CC SR 20211116 J - Business License Tax
CITY COUNCIL MEETING DATE: 11/16/2021
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration and possible action regarding the annual business license tax.
RECOMMENDED COUNCIL ACTION:
(1) Direct Staff not to increase the City’s business license tax (BLT) rate for 2022;
(2) Direct Staff to continue setting the annual BLT for home occupancy businesses
at zero ($0) for 2022; and
(3) Direct Staff to sunset the Small Business Financial Assistance Program.
FISCAL IMPACT: If the recommended action is approved, there will be an estimated
increase of $30,000 in revenues to the BLT.
Amount Budgeted: $795,000
Additional Appropriation: N/A
Account Number(s): 101-300-0000-3210
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
BACKGROUND:
In accordance with Section 5.04.050 of the Rancho Palos Verdes Municipal Code
(RPVMC), the City’s business license tax (BLT) may automatically increase on January
1 of each year based on the most current Consumer Price Index (CPI). However, on
January 17, 2017, the City Council determined that moving forward, Staff is to present an
annual report to consider the possibility of increasing the BLT based on CPI. Since then,
the City Council has not increased the BLT by setting CPI at zero. Furthermore, since
2019, the City Council also began setting the BLT at zero for home occupancy
businesses.
In response to the financial impacts many small businesses were experiencing as a result
of the COVID-19 stay-at-home orders, in 2020 and 2021, the City Council established the
City’s Small Business Assistance Program, which provided temporary relief by waiving
the BLT for the City’s small business community that generate less than $1.5 million in
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CITYOF RANCHO PALOS VERDES
gross receipts.
As a result of the aforementioned programs, the City has provided approximately
$102,000 in relief for home occupancy businesses and approximately $69,000 for the
small business community in the past two years.
DISCUSSION:
Business License Tax Rate for 2022
According to Section 5.04.050 of the RPVMC, 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 BLT. The primary features of the annual BLT are as follows:
1) A minimum tax based on the location in which a business operates (i.e., located
inside/outside the City and/or physical presence within the City) and the type of
work or service performed.
2) BLT is effective from January through December (calendar year).
3) The BLT is based on a flat rate tied to a business’s gross receipts from the prior
year. In addition to the minimum tax, for every $1,000 in gross receipts in excess
of $50,000. This rate applies to businesses physically located inside or outside the
City. Contractors, itinerant vendors, builders, developers, and operators of
commercial vehicles (i.e. taxis) are exempt.
The City has a total of 16 types of BLT and contributes approximately 3% of revenues to
the General Fund. As of October 2021, the City issued 1,832 licenses for a total amount
of $673,600. As illustrated in Chart 1, of the total amount, $272,200 or 40% of the BLT
comes from in-City businesses; $268,900 or 40% from general contractors and sub-
contractors; $69,400 or 10% from businesses outside the City; $44,200 or 7% from
residential rentals; and $18,900 or 3% from delivery vehicles and refuse haulers.
Chart 1 Business License Tax Year to Date Revenues
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RESIDENTIAL RENTALS ,
$44,229 , 7%
BUSINESS -OUTSIDE CITY,
$69,376 , 10%
The CPI rate for September is 4.6%. If applied to the current BLT rates, Staff estimates
an increase of approximately $30,400 in revenue. While BLT collected provides support
for general operations, the City’s main sources of revenues comes from property tax,
transient occupancy tax, and sales tax. For this reason, and in line with the City’s historical
practice, Staff recommends continuing not increasing the 2022 BLT with the CPI rate.
Since this revenue is not included in the adopted budget, if approved, there is no change
to the budget. thereby further supporting local businesses.
Business License Tax for Home Occupancy for 2022
On June 4, 2019, the City Council approved setting the annual BLT for home occupancy
businesses to zero, effective September 6, 2019. Subsequently, the City Council
approved to continue the zero tax in 2020 and 2021. Based on the most current
information, since 2019, the City assisted over 370 home businesses, totaling
approximately $102,000.
The tax reduction was made as part of City Council’s continued efforts to decrease taxes
and fees for the residents of Rancho Palos Verdes. Thus, Staff recommends that the
2022 BLT remain unchanged from the 2021 rate. Since this revenue is not included in the
adopted budget, if approved, there is no change to the budget.
Small Business Financial Assistance Program
In response to the economic impacts to local business es resulting from the L.A. County
Department of Public Health’s stay-at-home orders, in 2021, the City Council extended a
second year of the Small Business Financial Assistance Program. The City reduced the
business license tax to zero for small businesses within the City that generated less than
$1.5 million in gross receipts. In the last two years, the City provided temporary relief of
approximately $69,000 for over 190 small businesses in the community.
The program’s goal was to provide temporary relief to small businesses. Considering that
stay-at-home orders have been lifted and the number of available business grants and
assistance programs offered to small business, at this time, Staff recommends sunsetting
the program in 2022. Since this revenue is not included in the adopted budget, if
approved, Staff estimates an increase of $30,000 in thereby resuming assessing the BLT
for in-city small businesses.
ADDITIONAL INFORMATION:
The State fee for Certified Disability Access Specialist Program will remain at $4 in 2022
for all businesses even if the tax due is zero. This fee is mandated by the State and is
used to increase disability access and compliance with construction-related accessibility
requirements.
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ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action is available for
the City Council’s consideration:
1. Direct Staff to increase the City’s business license tax rate for 2022 based on the
September CPI index of 4.6%.
2. Direct Staff to sunset the zero-tax program for business license tax for home
occupancy businesses for 2022.
3. Direct Staff to continue the Small Business Financial Assistance Program for
2022.
4. Take other action, as deemed appropriate.
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