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SR-11-B (20) . e e II ~!3 2{J1- -DP I :JAtJ 2 '1 fA ~ CA:SSS:SC:bl Councll Meetlng 1/27/31 Santa MODlcar Callfornla 5T STAFf' REPORT FEB 1 J ;921 TO: Mayor and Clty Councll FROM: Clty Attorney and Clty Manager SUBJEC?: Replace~ent of Llcense Revlew Board by Adr.lDlstratlve Law Judqe BACKGROUND The Llcense Revlew Board ("LRB") was establlshed In August 1974 pursuant to Ordlnance 968 (CCS) r codlfled as Sectlon5 6124-6126 of the Munlclpal Code. The body, WhlCh 15 constltuted of =lve depart~ent heads and the Clty Clerk ana chalred b~r the Asslstant l1anager r Slts to declde appeals lnvolvlng the denlal or :e1Tocat.lOn. of ouslness llcenses or pollee permlts and the lmposltlon of buslness llceDse tax penaltles. Any declslon of the LRB nay be appealed to the Clty Councll. In the nastr however, few l= any such appeals have been flIed. Thusr the LRB has served the pur?ose for WhlCh It was orlglnally created, l.e., to ?rovlde a rlght of appeal to persons aggrleved by actlons of the Llcenslng Departnent wlthout In?051ng an addltlonal burden on the Councll. ISSUE In the past the nunber of cases appealed to the LRB was qUlte s~all and could be scheduled relatlvely promptly for hearlng wlthout unduly burdenlnq tne nembers of the Board. Howeverr both FFB: 0 tbe ~uantlty and the guallty of the LRB's workload has been changed ST ,,:,""' ~.--i I -. 11--8 UA N 2 ? 1981 A e e by the recent s?ate of appeals arlslng under the Massage Parlor Llcenslng Law. Not only have disappointed appllcants demanded hearlngs, but they are, for the most part, represented by counsel who have ln~roduced a greate~ for~allty lnto GFB proceedlngs than had prevlously eXlsted. It Tlay be expected too, that the nUMber of appeals to the Clty Counell wll1 1nerease aeeordlngly. The net result 1S that the LRB has ceased to constltute an efflclent and cost effectlve means of reso1vlng llcenslng dlsDutes. After study and dlScusslon undertaken ]olntly by the Clty Manager and the Clty Atto~ney, lt 1S our suggestlon that the Jurlsdlctlon of the LRB be taken over by an admllllstratlve law Judge and that the LRB elther be abollshed entlrely or retalned only for the llmlted purpose of hearlng a?peals fron deClslons of the admlnlstratlve law Judge. DISCUSSION There are at least three resoects on WhlCh It would be advantageous to have an admlnlstratlve law Judge hear and resolve the cases presently appealed to the LRB. Flrst, glven tne lncreaslng number of cases cO~lng before the LRB and the greater anount of tlffie consumed by each hearlng, lt has become increaslngly dlfflcult for the wembers of the LRB to coordlncte tnelr schedules and lncreaslngly expenslve, ln terms of the tlme FrtlCh the departnent heads constltutlng the LRB Qust ta~e from thelr areas of prlmary responslbll~ty ln order to fulflll LRB dutles. Altnough lt mav not have been cost effectlve at some pOlnt to hlre an outslue person to conduct license reVlew hearlngs, -2- e - the nunber of such hearlngs has now lncreased to the pOlnt where lt would be far more efflclent tnat they be heard by a slngle speclallzed person and the ~e~bers of the LRB freed, accordlngly, froB what has necome a burdensome obllqatlon. Second, although LRB heaTlngs have ln the past been conducted on a falrly lnformal basls, It may be presumed that as more ap~llcants are represented by counsel--as tDe a?pllcants for massage permlts seen to be--the ?rOCeedlngs wlll become more formal and legallstlc. For exarnDle, attorneys for dlsappointed massage permlt appllcants have announced an lntentlon to lntroduce ~olygraph eVldence at the hearlngs, thus requlrlng the LRB to evaluate and make a determlnatlon as to the rellablllty of such eVldence. Moreover, such a dete~lnation is increasingly likely to be subjected to Judlclal review. Slnce the members of the LRB have no legal tralnlng, It may be antlclpated that they l~~ll have to rely more and more on the advlce and aSslstance of the Attorney's Offlce. QUlte apart from the potentlal confllcts lnherent In utllizlng the Attorney's Offlce ln an advlsory capaclty (see below), the increaslng need for legal expertlse In llcense reVlew hearlngs could be more e=fectlvely resolved by