax adinambaa bemprepared. The recommended roWmimprove the
equity, adminiatrat cc -and reveme - generation capabffities of the
c*ting tax. Me ker compomms- of the, revised- ordinim., are. pmmued in
Chapter with a summary of resulting tax rate structure included in Chapter IV.
s
Ka Comp M&W of the Recited OASWnCe
CEIAPrER 11
KEY COMMONENTS
THE M MINAMI
z
a To develop a framework for the revised ordinance which addresses the' obse:va-
tim regarding equity, administration/compliance and revenue elasticity identified
in the overview assessment, the framework for the revised ordinance
■ b=We a system for classifyi W businesses
• Identify *=hT measures for each business clan #kadon
■ Iden* =dug ratios between business ckmifcationy.
: '°° Recommendations in each of these areas are presented below and on the following
pages. The resulting tax rate structure options are presented in the next chapter.
M
b!!
to
The business classification system refers to the different categories of business
activity identified in a business license tax ordinance for purposes of taxation. The
business classification system is important from the perspective that it:
: a Allows appkcatiorn of varyi>;g tar measures
' Allows app on of varying tax rates
<<� ■ Amures that all business activities are taxable
Classifications are used as a means of grouping similar or related businesses into
logicrl categories for purposes of taxation. From the standpoint of equity, they are
�- used because they permit a different tax rate or basis of taxation to be applied
according to the profitability or nature of a particular type or class of business.
Page 19
r
Jrsy CAnnpmwo of du Reviled OAfinowe
Cities have considerable flexibility in the way in which they classify business for
taxing purposes As indicated in a League of California Cities report on this
subject:
The restriction that license taxation shall not dory equal protection of
Me laws does not tequue the adoption of an ironclad nik of equal
tammm norprevent differences in tazado% disaedon In the sdec ions of
subjects, or classification for tawdon purposes of different busiriares, t
rade; and professions The only requirement of the constitutional
provision; is unifornnity in the operation of the taxing power and this
requirement is satisfied when the charge is uniform as to the class to w
hwh it applies Tfucs, while a liceruirg ordi wince may not discriminate
in the• burden of the charge placed on those exercising the same
priti►tTi ges, in the same marnur within the same jurisdiction, the legislative
body may ck=fy business carried on within its hmus and impose a
license tax on all thane naturally fait within such class different in a
mount from that charged than within all other classes, fife the differ
ent charges on the separate classes by any standard which is fair and
reasonable and not confiscatory."
"A IcgisWm body has wide discretion in the imposition of license twte;
and the right to classify for such purposes is of wide range and jknibMDP
Unless unreasonableness plainly appears, the detemination of the
legislative body is final But dassi'ficatfon may not go to the extent of
being a men subterfuge for legislation direction against a pairicukwSroup
of taxpayers."
The Gay's current ordinance does not have categories describing major business
activity. Because of this practice, all businesses are treated the same, thus the
ordinance does not take into consideration profitability or ability to pay. In
ensuring that the revised ordinance is equitable, and to enhance the ease of
administration, a sound business classification system must be developed
In designing the new classification system, the following factors have been
considered.
■ The number of business cidssifncadons to ensue that they are not too
numerous to negatively impact administration and enforcement
' Business groupings and consolidations to ensure that similar businesses are
treated sipnHady
• Individual business categories to reflect unique administrative considerations
and variations in profitability
i
• Totat 6usvuss to mum &W alt leguunate hwm=
weclewlyatbect:oMe=
Based on an analysis of current bowman in .the City, and using standard
Industrial Codes, Exhibit III M premm the recommended business clauifCatian
system.
r wa►� - rM:cOMMO o acMMEss cn s
�emrr�aw. iM�dquarnr.
Oonraaas
wa.war
wr�e tM�en
p.o..ron
&F
nwMr a PAWWW"M Prcparsy
weed a RMi0u�a1 Properly
ardt
arra
vMko�a.0
Exhibit III A2 summaries how the specialty business categories in the current
ordinance have been consolidated into the recommended business categories. A
few of the specialty categories will be included in the regulatory portion of the
ordinance that is currently being prepared in addition to the 11 business
classifications recommended, the revised ordinance should include a "catch all"
classification designed to apply to all businesses not specifically covered by other
parts of the ordinance.
EX4W aMs - UMO Mo Of sPECOVY suss+Eas CATEGORM
WW AECOraIEMDEo BUSNEss OSSIFICATION!
AIrw m * Mdaa. C♦I MM
i
A1numnem fit, Aduft
IbWAslOky
Maowgw. Rftm T.Nwe
iii EM"n rin.ne
Aucdonw
f
9, kw
wa
eowbq i ftd or BNNaraa
PAMO " a h m MWO
CambNa
FAWAdoy
aka,... t Sian snow.
PAWAdWy
Crane, saw or grab mwchhm
P49MID cry
Dano"
w«waaon i Enbru*-- s
Page 21
Key CompmaW of du Revised Onffamu
EXHIW N A2- MERGING OF SPECIALTY CATEGORIES
INTO RECOMMENDED BUSINESS CIAS!lFICATIOK
Door or Card Gana
R.- on i A-18 uh- A
Junk Daalar "ddnM)
R.htl
Junk Dw1w (M dA- 4
He"
Pawnbrolr�r
Real
PeddlM & SaW A
R.odlatoy
Peddlaa i SotdWm panorwy •wwhefwod poodt
or poduoa
FAA
Pool% aFRarda
Raon-vim n i EnMrWrrrwN
&A --I* o Paola
Racnatlon Nt arat h -Im t
Thaalm
FMaaaeon & EntafWnmwkt
Grave room
PAOWMNY
The business classes recommended to be included within the classification structure
have been developed to:
■ FAsury that CII businesses operating within the City are clearly subject to the
Z=
■ Ensure that simrlar businesses are treated similarly
■ Allow for the use of alternative taxing measures for unique situations
■ Allow for the application of variable tax rates that r e}lert profitability.
Definitions of the primary business classifications are presented in Appendix G
Based on the general practices of cities throughout California, alternative tax
measures available to the City of Lodi include:
• Flab fee ■ Gross receipts
• AverzW number of employees ■ Gross Payroll
Page 22
6 .
it
Key Cornpmaw of the Robad OASsma
The advantages and disadvantages of each are summarized m Exhibit III -B
General observations are presented below.
kFMW Mod — SUMMARY ANALYSIS OF ALTERNATIVE TAXIM MEASUMM
To" MMMWOG
Eq ft
Mavens
Adadnlatta110a AaMaoMos o/ Eeoam b
ChMP
tdY�► raplealYaoyaaa
FNWw,6bw
Mod.re.ly npnsabo
SInVb Lknb* rar«rt. a4ar 0
almd to adabn of
am b dans nand
nowenvoy.
AO"W* n a.ets
dlbnnaa In budrmm
PO Miapy mon a, 0: raAaala Brno»
oomvar, but can be In vohmn and voba of
voMrna
PI, --as a mates of cavil.
PAY
Ones Payrar
ModsraMy npnaAva
on* Modsra/� nrMols
ahepso in wk~ and
wapo nava
• Ffat Fee—The use of flat fees as a taxing measure is most often defended
on the grounds that it is the least complex of the available alternatives to
administer. Because no computation is involved, there is little compliance
cost for business. Similarly, the tax is relatively easy and inexpensive for
. the City to administer. The use of flat fees can make revenue estimating
easier, and it can be a particularly effective manner of taxing certain
-' businesses where enforcement might otherwise be a problem.
