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Business license fee increases to be proposed

City Council is looking to update tax model, unchanged since 1985, to simplify process, bring in more revenue.

July 16, 2012|By Joseph Serna

The Costa Mesa City Council on Tuesday will discuss a new fee structure for the city's business license tax.

The council is expected to narrow down its options — a final decision isn't anticipated — and move closer to putting the proposed tax changes on the November ballot for voter approval.

The council is looking to revamp the business license tax in hopes of shoring up revenues. The current model — unchanged since 1985 — charges up to $200 per business for those with more than $500,000 in gross annual sales.

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The fees bring in less than $900,000 annually, a fraction of what some other Orange County cities make under their models.

The current fee structure is based on gross receipts:

•Under $1,000 — $0

•$1,000.01-$25,000 — $25

•$25,000.01-$40,000 — $35

•$40,000.01-$75,000 — $45

•$75,000.01-$200,000 — $60

•$200,000.01-$500,000 — $100

•More than $500,000 — $200.

How the fee structure would change would be up to the council. It has until the end of the month to detail a proposal for the election.

"City Council can choose to alter the above tier amounts either by doubling the current amounts or by using some other factor and staff will provide the estimated financial impacts of any changes," according to the staff report.

"Another alternative is to amend the current tier structure to reduce the number of tiers from seven to three or four, thus simplifying the process altogether. City Council could also choose to direct staff to begin gathering number of employee data from businesses to enlarge our database for future potential business license tax ballot measures."

The Costa Mesa Chamber of Commerce opposes hurrying any changes onto the ballot, saying that a thorough, considered review of the free structure would be better.

"Rushing to patch together a revised tax structure, an example of which was advanced by city staff, could be very damaging to businesses still hanging on in what is still a horrendous economy," Chamber Director Ed Fawcett said in a letter to Mayor Eric Bever. "It would also be extraordinarily unfair to businesses with large sales volumes, since that does not always translate into a large margin of profit for the business, as pointed out by Councilman [Steve] Mensinger.

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