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Ordinance No. 1206ORDINANCE NO. 1206 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY VERNON, CALIFORNIA, ADDING SECTION 5.47 TO ARTICLE IV OF CHAPTER 5 OF THE CODE OF THE CITY OF VERNON, RELATING TO APPORTIONMENT OF THE SPECIAL PARCEL TAX ON WAREHOUSES, TRUCK TERMINALS, FREIGHT TERMINALS AND OTHER DISTRIBUTION FACILITIES WHEREAS, pursuant to Section 5.45 of the City Code (the "Tax Ordinance"), the City levies a special parcel tax (the "Tax") on certain parcels ("Taxable Parcels") improved with "warehouses," "truck terminals," "freight terminals," "railroad facilities," or "distribution facilities," as those terms are defined in the Tax Ordinance; and WHEREAS, the amount of the Tax on each Taxable Parcel is calculated based on that Taxable Parcel's gross land area; and WHEREAS, the "stor[age] of non -durable, perishable goods under refrigeration including services for processing, preparing or packaging goods for storage" (an activity commonly known as "cold storage") is excluded from the definition of "warehousing" under the Tax Ordinance; and WHEREAS, some Taxable Parcels, in addition to being improved and used in a manner that subjects the parcel to the Tax, are partially used and improved for cold storage, manufacturing, or some other use that would not, in,itself, subject the parcel to the tax; and WHEREAS, instead of calculating the Tax for such mixed -use parcels based upon the entirety of the gross land area of the Taxable Parcel, it is in the public interest that the Tax be apportioned based on the percentage of the parcel's improvements in a taxable use; and WHEREAS, it has been the practice of City staff, in administering the Tax, to make such an apportionment; and WHEREAS, this practice implements the Tax and does not cause the amount levied against any person or parcel to exceed the amount that would be levied under the voter -approved methodology for the Tax; -- and WHEREAS, the City Council desires to ratify and formally adopt the City's existing apportionment practices. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF VERNON HEREBY ORDAINS: SECTION 1: Findings. The City Council of the City of Vernon hereby finds and determines that all of the foregoing recitals are true and correct. SECTION 2: Code Amendment. Section 5.47 is added to Article IV of Chapter 5 of the Code of the City, to read as follows: Section 5.47. Apportionment of Special Tax (a) In calculating the tax imposed pursuant to Section 5.45 upon a parcel whose improvements are in multiple uses, the gross land area of the parcel shall be apportioned between the various uses of the parcel, and the amount of the tax against the parcel shall be based only on the land area apportioned to uses that would otherwise trigger the tax. The gross land area shall be apportioned proportionally to the use of the square footage of improvements on the parcel, with improved common space areas (such as break rooms, restrooms, hallways and loading docks that are shared by the occupants, tenants or uses of a building) allocated - 2 - a proportionally to the improved square footage of the uses. For example, if a 150,000 square foot parcel is improved with a single 100,000 square foot structure, 60,000 square feet of which is used for the storage of non-perishable goods, 30,000 square feet of which is used for the storage of non -durable perishable goods under refrigeration, and 10,000 square feet of which is common spaces shared by both the non-perishable and refrigerated storage uses, the tax upon the parcel pursuant to Section 5.45 would be calculated as if the parcel were a 100,000 square foot parcel improved and used entirely for the storage of non-perishable goods. (b) The City Clerk or his or her designee is authorized to issue guidelines for the implementation and interpretation of this section. SECTION 3: Ordinance Declaratory of Existing Law. This Ordinance reflects the existing practice of the City and the City's existing interpretation of Section 5.45 of the Municipal Code and is declaratory of existing law. All actions/of city staff in the administration of the special parcel tax that are consistent with this ordinance are hereby ratified. Neither.the provisions of this Ordinance, nor the existing practice it ratifies, revises the voter - approved methodology by which the special parcel tax is calculated in a manner that results in an increased amount being levied on any person or parcel. SECTION 4: Severability. If any chapter, article, section, subsection,.subdivision, paragraph, sentence, clause, phrase, or word in this