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Agenda Packet - CC - 2022.02.22 Study Session
City of Burlingame BURLINGAME F, Meeting Agenda - Final City Council Tuesday, February 22, 2022 6:00 PM Study Session BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLINGAME, CA 94010 On September 16, 2021, Governor Newsom signed into law AB 361 which allows a local agency to meet remotely when: The local agency holds a meeting during a declared state of emergency 2. State or local health officials have imposed or recommended measures to promote social distancing 3. Legislative bodies declare the need to meet remotely due to present imminent risks to the health or safety of attendees On January 18, 2022, the City Council adopted Resolution Number 007-2022 stating that the City Council and Commissions will continue to meet remotely for at least thirty days for the following reasons: 1. There is still a declared state of emergency 2. County Health Orders require that all unvaccinated individuals in public spaces maintain social distancing and wear masks 3. The City can't maintain social distancing requirements for the public, staff, Councilmembers, and Commissioners, in their meeting spaces Pursuant to Resolution Number 007-2022, the City Council Chambers will not be open to the public for the February 22, 2022 Study Session. Members of the public may view the meeting by logging into the Zoom Webinar listed below. Additionally, the meeting will be streamed live on YouTube and uploaded to the City's website after the meeting. Members of the public may provide written comments by email to publiccomment@burlingame.org. Emailed comments should include the specific agenda item on which you are commenting. Note that your comment concerns an item that is not on the agenda. The length of the emailed comment should be commensurate with the three minutes customarily allowed for verbal comments, which is approximately 250-300 words. To ensure that your comment is received and read to the City Council for the appropriate agenda item, please submit your email no later than 5:00 p.m. on February 22, 2022. The City will make every effort to read emails received after that time, but cannot guarantee such emails will be read into the record. Any emails received after the 5:00 p.m. deadline which are not read into the record, will be provided to the City Council after the meeting. Online City of Burlingame Page 1 Printed on 211712022 City Council Meeting Agenda - Final February 22, 2022 1. CALL TO ORDER - 6:00 p.m. - Online To access the meeting by computer: Go to www.zoom.us/join Meeting ID: 851 4585 6188 Passcode:992653 To access the meeting by phone: Dial 1-669-900-6833 Meeting ID: 851 4585 6188 Passcode:992653 2. ROLL CALL 3. PUBLIC COMMENTS, NON -AGENDA Members of the public may speak about any item not on the agenda. Members of the public wishing to suggest an item for a future Council agenda may do so during this public comment period. The Ralph M. Brown Act (the State local agency open meeting law) prohibits the City Council from acting on any matter that is not on the agenda. 4. STUDY SESSION a. Study Session on Potential Tax Measures Attachments: Staff Report Presentation Business License Tax Study 5. ADJOURNMENT Notice: Any attendees who require special assistance, a disability related modification, or language assistance in order to participate in the meeting should contact Meaghan Hassel -Shearer, City Clerk by 10:00 a.m. on Tuesday, February 22, 2022 at (650) 558-7203 or at mhasselshearer@burlingame.org. Any individual who wishes to request an alternative format for the agenda, meeting notice, or other writings that may be distributed at the meeting, should contact Meaghan Hassel -Shearer, City Clerk by 10:00 a.m. on Tuesday, February 22, 2022 at (650) 558-7203 or at mhasselshearer@burlingame.org. Notification in advance of the meeting will enable the City to make reasonable arrangements to ensure accessibility to the meeting, the materials related to it, and your ability to comment. NEXT CITY COUNCIL MEETING Regular City Council Meeting - Monday, March 7, 2022 at 7:00 p.m. VIEW REGULAR COUNCIL MEETING ONLINE www.burlingame.org/video City of Burlingame Page 2 Printed on 211712022 City Council Meeting Agenda - Final February 22, 2022 Any writings or documents provided to a majority of the City Council regarding any item on this agenda will be made available for public inspection via www.burlingame.org or by emailing City Clerk Meaghan Hassel -Shearer at mhasselshearer@burlingame.org. If you are unable to obtain information via the City's website or through email, contact the City Clerk at (650) 558-7203. City of Burlingame Page 3 Printed on 211712022 BUR— IN�AAGENDA NO: Study Session STAFF REPORT MEETING DATE: February 22, 2022 To: Honorable Mayor and City Council Date: February 22, 2022 From: Lisa K. Goldman, City Manager — (650) 558-7243 Helen Yu -Scott, Finance Director — (650) 558-7222 Subject: Study Session on Potential Tax Measures RECOMMENDATION Staff recommends that the City Council receive a presentation on a recent business license tax study, discuss potential tax measures, and provide direction. BACKGROUND California cities do not have an inherent power to tax. The passage of Proposition 13 in 1978 created a distinction between "general" and "special" taxes. A general tax is a tax imposed for general governmental purposes, the proceeds of which are deposited into the General Fund. A majority vote of the electorate is required to impose, extend, or increase any general tax. An election for a general tax must be consolidated with a regularly scheduled general election of City Councilmembers. A special tax is a tax that is collected and earmarked for a specific purpose and deposited into a separate account of the General Fund. A two-thirds vote of the electorate is required to impose, extend, or increase any special tax. Special taxes do not need to be consolidated with a regularly scheduled general election of City Councilmembers. DISCUSSION On September 20, 2021, the Council held a study session on potential tax measures, with an eye toward the possible placement of one or more measures on the November 2022 ballot. The City Council directed staff to explore a few of the options discussed at the study session and return to the Council with additional information. The potential tax measures include a business license tax, a cannabis tax, and a tax measure similar in structure to the City of East Palo Alto's Measure HH to address sea level rise, the Broadway Grade Separation project, or another large infrastructure project. Business License Tax As discussed at the previous study session, the City levies a flat rate business tax on all businesses. That means that a small mom-and-pop business pays the same amount as a large business such as an auto dealer or Facebook. In order to determine a more equitable way of levying the business Study Session on Potential Tax Measures February 2Z 2022 license tax, staff engaged the services of HdL Companies, the City's sales tax and business license tax consultant, to conduct a study of the City's business license tax and determine other methodologies for levying the tax. That study, along with HdL's presentation, are attached. As a general tax measure, any change to the business license tax would need voter approval in November 2022 or November 2024. Cannabis Retail Delivery Tax In February 2021, the City Council adopted an ordinance allowing cannabis retail delivery from businesses located within the city limits. During that meeting, as well as an earlier discussion of cannabis retail delivery, the Council expressed its interest in levying a cannabis delivery tax, which a representative for one company noted could bring in approximately $1 million annually from his company alone. According to HdL, one way to address the cannabis tax is to include it as a sub- section under the business license tax Ordinance. This would avoid the need for a separate tax measure. City of East Palo Alto's Measure HH Parcel Tax On November 6, 2018, the residents of East Palo Alto voted in favor of enacting Measure HH, a parcel tax on commercial office space of 25,000 square feet or more at the rate of $2.50 per square foot. The measure was estimated at the time to raise $1.675 million annually for housing and career programs. As a parcel tax, the measure required a two-thirds vote of the electorate for passage, and the monies can only be spent on housing and career programs. During the September study session, some Councilmembers expressed an interest in pursuing a measure similar to Measure HH and using the funds to help with sea level rise work or to pay the City's share of the Broadway Grade Separation project. Given the work of OneShoreline and the