HUNTINGTON BEACH : Business-License Tax Hike Proposed

The City Council has introduced a measure to increase business-license taxes by $20 per year.

If the council approves the fee hike at its April 15 meeting, the city’s average annual tax on business licenses will climb to $76 from $56.

The $76 rate would remain below the $96 annual average fee charged by other Orange County cities, according to a city staff report. Statewide, business-license fees for cities with populations comparable to that of Huntington Beach cost an average of $172 per year.

City officials say the proposed fee increase, which would be its first business-license tax hike since 1988, is needed to keep pace with soaring administrative costs.

The tax hike is expected to raise an additional $320,000 a year for the city, which is currently wrestling with a mounting budget deficit. The city to date has issued about 16,500 business licenses, from which it collects about $808,000 per year in taxes.

City Treasurer Donald L. Watson said the fee increase is expected to be a tentative measure to improve the city’s 30-year-old business license tax policy, which he said is outdated. Over the next year, his staff will be considering a sweeping overhaul of the city’s method of calculating business-license taxes, he said.

The Chamber of Commerce has endorsed the proposed $20 tax hike but remains skeptical about potential changes in the city’s license policy, chamber president Art Aviles said.

“There is no question that an increase is necessary,” Aviles said. But, he added, “this first (change in policy) is almost a temporary Band-Aid measure, to be reviewed again next year. We’re not sure what the full framing of this ordinance will be.”

Chamber leaders are concerned that the city may begin charging business license taxes based on a firm’s gross annual income, a procedure strongly opposed by many large businesses. The city currently bases its fees largely upon a company’s number of employees.

Council members this week urged Watson to consider introducing methods of collecting business taxes from self-employed business owners, many of whom are currently not charged. Under the city’s existing business-license ordinance, many such independent contractors are exempt from the tax, Watson said.