Merchants to Get Refunds : Cudahy Rescinds Hike in Business Fees

Responding to protests from Cudahy businessmen, the City Council has rescinded huge increases in business license fees, and agreed to pay back thousands of dollars collected under the higher fee schedule.

“It was never our intention to gouge anyone,” Councilman John Robertson said.

The council had approved the increased fees last October in an effort to offset the loss of federal revenue-sharing money. The council removed a ceiling of $2,000 per license, tying the fees instead to a business’s yearly gross receipts.

Some business owners complained that the city was forcing them to pay thousands of dollars more for a license. For example, the license fees for one of the city’s biggest businesses, Tianguis supermarket, increased to $19,000 from the old $2,000 limit.

‘A Ridiculous Tax’

“The businesses are off the hook. This was a ridiculous tax,” said Fred Smith, a leader of the effort to repeal the ordinance. Smith owns Dur-Red Products, a steel manufacturing company with about 100 employees.

Business owners also claimed the council had violated Proposition 62, which requires voters to approve new taxes or increases in general taxes.

“I can assure you the next time it will be put before the people,” Robertson said.

Business owners had formed an organization, the Professional and Businessman’s Assn., and hired an attorney, Lawrence J. Straw Jr., who sent a letter accusing the council of violating Proposition 62. City Atty. Richard Laskin said, however, that the ordinance authorizing the higher fees had contained only a “minor error” by failing to include a limit on the fees.

The city expected to raise $250,000 to $300,000 from the higher license fees, said City Manager Gerald Caton, who pointed out that business fees had not been raised in 10 years. The increases were suggested to help pay for such services as police protection, which consumes half of the city’s $3-million budget, he said. Two years ago, the city used $370,000 in federal money to help pay for the contract with the Bell Police Department, which provides police service for Cudahy.

Will Seek Elsewhere

“We’ll just have to look in other areas for money,” Mayor Bill Colon said.

The city used $270,000 from its reserve fund to balance the budget last year, Caton said. He also pointed out that the city is not filling vacant positions, including an assistant city manager and the executive director of the redevelopment agency.

In the last two months, the city collected about $50,000 in higher fees from about 120 of the 825 businesses in Cudahy, Caton said. The money should be returned by November, he said.

The bulk of the money will go to the larger businesses, including Tianguis, K mart Discount Store and Day-Glo Color Corp., a paint company.

Tianguis will receive about $17,000 in refunds while K mart and Day-Glo each will receive about $10,000, Caton said.