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SR-SS-2 (2) . .. ---- , e e , 5'5- ;L ;t-O?--007 JUM 1 4. ltOJ F I : CM : (l.1D : M S ~ jw Santa Monlca, Callforn1a C1ty Council Meeting: June 14, 1983 he ,"- 'VA .. . { <. t'lr"' /'..... t;/ c-.....:. '7 ( .', .....- TO: Mayor and C~ty Council FROM: City Staff RE: Opportunit1es to Increase Local Revenues INTRODUCTION The purpose of this report 1S to provide staff recommendations regarding local tax 1ncreases and to request funds for implementat10n and administration of a revised business license tax ord1nance. A menu of options which could generate up to a total of $3.9 million annually in addit10nal revenues is presented. It is recommended that City Council select and adopt tax changes in order to generate approximately $2.6 million annually. Rate changes could be effective 1n January 1984 to prov1de $1.3 million to balance the 1983-84 budget and allow for phase-1n of ~ncreases. Further tax increases or earl1er implementation would be needed to support any additional expend1tures approved by Clty Council during their budget deliberations. It 1S also recommended that the 1983-84 General Fund budget {Non-departmental D1vis1on} 1nclude $33,700 as a reserve for 1mplementat1on of a rev1sed business llcense tax. JUN 1 4 1983 55-:2- 1 ----------- --- --- - - - - - -~- -- /. . I e e OPTIONS TO INCREASE LOCAL REVENUES Background The staff report entitled "Opportunities to Increase Local Revenues ~n Santa Mon~ca>> prov1des an analyt1cal framework for poll.cy formulation. Five scenar10S for lncreasing buslness license tax revenues are detalled and alternatlves to lncrease utllity user tax revenues are ldentified in that report. Addltlonal background ~nformat~on is provided here relating to the incidence and revenue potential of varlOUS levels of exemptlons to protect small businesses, taxation of savl.ngs and loan corporations and utility user taxes. Th1S information 18 presented in Attachments A, B and C, respectively. As planned, staff recommendations have been developed to malntain Santa Monlca's competitive positlon and to provlde for falrness and equity by: 1- Malntaining rates at a level lower than comparison ]urisd1ct1ons 2. Phas ing in some 1ncreases: and 3. Recogn1zing small buslnesses. The 1983-84 proposed budget reflects the assumption that business license tax revenues w1Il be lncreased by $1.3 milion as a result of tax rate changes. The proposed budget lS balanced by these revenues and any additlonal expenditures recommended by City Council would require commersurate tax revenue increases. 2 -~- ------ ~--- . . . e e Menu of Op:tions The followlng menu of optlons to increase local revenues l.ncludes changes to bUs1.ness license and utility user taxes. BUS1ness license tax changes are similar to thos e ident1f1ed as Option #5 in the prior staff report; some modlf1cat1on to revenue prO]ectlon methodology and assumptlons lS reflected. Background on other elements of the menu lS presented in Attachments A, B and C. Three caveats should be reiterated before Clty Council formally acts to adopt tax rate changes. First. the revenue prO]ectlons provided are necessarily gross estimations due to lack of reliable data: staff have made generally conservat1ve assumpt1ons. Second, the CLty Attorney has reservations regarding the legality of the proposed small business exemption. Th1rd, changes to bUSlness llcense tax rates could result 1n assessment district charge increases. BUSlnesses located 1n the Downtown Park1ng and Montana street assessment distrlcts pay assessment charges based partlally upon thelr business llcense taxes. It is recommended that these bus1nesses be protected from substant~al changes 1n thelr assessment charges. The CJ..ty Attorney is cons1derJ.ng the feasibility of including a provlsion 1n the business llcense ordlnance to protect these buslnesses through an exemption/rebate and the alternative of amend1ng the terms of the assessment d1strict leg1slat1on. 3 . It e Potentlal Option Tax Type Tax Rate Increase -- BUSINESS LICENSE TAXES: 1 Prof/Occup/Servlce* $3/1000 $ 2,052,032 2 Reta21 Sales with exempt20ns 1. 25/1000 of $1.0 ml11ion (31,059) 3 Wholesale/Manufacturing with 1/1000 94,032 exemptions of 1.0 milllon 4 Auto Dealers 1. 25/1000 110,387 5 Commercial Rental 1.25/1000 28,292 6 Savings & Loan Corporations 3/1000 317,500 7 CommerClal Tenants Occup. Tax L 25/1000 8 Electrlc & Gas Utl1ities 3/1000 167,786 UTILITY USER TAXES: 9 Electrlc & Gas Utllit2es (a) Non-Res1dentlal 7.5% 971.343 (b) Non-Lifeline Consumpt2on 7.5% 1,033.642 10 Cable T.V. Users 5.0% 150.000 (*20% apportionment assumed) 4 -------- - ---- - . , . e e IMPLEMENTATION OF REVISION TO THE BUSINESS LICENSE TAX Should the Counc1l dec1de to alter substantially existing BUS1ness L1cense Tax rates and/or to reclassify groups of busJ.nesses for purposes of implementJ.ng new tax ratesl a temporary increase in workload and addJ.t1onal adminJ.strative costs will most likely be lncurred. The following J.S a brief discussion of the possible workload and admlnJ.strative cost increases. The discussJ.on 1S organized according to the three phases of work which wJ.ll constJ.tute the total implementation effort during FY 1983-84: amendJ.ng the Munlcipal Code, notlfying bus1nesses and process1ng annual tax payment adJustments, and admin1ster1ng the amended ord1nance. Amend1ng the MunJ.clpal C9de Po11cy and tax rate changes approved by the Council wlll need to be incorporated into the Munic1pal Code by ord1nance. The C::tty Attorney advises that the fOllowJ.ng is the ord1nance amendment procedure: -- Councll approves policy and tax rate change s , and dlrects the CJ.ty Attorney to prepare the approprlate amendment to the Munlc1pal Code. -- It will take the CJ.ty Attorney approximately 60 - 90 days to review, revJ.se, prepare and present to the Council an appropriate amendment to the MunicJ.pal Code. 5 . e e -- The City Council schedules a public hearlng on the proposed Code amendment. -- At the conclusion of the publlC hear lng, the proposed Code amendment 1S lntroduced for flrst readlng. -- No sooner than five days followlng the first readlng of the proposed Code amendment, the proposed amendment is presented to the Council for adoption. If the normal Council meeting schedule is followed, the second readlng would occur two weeks later. -- The amendment becomes law thirty days after Council approval. As outlined above, total elapsed time from inltlal Council direction to the Code amendment becoming law will be from 105 - 135 days. ThlS means that If inltial Council dlrection was provided on or before July 1, 1983, the amendment would become law some time between the mlddle of November to the mlddle of December, 1983. It should be noted, however, that for purposes of calculating annual tax payment adJustments based on the policy and tax rate change approved by the Council, the Council as a matter of policy can establish as the effective date of the rate change any date durlng FY 1983-84, including any time durlng the period July 1, 1983 through the date the Code amendment becomes law. 6 - --- ~ - ---- - . e e Durlng this phase of the lmplementation effort, all workload and associated costs wl11 be absorbed by existlng staff and funding already recommended to the Councll in the proposed FY 1983-84 budget will be utillzed. NotlfYlng Buslnesses an~ Processlng Annual Tax Payment AdJustments Durlng the period of June - December, staff of the BUSlness Llcense Divlsion, the Treasurer and the Data Processing Dlvlsion normally perform the follow2ng major tasks: a) prepare and mail bUS1ness llcense renewal notlces to approximately 15,700 bUslnesses 1n the City; b) receive, review and process gross receipts statements and annual tax payments; and, c) issue new Buslness Llcenses accord1ng to the following work schedule: -- June - (1) Data Processing prints renewal notices. ( 2 ) Bus1ness Llcense Divis10n reviews pr1nted notices and processes them for mailing on or about June 30. -- July/August (1) Businesses which were 20 operation during the ent1re preceding f1scal year and are renewing their llcenses have 60 days to submlt thelr gross rece1pts statement and and tax payment to the Clty to avoid a late payment penalty. The time limit for submission of only gross receipts data is 30 7 --- -- --- e e days 1f thls lS a business' first renewal period. The reason for the speclal data provision deadllne for f1rst-time renewals 1S that a special calculation, based on gross receipts data provided by the business, must be performed by the licensing staff to determine the amount which the f1rst-time renewal business must pay by the 60 day payment deadllne. (2) As the gross receipts statements are recelved, they are revlewed for completeness and to ensure that renewing bUS1nesses have correctly calculated and paid the tax amount. (3 ) Businesses filing 1ncomplete or incorrect returns are notified by letter. (4 ) Llcense renewals are entered into the computer. (5 ) Checks are balanced against the computer 11st1ng of up-dates. (6 ) Checks are processed through the Treasurer's off1ce. (7 ) New Business Licenses are issued. -- Septem~er (1) Letters are sent manually to approxlmately 1,300 8 --- - -- - . e e businesses wh lch have not responded wlthin the specified time period and have therefore incurred a payment penalty. (2 ) License staff contlnue to enter renewals into computer I process checks and lssue buslness llcenses. (3 ) Llcense staff begin to organize and manually post master record card files and to cross index llcenses by street address. -- October (1) Llcense staff lnitiate collection procedures for dellnquent renewals and bad checks. (2 ) Second delinquent letters are sent for renewals stlll outstandlng. -- November/December ( I) Llcense staff issue notlce of violatlon to businesses WhlCh still have not submitted renewal tax payment. ( 2 ) Inspectors V1Slt dellnquent businesses to determine If they are still in bUSlness and to lssue flnal vlolation notices. 9 - ------- ---- --- ---- . . e It ( 3 ) The computer lS updated for uncollectible renewals and firms which are out of bus1ness. (4 ) License staff send delinquent renewal files to the C1ty Attorney for processing. As this work schedule ind1cates, BUS1ness L1cense renewal workload lS most heavy for the period of July through September and then decreases dur1ng the perlod October - December. During the July through September perlod, the two BUS1ness License Inspectors do not perform field 1nspect1ons but remaln 1n the offlce to aSSlst the staff of two Fiscal Staff Asslstant II's 1n the process1ng of license renewals. In October the License Inspectors begin their normal schedule of field inspect1ons. Concurrent with the Buslness L1cense renewal period and dur1.ng the rema1.nder of the fiscal year, staff of the Business License Div1s1on also perform the followlng: process about 700 tax forms for the City's Business Promotion Districts (sem1.annually for Downtown Distr1ct and annually for the Montana Dlstrict) , process abou t 400 quarterly Parking Assessment D1strlct Tax forms, prepare and 1.ssue approximately 5,000 Dog L1.cense renewals, issue approxlmately 2,000 Bicycle Llcenses and attend bicycle license clinlcs at local schools, and process var1.OUS speclalized Business License renewals (taxi cabs, massage parlors, and new apartment/commerc1al landlords). Pending Councll's declsion concernlng possible revis1.on to BUS1ness Llcense tax rates, we are and will be proceeding wlth 10 ---- -------------- ------- ----- ---- . e e the Bus~ness License renewal tasks normally performed dur~ng June and July. This has been done to ensure that regular Business Llcense revenue flows are not interrupted during FY 1983-84. However, in add~tion to the standard renewal notice, all businesses are also being informed in wrlting that the Council lS cons~dering revlsing BUSlness License rates and that should the tax rates be altered, each business wlll be notifled concerning appropr~ate adJustments in their tax payment for FY 1983-84. Assuming the Counc~l does approve a comprehensive change lon BUSlness License tax pollcies and associated tax rates, and that these changes become law sometime durlng the period mld-November to mid-December 1983, the following work tasks will need to be performed ln additlon to regular license renewal work tasks: -- Payment adJustment notices wl11 need to be prepared for all 15,700 llcenses. Multlple verSlons of the adJustment notice may be necessary depending on the nature of the policy and/or tax rate change(s) approved by the Councll. -- Payment adJustment amounts wlll need to be calculated for an unknown number of buslnesses. Dependlng on the nature and complexity of the requlred adjustments, the adJustment amounts wlll either be calculated by City staff or by the bUSlness owner uSlng a standard City prepared calculation worksheet. 