AGENDA TITLE:
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Conduct a Public Hearing to Consider Waiving of the First Reading and Introducing An Ordinance Repealing Lodi Municipal Code Title 3 (Revenue and Finance), Chapter 3.01 (Business Tax Certification) and Replacing it with Chapter 3.01 (Business License Registration) (FIN)
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MEETING DATE:
February 21, 2024
PREPARED BY:
Melissa Munoz, Accounting Manager
recommendation
RECOMMENDED ACTION:
Conduct a Public Hearing to consider waiving of the first reading and introducing an ordinance repealing Lodi Municipal Code Title 3 (Revenue and Finance), Chapter 3.01 (Business Tax Certification) and replacing it with the proposed Chapter 3.01 (Business License Registration).
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BACKGROUND INFORMATION:
In September 2023, the City announced the suspension of the Business License Tax in Lodi Municipal Code Chapter 3.01(“Business License Tax”). The Business License Tax was adopted in March 1995, to monitor business operations in the City and raise revenue for the general fund.
Due to the date the Business License Tax ordinance was adopted, it was subject to the retroactivity clause of Proposition 218 as adopted in 1996 (“Prop 218”). Therefore, the Business License Tax should have gone back for voter approval to continue collecting the tax provisions. Since the Business License Tax was not taken back to the voters by 1998, under the terms of Prop 218, it was immediately invalidated. Upon discovery of Prop 218’s retroactive application and the invalidation, the City suspended all collection of the Business License Tax, issued refunds to those businesses that paid the tax within the preceding 12 months, and stopped issuing all business licenses.
However, it is critical for the City to have information on businesses and business types for monitoring safe operations, economic development strategic planning, data collection to be able to provide resources to specific business interests and groups in the region, as well as to provide local licensing as required regulatory agencies and for insurance or financing purposes by third parties. Therefore, the City now desires to revise the Lodi Municipal Code to still collect the important business information, meet local, regional, and state licensing requirements, and be consistent with Prop 218.
To accomplish this, City staff worked with the City’s contractor Hinderliter de Llamas and Associates (“HdL”) and legal counsel to draft the proposed ordinance that will repeal the Business License Tax code sections and replace them with Chapter 3.01 Business License Registration as shown in redline format in Attachment “A” with this report (the “Registration Program”).
As proposed for City Council consideration, the Registration Program’s purpose is no longer to raise revenue for the City’s general fund, rather to allow the City to continue to collect important data on the businesses operating within the City and replace the tax with a regulatory fee. The Registration Program would require businesses to annually register with the City, and to pay only a regulatory, cost recovery fee for administrative efforts processing and managing the business registrations (“Business Registration Fee”). City staff and HDL calculated the administrative costs per business registration and license issuance to be Twenty-Five Dollars ($25.00) each.
Therefore City staff recommends that the City Council hold a Public Hearing, and consider waiving the first reading and introducing an ordinance repealing the Business License Tax, replacing it with the proposed Registration Program, and setting the Business Registration Fee at Twenty-Five Dollars ($25.00) per registration as may be annually updated by the Consumer Price Index (“CPI”) increase to account for any inflationary cost increases over time.
STRATEGIC VISION:
3A. Fiscal Health: Promote City's transparency & fiscal fluency.
FISCAL IMPACT:
Not applicable.
FUNDING AVAILABLE:
Not applicable.
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Melissa Munoz
Accounting Manager
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Andrew C. Keys
Interim City Manager