CC SR 20190806 E - Business License TaxRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 08/06/2019
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA DESCRIPTION:
Consideration and possible action to adopt Ordinance No. 623 adding Chapter 5.04
(Business Licenses) of the Rancho Palos Verdes Municipal Code
RECOMMENDED COUNCIL ACTION:
1. Adopt Ordinance No. 623 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: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Deborah Cullen, Director of Finance
APPROVED BY: Doug Willmore, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Ordinance No. 623
B. June 4, 2019 staff report on the annual business license tax
The previous staff report, meeting minutes, and public comments on this topic can be
found on the City's website via the July 16, 2019, City Council Agenda at
http://rpv.granicus.com/player/clip/3456?view_id=5
BACKGROUND AND DISCUSSION:
On July 16, 2019, Ordinance No. 623 (Attachment A) was introduced and approved by
the City Council. This ordinance adds Section 5.04.015 (intent), and amends 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
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Chapter 5.04 (business licenses) of Title 5 (business taxes, licenses and regulations) of
the Municipal Code relating to business license taxes.
This evening, Ordinance No. 623 is presented for its second reading and adoption. If
adopted this evening, this ordinance will go into effect on September 6, 2019.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action s are available
for the City Council’s consideration:
1. Take other action as deemed appropriate by the City Council
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01203.0007/556242.2 Ordinance No. 623
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ORDINANCE NO. 623
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
WHEREAS, the City Council of the City of Rancho Palos Verdes may, pursuant
to its authority under Section 37101 of the Government Code, “license, for revenue and
regulation, and fix the license tax upon, every kind of lawful business transacted in the
city.”
WHEREAS, the City Council has provided for a business license tax for the
purposes of revenue generation in Chapter 5.04 of the Rancho Palos Verdes Municipal
Code.
WHEREAS, the City Council now wishes to clarify that the business license tax
will only be imposed upon businesses that have a physical presence in the City, no
matter how fleeting, to offset the cost of the use of the City’s services and infrastructure.
WHEREAS, the City Council finds that the CPI-U is a more accurate inflation
indicator than the Gross National Product deflator and desires to rely on the CPI -U
index for business tax increases.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES ORDAINS AS FOLLOWS:
SECTION 1: The forgoing recitals are true and correct and are incorporated
herein by this reference.
SECTION 2: 5.04.015 (Intent) of Chapter 5.04 (Business Licenses) of Title 5
(Business Taxes, Licenses and Regulations) is added as follows:
“5.04.015 – Intent.
It is the intent of this chapter to provide the city with a mechanism to
collect business license taxes from businesses that have a physical
presence within the city, or that enter the city to conduct business at
any point. The business license tax will contribute to the general
fund, and will thereby partially offset the cost of providing city
services, such as public roads and other public infrastructure and
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utilities. To that end, any business that provides services (including
construction), supplies, or equipment to any individual or to any
entity within the city, and which has any physical presence within the
city, however fleeting, shall obtain a business license.”
SECTION 3: Subsection A of Section 5.04.050 (License and tax payment
required) of Chapter 5.04 (Business Licenses) of Title 5 (Business Taxes, Licenses and
Regulations) is amended to read:
“A. There are imposed upon the businesses, trades, professions,
callings and occupations specified in this chapter license taxes in the
amounts prescribed in this chapter effective upon the effective date of the
ordinance codified in this chapter. It is unlawful for any person to transact
and carry on any business, trade, profession, calling or occupation which
has any physical presence whatsoever within the city without first
having procured a license from the city to do so and paying the tax
prescribed in this chapter or without complying with any and all applicable
provisions of this chapter.”
SECTION 4: Section 5.04.070 (Evidence of doing business) of Chapter 5.04
(Business Licenses) of Title 5 (Business Taxes, Licenses and Regulations) is amended
to read:
“When any person by use of signs, circulars, cards, telephone book, or
newspapers, advertises, holds out, or represents that he is in business in
the city, or when any person holds an active license or permit issued by a
governmental agency indicating that he or she is in business in the city,
and such person fails to deny by a sworn statement given to the collector
that he or she is not conducting a business in the city, or that his or her
business does not require him or her to physically enter the city in
any manner, including by his or her agents, representatives, or
employees after being requested to do so by the collector, then these
facts shall be considered prima facie evidence that he or she is
conducting a business in the city.”