11 --------- -~ . . e e -- AdJustment pa ymen ts will need to be made by affected businesses or the Clty may need to lssue FY 1983-84 refunds depend1ng, once again, on the nature of the business license policy and tax rate change(s) approved by the Council. -- City records will need to be revl.sed to reflect llcense tax payment adJustments. Performance of these tasks w1ll most llkely occur during the period October through January. Since all of the eXlst1ng 15,700 buslnesses ln the Clty may be affected, it seems clear that eXlsting stafflng in the Business License Divlsion and other Clty off1ces assoclated w1th the processing of Business Licenses cannot accomodate the add1tional workload without seriously dlsrupting other ongoing operatlons. To avold disruptlng ongoing operatlons, addltional fundlng should be provided 1n the FY 1983-84 budget to secure part-time staff asslstance or pay eXlstlng staff overtime. The following 1S an estimate of the additional fundlng requ1red for thlS work phase. Use of these funds would be approved by the Clty Manager only as necessary to . implement in a timely and efflcent manner an amended Business Llcense ordlnance. 12 ------- - ------- -----~-- --------- ~-- . . , e e ~peration Amount Tasks Accounting Divlslon, $ 1,400 - Processing of Flnance Department up to 2,400 BUSlness License Tax refunds. (200 hrs. , straight time) Revenue Management DlviSlon 2,000 - Process 4,400 (Treasurer's offlce) , check (batch) Flnance Department transactlons and 600 In-person cash transactions. (150 hr s. , overtime) Business License Division, 14,000 - Preparing, Finance Department malllng, revlewing all payment adjustment notices. (l, 900 hrs. , stralght time) Clty Clerk 1,400 - Postage Data Processing Dlvision, 400 - Programnnng and ci ty r.1anager' s Offlce prlnting (20 hrs. , overtime) Total $ 19,200 13 - ------- ----- e e Admln1sterin~ the Amended BUS1ness L1cense Ordinance Should any of the flve opt1ons for revis1ng the Business License ordlnance outlined 1n the staff's report "Opportunities to Increase Local Revenues in Santa Mon1ca" of May 6, 1983 be adopted by the C1ty Counc11, the Professional/Occupational/Serv1ce category of bUS1nesses would experlence the most substantial tax rate increase. Unfortunately, th1S is al so the category of bus1ness which we believe would be most prone to clalming that only a port1on of their gross receipts were actually generated 1n Santa Monica and therefore were subJect to the the new tax rates. Since the existing Business L1cense ordinance does not provide for apportionment of gross recelpts and Slnce existing tax rates are very low 1n compar~son to the rates of surrounding Jurlsdictions in the West Los Angeles area, apport1onment issues have not been raised as part of the current regular license renewal process. If apportlonment lssues are ralsed by a substantlal number of businesses, a whole new processing procedure will need to be developed and a much more complex review process will have to be implemented. ThlS will require add1tional, h1gher level staff asslstance. We estlmate that as many as 60 to 70 flrffiS (about 30 % of the larger firms ~n thlS category) may invoke apportionment 1ssues. Assuming 1t would take 8 hours to resolve 14 ----------------- -----------------------~ --------- ---------- ---------------------- , e e administratively the apportionment 1ssue(s) for each firm, an add1t1onal 500 hours of staff time 1n the Business License D1V1S10n may be requ1red. Th1s represents a need for an add1t1onal reserve appropriat1on of approximately $4,500. Moreover, the C1ty Attorney estimates that as much as $5,000 for Hear1ng Exaffi1ners and $5,000 for law clerk staff assistance may also be required to deal with legal processing of these apportionment 1ssues. Once aga1n, these funds would only be allocated for use upon approval of the City Manager. 15 - - --------- ----- --- ------------------- ---------- . , e e Sununary The following 15 a s ununa ry of the estimated additional administratlve costs which may be necessary durlng FY 1983-84 to prepare, lmplement and administer the BUSlness Llcense P011CY and tax rate changes which may be approved by the Clty Councll. It is recommended that these funds be appropriated in the FY 1983-84 General Fund budget (Non-departmental Division) as a Business License Implementation Reserve. \vork Phase Amount - Amend the Munlclpal Code $ -0- Notify BUSlnesses and 19,200 Process Annual Tax Payment Adjustments Administer the Amended 14,500 Ordlnances Total $ 33,700 To mitigate the potentlal use of these addltlonal funds, we are examining varlOUS work procedural changes and varlOUS ways to automate tasks now performed manually. Every effort wll1 be made to minlmlze additional expenditures, however, lt 15 recommended that $33,700 of reserve funds be approved at this time so as to ensure the effective and tlmely lmplementatlon of any Business License Tax changes directed by the Clty Cauncll. Prepared by: Charles N. Dennis, Flnance Director Meganne Steele, Sr. AdmlDlstratlve Analyst 16 -------------------------------------------------------------- --------------------------------- ---------- . . -, e e ATTACHMENT A Alternative Small Buslness Exemptlon Programs Amount # Firms Paying Revenue Increase Type Exempt Min.only G.R.Based (Decrease) Retail $ 1,000,000 1988 132 $ (31,059) Sales 750,000 1936 184 (29,826) 500,000 1829 291 70,988 250,000 1595 525 168,884 Manufac- $ 1,000,000 402 59 94,032 turlng/ 750,000 388 73 107,852 Who1esale* 500,000 367 94 125,435 250,000 342 119 149,171 *20% of gross revenues of these firms are assumed to be apportloned outslde the taxable base 17 -------------------- - ----------- ---------------- . . . . . e e ATTACHMENT B Taxation of Savings and Loan Corporations The City of Los Angeles taxes saVl.ngs and loan corporations at the rate established for professional/occupatl.on/service flrms ($5/$1,000 gross recelPts.) Optlons presented for Councll conslderation are to tax flrms at the L.A. City rate or to tax at the rate proposed for other professlona1/ occupation/service f~rms ($3/$1,000 gross recelpts.) The est1mated revenues from these rates would be $562,500 and $317,500, respectively. The following items of lncome are examples of receipts which would be taxable at the professional/occupation/ services rate: ( 1 ) Interest on real estate loans: (2) Loan fees of various kinds; (3) Bonuses rece1ved for prepayment of loans; (4) Penalty charges on delinquent loans; (5) Tax serVlce fe es : (6) Interest on personal loans to depositors; and ( 7 ) Recelpts over and above the recovery of prlnclpal from the sale of mortgages, excepting gains or losses from the sale of real estate acquired by foreclosure. Gross receipts from the sales of goods, wares or merchandlse or from the rental of commercial buildings would be taxable under dlfferent rates established elsewhere ln the business license ordlnance. Los Angeles City has establlshed Crl.terla for allocating gross recelpts to branch offices based upon cOsts of operation. 18 --------- ----------------- -------------------------- . . . . e e Revenue estimates for taxing Santa Monica's sav1ngs and loan corporations are very rough: they ind1cate only a general order of magn1tude. Based upon exper1ence 1n the City of Los Angeles, branches of large and small firms are assumed to generate $4.5 m11110n and $2.5 ml1110n, respectively, 1n taxable gross rece1pts annually. Branches of large flrms would pay taxes of $22,500 at L.A. City rates or $13,500 at the proposed professlonaljoccupation/serv1ce rate. Branches of small firms would pay taxes of $12,500 or $7,500 under th e s e rates. Prel1ffilnary estimates are that there are twenty branches of large savlngs and loan flrms and nine branches of small f1rms presently 10 Santa Mon1ca. 19 ----------------------------------------------------------- . . . .., e e ATTACHMENT C Utility User Taxes Revenue Increases from Differential Ut~l~ty User Tax on Non-Resident~al Consumption Rate Options Electric Gas Totals - 6.0% $ 313,568 $ 74,968 $ 388,536 7.5% 783,921 187,422 971,343 10.0% 1,567,842 374,844 1,942,686 Revenue Increase from D~fferential Uti11ty User Tax on Non-Lifeline Consumptlon Rate Options Electric Gas Total - 6.0% $ 322,107 $ 91,349 $ 413,456 7.5% 805,269 228,373 1,033,642 10.0% 1,610,538 456,747 2,067,287 These estlmates reflect the 1983-84 Proposed Budget assumption that utility user tax revenues on electric and gas utilities will increase by 11.3% due to rate changes by the utl11tles. 20 -- ---------- - --------- --------- -------- ---------------- -- . . ~ , ... . e e Local utllltles do not presently tax non-lifeline consumptlon at dlfferential rates for any taxlng Jurlsdictlons. Each company may require lead time to modlfy billing systems. As a result, lt may not be possible to realize the fUll-year revenue increase estlmated for 1983-84. 21 ----------~------------- ------------------------- - , '" . /' ,~ / I ' ~ ~~ (' r ... , ~ , . 2C?-ocZ-. OPPORTUNITIES TO INCREASE LOCAL REVENUES IN SANTA MONICA PREPARED BY~ CITY MANAGER'S OFFICE MANAGEMENT SERVICES DIVISION MAY 6" 1983 ~ - ~ " TABLE OF CONTENTS I NTRODUCT I ON I I , . . . . . . . . . . . , . . . ,1 LEGAL BAS IS. , , . , . , , . . . , . , . . , . , 4 EVALUATION CRITERIA AND STUDY LIMITATIONS , , . . 7 THE RANGE OF OPPORTUNITIES . . , . , . . . . . , 12 BUSINESS LICENSE TAXES . . . . . , , . , . . . . 