On the other band, the use of flat fees can result in a highly regressive
rate structure because the same fee is applied to a variety of businesses
-� without any consideration of business of volume or the profitability of
those businesses. As compared to other measures which more accurately
reflect business done within the City, flat fees can be particularly unfair
when applied to those doing limited business within the City.
Furthermore, the use of flat fees does not provide the City with a revenue
source that adjusts to changing economic conditions. Not only do flat
fees produce less revenue initially than other alternatives because they do
not measure prix or volume of goods produced, but they are deficient in
terms of growth in that additional revenue is only produced for the City
through an upward adjustment of license fees or an increase in the
number of firms doing business in the City.
My C,anpme o of At Ac9nd Orth? OW
■ ArCM Number of B,rDlo era — From the standpoint of levying business
license taxes for revenue -raising purposes, the use of average number of
employees is superior to a flat fee because increases in revenue yield are
not entirely dependent on the addition of new businesses to the communi-
ty. Rather, revenues grow as employment increases.
As compared to a flat he, the use of average number of employees also
does a better job of distingnishing between businesses for taxing purposes
by providing a rough measure of business vohtrne. Furthermorei
employers have little difficulty computing average number of employees
because they are presently required to keep records for social security and
withholding purposes. From the standpoint of the City, few administra-
tive
dministrative problems are encountered.
While the use of average number of employees as a tax measure is
substantially better, in most cases, than a flat fee, it does have problems.
With respect to equity, it is difficult to relate average number of
employees to ability to pay. Furthermore, while it does provide some
measure of business volume, it tends to penalize those businesses that are
labor intensive while virtually ignoring those having high profit margins
but few employees. ff the tax rate declines as number of employees
increases, then the business license tax structure can become highly
regressive.
■ Gross Rereieti — From the standpoint of equity and developing a tax that
reflects changes in the economy, gross receipts is clearly advantageous.
Not only does this measure of taxation offer a broad tax base, thereby
permitting the City to raise revenue from this source based on relatively
low tax rates, but it also allows for reasonable revenue growth without
adjusting tax rates, inasmuch as it is responsive to overall changes in the
economy.
Although more complicated than a flat fee, taxpayer compliance is not
unnecessarily complex. As indicated in a recent survey conducted by
Ralph Andersen & Assoda m on business licensing practices and policies
throughout California, groes receipts is the most common and preferred
method of taxing major business activities such as retailers, wholesalers,
manufacturers, contractors, service industries and professionals. Because
the tax is levied against only that business which is done within the City,
the use of gross receipts assures that double taxation will not occur.
r —
Mer C4nwonentr of dw AgWred Or4mowe
• Gran Pgrroll — Unlike gross r-Ampm which takes into account both
changes m price and volume of goods, gross payroll as a tax measture
accounts only for changes in wage rates. While this can minimize the tax
obligation to a business and the resulting tax revenue to the City, the
erosion of taxable ban may be offset by the fact that administration is
less costly anJ complex. As compared to some of the broad tax measures
described previously, gross payroll can be more limited in its application
in that it is only a practical alternative with respect to those classes of
business that employ sufficient persons to make gross payroll a realistic
tax base.
• Ma— Local agencies have used a wide variety of other tax measures in
specialized ckamistanca including number of vehicles, seating capacity,
number of units, and square footage. Some have even expressed interest
in net income as a basis for taxation. While this type of approach is the
most equitable, State law presently prohibits agencies from imposing a tax
based on net income (refer to Section 170415 of the Revenue and
Taxation Code).
Taking these observation into account, F -Aft M -C presents the recommended
taxing measures by business classification. General observations supporting the use
of grow receipts against the issues of equity, revenue generation and administration
follow thereafter.
M0*W Mc - RECOMMEMM TA7a1O MEASURE
A*rkftM" Head*mrWs
ConUuMm
Owu P
klmdeft"M
QV= ftoeipb
PICOMMM
eva ftc*b
PlAft MUM
QVMR P I$
%C IdOr1 and EIMftkWM"
QVW &a*%
PM of i1«t- - d Plops
QNMRic 4-
fto of Non4bakhw" PnVefty
00" F1 1 10
Owes ftceoft
Sarviae
NRwMMN
oram Rr-a4ft
Go— ftMC*ft
&& — In tem of eqtft, vm receipts is generally considered to be
the most equiuble tax basis available to local agencies. This ff w2me of
taxation provides the City with a broad tax base. As a result of creating
a broad tax base, the City can develop tax bills that are reasonable and
that reflect varying business volumes, i.e., smaller businemes will pay an
overall tax bill that is relatively less than that paid by larger businesses.
Furthermore, business license tax rates are only applied to that amount
of revenue which is generated from business activity within the City,
Key Caapmant of dw Revi ed Onfinanee
am
therefore avoiding "double taxation" for those businesses operating both .,
inside and outside the City. Finally, all businessa are treated on the
same basis„ regardless of whether they are labor intenh ve or not.
Gamnadm — From the standpoint of developing a tax that
reflects changes in the economy, grass receipts is clearly advantageous.
Not only does this measure of taxation offer a broad tax base, thereby
permitting revenue to be produced at relatively low tax rates, but it also
allows for reasonable growth without adjusting tax rates, inasmuch as it
is responsive to overall changes in the economy.
— Administratively, although gross receipts can be more —
complicated than a flat fee, taxpayer compliance need not be unneeessarl-
iy complex. Formused for reporting gross receipts and determining tax
payments due can s be developed to minimize compliance efforts. Ldce- —
wise, apportionment guidelines used for determining those receipts
attnibutable to business activity in the City can be developed to maximize
ease of administration and compliance. How detailed and complex
reporting forms and apportionment guidelines are is attributable more to
the policy of the organization than to the fad that gross receipts is the
primary method of taxation.
Because of administrative and enforcement considerations, the business categories
of administrative headquarters, solicitors/peddlers, and special events are
recommended to be taxed on an alternative basis. Definitions of recommended
taxing measures are presented in Appendix D.
The next consideration in developing a framework for the revised business license
tax ordinance is the development of taxing ratios between different business
classifications. Recognizing that gross receipts by itself does not adequately
indicate the profitability of a particular business, tax rates should be determined
on the basis of variations in profit margins among different classes of business.
The use of taxing ratios allows the City to tax different classifications of business
activity based upon the general profitability of the business activity or the general
nature of business activity. For example, if the tax rate for those in Group 1 was �-
S.10, it would be $.20 and S30 for those in Groups 2 and 3, respectively. Business
activity not specifically falling under one of the broad classifications of business
noted above would be taxed in Group 1, unless otherwise specified
Page 76
Key COMPORM& of ft RaWied Osl%nanu
Determining what is and is not an appropriate ratio b difficult at best. At the
outset, it is necessary to compute the ratio of net profit to gross receipts in order
to obtain the profit margin for different types of business activity. These figures
are seldom available locally, and they are not collected in California by either State
government or statewide associations like the Chamber of Commerce. As a result,
it is necessary to use national figures published by the U.S. Internal Revenue
Service from business income tax returns.