havlng a legally tralned person ln tne role of declslon-maker. Thus, agaln, It would seem the most economlcal use of human resources to have llcense appeals neard lnltlally by an adDlnlstratlve law Judge who can brlng to bear In each case, not only fornal legal tralnlng, but the expertlse accumu- lated tnough repeated centrallzed handllng of these cases. -3- e - F1nally, as alluded to above, there 1S a potentlal for confllcts of 1nterest In hav1ng cases heard by the LRB as presently constltuted. Plrst, If the LRB 1S advlsed by a memner of t~e Cl ty Attorney I S sl:aff, tnere 15 a potentlal confl1ct to the extent that another ~ehiller of the staff plays an adversary role In the hearlng. In lliassage parlor cases, for example, the ~ollce are re~resented be~ore the LRB by a Deputy Clty Attorney. There 15 also a potentlal co~fl1Ct 1nherent 1n the ~ake- up of the LRB 1tself. The Code provldes for the appolntnent o~ a substltute In the event that a permanent member of tne LRB has been lnvolved In a matter whlcn has been appealed to the LR3 (Sect1on 6126B2). Thus, an LRB Qember cannot Slt to reVlew D1S or he r O~'ln actlon. However, such wemner's actlon wll1 be rev1eued by hlS or her co-members on tne LRB. There lS arguably some resultant pre]Ud1Ce to the ap~ellant to the extent that the dec1s1on-makers have an ongo1ng relatlonshJP on the LRB, not to mentlon other respects 10 WhlCh department heads ~ay ~ork together, with the LRB member wnose declslon 15 be1ng rev1ewed. Whether elther of these s1tua~lons results In an actual confllct of lnterest, there lS at least s~~e colorable 1nference or lmproprlety. In each case th1S could be ellffilnated, to the benef1t o~ the ap?ellants and the adnln1stratlve process 1tself, by replaclng the LRB vn th a ;leutral admlnlstratlve law Judge who Das no other connect10n wlth any of t~e departnent heads whose dec1s1ons may come befoye hlB or her for reV1ew. To summarlze brlefly, lt would appear the present method of handllng llcense ap?eals lS exnenSlve and lnefflc1ent and creates -4- e . at least an ap~earance of lffi?rO?rlety. Conversely, the beneflts WhlCh ffilght oe reallzed by replaclng the LRB wlth an lndependent ad~lnlstratlve law Judge lnclude the followlng: 1. A savlngs In Clty resources re?resented by the tlme presently expended by department heads In LRB actlvltles and by the Clty Attorney's Offlce In advlslng the LRB; 2. Increased efflclency In scnedullng hearlngs proQptly and 1n conductlng ~earlngs In accordance w1th accepted legal standards and safeguards: lncreased efflclency represented by the centrallzatlon of functlons In a slngle s?eclallzed 1ndlV1GUal who may be expected to develop expertlse In both the substantlve area subJect to reVlew and the ?rocedura1 framework in WhlCh the reVlew lS to take place; 3. Ell~lnatlon of any appearance of lmproprlety, If not actual con~llcts of luterest, In havlng l~cense appeals declded by persons who have sone ongolng relatlonshl? wlth the admlnlstrators whose declslons are belng revlewed or the attorneys representlng the~. An addltlonal advantage In nlrlng an admlnlstratlve law Judge to hear llcense appeals lS that th1S same person would also be avallable to hear other klnds of cases. ~or example, there 1S presently no admlnlstratlve ?rocedure for hearlng complaln~s arlslng out of enforcement of alrport regulations. It would provlde an effectlve cOffi?lenent to crlwl~al prosecut1on for vlo1atlon 0= ordlnance--a re~edy rarely ~ursued because of ltS formallty--to establlsh a means whereby sueD cor~plalnts co~ld be lDltlated at an adWlnlstratlve level. -5- e . ALTER~ATIVES Assumlng the Councll accepts our reco~~endatlon to replace the LRB \11th an admlnlstratlve law Judge for the hearlng of llcense a?peals, there are two further lssues Whlch Must be addressed: 1. There lS a questlon whether a further admlnlstratlve appeal should be provlded fro~ a deC1Slon of t~e adrnln1stratlve law Judge, as tne Councll no~; orovldes a second level appeal =rom deClslo~S of the LRB. It would a~pear that to glve ourselves every opportunlty to aV01G lltlgatlon, If ?osslble, we ought to have an op?Ortunlty to reVlew dec1510ns of the admlnlstratlve law Judge lnternally before t~ey become subject to Judlclal reVlew. If t~e Councll would prefer not De burdened wlth the duty of Dearlng appeals from the ad~lnlstratlve law Judge, however, perhaps the LRB could be retalnec for that purpose. 