15 UTI LI TY USER TAXES . , . . , . . , . . . . , . , 38 OTHER EXISTING TAXES . . . . . , , , . , . , . , 44 POTENTIAL NEW TAXES 'II , I . . I I t I I . . I I 47 EXHIBITS A. PROFILE OF FIRMS - SANTA MONICA BUSINESS TAX FILE B. SIZE OF SELECTED SANTA MONICA BUSINESSES C. REVENUE IMPACT OF BUSINESS LICENSE TAX D. LARGE SANTA MONICA BUSINESSES ~- ~ . INTRO DUCT ION Santa Mon1ca's C1ty Council has been restored, perhaps temporarlly, wLth the opportunlty to lncrease revenues to support general government serVLces. The 1982 Farrell decl.sl.on of ':.he State Supreme Court prov1des an lnterpretat10n of ProposLtl.On 13 whl.ch narrows ltS restrlctive effect on local taxatlon authorLty. The Decis10n could not have come at a more opportune tlme. Add1tl.Onal resources may be requl.red to balance the 1983-84 Cl.ty budget currently under preparatLon. The Santa Mon1ca MUnlC1.pal Flnance: H1.story and Outlook (1982) report proJects contl.nued w1den1.ng of the defl.Cl.t between expend1.tures and revenues necessary to mal.nta1n current serVlce levels ln the Cl.ty's general fund. It 1.S proJected that thl.s expendlture/revenue gap wJ..ll .I.ncrease unless remed1.al steps are taken. The Governor has used the Farrell Decis1.on to rationalLze further cuts 1.ll state subventl.ons to Cl.tl.es and countl.es 1n 1983-84. In a surprl.se announcement 1n Aprl.l, the Ad~nistratl.on presented a revl.sed proposed budget for 1983-84 wlth the statement: "we bell.eve the lIl1pact of thlS proposal (an addltl.Onal $100 Il111110n cut) on local governments wlll be m1t1gated by the fact that C1.tl.es have been gl.ven broader authorlty to generate thel.r own revenues under. . . the Farrell dec1.sl.on. " 'ilh.l.le the Governor may suggest local tax lncreases, the State Legl.slature has taken steps to foreclose such optl.ons. 1 . . Ind1.v1.dual Legislators have 1.n1.t1.ated a Const1.tut1.onal amendment '....h1.ch, among other th1.ngs, \,.lOuld prevent local leg1.slat1.ve bod1.es from author1.z1.ng any tax l.ncreases. Approval of two-th1.rds of the voters vot1.ng on a tax measure would be requ1.red to enact tax change wh1.ch l.ncreases the amount of any tax lev1.ed upon any taxpayer. Impos1.t1.on of new taxes, l.ncreased tax rates or changes 1n the method of tax computat1.on would be subJect to such voter approval. New or l.ncreased ad valorem taxes on real property or a transact1.on tax or sales tax on the sale or lease of real property would cont1.nue to be proh1.b1.ted. The l.ntent1.on of this proposal l5, clearly, to permanently w1.thdraw the opportunlt1.eS prov1.ded by Farrell. In an 1.ndependent act1.on, Senator Jarv1.S has reportedly been organ1.z1.ng resources for a pet1.t1.on drlve to put a comparable propos1.t1.on on the ballot for voter referendum as early as June 1984. Santa ~10n1.ca has and will cont1.nue to exper1.ence unant1.c1.pated and undesired effects from statew1.de act1.ons regard1.ng mun1.c1.pal f1.nanc1.ng. However, the present C1.ty Counc1.l has an opportun1.ty to fundamentally determ1.ne the extent of local autonomy 1.n Santa Man1.ca: F1.scal 1.ndependence 1.5 the most effect1.ve buffer against the capr1.ce of State/Federal pol1.cy-makers. Th1.5 pol1.cy analys1.s reVl€WS poss1.ble adJustments 1.n the level, form and 1.nc1.dence of local taxes to better correspond W1. th the needs, wants and capac1.ties of Santa Mon1.ca taxpayers and C1.t1.zens. 2 t . The purpose of this report lS not to recommend tax 1ncreaseSi rather, 1t ~s to outl1ne opportunJ..tles whlch C1ty Councll may wl.sh to consl.der over the next several months to qenerate add~tl.onal revenue for the Clty. Staff recommendations will be presented durlng consideration of 1983-84 budget. Councll may select a ~articular optlon, ~ortlons of several options, or declde to make no changes. CounCll may also choose to "plan" any lncrease over 1 or more years. In order to maintain Santa Monlca's competitive position and provide for falrness and equ1ty, any future staff recommendations wll1: 1) Maintaln rates at a level lower than co~parison iurisdlctlons: 2) Phase In some or all increases; and 3) Provide recognition of small bUSlnesses. 3 , ~ LEGAL BASIS Mun~c~pal revenue ra~s~ng author~ty ~s both granted and restricted by the State Const~tut~on, State statutes and, ~n Santa Mon~ca, the C~ty Charter. This revenue rais~ng author~ty ~s a complex subJect, partJ.cularly sJ.nee the passage of ProposJ.tJ.on 13. A br1ef synops1s of the maJor legal parameters whJ.ch l~m~ t Santa ~]onJ.ca 's authority to J.ncrease local tax revenues J.S provJ.ded here as background. Local TaxatJ.on AuthorJ.ty of Charter CJ.t~es Charter cJ.tJ.es J.n Ca11forn~a may levy taxes w~ thout specJ.fJ.c authorJ.zat~on of the State as an exercJ.se of the munJ.cJ.pal affairs powers set forth In Art~cle Xi, Section 5 of the State ConstJ.tut1on. However, local authority J.s lJ.mlted J.n areas for whJ.ch the courts have determJ.ned the State has a preemptJ.ve "statew~de concern" . It has been establ~shed that the taxatJ.on of lJ.quor, new vehJ.cle taxes, and addJ.tJ.onal cJ.garette taxes, are rJ.ghts reserved for the State. The State constJ.tutJ.on expressly prohJ.bJ.ts local governments from levying J.ncome taxes. The Santa MonJ.ca CJ.ty Charter, SectJ.on 606, establJ.shes a 1 percent property tax 11mJ.t. ThlS lJ.m~t appl~es only to revenues raJ.sed for mUD1cJ.pal purposes, however. The lJ.mJ.ts establJ.shed by ProposJ.tJ.on 13 apply to property tax collectJ.ons for schools and the County as well as the CJ.ty. Under the eXJ.stJ.ng apportJ.onment formula, Santa MonJ.ca J.5 allocated 17.46 percent of .; . , the total of 1 percent of taxable assessed valuat10n tax collected w1th1n the C1ty. Therefore, the locally establ1shed property tax IlmJ.ts are more than five t1mes h1gher than the current effective Ilffi1tS 1ffiposed by statew1de act1on. Propos1t1on 13 and the Gann L1ffi1t Proposlt1on 13 and the Gann L1m1t are terms commonly used to reference two amendments to the State Const1tution, Artlcle XIII, approved by the voters 1n June 1978 and November, 1979, respect1vely. Key provlslons of each amendment Wh1Ch are pert1nent to th1S analysis are summarlzed below. 0 Proposition 13 - prohlblts the enactment of any new ad valorem property tax and transact10n or sales tax on the sale of real property; provides that "spec1al taxes" may be 1mposed by a two-th1rds vote of the qual1f1ed electors 1n a ..... county or speclal district; and establ1shes a maXlffium C1 ....y I property tax rate of 1 percent of full cash value of such property but excludes taxes or assessments to repay voter approved lndebtedness lncurred pr10r to June 8, 1978. 0 Gann L1mlt - establlshes a government spendlng Ilmlt equal to the pr10r year adJusted for CPI and populat1on; allows voters to authorlZe approprlatlon level changes effect1ve for up to four years; provldes that ablllty to repay eXlsting or future bonded lndebtedness shall not be lmpalred by these llffilts; and expressly excludes debt 5 , , serv.J..ce and expend.J..tures essent.J..al to comply w.J..th mandates of the courts or federal government. Recent Jud.J..c1.al dec.J..s1ons have sign.J..f1can~ly broadened the commonly held 1nterpretat.J..on of these restr.J..ct.J..ve amendments. The fOllowJ..ng two cases are 1mportant 1n def.J..n.J..ng local taxat.J..on authority. 0 C1ty and County of San FranC1sco v. Farrell, 32 Cal. 3d 47 (1982) [Farrell] : "SpeC.J..al" taxes are def1ned as taxes \vh.J..ch have restricted purposes; local taxes wh1.ch are for general fund purposes are not spec1al taxes. Therefore, the Proposlt1.0n 13 requ1.rement that spec1al taxes maybe 1.mposed wJ.th a two-th.J..rds vote of approval by the qual1.f1.ed electors does not apply 1.f the tax 1.mposed is for general fund purposes. As a result, local governments may levy v.J..rtually any non-property tax .Lf the tax imposed 1.8 for general fund purposes and the type of tax 1S W1.th1n the sphere of munic1.pal tax1.ng authority. 0 Carman v. Alvord, 31 Cal 3d 318 (l982 ) [Alvord]: Costs of employee ret1.rement system benef1ts may be cons1.dered as an 1.ndebtedness approved by the voters pr1.or to June 6, 1978. Th1.s appears to allow certaln local.J..t1es to exempt ret1.rement system costs from the tax (and spend1.ng l1.m1.ts) of Art.J..cle XIII. (Santa Honlca's charter 1ncluded prOVlS1.0n for part1C1.patlon 1.0 the State PERS system when 1t was adopted by the local voters 1.n 1948). 6 , ~ EVALUATION CRITERIA fu~D STUDY LIMITATIONS C~ty Counc~l now has the author~ty to fundamentally effect local tax pol~cy - to dec~de \vho pays and how much w~ll be pa~d to support bas~c local government serv~ces. Tax pol~cy ~s the s~ngle most vlslble and d~rect way local c~tlzens and taxpayers oay be affected by C~ty Councll pol~cy-mak~ng. Th~s report ldentlfles these decls10n opportunltles and adv~ses the Counc~l as to the potent~al ramlf~cations of var~ous opt~ons ava~lable. Every effort has been made to conduct an even-handed, ~mpart~al analys~s of alternat~ves. To further ensure that POllCY preferences do not blas the analyt~cal process, the follow~ng expl~cat~on of evaluat~on cr~terla ~s provlded. As a cautlon for pol~cy-makers, some of the llrn~tatlons lnherent 1n th~s type of analys~s are then descr~bed. Evaluatlon Crlterla Each of the maJor optl.ons ~dent1f1ed are evaluated cons1der~ng the follow~ng cr1ter~a. Unless otherwlse noted these factors reflect maJor pract~cal concerns or generally accepted public finance theory i as w~ll be discussed subsequently there ~s a lack of consensus among academlcs, leglslators and publlC adm~nlstrators regardlng the lmpact of varlOUS tax pollc~es and practlces. The order of presentat10n ~s not intended to convey the relat1ve importance of the crl.ter~a. The sl.gn~f~cance of the crlter~a vary among the options avallable. Some relatl.ve welghtlng of the crl.ter~a has been a necessary prerequlSl.te to 7 ~ . formulatlng optlons. Every effort lS made to be expllc1.t about these Judgments ~n the analysls of SpeClI1.C opt~ons. 1- Tax Incldence o Abll1.ty to Pay - progresS1.v1.ty 1.n the 1.nc1.dence of taxatlon upon 1.nd1.vl.duals and bU$1.nesses lS assumed des1.rable although lt 1.S remar:i<.ably d1.fflcult to pred1.ct '.tilth prec1.s1.on: prov1.s1.on for exempt1.ons or rebates to accompl1.sh progresS1V1.ty 1.5 assumed des1.rable, If needed: phased-1.n tax l.ncreases may also be deslrable to allow for r1.nanc1.al plannlng by taxpayers. 0 Percel.ved Equ1.ty - cumulat1.ve tax burden, conslderlng all local taxes, should meet standards of reasonableness for equl.ty by bel.ng equ1.valent for taxpayers In slm1.lar sltuatlons and by be1.ng approprlately d1.sparate between taxpayers who rece1.ve a substant1.ally different level of benef1.t from C1.ty servJ.ces. 0 Commerclal versus Resident1.al Share - federal lncorne tax deductlons for corporatlons and 1.ndJ.v1.duals who 1.temJ.ze results 1.n a lower effectJ.ve tax rate: the Federal government through tax exemptlon expendltures assumes a larger share of mun1.clpal costs. 0 Non-resldents - J.ncreased revenues from non-res1.dents may be necessary to ml.t1.gate a net dral.n wh1.ch they create upon C1.ty resources. 8 ----- . 2 . Secondary Effects o Effect upon Taxpayers - opt~ons wh~ch are unl~kely to cause changes ~n taxpayer behav~or are preferred s~nce the obJect~ves are not regulatory. 0 Cons~stency w~th other pol~c~es - ~f behavioral changes appear ~nev~table, the nature of change should be cons1stent w1th the C~ty's commun~ty and econom1C development goals, publ~c safety concerns or other poll.c1.es. 3 . Revenue Generat1ng Potent1al 0 H1.gher total dollar potent~al, recurr1ng rather then one-t1me revenues, short and long-term dependab1.l1ty of revenue sources and responsl.veness to general economic changes {elast1.c1ty} are preferred to ensure that the C1.ty's f1nanc~ng needs may be met. 4. Restr1ctions on Use of Funds 0 Only opt1.ons whl.ch l.ncrease revenues expressly for general fund purposes are conSl.deredi l.f the tax revenue 1.S earmarked for a specl.al purpose, 1. t .....ould be subJect to 2/3 voter approval. as a spec~al tax. 5. Procedural Requ1.rements 0 Ab~11ty to l.mplement proposed tax changes by Cl.ty Councl.l action 1.S preferred due to the 1mportance of t~mely actl.on. 9 . 