Council to Consider 3 Plans to Alter Business-License Fees : Ventura: Small firms would pay less and larger companies would be charged more. A change is required by state law.
Small businesses would pay less and larger firms would be charged more under changes in annual business-license fees to be considered Monday by the Ventura City Council.
Mayor Gregory L. Carson said the council will consider several options to base annual business license taxes on gross receipts. He said a change is required by state law, which bans the city’s current practice of using a fixed rate for business licenses.
In addition, Carson said, small businesses in Ventura are paying proportionally more than large companies under the current system, an inequity that city officials want to change.
Some large business owners, however, say the city would be better off leaving the rate structure alone--at least until the recession is over.
“To raise taxes when the economy is in a slump like this is ill-advised,” said Randy Vernon, president of Fluid Kinetics Corp. in Ventura. “I think we should leave it as it is.”
But if the city fails to act, it could be sued for having a system that violates state law, said Everett Millais, the city’s director of community development.
There are 9,530 businesses licensed by the city of Ventura, and nearly $770,00 is generated each year in taxes. Mallais said the total revenue should not change with a new tax rate. If adopted, the changes would be made starting next July, he said.
The three proposals up for consideration are:
* Option 1, which was formulated by a city-hired consulting firm. It would require retailers and wholesalers to pay a minimum of $25, plus 20 cents per $1,000 of gross receipts. Other businesses--including doctors’ offices, utility companies and manufacturers--would pay $25 plus 40 cents per $1,000 receipts.
Under the proposal, retailers that gross $60,000 would have to pay an annual tax of $37--about $23 less than the current rate. But similar businesses that gross $10 million would have to pay $2,025, up substantially from the current tax of $475.
* Option 2, which was designed by Councilman Todd J. Collart. It would require retailers to pay a minimum of $45 plus 10 cents per $1,000 gross receipts. Other business would pay $45 plus 30 cents per $1,000 receipts.
A business that grosses $60,000 would pay $51--about $9 less than the current rate, according to Collart’s proposal. A retailer who grosses $10 million would pay $1,045--about $570 more than the current rate.
* Option 3, which was formulated by Carson. It would charge retailers a base fee of $45 plus 11 cents per $1,000 gross receipts up to $5 million. Receipts that exceed $5 million would be taxed at 6 cents per $1,000. Other businesses would pay $45, plus 30 cents per $1,000 gross receipts.
According to Carson’s plan, businesses that gross $60,000 would pay $52 annually, while businesses that gross $10 million would pay $895.
Some members of the business community have criticized Option 1 as unfair because it calls for drastic fee increases for large businesses. As a result, Carson and Collart said they will encourage the council to go with either of their plans.
Although the savings are not as drastic to small businesses under Options 2 and 3, the fee increases to the larger companies also are not as extreme, they say.
“We tried to bring it down to a more reasonable rate,” Carson said. “We were all surprised that (Option 1) came up a little too high for some of the businesses. We were willing to spread out some of the hit.”
The three plans also call for levying a fee against utility companies, a proposal that has been sharply criticized by Southern California Edison Co.
Under Option 1, the electric company could be charged up to $30,000 a year for its license. Under Option 2, Edison would have to pay about $6,000, and under Option 3 about $4,000.
Mike Montoya, the Ventura area manager for Edison, said he believes any fee more than $1,000 is excessive.
“We already pay $415,000 a year for our franchise fee,” Montoya said. “It goes on and on. In light of the state of the economy, any higher taxes imposed on businesses would be very difficult.”
Collart said he understands the concerns, but said the current system “places the city in financial jeopardy” in case of a lawsuit.
“I strongly believe the present system is outmoded, outdated and unfair,” Collart said. “Anything would be an improvement.”
Larry Rasmussen, owner of a small architectural firm, applauded the proposed changes.
“I think it’s appropriate,” he said. “The existing license tax ordinance is not equitable. We need something that is fair to everyone concerned.”
Ventura Business License Tax Comparisons The Ventura City Council is reveiwing three proposals to cut annual business-license tax fees for small businesses while requiring larger operations to pay more. Under the first option, small businesses would receive the largest savings, but rates could go up drastically for some large operations. The mayor and a councilman are urging city officals to implement either Option 2 or 3. Although the savings under 2 and 3 would not be as dramatic to small operations, the fee increases to big businesses also are not as extreme. All three options are based on gross receipts, pushing the city away from a fixed tax system.
Existing Tax
Gross receipts Current Tax $10,000 $35 $20,000 $35 $30,000 $45 $40,000 $45 $50,000 $45 $60,000 $60 $70,000 $60 $80,000 $75 $90,000 $75 $100,000 $75 $200,000 $125 $300,000 $150 $400,000 $175 $500,000 $200 $1 million $250 $5 million $350 $10 million $475
Proposed Annual Tax: Option 1
Retail, Wholesale Others $27 $29 $29 $33 $31 $37 $33 $41 $35 $45 $37 $49 $39 $53 $41 $57 $43 $61 $45 $65 $65 $105 $85 $145 $105 $185 $125 $225 $225 $425 $1,025 $2,025 $2,025 $4,025
Proposed Annual Tax: Option 2
Retail, Wholesale Others $46 $48 $47 $51 $48 $54 $49 $57 $50 $60 $51 $63 $52 $66 $53 $69 $54 $72 $55 $75 $65 $105 $75 $135 $85 $165 $95 $195 $145 $345 $545 $1,545 $1,045 $3,045
Proposed Annual Tax: Option 3
Retail, Wholesale Others $46 $48 $47 $52 $48 $55 $49 $59 $51 $62 $52 $65 $53 $69 $54 $72 $55 $76 $56 $79 $67 $113 $78 $147 $89 $181 $100 $215 $155 $385 $595 $1,745 $895 $2,595
Source: City of Ventura
