Title
Introduction of Ordinance Amending the Alameda Municipal Code by Amending Section 5-7.1 Penalty for Nonpayment of Annual, Quarterly or Semi-Annual Business License. (Finance 2450)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Introduction of Ordinance Amending the Alameda Municipal Code by Amending Section 5-7.1 Penalty for Nonpayment of Annual, Quarterly or Semi-Annual License
BACKGROUND
In the spring of 2015 during the hearings to assign delinquent business licenses for collection on property tax bills, the City Council heard from several business owners that the penalties for non-payment were excessive and that there was no relief except appeal to the City Council. The Council directed staff to propose alternative penalties and collection practices.
The penalty was increased from its original 5% to 10% in 1986. The 10% penalty was applied after the first 30 days of delinquency and each 30 days thereafter until a maximum of 60% of the original amount was reached. In 2013, and in order to help raise revenue during a budget crisis, the amount was increased to 20% up to a maximum amount of 100% of the original amount.
Penalties have been waived only in extreme circumstances based upon substantive proof and with the consent of the City Manager’s office.
DISCUSSION
Staff surveyed the nine surrounding communities to determine Business License penalties and maximum amounts. All but one applies the penalty after thirty days of delinquency. The penalty amounts range from 5% to 50%. Seven of the nine communities increase the penalty amount to 25% or 50% after 60, 90 or 150 days. Four communities also apply interest to the principle plus penalties.
Currently, the City’s penalty falls at the higher end of this spectrum. However, the maximum of 100% in 150 days is the highest maximum of the nine communities. If an average business license fee is $90 and is not paid within 30 days of the due date, it will incur a penalty of $18 in the second month it remains unpaid. It will continue to incur an $18 penalty for each of the next four months in which it remains unpaid. The total due at the end of the sixth month after the due date will be $90 in license fee and $90 in penalties for a total of $180. It is this “doubling” of the amount owed that precipitated the complaints to Council.
In addition to the amount, a few of the business owners reported that despite having substantive reasons for not timely paying the business license fees, they were provided no waiver or relief. There is currently no clear language in the municipal code allowing the License Collector to accept any “good cause” rationale and provide relief from penalties.
The ordinance, as proposed, would return the penalty amount and maximum to that in effect until 2013. The penalty would be 10% up to a maximum of 60%. In addition, language is included, which provides the Bureau of Licenses Director (i.e. the Finance Director) the ability to waive all or part of penalties if there is good cause shown by the business owner. These two items respond to the Council’s previous direction.
Using the above example and updated ordinance, if an average business license fee is $90 and is not paid within 30 days of the due date, it will incur a penalty of $9 in the second month it remains unpaid. It will continue to incur a $9 penalty for each of the next six months in which it remains unpaid. The total due at the end of the seventh month after the due date will be $90 in license fee and $54 in penalties for a total of $144.
FINANCIAL IMPACT
In Fiscal Year 2015-16, the City has collected to date $45,000 in penalties for late business license payments. Staff anticipates penalties revenue due to business license delinquencies will go down; however, the financial impact will not be substantial in comparison to the revenues collected for business licenses.
Staff will update the Citywide Master Fee schedule to reflect the City Council’s changes to the Business License penalties.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action will amend Section 5-7.1 of the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This action is exempt from the California Environmental Quality Act ("CEQA") in that this ordinance is an organizational or administrative activity of government that will not result in direct or indirect physical change to the environment and therefore is not a project under CEQA Guidelines, Section 15378(B)(5).
RECOMMENDATION
Introduction of Ordinance amending the Alameda Municipal Code by amending Section 5-7.1 penalty for nonpayment of annual, quarterly or semi-annual license.
Respectfully submitted,
Elena Adair, Finance Director
Financial Impact section reviewed
Elena Adair, Finance Director