Finance Division, Administrative Services Division. Discussion of Amendment to Business License Provisions of the Municipal Code

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1 CITY OF EMERYVILLE MEMORANDUM DATE: March 15, 2011 TO: FROM: SUBJECT: Patrick O Keeffe, City Manager Finance Division, Administrative Services Division Discussion of Amendment to Business License Provisions of the Municipal Code The item attached was presented to the Finance Committee at the February 11, 2011 meeting. The Committee decided unanimously not to recommend any changes to the Business License Code. Councilmember Bukowski has requested this item be put on the Council agenda for discussion. Submitted by: Karan Reid Chief Financial Officer Approved by: Delores Turner Assistant City Manager Approved and Forwarded to the City Council Patrick O Keeffe, City Manager Attachment: February 11, 2011 Finance Committee Meeting Agenda item

2 CITY OF EMERYVILLE MEMORANDUM DATE: February 11, 2011 TO: FROM: RE: Finance Committee Karan Reid, Chief Financial Officer Michelle Strawson O Hara, Accounting Supervisor Finance Division, Administrative Services Department Interpretation of Business License Code This report is in response to a City Council member request to provide direction on interpretation of the Business License Code, specifically as it relates to licensing residential landlords. Background/Discussion The Emeryville Municipal Code Section requires a separate business certificate be obtained for each and every branch or location at which a business is carried on. This means, as an example, if one owner operated 6 Starbucks locations in town, each location is required to obtain a separate business license. The code section does not distinguish between the types of businesses to which the regulations applies, and as such in interpreting the business license regualtions residential landlords are treated similarly wherein each separate rental location requires a separate license. Through the adoption of the Municipal Code, City Council has delegated authority over administration and enforcement of the Business License Chapter to the Director of Finance under Section Decisions regarding interpretation and application of the Business License Chapter are frequent, as many as per week, and occur on a daily basis. The interpretation and administration of the Municipal Code sections relating to Business Licenses has been the authority of the Finance group for more than 13 years. Accordingly, the interpretation of the code as it relates to residential landlords was discussed at a Revenue Division meeting on February 24, 2010, after the renewals for 2010 were mailed. For consist compliance with the Municipal Code Section , and for tracking purposes, Finance determined that residential landlords needed to comply with code and obtain a separate license for each location; this was to be implemented with the 2011 renewal process. Prior to the 2011 renewals, most residential landlords reported gross receipts from all locations on one business license return. The Finance Division supports the consistent treatment of residential landlord licensing with that of other businesses in town, and aligning that type of business to be in compliance with the language of themunicipal Code.

3 Business License Code Interpretation February 11, 2011 Page 2 of 2 The Council has not retained authority to make interpretations nor hear appeals regarding the interpretation and administration of the Business License Chapter. An amendment to the Municipal Code would be necessary in order to institute an appeal process and/or involve Council in the decision making process regarding the Business License Chapter of the Municipal Code. Consideration of an Appeal Process Given the daily occurrence and volume (20-30 per week of decisions needed regarding interpreting and applying the Code, it is most efficient and effective to continue having this resolved at the staff level in the Finance Division. In researching best practices in other cities that have an established appeals process, requests for appeals appear to be uncommon. Currently, an applicant has three opportunities for a challenge and/or review of the interpretation: first line staff (Accounting Technician, Accounting Supervisor and Chief Financial Officer. If an appeal process independent of Finance is recommended, an amendment to the municipal code is required. Elements to be included: Deadline for written receipt of appeal Authority to process appeal (staff, Council, outside party Time and place for a hearing, if applicable Consider a fee to remit an appeal Options for who would consider the appeal include the following: Pros Cons City Manager Independent from Finance Likely not cost effective given insignificant amounts in question, and time required to process appeals. City Council Independent from Finance Inefficient, may overload agendas and increase the timeline for resolution of appeals. Impacts/delays collection of revenues. Outside Hearing Officer Most independent option Costly given amounts in questions and would likely require a retainer or minimum fee. Recommendation Discuss staff interpretation of Business License Code for licensing residential landlords. Provide direction to staff regarding amending the Business License Chapter of the Municipal Code in to incorporate an appeal process. Attachments: Sections & Business License Chapter of Emeryville Municipal Code