potential for a regional sea level rise measure, staff recommends against a parcel tax for sea level rise at this time. Should the Council be interested in a parcel tax measure to help with the Broadway Grade Separation project or other large infrastructure projects, such a measure could be placed on the November 2022 ballot or any other ballot. Next Steps Staff requests that the City Council provide direction on whether it wishes to pursue one or more tax measures for the November 2022 election. Should the Council choose to move forward, then staff will engage the services of a professional polling firm and a public information consultant to assist with next steps. FISCAL IMPACT There is no fiscal impact associated with tonight's study session. The amount of revenue raised by a future ballot measure will depend on the measure pursued and its associated tax rate. Exhibits: • Presentation 2 Study Session on Potential Tax Measures February 22, 2022 • Business License Tax Study BURLINGAME C A I. . `-" I t Business Tax Analysis 160 Ordinance Review Presented by Josh Davis HdLO Companies The purposes of this are to provide a guided exploration of different tax structures while evaluating how closely each structure aligns with the City's goals and values. The objective of this study is to recommend a tax structure that modernizes the code, increases revenue, and transforms the City's business license structure to be equitable for all businesses in Burlingame. Recommended Tax Policy Outcomes: Increased fairness and equity in rates for local businesses Simplification of the tax structure Increased revenues to the City Increased efficiency for City operations $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 L $587,729 FY 2017 $590,692 FY 2018 $589,737 FY 2019 $579,251 FY 2020 $583,600 FY 2021 Est # of Last Ord. City Name Population Businesses* Tax Type Est. Revenue Revision Belmont 26,941 3,074 Employee and Flat Rate $ 880,000 1993 Burlingame 30,889 5,897 Flat Rate $ 5891737 2001 Foster City 33,693 3,714 Gross Receipts $ 1,764,875 2013 Menlo Park 34,138 5,491 Gross Receipts $ 2,295,367 1975 Millbrae 22,394 2,385 $ 381,177 2004 Employee & Gross Receipts Redwood City 16,175 85,319 Employee $ 2,697,658 2018 San Bruno 42,807 4,060 Gross Receipts $ 2,176,473 2019 San Carlos 30,185 4,245 Employee $ 1,020,000 2003 San Mateo 104,570 21,337 Gross Receipts $ 6,265,284 1984 South San Francisco 67,789 5,590 Employee & Flat Rate $ 1,805,595 2008 Grouoina Total Business Count Total Taxes General Commerce/Retail 1 712 $71,200 Rental (Commercial & 70 $7,000 Residential) Service 2,004 $200,400 Professional 1,596 $159,600 Administration/Research & 77 $7,700 Development Contractors 1,377 $137,700 5,836 $583,600 Number of Businesses 5,836 As indicated in the model, a simple increase could keep the existing structures in place while yielding higher revenues to the City. Number of Businesses Business Tax Total Taxable Gross (Est. $2.3 Billion Est. FY 21-22 Revenue 20% Increase 40% Increase 5,836 $583,600 $700,320 $817,040 This option has the benefit of spreading the burden of an increase across multiple business types. The model includes basic rate increases for standard categories but can be further expanded or contracted to accommodate a different method of the City's choosing. This option is simple to administer - everyone is charged the same rate, while at the same time it allows the City to increase revenue Number of Businesses Tax Basis Base Rate Gross Receipts Tax Taxable Gross Receipts Total Count $25 Flat Rate (first $25,000 Gross Receipts + $1 per thousand dollars of Gross Receipts (0.001 x Gross Receipts) Tax Amount Tax Amount $1.25 per $1 per thousand Base Rate at $25 per Business thousand gross receipts over $25K gross receipts over $25K 5,836 $2.3B $145,900 $21230,767 $21788,458 TOTAL $2,376,667 $2,934,358 This option creates different rates for different business classifications. This models affords the most flexibility for increasing revenues while accommodating certain business categories. Additionally, the revenue yield is higher than in any of the other previous models. Cate ories Base Kate Gross Kecei is I ax Kate General Commerce/Retail 0.001 X Gross Rental (Commercial and Residential) 0.002 X Gross Service 0.002 X Gross $25 Flat Rate per Business (first $25k Professional in Gross) 0.003 X Gross Administration/Research & Development 0.003 X Gross Contractors 0.002 X Gross Number of Est. Taxable Gross Base Rate $25 per CatarinrlPc Micinaccac Raraintc himinAGc Tntal Fct Anniml rrncc Raraintc TaY General Commerce/Retail 712 $669,835,011 $ 17,800 $1,304,070 Rental (Commercial and Residential) 70 $36,338,070 $ 1,750 $69,176 Service 2,004 $862,416,375 $ 50,100 $1,621,633 Professional 1,596 $594,920,527 $ 39,900 $1,665,062 Administration/Research & 77 Development $63,364,633 $ 1,925 $184,319 Contractors 1,377 $146,205,301 $ 34,425 $223,561 TOTAL $5,216,720 Forecasting the potential size of the City's Cannabis market is beyond the scope of the business license tax study. But preliminary numbers indicate that if the City were to capture significant market share, which may be a challenge given the expansion of delivery and retail services in the area, at a rate of 4% the City could stand to gain between $300,000 - $500,000 per year in revenue from the four Cannabis delivery services businesses recently authorized by Council. This opportunity for revenue generation can be done through creation of a separate classification or class for cannabis businesses within the existent business license ordinance provisions. $500,000 $450,000 r $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2023* 2024* 2025* 2026* *These are revenue estimates and should not be relied upon for budgeting purposes. We recommend that the City consider adopting a gross receipts tax structure similar to Model 3. Model 3's gross receipts tax structure allows the City to charge different rates based on business activity while improving equitability and increasing business tax revenue. The basic structure of Model 3 should be fine- tuned to fit the City's unique structure, particularly the large number of outside service firms providing personal services in the City. h 1wj a 0 SUBMITTED BY CONTACT HdL Companies Josh Davis 120 S. State College Blvd., Ste 200 T: (714) 879-5000 Ext. 383 Brea, CA 92821 E:jdavis@hdlcompanies.com hdlcompanies.com Table Of Contents EXECUTIVE SUMMARY 3 SECTION 1— CITY OF BURLINGAME & COMPARATIVE JURISDICTIONS 5 BUSINESS TAX - ANALYSIS 5 BUSINESS TAX - AVERAGE EFFECTIVE TAX RATES 6 CITY OF BURLINGAME: BUSINESS TAX - RATE SCHEDULE SUMMARY 6 CITY OF BURLINGAME: SIMILAR AND SURROUNDING JURISDICTIONS 7 COMPARISON CITIES SUMMARY TABLE (USING FY 18-19 DATA) 7 RATE COMPARISON - CITY OF BURLINGAME VS. NEIGHBORS 11 SECTION 2 — CATEGORY & TAX ANALYSIS 13 LICENSE CLASSIFICATION AND RATE TYPES 13 POTENTIAL ADMINISTRATIVE EFFICIENCIES 14 MODEL 1: EXISTING CATEGORIES WITH SIMPLE INCREASES 15 GROSS RECEIPTS TAX — REPLACE ALL CATEGORIES WITH GROSS RECEIPTS TAX 15 MODEL 2: GROSS RECEIPTS TAX — SINGLE GROSS RECEIPTS RATE 16 MODEL 3: GROSS RECEIPTS TAX — CLASSIFICATION -BASED RATES 18 PROPOSED RATES COMPARISON 20 APPENDICES 22 CITY DETAIL RATES 22 HdL© Companies 2 1 P a g e Executive Summary Background The City of Burlingame (City) requires all businesses operating within the City to obtain a business license and pay business license tax per section 6.04.040 of the City's Municipal Code (Code). This revenue is locally controlled and funds essential services. Therefore, the City commissioned the HdL Companies ("HA" or "we", "us", "our", or similar terms) to prepare this tax study to identify methods of generating additional local funds and potential efficiencies from modernizing the City's business license code. This tax study provides a guided exploration of different tax structures while evaluating how closely each structure aligns with the City's goals and values. Two of the most pervasive goals of a modernization project are "tax simplification" and "equitability." To put it another way, the proposed changes should not only modernize the code and increase revenue but, ideally, also move a city's business license structure up and to the right in the four quadrants presented below in Chart 1. Chart 1: Key attributes of modern business tax structures Tax Structure Simplification a m x v ~ ♦ rD ♦ m v m w ♦ n w ♦ ♦ �. O X C � � fl/ N Complex Tax Implementation Recommendation We recommend that the City consider adopting a gross receipt tax structure similar to Model 3 on page 18. Model 3's gross receipts tax structure allows the City to charge different rates based on business activity while improving equitability and increasing business tax revenue. The basic structure of Model 3 should be fine-tuned to fit the City's unique structure, particularly the large number of outside service firms providing personal services in the City. Report Structure & Key Findings This report is divided into two major sections. Below is a roadmap that will help the reader navigate this report. Section 1 - Pages: 5 to 12 In the first section, we review the City's current revenue and tax structures to establish fundamental facts about the City used throughout the analysis and to give context to the analysis. We also show how the City's structure compares to other cities of interest. The City's flat -rate structure presents two challenges. While it does protect somewhat against downturns in the economy, it fails to capture up -turns in the economy. And, while it is simple to administer, it presents a much higher effective tax rate on small businesses than on large ones. Additionally, a comparison of the City and its neighbors indicates that the City might capture additional business tax revenue on a per business basis, particularly from larger businesses who are benefitting from their access to the City's markets. HdP Companies 31.