A Hermosa Beach city committee on Monday backed a proposed ballot measure that could raise the total business license taxes paid by nightspots and other restaurants from $100,000 to about $135,000 a year.
If a four-fifths majority of the Hermosa City Council agree, the measure would compete with a ballot initiative by activist Jim Lissner that could increase the nightspots’ taxes by as much as $4.6 million.
The city-backed measure, put together by Jed Sanford of the highly regarded Union Cattle on Manhattan Avenue, would also raise the business license taxes for some retailers and for contractors, unlike Lissner’s proposal.
Hermosa Beach has not increased any of its business license taxes in 19 years.
Adding all the city’s businesses together, Sanford’s proposal could increase business license tax revenues by at least $120,000, to a total of about $965,000 a year.
The figures are rough; Sanford said the total tax increase might grow as the details of his proposal are worked out.
Sanford, who served on a previous city committee that reviewed the business license tax in 2009, said his plan would impose larger tax increases upon late-night restaurants and bars than on any other businesses.
Lissner countered that the Sanford plan does not raise those taxes enough. He said $35,000 falls well short of paying for police and other city services in the entertainment-heavy downtown.
City officials have placed the cost of policing the Pier Plaza at $500,000 a year, based on officers’ salaries and benefits. Lissner places the cost at $1.5 million, counting other aspects of police overhead.
Sanford’s measure would impose a $5,000 tax for a restaurant with liquor, dancing or live music, and a midnight closing time five nights a week.
The tax would go up by an additional 10 percent if the business is located on upper Pier Avenue, or 20 percent if it is located in the downtown area bounded by Hermosa Avenue on the east, The Strand on the west, Eighth Street on the south and 14th Street on the north.
The highest tax for a nightspot would be about $6,000, triple what it is now. But the tax would remain far less than under Lissner’s initiative, which, according to city officials, could reach $640,000 for the hardest hit nightspot.
Numerous businesspeople have said their establishments would be forced to close if Lissner’s initiative wins out, a contention Lissner debates.
Greg Newman, co-owner of the popular Sharkeez on the Pier Plaza, told the city committee that he would support Sanford’s measure.
Newman asked committee members to run the numbers on Sharkeez and see what its tax would be under the Sanford proposal. It came to $6,000 – a 300 percent increase, but nothing like the $465,000 Sharkeez would pay each year under Lissner’s proposal.
City support
Sanford described his proposal as a “starting point,” but the committee enthusiastically agreed to present it to the City Council on July 12.
The committee scrapped a proposal that it had been working on, which included larger tax increases than Sanford’s. The vote to adopt Sanford’s proposal was 4-0, with member Robert Booker absent.
“Jed, I think you did a great job,” committee member Andrea Jacobsson, of Jama Auto House on PCH, told Sanford. “…I think it’s a very workable plan.”
Jacobsson praised a provision that decreases the business license tax for residents with home-based businesses.
Committee member Brittny Tacker called Sanford’s proposal “sensible, reasonable and fair,” and joined Jacobsson in praising the break for home businesses.
Mayor Peter Tucker, one of two City Council members on the committee, told Sanford that is proposal “is what we were trying to come up with.”
Tucker praised Sanford’s proposed tax increase for late-hour liquor stores.
“I think a lot of our problems at night have been coming from the liquor stores,” Tucker said, adding that empty bottles and cans downtown demonstrate his point.
“I’ve been down there at 1:30, and the line around the liquor stores is ridiculous,” he said.
“The council wants to tame the downtown down,” Tucker said.
“I don’t think the businesses would fight this, and it would just be up to the voters,” he said.
Councilman Kit Bobko, also on the committee, said after the meeting that Sanford’s proposal is a compromise.
“It’s like everything that happens in government, it’s a compromise solution,” he said. “…You have to have four votes for this and you have to convince the public.”
“I’d be lying if I said Mr. Lissner’s proposal didn’t affect the course of events. It did,” Bobko said. “And that was good. It invigorated the discussion.”
Bobko said a “compromise solution” might not have emerged without Lissner’s “oppressive and terrible option waiting in the wings.”