Ordinance or any part thereof is for any reason held to be - 3 - unconstitutional or invalid or ineffective by any court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Ordinance or any part thereof. The City Council hereby declares that it would have adopted this Ordinance and each chapter, article, section, subsection, - — —subdivision, paragraph, sentence, clause or phrase thereof, irrespective of the fact that any one or more chapters, articles, sections, subsections, subdivisions, paragraphs, sentences, clauses, phrases or words be declared unconstitutional, or invalid, or ineffective. SECTION 5: Book of Ordinances. The Interim City Clerk, or Deputy City Clerk, shall attest and certify to the adoption of this Ordinance and shall cause this Ordinance and the Interim City Clerk's, or Deputy City Clerk's, certification to be entered in the Book of Ordinances of the Council of this City. The Interim City Clerk, or Deputy City Clerk, shall cause this ordinance to be published or posted as required by law f / / - 4 - SECTION 6: This Ordinance shall go into effect and be in full force and effect at 12:01 a.m. on the thirty-first (31st) day after its passage. APPROVED AND ADOPTED this 7th day of May, 2013. VDana Reed Interim City Clerk / APPRkAS TO FORM: r1jp3 Nicholas George Rodriguez, City Attorney M ra k E. Mandell, Esq. Mandell Municipal Counseling Special Counsel to City - 5 - Name: W. Michael McCormick Title: Mayor STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, DANA REED, Interim City Clerk of the City of Vernon, do hereby certify that the foregoing Ordinance, being Ordinance No. 1266, was duly and regularly introduced at a meeting of the City Council of the City of Vernon, held in the City of Vernon on Tuesday, April 16, 2013, and thereafter adopted at a meeting of said City Council held on Tuesday, May 07, 2013, by the following vote: AYES: Councilmembers: Mayor McCormick, Maisano, Martinez NOES: Councilmembers: Mayor Pro-Tem Davis, Ybarra ABSENT: Councilmembers: None And thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this �; day of Ma , 2 13, at Veprnln, California. a Reed erim City Clerk (SEAL) CITY CLERK'S OFFICE INTEROFFICE MEMORANDUM DATE: May 9, 2013 TO:_ _ Mark Whitworth, City Administrator S. Kevin Wilson, Director of Community Services & Water FROM: Deborah Juarez, Records Management Assistant jfT RE: Ordinance No. 1206 — An Ordinance of the City Council of the City of Vernon, California, Adding Section 5.47 to Article IV of Chapter 5 of the Code of the City of Vernon, Relating to Apportionment of the Special Parcel Tax on Warehouses, Truck Terminals, Freight Terminals and other Distribution Facilities Transmitted herewith is a copy of Ordinance No. 1206 referenced above, which was approved by City Council on May 7, 2013. Thank you. Attachment c: Claudia Arellano Ana Barcia William Fox Ordinance No. 1206 p RECEIVED APR 11 2013 CITY CLERK'S OFFICE DATE: TO: FROM: RE: STAFF REPORT COMMUNITY SERVICES April 16, 2013 WATER DEPAR Honorable City Council Samuel Kevin Wilson, Director of Community Services & Water 1 1 2013 ADMINISTRATION Introduction of Ordinance Regarding Apportionment of Warehouse Parcel Tax Recommendation It is recommend that: 1. the City Council find that approval of the proposed ordinance on the apportionment of the warehouse parcel tax is exempt under the California Environmental Quality Act (CEQA) in accordance with Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. 2. the City Council conduct first reading of an ordinance adding Section 5.47 to the Code of the City of Vernon, relating to apportionment of the special parcel tax on warehouses, truck terminals, freight terminals and other distribution facilities in order to codify existing administrative practices. Discussion The City currently imposes a $28.72 per 100 square feet of gross area of land parcel tax on each parcel of property improved with a "warehouse," a "truck terminal," a "freight terminal," a "railroad facility," or a "distribution facility." Section 5.45, of the Vernon City Code governs the administration of the tax, and includes detailed definitions of the types of improvements that trigger the tax. Read literally, Section 5.45 appears to require that, if any such improvement is present on a parcel, the entire gross land area of the parcel is subject to the tax. However, that literal reading can result in an unfairly high tax for parcels that are improved with multiple uses, and is unlikely to have been the intent of the authors of Section 5.45. Some parcels in the City are improved with multiple uses. For example, a parcel may