Title
Public Hearing to Consider Collection of Delinquent Business License Taxes and Fees and Delinquent Integrated Waste Management Accounts Via the Property Tax Bills. (Finance 2450)
B
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Hold a Public Hearing to Consider Collection of Delinquent Business License Taxes and Fees and Delinquent Integrated Waste Management Accounts Via the Property Tax Bills
BACKGROUND
City of Alameda Ordinance No. 2655 added Municipal Code Section 5-7.2, “License a Debt.” Specifically, the ordinance provides for the collection of delinquent business license fees and charges via the property tax bill. In accordance with Chapter XXI, Solid Waste and Recycling, Section 21-20.6 of the Alameda Municipal Code (AMC), Alameda County Services (ACI), the City’s provider of waste and recycling collection services, may assign delinquent Integrated Waste Management (IWM) accounts to the City for collection. Prior to assigning their rights to the City, ACI is obligated to make at least four attempts to collect the delinquent accounts.
In addition to the delinquent business licenses, staff is also including delinquent Integrated Waste Management bills in the property tax attachment process. These delinquent bills will be processed along with the delinquent business licenses in order to improve efficiency in the collection of both types of billings.
DISCUSSION
Business License Taxes
The Finance Department continually pursues collection of business license taxes from owners and managers of commercial and multi-family residential rental properties who have no current business license. Property owners are notified by mail using the last mailing address shown in the County tax records and are given ample time (9 to12 months) to respond prior to the City sending final collection notices. Payments are accepted through June 30. Those parcels for which licenses and fees are paid will not be placed on the tax roll. However, all unpaid fees at June 30 will be recorded on the County tax roll in July 2016.
California State Bill 1186 (SB1186) mandates cities impose a $1 state fee on all business licenses issued. The SB1186 state fee is used to fund disability access and compliance with construction-related accessibility requirements. Because this fee is mandatory, it cannot be waived.
Delinquent business license accounts currently accrue a penalty of 20% after 30 days of the due date to a maximum of 100% six months after the due date. Many of the delinquent accounts have paid their business license tax plus penalties to have their account current. On June 7, Finance staff submitted to the City Council for approval an amendment to the Ordinance. Per prior City Council direction, Finance staff evaluated and made a recommendation to return the penalty rate and the maximum rate to those in effect until 2013, which was 10% after 30 days of the due date to a maximum of 60%. Because the amended Ordinance will not be effective until after July 1, 2016, the penalty on the delinquent business license accounts are subject to the current ordinance rates. However, the City Council has the ability to waive all or a portion of the penalties with the exception of fees charged by outside agencies. After Council adoption and the Ordinance is in effect as directed by the Council on June 7, this ability to waive all or a portion of the penalties will also be extended to the Bureau of License Director (Finance Director).
Integrated Waste Management Fees
As part of the Franchise Agreement, the City is obligated to pay ACI for all delinquent accounts. In accordance with the AMC, the City may send a letter to each account’s property owner requesting payment, and if not promptly received, the City can collect delinquent accounts through their property tax bills at a noticed public hearing.
Property owners are notified three times by mail; twice following the City’s receipt of the list, and once after the City Council sets the hearing date to consider collecting the delinquent amount plus City fees through the tax roll. Included with the notices is contact information written in the six most commonly spoken language within the City. On June 30, 2016, all unpaid fees will be recorded on the County tax roll in July 2016.
To be consistent with City Council’s direction, property owners' payments will be accepted through June 30, 2016. Those properties owners for which delinquent accounts are paid will not be placed on the tax roll.
FINANCIAL IMPACT
Delinquent business license taxes will be determined at the close of business on June 30, 2016. The City receives a 10% franchise fee from ACI, which is revenue for the General Fund. Unpaid IWM fees, therefore, result in a loss in General Fund revenues. Under City Council direction, delinquent IWM fees may continue to be collected until the close of business on June 30, 2016, so as to be consistent with the business license tax final day of acceptance. This will be the final day of acceptance of late business license payments and unsettled IWM fees.
As of May 31, 2016, there were 40 unpaid IWM accounts amounting to $62,983.62 (Exhibit 3). Balances are inclusive of late fees and processing fees.
As of June 8, 2016, there were 16 delinquent business licenses. Tonight, there are two business license lien lists presented for the City Council’s consideration. One is calculated at the 100% delinquency rate (per current Ordinance in effect) amounting to $9,732.79 (before County fees) as shown in Exhibit 1 and one is calculated at the 60% delinquency rate (per proposed amended Ordinance) amounting to $7,701.08 (before County fees) as shown in Exhibit 2. A list with the reduced delinquency rate will generate $2,031.71 less in revenue to be collected. Staff recommends that Council approve collection of the delinquent business license tax and that Council waive 40% of the penalties applicable to the delinquent business licenses by calculating the penalties at a 60% rate.
The Business License Tax Ordinance allows business owners to ask Council to fully or partially waive fees and penalties. The Finance Department received two letters (Exhibit 4) requesting a full waiver of the penalties resulting from the late payment of the business license tax. Cumulative amount of the penalties under consideration is $1,655.84.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The collection of business license taxes via the property tax roll is authorized pursuant to AMC Section 5-7 et seq. The City is authorized to place a lien on the property of a delinquent Integrated Waste Management customer pursuant to AMC Subsection 21-20.6 (b), Government Code Sections 38790.1 and Government Code section 25831.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378 (b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities (collection of delinquent business license fees), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Hold a public hearing to consider collection of delinquent business license taxes and delinquent Integrated Waste Management accounts via the property tax bills.
Respectfully submitted,
Elena Adair, Finance Director
Exhibits:
1. 2016 Business License Lien List (with 100% Penalty Rate)
2. 2016 Business License Lien List (with 60% Penalty Rate)
3. 2016 Integrated Waste Management Lien List
4. 2016 Correspondence