Pro and con
Three people addressed the committee to either back Sanford’s proposal or oppose Lissner’s.
Two other people expressed frustration at Hermosa’s nightlife or the city’s handling of it, and another said the city would have to work hard to be more persuasive than Lissner.
Seth Weiss, owner of Underground Pub & Grill and Chelsea’s on Hermosa Avenue, said he wants Lissner’s initiative to get “thrashed at the polls.”
“I don’t even like the other ones on the table, because they are going to raise my fees threefold,” he said. “But I can live with them.”
Underground would pay $255,000 under the Lissner plan.
Alesia Alonso, whose husband owns Café Boogaloo on Hermosa Avenue, said potential revenues the city estimates from Lissner’s initiative “would never materialize, because we will all be out of business down here.”
Thirty-nine-year resident Ann Sullivan, who lives on 18th Street, told the committee of closing time revelers “sitting on the wall, peeing on my front yard, throwing beer cans, all of that.”
“I hear the police cars at night, the fire trucks and the ambulances go, I think some people who make money from the bars ought to help pay for that,” she said.
A woman who identified herself only as Barbara told the committee, “You have what you deserve right now. You haven’t increased the business license tax in I don’t know how long, and people are frustrated.”
Jacobsson responded, telling Barbara that “one of the revenues the city gets is from parking. They also get a lot of sales tax revenue from downtown.”
“We’re trying to bring in revenues, we’re trying to address police [funding], but we’re trying to not make it so punitive,” Jacobsson said. “…We don’t want to drive people out of business. And we don’t want a lawsuit, and I think Mr. Lissner’s proposal would draw a lawsuit.”
From the lobby
After the committee meeting, Sanford said he pitched in to help the tax committee after serving on the committee’s 2009 incarnation, which failed to make any change in the tax.
“My biggest goal was to get the city and business owners working together to get this done,” Sanford said.
Sanford and Lissner stuck around for a while in a City Hall lobby to compare their tax plans.
“Really, 20 grand for Mediterraneo?” Sanford asked Lissner, referring to the potential business license tax for a Pier Plaza eatery that has not been associated with police calls or disturbances.
(The city’s estimates show Mediterraneo paying $67,000 under Lissner’s plan, but the estimate is based upon the eatery’s maximum allowable hours and other factors, instead of its actual operations.)
Lissner complained that Sanford would get most of his tax-increase revenues from non-food and beverage businesses.
“I think it’s favorable to your industry,” Lissner told Sanford.
Sanford replied that restaurants with late night hours would see the largest tax increase measured in dollars or in percentage.
Sanford said if his St. Rocke was required to pay the Lissner-proposed tax, which city officials place at $174,000 a year, he “would have to close.”
“I’m not going to allow that to happen, but I would not be able to operate on that basis,” Sanford told Lissner.
Sanford said St. Rocke would see a tax increase under his proposal.
Jacobsson joined in to accuse Lissner of suggesting that his measure could help the financially ailing city schools, which she called “very deceptive.”
Lissner responded that when residents ask him about the schools, he tells them that “if the city was flush” it could “maybe give [the schools] $100,000 again, but that’s about all they could do.”
The City Council cannot legally give cash directly to the city school district, but it can get around that by paying for some school services. In 2009 the council helped out by paying for $100,000 worth of services the school district otherwise would have purchased.
Jacobsson told Lissner that nightspots help the schools.
St. Rocke and Sangria are prominent among the nightspots hosting Hermosa Beach Education Foundation fundraisers, and Sangria’s owner was recently honored for helping to raise more than $3 million for local schools and nonprofit entities (see story page 17).
“When the Education Foundation needs money, who do they go to? They go to the restaurants,” Jacobsson said.
Former Councilman Michael Keegan, who during his tenure tried unsuccessfully to raise some business license taxes, showed up after the committee meeting had ended. He called Sanford’s plan “a joke.”
Keegan pointed out that the City Council earlier this month raised a variety of fees on residents and building contractors by a total of $750,000.
“I support [Lissner’s] initiative unless the city comes up with something with some teeth in it,” Keegan said.