The figures from the Internal Revenue Service are actual receipts, and are widely
'~ used by economists and others for purposes of determining the profit margin of
various dosses of business. However, the figures do have limitations in that the
rM reports are nationwide in supe and may not completely reflect the nature of
business in the City of Lodi. Furthermore, timing of the reports is such that
publication is delayed for several years. Because of these limitations, it is
important that they be used only w a 8uk;a w in determining taxing ratios in order
to avoid applying them unfairly to any particular class of business.
t4
p, Profit margin figures are available from the Internal Revenue Service for
propr,'etorsbips and corporations. For purposes of establishing a ratio between
busing clamlications, profit figures for netorslri are used.
�'g� 8� Prof Ps tYPL�Y
While fair for those engaged in business as proprietors, this approach also tends
to work to the advantage of corporations because they are generally more
profitable than proprietorships.
Exiubit III -D presents the minimum and maximum profit margin figure- for each
broad classification reported for sole proprietorships. Appendix E presents the full
range of profit margin figures for sole proprietors by specific type of business
activity.
oalrolr moo- iwo wuaruM raofLr �uRONL
ftauaes By lUa1NHs CLASSIFICATM
FbW 319%
52.07%
Larwac4r.r a e3%
43.85%
NRio1M�N 9.0%
17.26%
iipweon 3 EMrrfainrt t 10 -In
553M
SKMOM 11.15%
TORO%
Gonevuedon 14.88%
2230%
Pubic UtWAIM 1e.721c
51.757L
Prohwbm 24.30%
67.89%
W Some. ftdatlea of moon» SOAP Pmw1sMmW AM om Dwrbrwrf of" TMMW. MM 11M)
Page 27
Afr C4MVOrAWU of Oe KW ed OrAw ce
In establishing taxing ratios„ it is theoretically possible to establish a separate taxing
ratio for each business classification. However, available data would make it
difficult to defend these ratios. and the City would run the risk of imposing a
higher tax rate on some businesses than might oftrwise be justified. By looking
at the general groupings of profitability, and using the minimum profit margin
figures it is passible to establish broad tau rate categories that are sound and
reasonabe.
Based on the groupings of profit margin data for proprietorships. the relatedness
of other business activities to these businesses, and the general practices of local
agencies elsewhere in the State, Exhibit III -E presents the ratios recommended
for setting tax rases in Lodi.
' E1Qliri�E-TAJOgOpA�q 1
AdminAtrt" iMtdpi -r
1
M�nuhodrwa
1
POW UlMdra
3.2% -GAM
1
FWW
1
VA -1 M
1
OaitaGols
2
FW c w don a En rfarr-,wd
2
P of p.rd.r 1 Properly
In.4x-14ax
s
R d MmAm im Propol ly .
s
R - F"
2
P"bow,
1 244%
1 3
Lw E=kx & radon br p,erc uAWd . and whoboatm sm mengaa d d e norl. '
In comparing the recommended ratios against the more detailed profit margin
figures, wholesaling and public utilities have been recommended to fall in category
1 even though category 2 appears reasonable. To minimize administrative issues,
wholesaling has been linked to the same taxing ratio as mamtfacturing and
retailing. With respect to utilities, legal stipulations require that this category not
be taxed at a rate higher than retail merchants.
The special business categories of solicitors/peddlers, and special events have not
been incorporated within the analysis of ratios in that they are recommended to
be taxed on methods other than gross receipts or cost of operations. Coin
operated machines would fall into group 1.
F
Kay Catrmm& of the Revba Ordkosee
-' OTHER CONSIDERATIONS
A specific business classification has not been identified for home occupations.
Under this it is reeommenJed that home ons be taxed at the rate
Pel• � ti � .
consistent with the type of business activity undertaken. For example, if an
aecoRmting service were established as a home occupation, the business would be
taxed as a professional
i
s
SUMIARY
These rates are applied consistent with the revenue raising authority of the
business license tax ordinance. Based on these recommendations., a specific tax
rate structure is presented in the next chapter.
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Rec mmmded Fim ewoo c for the Barb m Lkxwe Tas Oanm m
IV
RECO ED FRAMEWORK
FOR THE BUSINESS LICENSE
TAX ORDINANCE
1�t
A modified tax rate structure has been developed for the City's business license tax
ordinance based upon the recommendations previously presented regarding:
i=a
PW
w.�
■Busihm Gl=ftcation structure
■ Tadng meaum
■ Taxing mtioe.
The recommended tax rate structure and assumptions used to estimate the impact
of the revised structure fallow. An assessment of the framework for the revised
ordinance is presented at the end of this chapter.
The amount of revenue to be generated through the revised ordinance is a policy
decision to be made by the City Council. To assess the impacts of the proposed
taxing structure, three alternative scenarios have been developed for review and
consideration. These proposals include generating:
■ $1,100,000
■ $900,000
■ $700,000
These revenue target amounts were selected to provide a range of revenue options
for the City Council's consideration. Recognizing that the City currently generates
.-. only S9'6 of general fund revenue from the business license tax, Option #1 would
bring the percentage of general fund revenue up to the Statewide average of 5.8
percent, and Option #2 would bring business license tax as a percentage of
-• general fund revenue up to 5 percent. The last alternative brings the City's
business license tax revenue up to 4 percent of general fund revenues.
Page 31
Rerornnfended FAvnewok for the Budwa Lkmm Tat OrAnm a
Before tax rates can be established that will generate these identified revenue
amounts, it is necessary to determine the taxable base within the City. Taxable
base information includes both the number of businesses operating in the City by
business category and the resulting gross receipts generated. In evaluating taxable
base, the primary source of information that has been used is Bureau of the Census
data. Because the City currently taxes businesses based on average number of
employees„ gross receipts data was not available; the Census data presents average
gross receipts by type of business. For retail activities, trends from the state Board
of Equalization were used to estimate gross receipts. City records were utilized in
the analysis to estimate the number of businesses in each business category.
Taxable base figures are shown in Exhibit IV -A.
MOOM r" - ElirIMATM TAXABLE BASE
VIA
Ss VIM 1,625 5200,374
$340.Za2,903
$340.232
ROW 736 -
$471460,000 N
$060,125
No On A 77 itfq,301
it3A06 R00
=13,905
platsllw 330 5373.616
$123.963.775
$123,964
COMMON 726 $172.623 (d)
$123AMA00
$126A71
VYholassfa 216 $4,334,11-
$936,243,M
$936,243
hknu(a6haat 130 197,426._.4
$1,032.375,140
$1,032,676
(a) Sasor Ck/ tacnnda
(a) Sbuaoa: U& DaparWw* of Cat m*=, ea.w o/ do Csnsw, 1067.
(e) Sho Bard o/Eguaft0 , 102. FOM dbco~ S% to MNef #aim Lox nwnw 0WWW*d ftm non-
n/N *OMOMW 7M Lt.
(ep To - 0aet a ppotdm7m t kam ansodlwd wIM► ft oonOwdw Is4 Apwr na0 P 1 23% of awaoa
Von # P pw oonbecoar In Ms Swnwono mabopoetan stads" am.