be improved both with a manufacturing facility and with a dry storage warehouse that is unrelated to the manufacturing operation. Similarly, a parcel may be improved with a single warehouse structure, the bulk of which is in use for storage of non-perishable goods, but a portion of which is used for a cold storage. Under Section 5.45, neither manufacturing uses nor cold storage uses themselves trigger the tax. For such mixed -use parcels, the City's practice has been to apportion the gross land area of the parcel between uses that trigger the tax and uses that do not. The tax on the parcel is then calculated as if it were a parcel consisting only of the portion of the parcel that has been apportioned to the uses that triggers the tax. The attached ordinance codifies and ratifies the City's practice of apportioning the parcel tax. It does not alter the definitions set forth in the existing parcel tax ordinance. Fiscal Impact Because the ordinance merely codifies the City's existing administrative practices, it will not result in any increase or decrease of tax revenues. Enclosure 2 LEE COMMUNITY SERVICES & WATER DEPARTMENT OFFICE MEMORANDUM P-8 TO: Mark C. Whitworth, City Administrator FROM: Samuel Kevin Wilson, Director of Community Services & Water DATE: April 10, 2013 SUBJECT: INTRODUCTION OF ORDINANCE REGARDING APPORTIONMENT OF WAREHOUSE PARCEL TAX Enclosed herewith is a Staff Report recommending that the City Council conduct first reading of an ordinance adding Section 5.47 to the Code of the City of Vernon, relating to apportionment of the special parcel tax on warehouses, truck terminals, freight terminals and other distribution facilities in order to codify existing administrative practices. Please schedule this item on the April 16, 2013 agenda for City Council consideration. Thank you. SKW/ca Enclos= ORDINANCE NO. 1206 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY VERNON, CALIFORNIA, ADDING SECTION 5.47 TO ARTICLE IV OF CHAPTER 5 OF THE CODE OF THE CITY OF VERNON, RELATING TO APPORTIONMENT OF THE SPECIAL PARCEL TAX ON WAREHOUSES, TRUCK TERMINALS, FREIGHT TERMINALS AND OTHER DISTRIBUTION FACILITIES WHEREAS, pursuant to Section 5.45 of the City Code (the "Tax Ordinance"), the City levies a special parcel tax (the "Tax") on certain parcels ("Taxable Parcels") improved with "warehouses," "truck terminals," "freight terminals," "railroad facilities," or "distribution facilities," as those terms are defined in the Tax Ordinance; and WHEREAS, the amount of the Tax on each Taxable Parcel is calculated based on that Taxable Parcel's gross land area; and WHEREAS, the "stor[age] of non -durable, perishable goods under refrigeration including services for processing, preparing or packaging goods for storage" (an activity commonly known as "cold storage") is excluded from the definition of "warehousing" under the Tax Ordinance; and WHEREAS, some Taxable Parcels, in addition to being improved and used in a manner that subjects the parcel to the Tax, are partially used and improved for cold storage, manufacturing, or some other use that would not, in itself, subject the parcel to the tax; and WHEREAS, instead of calculating the Tax for such mixed -use parcels based upon the entirety of the gross land area of the Taxable Parcel, it is in the public interest that the Tax be apportioned based on the percentage of the parcel's improvements in a taxable use; and WHEREAS, it has been the practice of City staff, in administering the Tax, to make such an apportionment; and WHEREAS, this practice implements the Tax and does not cause the amount levied against any person or parcel to exceed the amount that would be levied under the voter -approved methodology for the Tax; - and WHEREAS, the City Council desires to ratify and formally adopt the City's existing apportionment practices. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF VERNON HEREBY ORDAINS: SECTION 1: Findings. The City Council of the City of Vernon hereby finds and determines that all of the foregoing recitals are true and correct. SECTION 2: Code Amendment. Section 5.47 is added to Article IV of Chapter 5 of the Code of the City, to read as follows: Section 5.47. Apportionment of Special Tax (a) In calculating the tax imposed pursuant to Section 5.45 upon a parcel whose improvements are in multiple uses, the gross land area of the parcel shall be apportioned between the various uses of the parcel, and the amount of the tax against the parcel shall be based only on the land, area apportioned to uses that would otherwise trigger the tax. The gross land area shall be apportioned proportionally