SECTION 5: Subsection (E) of Section 5.04.090 (Exemptions) of Chapter 5.04
(Business Licenses) of Title 5 (Business Taxes, Licenses and Regulations) is added as
follows:
“E. Any person who does not physically conduct business in the
city, or who conducts business in the city but requires no physical
presence in the city whatsoever to conduct his or her business in the
city, shall not be subject to the license tax. By way of nonexhaustive
examples, any person who conducts all business in the city
electronically, is not required to obtain a business license; on the
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other hand, site visits, plan review at city hall, or a meeting in the
city, shall trigger the business license requirement.”
SECTION 6: Section 5.04.440 (Annual change of business license tax) of
Chapter 5.04 (Business Licenses) of Title 5 (Business Taxes, Licenses and
Regulations) is amended to read:
“All business license taxes and other fees or charges specified in this
chapter shall be changed on January 1, 1979, and on January 1st of each
year thereafter, as follows:
A. On January 1, 1979, all such taxes and other fees or charges shall
be equal to an amount to be determined by adding to the current tax or
other fee or charge the product obtained by multiplying the average Gross
National Product deflator factor, for goods and services purchased by
state and local government, as published by the United States Department
of Commerce, for the four calendar quarters available prior to Janua ry 1,
1979, by such tax or other fee or charge.
BA. On January 1st of each year thereafter, all such taxes and other
fees or charges shall be equal to an amount to be determined by adding to
the amount of the tax or other fee or charge in the previous ca lendar year
the product obtained by multiplying the average Gross National Product
deflator factor, for goods and services purchased by state and local
government, as published by the United States Department of Commerce,
for the four calendar quarters available prior thereto by such tax or other
fee or charge in the previous calendar year may be increased in an
amount not to exceed the Consumer Price Index-U, as published by
the U.S. Bureau of Labor Statistics, or the equivalent or successor
index; provided that the increase in tax pursuant to the CPI -U shall
be equal to or less than the increase to the tax in an amount to be
determined by adding to the amount of the tax or other fee or charge
in the previous calendar year.
B. Annual business license increases shall be instituted
following consideration and approval by the city council based on
annual analysis and recommendation by the Director of Finance.”
SECTION 7: If any section, subsection, subdivision, sentence, clause, phrase, or
portion of this Ordinance or the application thereof to any person or place, is for any
reason held to be invalid or unconstitutional by the decision of any court of competent
jurisdiction, such decision shall not affect the validity of the remainder of this Ordinance.
The City Council hereby declares that it would have adopted this Ordinance, and each
and every section, subsection, subdivision, sentence, clause, phrase, or portion thereof,
irrespective of the fact that any one or more sections, subsections, subdivisions,
sentences, clauses, phrases, or portions thereof be declared invalid or unconstitutional.
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SECTION 8: The time within which judicial review of the decision reflected in this
Ordinance must be sought in governed by Section 1094.6 of the California Code of Civil
Procedure and other applicable short periods of limitation.
PASSED, APPROVED, AND ADOPTED this 6th day of August 2019.
_____________________
Attest: Jerry V. Duhovic, Mayor
_______________________
Emily Colborn, City Clerk
State of California )
County of Los Angeles ) ss
City of Rancho Palos Verdes )
I, Emily Colborn, City Clerk of the City of Rancho Palos Verdes, hereby certify that the
whole number of members of the City Council of said City is five; that the foregoing
Ordinance No. 623 passed first reading on July, 16 2019, was duly and regularly
adopted by the City Council of said City at a regular meeting thereof held on
, 2019, and that the same was passed and adopted by the following roll call
vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
__________________________
Emily Colborn, City Clerk
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RANCHO 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
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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
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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
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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.
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