Orinda
CA

CC Staff Report
1332

Consideration of an ordinance establishing a business registration requirement for certain types of businesses in the City of Orinda.

Information

Department:Planning DepartmentSponsors:
Category:Report

Body

BACKGROUND: 

On August 1, 2017, the City Council considered the issue of business registration as a policy matter (for staff report, refer to Attachment B).  As reflected in the minutes from that meeting (Attachment C), there was general support for the idea, although staff received questions from the Council regarding whether it should be applied to Home Occupations.  In addition, prior to the Council meeting, staff received a letter of support from the Chamber of Commerce (Attachment G).  Based on Council’s direction, staff has prepared an ordinance establishing a business registration program for Orinda. 

 

Since the proposed business registration rules do not constitute a land use ordinance, it is not subject to recommendation by the Planning Commission.  However, on September 26, 2017 the Planning Commission held a workshop regarding the proposed regulations at which members of the public provided input and Commissioners provided individual comments without making a recommendation.  Public outreach for this workshop included a special edition of the Orinda Outlook newsletter (emailed to approximately 1,800 subscribers) and notification to Chamber of Commerce members via their internal distribution list.  The staff report and minutes from the Planning Commission workshop are included as Attachments D and E of this report.   

 

Orinda is one of the few jurisdictions in the State of California, or in the East Bay, that does not require either a business license or business registration.  A table showing the license or registration requirements for all municipalities in Alameda and Contra Costa is included as Attachment F to this report.

 

Lacking a business registration system in Orinda, there is no way to identify or contact the specific businesses in the downtown or elsewhere, other than to do a time-consuming and incomplete field survey or rely on the Chamber of Commerce to distribute information to their members.  (Not all businesses in Orinda are members of the Chamber.)  A registration system can also improve gathering current contact information for the corporate owner, confidential emergency contacts, as well as local manager.  This confidential information can sometimes be of assistance to Police and Fire personnel in providing their services.   

 

Most California and East Bay jurisdictions require a business license tax which is paid annually and requires the filing of certain information.  Under current State law, establishment of a business license tax and/or an increase in a tax requires voter approval.  Some jurisdictions, such as Dublin, San Ramon, and Palo Alto in the Bay Area, and Encinitas and Glendale in southern California, have established business registration programs which require businesses to register annually.  Business registration programs do not include a tax, but rather a nominal fee that covers the City’s costs to administer the program.  As such, they do not require voter approval.

 

SUMMARY: 

Benefits of Business Registration. There are a number of reasons to establish a business registration program, including:

 

·         Communication – The City currently has no structured way to communicate with businesses.  For example, the Council recently had workshops relating to the future of the downtown.  Downtown property owners were notified directly but not the businesses.  Currently there is no mechanism to notify and identify Business owners in the community. 

 

·         Public Health and Safety – Agencies have procedures they use to contact property and business owners.  A business registration program could enhance the Police, Fire, and Sanitary District’s ability to respond and contact owners when there is an emergency, crime, hazardous materials issue, or non-residential discharge into the sewer system.

 

·         Business Inventory- The program would provide an up to date inventory of businesses and commercial activities.  This would also help identify when there is a change of ownership.  A clear knowledge of the businesses in the community can be helpful in planning municipal services.

 

·         Sales Tax Monitoring – Sales tax is one of the City’s larger revenue sources.  The City has a contract with a private firm which monitors this revenue to ensure that local businesses are reporting to the State Board of Equalization sales transactions occurring in the City of Orinda.  There can be mistakes in reporting by taxpayers and mistakes in distribution by the state.  It is difficult to accomplish this when the City does not have a list of businesses which are operating in the City.  There is the potential to capture more sales tax revenue if payments are currently being reported to another jurisdiction.  (Note that this may also apply to home occupations where such businesses involve the movement of goods from one offsite location to another but the orders are processed in Orinda.)

 

·         Economic Development – Without a registration program it is difficult to work on joint advertising efforts, connecting businesses which could support each other, or simply let businesses know about events from which they might benefit.  Examples are CalShakes, the Farmers Market, the Thursday evening Taste of the World Food Truck Program, performances in the Community Park, the Community Center, and the Library Auditorium.  The program could also help the Chamber strengthen the business community.

 

Main Components of Proposal.  Staff has prepared a draft ordinance for review by the City Council (Attachment A).  It is not staff’s intention to imply that all components of the draft ordinance should be introduced at this time.  Rather, it is presented to the Council as a draft for consideration; if the Council determines that there are substantive changes necessary, staff will return with a revised draft reflecting those changes at a future date.

 

As currently drafted, the Business Registration ordinance has the following components:

 

Applicability.  Business registration would be required for all businesses operating within the City of Orinda unless they are specifically exempted.  As noted in the draft ordinance:

A.                 "Business" means any commercial enterprise, trade, calling, vocation, profession, occupation, or means of livelihood, whether or not carried out for gain or profit.  This definition includes, without limitation:

1.                  businesses operating at one or more fixed locations in any area of the City, whether or not the location(s) are zoned for commercial activities.