2. A second questlon WhlCh must be resolved lS the status of the adNlnlstratlve law Judge wlthlD tne Clty govern~ent, that lS, to WhlCh department or offlce 15 he or she to be attached. It has been suggested that, as an attorney, the adrnlnlstratlve law Judge s_lould be a member of the Clty Attorney's staff. Before thlS route lS chosen, however, we ought carefully to conslder the llotentlal confllct of lnterest questlons. -6- " . - . ! ~ RECO~h~ENDATION It lS respectfully submltted that the Counell authorlze an ad~lnlstratlve law Judge to be hlred to hear cases lncludlng, lnte~ alla, those 9resently wlthln the Jurlsdlctlon of ~he Llcense ReVlew Board and complalnts arislng =rom vlolatlons of a1rport regu1atlons; once the Cauncll has resolved certaln lssues concernlng the status of the adWlnlstratlve law judge wlthln the Clty government and the avallablllty of further adnlnlstratlve a?peals from hlS or her declslons, the Clty Attorney should be olrected to pre?are an ordlnance amendlng the Munlclpal Code to reflect the procedure adopted by the Councll. Prepared by: Step~en Shane Stark, Actlng Clty Attorney Susan Carroll, 0eputy Clty Attorney John Jallll, AS~lstant Clty ~anager -7- ./ e Santa Monlca, calif4iiia, March 14, 1980 11~ ;2C?-ool MAR 2 5 1980 TO: Mayor and City Council FROM: Clty Staff SUBJECT: Appeal of Saghir Ahmad Aslam from Assessment of a Penalty Incurred by Late Payment of Gross Receipts Tax. 515 APR 2 2 1980 sR IntroductlOn MAY 2 7 1980 This report forwards the appeal of Saghlr Ahmad Aslam from the assessment of a penalty ln the amount of $870.41 which was incurred when Mr. Aslam failed to pay gross receipts tax for a business dba Fabrics and Draperies by Sols at 1248 Santa Monica Mall. Background Section 6116 of the Municipal Code provldes that each buslness submit to the City License Dlvision a statement of gross receipts for the perlod endlng June 30th of each year (see attached for~). Based on the amount of such gross receipts, the business is assess~d a tax, payable by September 1st. A 15% penalty is assessed for late oay~ents received from September 1 through September 30th, with an additional 5% penalty for each month thereafter, wlth a maximum not to exceed 50%. Last year the License Division issued license renewals for 16,000 businesses wlthin the City, generating a total of $1,400,000 in revenue. Three hundred of the 16,000 businesses were assessed late payment penalties. Seven appealed their assessment to the License ReVlew Board. The Board, however, found in every lnstance that the License Divislon had mailed the gross receipts statement sA in a timely manner and that the Dlvision had not acted in an arbitrary, MAY 2 7 1980 capriclous or discrlmlnating manner wlth respect to the penalty assessments. SJ3 APR 2 2 ~980 '2~R~ MAR 2 5 10!Ht .. . TO: Mayor and Clty COU1IiJ . t~arch 14~ 1980 -2- Jhe Appeal Sols Fabrlcs and Draperies' license was due for renewal on July l~ 1979. A gross receipts statement was mal led to Sols on June 26~ 1979. Another was hand delivered to the business by request on September 30~ 1979. The payment for renewal of the business license was not received until November l~ 1979~ and therefore a penalty of $870.41 was assessed. Mr. Aslam appealed the assessment, pursuant to Section 6126 of the Santa Monica Municipal Code~ copy of which is attached for your review. Mr. Aslam's appeal to the License Review Board was heard on November 20, 1979 and was unanimously denied. Section 6126F provldes for appeal of the License Review Board decision to the City Council with the specific condition that a transcrlpt of the appeal before the Llcense Review Board be provided to the Council for evaluation and that no new evidence may be presented to the Council unless it is established that Mr. Aslam !I...with reasonable diligence~ could not have submitted this evidence to the License Review Board. II The transcript of the appeal heard by the License Review Board is attached for Council evaluatlon. Prepared By: JOHN JALILI Attachments