Out-of-town gardeners, caterers, trash haulers, painters, rug cleaners and salesmen with customers in Redondo Beach have been required for at least 20 years to buy city business licenses.
And next month, doctors who have practices in neighboring cities, but who sometimes treat patients at South Bay Hospital, may have to buy them as well.
In a move officials say is needed to bring fairness to the city's business license policies, the License and Collections Department recently mailed 103 applications to out-of-town doctors who appear on the roster of physicians at the hospital on North Prospect Avenue.
An additional 400 applications are ready to be mailed to the rest of the physicians on the roster, but complaints from doctors who have already received the applications and concerns by the City Council over the legality of the license fees have put the program on hold.
'Out of the Blue'
"This came out of the blue," said Dr. Richard Goldin, chief of the medical staff at the hospital, who has his office in Torrance and has a business license in that city. "I don't think any of us are against taxation, but like any tax, we deserve an explanation for it."
At its meeting last week, the City Council opted to delay action on the licensing program until after Christmas so City Atty. Gordon Phillips can investigate questions about its legality. Councilwoman Kay Horrell said that the charges may be illegal because they are based on a flat rate rather than on the amount of business performed in the city by the doctors.
A business license costs $73.50 for doctors and other professionals, with an additional $13 for each employee. The rate applies to all doctors, regardless of where they live or how often their work brings them to Redondo Beach. In contrast, other cities, such as Los Angeles, base the license fee on a percentage of gross receipts collected in the city by the business or individual. In those cities, the businesses pay only for the work performed in that city.
"We should back off a little and do some PR and indicate to the doctors that at some time they are going to be billed," said Councilman Archie Snow, who first questioned the licensing policy at a meeting last month. "If they are told properly, they would pay it." Snow said a letter explaining the fee should have been included with the application.
Written in 1963
City Treasurer Alice DeLong, who oversees the licensing department, said the city's business license ordinance, written in 1963, requires that doctors be charged along with everyone else who works in the city--regardless of where their business or practice is based.
Several other South Bay cities and the city of Los Angeles have similar ordinances, but officials from those cities said provisions pertaining to out-of-town doctors are rarely enforced.
"We have gone to hospitals and asked for lists, but we don't do it on an ongoing basis," said Don DeBord, chief of the tax permit division of the Los Angeles city clerk's office.
Officials in Inglewood, which has two major hospitals, said that city taxes out-of-town doctors only if the patients they treat at Inglewood hospitals have been referred to them by those hospitals rather than through their private practices. Hawthorne, which also has two hospitals, has an ordinance similar to Redondo Beach's, but Lisa Miller, business license supervisor, said the doctors are rarely taxed because the city does not have the time or staff to enforce the ordinance aggressively.
In Redondo Beach, 30 of the 103 applications sent to doctors have been returned to the city without payment because the physicians said they do not treat patients at South Bay Hospital, DeLong said. Six doctors sent letters requesting more information about the license and eight called the city to complain, she said. No one has paid the fee.
"They have been largely ignored for years," Delong said of the out-of-town doctors at South Bay Hospital. "But an ordinance is the same for everybody. No one likes taxes, so it is especially important that you really are fair when you enforce them."
City Manager Timothy Casey said some doctors reacted with surprise because for many years the hospital was run by the South Bay Hospital District, a public agency that was exempt from city taxes. Last year, the district leased the hospital to American Medical International, a private corporation, and now, as a for-profit business, it is taxed by the city.
"Among AMI's public representations regarding the benefits of the long-term lease arrangement was the fact the company would be a major local taxpayer, and the hospital property would go back on the property tax rolls," Casey said last week in a report to the City Council. DeLong said AMI paid $5,273.50 for its business license this year.
Would Not Cooperate
The city wanted to begin taxing individual physicians in June, 1984, when AMI began leasing the hospital, but the hospital would not cooperate with licensing inspectors, DeLong said.
Casey confirmed that the hospital would not release the physician roster to the city until last month. He also said AMI officials did not cooperate with the city when it tried to calculate the charge for the corporation's business license, which is based on the number of employees who work there. Casey said the city was able to bill AMI only after the hospital printed a newspaper advertisement listing all employees and thanking them for their work.
But John Wilson, assistant administrator for the hospital, denied last week that the hospital withheld the employees' and physicians' rosters from the city. He said the hospital has always been "extremely cooperative" with the city.
"We pay our bills and we cooperate," Wilson said. "I don't know why the city would say we don't. For a $3-billion company, (the license fee) is a drop in the bucket."
City Atty. Phillips, who provided legal background on the license issue to the City Council last week, said that several court rulings have shown that in some cases the requirement for a business license may not apply to individuals whose work in the city is "casual or occasional" or who may be subjected to multiple taxes for the same work.
Phillips, who will issue a final legal opinion on the issue at the next meeting on Dec. 30, shared Horrell's view that the license fee may have to be "apportioned" so that doctors who work in the city only occasionally are not charged the same rate as doctors who have a regular practice there.
DeLong said she favors rewriting the entire business license ordinance so that fees are based on gross receipts rather than a flat rate.
"It is going to have to happen," DeLong said. "It is the only fair way to go."