2.                  temporary businesses operated for a short duration (e.g., pumpkin sales, temporary events (see Chapter 17.37)).

3.                  businesses providing services within the City such as construction, landscaping and cleaning, regardless of whether or not they have a fixed address in the City.

Note that temporary businesses requiring a Temporary Event Permit would be exempt as noted below. 

 

Exemptions.  As noted in the draft ordinance, the following types of businesses would be exempt from the registration requirement:

 

A.                 Businesses with gross receipts of less than $10,000 per year from operations in the City;

B.                 Businesses exempt from registration based on State of California or Federal law;

C.                Public agencies and their contractors;

D.                Businesses that sell and/or deliver goods to locations within Orinda, but have no other operations in the City (e.g., water delivery services, suppliers to retail stores);

E.                 Businesses that have completed and/or obtained one of the following within the past 12 months:

1.                  Short – term rental registration (see Section 17.3.12)

2.                  Temporary event permit (see Chapter 17.37)

3.                  Other annual permit or registration issued by the City (not including public health licenses; see Chapter 8.08)

4.                  Solicitor registration (see Chapter 5.32)

F.                 Those selling products or services under the auspices of another registered business (e.g., vendors at the Farmers Market , stylists at a hair salon, technicians at a nail salon);

G.                Those representing that they are engaged in expressive rather than commercial activity.  For purposes of this Chapter, "expressive activity" means conduct, the sole or principal object of which is the expression, dissemination, or communication by verbal, visual, literary, or auditory means of opinion, views, or ideas, whether or not that conduct involves a request for funds or any other thing of value.

ExamplesAs currently drafted, the combination of applicability and exemptions described above would result in the following:

 

·         A transient business without a fixed location in Orinda, such as a landscaping company, would require business registration if it generates more than $10,000 gross income within the CityStaff is recommending that registration apply to transient businesses be included in the program for some of the same reasons that fixed businesses are—especially the ability to communicate with these businesses regarding policy or public safety issues.

 

·         Home occupations (businesses operated from one’s residence) would require registration unless they fall into one of the exemption categories such as the income threshold. Home occupations by short-term rental hosts would be exempt from business registration because they are already required to register under the recently-adopted short term rental ordinance.  Staff is recommending that registration apply to home occupations so that the City has a way to communicate with these businesses, similar to the reasons for applying the registration requirement to businesses located in commercial or office buildings.  As noted above, registration of home occupations may also help the City to capture sales tax.  (There is no current requirement to obtain a permit or otherwise register home occupations.  However, the Planning Department has a “home occupation” form that can be optionally completed at no cost to the resident; these forms simply cite the OMC and include a “property owner’s acknowledgement of home occupation regulations and promise to comply.”  Once completed, the Planning Department keeps a copy of the signed form.)

 

·         Contractors to public agencies, such as City of Orinda Park and Recreation Department instructors, would not be subject to the registration requirement.  A majority of such contractors would work for the City of Orinda.  Staff feels that since their contact information and type of business is already known, there is no need to require registration.  

 

·         Consistent with First Amendment constitutional protections (and with the City’s solicitor ordinance), nonprofits and religious organizations would not be required to register, but could do so voluntarily.

 

Term.  Business registrations would have a one-year term beginning on January 1 and ending on December 31.  They would need to be renewed prior to expiration.  In addition, a new business registration would be required if there is a change in ownership.

 

Fee Amount.  The fee amount must be based on the cost of administering the program.  Determination of the amount will require more study, and will include direct costs as well as any potential third party processing costs if applicableIn addition, any State of California Fees (Effective January 1, 2018 $4 per License or Renewal) would be collected in addition to the fee amount set by the City to cover its costs. Based on other local jurisdictions as described below, staff anticipates that the fee could be around $50, plus state fees per year.

 

Grace Period.  Staff proposes a 3-month grace period after the ordinance becomes effective.  This would give staff time to do business outreach, and businesses time to respond. 

 

Enforcement.  Enforcement of the business registration requirement would be covered by the City’s existing Title 19 enforcement procedures in the Orinda Municipal Code.  In addition, as an incentive to businesses to register initially and re-register each year, the fee schedule will include a late fee amount.  It is not the intent of staff to rigorously pursue code enforcement under Title 19 regarding business registrations; rather, it is hoped that, as in other jurisdictions, businesses voluntarily comply. 

 

Other Jurisdictions.  Based on staff research  including information provided by the League of California Cities, within Alameda and Contra Costa Counties, there are three cities with neither a business license or registration requirement (Orinda, Lafayette, and Moraga), and 30 cities that require either business license or registration. 

 

The following describes two bay area jurisdictions that require business registration:

 

·         The City of Dublin operates a flat-rate system with a fee of $50 (plus the $1 State Fee prior to 1/1/2018). Non-Profits are exempt from paying the fee, however they still must fill out an application and provide documentation of their non-profit status. Contractors and Sub-Contractors are required to complete registration annually; the “Registration Year” Runs from October 1 to September 30. Home Occupations have a separate business registration form. All forms are able to be filled-out through a portal on the City’s website, but must be delivered or mailed to the Community Development Department.

