HomeMy WebLinkAbout1993-05-11 - AGENDA REPORTS - BUSINESS LICENSING (2)City Manager.
Item to be pre
Steve
CONSENT CALENDAR
DATE: May 11, 1993
SUBJECT: Business Licensing
DEPARTMENT: Finance
At the April 13, 1993 Council meeting, Council directed staff to evaluate the City's current business
license program. The Finance Department has reviewed the current business license program, as well
as several alternatives to the current program. There are two types of business license programs, one
Is fee-based and one Is a tax. When the amount charged for the license is based upon recovering the
cost of administering the program, the license is a fee. When the amount charged for the license is
based on something other than the cost of the program, the license is a tax. A business license tax
must pass a vote of two-thirds of the electorate.
When the City of Santa Clarita was incorporated, It adopted the Los Angeles County Code, Title 7, to
establish a business license program. At the time of adoption, the City also contracted with the
County of Los Angeles for administration of the business license program. The County operates Its
business license program:as a cost -based program. Business license fees are set at a level
commensurate with the county --wide cost of the program. The purpose of business licensing is to
regulate business activities which could potentially affect the public welfare. The Los Angeles County
Business License Commission decides which business activities are deemed to have an effect on
public welfare. Examples of types of businesses that require a license are ambulances, gun dealers,
private schools, and taxicabs. Business activities regulated by state or federal agencies are not
covered by the county business license code. For Instance, the State of California regulates limousine
services, so the County does not Businesses whose activities require a license must meet the
requirements for that type of activity in order to obtain a license. Requirements may Include health
inspection, fire inspection, applicant background check, and a hearing before the Business License
Commission. Licenses are not transferable from one owner to the next or from one location to
another. Under the City's contract, the County collects all business license fees and remits them to
the City on a monthly basis. The County then bilis the City for the cost of administering the business
license program. For fiscal year 1991-92, the City received approximately $108,000 in business license
fees from the County, and paid $67,900 for the County to administer the program. Through January
of fiscal year 1993, the City has received approximately $78,000 in business license fees, and paid the
County $47,000 for administration. Revenues collected through business licensing are used to provide
a business information line, a 'How to Start a Business' brochure, and customer service to persons
requesting business license Information.
The City has the option of continuing the business license program with the County, start its own
program, or abolish the program completely. Below is further information concerning these options.
1. Abolish business licensing in the City of Santa Clarfta.
By abolishing business licensing, local businesses would be relieved from the initial license
and annual renewal. However, business licensing provides safeguards for the public that
would no lnger be provided. For example, a business license requires a background chec
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on owners of private schools for children. This protects children from persons who have
criminal records related to child abuse. A business license requires a taxicab service to have
valid insurance for each of Its vehicles. Consumers receive additional protection from
business licensing, since licensing regulates business acUvitles rather than the physical
property of the business. If business licensing were to be abolished in the City, it would lose
some of the licensing regulatory benefits and receive a loss of general fund revenue currently
being received under the County administered program.
2. The City can establish its own business license program.
The City would have greater control over the method of licensing if It established it own
program. To implement its own business license program, the City would first need to
determine if the license is going to be a fee or a tax. If the license Is to be a fee, a fee
schedule will have to be developed which would set the rates to cover costs associated with
administering the program. In the Instance where the license becomes a tax, the basis of the
tax would need to be determined and the process of getting the tax approved by two-thirds of
the electorate will have to be completed. Under both cases, a system to administer the
program would need to be established. Then it must be determined whether or not a business
license commission will be created to set policies and review applications. Also, the City will
need to adopt a business license code. In this code, the types of businesses to be regulated,
requirements for obtaining each type of license, and the fee or tax for each license must be
stated. The City would need to hire full-time business license inspectors and clerical support,
as well as Incur the costs of vehicles and other supplies necessary to perform business
license code enforcement duties. Any initial start-up costs will not be able to be recovered
until subsequent years.
3. Continue contracting with the County for business licensing.
If the City continues to contract with the County for business licensing, the City continues the
current benefits of business. Since the current fee schedule covers the costs of administering
the program, there is no Impact on the City's general fund. The current contract with the
County will continue to render consumer protection through business licensing, such as
background checks and Insurance requirements. In addition, the City can continue the
business license assistance program currently provided at City Hall with the revenues
generated from the current program.
Staff recommends that the City maintain the program as It currently exists, due to the benefits to both
businesses and citizens and potential budgetary Impacts of any changes to the exisUng program.
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