Based on estimates of the number of businesses and total gross receipts generated "
in the City, coupled with earlier recommendations regarding the business
classification system, taxing measures and taxing ratios, three alternative tax rate
options have been developed to generate $1.1 million, $900,000 and $704,000
respectively. The tax rates generated from these alternatives are presented in
Exhibit IV -B. in addition to the resulting tax rates shown, it is recommended that
each business pay an additional charge of $15 to covcr administrative and related
costs. The detailed data used to develop these tax rate options are presented in
Appendix F. ,.
M
Recorn+ WR&d FmMework for the Busmtts Li M" Tar Obi wwe
E70UWF N -s — TAX RATE ALTERNATIVE=
Bunko" deaNIONNOA
Adm Fm
OPNM 4" OPSON 02 OPGOO 30
$1.1 MOM sI00A00 s700.000
Iienufochow
=ts
&W &a SM
Rr61ia UdNd"
=ts
SM $Zs SM
R.w
$15
SM to $.2c
YM►of..w
s1a
i.3o i.�s s.�o
Adn*L Hm dquMws 1Di
$ta
SM SM sso
f'" -1,
$15
SM SAO =A0
PA, ntlbn i int
$13
s.00 s.a0 MO
RN of AoddM1W Rov.nr
its
te0 M s.e0
Flue of Non4beldendd
P WWI r
$15
sd0 s.30 s.10
SWVk"
fits
&W t 0 ff.40
ProfNions
$15
t 90 s.75 s eo
00 R. - #A*Psr$I.000affA=$+O
IN RSI WPIVPW S1,M oftwcow ofr0 M'o
These rates are based on a review of three factors: (1) the current rate structure
for all business categories recommended to be merged into these special
classifications, (2) consideration of reasonable rate growth, and (3) administrative
considerations. Coin-operated machines would be taxed the same as Group 1
businesses.
To assess the impacts that the revised rate structure will have on individual
businesses, sample tax bills have been prepared for each of the major business
categories. Exhi-bit IV -C presents the sample tax bills prepared. For each major
business category, the following information has been identified:
• Vmymg bunnes volume shown in gnus receipts
• Resulting tar ball under the cunvw ordi wwe
• Resl kM tat bill; including option; under the proposed rate structure^
Page 33
r
Remo ounded Fromewook for dee Bu ums Lkerse Tar 07dFiearee
Showa in Exhibit IV -G there are significant opportunities to increase revenue for
the majority of businesses operating in the City of Lodi. The tax bids show that
the gross receipts tax structure is wt regressive, therefore it does not cause a --
greater tax burden on smaller businesses versus larger businesses. Instead, the
gross receipts tax structure promotes equity, ensuring that similar businesses are
treated similarly.
er7LHIMI NC BAWLS TAX DLLS Cir OF LOO1
t:OMiRACf0ete
.
i?04000i'dl
000
et07
eM
qs0
elle
ptD,m00/OR 100 1107 els 1100
hs
i17ep00/Oel m0 tit h>0 1100
- .. M6
it0.000feR as M7 w see
es7
slp,oeo/ee1 1e sft sa tam
sal
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slaloipro/oR
100o
NO
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$0.Ms
vpfs
iwpo00popR eco Ow tape v,0/e
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ap00000pe RD star vete "As
soca
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sell
IMAM-DAMMM IS ear OOm MN
sae
te001A00/fflll q an ON este
aBBp.110
W`BBBBNlplYel0lee
8471
M.tOppOD/OR
100
star
f1af0
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64MANIM so OR ere ale
NO
*30CA o/OR is tar IM NO
61st
UTAM/oR to so IN we
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MAIL
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it,7w
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u."Di 00/dl 1000 tee? it MO elm*
slim
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8136
OIJOCADOM 100 stay 8400 GM
am
i1p0pp00/M t0 iia ta/m NO
one
s704000/OR s to tae i/to
Mem
504000/OR t0 Be its $110
isle
MIMCO
67,100p0pM
1000
fen
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IONDUMALele
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5.100.t0e/oR low ett7 et,719 vin
Pow
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st,f0aAalA11 I e0 IM i10 8416
pee
p'00.00D/dl M se7 am also
$1M
(y Ab Ipw b w1a awEr d �!•r rwr � rdpYe� �/lrr,r�a
aaXWSVsdv* cs�ns
CHAPTER V
ADMINISTRATIVE
CONSIDERATIONS
=r
In addition to adopting a system for classifying businesses and establishing a basis
for taxing businesses within each classification, it is also necessary to make certain
r- policy decisions with respect to the revised business license tax ordinance. 1-nis,
chapter identifies these policy decisions, as well as other opportunities for
improving the overall administration the ordinance.
t �.q
e«, ADMIIVISTRR_AT ME AND POLICY OIMMONS CONCERNING TIME RMSED
s BUSINESS LICENSE TAX ORDINANCB
w
t�• This section outlines administrative and policy questions that must be addressed
in the new ordinance. Suggested recommendations in each highlighted area are
also presented.
w
Deft Business CksmWa&ns — Because the current ordinance did not
identify business classifications, the new business classifications must be
clearly defined. Appendix B includes definitions that can be used the
� revised ordinance.
AdWnistmtive Fees — To cover administrative and related costs, it is recom-
mended that the City adopt an administrative fee of $30. lois fee would be
charged to businesses that pay a business license tax, as well as those
business that are exempt from the tax, but required to display a business
license. A provision descn�ing administrative Pecs should be included in the
revised business license tax ordinance.
License Renewal — Guidelines should be established for renewing a business
license. The current ordinance does not describe renewal procedures.
Page 35
. Admbdavdve ConAdaad"
&formadton Cogf ide r�icl — While the ordinance idles a provision for the T
examination of records, there is no provision in the ordinance to ensure
confidentiality. Because the ordinance indicates that the City has the
authority to " ... examine any papers, records, and memoranda ... "
(Section 5.04340 there should also be a provision that. ensures that the
Collector or designee will not make known the business affairs, operations
or information obtained from the examination, except as it relates to the
business license tax paid. It is recommended that the provision be included
in the revised ordinance.
jhtiue Collector — There is no clear definition in the ordinance of the
designated "Collector" of the business license tax. In describing enforcement
powers, the Director of Finance n referenced (Section 5.04360), however no
specific section defines the Director of Finance as the Collector. it is
recommended that the "Collectoe be defined in the ordinance, including a
description of roles and responsibilities..,
Egforcement — In order to maximize both equity and revenue generation p»
capabilities from the business license tax, appropriate measures should be . .
taken by the City to ensure that all businesses operating in the City are
licensed, and that those business licensed are in compliance with all *"
provisions of the ordinance. Supporting this area of enforcement, provisions ..
should be developed that will support the identification of new businesses
operating in the City by existing businesses. Examples include:
■ Contractors reportbng any subcontractors working with them on
proje
• Supporting the above, contractors being identified for business license
tat purposes at the tone bui't permits are taken out
■ Retaffers, sen^ -es and others, identifying outside service providers that
they receive products and services from on a reoccurring basis
■ Motels and other lodging establishments identcfy special events and
related activities scheduled for their facilities.
Other enforcement provisions include the establishment of internal cross
controls to check the validity of reported gross receipts.