6. Legal Author~ty 0 Opt~ons wh~ch have a lower chance of provok~ng legal challenge are preferred due to the cost of l~t~gat~on and potent~al loss of revenue ra~s~ng opportun~t~es. 7. Collect~on Procedures 0 Lower costs to admin~ster ~nclud~ng computat~on, not~f~cat~on, collect~on and aud~t~ng, along wl.th lower ra~es of uncollect~bles are preferred. 8. Citizen Mon~toring Capac~ty 0 The method of comput~ng taxes due should be s~mple enough for taxpayers to easl.ly monitor. Study L~m~tat~ons The publ~c pol~cy issues ra~sed ~n an analys~s of local tax practl.ces are enormously complex. Publ~c f~nance theory offers 11ttle guidance beyond ~dentl.flcat~on of the factors to be cons~dered. The lnc~dence of tax pract1.ces 1.S debated among the experts both ~n terms of general theoret~cal models and concrete cases. For example, the popularly held not~on that property taxes are a regress~ve form of taxation does not enJoy a consensus of support among academ~cs. Even ~f a consensus of opinion regarding the ~nc1.dence of a particular tax policy could be developed, the ult~mate 1.nc~dence of that tax policy would be d~storted by the ~nfluence of other governmental pollc~es. l'he multl.pl~cl.ty of forms of taxat~on and governmental ~ntervent~ons 10 . . l.n private sector declslon-maklng render .It 1mposs.lble to pred.lct the .lmpact of a sl.ngle tax POllCY change. Data l.nadequac.les further compll.cate analytl.cal efforts. In order to descrl.be the potential results of changes l.n tax poll.cl.es, it l.S essentl.al to understand the J..' condl.tl.ons. eXl.s...l.ng However, only general lnrerences about eXlsting condltlons could be made based upon data aval.1ab1e l.n publl.c records. Due to the sensltl.Vl.ty of the l.ssues l.nvo1ved, lt was decl.ded not to make efforts to collect addl.tional prl.mary data from cl.tizens. 11 . THE RANGE OF OPPORTUNITIES A broad array of opportunJ.tJ.es eXJ.st to J.ncrease local revenues for the CJ.ty of Santa MOnJ.ca. The scope of th~s analY5J.s J.5 IJ.ffiJ.ted to eXJ.stJ.ng and potentJ.al local, non-property taxes. It J.5 these optJ.ons whJ.ch were restored as a dJ.rect result of the Farrell dec~sJ.on; J.t J.5 these opportunJ.tJ.e5 whJ.ch may be short-lJ.ved. The optJ.on of J.ncreasing local property tax rates by an amount equal to the cost of retJ.rernent programs for general government staff J.s not consJ.dered J.n thJ.s analY5J.s. If the CJ.ty CouncJ.l J.S J.nterested J.n explorJ.ng potentJ.al property tax rate J.ncreases, the subject merJ.ts separate analysJ.s. Property tax rates J.ncreases are not presented as an optJ.on because of concern regardJ.ng potentJ.al J.nequJ.ty and the J.ncreased burden on resJ.dents. Payroll based taxes are also not presented as an optJ.on for consJ.deratJ.on. Santa MonJ.ca could be competJ.vely disadvantaged by such a highly VJ.SJ.ble tax and there would be an enormous adrninJ.stratJ.ve burden. VarJ.ous other munJ.cipal revenue producJ.ng optJ.ons are not addressed. In general, the assocJ.ated revenues would be restrJ.cted purpose, relatJ.vely nomi:J.al J.n amount or are be~ng consJ.dered J.n another context. or are beJ.ng consJ.dered J.n another context. OptJ.ons outSJ.de the scope of thJ.s study are: varJ.ous "specJ.al" taxes; specJ.al assessments; subdJ.vision map act requirements; bUJ.ldJ.ng development taxes; IJ.censes and permJ.ts; charges for current servJ.ces; fJ.nes, forfeJ.tures and penalJ.tJ.es: 12 ---- . , sale and ren~al of c~~y property; concess~ons; royalt.~esi and contr~but~ons from the pr~vate sec~or. ..,,., - ~s upon opt~ons wh~ch can of=er substant~a~ :evels ... ..e I:OCUS of recur:n.n.g, unrestr~cted revenues to suppor~ general government serv~ces. The CJ.ty's 1982-83 general fund revenues were est~ma~ed to total $36.5 !11ill~on as of budget aaoptJ.on; nalf (13.4- rru11J.on) of these revenues are provJ.ded by ex~s~~ng local, nonproperty taxes as shown below. Cons~dera~J.on has been gJ.ven to J.ncreasJ.ng each of these revenue sources. GENERAL :aEVENUE Flim REVENti'ES Percent of Percent 1902-83 1983-84 General of ~on- EStJ.lllated Projections Source Estimate Fund Prope-~y .Actt'la 1 mo tax d1anges) ~ BusJ.I1.esS LJ.cense Tax 1,650,000 4.5% 8.9% 1,511,900 1,694,800 G'tility User Tax 4,325,603 11.8 23.5 4,608,200 4,992,700 Franchise Tax 448,600 1.2 2.4 5l6,900 568,500 TranSJ.ent Occupancy Tax 1,454,980 4.0 7.9 1,222,100 l,677,600 Sales/Use Tax 10,308,000 2B.3 55.9 9,983,000 10,849,800 Co./"lr'l~un Tax 264,000 .7 1.4 264,000 0 :.o("~l ~on-property 18,451,183 50.5 100.0 18,lQ6,100 19,783;400 'faxes Ot.~ C-eneral Fund 18,061,850 49.5 17,342,450 18,665,242 Revenue Tot;; 1 General Fund 36,513,033 100.0 35,448,550 38,448,642 13 - - - . Potent~al new taxes recommended for cons~derat~on are l~I!U ted to an adm~ss~ons tax and a park~ng tax. .:0. rat~'1er exhaust~ve rev~ew of tax~ng pract~ces ~n other Cal~forn~a c~t~es found that Santa Mon~ca ~s already qu~te comprehens~ve ~n the scope of ~ts local taxation. As ~llustrated ~n append~x A, .l.nd~v~duals from over twenty other mun~cipal~t~es, state agenc~es and nat~onal organ~zat~ons were consulted dur~ng th.l.s study. A var.l.ety of publlshed and unpubl.l.shed l.l.terature was reviewed. Hany Santa Mon.l.ca C.l.ty Staff prov.l.ded ass~stance ~n th.l.S analys.l.s. The C~ty Attorney was part~cularly helpful by offer~ng t.l.mely, cogent gU.l.dance throughout the study. Pr.l.mary emphas.l.s .l.n th.l.S reV.l.ew loS placed upon potent.l.al l.ncreases to bUSl.ness l.l.cense taxes and ut.l.l.l.ty user taxes. Each of these opt.l.ons are reviewed l.n deta.l.l, A relat.l.vely cursory overv~ew of'opportun.l.t.l.es to .l.ncrease other eXl.stl.ng taxes or to establish new taxes .l.S also prov~ded. 14 . BUS nlESS LICENSE TAXES General Informat~on Bus~ness L~cense ~axes may be lev~ed for both regulatory and revenue ra~Slng purposes. These taxes are adm~n~stered by c~t~es and rates maybe set at each C~ty's d~scret~on. Use of bus~ness tax revenues ~s unrestricted but the revenues must be pa~d ~nto the c~ty general fu nd . Both general law and charter cLtLes may levy bus~ness l:l.cense ta xe s , al though there are certa~n lLffiLtatLons wh~ch apply only to general law cLtLes. }\s a charter c~ty, Santa Mon~ca has autonomy to deal wLth matters declared to be a mun1clpal affa1r. The state may preempt a charter C1ty'S local taxat~on author~ty only Lf the subJect LS deterrnLned to be of statewlde concern. Exemptlon of banks, Lnsurance companLes, and cafe mUSLCLans from local busJ.ness taxes in all cLtLes 1S apparently undisputed. State codes also prescribe that a gross rece~pts basLs must be used for taxes upon laundry equLpment operatJ.ons and vending machJ.nes dJ.str~butlng tang~ble personal property. Gross rece~pts from alcohol and tobacco sales are also exempted from lOcal bus~ness taxatLon. Local taxatLon of fLnancLal corporat~ons, such as savings and loans, was preempted by the State for general law cltles through legJ.slatLve act~on effectLve LO 1981. It 15 unclear whether charter c~tLes retain authorJ.ty to tax flnancJ.al corporatLons. The charter cLt~es of Downey and Los Angeles are 15 . . the only two Jun..sd~ct~ons ~dent~fled WhlCh currently collect taxes on savlngs and loan corporatlons. These Cltles lnltlally d1scontlnued levy~ng bus~ness taxes on sav~ngs and loans corporatlons ln deference to the State legJ.slatlve actlon. However, each Clty restored thlS local tax when the State ellInlnated the subvent10n ald WhlCh had been promlsed to offset lost local revenu'es . I'hese charter Cl.t1es consl.der the "munlcl.pal affalrs" authorlty as basl.s for continued taxatlon of financl.al corporatlons. Savl.ngs and loans corporatl.ons in each Clty have reportedly pald the local taxes under protesti It 1.9 expected that the l.ssue wl.II be lltlgated. Deflnltlon of the taxable base of busl.ness gross recel.pts l.nvolves complex legal 1.ssues. The Clty of Los Angeles has been involved In a number of cases over the past thlrty years which apparently provlde precedent~al standards. Whl.le there ~s no constl.tutional prohlbltl.On against local taxes on fl.rms/lndlVl.duals d01ng busl.ness both wlthJ.n and outsJ.de the taxing Jurl.sdJ.ct1.on, a Clty may only base the tax on gross recel.pts WhlCh are attrlbutable to selling act1.Vl.tl.es wJ.thJ.n the cJ.ty. Gross recelpts attr1.butable to sell1.ng actl.Vl.tl.es conducted outs1de the Cl.ty must be "apport1.oned". A C1.ty has broad dlscretl.on in determlnlng the base for lts tax and when municl.pal taxlng ord1.nances are attached on const1.tutl.onal or other grounds, every presumptlon 15 in favor of upholdlng them. In response to court dec1.s1.ons on this subJect, the Los Angeles Cl.ty Clerk has l.ssued a series of adm1.n1.strat1.ve rulJ.ngs to deflne the proportion of gross receipts taxable under var1.OUS 16 . condl.tl.ons, for varl.OUS types of busl.ness actlVl.ty. Such a system for apportl.onl.ng gross recel.pts has not yet been appll.ed l.n Santa Monl.ca prl.ncipally because of the low rnaX1IT1Um tax rates. Substantl.al rate lncreases could spur local busl.nesses to explore and apply every opportunlty to reduce thel.r effectl.ve tax rate. The CJ.ty would need to be prepared to establl.sh apportlonment standards as serVJ.ce to taxpayers, as a means for ensurJ.n-g equal treatment of taxpayers, as a means to maXl.rnl.ze revenues and as a means of avol.dl.ng legal challenge. Santa Monlca's Busl.ness Llcense Taxes Santa Monlca's ~1unlcJ.pal Code sets forth a tremendously complex structure for business ll.cense taxes. Rates are set forth for more than 1.0.0 categorles of busl.ness, professJ.onal and occupatl.onal perml.t fees or taxes. Both flat and varl.able rates are appll.edi ffi1.nl.mUm and maXl.mum rates are generally defJ.ned 1.n fl.xed dollar amounts. Varl.able rates are based upon eJ.t.her gross receipts, number of vehl.cles, number of employees, number of specifl.c events, hours of use, number of locatl.ons, number of machJ.nes, or square feet of space used. The varJ.ous categorles l.nclude a nearly absurd level of specl.ficl.ty particularly since many categorles of busl.ness actl.vl.ty are obvl.ously out-dated. For example, roedl.Clne peddlers are taxed a flat rate of $2.00 per year unless they use musl.C, speakers, etc. , l.n wh~ch case the tax l.S l.Dcreased to 8612110 per year. 17 . . Exernpt~ons from th1.S tax ~n Santa ~-1on~ca ~nclude bus1nesses for char1.ty, bond brokers and banks, d1.sabled m111.tary vets ',ojork1.ng as peddlers, blind persons cert1.f1.ed by the state and auto parks prov~dl.ng free park1.ng/storage. Analys1.s of the present l.ncl.dence of business taxat1.on 1n Santa Mon1ca 1.5 hampered by a ser1.es of problems. F1.rst and foremost, data on the gross recel.pts of f1.rms and 1nd1.v1duals 15 unrel1.able. As reflected 1.n Exhl.b1t A, gross rece1.pts were not reported at all for a remarkably large proportl.on (36%) of the 14,654 bus1.nesses WhlCh pay on a gross rece1.pts basl.s. In some l.nstances, the bus1.nesses were newly establ1.shed or ownershl.p was transferred durl.ng the year so gross rece1.pts will not be reported unt1.1 year-end. In other cases, tax adm1n~strators choose to accept the taxes pal.d by the bus~nesses without benefl.t of reported gross recel.pts 1nformat~on. Thl.S precludes ver1.f1.catl.on of the taxpayer's calculatl.on of taxes due and brl.ngs the effect1.veness of current collectl.on procedures