to the use of the square footage of improvements on the parcel, with improved common space areas (such as break rooms, restrooms, hallways and loading docks that are shared by the occupants, tenants or uses of a building) allocated - 2 - proportionally to the improved square footage of the uses. For example, if a 150,000 square foot parcel is improved with a single 100,000 square foot structure, 60,000 square feet of which is used for the storage of non-perishable goods, 30,000 square feet of which is used for the storage of non -durable perishable goods under refrigeration, and 10,000 square feet of which is common spaces shared by both the non-perishable and refrigerated storage uses, the tax upon the parcel pursuant to Section 5.45 would be calculated as if the parcel were a 100,000 square foot parcel improved and used entirely for the storage of non-perishable goods. (b) The City Clerk or his or her designee is authorized to issue guidelines for the implementation and interpretation of this section. SECTION 3: Ordinance Declaratory of Existing Law. This Ordinance reflects the existing practice of the City and the City's existing interpretation of Section 5.45 of the Municipal Code and is declaratory of existing law. All actions of city staff in the administration of the special parcel tax that are consistent with this ordinance are hereby ratified. Neither the provisions of this Ordinance, nor the existing practice it ratifies, revises the voter - approved methodology by which the special parcel tax is calculated in a manner that results in an increased amount being levied on any person or parcel. SECTION 4: Severability. If any chapter, article, section, subsection, subdivision, paragraph, sentence, clause, phrase, or word in this Ordinance or any part thereof is for any reason held to be - 3 - unconstitutional or invalid or ineffective by any court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Ordinance or any part thereof. The City Council hereby declares that it would have adopted this Ordinance and each chapter, article, section, subsection, -----subdivision, paragraph, sentence, clause or phrase thereof, irrespective of the fact that any one or more chapters, articles, sections, subsections, subdivisions, paragraphs, sentences, clauses, phrases or words be declared unconstitutional, or invalid, or ineffective. SECTION 5: Book of Ordinances. The Interim City Clerk, or Deputy City Clerk, shall attest and certify to the adoption of this Ordinance and shall cause this Ordinance and the Interim City Clerk's, or Deputy City Clerk's, certification to be entered in the Book of Ordinances of the Council of this City. The Interim City Clerk, or Deputy City Clerk, shall cause this ordinance to be published or posted as required by law. - 4 - SECTION 6: This Ordinance shall go into effect and be in full force and effect at 12:01 a.m. on the thirty-first (31st) day after its passage. APPROVED AND ADOPTED this 7th day of May, 2013. ATTEST: Interim City Clerk / Deputy City Clerk APPROVED A TO FORM: s/i I i7 Nicholas George Rodriguez, City Attorney Mark E. Mandell, Esq. Mandell Municipal Counseling Special Counsel to City - 5 - 1WFiMEN Title: Mayor /Mayor Pro-Tem STATE OF CALIFORNIA ss COUNTY OF LOS ANGELES I, Interim City Clerk / Deputy City Clerk of the City of Vernon, do hereby certify that the foregoing Ordinance, being Ordinance No. 1206 was duly and regularly introduced at a regular meeting of the City Council of the City of Vernon, held in the City of Vernon on Tuesday, April 16, 2013, and thereafter adopted at a meeting of said City Council held on Tuesday, May 7, 2013, by the following vote: AYES: Councilmembers: NOES: Councilmembers: ABSENT: Councilmembers: And thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this day of May, 2013, at Vernon, California. (SEAL) Interim City Clerk / Deputy City Clerk - 6 - CITY OF VERNON CITY COUNCIL MEETING APRIL 16, 2013 ORDINANCE NO. 1206 SUMMARY A CERTIFIED COPY OF THE FULL TEXT OF PROPOSED ORDINANCE NO. 1206 IS AVAILABLE IN THE OFFICE OF THE CITY CLERK LOCATED AT 4305 SANTA FE AVENUE, VERNON, CALIFORNIA. Ordinance No. 1206 was duly introduced at a regular meeting of the City Council of the City of Vernon held on April 16, 2013. Ordinance No. 1206 is scheduled to be approved and adopted by said Council at a regular meeting to be held on May 7, 2013. On May 7, 2013, the City Council of the City of Vernon is proposing to adopt Ordinance No. 1206 adding Section 5.47 to Article IV of Chapter 5 of the Code of the City of Vernon, relating to Apportionment of the Special Parcel Tax on Warehouses, Truck