Voters will see dueling tax hikes
(Updating with corrected timeline for last tax increase)
The City Council is backing a November ballot measure that would increase taxes for some businesses. Proponents said the measure is designed to compete with a citizens’ initiative on the same ballot, which would raise the same taxes much more steeply.
The council voted 4-1 to proceed with its ballot measure. Councilman Jeff Duclos cast the dissenting vote, saying the city measure was not “ballot ready” and should have undergone more study. The council will have one chance to rethink the measure at its next regular meeting, and could make some changes before it goes to the ballot.
Under the measure, total revenue to the city from its business license taxes would increase from $850,000 to about $1.1 million a year, according to a report by proponents. The actual increase might be somewhat less, because the measure calls for no license tax for a business in its first year.
Hermosa Beach has not increased any of its business license taxes in 23 years.
The citizens’ initiative, backed by activist Jim Lissner, would focus its tax increases on nightspots that stay open late, serve alcohol and are clustered close to each other. Lissner has said the increases would make downtown nightspots shoulder the costs of providing police and other services to their area.
Under Lissner’s initiative, which qualified for the ballot after a petition drive, the highest business license taxes could soar from about $2,000 to as much as $640,000 a year, according to a study by city officials. Lissner said nightspots could reduce the tax increases with measures such as closing earlier.
The city measure would cap the business license tax for an individual nightspot at $8,000.
The city measure would impose a $5,000 license tax for a nightspot serving alcohol, with live music and dancing, that closes after midnight five or more nights a week. In addition, all nightspots would pay a 20 percent surcharge if they are located downtown, or a 10 percent surcharge if they are on upper Pier Avenue, and a 5 percent surcharge if they are located elsewhere.
Downtown and upper Pier have high concentrations of eating and drinking businesses.
Under the city-backed plan, total business license tax revenues from the nightspots, and all other eating and drinking businesses, would go from $100,000 to $158,000 a year.
Total revenues from building contractors and subcontractors would increase from $200,000 to $309,000. Total revenues from retailers would drop a bit, in part because of breaks for small businesses and in-home businesses. The tax for gas stations would be reduced, proponents said, because those businesses have slim profit margins.
While taxes for eating and drinking businesses would be determined largely by whether they serve alcohol and how late they stay open, taxes for retailers would be $1 for every $1,000 of gross revenue, and some other taxes would be based on the number of employees at a business.
Lissner’s proposal would not change the taxes for businesses other than eating and drinking establishments.
Proponents of the city measure told the Council that it is fair to businesses.
“It is fair, it is balanced, it is complete,” said Andrea Jacobsson of Jama Auto House on PCH, a prominent member of the committee that worked up the city proposal.
Kit Bobko, one of two council members on the committee, said the city-backed measure must appear on the ballot to compete with Lissner’s, the passage of which would “destroy” local businesses.
If voters approve both Lissner’s initiative and the city’s measure, the one that gets more votes would go into effect.
Lissner addressed the council to question how much revenue would be lost by declining to charge business license tax for a new business. If businesses change hands every 10 years, he said, revenues to the city would be about 10 percent less than the city’s report indicates.
A handful of businesspeople approached the council to seek changes in some aspects of the ballot measure.
Resident Ann Sullivan told the council that downtown nightspots should shoulder more law enforcement costs, contending that the Pier Plaza has become unsafe.
“At this point I don’t consider it safe,” she said. “I think there are people down there who are making the money and should be paying for it, not the homeowners,” she said.
Former Councilman George Barks said voter approval of Lissner’s plan would create “a ghost town” downtown.
Michael Bell of Bell Event Services cautioned that the appearance of two tax items on the ballot might “confuse voters.”