under ser1.Ous questl.on. In a few cases, businesses willl.ng to pay the rnaXl.mum tax due reported no gross rece1pts of the level of gross rece1.pts of exactly equal to the ml.U1.mum necessary for payment of the maX1.murn tax. In add1.tl.on, l.t 1.S unknown whether any s1.gn1.f1.cant number of bus1.nesses apportl.on thel.r gross rece1.pts to actl.Vlty lnslde/outs1de the Clty. Another factor wh 1. ch hampers efforts to determlne the characteristl.cs of current taxpayers 1.S the categorl.zat1.on of bUSlnesses and 1.nd1.Vlduals 1.n a somewhat arb1.trary manner. The 18 .. > result ~s groupings T.vh~ch e~ther overlap or are too broad to be of much value. ~~ could facl1~tate aud~t efforts as \llell as ..I.... incJ..dence analysls J..f categorles were rederJ..ned to correspond ,vJ..th those of the State Board of Equalizatl.on for retaJ..l sales operatl.ons, for example. Other categor~zat1.on schemes ffiJ..ght further efforts to generallze the prJ..ce-demand characterl.st1.cs and prof~tabJ..llty levels for varJ..ous enterpr1.ses. There lS also a lack of data on speclf1.c busJ..nesses such as number of eITlployees, work force character~st~cs and assessed value of property. In add~t~on, not all bus~nesses are included In 'the c~ty's computer~zed records. Who Ultimately pays the cost of a bUs1.ness tax depends upon the extent to wh 1.. ch a f1.rID or l.ndlvJ..dual can pass through the costs to consumers. PubllC f~nance theory suggests that bus~ness taxes are generally pa~d by consumers, although they are an l.nd~stJ..ngu~shable component of the total cost of the goods or serv~ce. However, 1f consumer demand is hlghly sens1.tive to pr~ce changes, the bus1.ness may choose to absorb all or part of the cost of taxesi the profit marg~n of the f1.rm may thereby be reduced. In the extreme case, consumers and/or buslness may choose to not locate or to leave one tax1.ng JurJ..sd1.ction 1.n order to real1.ze lower costs or hJ..gher prof1.ts ~n another JurJ..sdl.ct~on whJ..ch taxes at a lower rate. However, it .1..5 very dl.fficult to ascertain the relat~ve ~mportance of taxes on 10catl.onal cho~ces. 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I.C . o >: r-l:< ::l .-I X (1).::< om (J}-It! c V>1tl ^ Itl .. = eS c ^ 5 c::;e c r:.:lo .c:: Itl 0::: r:.:l NO 0 r.:Jo 0 -!J'loO +00 ..... + 0 +00 +,..0 00 s:: 00 00 0 .. .q .. 0 'ON .0 N .oan s::o.... ~ COV> s::.-I-!J'lo COV> ..... r-l V> .-1..-1 ..... 0- '001 .. 50- Itl =0-0 e.......o e...... 0 .......0 .oJ o.oJ in+J ........;.; 00401 s:: U"l 01.0 It'lO 010 Itl N~o.. N .0.. N~o.. .... .0.. tn {l)-iJ>::l iJ>iJ>=' (I). ,.=' (I).{J).:3 ~ Itl s::....... Cl o s:: .... 0 r-f . U1-1JllI Itlll-i .-t Ul ::l ..-I UJ au <ll C tll Itl (].I ..... r-! It! o (l) +.l II-i ::l i::: 0:;: +.l..-l QJ &8~ ~ :l Itl c:: ~~ <tn . dec~sJ.on ~nclude geographJ.c des~reab~llty, demographJ.cs. labor costs, spJ.llover benefJ.ts from other buslnesses and the costs of mov1ng a busJ.ness or travelJ.ng further. Inertia lS another element Wh1Ch should not be underestJ.mated as a declson-mak1ng force: l.t lS eaSler not to change than to change. G1ven these 11mJ.tat1ons of theory and data, 1t lS 1mposs1ble to confldently predlct the ultl.mate l.ncl.dence of any changes to the current tax structure 1.n Santa Mon~ca. POl1.cy-makers are left to rely upon rudl.mentary technl.ques of comparl.son wl.th other locall.t1.es and l.nd1vl.dual or collect1.Ve percept1.ons of what 1.S "reasonable" to expect 1.U terms of the stated evaluatl.on crlter1.a. Comparlson Wlth Other Cl.tl.es Santa Hanlca's current bUSlness license tax rates are S.1. gnlf1.cantly lower than those of the cJ.tl.es of Los Angeles. Beverly H1.11s and Culver City. As shown 1.ll the next chart, none of these ]urlsdl.ct1.ons set maXl.rnum caps on taxes for the ma ]or revenue produe1.ng categor1.es of retall sales, professl.onal occupatlons or wholesale/manufactur1.ng bus~nesse5. The gross recel.pts tax rates for reta1-l and wholesale!manufacturlng busl.nesses ~n these other Jur1.5d1.ct~ons 1.5 about tw~ce as hl.gh as Santa Monl.ca's rates. The gross reCe1.pt5 tax rates for professional/occupational bus~ness 1.5 $5/1000 1.n Los Angeles and $3/1000 in Culver City compared to $.65/1000 in Santa Mon1.ca. Beverly H~lls taxes professlona1/occupatl.on/service buslnesses on a per employee 20 basl.s. Auto sa 1 e s 1.n Santa Honl.ca are taxed at the except1.onally low rate of $.50/10,000 wl.th a maXJ.ntum tax or $1,01.10 annually; other ]url.sdl.ctl.ons typ1.cally tax auto sales businesses on a par w1.th other reta1.1 sales f1.rms. Certain bus1.nesses whl.ch are not taxed 1.n Santa Non1.ca are taxed 1.n Los Angeles. Commerc1.al tenants 1.n bUl.ldl.ngs where the owners are exempt from a commerclal rental tax are taxed In Los Angeles; th1.s ensures equl.table treatment of busl.nesses wh1.ch rent space 1.n bU1.1dl.ngs owned by banks and 1.nsurance compan1.es, for example. Savings and loans corporat1.ons are taxed 1.n Los Angeles, as prev1.ously dl.scussed. Cr1.teria for lncreasl.ng Bus1.ness L1.cense Tax aevenues Approaches wh1.ch maX1.m1.ze the relat.l.ve advantages of any actl.ons to increase bUSl.ness llcense tax revenues are outll.ned below. To make staff assumpt1.ons as expll.cit as poss1.ble, th 1. s dl.scussion l.S presented 1.n terms of the el.ght evaluation crl.terl.a outlined 1.n seetl.on IV of thl.s report. 1- Tax Inc1.dence 0 Abl.l1.ty to Pay - The progressl.v1.ty of the eX1.st1.ng Santa Monlca tax structure could be l.mproved by rernov~ng the maXl.mum tax caps, exemptlng small bUSlnesses from gross recelpts based taxes and taxlng larger fl.rms at or below the levels of nearby c1.ties. Deferred collectlon of lncreased taxes for, say, SlX months would allow for fl.nanClal plann~ng by taxpayers. 21 . 0 Perce~ved Equ~ty - Tax~ng of sav~ngs and loans organ1zat1ons and cornmerc1al tenants OccupY1ng space 1n otherw1se tax exempt bU11dlngs would restore some equ1ty to the local tax structure. In general, gross recelpts based tax rates appear most equ1table as they clearly correlate wit.h ab11~ty to pay. 0 Cornmercl.al versus Resl.dentl.al Share - By def1nl.tl.On, 1ncreas1ng bUS1ness taxes alone 1ncreases the corruner1cal share of the tax burden. rhe s1ngle b1ggest taxpayer of 1ncreased bU51ness license rates would be the federal government due to tax deduct10ns for corporatl.ons. 0 Non-re5~dents - To the extent non-res1dents patronl.ze, work at or own Santa Mon1ca busl.ne5ses, they would contr~bute to Cl.ty revenues. It is not legal to tax contractors whose place of bus~ness 15 outSl.de the city at a higher rate than contractors located w~th1n C1ty lim1ts. 2. Secondary Effects o As long as effectl.ve tax rates are lower than or equ1valent to those of Los Angeles Cl.ty, l.t 1S unl.kely that there would be any short term locat1onal changes by busl.nesses. Long-term effects for firms Wl.th local markets must be assessed l.n terms of margl.nal effect upon consumer prlces and profl.tabl.ll.ty. Small, local businesses are to be protected from sl.gnl.fl.cant rate l.ncreases. Gl.ven the defl.nl.tl.ons of taxable base to bus1ness actl.vl.ty 1nsl.de the 22 , Cl.ty, l.t l.S probably fl.rms whl.ch draw upon a regl.onal population for reta1.l sales wh1.ch would be most 1.ncl1.ned to cons1.der locat1.onal change 1.n the long-run. Such f1.rms would include auto dealers, appl1.ance dealers, and retal.lers of other durable goods. Nanufactur1.ng f1.rms m1.ght also be 1.Dcl.Lned to cons1.der changes; howeve r , the costs of mov1.ng plants, faC1.11.t1.es and skilled labor rorces would be a dl.s1.ncent1.ve. Ind1.v1.duals or f1.rms 1.n professl.ons and occupat1.ons could exper1.ence relat1.vely low cost for phys1.cal relocatl.on but, for many, the market for serVl.ces 1.S on a conunun1.ty level and relocat1.on beyond both Santa lYlon1.ca and Los Angeles C1.ty borders would neceSS1.tate rebu1.1d1.ng a cl1.entele. For those conductl.ng professl.ons, occupat1.ons, or wholesale bUs1.nesses wh1.ch serve a regl.onal or larger market, the apport1.onment of gross recel.pts attn..butable to actl.vity outsl.de the city would buffer the effect1.ve tax changesi these bus1.nesses would contl.nue to be taxed by the other 10cal1.tl.es 1.n wh1.ch gross rece1.pts are earned. 0 51-nce the prec1.se nature of behavl.oral changes 1.S so d1.ff1.cult to pred1.ct, cons1.stency w1.th other Cl.ty pOl1.c1.es 1.5 equally d1.ff1.cult to ascerta1.n. In a very general sense, wel.ght may be g1.ven to ensurl.ng that ne1.ghborhood convenl.ence stores and busl.nesses provl.dl.ng m1.ddle-class employment opportun1.ties are not s1.gnifJ.cantly dJ.sadvantaged. 23 < , 3. Revenue Generat~ng Potent~al 0 El~m~nat~on of rnax~rnums and adoption of rates more equivalent to nearby c~tl.es would raise c~ty revenues substant~ally. Increases 1.n m1.n~mum taxes for bus1.nesses could s~gn~f~cantly ra~se Cl.ty revenues. Introduct1.on of a CPI "k~cker" clause would ensure that flat rate taxes would retaln constant value over time. 1'he gross rece1pts bas1.s of major tax rate categor1.es would continue to ensure elast~c1ty of revenues ~n response to general econom1.C changes. These features are partlcularly valuable cons1der1ng the c~ty may not reta1n author1ty to adJust rates ~n the future. 4. Restrlctlons on the Use of Funds 0 Revenues must flow to the Clty'S general fund but are then unrestrlcted 10 use. 5. Procedural Requirements 0 Clty Councll has authority to reV1.se the bus1ness llcense tax rates and system by a four member vote. 6. Legal Author1.ty 0 Local autonomy 1.S restr1.cted 1.0 those areas over wh1.ch there 1.S a statew1de concern. As prev1.ously discussed, author1.ty to locally tax savlngs and loan corporat1.ons 1.5 unclear. 24 ~ . 7. Collect~on Procedures 0 Costs of adml.n1.sterl.ng the busl.ness l~cense tax system should .l.ncrease l.f tax rates are signl.fl.cantly ra~sed. Only ml.n~mal efforts are presently made to audl.t gross rece1.pts based tax returns. If rates are ra~sed, the appl1.catl.on of gross receJ.pts apport1.onrnent factors wl.ll neceSSl.tate fl.nancl.al aud.l.ts l.n the fl.eld and the expected return on aud1.ts wl.ll l.ncrease. The C~l.ef of the Busl.ness L1.cense D1.vl.sl.on for Los Angeles Cl.ty estimates a return of $6 or $7 for each $1 it costs that Cl.ty to conduct audits of busl.nesses. ~vlll.1 e l.t appears that product1.v1.ty l.lnprovements could be l.ntroduced in Santa Monica's busl.ness license dl.vl.sl.on, changes 1.n the composl.tl.on and level of staffl.ng may be necessary to ensure cost-effectl.ve program adm1.n~stratl.on. There are l.ntang1.ble costs wh1.ch the city bears l.f thl.s functl.on 1.S percel.ved as less than an effl.cl.ent, service-consc1.ous operatl.on. 8. Citizen monl.tor1.ng 0 Sl.mpll.fl.cat1.on of the bus1.ness ll.cense ordl.nance and tax structure l.S necessary l.f taxpayers are to understand and to effectl.vely mon1.tor tax requirements. Flat rate taxes for small bus1.nesses would obv1.ously sl.mpl1.fy the requl.rements upon them. 25 Opportun~ties to Increase Business L~cense Revenues Due to the unrel~ab~lity of gross rece~pts data and the unknown reduct~ons ~n the taxable base wh~ch could t"esult from apport~onment, ~t ~s very d~ff~cult to pred~ct the revenues wh1.ch would result from changes gross rece1.pts based bus~ness l1.cense "taxes. Increased revenues from ra~s~ng the m1.n1.mum tax rates are the only changes wh1.ch can be confidently proJected. For 1.llustrat1.on purposes, assume that 50% of a firm's rece1.pts would be exempt from tax 1.n Santa Mon1.ca under an apport1.onment scheme. Current reVenues would be reduced by one-half ~f no act1.on were taken to ra1.se rates. A net decrease of revenues would result from any changes wh1.ch less than double the ex~stl.ng rates. Revenue prOJections for new areas of gross rece1.pts business taxat1.on are even less certaJ.n. No data has been found in publ~c records to use as a basis for predJ.ctJ.ng the revenues wh1.ch would result from a new tax comparable to Los Angeles' conunercl.al tenants occupancy tax or 1.ts tax on savings and loans. Gl.ven these sJ.gnJ.fJ.cant caveats, the following set of five opt1.ons to J.ncrease local bus1.ness lJ.cense revenues are presented for cons~deratl.on. As reflected 1.n the following table, these optl.ons are qUl.te diverse ~n terms of scope of l.mpact on local business and revenue generatl.ng potent1.al. 26 - ~ Counc~l may select a particular option, port~ons of several options, or dec~de to make no change s . Counc~l may also choose to "planll any increase over 1 or more years. In order to rna~nta~n Santa Monica's Compet~t~ve pos~t~on and provide for fa~rness and equity, any further staff recommendat~ons w~ll: l) Mainta~n rates at a level lower than comparison Jurlsd~ct~ons; 2) Phase ~n some or all increase s ; and 3) Prov~de recognltion of small bus~nesses. 