-' a g e Section 2 - Pages: 13 — 19 In this section, we review three possible models for a tax structure. Models 2 and 3 are based on gross receipts, and both would result in potentially significant increases in revenue. Model 2 is as simple as the current flat fee with potentially three times as much revenue. Ultimately, we recommend model 3 because of its ability to impose variable rates without too much additional complexity while potentially yielding $4 million to $5 million a year in business tax revenue. HdP Companies 41 P a g e SECTION 1 — City of Burlingame & Comparative Jurisdictions Business Tax - Analysis The City currently issues over 5,800 business licenses annually and, over the last five fiscal years, has generated an average of $586,000 in business license tax revenues per fiscal year. For the purpose of this study, comparisons are based on the sample data provided by the City, which consists of 5,836 businesses with a total potential business tax revenue for FY21-22 of $583,600. The current tax is levied at a flat rate of $100 per business per year. As you can see in Chart 2, the City's business tax revenue peaked in Fiscal Year (FY) 2017-2018. The revenues have been relatively flat (with small declines). That said, the potential revenues for FY 21-22 appear to be rebounding, though not to pre -pandemic levels. $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Chart 2: 5-year revenue trend City of Burlingame Business Tax Revenue Recent Trend FY2017 FY2018 FY2019 FY2020 FY2021 Chart 3, which compares the percentage change in business tax revenue to the percentage change in sales tax, is also telling. As you can see, sales tax was growing in 2019 and rebounding in 2021. But, because of the City's flat -fee structure, the City was unable to capture any of that growth to fund services for the community. 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% Chart 3: Comparing retail growth against the broader economy Business Tax and Sales Tax Percent Change Year to Year (YTY) FY2017 FY2018 FY2019 FY2020 FY2021 —•--Bus Tax % Change YTY —•—Sales Tax % Change YTY *FY 2021 is based on an estimate for sales tax since reporting may not yet have been completed. HW Companies 51 P a g e Business Tax - Average Effective Tax Rates The City's flat -rate structure has the advantage of simplicity and certainty —every business knows what it will pay. But by their nature, flat fees impose a higher effective tax rate on small businesses than on larger businesses. Given that the City's flat rate is a reasonable $100, the impact on smaller businesses may be tempered. The gap, however, between the effective tax rate paid by small businesses (see the green bars in Chart 4) and large businesses (the red bars in Chart 4) is significant. (Gross receipts were estimated to calculate the effective tax rates.) Chart 4: Examples of effective tax rates with the $100 flat rate Sample of Current Effective Tax Rates Contractor Genera I/Reta i I/H ote I Rental(Comm & Resid) Service/Professional 0.000% 0.050% 0.100% 0.150% 0.200% 0.250% ■S ■M ■L City of Burlingame: Business Tax - Rate Schedule Summary The City's economy is stratified in an interesting way (See Chart 5 below). Based on the available data, it appears that the City's largest tax base is contractors and service providers that are outside the City. This can make enforcement challenging since these contractors generally lack a permanent place of business in the City. Chart 5: Top five rate types in the City's current tax structure ■ CONTRACTOR - OUTSIDE CITY ■ GENERAL - WITHIN CITY ■ GENERAL - OUTSIDE CITY HOME OCCUPATION ■ All Others HdP Companies 61 ' a g e City of Burlingame: Similar and Surrounding Jurisdictions The City appears to have room to grow its revenue. While the City has one of the larger license counts, the $100 flat fee means that its per business revenues are among the lowest of the comparison jurisdictions. Below is a summary table of the comparisons, which highlights population, the estimated number of licensed businesses, and estimated annual revenue. Below the table are some key graphics showing how the City compares to otherjurisdictions of interest regionally. (The Comparison Details for the neighboring jurisdictions can all be found in the Appendices.) For purposes of comparison we use the fiscal year 18-19 data. We do so for two key reasons. First, that is the year with publicly available data for comparison. Second, it is pre-COVID and so avoids the 'noise' in the data caused by the impact of the pandemic on the City. Comparison Cities Summary Table (Using FY 18-19 data) Table 1: Comparison Data Est. • Est. &evenue : • . Jurisdiction Name Businesses Tax Type Population Revision Belmont 26,941 3,074 Employee and Flat $ 880,000Rate 1993 Burlingame 30,889 5,836 Flat Rate $ 589,737 2001 Foster City 33,693 3,714 Gross Receipts $ 1,764,875 2013 Menlo Park 34,138 5,491 Gross Receipts $ 2,295,367 1975 Millbrae 22,394 2,385 Employee & Gross $ 381,177 2004 Receipts Redwood City 85,319 16,175 Employee $ 2,697,658 2018 San Bruno 42,807 4,060 Gross Receipts $ 2,176,473 2019 San Carlos 30,185 4,245 Employee $ 1,020,000 2003 San Mateo 104,570 21,337 Gross Receipts $ 6,265,284 1984 South San Francisco 67,789 5,590 Employee & Flat Rate $ 1,805,595 2008 HdL* Companies 7 1 P a g e Chart 6: Population comp Est. Population During FY18/19 by Jurisdiction San Mateo 104,570 Redwood City 85,319 South San Francisco 67,789 San Bruno 42,807 Menlo Park 34,138 Foster City 33,693 Burlingame T 30,889 - San Carlos T 30,185 Belmont 26,941 Millbrae 22,394 0 20,000 40,000 60,000 80,000 100,000 120,000 c.nart 1: License count comparison Est. Count of Businesses FY18/19 by Jurisdiction San Mateo 21,337 _ Redwood City 16,175 _ Burlingame 5,897 South San Francisco 5,590 Menlo Park T 5,491 San Carlos T 4,245 San Bruno 4,060 W Foster City 3,714 W' Belmont 3,074 ■l Millbrae 2,385 0 4,000 8,000 12,000 16,000 20,000 24,000 HdP Companies 81 1 a g e \I IOIL U. oua111c2� I ail I cvcINuc a.an I NVOINwl Approx. FY18/19 Business Tax Revenue by Jurisdiction (in thousands $) San Mateo $6,265 Redwood City $2,698 Menlo Park $2,295 -I San Bruno $2,176� South San Francisco $1,806 Foster City $1,765 San Carlos $1,020 Belmont $880 Burlingame _ $590 Millbrae $381 $0 $1,000 $2,000 $3,000 $4,000 Thousands $5,000 $6,000 $7,000 Chart 9: Business Tax per capita comparison Est. FY 18/19 Business Tax Revenue Per Capita Menlo Park $67 San Mateo $60 Foster City $52 San Bruno $51 San Carlos $34 Belmont $33 Redwood City 1 $32 4 South San... $27 Burlingame $19 Millbrae $17 $0 $10 $20 $30 $40 $50 $60 $70 $80 HdL* Companies 91 P a g e Chart 10: Business Tax per business comparison Est. FY 18/19 Business Tax Revenue Per Business San Bruno 1 $536 Foster City 1 $475 Menlo Park 1 $418 South San... $323 Md San Mateo j $294 Belmont $286 San Carlos 1 $240 Redwood City 1 $167 Millbrae 1 $160 Burlingame 1 $100 MM $0 $100 $200 $300 $400 $500 $600 HdL* Companies 101 P a g e Rate Comparison - City of Burlingame vs. Neighbors Current Rate Comparison (Table 2) Small Craft Business with 1 employee and less than $20K in gross receipts Restaurant with 8 Employees and $350K in gross receipts Hair Salon with 15 Employees and $600K in gross receipts Repair Service Business with 2 Employees and $150K in gross receipts Doctors Office with 20 Employees (4 doctors) and $2 million in gross receipts Professional Firm with 15 employees (8 professional) and $1.1 million in gross receipts Small Contractor with 1 Employee and $75K in gross receipts Technology Research Firm with 5 Employees and $800K in gross receipts Commercial Rental with 1 Employee, 2 units, and $1.5 million in gross receipts Car Dealership with 10 employees