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Home My WebLink About06/06/1990, 6 - INTRODUCE ORDINANCE EXTENDING THE BUSINESS LICENSE TAX TO ALL RESIDENTIAL RENTAL PROPERTIES 11101111 I�1111i111U City Of San LUIS OBISPO - M 6"GP:E9G COUNCIL AGENDA REPORT ITEM NUMB6r9.•� FROM: William C. Statler, Directpp��of Financ Prepared by: Dixon Flynn; nance Systems Manager SUBJECT: INTRODUCE ORDINANCE EXTENDING THE BUSINESS LICENSE TAX TO ALL RESIDENTIAL RENTAL PROPERTIES CAO RECOMMENDATION Introduce to print an ordinance amending Section 5.04.230(A) of the San Luis Obispo Municipal Ordinance to provide for extending the business license tax to all residential rental units. DISCUSSION The present version of San Luis Obispo Municipal Code Section 5. 04.230 provides that a business license tax will be paid by any person that conducts :a business of renting or leasing 4 or more apartment units on a single parcel of land or rooming houses with the capacity of five or more. This section of the ordinance further authorizes the tax to be based on gross receipts. At its April 1989 meeting, the Council received a letter from John Cotton and GlennaDeane Dovey, who are residents of Albert Drive, requesting that the. City investigate the feasibility of regulating rental housing in the City as a means of maintaining neighborhood compatibility. In considering this request, the Council directed Staff to develop residential occupancy regulations and review extending the business license tax to include the rental or lease of all residential units. At its August 1, 1989 meeting, the Council considered pursuing an ordinance concept patterned after the City of Davis which sets minimum performance standards for rentals in the R-1 residential zoning district. On September 6, 1989, the Planning Commission considered the draft regulations prepared by staff. At this meeting of the Planning Commission, the Commission voted to recommend to the Council a change in the Municipal Code to require a business license tax for any commercial venture within the City to rent residential units, including the rental of individual dwellings and rooms. At its November 14, 1989 meeting, the Council adopted Ordinance 1154 to control high occupancy residential use and directed that Staff return with an amendment to the Municipal Code to extend the business license tax to the rental of all residential units. To implement Council direction, the enumeration of businesses provided in Section 5.04.230(A) of the Municipal Code is recommended to be amended as follows: Autocamp cabins; Autocourt; Auto - repair, parts, trailer sales or wrecking; Barbershop; 6-� GIR11111 p°iy1p1 city of san lu1 s OBISPO WMbMo COUNCIL AGENDA REPORT Beauty parlor; Campground; Clothing - sale of; Drugstore; Florist; Furniture; Furs; Gift shop; Hardware; Hotel; Household appliances and furnishings; Jewelry; Junk dealer (fixed place of business) ; Lumberyard; Merchant - general; Motel; Music store; Nursery; Office equipment; Paint store; Pest control (fixed place of business) ; Pharmacy; Planing mill; ssidsnt9al renal unitsaCiudag r�Y4Bs; apartment , 'rooutzag I�ousBs, anal ...famill!., refl, #�os an ....eimar uses; s sanitarium; scooter or motorbike sales; Secondhand dealer; Shoe repairing; Shoes - sale. of; Sporting goods; Stationery store; Storage; Theaters, except moving picture; Television sales; and Upholstery. CONCURRENCES Staff involved in implementing Chapter 5.04.230 of the Municipal. Code have been informed of this report, and concur in the adoption of the recommendation. All parties who have previously requested to be notified of actions related to this matter (Attachment B) have been contacted. FISCAL IMPACT As discussed in the Council Agenda Report dated October 3, 1989, the purpose of the business license tax is to raise revenue for municipal purposes; it is not intended for regulation. As such, extending the requirement for the payment of business taxes to all residential rental units does not provide additional regulation, only additional revenue. Apartment houses with four or more units and rooming houses with a capacity of five or more are currently taxed under the following . table, which is the recommended schedule for all residential rental units: Gross Annual Receipts Annual Tax Less than $25,000 $25.00 Between $25,000 and $75,000 $25.00 plus $5.00 for each $5,000 of gross receipts in excess of $25,000 Greater than $75,000 $75.00 plus $2.50 for each $5,000 of gross receipts in excess of $75,000. Currently, there are approximately 10,500 housing units that are exempt from paying business taxes. Assuming 50% of these are rentals, at least 5,000 units would need to be identified and associated revenues collected. Based on current staffing levels, a major Department of Finance enforcement effort is not anticipated ��► ►��IIIII�pniglNlll city of San-LUIS OBISpo WhIMN COUNCIL AGENDA