27 , Opt~on 1: El~m~nate max~rnurn tax caps The four largest gross-receipts produc~ng categor~es of bus~ness now taxes are l~m~ted to max~mum tax rates: $210100 for professionals/occupations/services; $21000 for reta~l sales; $5000 for whole/manufactur~ng: and $10100 for auto sales. El~m~nat~ng these max~mum tax caps would result ~n add~tLonal revenues est~mated to be $346,1057 at 1983-84 levels assum~ng no apportionment of earn~ngs. A total of 67 f~rms would pay more taxes: 21 profess~onals/occupat~ons/services: 31 reta~l sales; 8 wholesale/manufactur~ng; and 7 auto sales. These f~rms report gross rece~pts ~n excess of $3,1052,10100, $3,301,0010, $9,970,0100, and $18,1010,.0100, respect~vely. Ex~st~ng Santa Mon~ca gross rec~epts tax rates for these f ~ rms would cont~nue: Profess~onal/Occupat~ons/Serv~ces $2.0 + $.65/$1.0.00 GR over $6,.0.0.0 GR Reta~l Sales $25 + $.610/$10100 GR over $110,0100 GR TNholesa1e/Manufactur~ng $25 + $.510/$101010 GR over $210,.000 GR Auto Sales $11010 + $.510/$110,10010 GR over $100,0100 GR Opt~on 2: Set rates equal to Los Angeles C~ty Each business 1n Santa Mon~ca Clty would be affected Lf Los Angeles C~ty tax rates were adopted. It is estimated that add~t~onal revenues of $4,398,893 at 1983-84 levels would result, assum~ng apport~onment of 210% of the gross rece~pts of Santa Mon~ca's wholesale/manufacturlng and profess~ona15/occupat~ons/serv~ce firms would be outs~de the 28 ~ , tax~ng author~ty of th~s Cl.ty. At 1982-83 levels, professlonalsjoccupatl.onsjservlces flrms alone would contrlDute add1.tional revenues of $3,516,946 ml.lllOn T.vl thout apportlonment and $2,730,612 ml.lll.on wlth the assumed apportl.onment. The average effectl.ve tax l.ncrease would be $873 for thl.S category Wl.th apportlonment at the adJusted 1983-84 levels. Auto sales bUSlnesses would contrl.bute $345,311 addl.tl.onal revenues at 1982-83 levels, assuml.ng no apportl.onment. The average effectlve tax l.ncrease would be $7,506 for the 46 auto sales firms on flle. Revenues from retail sales fl.rms would roughly double that generated from existing rates wl.thout maXlmum caps. An average l.ncrease of ~359 at 1983-84 levels would result. \iholesale/manufacturl.ng flrms tax rates would double. However, the 2.0% apportl.onment assumptl.on lowers the effectl.ve tax l.ncrease on fl.rms to an average of $427 at adJusted 1983-84 levels. Corrnnercl.al rental busl.ness taxes changes would generate $26,.028 add2tl.onal revenues wl.th an average l.ncrease of $38 per firm at 1983-84 levels. Los Angeles Cl.ty gross recel.pts tax rates for selected categorles are: Professlonals/Occupatl.ons/Servl.ces $30 + $5/$1000 GR over $6,000 (no max.) Retal.l Sales $1.25/$10130 GR (ml.n. $18.75 - no max.) Wholesale/Manufacturl.ng $1. 00/$1000 GR (ml.n. $20 - no max.) Auto Sales (taxed on retal.l sales) $1.25/$1000 GR (ml.n. $18.75 - no max.) --- --------- ~-~------ - - - --- -- -- ------ - - ----- -- --- - - - -- ~-- - -- ~ ---- 29 , Opt:lOn 3: Tax bus1nesses, J..n aaareaate, one-half the level of Los Angeles . " .- C1tv Santa Mon1ca bus1nesses would contribute one-half, ~n aggregate, the revenues WhlCh would be collected If i.os Angeles C~ty rates were in effect. Profess1onaljoccupat1onl serV1ce f1rms,rnanUfactur1ng/wholesale f~rms and commerc1.al rental f1rms would be taxed at a level equal to the lowest rate charged by our compar1son c1t~es. Reta1l sales firms would be taxed at eX1sting rates but the maX1.ffiUm tax IJ.mJ.ts would be removed. Auto sales f1rms would be taxed at Los Angeles City rates but a maX1mum cap of $5,000 10 1983-84 and $75,000 thereafter would m1tlgate rate 1ncreases. Opt1on 4: Set rates equal to the lowest of our comparison CJ.tles Comparison WJ.th the nearby clt1es of Culver C1ty and Beverly 31115 as well as Los Angeles shows that Santa Mon1ca cons1stently taxes on a lower gross receipts basl.s. Adopt1ng rates equal to the lowest gross rece1.pts based taxes of these comparison clt1es would result 1n revenue lncreases totalllng $2,446,225 at 1983-84 levels. Professl.onal/occupat1onal/serv1ce fl.rms would contrl.bute a total of $1,945,022 add1.t1.onal revenues W1.thout apport1.onment at 1982-83 levels. Th1.s would become $1,642,290 at 1983-84 levels, assum1ng 20% apportionment. The average l:1CreaSe for these f1rms would be $483 at th1.S adJusted 1983-84 level. Reta~l f1.rms would contrlbute $288,440 at 1982-83 levels, and $313,534 at 1983-84 levels. The average 2ncrease 1.n 1983-84 would be $147 for retall flrms. Manufacturing/wholesale firms would contr~bute $266,946 at 1982-83 levels w1.thout apport.lonment. At 1983-84 levels w~th 20% apport~onment thlS would become $232,136 or an average of 5503 per f1.rm. Auto sales flrms would contr~bute 30 < . addit~onal revenues of 8237,697 at 1982-83 levels and $258,376 at 1984-85 levels. The average ~ncrease per auto sales f~rm would be $5,616. Gross rece~pts tax rates for key categor~es would become: Profess~onal/Occupat~ona1/Serv~ces $3/$1000 GR over $15,000 ($50 lun. - :10 max.) Reta~l Sales $25 + $1.00/~1000 GR over $25,000 (no ma x. ) wno1esale/Manufactur~ng $45 + $1.00/$1000 GR over $50,000 (no ma x . ) Auto Sales (taxed at reta~l rates) $25 + $1.00/$1000 GR over ~25,000 ( no max.) Option 5: Set rates equal to or lower than cornpar~son c~t~es but protect small bus~nesses and auto sales firms. Exempt~on of the f~rst ~1.0 m~11~on gross rece~pts for all . retail and whOlesale/manufacturing firms ~s included ~n th~ s scenar~o of bus~nesses tax changes. Effect~ve tax rates for small bus~nesses would be the ex~stl.ng $25 ffi1.n1.ffiUffi. Small f1.rms are def1.ned as f~rms w~th annual gross rece~pts of less than $1.0 m1.111.on: th1s standard def1.n1t1on ~s set by the u.S. Department of Commerce. 1,988 reta~l sales and 402 manufacturing/wholesale f~rms would benef1t. Based upon present tax rates, the average tax sav1ngs of $92 for reta11 sales and $82 for wholesale/manufacturLng fLrms would be real~zed. The tax savl.ngs under the rates proposed for large f~rms would average $146 and $97, respect1vely. Forgone revenue to the c~ty totals $206,843 at present rates and $329,986 at proposed rates W~ thout apport~onment. The legal~ty of th~s approach requ~res further analys~s but is outlined here as a means to ~ntroduce more progress~v~ty. The exempt~on would need to apply to the total 31 , gross rece.1.pts earned w.1.th.1.n Santa Mon.1.ca regardless of busl.ness locatl.on. Th.1.s would ell.rnl.nate the possl.bl.ll.ty of fl.rms d.1.vl.dl.ng busl.ness off.1.cesjlocat.1.onS l.n order to reall.ze the exemption. The ffi1n.1.ffiUm rate would be charged for f.1.rms at each locat.1.on .1.n Santa Monl.ca .1.n order to ensure ava.1.1ab.1.ll.ty of data for aud.1.t.1.ng and other l.nformatl.on needs. Large retal.l and wholesale/manufacturing fl.rms would be taxed at rates equivalent to Los Angeles. Of the large local businesses currently report.1.ng gross rece.l.pts, there are only 132 reta.l.l sales and 59 manufacturing/wholesale florms wh.1.ch would be a=fected. The median reported annual gross receipts of these large f1rms .1.S $1,608,000 for rata11 and $2,838,000 for manufacturlong/wholesale. The tax l.ncreases for fl.rms at the med1an Sl.ze would be $1, 074 and $1,404, respectl.Vely,w1thout apport.Lonment. By def.Lnl.tl..on half of the fl.rms affected would exper1ence a lower tax .1.ncrease. These large firms would benef.1.t from ~ncome tax deduct~ons, result~ng in the burden be~ng d1str.1.buted to taxpayers nat~onwide. A listing of the major types of large busLnesses Lncluded Ln each of these categor.Les .1.S provl.ded as Exh:101t E. I'axes for profess.1.onal/occupat~ons/serv1ces bUs.1.nesses WQuld rema:ln 40% less than Los Angeles and to be equ1va1ent to Culver City. Increased revenues totall.1.ng $1,945,022 at 1982-83 levels and $1,642,290 at 1983-84 levels are projected; th1s allows for 20% apport.l.onment of 1983-84 gross recel.pts not taxable .1.n Santa Mon:lca. Los Angeles nO'N taxes th:lS group at 32 . $5/.i.000 gross rece~pts. Culver C~ty taxes at $3/1000 gross rece~pts. It 1.S expected that apport1.onment will mit1.gate the effective tax ~:1crease ~n Santa Mon~ca from the current level of $.65/1000. Assuming that 20% of a f~rm's rece~pts are found outside the mun~c~pal tax~ng base, the effect~ve tax rate proposed would be $2.40/1000 for a typ~cal f~rrn. The tax ~ncrease for an average f~rrn ~s est~mated at $572 w~thout apport~onmenti small f~rms would real~ze an l.ncrease of $133 on average whereas large f~rms (over $500,000) would rea1~ze an average ~ncrease of $6,594. A total of 3,399 f~rms would be affected by the rate change. Auto sales would be taxed on a par w~th Los Angeles, but the . tax ~ncreases would be phased-in and low maX1.rnum tax levels ma~nta~ned. Santa Mon~ca's current maximum tax of $1,000 and low gross rece~pts rate l~m~ted 1982-83 revenues to $14,689 from the 46 auto dealers on flle. At Los Angeles rates, the City could realize total 1982-83 level revenues of $360,000. However, in order to cont~nue the econornlC benefit enjoyed by these flrms and protect agaJ...nst any relocatlons, maX1InUm tax ce~llngs are proposed. The maXlmum tax level would start at $5,000 10 1983-84 and :nove up to $7,500 ~n 1984-85 and thereafter. Th~s phased approach may provlde for flnanclal plann~ng of firms and, perhaps, allow l.ncreases to take effect during a more fa vorable bus~ness per~od. It ~s recommended that the maX1IDum rates be establ~shed as exempt10n prov~s~ons which would exp1re 1n 1995 unless reauthor1.zed by Clty Counc~l. 33 . . Owners of comrnercl.al rental property would pay at rates equ~valent to Los Angeles. Relat~vely modest revenue ~ncreases of $28,742 at 1982-83 levels and $32,219 at 1983-84 levels would occur. The gross receipts tax rate would ~ncrease from $.75/1000 to $1.25/100.0. Thl.s act~on would aSSl.st the Cl.ty l.n coverl.ng the costs of serVl.ces enJoyed by offl.ce workers and other non-resl.dents coml.ng to Santa Monl.ca because of these commercl.al property uses. Related Opportunl.tl.es In addl.tl.on to the five basl.c optl.ons outll.ned, there are seven related opportun1tl.eS whl.ch merl.t concurrent conSl.deratl.on. These relate to other revenue producl.ng adJustments to the busl.ness ll.cense ordl.nance, parkl.ng assessment rates, data collectl.on needs, tl.ml.ng of any tax rate changes and publl.c l.nforrnatl.on needs. 