·         The City of Palo Alto operates a system that only requires annual registration for businesses located in fixed locations. Every fixed-location business in Palo Alto requires a Business Registry Certificate ($51) to be renewed annually with the exception of businesses with less than one (1) full-time-equivalent employee (2080 yearly hours,) or non-profits/religious organizations with no ancillary or commercial property. The City processes all applications online through a vendor called OpenCounter. Home-based businesses are exempt from Business Registry and are only subjected to zoning requirements. Exempt businesses must claim an exemption through the Business Registry website.

Although a business license/tax requirement is not proposed for Orinda, nor could one be approved without a citywide ballot measure, it is the most common requirement in the East Bay and throughout California.  For comparison purposes only, staff looked into the Danville requirement:

 

·         The Town of Danville requires separate business licensing for “in-town” businesses as opposed to “out-of-town” businesses. The only difference between these is the in-town businesses must pay $10 per employee working on-site. Certain businesses are exempted from licensing including: non-profits (if they provide IRS or State letter,) businesses with annual gross receipts of less than $10,000 per year (if they submit tax form,) businesses which rent or lease no more than four residential dwelling units to others, as well as entertainment businesses/events that appropriate funds to a charitable organization. Exemption notices are not issued. Home occupation businesses need to register for a business license and complete a Home Occupation application; Planning approves the Home Occupation before the Business License is processed by Finance. All types of businesses must renew annually, and can do so on Danville’s Citizen Access Portal, which is handled by Tyler Technologies. The license is a yearly flat fee of $101.

As can be seen in the Danville example, business license requirements generally result in a much greater expense to businesses than the approximately $50 per year fee that would apply to a registration system, where the fees can only be used to cover the costs of administering the program.

 

NEXT STEPS:

If the Council wishes to introduce first reading of the draft ordinance as prepared by staff, the next step will be second reading and adoption of the ordinance.  If Council would like changes, staff will return with an updated draft at an upcoming meeting.

 

If and when the ordinance returns for second reading, staff will concurrently present a fee resolution (including both the amount of the registration and late fees) for adoption.  This would allow for the precise fees to be known at the time that the ordinance is adopted. In addition to staff time associated with administration of the business registration process and the aforementioned $4 State of California surcharge, the fees will also incorporate the cost of utilizing an outside vendor if applicable. Outside vendors such as Muniservices, the City’s sales tax consultant, generally charge a one-time setup fee plus an ongoing fee per transaction.

 

FISCAL IMPACT:

None.  This proposal is revenue neutral because the registration fees will cover the cost of administering the program.

Meeting History

Nov 21, 2017 7:00 PM Video City Council Regular Meeting
draft Draft

IM - Business as a lawyer here in Orinda

Planning Director Buckley - Finance Director Paul Rankin and City Manager.

Home occupation form and City mantains a list.

Showed a powerpoint showing Contra Costa County and Alameda County cities.

AW - Summary presentation. Sales tax. Ensuring that there is the proper accounting. Generate the number of restaurants. Would encompass that sales tax.

EP - SS Sales tax comes through the State Board of Equalization and they make mistakes. To the extent that they don't know what is here, they can't correct it. The City then could do a better job. Ending up getting business licenses in other jurisdictions. Run a couple of businesses out of Moraga.

SS - One other comment. If a business had a choice for where to bill out from.

DG - In house or service - would it be done online. If a business wants the database, can the public access this? Public Access to certain parts and not others. One last question, experiences with any communites who have the registration system rather than a license.

Paul Rankin - City of Dublin - Registration system - Storm water permit. A lot of people expect it.

DG - It was essentially voluntary. High rate of compliance.

Roy Hogkinson - EBMIUD and PGE are members of the Chamber of Commerce. Would help address that. The commercial landlord. Idea of exempting a business. Allow the exemption at higher levels. Wants to be registered.

Richard Colman - 20 year resident of Orinda - member of the Orinda Chamber of Commerce - Fee and Taxes. Garbarge and Water rates went up. Housing now deducting morgage interest and sales tax paid. What State has the highest sales tax. Personal tax. Gasoline tax; answer California. Why FPPC. We need to figure out how to manage things better. Garbage collection rates are 100% higher than they were in 2006. Make it voluntary if you want.

DO - talked about this more than once. Staff report was really well written. A number of benefits from this until we analize the data.

DG - I think you've done a great job or adding alot of detail. Appreciate the Chamber weighing in on it. I think there is a possibility of businesses being in touch.

AW - Concur with DO & DG - Roy mentioned some very good points as well. Provides a range of benefits.

EP - Do appreciate the work. More of a solution chasing a problem. Could be acheived in other ways. Want to have further communication you can join the Chamber. Sales tax monitoring is interesting. Economic Development hasn't hurt Lafayette. Not supportive of. Recommend eliminating home-based businesses.

DO - threshold one; making available to anyone. Osa - to be clear, anyone could register. Home based businesses should be included. Could be super valuable.

AW - No changes. Concur with DO. Happy to start with what staff has recommended. Review of it in a year to see how it is working.

Drummond - Think about when it is a big enough operation that they should register.