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HomeMy WebLinkAboutFin Business License Compliancecrrr 11F��Aott — Agenda Item No: 6 • a Meeting Date: September 17, 2012 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Mark Moses City Manager Approval:, P Interim Finance Director SUBJECT: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AUTHORIZING THE TEMPORARY WAIVER OF PENALTIES FOR BUSINESSES THAT ESTABLISH COMPLIANCE WITH THE BUSINESS LICENSE REQUIREMENTS OF THE MUNICIPAL CODE RECOMMENDATION: ADOPT RESOLUTION BACKGROUND: The San Rafael Municipal Code (Chapter 10.04) requires persons conducting business in the City of San Rafael to have a business license and pay applicable taxes and fees. The Code applies to both businesses located in the City as well as those outside the City that conduct business within the City. The City of San Rafael's Business License "fee" is actually a general tax and, therefore, monies from the tax are deposited into the general fund to support city services such as public safety, public works, recreation, and library services. For the fiscal year ended June 30, 2012, revenues from business taxes were $2.4 million, or approximately 4% of the total general fund revenues. There is often confusion regarding what a business tax certificate is and what it represents. Although commonly referred to as a "business license," it does not include the regulatory oversight typically associated with governmental licensing of business activities. Further, because the issuance of the business tax certificate is based solely on payment of the tax, it does not in itself authorize the holder to operate a business, since it does not constitute verification that the business is in compliance with licensing and/or other regulations by the state, county or other jurisdictions, including other City requirements. It is not practical or cost-effective to make the issuance or maintenance of a business tax certificate contingent upon compliance with other City requirements (such as zoning, use permit, building or fire codes, etc.) because there is no convenient mechanism to withhold certificates once payment is received, nor are there sufficient resources to withdraw certificates once issued. Recent staffing and hours reductions have limited the City's capacity to enforce compliance with the business tax ordinance. The average time available each month to identify and collect on non-compliant businesses has declined from over 100 hours to fewer than 20. Given the City's reduced resources, staff believes that a one-time amnesty program will have the advantage of FOR CITY CLERK ONLY File No.: q_( , Council Meeting: %cr Disposition: -pc=t--u -(101;t) 13&f/ SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 educating the business community regarding the tax requirements and will provide a business - friendly opportunity for those who have not previously registered to do so. ANALYSIS: Currently, the City has 7,742 registered businesses: 4,521 are located in the City limits in a business or commercial location; 1,801 are home-based; and 1,420 outside contractors and service -providers. Over the past two years, the staffing in the business tax revenue unit of finance has dropped by 20%. The recently reduced workweek and furloughs have stretched this loss of capacity to 25%. Although business tax collections have remained fairly constant, staff is not able to perform the level of compliance work and collection efforts afforded by past staffing resources, and service levels have declined. Highlights of proposed program: 1. Commences September 18, 2012, upon City Council approval, and runs through December 14, 2012 (final dates to be determined by staff with option to extend for up to 30 days, if needed for administrative processing). 2. During this period, business tax -related penalties will be waived for all years for which the business registers and pays the total tax due. New business registrants are expected to comply fully with all other City requirements, including zoning, use permit and building and fire codes. 3. Eligible businesses include only those applicants that have not been contacted previously with respect to the status of their license and payments due to the City, and who are not currently part of an active collections process or enforcement action. 4. Requests can be made in person, by mail, by phone, fax or email during the amnesty period; forms and instructions will be available on the City's website. Other jurisdictions have had success with similar programs, increasing their collections by 2-5%. The program will be advertised and promoted through the following vehicles: • Snapshot • City website • Press releases • Chamber of Commerce • Public service announcements, where possible • Paid advertising • Postcards to commercial landlords The development of this program included outreach to the business community for comment and feedback. City staff discussed this with the Federation and Coalition on August 22, and with the Business Issues Committee on September 6. The proposed program was well-received by both groups. FISCAL IMPACT: Staff estimates that additional revenues from this program have the potential to reach $75,000 in fiscal year 2012-2013, or 3% of annual business tax revenues, which have remained flat for the past four years. This revenue is expected to be partially offset by approximately $25,000 in one-time program and staffing costs required to support the amnesty program. A portion of the new revenues is expected to be ongoing, as the newly registered businesses renew their licenses in future years. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 RECOMMENDATION: Staff recommends that Council accept the report and adopt the Resolution as presented. ATTACHMENTS Resolution RESOLUTION NO. 13416 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AUTHORIZING THE TEMPORARY WAIVER OF PENALTIES FOR BUSINESSES THAT ESTABLISH COMPLIANCE WITH THE BUSINESS LICENSE REQUIREMENTS OF THE MUNICPAL CODE WHEREAS, the San Rafael Municipal Code (Chapter 10.04) requires persons conducting business in the City of San Rafael to have a business license and pay applicable fees and taxes; and WHEREAS, City staff believes that with its limited enforcement resources, a temporary, business license amnesty program provides a business -friendly approach to ensure compliance with the business tax requirements of the Municipal Code-, and WHEREAS, Staff has prepared a report to Council describing how a business license amnesty program would work and has recommended implementation of such a program, and Council has received and approved that report; NOW, THEREFORE, BE IT RESOLVED, by the San Rafael City Council that the City Manager is authorized to implement a temporary business license amnesty program during fiscal year 2012-2013, waiving penalties for businesses that establish compliance with the business license tax requirements of the Municipal Code, with specific dates, terms and procedures to be determined by staff. 1, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of said City held on Monday, the 17th day of September, 2012, by the following vote, to wit: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COU" NCILM EMBERS: Heller, McCullough & Mayor Phillips None Connolly, Levine ESTHER C. BEIRNE, City Clerk INSTRUCTIONS: USE THIS FORM WITH EACH SUBMITTAL OF A CONTRACT, AGREEMENT, ORDINANCE OR RESOLUTION BEFORE APPROVAL BY COUNCIL / AGENCY. SRRA/ SRCC AGENDA ITEM NO. 6-a DATE OF MEETING: September 17, 2012 FROM: Mark Moses DEPARTMENT: Finance DATE: September 10, 2012 TITLE OF DOCUMENT: RESOLUTION OO OF THE Cl CZOUNCIL•F THE CITY•F SAN -H T C RAFAEL AUTHORIZING THE TEMPORARY WAWOFL PENALTIES FOR BUSINESSES THAT ESTABLISH COMPLIANCE WITH THE BUSINESS LICENSE REQUIREMENTS OF THE MUNICPAL CODE Department Head (signature) APPROVED AS COUNCIL AGENCY AGENDA ITEM: City Manager (signature) lilL rallwAi M12i.-JOITI � EXAU27M i ff I I I i I• 'LaL, City Attorney (signature) I