Report to Mayor and City Council
Tuesday, May 05, 2020
Discussion
SUBJECT:
Title
CONSIDERATION OF BUSINESS LICENSES AND PERMIT PROGRAM IN LIGHT OF SMALL BUSINESSES EXPERIENCING NEGATIVE FINANCIAL IMPACTS STEMMING FROM THE COVID-19 PANDEMIC (CITY COUNCIL)
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I. SUMMARY
Both the City Council and the Carson Disaster Council have expressed an interest in an update on the City’s Business Licenses and Permit program and, in particular, information on those Licenses and Permits that were either renewed or newly issued in March of 2020, or a subsequent month.
II. RECOMMENDATION
Recommendation
DISCUSS and PROVIDE direction.
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III. ALTERNATIVES
1. Direct staff to process REFUNDS for all businesses OR a specified subgroup of businesses for a portion of the Business License tax that would be prorated to take into account the number of months the business was operating, OR
2. Approve the Business License Tax Refund Request application AND direct staff to either:
a. Provide REFUNDS on a case-by-case basis for that portion of the year that the business was not operating, OR
b. Apply a CREDIT to the account for the next renewal period for that portion of the previous year that the business was not operating, OR
3. TAKE another action the City Council deems appropriate.
IV. BACKGROUND
On March 17, 2020, the City Council adopted Resolution 20-053 (EXHIBIT 4) declaring a local emergency in response to COVID-19. On March 16, non-essential businesses were ordered to close by the County of Los Angeles (Exhibit #4). Many of our Carson businesses that are vital to the economic wellbeing of our community have either had to close because they were non-essential or have had significant reductions in business revenues because of COVID-19.
Most businesses that operate in Carson simply pay the base Business Tax in the amount of $180; however, the tax increases for businesses with six (6) or more employees and for specified business types (e.g., real estate broker, contractor/construction, street vendors, etc.). For businesses that employ more than five (5) employees, $36 is charged per additional employee.
The following table illustrates the number of Carson-based Business Licenses/Permit accounts, correlating expiration dates and the total revenue received for those months. Unless a business owner notifies the City that the business is permanently closed, that account remains in renewal status.
The Table below shows that of the 5,556 Businesses Licenses issued, 4,493 (81%) are for businesses that employ zero to five (0-5) employees and 1,063 (19%) employ six (6) or more employees.
As mentioned above, the City’s base Business License tax includes payment for 0-5 employees and for every employee (6+), the City charges an additional $36 each. In addition to the base Business License tax, certain business activities also require a Permit, for which there is an additional tax. Of the 5,556 businesses operating in Carson, 378 businesses pay for a Permit in addition to the Business License fee. For example, a mini-mart gas station that has a Business License and would also pay a $600 Permit fee if tobacco is sold.
New Business License/Permits Applications Since March 2020
As of March of this year, twenty (20) businesses applied for a new Business License/Permit as depicted in the chart below. Additional information is provided in (EXHIBIT 1).
If the Council desires to refund a portion of the paid Business License tax and applicable Permit fee, refunding a percentage (prorated to take into account the months they were open) may be more equitable than refunding a fixed dollar amount.
There is a chart below that illustrates refunding 10, 20, or 30% of the total tax revenue collected by the City each month for applications filed in March 2020 or later. Staff has not been notified if a new business actually did not open
Non-renewed Business Licenses
For licenses expiring March 31, 2020, 59% of businesses renewed their account; however, only 21% of accounts expiring in April have renewed.
After analyzing all non-renewed accounts there does not appear to be any one type(s) of business that is more prevalent. The majority of non-renewed accounts are considered “general” and those licenses incorporate restaurants, warehouses, administrative offices, variety of retail stores, machine shops, auto repair, and service type businesses.
If the City were to refund all Business License/Permit fees for the months March and April (renewals and new applications), the total estimated City tax revenue for those two months is $363,853.
The chart below depicts what revenue the City would forego by refunding 10, 20, or 30% of the total collected revenue for the month.
Rather than refunding all or some portion of Business License/Permit revenue, another approach would be for businesses seeking a refund to complete and submit a Tax Refund Request application (EXHIBIT 2). This could be reviewed and granted on a case-by-case basis, subject to adequate proof of a COVID-19 impact. This could be processed in one of two ways:
1. Process a refund OR
2. Issue a credit to the account for the next renewal period.
V. FISCAL IMPACT
The fiscal impact will be based upon what type and how extensive any refund or the Business License Tax or credit would be. For example, refunding new application payments can cost between $1,286 - $12,856, whereas refunding renewed accounts would be between $36,385 - $109,156. The determining factor will be based on the percentage of refunded revenue.
VI. EXHIBITS
1. New Business License & Permit Application Information
2. Business License Tax Refund Request application
3. Resolution 20-053
4. Los Angeles County Safer at Home Order for Control of COVID-19
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Prepared by: Tarik Rahmani, Finance Director