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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: FINANCE DIRECTOR
DATE: NOVEMBER 5, 2002
SUBJECT: BUSINESS LICENSE ORDINANCE REVISION – SIMPLIFICATION OF TAX CALCULATION
Staff Coordinator: Kathryn Downs, Accounting Manager
1) Introduce Ordinance No. , an Ordinance of the City of Rancho Palos Verdes regarding the classifications and calculation of business license tax, amending the Rancho Palos Verdes Municipal Code, for the first reading; and
2) Direct staff to prepare the necessary resolution to adopt a cost based business license application-processing fee to be presented during a Public Hearing at the November 19, 2002 meeting of the City Council; and
3) Direct staff regarding the inclusion of the cost of staff time within the proposed application-processing fee.
BACKGROUND AND ANALYSIS:
The City of Rancho Palos Verdes Municipal Code requires all businesses operating in the City to obtain a business license by completing an application and paying a business license tax. The business license tax was enacted solely to raise General fund revenue, rather than regulate business within the City.
Currently, section 5.04 of the Rancho Palos Verdes Municipal Code (hereafter referred to as the Business License "Ordinance") defines nineteen (19) inidual classifications of business for the purpose of obtaining a business license. Depending on the nature and business classification, businesses remit an annual business license tax based on annual gross receipts, number of vehicles, number of rental units, itinerant carts and wagons, a flat tax, or a combination thereof.
As a result of the numerous business license classifications, City staff maintains multiple business license applications defined by the Ordinance. Updating the applications and mailing the proper application to each prior applicant based upon their respective classification is a monumental task performed by staff each year. As a result of the number of classifications and methods for computing the tax, the applicants’ calculation is often incorrect.
Staff believes the proposed simplification of the Ordinance will reduce the number of applications with incorrect calculations, as well as the staff time required to complete the processing of the applications. The simplification of the Ordinance is essential to enabling the filing of applications and accepting payment via the City’s Web site in the future.
Following is a summary of the number of business license applicants, business classifications, and business license tax received for 2002.
Staff proposes a reduction to four classifications as follows:
Based upon past experience, the flat fee tax currently paid by General Contractors and Subcontractors ($269 and $134, respectively) exceeds what would be payable if based upon gross receipts. The retention of the flat fee tax method for General Contractor and Subcontractor classifications, rather than the gross receipts method, enables the simplification to be conducted without a significant loss of business license tax revenue. An analysis of the impact of the proposed business license tax simplification follows, in the schedules below:
In the event the City Council elects to adopt the proposed business license tax simplification, staff will prepare the necessary resolution to be presented during the November 19, 2002 meeting of the City Council. Upon the majority affirmative vote to enact the proposed revision to the Municipal Code to simplify the business license tax calculation, the revision would be effective thirty (30) days after the adoption of said resolution.
Business License Application-Processing Fee
To mitigate the business license tax revenue loss resulting from the proposed simplification, staff recommends the adoption of a business license application-processing fee. The proposed processing fee of $10 is based upon the cost of computer hardware, software, maintenance and annual support fees. An estimate of the proposed processing fee revenue follows:
The proposed fee does not include staff time to process the application and issue a business license. The cost of fully burdened staff time to process each application has been calculated as $12. Staff seeks Council direction regarding the inclusion of staff time in the processing fee.
In the event the City Council elects to adopt the cost based application-processing fee, staff will prepare the necessary resolution to be presented during a duly noticed Public Hearing at the November 19, 2002 meeting of the City Council. Upon the majority affirmative vote to enact the application-processing fee during the Public Hearing, the assessment of the processing fee would be immediately effective.
Staff’s recommendation for the Business License Ordinance simplification is revenue neutral; therefore, no fiscal impact is anticipated. The tax rates of the four proposed business license classifications remain the same.