and $10 million in gross receipts **Redwood City utilizes a cap of $5,966. $ 100.00 $ 376.00 $ 100.00 $ 68.25 $ 169.00 $ 148.00 $ 100.00 $ 1,200.00 $ 263.00 $ 68.00 $ 362.00 $ 326.00 $ 100.00 $ 2,250.00 $ 450.00 $ 127.75 $ 628.00 $ 619.00 $ 100.00 $ 300.00 $ 113.00 $ 72.50 $ 134.00 $ 164.00 $ 100.00 $ 1,041.00 $ 1,500.00 $ 1,577.75 $ 1,214.00 $ 1,214.00 $ 100.00 $ 866.00 $ 825.00 $ 1,376.50 $ 939.00 $ 939.00 $ 100.00 $ 341.00 $ 100.00 $ 80.00 $ 114.00 $ 128.00 $ 100.00 $ 750.00 $ 600.00 $ 272.00 $ 248.00 $ 269.00 $ 100.00 $ 165.00 $ 1,125.00 $ 106.40 $ 168.00 $ 1,223.50 $ 100.00 $ 300.00 $ 7,500.00 $ 2,606.50 $ 664.00 $ 7,343.50 Current Rate Comparison (Table 3) Small Craft Business with 1 employee and less than $20K in gross receipts Restaurant with 8 Employees and $350K in gross receipts Hair Salon with 15 Employees and $600K in gross receipts Repair Service Business with 2 Employees and $150K in gross receipts Doctors Office with 20 Employees (4 doctors) and $2 million in gross receipts Professional Firm with 15 employees (8 professional) and $1.1 million in gross receipts Small Contractor with 1 Employee and $75K in gross receipts Technology Research Firm with 5 Employees and $800K in gross receipts Commercial Rental with 1 Employee, 2 units, and $1.5 million in gross receipts Car dealership with 10 employees and $10 million in gross receipts $ 100.00 $ 50.00 $ 31.00 $ 119.75 $ 100.00 $ 240.00 $ 315.00 $ 195.00 $ 100.00 $ 310.00 $ 457.00 $ 115.00 $ 100.00 $ 160.00 $ 201.00 $ 85.00 $ 100.00 $ 750.00 $ 1,511.50 $ 996.25 $ 100.00 $ 750.00 $ 863.50 $ 1,793.25 $ 100.00 $ 125.00 $ 53.00 $ 199.25 $ 100.00 $ 390.00 $ 571.00 $ 100.00 $ 100.00 $ 750.00 $ 970.00 $ 119.75 $ 100.00 $ 2,750.00 $ 75.00 $ 299.75 $ 75.00 $ 1,948.00 $ 2,930.00 $ 3,260.00 $ 1,480.00 $ 985.00 $ 100.00 $ 4,730.00 $ 90.00 $ 75.00 Current Rate Comparison Chart (Select Jurisdictions & Examples) $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $ 0 ........ Big Retailer ■ Burlingame Chart 11: Comparing rates across cities Hotel/Rental Property Doctor's Office Professional Firm Commercial Rental ■ San Mateo San Bruno Redwood City San Carlos Menlo Park ■ Foster City ■ Belmont Car Dealership HdE° Companies 121 SECTION 2 — Category & Tax Analysis The City requested that HdL conduct an analysis of the current tax structures as they relate to business licenses and explore options for modifying the rates and categories. In Section 1, HdL prepared summaries of each classification and, to the extent data were available, provided a breakout of the number of businesses and their contribution to the local funding for essential City services. We also provided comparisons to neighboring jurisdictions to give an idea of how the various tax structures and markets in nearby municipalities are creating different revenue outcomes. In this section, we provide options for modifying the City's business tax rates and classifications. Using the data compiled in section 1 of this report on current license revenues, we developed models to estimate potential fiscal impacts to the City from the different models. You can find a summary chart on page 17 that provides a quick look at each proposed model's impact on the City revenues and the business community. License Classification and Rate Types The City currently has a simple, flat -rate structure. We propose that the City adopt six basic categories that are more reflective of Burlingame's economic makeup. The definitions below are general and not meant to be complete definitions that would appear in the municipal code. General Commerce/Retail: These are retailers, wholesalers, hoteliers, restaurateurs, and manufacturers. All these businesses are likely to contribute to your tax base in other ways (i.e., property tax and sales tax) and often have lower profit margins. Rental (Commercial & Residential): This category includes any business that leases, rents, or provides use of real property to another individual or entity for compensation. Examples include but are not limited to commercial leasing, residential rental, parcel leasing, etc. Service: This is the offering of services that require minimal to no higher education training. This is also the default category for any business that is not specifically defined in one of the other five categories. Examples include but are not limited to hair stylists, gardeners, nail salons, etc. Administration/Research and Development: This category includes any business that operates in purely an administrative basis and/or explores or develops new products/services for governmental or market application such as research firms or tech start-ups. Professional: This is the offering of services that require a rigorous amount of training through any type or trade, higher education, or vocational institutions that exclusively certifies, complete obtainment of skills and the ability to offer such professional services. Examples include but are not limited to doctors' office, law office, consultant firm, etc. Contractor: These are persons or firms that are carrying on the business of contractor, subcontractor, or builder particularly the construction or repair of any buildings. Examples include but are not limited to construction, plumbing, HVAC, etc. Table 4: Approximate grouping of City's Businesses by the proposed categories CONTRACTOR 1,377 $ 137,700 SERVICE 2,004 $ 200,400 GENERAL COMMERCE/RETAIL 712 $ 71,200 ADMINISTRATION/RESEARCH & DEVELOPMENT 77 $ 7,700 RENTAL (COMMERCIAL & RESIDENTIAL) 70 $ 7,000 PROFESSIONAL 1,596 $ 159,600 TOTALS 5,836* $ 583,600 *We have excluded exempt businesses 131 HdL© Companies Potential Administrative Efficiencies We have conducted a preliminary review of the City's administrative provisions in its Business Tax ordinance. Below are some suggestions about administrative efficiencies. We will conduct a more complete review if the City decides it wants to implement changes to its tax structure. We commend the City for having a clear statement of intent that this is a revenue measure. (sect. 6.04.010) This statement of intent is important for separating revenue measures and regulatory measures. Section 6.04.060 requires taxes to be paid "...at the office of the license collector." The City may want to consider updating this language to allow telephonic and online renewals and applications. Paragraph 6.04.070(c) imposes stiffer penalties on two specific types of businesses, commercial parking facilities and close out sales. The City may want to confirm with legal counsel that there remains a reasonable basis for the stiffer penalties on these two business types. Paragraph 6.04.070(d) has good language allowing the City to recapture costs when enforcement steps are taken. The City could strengthen this language by expressly including collection costs as being one of the necessary categories of costs that can be recouped. Section 6.04.080 includes the following clause: The date of commencement of business shall be deemed the date of application whenever an application is filed after the commencement of business. (Ord. 1725 § 2, (7978)) The City may want to change or remove this clause. Read literally, this clause may prevent the City from pursuing back year liability since it effectively sets the start date of the business on the date of the application and no earlier. Section 6.04.120 applies a charge of $10.00 for a duplicate license. Given the ease of producing copies these days, the cost to collect and track this charge may exceed the charge itself. We recommend removing the charge. Section 6.04.130 refers to amending a license to allow for a change of address. Section 6.04.230 then requires that new approvals be obtained for the new location. It may be simpler from an administrative position to not allow a transfer on the basis of a change of address and just require a new application for a license at the new location. Section 6.04.160 requires an application on a sworn, signed form. This adds administrative burden (since paper copies must be tracked and stored and neither telephonic nor online applications would be allowed) and, arguably adds no real benefit, given that section 6.04.180 rightly indicates that nothing in the application is conclusive. In section 6.04.210 the first appeal is to the same person who made the decision, the license collector. A better practice may be to have the appeal be to the Finance Department so that the person making the decision is not the first recourse for appeal. Section 6.04.280 addresses revocation hearings. We recommend that the revocation hearing first be heard before the City Manager with an appeal to the City Council. This minimizes certain difficulties with public disclosure of confidential matters and allows another opportunity to resolve the matter before it becomes a