1 ) Conslder adoptl.ng Los Angeles tax rates on savlngs and loan corporations and re1.nstl.tut1.ng collectl.on of these taxes. Sl.nce the present tax set at $Um per firm locatlon 1S not collected, and the necessary taxable gross recel.pts data 1.5 unava1.1able, no proJectl.on of l.ncreased revenue 1.S provl.ded, The l.ssue needs to be declded lnlt1.ally on POllCY grounds. Fl.rms may then be requ1red to prov1de records for tax payment and audl.t purposes. A key poll.cy quest~on 1S whether ~he taxing authority of the State ~s approprlately founded on an ~ssue of "statew~de concern". The enabll.ng State Legl.slat~on proml.sed local return of revenues collected: subsequent legl.slat10n cancelled th1.s plan 34 -- . before c~t~es real~zed any of the subvent~on a~d. It ~s l~kely that the C~ty would be challenged through the Courts If SaVl:lgs and loans were taxed; Los Angeles C~ty reportedly expects llt~gat.1.on. However, the cost of l.1.t~gation to Santa Monlca must certalnly be less than the total revenues wh~ch would be real~zed over t.1.me. If we were confldent that we could enact and start collectlng hlgher taxes In the future, ~t would be most prudent to wa~t for a declslon on cases from Los Angeles or other cltl.es. There ~s no such certal.nty about our future taxl.ng author~ty, however. If there lS any desl.re to tax these busl.nesses l.n the future, l.t may be essentl.al to authorl.ze the taxes now. 2) Cons~der adoptl.ng a cpr (consumer prl.ce index) adJuster clause to allow period~c, adml.n.lstratl.ve increases 1.n any flat rate provl.s~ons ffil.nlmUrnS, rnaXl.mums or basl.c levl.es. Every two years adml.nl.strat2ve staff would calculate the cumulatl.ve l.nflat.lonary effect upon rates set l.n th1.s base year. Rates would be rounded upward to the nearest $5. l'hl.s type of authorl.zatl.on could mean substantial revenues to the Clty l.f l.t does not retal.n authority to legislatlvely adjust rates. 3) Cons.1.der estahlLshl.ng a busl.ness tax on a new category - conunerc1.al tenants l.n propertl.es for whl.ch the owner 1.S exempt from busl.ness taxes. The Los Angeles Cl.ty business llcense ordinance could be rev.lewed for approprl.ateness l.n Santa Monl.ca, The ~ntent~on 1.S to capture busl.ness Il.cense taxes for cornmercl.al tenants of lnsurance, bank~ng and other exempt propert~es. Al though revenues have not been estl.mated due to lack of data, 35 . the fundamental reasonableness of such a tax l..S obvJ.ous. ~'- ........ would close a loop-hole by whJ.ch certa1n un1dent1f~ed commercJ.al fJ.rms have an advantage over comparable fJ.rms J.n non-exempt propertJ.es. InstJ.tutJ.ng a tax equJ.valent to Los Angeles rates ($1.25/$1000 charges per calendar quarter) would restore equJ.ty w1thJ.n Santa MonJ..ca and establJ.sh comparabJ.l1ty w1th nearby areas. 4) RevJ.ew the rate basJ.s for ParkJ.n9 DlstrJ.ct Assessment charges and consJ.der raJ.slng taxes on parkJ.ng busJ.nesses. The asseSS!Ilent d1strJ..ct charges are set at fl.ve tl.mes the bUSJ..ness ll.cense tax rate. If busl.ness tax rates are lncreased, there would be an increase J.n assessment chargesithls should be revJ..ewed to determl.ne whether It 1S approprl.ate and deS1rable. The tax on par~l.ng bUS1nesses was lowered after the assessment dl.strict was downtown near the mall. It was decided to lower the entl.re rate structure for prJ.vate parkJ.ng lot owners throughout the C1ty to avo1d a hl-gh assessment for those in the dJ..strJ..ct. The appropriate tax structure for parkJ.ng bUSlnesses requJ.res separate, detal-led analysJ.s due to the potentl.al J..mpact on parkJ.ng and traff~c patterns ~n the C~ty.rhe opt~on of a parklng tax ~s outl~ned later In thJ.s report. S) Considerat1on should be gJ.ven to requJ..rJ.n9 all bUSJ..ness fJ.rms to provJ.de a data profJ.le to facl.litate tax audl.t1.ng, economJ.c analyses and rent control admlnJ.stratJ.on. In the course of th1.s analysl.s, there were many ll.mJ.tatJ.ons resultJ..ng from J..nsuffl.cJ.ent and unreliable data. It has been suggested that 36 > bas~c data on f~rrns be collected annually at the t~me of l~cense renewal.Counc~1 act~on to requJ.re reportJ.ng would help to ensure a hJ.gh response rate. Any legislat.Lve authorizatl.on should prov~de some flex~bJ.l~ty for admJ.nJ.strat1.ve d1.scret~on 1.n the form and content of the questl.onnaJ.re. Inev~tably, areas of l.mprovement are 1.dentl.fl.ed after a questl.onna1.re J.5 ut1.ll.zed. Informatlcn needs may also change from tJ.me to t~me. 6) Consl.der settJ.ng the effectl.ve date of J.ncreases as January 1, 1984 and deferr1.n~ collectJ.on of addJ.t~onal 1983-84 taxes unt1.1 February or March 1984. Th1.s approach would allow taxpayers to plan for any J.ncreased expendJ.tures, F1.nance department staff also need t1.me to reV1.se procedures, develop manager1.al and audl.t capac~ty and otherw~se prepare for a maJor admJ.nJ.stratJ.ve proJect. 71 Consl.der developl.ng a publ~c l.nformat~on program to assJ.st busl.nesses affected J.n understandl.ng and comply~n9' w~th new laws. 37 - . ~ UTILITY USER TAXES Overv~ew Authorl.ty to levy utl.l.l.ty user taxes ~s der~ved from the "rnun.l.cipal affa.l.rs" authorl.ty of charter C.l.t.l.eSi the Californ.l.a Supreme Court has affl.rmed thl.s authorl.ty. Nearly 50 charter c~t1.es levy a utl.lity user tax. In general, the tax is J.mposed upon the consumer of electrl.c, gas, cable televl.sl.on, water and/or telephone serV.l.ces. Tax rates are establl.shed by the Cl.ty Councl.l based upon a percentage of the amount bl.l1ed to each conSUMer. Exemptl.ons are provl.ded to state and federal government agencles, pay telephone users, mobl.le phones, gas and water used by utl.ll.ty companl.es to generate electrl.cl.ty and l.nterstate phone calls. Santa Monl.ca's Utl.l.l.ty User Taxes Santa ~10nl.ca ' s Hun.l.c.l.pal Code establl.shes a fl.ve percent (5%) tax on telephone, gas and electr.l.c consurnptl.on. The tax 1S calculated based on 5% of the monthly billing, collected by each utl.ll.ty and subsequently forwarded to the Cl.ty. I'he standard exemptl.ons are recognl.zed 1.n Santa Mon.l.ca. Al though water consurnptl.on and cable televl.s.l.on use are not presently subJect to utl.ll.ty user taxes l.n Santa Honl.ca, l.t does not appear that opportunities to establl.sh such taxes are foreclosed. The Mun.l.cl.pal Code does not specl.f1cally address taxatl.on of these utl.ll.tl.es: it 1S presumed that Santa Honl.ca's 38 .. . "mun~c~pal affa~rs" author~ty as a charter c~ty would prov~de suff2c2ent baSlS for Clty Counc21 to lnstltute these taxes. Analys~s of the ~ncidence of ex~st~ng ut~1~ty user taxes ~s compl~cated by the unava~lab~l~ty of data and the ~nherent complex~ty of rate structures. Rate structures for the local electrlc and gas companles prov~de for Ilfel~ne rates for resldent~al users and nonol~fell.ne allocat~on rates for res~dent~al users. Non-~nterruptable serVl.ce rates and lnterruptable serVlce rates for cornmerc~al/~ndustrl.al users are among the other elements of the rate structure. For the purposes of thlS analysls, data collectlon has focused upon the lncl.dence of lifellne allocatl.on usage for electrlc, gas and water util~t~es by residences. Comparl.son Wl.th Other C~ties ::;:n Call.fornl.a, ut~lity user tax rates range from 1% to 11%, wlth 5% as the most common rate. Los Angeles Cl.ty has a 5% tax on telephone use, a 5% tax on res~dent~al electr~c usage, a 10% tax On electric usage by commercial or lndustr~al users, and a 5% tax on gas usage. Culver Clty l.rnposes an 11% tax on usage of each util~ty. Dl.fferentlal tax rates for Ilfellne versus non-llfeline consurnptlon have not apparently been adopted by any Call.fornl.a Cl.tl.es. 39 . . Cr~ter~a for Increasing Ut~l~ty User Tax ReveGues Approaches I..Jh~ch Plax~nnze the relat~ve advantages of any act1.ons to J.ncrease revenues from ut1.l~ty user taxes are outI1.ned below. To :nake staff assumpt1.ons as expl1.c1.t as poss~ble, th1.S d1.scussl.on loS presented in terms of the eJ.ght evaluatl.on crl.teria prev1.ously outl1.ned 1.n th~s report. 1- Tax Incidence 0 Ab~l1.ty to Pay - A cable televl.sl.on ut1.ll.ty user tax would be l.ntr1.ns1.cally progress1.ve and only those able and wl.llJ.ng to pay for th1.S serVl.ce would bear the add~t1.onal cost of a utill.ty user tax. 0 Perce~ved equJ.ty - The progressivity of taxes upon electrl.c, water and gas usage could be increased by establJ.shl.ng h~gher tax rates for consumption above 11.fel1.ne allocat1.ons. Th1.s approach would protect res1.dent1.al customers from tax-related cost increases in bas1.c consumpt1.on needs. Add1.tl.onal revenues would flow from the commercial and 1.ndustn..al users and those res1.dential users who can afford a luxur1.ous level of energy consumptl.on. A 61.In1.1ar approach could be appl1.ed to any taxes l.mposed J.n water consumpt1.on. It 1.6 unclear how more progres61.vity could be l.ntroduced into the tax rates upon telephone usage. 40 . , 0 Cormnerc.lal versus Res~dent.lal Share- By def~n~tJ.on, .lncreas1.ng taxes on only non-l1.feline or non-res~dent1.al ut1.l.lty consurnpt~on would l.ncrease the relatJ..ve tax share supported by the cornmerc.lal sector. On the other hand, cable telev.lsJ..on user taxes would be born almost exclus1.vely by the res.ldential sector. 2. Secondary Effects 0 Protect.lng the elderly and low .lncorne persons from rate .lhCreaSes could be accompl1.shed through exernpt1.ons. Energy conservation may be encouraged through h1.gher effective rates On ut1.l1t1.es. 3. Revenues generat.lng potential 0 Utll1.ty user taxes may be characterized as a predlctable, recurr1.ng, and elast.lc revenue source. 4. Restrictlons on the Use of Funds o Revenues would flow to the general fund. 5. Procedural Requirements 0 C1.ty Council may establlsh new taxes or author1.ze changes to utll1.ty rate tax structures and lev1.es. 6. Legal Author1.ty 0 Any d1.fferential rate structures established must w1.thstand tests of reasonableness regard long const1.tut1.onal 41 . provJ..sJ..ons of equal treatment. The opt~ons of d~fferent~al rates for non-l~feline or all re5ldent~al con5umpt~on do not appear likely to provoke legal challenge. 7. Collection Procedures 0 Publ~c utJ..l~t~e5 would be required to adJust collectlon procedures to conform to any locally establ~shed tax system. Reasonable not~ce would be requ~red. It appears that any ~ncreased costs of collectJ..on realJ..zed by the ut~lJ..t~es would be borne by each respectlve company ra ther than dJ..rectly charged aga~nst the tax revenues for Santa Mon~cad 8. C1t1zen Monltorlng Capaclty 0 Ut1l1ty user tax rates would be somewhat nore difflcult for ta:x payers to verlfy If a two-tlered system were adopted. opportunities to Increase UtJ..l~ty User Tax Revenues 0 No changes to existJ..n9 util~ty user taxes are proposed. It ~s felt that the basJ..cally regress~ve J..mpact of user taxes on essential utJ..IJ..ties could not be suffJ..clently moderated. The admJ..nJ..stratJ..ve costs and responsJ..bllty of an exemption program would probably be borne by the CJ..ty. 0 ConsJ..deratJ..on may be gJ..ven to establishment of a cable television utlllty user tax. Based upon gross recelpts reported to the CJ..ty by Group W Cable under J..ts franchlse, J..t appears that a 5% tax would generate approxJ..mately 42 $150,000 at 1982-83 levels. These costs would be born by c1t1zens who purchase cable services. 