4 Ord , eff Jan. 3, 1991; Sec. 4, Ord , elf. July 1, , Deleted Deleted. Transfer of Commercial Property, Miscellaneous Business, Optional Method of Determining Tax. When a person engages in two (2 or more businesses, other than manufacturing, which are taxed on the basis of gro ss receipts under different provisions of this article, such person may elect to combine all such gross receipts and pay a tax determined by applying the rate oftax applicable to that business activity producing the greatest amount of gross receipt s, subject to the following provisions: (a All businesses must be conducted at the same locat ion; and (b The gross receipts ofall businesses, except the business producing the greatest amount of gross receipts, must not exceed twenty percent (20% ofthe total combined gross receipts of all businesses. (Ord II, eft. Dec. 18, 1984, as amended by Sec , Ord (A, eft. May 7, 1985; Sec. I, Ord , eff Dec. 17, Minimum Tax Registration Fee. Repealed by Sec. 2, Ord , elf. Jan. 3, Provision for Bad Debts. Whenever there are included within the gross receipts used to determine the business tax of a business under this article, amounts which reflect sales for which credit is extended and such amounts prove uncollectible in a subsequent year, those amounts may be excluded from the gro ss receipts in the year they prove to be unco llectible; provided, however, if the whole or portion ofsuch amounts excluded as uncollectib e are subsequently collected. they shall be included in the amount ofgro ss receipts for the period when they are recovered. (Ord ,eff Dec. 18, 1984, as amended by Sec , Ord (A, elf. May 7, 1985; Sec. I, Ord , eff Dec. 17, Duties of the Director of Finance: Notice of Decisions. It shall be the duty ofthe Director offinance to collect and receive all taxes imposed by this article and to keep an accurate record thereof. Said Director of Finance is hereby charged with the enforcement of this article, except as oth erwise provided herein, and may prescribe, adopt, and enforce rules and regulations regulating to the administration and enforcement ofthis article, including provisions for the reexamination and correction of returns and payments. The Director of Finance may prescribe the extent to which any ruling or regulation shall be applied without retro active effect, For good cause, the Director offinance may extend for not more than thirty (30 days the time for making any return payment oftax. Sec , Ord (A, eff May 7, 1985; Sec.l,Ord O,eff.Dec.17, Refund oftax, Penalty or Interest Paid More Than Once or Erroneously or Illegally Collected. (a No business license tax collected under the provisions ofthis chapter shall be refundable or prorated in any manner, unless the business subject to the tax: ( I Establishes that it has paid the tax more than once, the tax was erroneously or illegally collected, or it has paid in excess ofthe correct amount, and; (2 Filesa claimwith the City within one (I year from the date of the payment in accord ance with all applicable statutes, regulat ions and ordinances (Supp. No. 1 - November. 1997

5 by such other corporation with which such transaction is had, or (ii Which owns at least eighty percent (80% of the voting and nonvoting stock of such other corporation, or (iii At least eighty percent (80% of the voting and nonvoting stock ofwhich is owned by a common parent corporation which also has such ownership ofthe corporation with which such transaction is had; (9 Receipts from investments where the holder ofthe investment receives only interest and/or dividends; (10 Receipts derived from the occasional sale ofused, obsolete or surplus trade fixtures, machinery or other equipment used by the taxpayer in the regular course of the taxpayer's business. (e "Person" shall mean any individual, firm, partnership, joint venture, association, social club, fraternal organization, joint stock company, corporation, estate, trust, business trust, receiver, trustee, syndicate, or any other group or combination acting as a unit. Sec. 12-2, Ord (A, elf. May 7, 1985; Sec. I, Ord , eff. Dec. 17, Separate Certificate for Each Place of Business. A separate certificate must be obtained for each and every branch establishment or separate place of business at which a business is carried on. (Ord eff. Dec. 18, 1984, as amended by Sec. 12-3, Ord (A, elf. May 7, 1985; Sec. I, Ord , elf. Dec. 17, Revenue Measure Only Does not Permit Business Otherwise Prohibited. The taxes prescribed by the provisions ofthis article constitute a tax for revenue purposes, and are not regulatory permit fees. The payment ofa business tax required by this article, and its acceptance by the City, and the issuance of a certificate to any person shall not entitle the holder thereof to carry on any business unless he has complied with all ofthe requirements ofthis Code and all other applicable laws, nor to carry on any business in any building or on any premises designated in such business tax certificate in the event that such building or premises is situated in a zone or locality in which the conduct ofsuch business is in violation ofany law. Sec. 12-4, Ord (A, eff. May 7, 1985, Sec. I, Ord , eff. Dec. 17, Public Inspection. The following information for each business tax certificate under this article shall be available for inspection by the public during normal working hours in accordance with regulations prescribed by the City Council: (a The name and address ofthe business; (b The name in which the certificate is issued; (c The name and address of the owner of the business, if such names and address are shown on the records filed pursuant to this article. (Ord , eff. Dec. 18, 1984, as amended by Sec. 12-5, Ord (A, eff. May 7, 1985; Sec. I, Ord , elf. Dec. 17, Contents ofcertificate. Every person required to have a certificate under the business tax provisions ofthis article shall make application for the same to the Finance Department ofthe City ofemeryville and upon payment of the prescribed tax, the City shall issue to said person a certificate which shall contain: (a The name ofthe business; (b The place where the business is to be carried on; (c The type ofbusiness; (d The date ofthe expiration ofsuch certificate; and such other information as the City shall determine. 3-5