matter for the Council to resolve. In section 6.04.160 the business license applicant is required to "set forth such information as may be necessary properly to determine the amount of the license tax to be paid by applicant." The City may want to expand this to require the applicant to report additional information like gross -receipts or number of employees that are important for City administration but not necessary for determining the amount of tax to be paid. 141 HdL© Companies Additional General Comments from the Preliminary Review Record keeping. The City may also want to require businesses to retain records for four years since the statute of limitation may reach back that far. "License" vs "Certificate". The use of "license", and ultimately the standard usage and interpretation as an authorization, can create confusion for the City and the business community. The City may wish to consider eliminating all references and concepts of "license" and replace with a more appropriate "certificate" or "registration" based language. Rules and Regulations The City may want to consider additional enforcement authority language. For example: "The collector may adopt rules and regulations that are not inconsistent with the provisions of this chapter, as may be necessary or desirable to supplement or clarify such provisions or aid in their enforcement." Model 1: Existing Categories with Simple Increases The City may elect to retain the existing structure while modifying the tax amounts for each category. Keeping the current structure in place would eliminate the need to create different categories and allow for a much simpler implementation for the City and the business community. It would not avoid the need for an election since it would entail an increased tax rate. Table 5: Estimated revenue from a simple flat -fee increase Model 1 — Highlights and Impact Review As indicated in the model above, a simple increase could keep the existing structures in place while yielding higher revenues to the City. The City could apply rate increases across the board (as shown in the table) or only apply the increases to specific categories by, for example, increasing the rates on professionals and residential property rental by 60% while increasing other rates by 20%. The drawback of model 1 is that the tax remains regressive. In fact, because it is a flat fee, it becomes more regressive the higher the flat fee. Gross Receipts Tax — Replace All Categories with Gross Receipts Tax We now turn to consider two models that are variations on the theme of a gross -receipts -based tax. Over 60% of California cities use some form of gross receipts tax structure. Many of those cities use a standard rate multiplier to determine the tax amount owed, setting the rate for each business category. For example, a city may choose to charge $1 per thousand dollars of gross receipts (0.001 x Gross) for a retail business while charging a rate of $2.50 per thousand dollars of gross receipts (0.0025 x Gross) for service or professional businesses. 15� HdL© Companies The benefits of gross receipts -based taxes are the equity of their effective tax rate, ease of calculation, and potential for capturing revenue from growth in the economy. The drawback is that it exposes city revenues to the fluctuations of gross receipts in the economy. Gross Receipts Tax — Estimates Since we did not have complete information on gross receipts for the City's current businesses, we used estimates gleaned from other data sources. It is important to note that HdL has used multiple assumptions as outlined in the options below, which are meant to provide a baseline of the possible impact and should not be relied upon for precise budgeting. The following information was used as a basis for the tax tables and models in the options below. Table 6: Key estimates used in the gross -receipts models Model 2: Gross Receipts Tax — Single Gross Receipts Rate Model 2 reflects the potential revenues for converting the City tax to a single -rate -type gross -receipts model. This model is simple to administer —everyone is charged the same rate —but it allows the City to increase revenue. Table 7: Model 1—Potential Tax Structure Base Rate $25 Flat Rate (first $25,000 Gross Receipts) Gross Receipts Tax + $1 per thousand dollars of Gross Receipts (0.001 x Gross Receipts) The table below indicates the potential revenues from implementing a gross receipts tax with two options, $1 per thousand and $1.25 per thousand. Information for the estimates comes from the data in the section above. Table 8: Model 1 — Rough Estimates from a simple gross receipts structure 5,836 1 $2.313 1 $145,900 TOTAL $2,230,767 $2,376,667 $2,788,458 $2,934,358 161 HdL© Companies Model 2 — Highlights and Impact Review The "single rate" method of taxing on gross receipts provides an even distribution of the effective tax rate because all businesses subject to the tax will pay the same rate. Under this method, no cap is put in place, and therefore most of the revenues are received from the highest -grossing businesses. Model 2 expands revenue while keeping the tax structure simple and easy to understand for businesses and helping to decrease the effective tax rate on smaller businesses while asking larger businesses to pay their fair share too. Chart 12: Estimated Effective Tax Rates under a simple gross receipt model Current vs. New Effective Tax Rates 0.15% Small Business 0.125% 0.10% ■Current Tax Structure 0.02% Medium Business 0.125% $1.25/Thousand-Over $25,000 P 0.00 0 ■ $1.00/Thousand-Over $25,0000 Large Business 0.125% 0.10% 0.00% 0.05% 0.10% 0.15% 0.20% HdLP Companies Model 3: Gross Receipts Tax — Classification -Based Rates Model 3, as indicated below, would create different rates for different business classifications. The City may, for example, choose to implement a rate for the general commerce/retail business activities at a base rate of .001, recognizing the higher costs of goods sold and lower profit margins for these types of business as well as their contribution to other City revenues such as sales tax. Conversely, the City could consider implementing a higher rate for professionals and property rental. This model affords the most flexibility for increasing revenues while accommodating certain business categories. Model 3 utilizes the same base rate as the previous model. Tax Structure and Estimated Revenue The following table illustrates how gross receipts rates can vary by categories giving flexibility to the tax structure. The structure provided is just one example of how the City might utilize a gross receipt model. Should the City decide to update the Business Tax using a gross receipts tax model, HdL will work with the staff to finalize a structure that best serves the City's goals. Table 9: Basic tax structure for classification -based gross receipts categories General Commerce/Retail 0.001 X Gross Rental (Commercial and Residential) 0.002 X Gross Service $25 Flat Rate per 0.002 X Gross Professional Business (first $25,000 in 0.003 X Gross Gross) Administration/Research & 0.003 X Gross Development Contractors 0.002 X Gross Table 10: Estimated revenue from classification -based gross receipts CONTRACTORS 1,377 $ 146,205,301 $ 34,425 $ 223,561 GENERAL COMMERCE/RETAIL 712 $ 669,835,011 $ 17,800 $ 1,304,070 SERVICE 2,004 $ 862,416,375 $ 50,100 $ 1,621,633 ADMINISTRATION/RESEARCH & 77 $ 63,364,633 $ 1,925 $ 184,319 DEVELOPMENT RENTAL (COMMERCIAL & RESIDENTIAL) 70 $ 36,338,070 $ 1,750 $ 69,176 PROFESSIONAL 1,596 $ 594,920,527 $ 39,900 $ 1,665,062 5,836 TOTAL $ 5,216,720 181 HdL© Companies Model 3 — Highlights and Impact Review This option has the benefit of spreading the burden of an increase across multiple business types. The City has the option of modifying the rates and reassigning business types to different categories to account for concerns about impacts on different parts of the economy. The model above includes basic rate increases for standard categories but can be further expanded or contracted to accommodate a different method of the City's choosing. As is depicted in this model, there exists a combination of a tax base that is diversified in industry category as well as in large number of businesses that exist within these categories. This will further solidify a long-term revenue source for the City and any long-term budgetary needs. Cannabis Forecasting the potential size of the City's Cannabis market is beyond the scope of the business license tax study. But preliminary numbers indicate that if the City were to capture significant market share, which may be a challenge given the expansion of delivery and retail services in the area, at a rate of 4% the City could stand to gain as much as $500,000 per year in revenue from the four Cannabis delivery services businesses recently authorized by Council. The opportunity for revenue generation can be done through creation of a separate classification or class for cannabis businesses within the existent business license ordinance provisions. 