.� A&nbs� ConsUmad=
— The current business license tax ordinance
does not include apportionment guidelines. Pursuant to law, the City may
only impose its business license tax on business that is attributable to the
City. In many cases, businesses with a fixed location in the City will Sad
that all of their gross receipts are attributable to the City, and therefore will
pay a tax based on their total gross receipts. However, in the case of busi-
nesses
usinesses operating both inside and outside the City, apportionment can
become a consideration in calculating the amount of tax due.
To ensure that individual businesses apportion gross receipts in the same
man=s* as other businesses, it is recommended that the apportionment
guidelines be established and that the Finance Director, or designo:.: ssume
a
responsibility for the administration of the guidelines+
,v.
a.
Prise Inder — One objective of the new business license taxing
structure is to ensure that revemus generated from the tax reflect changing
economic conditions The use of gross receipts fulfills this objective in that
this taxing measure reflects changes associated with both volume and value
of goods sold. Flat fees and administrative fees, however, do not have any
inherent mechanism in place to reflect changing economic conditions.
Therefore, it is recommended that the administrative fee and flat fees all be
tied to the Consumer Price Index and be adjusted annually to reflect
changing economic conditions
6.4 This chapter has bighlighted key administrative and policy decisions that need to
*- be resolved prior to drafting the revised business license tax ordinance. These
issues are in addition to the basic policy decision of how much revenue the new
taxing structure should be designed to raise.
ra8e m
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Armament Of the PAV=d *dMMM
CE[APrER VI
ASSESSN[EW OF THE
PROPOSED ORDINANCE
1"nis, chapter provides a summary analysis of theproposcd business license tax..
structure from the perspective of equity, revenue elasticity/gewra&4L, 'Rhd
administration ease- Specific findings are summarized below and on the following
page by study objective.
The proposed business heme ta=g structure improves the overall equity of the
City's business license tax based on the following.
• With the -development of a business chusykadon system, sbnfiar types of
business activity are treated similarly.
a Bit vwm classifications and taxing ratios have been established to support
V-4
dffff='Wt= rates which recognize the general pr*abHnY of,*ffffW open
of business acntW and the practices found in selected xmV
• With the development of a concise system of classifying busineL-es, all
business activity within the City, unless specifically ewnpied, is ckarly
subject to the t=
By taxing the majority of businesses on the same basis of taxation, the overall
tax burden is distributed consistently and jusfifiably among all business
classes:
By utilidV gross receipts as the primary basis of taxation, equity is improved
in that business volume and size are reflected in the calculation of total t=
Fa) n dim
r""
AMWMVst of Me Proposed Oma
■ Braclats and caps w: the total tan payment have not been recommended to
ensure that taxpayers within the same clasaykation pay the sane tax rate per
$I,OW of grass receipts: ?his enures that the rrvbcd ordinance is not
Incotpmatmg these components in the revised business license tax ordinance will
ensure that sl nilaf businesses are treated similarly.
REVENUE ELASTIEMME2MMON
line revised ordinance ensures the ability of the tax to read changes in the .
exonomy and to generate revenue consistently in the following ways:
■ The proposed ordveance retia on the wee of gens rece4, %. -**has bracke%
for all major business cl;ssses as a measure of taxation As compared to
other measures of taxation such as avenV number of enployea or a
bracketed grass receipts structure; strai8ht grass receipts is mon responsive to
overaII charge in the economy By using grass receipts, revenue yield a not
solely dependent on the addition of new businesses to the City or bwrearses
in tax rates.
■ The resuking tax rates and relatea practices are competitive with the bunness
kcense practices found in the CO srkcxed comparison
■ Because of the broad tax base which results from the use of grass receipts as
a tax measure, revenue can be generated through the application of
reasonable tax rates:
7be optional tax rates provide the City with opportunities for increasing revenue
without negatively impacting the business community.
�l
7
Assapunt of the Proposed Ont umm
ns framework for the mvised business license tax ordinam maximizes
administrative ease and compliance, while balanca concerns of eqmty, asfollows: -
The pvpwM ordbunce 6whda a concise and Jogicalowem of do
&a&= activity, araft 11 business civqwieL
■ With the development of a business classification system and Mnift the
number ofdiffmnt t=W meantres utfil=4 audit and enforcement actlywas
of the ordbuvwe are simplifwd.
■ By ekmbuww the bracketed average number of employees tax rate struchar,
it h jvrd" fn rnm rude mrd mrRri AP tar nmment due m& the = s&ueam
is no longer regauive.
For than types of business activities where it IsSenerWy difficult to calculate
V= receipts specifically attributable to the City, alternative tar measures
have been recommended,
By mabadnbw an adrabdoative license fm equity of the tax is ensured to
the extent that all businesses operaft in the City are required to pay an
appropriate share of the City's administr�ativr costs related to the business
license tare
• It is further recommended that City staff develop and document apportion-
ment ffidddbum Cities in California are only able to apply the budness
license tax to :hat business activity that u directly attributable to the City.
For those businesses that operate both inside and outside the City, 8ukk&=
assist the business owner in calculating those grass receipts that are dmx*
attributable to the City of Lodi
The administrative parameters provide City staff with tools to enforce the
ordinance more effectively and efficiently.
Page 41
Awa air Of atPAVONd OFAURN
The areas of concerns addressed in the Overview Assessment in Chapter II have
been &mmgbly addressed in this report.. By incorporating the proposed taxing,
structure, and additional recommendations in the revised business license tax
ordinance, the CitywM achieve the objectives of equity, revenue generation and
administrative ease. These improvements wM be realized regardless of hoar much
revenue is ultimately generated from the business license tax
SPP'
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APPENDIX A - RATE SIRDCI'[JRE IN CURRENT ORDINANCE i
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Page
Page A -2r.
3M.020
or be ar an ylsce tate
the a of of dor
does a thatis
or In ( f 12.3
the con o: y
t. � �
to: 5.04.040 a p1m d
I. bushmm
or of of Every person commencins,
tYDa trasact-
in and arryin= on at a fixed place of
O n su ons t boo b dwu in the city any budnemcs otber
than those enumerated in Sections
oa 5.04.060 and 3.04.070 "1 nay an
is not be aaaval license tax baud upon the ava-
- a ale numba of employees employed in
or Val tions f sucb businm of Mwn dogs for the
thin` or of as first employee, three dodw each for the
,.. tnext nine employees, one dollar each'for
aniseor °" the am forty emnloym and fifty cents
each for each additional employee: (Prior
not code J 12-4)
or
*a io or S.KM Mm—No find pha of
to f bust.
. , . Poses to us
or n Every person commenciaf, trans d
5211 1983: or 1 2-1) ins and carrying on at other than it fixed
p1m of busiaem in the city any busi
3 umes other than thorn enumetate4 in
. isbu • in SeWoas 5.04.060 and 3.04.070 shall piy
the ' laza the n an annual license tax based upon the
• this is averep number of employes of thirty .
n; for o for dollars for the first employee, six doUsts
to m tach for the *act nine employem, two
on y in not doUars each for the next forty employees
exd fins and one dollar each for each addhlonal
a from Ci to approves. (Prior code 412-5)
Soo y
a aU us co ed 'a 5.04A60 ML,,-FW amoent.
on any nese Every person comrneaci!4� trspsac'w
a H in= and carryins on in the city any
from to do , or out bt si enumnaW in this 1eCtio3l shall
plurra th y all res o of pay a Ike= tax as follows:
61 a.•■ Haan. .
r-
19 ACO
Darlene hrm Ta
Amar.mrar IMM aaa rim•
Hat e.oe.rriom dkU-
dM%.VWweM ..... mooch s Uo
AMoSO M MU a.d shm.
art COMMON^ a"
preouk 140ft 10.00
Asaol.pM bs�aaips.
.rr.q.arwr 230.00
Aaaloeerr ............ gamwr 25Ao
s veer 24.00
Dowty sea "d or Oil -
0. .............. rest 70Ao
Doaiaa ud wnrAn .... dqr 20.00
Cm*fiab ............. day 1000
Ctree.m.ad side slaws . tip 100.00
Cres.. Now or arab
eaarl M per m.ekiae awrsa 25.00
tlas.es ............... tit✓ 3.00
CZ wend Ames, pa
,.a. .............. qo ewr 25AO
J=kd=hrO id.W ... qumwr i5A0
JwldoWa oerrridem) awns 70.00
Pawstrolw ........... queswr 13.00
Ptiddl= d.olidraes .. day 10.00
Jwtm.ere.d eelid�on� Ora~
soar �
pods or pod= .... quarter &00
Pbo4
Webra a .......... y.m 24.00
pooh.... 7o r UMra.mrw.00ario�ii..... der 5.00
(Prior code 112-6)
SACH 1bc—Grape Fadval.
For the purpose of this chapter, the
Lodi GMM f estival and National Wire
Shop, refeszed to In this section as "fe*
tivai," shall be considered to be a fixed
place of business within the city and shall
pay to the dire= of finance the sum of
twenty-five dogars per day during the
actual operation of the fbstival. This sum
sha0 not constitute a tax against the fes-
tival, but shall be paid on behalf of all
Concessionaim exclusive of carnivals
and allied We shows, of icislly listed
with the director of finarloe by the festival
prior to the first day of actual operation,
who transact their business wholly upon
cteai �+e
62
grounds operated by the festival. Each of
the ofl'iciafly listed concesoasires $113%
upon payment by the fadval of the sum
oftwetity-five dollars M day, be entitled
to web license as may in this chq ter be
required. Each such Heem shall be in
effect during the period otwtual operw
tion ofthe feaival f lrbusiam conducted
on festival gmunds and shall be disphyed
and be subject to an other pe ovisions of
this chap= (Prior code;12.7)
SA4= T"—Home omptions.
Every person commmeaclM trans-
acting and • reserving on in the city any
business in his home in a residential
sone, not as a nonconforming use, whose
annual g= reaipb fiom such business
is one thousand dollars or less shall be
exempt from the payment of i license
ww, but shall be required to obtain and
display a license dated by the director of
finance without charge. Where the
anneal gross receipts from such business
exceeds one thousand dollars, a license
tax as prescribed in Section 5.04.080
shall be imposed. Persons; who, by reason=. -
of age or infirmity. are physically unable .
to earn a livdihood through ordinary
mesils of labor or business -shall be
exempt from am tax on business con•
ducted from their own homes, as a home
occupation. but shall be required to
obtain a license to be issued without
charge. (Prior code 112-8)
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AppoWh
� q
DEFINITIONS OF RECOMW ENDED
BUSINESS CLASSIFICATIONS
Legal definitions and related terminology, will be drafted by City Attorney►.
a However, general definitions of each of the broad classifications referenced
previously are provided below.
`w Ad=nLtnsdmffmdm=—AMbumnmopemumwhaetbepnnapd
r,. business transacted consists of providing administrative or management -
41 related services such as, but not limited to, record keeping, data
processing, research, advertift public relations, personnel administm-
�. tion, legal and corporate headquarters services, to other locations where
the operations of the same business are conducted which lead more
directly to the production of gross receipts.
ice, ■CoRawsm — Any person who is licensed as a contractor by the State of
California and who undertakes to or offers to undertake to or purports
•- to have the capacity to undertake to or submits a bid to, or does himself
;-, or by or through others, construct, alter, repair, add to, subtract from,
improve, move, wreck or demolish any bu>7ding, highway, road, railroad,
excavation or other structure, project, development or improvement, or
to do any part thereof; including the erection of scaffolding or other
structures or works in connection therewith, is defined as a contractor.
The term contractor includes subcontractor and specialty contractor.
■ Mamnfacturm — Any person conducting, managing or carrying on a
business consisting mainly of manufacturing, packing, or processing any
goods, wares, merchandise or produce.
■ fess feu—Any person, group, association, partnership, firm or corpora-
tion engaged in a profession or vocation licensed by the State, related to
a licensed profession or vocation, and/or requiring a period of specialized
training such as, but not limited to, physicians, dentists, attorneys, and
` accountants.
■ Ptcbtie Utics — Any person engaged in the business of providing utility
_ services to the general public or to private businesses including such
services as electrical, gas, sanitary and garbage, cable television and
telephone.
■ Recreation and EnterWamemt — Any person engaged in the business of
providing directly recreation, entertainment, or amusement services.
• Read of Resid ndd EmaM — Any person engaged in the business of
renting or letting a budding or structure to a tenant for purposes of
dwelling, duping or lodging (Le, apazinteM dupes, condominium or
other residential property rental excluding hotels/motels or single family
w
dwelling).
• Read of Non -Residential Prnveri — Any person engaged in the business
4.
of renting or letting a building or structure to a tenant for purposes of
conducting business (Le, commercial retail space,, office• buiildsngs,
–.
warehouses or other non-residential property use). (Note: As is the case
in other California jurisdictions, those included under this classification
are typically owners of the building, or those who are in the business of
leasing space for the express purpose of sub -letting. Space occupied by
;
the owner is typically exempt.
• RAW — Any person conducting, managing or ung on the business
r ,�
consisting mainly of selling at retail any goods.
• Smkes —Any business providing services, repairs or improvements to or
.�
on real and personal property; renting or leasing personal property to
businesses or persons; involving the operation of a hotel or motel;
providing services to persons such as, but not limited to, laundries,
+�
cleaning and dyeing, shoe repair, barber and beauty shops, photographic
studios, and transportation.
`7
`..
■ —Any person conducting, managing or carrying on the business
consisting mainly of selling at wholesale any goods.
�.
■ Misce faneous — Any person engaged in a business not specifically taxed
,w
.by other provisions of this ordinance and not otherwise exempt.
w.
Page
APPENDIX D — DEFINITION OF TAXING MEASURES
Page D-1
AWaidk
Page D-2
Appends
DEFINITION — GROSS RECEIPTS
Gross receipts is the total amount actually received or receivable from sales and/or
the performance of any act or service for which a charge is made or credit allowed.
Included in gross receipts are all:
• Receipts (cash received)
Credits (sales on time)
• Property (taken in keu of cash payment).
�.. E=luded from gross receipts are:
■ Cash and jobber discounts (which reduce selling price and ultimate receipt
r s from sale).
■ Any tax (such as a sales tar, use tai gas tar, transient occupancy tai teal
r- properly transfer tax) which is meanaed by the sales price and is included in
the purchase price and collected from the consumer or purchaser.
