CC SR 20190319 02 - Business License TaxRANCHO PALOS VERDES CITY COUNCIL
AGENDA REPORT
MEETING DATE: 03/19/2019
AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action to receive information related to the collection of
Business License Tax from businesses not located within the City of Rancho Palos
Verdes.
RECOMMENDED COUNCIL ACTION:
1.Receive and file this report related to Business License Tax collected from
businesses not located within the City of Rancho Palos Verdes.
2.Continue the current practice of collecting business license taxes from
businesses not located within the City of Rancho Palos Verdes.
FISCAL IMPACT: If the recommended action is approved, there will be no change to
the adopted budget.
Amount Budgeted: $904,100
Additional Appropriation: N/A
Account Number(s): 101-300-0000-3210
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Deborah Cullen, Director of Finance
APPROVED BY: Doug Willmore, City Manager
ATTACHED SUPPORTING DOCUMENTS: N/A
BACKGROUND AND DISCUSSION:
In January 2018, Council Member Cruikshank requested that Staff prepare a report
regarding the requirement for outside businesses paying the City’s Business License
Tax (BLT). He was primarily concerned with the Municipal Code that requires a BLT
paid by businesses that are not physically located within the City of Rancho Palos
Verdes but provide services from their location outside the City.
As required by the City’s Municipal Code, Section 5.04.050, all business activity
performed within the City of Rancho Palos Verdes requires the business owner to
obtain a business license and to pay the related business license tax.
In general, the City has a passive approach to collecting the BLT. If the business is not
physically located within the City, the BLT would be identified and collected only when a
business activity requires an interaction with the City. For example, businesses that
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come to either the Public Works or Community Development counter to request a
permit or inspection, etc. At that time, they would be asked if they have a valid business
license and if they do not they would be required to pay for a business license at that
time.
BLT revenue has remained relatively stable over the past several fiscal years, after
seeing a slight increase of $90,000 in FY15-16 to FY16-17. BLT revenue for FY18-19 is
estimated to reach just over $904,000. FY19-20 revenue is projected to be
approximately $935,000. BLT revenue has consistently accounted for roughly 2.9% of
total General Fund tax revenue over the past 5 fiscal years. Revenue from BLT has also
consistently grown faster than the combined total citywide revenue over the last 5 fiscal
years. This tax is collected on an annual basis every January; however the revenue
reporting is based on the fiscal year calendar.
FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18
FY 2018-19
YEAR-END
ESTIMATE
FY 2019-20
BUDGET
ESTIMATE
Business License Tax Revenue 764,494 808,668 811,417 904,107 887,276 904,100 935,881
Total Operating Revenue 27,829,790 28,084,854 28,903,281 29,259,662 30,452,603 30,735,985 31,339,801
BL % of Total Operating Revenue 2.7% 2.9% 2.8% 3.1% 2.9% 2.9% 3.0%
Year Over Year Growth 5.8% 0.3% 11.4% -1.9% 1.9% 3.5%
BLT Growth Over Past 5 Years 16.1% 11.8% 15.3%
Total Revenue Growth Over Past 5 Years 9.4% 9.4% 8.4%
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For the calendar year 2018 the City issued a total of 1,629 business licenses of which
246 or 15% were issued to outside businesses. Of the 246 outside businesses 152, or
62%, paid more than $200 and only 37, or 15%, paid more than $350. The remaining
businesses paid the base rate of $152.00 and did not report gross receipts.
During the calendar year 2018, $1,469,716 in BLT was collected from the 1,629
businesses. Eliminating the collection of BLT from outside businesses would reduce this
revenue source by approximately $111,000 or a 7.5% overall reduction in BLT revenue.
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CONCLUSION:
Staff recommends that the City continues with the current practice as stated in the City’s
Municipal Code, Section 5.04.050, whereby all business activity performed within the
City of Rancho Palos Verdes requires the business owner to obtain a business license
and to pay the related business license tax.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action is available for
the City Council’s consideration:
1. Take other action as deemed appropriate by the City Council.
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