191Page HdL© Companies Proposed Rates Comparison Table 11: Comparison of Gross -Receipt Models of Hypothetical Businesses Small Craft Business with 1 employee and less $20K in gross receipts $ 100 $ 25 $ 25 Restaurant with 8 employees and $350K in gross receipts $ 100 $ 350 $ 350 Hair Salon with 15 employees and $600K in gross receipts $ 100 $ 600 $ 1,175 Repair Service Business with 2 Employees and $150K in gross $ 100 $ 150 $ 275 receipts Doctor's Office with 20 employees (4 doctors) and $2 million in $ 100 $ 2,000 $ 6,000 gross receipts Professional Firm with 15 employees (8 professional) and $1.1 $ 100 $ 1,100 $ 3,300 million in gross receipts Small Contractor with 1 Employee and $75K in gross receipts $ 100 $ 75 $ 125 Technology Research Firm with 5 Employees and $800K in gross $ 100 $ 800 $ 2,350 receipts Commercial Rental with 1 Employee, 2 units and $1.5 million in $ 100 $ 1,500 $ 3,000 gross receipts Car Dealership with 20 employees and $10 million in gross receipts $100 $ 10,000 $ 10,000 Estimated Totals $1,000 $ 16,600 $ 26,600 20 HdLIP Companies Chart 13: Comparing the gross -receipts models $12, 000 $10,000 $ 8, 000 $6,000 $4,000 $2,000 $0 di Small Craft Restaurant Business Hair Salon 11� oil Repair Service Doctor's Office Professional Business Firm ■ Model 2 ■ Model 3 Small Technology Commercial CarDealership Contractor Research Firm Rental 21 1 Page HdLIP Companies Appendices City Detail Rates Belmont, CA Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: 12-16 33,693 San Mateo County April 27, 1971 $129,733 19.84 square miles 8,685 people per square mile All annual licenses expire on the last day of the 12th month from which businesses started conducting business in the City. Rate Structures And Fees — Penalties: Sec.12-16 Whenever an initial license or annual license renewal is not paid within thirty (30) days after commencing business or within thirty (30) days of due date, then said license is declared delinquent and the collector shall thereupon add to said license and collect a penalty of twenty-five (25) per cent of the license so delinquent. Thereafter, for each thirty -day period that the license remains unpaid, an additional sum of twenty-five (25) per cent shall be added thereto and collected as a penalty. Said penalty shall not exceed one hundred (100) per cent of the license fee. City Of Belmont Business License Tax Rates & Fees: Sec 12-26 The below schedule of fees, including but not limited to the per employee fees, minimum tax, and license fees shall be adjusted annually pursuant to the Bay Area Consumer Price Index (BACPI) over the previous calendar year. The first such adjustment shall occur on July 1, 1991, based upon the 1990 calendar year BACPI. Category Employee Tax Rates General Business Tax $341 Plus Number of FT/PT Employees + $35 Per Full Time Employee + $11 Per Part Time Employee HW Companies 221 Category Prof. & Emp. Tax Rates Professional and Semi -Professional $341 per Pro/Semi + Employee Schedule Real Estate Brokers $112 per Agent + Employee Schedule *Rates on not included in current business tax fee schedule and are based on similar fees. Category Unit Tax Rates Automobile Parking or Storage $341 + $2.18 per Parking Space Service Stations $171 per Pump + Employee Schedule Taxicab $341 + $73 per Vehicle Category Tax Rates Advertising on Vehicles by Sign, Sound, Searchlight $341 Advertising by use of Signs $341 + $1.12 per Sqft (non -Luminous) Advertising by use of Signs $341 + $1.97 per Sqft (Illuminated) Advertising by Distribution of Samples Handbills $341 + Employee Schedule Advertising by use of vehicle $341 + $73 per Vehicle Category Gross Receipt Tax Rate Laundry Equipment and/or Coin -Op* 1.5% of first $21,755 of gross receipts: 0.75% of gross receipts in excess of $21,755 Video/Vending Machines* 15% of first $2,176 of gross receipts 5% of gross receipts in excess of $2,176 *But not less than the General Tax. Category Tax Rates Rental of residential property (4 or more units) $37 per unit but not less than $341 Commercial Rental $118 per building Or $0.59 per Sqft, whichever is greater and not less than general Tax HW Companies 231 Category Flat Tax Rates Auctioneer $341 Billiard parlor $1,130 Bowling alley $1,130 Christmas Trees $171 Contractors $341 Dance per Night* $50 Escort Service $4,514 Financing, including Savings and Loans —Loan Companies* $175 Hotel and Motel $341 Itinerant* $341 Junk dealer* $341 Massage Parlor $4,514 Shooting Gallery* $1,130 Vehicles, Delivery, not paying any other license* $341 HdL© Companies 241 Menlo Park, CA Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: 5.04.060 CITY OF MENLO . PARK, 34,138 San Mateo County November 23, 1927 $160,784 9.99 square miles 3,473 people per square mile There exist, a daily license, monthly license, quarterly license, semi-annual license, and annual license. All license taxes, under the provisions of vary in the day and time in which they are due. The license tax amount is entirely dependent on gross receipt amounts, and the license tax amount is reflective of this variability. License Type Due Date Specifications Daily License Due on effective date, delinquent at 5:00 p.m. on due date. Monthly License Due first day of each month, delinquent at 5:00 p.m. on the tenth day of the month. Due on the first day of January, April, October, Quarterly License and July, delinquent at 5:00 p.m. on the twentieth day of the first month in which the quarterly license is due. Due on the first day of January and July, Semi -Annual License delinquent at 5:00 p.m. on the twentieth day of the first month in which the semi-annual license is due. Annual License Due on the first day of January, delinquent at 5:00 p.m. on January 31. Rate Structures and Fees — Penalties: 5.04.060 Annual license All delinquent licenses shall be added a penalty of fifteen percent of the amount of the tax due for the period, and an additional fifteen percent for each month delinquent thereafter. The amount that is added to the penalty shall not exceed sixty percent of the total amount of the license tax due. HW Companies 251 City of Menlo Park Business License Tax Rates & Fees: 5.12.020 Every person that engages in or carrying on any profession, trade, calling, occupation, or business the City shall be an annual license fee in accordance with the amount of annual gross receipts generated. These rates are illustrated in the table below. When gross receipts exceed two million dollars, the license fee is seven hundred fifty dollars plus two hundred fifty dollars for each million or potion up to thirty million dollars. When gross receipts exceed thirty million dollars, the license rate is a maximum of eight thousand dollars. Annual Gross Receipts Annual License Fee Over But Not Exceeding Flat Tax Rates $0 $25,000 $50 $25,000 $50,000 $75 $50,000 $75,000 $100 $75,000 $100,000 $125 $100,000 $200,000 $160 $200,000 $300,000 $200 $300,000 $400,000 $240 $400,000 $500,000 $275 $500,000 $600,000 $310 $600,000 $700,000 $350 $700,000 $800,000 $390 $800,000 $900,000 $425 $900,000 $1,000,000 $460 $1,000,000 $2,000,000 $750 HW Companies 261 { of FosrF9 Foster City, CA /yC0RPpRATE� Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: 5.20.010 33,693 San Mateo County April 27, 1971 $129,733 19.84 square miles 8,685 people per square mile All annual license taxes shall be due and payable in advance on the first day of January of each year based on gross receipts during the prior calendar year ending December 31; provided, that license taxes covering new operations commenced thereafter may be prorated for the balance of the license period based upon an estimate of the anticipated gross receipts for that year. Rate Structures And Fees — Penalties: 5.20.020 For failure to pay a license tax when due, the collector shall add a penalty of ten percent of the license tax at five p.m. on the sixtieth day after the due date thereof, and an additional ten percent at five p.m. on the last day of each month thereafter. The amount of such cumulative penalty to be added shall in no event exceed one hundred percent of the license tax due. City Of Foster City Business License Tax Rates & Fees: 5.24.010 Every person who engages in business at a fixed place of business within the city shall pay a license tax of seventy- five cents per one thousand dollars (or 0.075 percent) of gross receipts or part thereof subject to the following: Business Type Tax Rate Inside (Fixed Place) Businesses Gross Receipts X $0.75 per thousand Not less the $100 Not exceeding $25,731* General Contractors Gross Receipts X $0.75 per