■
Any refund that is granted, either in cash or aediti to a purchaser who
returns property upon the rescission of a contract of sale
■ Amounts received by persons acting as agents, brokers or tnutees, where such
.-- amounts have been collected for and are paid to another party (e&,
amounts collected by salesmen and transmitted to manufacturer or
dioibutor, taut f ads received and transmitted by trustee; fees separately
-- itemized on statements and forwarded to a subcontractor or fee consultant
as payment for services rendered, provided that a list of subcontractors or
consultants and amounts paid is reported to the dry; receipts collected for
and subsequently paid to a lessor, provided that the name of the lessor an
d the amount paid is reported to the city).
• Amounts received as refundable deposits, except those amounts that are
forfeited and subsequently taken as business income
• Any aedit that is granted for property provided by the consumer or purchaser
as part of the purchase price (trade-in merchandise), provided that the value
of property taken is reported in gross receipts when sold to someone else
■ Bad debts, when credits are reported in total in the fust year and prove
uncollectible in a subsequent year.
Page
APPM&C
• Passim bwome (e.,&, WOW on kveM nam &MmA oaaasimd wk of '
PropoV or surplus apapmen& M)-
tas•
•Rec*u not taxable by virtue of providwa i wk ded in du Fedmd or State r
CbnstUudom
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w
DEFINITION — COW OF OPERATIONS
Cost of operations is the total amount expended for operating within the City
includinz but not limited to, salaries and benefits, apenL&S leases/rentals for
equipment and facilities, utilities, services and supplies, maintenance, and general
operhead expenditures. This shall not include nom -cash cq)cnditum for
dcpvdatkm and amortization.
FW55
Page E-1
APPENDIX E
SOLE PROPRIETORSHIP-13USPOMES WITH NET INCOUE. 1990
(DOLLAR AMOUNTS ARE IN 1.000 OF DOLLARS)
r
..
R.K• >
CONSTRUCTION
1.390.577
90.993.182
17.823.993
General Building
271.133
27.637.811
4.057.078
Heavy Construction
20.085
5,012,535
441.524
PM
Special Trades
1,290.379
54742,818
13,324./33
MANUFACTURING
263.164
18.583.711
3,148.747
o
Food 6, Kindred Products
5.972
268,304
7%=
Textile Mill Products
837
111,861
48.892
r '
Apparel 8 Other Textiles
20.510
1.649.220
1 W.11" a
Lumber & Wood Products
56.077
4.005.644
704,744
T
Fumiture A Fbdures
17.231
777.107
118,081
i i
Printing 3 Related
40.885
3.173.460
604.496
Leather
4.897
290.176
26,270
Stone. Gey 6, Glass
11.964
661.318
43.882
+�
Primary Metal Industries
1.266
174.479
41.925
Fabricated Metal Products
12,646
2,668.749
291.735
Machinery
42.025
2.716.291
622.618
Electrical
8.511
324.810,
97,575
Paper & Allied Product
••
••
••
t ti
Other Manufacturing
35.843
1.669.892
396.090
PUBLIC UTILI7Y SERVICES
467.308
24.768.836
5.065.600
Local Transit
81.790
1.457,541
498.955
i
Trucidng 3 Warehousing
307.526
19.290.278
3.627,178
Water Transportation
51602
297.301
153.550
P4
Alf Transportation
8,876
174,506
79.936
Transportation Services
46.064
2.235.396
373.702
Communication Services
28.001
1.129.120
267.7:30
Usides
10.649
164.666
84.499
r.�
WHOLESALE
1.S72.379
200.555.041
19.756.079
Wholesale Trade
284.809
42.566.734
5,854.371
Durable Goods
167.110
20.545,216
3,550.838
l4
Non -Durable Goods
117.699
22,021,518
2.303,533
RETAIL
1,257.570
158,019.307
13.902.606
;_.
Building Materials
34.833
4,910.389
453,578
Lumber & Other
3.167
944.990
73.839
Paint/Glass/Wallpaper
8,871
655.973
68.156
Hardware Stores
4,763
1,366.384
118.118
r -
Nurseries a Garden Supply
12.731
1.005.976
121.519
Mobile Home Dealers
5.301
847.054
72.148
w.
General Merchandise Stores
34,129
3,491,362
439,659
Variety Stores
12.869
1,713,942
159,822
Computer & Software Stores
8,883
446,922
99.270
Other General Merchandise
12.577
1.630.498
180.567
Food Stores
113.811
30.154,147
1,580,858
�.+
Grocery Stores
80.139
24,6,993
1,230,021
Retail Bakeries
16,078
1.035.914
52,454
Misc. Food Stores
17,600
4.478.240
295,383
Auto Dealers 8 Service
111,134
36.3W,262
1,663,355
Motor Vehicle Dealers -New
8,117
.,316,409
41,986
`� E-3
19.72%
14.68%
14AM
22.30%
18.93%
29.30%
436,5%
11.82%
17.21%
15.20%
1805%
905%
6,63%
24.03%
1890%
22.90%
11.57%
..
20.13%
20.39%
34.25%
18.60%
51.75%
45.81%
16,72%
23.71%
45.72%
9.85%
13.75%
17.28%
10.48%
6,60%
9.24%
7.79%
10.39%
8.64%
11.09%
8.52%
5.24%
4.99%
5.00%
6.66%
4.57%
3.19%
APPENDIX E
SOLE PROPRIETORSHIP - BUSINESSES WITH NET INCOME. 1990
(DOLLAR AMOUNTS ARE IN 1.000 OF DOLLARS)
414.004
Sim
I
MoWrVddd*DOWM-Wed
45.294
7.44%W4
Auto Parts S Accessodw
10.917
4.190.142
(les SWIM Stations
23.156
20.176.673
13CM Dadm
1.418
822A43
Misc. Auto Dealers
10.290
2e25.o61
Apparel A Accessory Stops
59,034
4AM924
Msn'1{/BOy'8Ckr"v Stows
4.781
700.515
Woman's Ready -To -Weer
0.9He
1.142.113
Woman's Accosmay Stores
10.105
188,760
Family Clothing Stores
14.468
982.112
Sloe Stores
0.040
NZ358
Misc. Apparel Stores
SAM
804.050
Fumltore/Home Furnishings
78.WT
9.542.885
Fumiww Stores
21.850
3,967.224
Horne Equipment
29.577
2,299.124
Roue.told AppNonCe Stores
10.476
1.785.399
W/Audlo/Electionle StDres
12.102
1.234295
MUSICIRecord Slo as
2.794
250.843
Eating i Ddnidng Places
113.170
17,187.009
Eating Places
72.353
12.225.345
Drinking Places
27.841
4.700.300
Catering Places
12.982
295.284
Misc. Roue Stores
750,850
51.336.329
Drug Stores
7.166
4.937.000
Liquor Stores
17.909
0.452.960
Used Momhan0se/Antiques
29,274
971.020
Spotting GoodwSicycles
12,046
979.046
Book Stores
5.079
837.571
Stationary Stores
5,994
1,145.073
Jewelry Stores
30.296
3.170.150
Hobby/Toy/O me Shops
21.307
1.327.423
Camara 3 Photo Supply
1.395
19.174
Luggage i Leather Goods
••
••
FabriclNeedlework Storrs
8.134
176,307
Cstelog or Mail Ordet
20.301
1,334.005
Vending Machine Sates
12.007
444.239
Door-to-Door/Telephone
380.278
10.308.100
G104Novaity/Souvenir Shops
42,675
2.214,850
Fuel Oil Dealers
1.840
973.117
Florists
191953
2.155,333
Mbc. Retail Shops
125.504
14,029,23v
3ERVICES
39.08%
FINANCEANSURANCE/REAL
55AM
ESTATE
954.483
42,508,973
Finance
44.321
3.503.510
Credit Agencies/Mortgage Bnks
9,952
311.488
Security/Commodity Brokers
34.389
3.192.022
Secudty8rokers/De m
11.6{7
821,254
Investment Advisors/Services
10.012
732.720
414.004
Sim
SM487
778%
649.525
3.22%
27.817
4.47%
200.954
7.77%
570,424
12.60%
02.957
Me%
94.060
6.24%
97.248
52.07%
200.137
20.62%
45.200
70,553
52516
.�
1,210,989
1260%
418.981
10.56%
4116.994
18.14%
158.047
&am
..
