CC SR 20190604 03 - Annual Business License TaxRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 06/04/2019
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action regarding the collection of the annual business
license tax from home occupancy businesses, addition of Section 5.04.015 and
modification to the language in Sections 5.04.050, 5.04.070, 5.04.090 and 5.04.440 of
the Municipal Code.
RECOMMENDED COUNCIL ACTION:
1. Set the business license tax rate for home occupancy businesses at $0 for FY
2019-20 and direct Staff to bring this item back to the City Council annually for
direction.
2. Introduce Ordinance No.____, AN ORDINANCE OF THE CITY COUNCIL OF
THE CITY OF RANCHO PALOS VERDES ADDING SECTION 5.04.015
(INTENT), AND AMENDING SECTIONS 5.04.050 (LICENSE AND TAX
PAYMENT REQUIRED), 5.04.070 (EVIDENCE OF DOING BUSINESS),
5.04.090 (EXEMPTIONS), AND 5.04.440 (ANNUAL CHANGE OF BUSINESS
LICENSE TAX) OF CHAPTER 5.04 (BUSINESS LICENSES) OF TITLE 5
(BUSINESS TAXES, LICENSES AND REGULATIONS) RELATING TO
BUSINESS LICENSE TAXES.
FISCAL IMPACT: Reduction in the 2020 calendar year business license tax revenue
in the amount of $53,000
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:
A. Chapter 5.04, Sections 5.04.050 and 5.04.440 (attachment forthcoming)
BACKGROUND AND DISCUSSION:
At the March 19, 2019 City Council meeting, Staff presented an analysis of the business
license tax (BLT) revenue and business licenses issued. The City Council members
requested further review of BLT revenue for home occupancy businesses as well as a
1
review and possible clarification of the language in the Municipal Code Section 5.04.420
relating to businesses located outside of the City.
In general, the City has a passive approach to collecting BLT. For home occupancy
businesses and businesses located outside City limits, the City relies on the owner to
self-report and obtain an annual business license. If the business does have an
interaction with the City, Staff will confirm if there is a valid business license. For
example, business owners who come to either the Public Works or Community
Development counters to request a permit or inspection, etc., 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.
Finance staff completed a detailed analysis of BLT revenue and licenses issued during
calendar year 2018. During this time, $863,642 in BLT revenue was collected as
follows:
Business Type # of Business Licenses Revenue
Home Occupancy 370 53,403.42$
Businesses Located Outside of City 283 70,017.74$
All Other Businesses 1,016 740,221.24$
Total 1,669 863,642.40$
2018 Business License Data
2
As noted in the data and pie chart above, there are 370 business licenses issued to
home occupancy businesses which make up $53,403 or 6% of total BLT revenue, while
$810,239 or 94% of the revenue comes from all other businesses.
At the May 21, 2019 City Council meeting, Staff was directed to bring back a staff report
reducing the FY 2019-20 annual BLT for home occupancy businesses (due January
2020) to zero ($0). This will be brought back annually to the City Council.
Additionally, Staff has worked with the City Attorney to add language that clarifies the
intent in Section 5.04.015 and to modify the language in Sections 5.04.050, 5.040.070
and 5.04.090 to make it clear that the requirement to obtain a business license is limited
to businesses that are:
Physically located within the City of Rancho Palos Verdes; and/or
Conducting work in such a manner that requires their physical presence within
the City of Rancho Palos Verdes.
It was also noted that the language in the Municipal Code Section 5.04.440 regarding
the annual adjustment language has not been updated. The current language
references a Gross National Product (GNP) factor for calculating the annual increase —
Home Occupancy
6%
Businesses Located
Outside of City
8%
All Other Businesses
86%
CALENDAR YEAR 2018 BUSINESS LICENSE DATA
3
an inflation measure that is no longer published or calculated by the U.S. Department of
Commerce. While the City has not applied the annual increase for the past three years,
the language in the Municipal Code should reflect the current terminology, which uses
the Consumer Price Index (CPI) as the inflation factor.
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.
4