thousand Not less the $200 Not exceeding $25,731* Specialty or Solicitor Gross Receipts X $0.75 per thousand Not less the $100 Not exceeding $25,731* Ij *City tax cap is based on the year-to-year CPI adjustments. HW Companies 271 Millbrae, CA Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: 7.05.180 CM) MILLRRAE 23,154 San Mateo County January 14, 1948 $98,533 3.26 square miles 6,927 people per square mile Annual License: Each business shall, for purposes of paying the business license tax, be categorized by the tax collector as conducting business under one of the following: A. Fiscal Year Period. Fiscal year period shall commence on July 1 st and end on June 30th. Rate Structures And Fees — Penalties: 7.05.260 If a fiscal year business license tax is not paid in full by August 15th of each fiscal year or, in the case of newly established businesses, by the commencement of business in the city, the tax collector shall A. Impose a thirty percent penalty on the tax payment due and owing; and B. Impose an additional fifteen percent penalty per month of the license tax payment, or fraction thereof, that remains unpaid; and C. Impose an interest charge at the rate of one and one-half percent per month, or fraction thereof, on the amount of the license tax and penalties from the date on which the license tax was delinquent. City of Millbrae Business License Tax Rates & Fees: 7.05.120 Business license taxes for each business in the city shall be calculated in the manner described below; provided, however, that if gross receipts are the indicated tax measure but cannot be calculated or reasonably determined for any particular business, the tax shall be based upon its cost of operations. Gross Receipt Schedule Structure Tax Rate $750,000 - $5,000,000 $0.35 per thousand For those business classifications that are to pay a portion of their business license to based Over $5,000,001- $10,000,000 $0.25 per thousand on their gross receipt $750,000 of more. Over $10,000,000 $0.20 per thousand HW Companies 281 Business Type Tax Rate Administrative Headquarters $64 plus $4.25 per employee Contractors, General $160 Contractors, Specialty, and Subcontractors $80 Home Occupations $27 if gross receipts are less than $15,000 per year; otherwise based on applicable classification of business activity Manufacturing $64 plus $4.25 per employee, plus application of gross receipts schedule Massage Business Initial $370; renewal $210 Independent Massage Practitioner $105 Motel/Hotel $64 plus $4.25 per employee, plus application of gross receipts schedule Professionals $210 Real Estate Brokers $210 Real Estate Agents $53 Recreation and Entertainment $64 plus $4.25 per employee, plus application of gross receipts schedule Rental of Property, Commercial $64 plus $10.60 per 1,000 square feet Rental of Property, Residential $64 plus $5.30 per unit $64 plus $4.25 per employee, plus application of gross receipts Retailing schedule Seasonal Sales, Monthly $64 plus $120 per month Seasonal Sales, Yearly $64 plus $530 per year Services $64 plus $4.25 per room, plus application of gross receipts schedule Theaters $64 plus $.50 per seat Transportation of Persons and Goods $64 plus $64 per vehicle and driver Warehousing $64 plus $.32 per $1,000 cost of operations $64 plus $4.25 per employee, plus application of gross receipts Wholesaling schedule HdL° Companies 291 Redwood City, CA Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: Sec. 32.107 Redwood Cityl eal;,ania �dMieg qW 85,319 San Mateo County May 11, 1867 $90,461 34.67 square miles 3,955.0 people per square mile Annual License: All license taxes due hereunder shall be paid in advance in the lawful money of the United States at the office of the Director. All license taxes due hereunder shall be due and payable and delinquent as follows: Genera(: Except as provided in subdivision B hereinafter, all license taxes shall be due and payable on or before the first day of the period for which the license is issued and shall become delinquent thirty (30) calendar days thereafter. Rate Structures And Fees - Penalties Sec. 32.108 To all delinquent license taxes there shall be added a penalty of ten percent (10%) of the amount of the tax due plus an additional ten percent (10%) for each month delinquent thereafter providing that the amount of any penalty shall in no event exceed one hundred percent (100%) of the amount of the license tax due. City of Redwood Business Type General Business City Business License Tax Rates & Fees: Base Rate $114.00 Employee Rate $55 per employee Business Type Base Tax Unit Tax Residential Property Rental $68 $25 per unit of dwelling space in excess of 3 units Non-residential Property Rental $68 $25 per 1000 sq. ft. or fraction Real Estate Brokerage $68 $46 per salesperson or employee Dance Hall Operator $68 $678 flat annual Vehicle Wrecking Facility $68 $678 flat annual Christmas Tree Lot Sales Operation $68 $678 flat annual Commercial Advertising $68 $678 flat annual Fortunetelling $68 $678 flat annual HdE° Companies 301 Business Type Base Tax Unit Tax Junk Collector $68 $678 flat annual Pawnbroker $68 $678 flat annual Itinerant Vendor $68 $46 per week Solicitors/Hawkers $68 $46 per day Peddlers $68 $46 per person Curb Painters $68 $25 per day per person Carnival Operator $68 $564 per day Coin -Operated Device Activity $68 $13 per device Commercial Advertising Vehicle Operation $0 $68 Per Vehicle (Base Tax Not Applicable) Contracting (excluding any contracting business with gross receipts over $50,000.00) Business In $68 $46 flat annual Redwood City Sec. 32.155. — Maximum Tax Notwithstanding anything to the contrary contained in this Article, the annual business license tax payable for any one business shall not exceed: • $3,535.00 effective July 1, 2012; • $4,124 effective July 1, 2013; and • $4,811 effective July 1, 2014. HdE5 Companies 31 M. San Bruno., CA III r[Tr OF BAN BIR Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: 3.12.110 29,864 San Mateo County July 08, 1925 $135,220 5.51 square miles 5,368 people per square mile Annual Licenses. Unless otherwise specifically provided in this article, all annual license taxes shall be due and payable on the first day of August of each year and delinquent on the first day of September of each year. Rate Structures and Fees — Penalties: 3.12.120 If a person responsible for payment of a business license tax fails to pay such tax when due, there shall be added a penalty of twenty percent of such license tax on the last day of each month after the due date thereof. The amount of the penalty to be added shall not exceed one hundred percent of the amount of the license tax due. If, after a payment is made to the tax collector, the records of the taxpayer are examined, audited, or inspected and it is determined by the tax collector that the amount paid was, in fact, less than the amount due, the penalty applicable for failure to pay the tax when due shall begin to apply from the date the amount of the deficiency was delinquent rather than from the date of notice by the tax collector of the deficiency. City of San Bruno Business License Tax Rates & Fees: 3.16: business type cross Keceipts Hnnuai iax General Business Less than $75,000 $75 $75,000 or more, but less than $100,000 $100 Over $100,000 to $500,000 $110 + $5.25 per $5,000 Over $500,000 to $1,000,000 $530 + $4.00 per $5,000 Over $1,000,000 to $5,000,000 $930 + $2.75 per $5,000 Over $5,000,000 $3,130 + $1.65 per $5,000 HdL° Companies 321 uu.mn ic» i ypc ru ca Ui riaL-c Ui ouZIii icZ,.� vLLuNicu MI n ivai 1 an Central Administrative Offices— 999 square feet or less $150 Auxiliary units —Manufacturing. 1,000 — 2,499 square feet $250 2,500 — 4,999 square feet $350 5,000 — 9,999 square feet $550 10,000 square feet or more $850 business type Central Administrative Offices — Auxiliary units —Manufacturing (continued). ivumoer or tmpi 1-10 11 — 25 26 — 50 51 or more IGC� [� I ly [�] ail I.