185.785
13.27%
53,202
20.71%
1.567.384
9.13%
1.081.134
6.04%
401.504
8.53%
84.800
95 091E
8.410.301
12.507E
571,299
11.57%
270,813
4.20%
115,583
II.W%
�
120,315
1229%
r,
45.509
7.1496
151.958
13.27%
�,..
495.413
15.83%
156.564
11.79%
5.449
28.13%
18.906
9.82%
141.402
10.50%
63.830
14.37%
2.147,366
20.71%
4!
273,233
12.34%
*q
57,021
5.941A
168.098
7.64%
1.613A30
11.50%
T .
19.210.128
44.81%
1.300,124
39.08%
173.239
55AM
1,21085
38.12%
201,141
24.49%
366.509
50.027E
its.
F_-4
APPENDIXE
SOLE PROPRIETORSHIP - 13USINESSES W17H NET INCOME. 1900
(DOLLAR AMOUNTS ARE IN 1.000 OF DOLLARS)
Covanrodily13ea*T hwQas
12,710
1.698.036
649.295
30.03%
nsurance Agent Omkom
301.150 !
15,029,411
7.260.201
45.63%
teal Estate
OM012
23.434,045
10.560.706
45.0.211
Red Esuft Property Mgm
33403
1.490.127
462.607
33.5671
OperatodLasaors of Buildings
4,746
402.0//
1611.671
34ASN
Mies.OperatogLeaors
x063
091.941
77.060
11.15%
RMI Estats Agwan8robrs
474,003
15:617.196
7.763.410
49.08%
TitN Abstract Compania
N
N
N
f.
Subbdividna & Devdopma
7.061
1,231.703
366.254
29.74%
Mist. Insmance Services
12.296
942.624
172.660
60.4271
Misr. Finance & Red Estete
67.751
3.410.766
1.516.715
44A1%
IEAVICES
2.624.673
07.472.637
27.263.910
27.074A
lotdsJOlhw Lodging
21,92.9
1.960.762
247.060
12AM
Hoteis/Mot"Tourld Court
10.703
1.466,410
170.905
11.60%
RoontinQlBoarding Houses
11,217
474.372
70.065
10.09%
Cwnpo)Cmping Partys
ff
N
N
N
personal Services
665.446
21.577.456
0.895.321
91.0676
Coin-operated I sundry/Cleaning
13,572
1.115.295
150.941
13A0%
Other Laundry/Cleaning
56.500
3,666.329
1.053.731
26.5796
Portrait Studios
30.105
1.396,299
933.543
24.02%
Beauty Shope
246.909
5.662.661
1.764.651
30.00%
Barber Shops
53.664
1.152.196
599.929
52.0716
Funeral Services
9,566
874,414
120.913
13AM
Misc. Pasonal Services
442.699
7.S28,052
2.612.213
37.37%
7ushm" Services
1.501.501
46,474.993
15.940.931
92.66%
Advertising (except direct mail)
56,057
31906.517
694.575
22.1091
Consumer Credit Reporting
5,261
104.623
43.943
42.00%
Janitorial Services
322.003
4.184,941
1.752,690
41.69%
Compulm/Data Processing Service
110,877
2.966,209
1.670.307
56.62%
MWW lReprglArVPhoW1SIwno
79.520
2,499.151
916.212
39.54%
Computer Repeir/MaintXeasing
7,826
225.670
158.113
70.00%
Equipment Repdr/Maintenence
14.763
1.464.730
909.750
20.74%
Otlw Business Services
909277
35,120.950
10.119.6M
30.55%
lutomotive Repair 5.E Servtoes
254,032
17,734.736
2.560.234
14.44%
Auto Rental/Leeming
3.652
29.295
12.133
43.90!1
Auto Parldng
••
N
..
..
Auto Repair Shope
195.570
14.206.366
2.071.151
14.50%
Auto Services (wu*pt repair)
54,610
3,497,115
476.250
13.02%
Wiscelleneous Repair Services
161,664
7.724.670
1.660.364
21.7!9%
W & Audio Equipment
19.712
411.122
147,663
35.92%
Other Eleetronlc Repair
41,521
2.577.106
462.322
17.94%
Reupholstery/Fumiture Repair
33,769
1,016263
219.069
21.62%
Other Misc. Repair
66.642
3.720.379
850.890
22.67%
RECREATION i ENTERTAINMEN'
406,260
11 ,?712W
3.970,968
35.29%
Motion Pictures
54,334
1,904.885
515,297
25.63%
Motion PictuWrdeo Production
24AM
397.150
219,960
55.36%
Motion Picturs%Tape Distribution
11.994
499.13a
180,057
36.06%
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APPENDIX F TAX RATE OPTIONS
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CITY OF LODI
FRAMEWORK FOR A REVISED BUSINESS LICENSE TAX ORDINANCE
OPTION #1 ($1.100,000)
Manufacturer
139
GR
$1,032.575
$16
WOS
$0.30
$309.773
$31111,658
Retall
758
GR
$471,960
$15
$11,370
$0.30
$141,588
$152.950
Wholesale
216
GR
$938.243
$15
$3,240
$0.30
$280,873
$284.113
Services
1625
GR
$340.232
$15
$24,375
$0.80
$204.139
$228,514
Contractors
728
GR
$125,671
$15
$10.920
$0.60
$75.403
588.323
Recreation & EnterlaInment
77
GR
$13.905
$16
$1,156
$0.80
$8,343
$9,498
Professions
330
GR
$123.964
$is
$4,950
$0.90
$111.559
$116.609
CITY OF LODI
FRAMEWORK FOR A REVISED BUSINESS LICENSE TAX ORDINANCE
OPTION #2 ($900,000)
61
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Manufacturer
139
GR
$1,032,575
$15
$2,085
$0.25
$258,144
$260,229
Retail
758
GR
$471,960
$15
$11,370
$0.25
$117,990
$129,360
Wholesale
216
GR
$936,243
$15
$3,240
$0.25
$234,061
$237.301
Services
1625
GR
$340,232
$15
$24,376
$0.50
$170,116
$194,491
Contractors
728
GR
$125,671
$15
$10,920
$0.50
$82.836
$73,756
Recreation & Entertainment
77
GR
$13,905
$15
$1.155
$0.50
$6.953
$8,106
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Professions
330
GR
$123,954
$16
$4,950
$0.75
$92,966
$97.916
61
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APPENDIX G — SAMPLE TAR BILLS
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