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Meeting Date: February 19, 2002

Subject/Title: Direct Staff to amend portions of Title 5 of the Municipal Code - Business Licenses, Taxes and Regulations as it pertains to Business License.

Submitted by: Pamela Ehler, Director of Finance & Information Systems
Denise Davies, Accountant

Approved by: John Stevenson, City Manager

Direct Staff to amend portions of Title 5 of the Municipal Code - Business Licenses, Taxes and Regulations as it pertains to Business License.

On February 24, 1948, the City Council passed Ordinance No. 2 which provided for the licensing of businesses within the City limits. Since Ordinance No. 2 was passed, the City Council has passed amendments to Title 5 of the Municipal Code however, the only increase to license fees was a business license surtax added in 1975. This surtax (20%) has been used to subsidize the Brentwood Chamber of Commerce.

The business license ordinance has not been evaluated on a comprehensive basis since 1948. A small number of businesses generated $9,785 in license revenue for fiscal year ending June 30, 1949. In fiscal year ending June 30, 2001, 1521 businesses generated license revenue in the amount of $73,943, of which $12,389 was sent to the Brentwood Chamber of Commerce. 

The estimated cost to administer business license is $54,000. This includes the processing of the applications, billing, depositing receipts, posting payments, issuing licenses, and following up on collections. Business license revenue has not kept pace with inflation and has not reflected the growth the City has experienced.

The current ordinance sets the fee at a flat base charge plus a per employee or unit charge not to exceed $60 per year. This fee does not include the business surtax of 20%, an initial application fee of $25, a home occupation permit of $50, or late fees. 

Based on a random sample of 26 Brentwood retail businesses, the following represents the amount of business license fees paid to the City of Brentwood versus business license fees that would be charged by other Cities:

City Fees Fee Structure 

Brentwood $ 2,018 Flat Fee
Pleasanton $ 26,293 Gross Receipts
Antioch $ 41,441 Gross Receipts
Livermore $ 72,559 Gross Receipts

Staff’s goals for revising the business license ordinance would be to:

§ Ensure equity for the basis and rate of the tax and ensure that all business activities are required to pay a business tax;

§ Provide consistent general fund revenues that reflect economic changes, either up or down;

§ Establish a revenue source that will not be difficult or costly to administer and enforce and that is easy for both the City staff and business community to understand.

Proposition 218 reduces all taxes to either general taxes or special taxes. A tax is called a “special” tax if its revenues are used for specific purposes and a “general” tax if its revenues may be used for any governmental purpose. Business license taxes are considered a “general” tax because the revenues are not for a specific purpose but are used to supplement the General Fund. Pursuant to the guidelines for general taxes and in accordance with propositions 62 and 218, no local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote. The election required must be consolidated with a regularly scheduled general election for the City Council, except in cases of emergency declared by a unanimous vote of the City Council. 

Upon completion of the draft ordinance it will be brought back to Council, at which time a public meeting and public hearing process would be followed. In order to place the measure on the November 2002 ballot this process must be completed by June 2002.

Unknown at this time.

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