\ �1111 Fl ■ [:1:� $75 per employee $100 $110 + $5.25 per $5,000 $3,130 + $1.65 per $5,000 business I ype I ype of concession Quarterly I ax Amusement concessions Merry-go-round, Ferris wheel, dodgem, swing or other $75 mechanical device for the carrying of passengers Ball and ring throwing games, spin -the -wheel, mechanical and electrical games, shooting gallery, keno, lotto and similar $50 games of chance C. Sales of merchandise or foodstuffs, not in connection with $30 any game of chance business type Apartments and rooming houses Commercial property rental. Bowling alleys and similar games Boxing or wrestling exhibitions Carnivals and circuses Electrical musical devices Mechanical, electronic, and video amusement devices Nonresident Contractors and other businesses (Every person not having a fixed place of business in the city) Peddlers and solicitors Public Dances — Place of public dance > dancing is accompanied by mechanized music > dancing is accompanied by live or unmechanized music Shuffleboards Temporary Vendor Quarterly I ax $50 (base) + $1 per room (minimum 3 rooms) $50 (base) +$10 per 1,000 sgft $40 for each alley $200 for each exhibition $300 for the first day + $75 for each addl. day $25 per device $30 per device $40 per day + $10 per each addl. day $200 $450 $15 per game $40 per day + $10 per each addl. day HdE5 Companies 331 South San Francisco, CA Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate Structures And Fees - Renewal Cycles: 6.12.140 29,864 San Mateo County July 08, 1925 $135,220 5.51 square miles 5,368 people per square mile Unless otherwise specifically provided, all annual license taxes, under the provisions of this chapter and Chapters 6.04, 6.08, and 6.16, shall be due and payable in advance on the first day of January of each year ... Rate Structures and Fees — Penalties: 6.12.150 For failure to pay a license tax when due, the collector shall add a penalty of ten percent of said license tax on the thirtieth day after the due date thereof and an additional fifteen percent on the sixtieth day after the due date thereof. City of South San Francisco Business License Tax Rates & Fees: 6.16: Business Type Auctioneer Business and Personal Services Manufacturer Warehousing Wholesale/Retail Sales Distributor & Other Services Repair & Other Services$132,883.25 max Freight Forwarding Services Trucking Moving Van/Trucks Coin Operated Machines (See Ordinance for details) Commercial Parking Facility (See Ordinance for details) Construction Contractor > General 'A' or 'B' > Subcontractor or Specialty'C' Junk Collector/Recycler Medium Pawnbroker Annual Tax $132.50 per "Auction Day" $99.75 + $20.00 per employee/owner $132,883.25 max 1% of Gross Receipts 8% of Gross Receipts $199.25 $165.75 Higher of $266.00 or 4% gross receipts $664.75 $266.00 ompanies 341Page Business Type Peddler or Solicitor Other Peddlers > Single Perishable Product > Catering Truck > All Others Professional/Semi-Professional Public Utilities Recreation and Entertainment *Bowling Alley *Circus or similar exhibition *Carnival or similar event Rental of Residential Property (Hotels, Motels or Apartment house) Temporary Vendors Trailer and Mobile Home Parks Transportation of Persons Annual Tax $99.75 + $20.00 per employee/owner + $332.25 per vehicle used $186.50 $372.50 per vehicle $372.50 plus $13.50 per day in excess of 2 persons $199.25 + $199.25 for each addl. associate, partner or member of the professional corporation $6,644.50 $66.50 per alley $664.75 for 1st day + $132.50 add'I day $664.75 for 1st day + $132.50 add'I day $99.75 + $7.00 per unit (occupied or vacant) $66.50 per day $99.75 + $7.00 per space $332.25 per vehicle + $20.00 per employee HdE5 Companies 35I *FO San Carlos, CA Population: County: Incorporation: Estimated Median Household Income: Land Area: Population Density: Rate structures and Fees- Renewal Cycles: 5.04 29,864 San Mateo County July 08, 1925 $135,220 5.51 square miles 5,368 people per square mile Annual Business Registration: All businesses in the manufacturing, wholesale and retail; services, contractors, property rental, entertainment and utilities; all businesses in the professions category shall pay an annual business. Every person or entity engaged in the business of conducting, managing or operating an apartment house consisting of a building or buildings in the same ownership, constructed upon one parcel or upon adjoining parcels of land and comprised of three or more units per building shall pay an annual registration fee. All businesses in the seasonal and specialized category shall pay an annual registration fee. Semi -Annual Business Registration: Contractors and mobile food facilities who are headquartered outside of San Carlos and wish to purchase a limited -term registration certificate can obtain a six-month registration. Rate Structures and Fees- Penalties: 5.04.170 A. Whenever a person, firm or corporation fails to pay a business registration fee within fifteen days after the same becomes due, there shall be added a twenty percent penalty to the business registration fee on the last day of each month after the due date thereof; provided, that the amount of the penalty to be added shall in no event exceed one hundred percent of the amount of the business registration fee due; such penalty to be collected in the same manner as the business registration fee. B. The City can collect business registration fees for up to three prior years if the business has been in operation and unregistered during that period of time. However, in no case will the penalty amount exceed one hundred percent of the amount of the business registration fee due. (Ord. 1188 § 1 (part), 1995) City of San Carlos Business License Tax Rates & Fees: All business registration taxes hereinafter referred to as business registration fees and charges, including base and unit charges and minimum and maximum charges in this chapter, shall be increased annually by four percent commencing January 1, 2003 HW Companies 361 San Mateo, CA Population: County: Incorporation: Estimated median household income: Land area: Population Density: Rate Structures And Fees- Renewal Cycles: 5.06.030 104,748 San Mateo County September 3, 1894 $64,279 15.88 square miles 8,013.8 people per square mile Annual License: Business Taxes. As established by resolution of the Council or, in the case of a new business, prior to its commencement. They shall be valid only for the period of the certificate issued. (Current Council resolution defines effective period of all annual licenses as expiring on December 31 of any given year). Rate Structures And Fees- Penalties: 5.27.010 Delinquency. If a tax certificate is not renewed by payment of the annual business tax by the 45th day after the tax becomes due, the Tax Collector shall add to the amount due, as a penalty, 5% thereof for each 30 days or fraction thereof after the 45th day that the tax is unpaid, provided that after 150 days from said 45th day, and after 7 days' notice from the Tax Collector, the penalty shall be 100% of the tax. Double Business Taxes. Notwithstanding any other provision of this title, any person who has conducted any business in this city for which a tax payment is required, without first having paid the business tax due, and after having received seven days' notice from the collector in any year of the need to pay the tax, shall pay a business tax as follows: If such a tax is payable in advance for a certain period the tax shall be double the amount otherwise required for such purpose and period, or double the amount otherwise required for the period during which the business has been conducted without paying the tax, whichever is the greater. License Tax Imposed: 5.06.010 It is unlawful for any person, either for himself or for any person, to commence or carry on any business in the City, without first having paid the applicable business taxes and having obtained the tax certificate provided for in this title as proof of payment to the City, to do so, or without complying with any and all regulations of such business, contained in this title. HdL© Companies 371 City of San Mateo Business License Tax Rates & Fees: Business Type Annual Gross Receipts Tax Rate All Businesses Not Stated Below $30,000 and under $31.00 30,001 — 40,000 $37.50 40,001 — 45,000 $47.00 45,001 — 50,000 $56.50 50,001 — 55,000 $67.50 55,001 — 65,000 $77.00 65,001 — 70,000 $86.50 70,001 — 75,000 $97.50 75,001 — 80,000 $107.00 80,001 — 85,000 $116.50 85,001 — 90,000 $127.50 90,001- 95,000 $137.00 95,001 — 100,000 $143.50 $143.50 + $3.60 per $5,000 gross Over 100,000 receipts over $100,000 Business Type Classification Tax Rate Contractors General Contractor $128.00 Specialty Contractor $53.00 Business Type Classification Tax Rate Automotive Industry Automobile Sales $93.00 Automobile Repair $37.00 Gasoline Sales $106.00 Public Garage/ Parking Lot $30.00 Business Type Classification Tax Rate Minor Business Class Auctioneer $100 + $50 per day Carnival $30 per day Tree & pumpkin sale lots $50 per season Circus $150 + $30 per day Pawnbroker $30 annual Peddler $30 annual Newspaper/ magazine publishing $100 for daily publishers, $75 for non - daily publishers HdL° Companies Business Tvr)e Classification Tax Rate Minor Business Class Public dance $30 per night or $120 annual Real estate broker $50 + $5 per salesman Private school $50 annual Shows — exhibitions $200 annual or $50 per quarter Solicitor $75/ quarter + $5 per solicitor over 2 Street vendor $10 per day Temporary vendor $20 per day + $5 per employee over 3 Hauling, draying or moving $30 per vehicle, annual Water company 1.35% of gross receipts HdE5 Companies 391