12-21-1993 - 1994 Business License Fees'*city of West Covina
Memorandum
TO City.Council and City Manager
AGENDA
FROM Finance. Department
ITEM NO. C-8a
SUBJECT: 1994 BUSINESS LICENSE FEES DATE December 21, 1993
SUMMARY: The, City Council will consider adopting a resolution
suspending: 1) C.P.I. increases on business license fee,
2)' a portion of the business license fee for Category A -II
and all of the business license fee for Category A -III, and
3) a portionof the business license fee for Category
S(26).
BACKGROUND:
Each year the City's Business License Tax rates are reviewed.. The
purpose of the review is to compare West Covina's rates with
comparable cities`and,to recommend whether or not to allow the rates
to be increased by an amount equal to the percentage increase of the
.Consumer Price Index (C.P.I.). Those tax categories for which a
portion of the rate has been suspended are also reviewed as to whether
or not to continue the rate suspension: This year, staff also
reviewed the City's Transient Occupancy Tax .(TOT.) rate which is
currently set at ten percent.._
An informal review of other communities found that rates have not been
increased. Therefore, rates charged in West Covina are generally at
or above the average and staff is recommending that neither the
Business License Tax rates nor the TOT rates be increased. As
discussed in more detail'below, staff 1s'recommending that the C.P.I.
increase be suspended as well as continuing the partial suspension of
rates for specific categories.
ANALYSIS:
Ordinance No. 1442 provides that business license fees shall
automatically be adjusted each year by the .percentage increase of the
Consumer Price .Index (C.P.I.) for the Los Angeles -Long Beach area.
The Municipal Code further provides that the City Council may suspend
all or ,any portion of such increases. The City Council must,
therefore, act each year if the increase is to be suspended.
Historically, the City has generally suspended the C.P.I. increase due
to the current fee schedule being higher than comparable cities. As
in the past, it is recommended that the C.P.I. adjustment be suspended
again this year which would result .in the rates for calendar year 1994
remaining constant. If,not suspended, rates will increase by 1.7%.
Commercial property rental (Category. A -II) is .subject to a separate
formula for calculating the amount of business license, based upon
gross rental receipts. The Municipal Code permits the City Council
to suspend all or a portion of the business license fee for this type
of activity., Suspension action by the Council in the- past has reduced
by 50 percent both the minimum license fee and the additional amounts
due on gross rentals received. Thus, this has .resulted in a basic
license of $50 .for the first $10, 000 in receipts ,plus $5 for each
$1,000 of rental income over $10,000.' As revenue to the City from the
commercial property rental business license is based upon the license
percentage rate being applied to gross rentals, the amount to. be
received from this source will tend to increase as rental charges to
tenants are increased by property owners. Therefore, staff is
recommending that the fee schedule not be increased for this category.
This is accomplished by the Council continuing the same suspension of
a portion of the fee.schedule as in the past.
Another schedule 'of business license fees, covering tenants of
commercial property owned by landlords exempted from local business
licenses under State law (Category A -III), has been fully suspended
in the past. Staff is recommending that this full suspension be
continued.
Memo to City Council aCity Manager
Page 2
Lastly, Ordinance No. 1766 provides that the business license fee of
small collection facilities and reverse vending machines may
temporarily be reduced by Resolution and Council approval. Recycling
centers are a result of the California Beverage Container Recycling
and Litter Reduction.Act effective January 1, 1988. The consideration
of suspending a portion of' the fee is to continue to encourage their
establishment and success in our City.
The resolution would reduce the business license fee for. Category
S(26), small collection facilities and reverse, vending machines from
$286 per year, or $16.50 per day, to $10 per year. The reduction is
temporary through December 31, 1994, but may be extended in future
years by Council resolution.
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution
suspending certain C.P.I. increases and portions of the business
license tax and confirming the City's Transient Occupancy Tax rate:
RESOLUTION NO. a
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WEST COVINA, CALIFORNIA, SUSPENDING ANY INCREASE
IN THE AMOUNT OF CHARGES RELATING TO BUSINESS
LICENSE TAX FOR THE CALENDAR YEAR COMMENCING
JANUARY 1, 1994, AND SUSPENDING ALL OF THE
BUSINESS LICENSE TAXES IMPOSED UNDER SECTION
A=III OFFICE AND COMMERCIAL RENTALS, AND A
PORTION.OF THE BUSINESS LICENSE TAXES IMPOSED ON
CATEGORY . S (2 6) SMALL COLLECTING FACILITIES AND
REVERSE VENDING MACHINES AND CONFIRMING THE
TRANSIENT OCCUPANCY TAX RATE.
Basil Panas
City Controller
REVIEWED AND APPROVED:
Abraham . Koniarsk
Finan Director
AWK/gma
1994BUSI.AGE