ORDINANCE NO. ___
AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES AMENDING THE CITY’S BUSINESS LICENSE ORDINANCE AND AMENDING THE RANCHO PALOS VERDES MUNICIPAL CODE
THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES ORDAIN AS FOLLOWS :
Section 1. Section 5.04.100 B of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to read as follows :
Section 2. Section 5.04.110 A of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended by amending paragraphs 5 and 7 thereof to read as follows :
Section 3. Section 5.04.130 B of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to read as follows :
Section 4. Section 5.04.140 of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to read as follows :
5.04.140 Information confidential.
It is unlawful for the collector or any person having an administrative duty under the provisions of this chapter to make known in any manner whatever the business affairs, operations, or information obtained by an investigation of records and equipment of any person required to obtain a license, or pay a license tax, or any other person visited or examined in the discharge of official duty, or the amount or source or income, profits, losses, expenditures, or any particular thereof, or other criteria for measurement of the tax set forth in any statement or application, or to permit any statement or application, or copy of either, or any book containing any abstract or particulars thereof to be seen or examined by any person; provided, that nothing in this section shall be construed to prevent:
Section 5. Section 5.04.200 of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended by deleting paragraphs C and D therefrom.
Section 6. Section 5.04.220 B of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to read as follows :
B. No license shall be issued, nor shall one which has been suspended or revoked be reinstated or reissued, to any person, who at the time of applying therefor is indebted to the city for any delinquent license taxes, unless such person, with the consent of the collector, enters into a written agreement with the city, through the collector, to pay such delinquent taxes, plus seven percent simple annual interest upon the unpaid balance, in monthly installments, or oftener, extending over a period of not to exceed one year.
Section 7. Section 5.04.240 of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to reflect the amount of the tax that was first established, which has been increased annually commencing on January 1, 1979, pursuant to the provisions of Chapter 5.04 (formerly Section 5.04.440) so that this Section also will set forth the current amount of the tax, which was in effect as of January 1, 2002, (thus, this amendment does not increase the tax that is to be paid by businesses in the City above the level that currently is in effect), to read as follows :
Except as expressly otherwise provided in this section or elsewhere in this chapter, every person who engages in business at a fixed place of business within the city shall pay a license tax measured by the gross receipts of such business within the city for the immediately preceding calendar year.
In 1974, when this Chapter was adopted, the minimum tax was $20.00 for the first $50,000.00 of gross receipts or fractional part thereof, and in addition thereto $0.30 for each $1,000.00 or fractional part thereof of gross receipts in excess of $50,000.00. Due to the annual increases of this tax rate that have occurred pursuant to the provisions of this Chapter, which commenced in January 1, 1979, the current rate of the tax, as of January 1, 2002, is $53.00 for the first $50,000.00 of gross receipts or fractional part thereof, and in addition thereto $0.81 for each $1,000.00 or fractional part thereof of gross receipts in excess of $50,000.00.
Section 8. Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended by deleting Sections 5.04.250, 5.04.260, 5.04.270, 5.04.280, and 5.04.290 therefrom.
Section 9. Section 5.04.340 of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended by changing the title of that section from "Classification G-- Residential builders, developers—Annual" to "Residential builders, developers—Annual."
Section 10. Section 5.04.350 of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended by changing the title of that section from "Classification H— Commercial, industrial builders, developers—Annual" to "Commercial, industrial builders, developers—Annual"
Section 11. Section 5.04.370 B of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to read as follows :
B. A builder or developer within the meaning of Sections 5.04.330, 5.04.340 and 5.04.350 shall not be required to pay the license tax imposed upon contractors under the provisions of Sections 5.04.300 with respect to any residential, commercial or industrial construction as to which such licensee is a builder or developer.
Section 12. Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended by deleting Sections 5.04.380, 5.04.390, 5.04.400, 5.04.410 and 5.04.420 therefrom.
Section 13. Section 5.04.490 of Chapter 5.04 of Title 5 of the Rancho Palos Verdes Municipal Code is hereby amended to read as follows :
Any person violating any of the provisions of this chapter or knowingly or intentionally misrepresenting to any officer or employee of this city any material fact in procuring the license provided for in this chapter shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punishable by a fine of not more than one thousand dollars or by imprisonment in the city jail for a period of not more than six months, or by both such fine and imprisonment.
PASSED, APPROVED AND ADOPTED THIS ____ DAY OF ________, 2002.
STATE OF CALIFORNIA )
I, JO PURCELL, City Clerk of the City of Rancho Palos Verdes, do hereby certify that the whole number of members of the City Council of said City is five; the foregoing Ordinance No. ____ was duly and regularly adopted by the City Council of said City at a regular meeting thereof held on ______________, and that the same was passed and adopted by the following roll call vote: