The City Council met twice last week – on Tuesday and Wednesday evenings – and devoted portions of each meeting to discussing the proposed fiscal year 2005-2006 budget (see story, this page), and the balance of its time to its usual agenda.
Wednesday night, the Council unanimously approved (Council member Robert Holbrook was absent) an ordinance that exempts businesses with annual gross receipts of up to $40,000 from the City’s Business License Tax.
According to the City staff report “the City currently imposes a gross receipts based tax on most businesses located within Santa Monica” with “a minimum tax of $75 being levied on gross receipts up to $60,000. A few business activities, such as administrative/headquarters offices, taxicabs, delivery services, and lunch trucks, are taxed on a basis other than gross receipts and will be excluded from the current exemption.”
According to the report, the change will reduce the City’s business tax revenue “by an estimated 3 percent, or $320,000, per year. In addition, the City would forgo other fees and charges collected in connection with business license tax (late payment penalties, planning review fees), which would mean an additional reduction of $220,000.” Administrative costs will remain constant “in order to both ensure that only qualified businesses are exempted from the tax and that all City permitting and other requirements are met.”
In his presentation to the Council, City Finance Director Steve Stark pointed out that “the City of Los Angeles is leading the charge in this area. They raised their small business exemption in July of 2005 to $50,000 and for July of 2006 it will be $100,000.”
The Council also reduced the home business planning fee (a one-time charge for each business address) from the current fee of $95.59 to $30 (subject to adjustment to the Consumer Price Index) that will reduce City revenues by approximately $26,000 annually. About 400 new home–based businesses start up each year in Santa Monica. However, all businesses will still have to apply annually for business licenses so home based businesses will still pay the $19.40 annual fee, at which time the City will verify their annual receipts. It will also enable the City to maintain a list of all businesses operating in Santa Monica.
The Council heard from one speaker, former City Council member Cheryl Rhoden, on the question. Speaking on behalf of entertainment industry guilds, unions and associations that have several thousand members in Santa Monica, she said, “We are supporting passage of the proposed ordinance as a good first step towards addressing business tax reform and urge the Council to consider raising the proposed threshold to a higher limit. Our members are not businesses and they and many other residents of the City receive monies reported to the Internal Revenue Service on a 1099 (form) that should not be the sole determining factor as to whether an individual should be subject to a business tax.
“The proposed ordinance will require anyone applying for the exemption to document his or her income. Individuals and small business shouldn’t have a higher burden than corporations just to save $75. 50 percent of Writers Guild members earned no income last year. 25 percent earned under $35,000. Those employment patterns are similar throughout the entertainment industry. These individuals shouldn’t have to pay fees just because they are living in Santa Monica and are looking for work.”
Council member Kevin McKeown responded that the points Rhoden made needed to be “considered as future directions to improve the ordinance…[but] this is a good first step. $40,000 is truly a small business so there is an issue of economic justice in doing this. When you consider storefront and office rental costs in Santa Monica, when you consider a $40,000 gross we’re talking home businesses. There are a lot of good environmental, social policy and sustainability reasons to do this. People working at home don’t drive to work and don’t drive back home. They don’t commute so they don’t pollute. They tend to shop and eat at shops and restaurants in Santa Monica,” generating additional tax revenue for the City. “I think this is a good incentive for people to work at home.”
The City staff report concurred, but noted, “the proposal to create a uniform small business exemption is preferable to creating a special exemption for screenwriters or artists, which would, in effect, afford a favored status for one type of business activity.”
Council members also approved an $85,000 professional services contract with Allison & Partners to develop a marketing campaign for the new Main Library, following a lengthy discussion. Council member Bobby Shriver stated “that this is an enormous number…for such a big asset that’s going to get earned media. People are going to know the library is open.”
Mayor Pro Tem Herb Katz agreed, stating, “we have people that go to the library, and it’s almost going to be self opening and self sustaining.”
Council member Richard Bloom disagreed: “We need more community celebrations in Santa Monica. We have one opportunity to celebrate something extraordinary in this community.” City Manager Susan McCarthy defended the amount of the contract. “Our recommendations key on a couple of things. One is the impact and extraordinary presence that such a major facility will play in the life of community. Council members have talked to me personally over the years about the fact the City doesn’t celebrate those things that we accomplish. We’re not going to open another library for many years…The library staff is fabulous at what they do, providing library service. They’re not event planners, marketers, they’re not materials guys.”
Acting City Librarian Greg Mullen also defended the request, saying, “Our staff is swamped. We want to plan a whole schedule of things around the opening of the new library…to have a series of programs is going to take a lot of staff time and we have our staff time devoted to the program and we don’t want them tied up with the organizational and promotional activities associated with that. Most people in Santa Monica know we’re building a new building but not everyone knows what will be going on inside that building in terms of the services we’ll be providing. There’s a large turnover of residents in Santa Monica and that may be speeding up. The number of people who are renters in Santa Monica and those renters who have lived here less than four years don’t know much about the library because they don’t use it.”
In the end, the Council approved the $85,000 contract, but suggested the staff look for areas to trim, such as advertise in the Los Angeles Times.
Council also responded to a request from the Commission on the Status of Women to support State Senate Bill 33, the Circle of Trust Bill, which closes loopholes in California’s child abuse and incest laws.