43 , OTHER EXISTING ~AXES Franch1.se Taxes Cit1.es have the authority to 1.rnpose =ees on pr1.vately-owned ut1.l1.ty compan1.€s and other bus1.nesses for the pr1.v1.lege of US1.ng C1.ty streets. The follow1.ng types of bus1.nesses are fregquently requ1.red by C1.t.y ord1.nance to pay such franchise fees: publ1.c ut1.11.t1.8s, such as gas, water and electr1.c1.ty; cable telev1.s1.on compan1.eSi and compan1.es which conduct bus1.ness on C1.ty streets, such as taxl. cabs and ambulances. State law protects telephone compan1.es, ra1.lroads, and wharves and p1.ers from local franch1.Eang author1.ty. In Santa Man1.ca, establl.shment of a franch1.se 1.S subject to rl.ght of referendum to the people. In general, franchl.ses are not to exceed 2.0 years except for electrJ..c and gas franchises whJ..ch are l.ndefJ..nl.te 1.0 Santa Mon1.ca. S1.nce eX1.stl.ng franchise agreements w1.th the ut1.litl.es provide favorable rates, there appears to be little chance that they would be 1.nterested in renegotiating l.n the near term. Shell 01.1 and the City are currently engaged l.n 11.t1.gat1.on over the proposed franchl.se agreement for an onshore 01.1 p1.pell.ne. Theta Cable of Californ1.a has an agreement w1.th the C1.ty which exp1.res 1.n 1988. However, there 1.S concern that the f1.rm may have breached its contract when 1.t affl.l1.ated w1.th 44 - ~ 'dest~nghouse. The Cable Task Force ~s presently explor~ng tn1s "1latter. Opt.1.ons of franch~s.1.ng taX1.cabs and ambulances are not recommended at th1S t~mel due to .1.nherent adm.1.n.1.strat.1.ve and legal complex1ty. Trans1.ent Occupancy Tax Trans.1.ent Occupancy taxes may be .1.mposed for the pr~v11ege of occupYl.ng a room or rooms J.n a hotel, ~nn, motel, tour~st home or other 10d91.n9 facl.lit~es for less than 30 days. Rates may be set at each c1ty'S dl.scret~on. Th~s tax 1$ admln.1.stered by Cl.t1es. About two-th1.rds of Call.forn1.a C1.ties levy th~s tax. Rates range from 1 percent to 10 W1.th most at about 6 percent. Los Angeles and Culver Cl.ty have rates establ1.shed at 7 1/2 percent; a reduction to 7 percent 1.n each jurisd~ctJ.on is scheduled for September 1984, after the Summer Olymp1.cs. Tourists, bus1.ness persons and other non-res~dents prov1.de th~s source of revenue to c~ties. Generally, the airl.1.nes and other corporat.1.ons escape this tax by rent Lng for more than th1rty days. Santa Monica's transient occupancy tax rate was ra~sed to 8 percent 1.n 1982. An 1.ncrease to 10 percent may result 1.n an annual revenue .1.ncrease of $419,400 based on 1983-84 revenue assumptions. However, this would place the C~ty tax rates notably above those of nearby Jur1.sd~ct~ons. It ~s u:lclear -l5 . whether th1S would mater1ally affect demand for hotels/motels 1n Santa Non1ca. Clos1ng the corporate loop-hole ffi1ght well reduce demand for Santa Monica hotels/motels: A1r11nes may be the s10gle largest beneficLary of existLng tax prOVl.SLons. It .ts poss.tble a1rl1.nes would respond by chos1ng to rent space .tn hotels/motels W1.thLn Los Angeles which also has a comparable def1nitLon of trans1.ency. Sales/Use Tax The C.tty Attorney has rendered an op1n1on to C.tty Council regard long local author1ty to 1ncrease sales/use taxes. The overr1d1.ng practical concern 1.5 that any local rate increases would apparently requ1.re the C1ty to assume adm1.nistrat.ton of th1s tax. The Board of Equal1.zat1on currently provides adm1.nJ.strative serV1.ces 1n accordance w1.th the Bradley-Burns Law of 1955. CondomJ.n.tum Tax The condomin1um bus1ness l1cense tax 1S .tmposed under the "municipal affa.trs" authorJ.ty of charter c1.ties. The 1983-84 budget proJects zero revenue from th1s source due to an eX1.st1.ng moratorJ.um. Due to the relat1.vely 10\.. long-ter:n revenue potent.tal from th1s tax, 1t has not been g1.ven detailed revJ.ew. 46 . . POTE~TIAL NEW TAXES Compar~sons wlth other Jurlsd~ctlons and rev~ew of League of Callfornla publlcat~ons show that Santa Non.~ca appears to be qu~te comprehens~ve ~n lts scope of local taxation for general fund purposes. \h th~n the framework of exis~t1.ng taxes, there appear to be s1.gnlf~cant opportun~t~es to lncrease local revenues through the bus1.ness l~cense and ut1.l~ty user taxes; these opportun1.tles have been outlined. In terms of new forms of taxat1.0n. levy of an Admiss1.ons Tax and/or Park1.ng Tax are the key opt~ons. Adml.ssl.ons Tax Only charter clt~es may l.mpose an adm~sSlons tax upon consumers for the pr1.v~lege of attend1.ng a show, performance, d~splay or exhib~t~on. Events for wh1.ch the tax 1.S lev~ed vary among C1.t1.es but lnclude: horserac1.ng, sport events. concerts. C1.rcuses. movies, museums, skate centers, and any other exh~bitlons or performances. The tax 1.S lev1.ed at a flat rate wh1.ch may range from $.02 to $.50 per tlcket, a percentage of the adrn1.ss~ons pr1.ce, or a slld~ng scale of some sort. The tax is ~ncluded In the t1.cket, 1.S collected by the tl.cket seller, and remltted to the C1.ty. Exempt1.ons mays l.nclude sen1.or Cl.t1.zens, ch1.ldren under 12, student organlzations, or unlformed m1.11.tary personnel. 47 - --- - . Los Angeles Clty has established a 6 percent adm~sSlons tax on the sale of Olymplcs tlckets. Santa Monlca may be able to levy a Slmllar tax on marathon event ticket sales. However, the resources WhlCh might be requlred to research ltS potentJ..al, draft leglslatlon and collect the taxes would be more approprlately dlrected towards recurrlng revenue opportunitles. Parklng Tax Author1ty to levy a parking tax 1S der1ved from the "mun1c1pal affa1rs" author1ty of charter c1t1es. The tax 1S collected by the owner or operator of the off-street parklng facil1ty and 1S remltted to the C1ty. This tax is reportedly lev1ed only by a few c1tles and practlces are qU1te d1fferent. San Francisco levies a 25% tax wlth no cap. Inglewood levies a 15% tax with a maxJ..murn of $.15 per day. Santa Mon~ca currently levles a buslness 11cense tax upon parkJ..ng lot operators at the exceptionally low rate of $1 plus .5.0 per 1,0'110 square feet of lot area over 10,000 square feet. ThlS rate was lowered to the present level after establlshment of the downtown par lung d1str1ct adJacent to the mall. Slnee bus1ness IJ.eense taxes due serve as the base for the park1ng assessment charges, lt was deClded to lower the entlre rate structure for prlvate parklog lot operators. If a separate park long tax were levied, lt could be set wlthout regard for the spec.l.al d~str1ct charges. 1'he revenue produc~ng potentlal of a parkJ..ng tax has not been analyzed. The potent~al usefulness of th~s tax as a deV1ce to affect park~ng behav~or and demand 48 . . , funct~ons may be of even more ~mportance than the d1rect dollar benefits from revenues. It has been prev10usly recommended ~n th~s report that th1S opt~on be g1ven further study. ReV1S1ons to the buslness l1cense tax rates necessltate a reVlew of the method of computlng speclal dlstrl.ct charges. It may be deslrable to either reVlse the eXlstlng buslness taxes on prlvate parklng lot owners or to establLsh a separate parklng tax. 49 . ~ Append~x A LISTI~G OF AGENCIES CONTACTED Other Mun~c~pal~t~es Ut~lltles C~ty of Atherton Southern Callfornla Gas City of Berkeley Southern Callfornla Edlson Clty of Beverly Hllls CA Publlc Dtllltles Commlsslon Clty of Culver Clty Clty of Downey ASSOclatlons/Advlsors Clty of Hlllsborough CA Tax Reform CommlSSlon Clty of Los Angeles Clt~zens for Tax Justlce Chlef Adm~n. Qfflce League of Cal~forn~a Cltles Clty Clerk's Offlce Munlclpal Bus~ness Tax Assoclat~on Department of Water and Power Clty of Manhattan Beach Ralph Andersen Assoc~ates City of Monterey Park Clty of Redondo Beach Clty of Walnut Creek County of Los Angeles Assessor's Offlce Audltor - Controller's Offlce ~ . .. 5/2/83 . :cxhJ..b~t A Prof~le of F~rms - Santa Mon~ca Bus~ness Tax F~le Reported 1982-83 Licenses Gross Not Category Gross Rece~?ts On F~le Reported Profess~onal/Occupat~onal Ser..nce 5786,581,.138 3,399 984 Feta~J. sales 677,263,381 2,120 533 Manufacturmg /Wholesale 434.499,590 461 117 Auto Dealers 252,386,981 46 14 Apt/Hotel 138,239,790 3,101 197 WIlli. Rental 80,497,807 740 31 Plumbl.Ilg & Heatll1g or Sewer Contractors 725,987 43 24 plumbmg, Heating and Sewer Contractors 532,827 7 0 PlurobJ.ng QE Electr~cal 9E. General COntractors 59,581,776 2,010 1,622 Subcontractors 36,695,522 2~311 1~746 Servl.ce Prov~ders - outs~de Santa Maruca 4,696,942 409 76 Adv. - Billboards 188,349 3 0 Pool Hall & Bowhng 82,408 4 3 Wash/Dry Y..acIllnes 470,750 3 1 Subtotal GR Based Taxes 2,472,443,548 14,654 5,360 Flat Rate Based Taxes N/A 952 N/A Total - Finns on Ccmputer F~le 2,472,443,548 15,606 5,360 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Profess~ons Taxes Paid by Finns Not Occupations l'oJholesale Re[XJrtInCJ Gross Rece~?ts Servl.ces Retal.l Sales Hanufacturll1g 1) ~ tax paid 4 2 2 2} M1.ni1rn..m1 tax p.nd 776 403 92 3) Other tax paJ.d 10 13 7 4) No tax paid 194 115 16 5) Tota 1 not reporting 984 533 117 ~ Exil1.b~ t B 5/1/83 Selected Santa. 1-1oruca Buslllesses by S~ze Profess~onal/ Reta~l 'i"lllo1esalej CccupatJ.onal/ Sl.ze Sales Manufacturers serv~ce A. Number of FllIIIS I.a.rge (a) 132 59 231 Small (b) 1,455 285 2,184 Unknown sJ.Ze 533 117 984 (Rece~pts not Reported) - Total number of fJ.UnS 2,120 461 3,399 B. Total Gross Fece~l?ts (000'5) Large 404,843 385,288 577,070 Small 272,420 49,211 209,511 Unknown - - - Total Gross Receipts 677,263 434,499 786,581 (a) Large finns are Clefllled by gross rece~pts: Retall Sales > $1. 0 nulllon Wholesale/Manufacturing ? $1.0 mll1.on Professlonals, etc..2 $ .5 mlll.on (b) SMall fJ.nns are defmed by gross rece~pts: RetaJ..l Sales L- S 1. 0 nu..lhon Wholesale/Manufacturmg <. $1.0 nulll.on profess1.onals, etc. <:. $.5 mll1.on t . r ...; -- :.r ........ N 'Il:t -=t - - '=' "=" "'::I --. -..........0 o;;!'" _ C'\.; -.-. ;...""] c.. ~ 0...:: ="_ _ - __.............. ~ ...... - -=- -- - --. ~ -'" ---.. ~.... ........ ~ ..c -......... ....... - ........ - -.::- "'- ::::!i;:: _ IC:T~ ('1..,:- N__........ w:::t" -""_L.'"1 - - - - -...,; ,-.-..... ~ vr "'./"r to'). ....... 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Sxh1.b~t D Gross Rece~pts of Selected Large Santa Mcm.ca Busmesses 5/1/83 Number Average MedJ.an Type of Busmess of F~rms Gross Rece~pts Gross Rece~cts . f..eta~l Sales Depart::rrEnt 8 9,592 6,384 Grocery 13 6,384 2,405 Auto Repair 5 1,816 1,415 Bmldmg 6 3,457 3,445 Drugs 7 2,844 1,810 P:n.n:tJ.ng jPublJ.shing 5 2,277 1,639 Rest Hare/ConvaL Hosp. 7 1,981 1,370 P.estaurant 31 1,503 1,331 We.:>.rl.I1g Apparel 7 1,289 1,183 Other ("';:: r:er t::-pe) 43 - - 132 3,066 1,608 Toole sale J;'1anufacturmQ Alrcraft parts 2 2,827 4,277 Auto repall 2 2,092 3,265 Bul.ldlilg 3 3,984 1,593 Grocery 4 5,293 4,843 Jewelry 2 7,553 9,828 Manufacturl.!lg 20 5,343 2,289 Ml.scellaneous 7 5,732 5,425 Ofhce eqw.prent/suppl~es 3 4,270 5,290 Photo 2 46,112 80,500 PrLl'1tmg /Publ~slu.ng 2 6,675 11 ,045 Sp::>rtmg Goods 2 1,884 2,524 Ot.. ~er (~2 p:rr type) 10 - - S9 6,530 2,838 Professional/CccU'l?at~onal/SerV1ce Accountant 5 1,097 687 Archltect 10 1,416 1,362 Attorney 10 878 829 Auto rerair 7 o~-- 929 ~""'.;. stoc.lc Broker 4 3,203 2,958 Employ. Serv~ce/:\gency 4 951 1,059 Gas StatJ.on 30 1,:20 913 Canputer Prog. 6 889 790 Physlcian 48 900 752 Property Mgt. 14 2,~77 1,198 Rental Sales 9 n9 646 Research 27 n,cn 1,498 SchCXJl 4 1 , 071 1,042 other ("'- 3 per tyr;:e) 53 - - 231 4,411 ~ . ~ ! . . ... -~-