Item #18 - Business License Modernization.Desk Item
PREPARED BY: Arn Andrews Holly Young
Assistant Town Manager Town Manager Administrative Analyst
Reviewed by: Town Manager, Town Attorney, and Interim Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 08/02/2022 ITEM NO: 18 DESK ITEM
DATE: August 2, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Adopt a Resolution of the Council of the Town of Los Gatos for Model 3,
Calling a Municipal Election for November 8, 2022, Requesting that the
County Consolidate the Municipal Election with the General Election on
November 8, 2022, and Submitting to the Qualified Electors of the Town at
the November 8, 2022 Consolidated General Election a Measure to Amend
Chapter 14 of the Los Gatos Town Code Relating to Business License Taxes
REMARKS:
The following information is provided in response to questions from Council Members,
additional business feedback since the posting of the staff report, and other considerations.
Can the ballot measure acknowledge the inflation of the last 30 years?
Yes, the ballot language can acknowledge the 117% inflation that has occurred in the last 30
years. This could read:
Shall the measure to fund critical Town needs such as public safety by
imposing …… , raising about …… yearly for general fund purposes until
ended by voters, and which have not been increased since 1991 while
inflation increased 117%, be adopted?
YES
NO
Do other municipalities have inflation adjustments built in?
Yes, the cities of Belmont, Union City, and Newport Beach have included inflation adjustments.
Details of their approaches are provided on the next page.
PAGE 2 OF 4 SUBJECT: Business License Modernization DATE: August 2, 2022
REMARKS (continued):
In addition, in the event Council opts for a Model that captures only a portion of the 117%
inflation factor since 1991 (Model 1 20%), or most of the 117% inflation (Model 3 reduced or
Finance Commission alternative), staff would recommend an inflation adjustment be included.
Staff would recommend using the Bay Area Consumer Price Index. This could be accomplished
by adding the following language to any of the proposed ballot statements.
Shall the measure to fund critical Town needs such as public safety by
imposing …… , raising about …… yearly for general fund purposes until
ended by voters, and which have not been increased since 1991, and
adjusted annually for inflation, be adopted?
YES
NO
Belmont
Sec. 12-28. - Annual adjustment.
The above referenced schedule of fees, including but not limited to the per employee fees,
minimum tax, and license fees shall be adjusted annually pursuant to the Bay Area Consumer
Price Index (BACPI) over the previous calendar year. The first such adjustment shall occur on
July 1, 1991, based upon the 1990 calendar year BACPI.
Union City
5.08.100 Annual adjustment.
Annual adjustment shall be based on the Consumer Price Index. The rate of the license payable
for the license period beginning January 1, 1984, and each year thereafter, shall be adjusted as
follows: The Consumer Price Index published as of June 30, 1967, by the United States
Department of Labor, Bureau of Labor Statistics for San Francisco, California area shall be used
as the base year. The Consumer Price Index used for the computation for the succeeding year
shall be the preceding June to June, all urban index, San Francisco/Oakland Index rounded off
to the nearest full percentage point. Increase shall be sixty-five percent of the CPI and the
increase shall be no less than three percent, nor more than ten percent of the increase in CPI
for all categories not currently taxed at gross receipts or gross payroll.
Newport Beach
5.08.022 Business Tax—Commercially Based Businesses.
Every commercially based business as defined by this chapter shall pay an annual business tax
as established by resolution of the City Council. The business license tax shall automatically be
adjusted each year in July to reflect the percentage change, rounded to the nearest dollar, in
the cost of doing business as measured by the consumer price index. The term “consumer price
PAGE 3 OF 4 SUBJECT: Business License Modernization DATE: August 2, 2022
REMARKS (continued):
index” shall mean the United States Department of Labor Bureau of Labor Statistics consumer
price index, Los Angeles Anaheim-Riverside.
How would the Town’s business license structure and fees compare to other municipalities?
Based on the HdL analysis and report, the Town has the 3rd highest Business License receipts of
the comparators used in the report (pg. 8 of the report). The fact that the comparator
jurisdictions have different tax structures (flat fee, per employee, gross receipts) is the primary
driver of the difference in receipts. Since all the models under consideration raise additional
revenues, Los Gatos will continue to be in the top tier of Business License receipts.
Additional Business Feedback
Staff concluded their third conversation with representatives of Netflix on August 1, 2022.
During the call with Netflix, representatives shared that they understand the Town’s impetus
for initiating a review of the Business License program and expressed their thoughts on the
three models under consideration. Netflix is neutral on Model 1, opposed to Model 2, and felt
Model 3 is overly punitive as is, and if considered by Council, should be closer in line with the
117% inflation factor referenced in the staff report. Staff greatly appreciated Netflix’s
engagement and will be available to respond to questions on the sequence of calls.
Other Considerations
As the Town Council considers the different models, the Council is free to consider options for
any of the three models. Staff is prepared to run real-time calculations if Council would like to
see the effects of different tax rates for the flat fees, retailing gross receipt rates, and/or e-
commerce, manufacturing, wholesaling/jobbing gross receipt rates. Staff is also preparing a
resolution and associated ordinance for the Finance Commission recommendation.
If the Council votes on a measure that is a more complex variation of one or more of the
models, a special meeting prior to August 12, 2022 would be needed to provide the public and
the Council an opportunity to review the associated resolution and ordinance.
Attachments Previously Recieved with the July 29, 2022 Report:
1. Public Comment
2. Model 1 Resolution with corresponding Ordinance as Attachment A
3. Model 2 Resolution with corresponding Ordinance as Attachment A
4. Model 3 Resolution with corresponding Ordinance as Attachment A
PAGE 4 OF 4 SUBJECT: Business License Modernization DATE: August 2, 2022
Attachment Provided with this Desk Item:
5. Correspondence received after 11:01 a.m. on July 29, 2022 and before 11:00 a.m. on August
2, 2022
ATTACHMENT 5
Dear Los Gatos Town Council,
It’s my opinion that “Model 3” is the best model to implement as regards a BL change that would result
in an increase of approximately $1,100.000 in annual town revenue.
Best,
Doc A
Dr . Thomas Antone, DC, AMD
HYPERBARIC OXYGEN THERAPY, EEG NEUROFEEDBACK, ADVANCED CHIROPRACTIC CARE
"To become fully conscious, in this moment, is the true purpose of life." Eckhart Tolle