REPORT until Fall of 1991. Temporary staffing and computer resources are estimated to cost $35, 000 to support this future effort, which should appropriately be considered during the 1991-93 Financial Plan process. However, additional ongoing revenues of $25,000 to $100,000 should offset this one-time cost as well as any ongoing efforts that may be required. Variables which will affect overall revenues include the number of total rental units, the number of units owned by each owner, and the owner's gross annual receipts from this activity. ALTERNATIVES The following alternatives are available to the Council: 1. Exempt the first unit from taxation Although taxing residential rental units is a standard municipal practice in California, many cities have encountered difficulties when a unit is rented to an immediate family member. In this case, owners do not perceive themselves as being in business, but rather, as meeting, the housing needs of their parent or child. Exempting the first unit (often there is only one) from taxation is an approach used by many cities to accommodate this concern. However, this approach may not achieve the Council 's primary goals in extending business taxes to all residential rental properties. 2. Deferring this change until the Business Tax Ordinance is comprehensively reviewed in Fall of 1990 The City's current business tax ordinance is virtually unchanged from when it was last reviewed on a comprehensive basis in 1958. Updating the business tax ordinance is a major objective of the Department of Finance, and submittal of a draft ordinance to the Council is projected for the Fall of 1990. Consideration of this change could be deferred until that time. However, as extending business taxation to all rental units has been identified as a key item for revision in the proposed ordinance update, there is no benefit in deferring this change. Based on Council direction at their November 14, 1989 meeting, none of these alternatives is recommended. SUMMARY The attached ordinance revision has been prepared in response to Council direction to extend the business tax to all residential rental units. Accordingly, it is recommended that Council introduce to print an ordinance amending Section 5.04.230(A) of the San Luis Obispo Municipal Code. (O OPLL-dANCE NO. (1990 Sees) AN ORDINANCE AMENDING SECTION 5.04.230 OF THE SAN LUIS OBISPO MUNICIPAL CODE, EXTENDING THE BUSINESS LICENSE TAX TO ALL RESIDENTIAL RENTAL UNITS BE IT ORDAINED by the Council of the City of San Luis Obispo: Section 1. The enumeration of businesses provided in Section 5. 04.230(A) of the San Luis Obispo Municipal Code is amended to read as follows in order to include all residential rental units: Autocamp cabins; Autocourt; Auto - repair, parts, trailer sales or wrecking; Barbershop; Beauty parlor; Campground; Clothing - sale of; Drugstore; Florist; Furniture; Furs; Gift shop; Hardware; Hotel; Household appliances and furnishings; Jewelry; Junk dealer (fixed place of business) ; Lumberyard; Merchant - general; Motel; Music store; Nursery; Office equipment; Paint store; Pest control (fixed place of business) ; Pharmacy; Planing mill; Residential rental units including rooms, apartments, rooming houses, single family residences and similar uses; Sanatarium; Scooter or motorbike sales; Secondhand dealer; Shoe repairing; Shoes - sale of; Sporting goods; Stationery store; Storage; Theaters, except moving picture; Television sales; and Upholstery. Section 2. This ordinance, together with the names of Councilmembers voting for and against, shall be published once in full, at least (3) days prior to its final passage, in the Telegram-Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect at the expiration of thirty (30) days after its final passage. . INTRODUCED AND PASSED TO PRINT by the Council of the City of San Luis Obispo at its meeting held on the _ day of , 1990, on motion of seconded by and on the following roll call vote: AYES NOES: ABSENT: !p'? Ordinance No. (1990 Series) • ATTEST: Mayor Ron Dunin City Clerk APPROVED: 1 y anis ra ive icer i r i Attachment B RESIDENTIAL RENTAL PROPERTIES - NOTIFICATION LIST Dorothy Connor 216 Albert Drive San Luis Obispo, CA 93401 William McWhinney 150 Serrano Hts. San Luis Obispo, CA 93401 Walter Riley 288 Herman Way San Luis Obispo, CA 93401 Doug Gerard, Executive Dean Adm Bldg. - Room 401 Cal Poly San Luis Obispo, CA 93407 Shannon White, A.S.V.P. Cuesta College Student Development Dept. P.O. Box 8106 San Luis Obispo, CA 93403-8106 Dr. Grace Mitchell President, Cuesta College P.O. Box 8106 San Luis Obispo, CA 93403-8106 Karen Bergner Director, Cuesta College P.O. Box 8106 San Luis Obispo, CA 93403-8106 GlennaDeane Dovey 919 Bluebell Way San Luis Obispo, CA 93401 Dr. Hazel Scott V.P. Student Affairs Admin BIdg. - Room 209 Cal Poly San Luis Obispo, CA 93407 John Cotton 225 Albert Drive San Luis Obispo, CA 93401