Terminals, Freight Terminals and Other Distribution Facilities for the purpose of formally adopting the City's practice of apportioning the Tax based on the percentage of a parcel's improvements in a taxable use. Dana Reed, Interim City Clerk of the City of Vernon, does hereby certify that Ordinance No. 1206 was duly introduced to the City Council of the City of Vernon at a regular meeting held on April 16, 2013, and said Ordinance is scheduled to be approved and adopted at a regular meeting of the City Council to be held on May 7, 2013. Dated: Da Reed, Interim City Clerk CITY OF VERNON CITY COUNCIL MEETING MAY 7, 2013 ORDINANCE NO. 1206 SUMMARY A CERTIFIED COPY OF THE FULL TEXT OF ADOPTED ORDINANCE NO. 1206 IS AVAILABLE IN THE OFFICE OF THE CITY CLERK LOCATED AT 4305 SANTA FE AVENUE, VERNON, CALIFORNIA. On May 7, 2013, the City Council of the City of Vernon Approved and Adopted Ordinance No. 1206 adding Section 5.47 to Article IV of Chapter 5 of the Code of the City of Vernon, relating to Apportionment of the Special Parcel Tax on Warehouses, Truck Terminals, Freight Terminals and Other Distribution Facilities for the purpose of formally adopting the City's practice of apportioning the Tax based on the percentage of a parcel's improvements in a taxable use. I, Dana Reed, Interim City Clerk of the City of Vernon, do hereby certify that Ordinance No. 1206 was duly approved and adopted by the City Council of the City of Vernon at a regular meeting held on May 7, 2013, and passed by said Council by the following vote: AYES: COUNCILMEMBERS NOES: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS Dated: McCormick, Maisano, and Martinez Davis and Ybarra None Dana Reed, Interim City Clerk U. S. GROWERS COLD STORAGE, INC. 3141 EAST 44th STREET • LOS ANGELES, CALIFORNIA 90058 TELEPHONE (323) 583-3163 • FAX (323) 583-2542 City of Vernon Attn City Clerk 4305 Santa Fe Ave Vernon Ca 90058 April 19, 2013 RE: Rewording of Ordinance 1076/ Section5.45 to 5.47 RECEIVED APR 2 3 2013 CITY CLERK'S OFFICE Dear Mr. City Clerk (the following letter was sent to each council member and the City Administrator), I am writing to further clarify my objection to the proposed "clarification" that Kevin Wilson proposed at the Vernon City Council meeting on April 16, 2013. Ordinance 1076 (Special Parcel Tax) was put in place to address the burden that was placed on Vernon's infrastructure owing to the increase in number of "dry goods" warehouses. Vernon had long done its best to attract large consumers of electricity, but as the world market has changed, there are fewer and fewer manufacturers that wish to be located in California. The population, however, has continued to increase so distribution facilities have become more prevalent. These distribution facilities (dry goods warehouses) do not consume a significant amount of electricity; they cause or create significant traffic and wear and tear on the City's services. In 1999, in order to better distribute the expense of running the City, Ordinance #1057 was amended to Ordinance #1076; which increased the Special Parcel Tax from .01/sgft of land to .20/sgft of land. The following excerpt is from the ordinance: Whereas, the small maximum parcel tax which is currently authorized and which is currently in effect is not substantial enough to deter trucking uses from entering the City or to offset the detrimental effects that these businesses have on the City. While, at first glance, the proposed rewording of Section 5.45 might seem to be quite logical it is an oversimplification of what Ordinance #1076 was intended to accomplish. The examples given, in the staff report, while technically accurate, are not wholly indicative of the situation, current or potential. The Staff report paints a scenario where, with the current wording of the ordinance, a facility with both manufacturing and dry goods storage could be unfairly charged the Special Parcel Tax, on the entire parcel The flip side of this scenario is that, with the current wording of the ordinance, a manufacturing facility, which is contributing to the City with large utility payments but has some dry storage space, is exempt from the Special Parcel Tax; as was the intent of the original ordinance. U.S. GROWERS COLD STORAGE, INC. -* For Example with the defined apportionment plan, as proposed: Company "A" pays $2,000,000./year in electric bills but has 20,000 square feet of dry storage space on the same parcel that consumes all of the electricity. They will have to pay the Special Parcel Tax. Company `B" (on the same size parcel as Company A) manufacturers a product that requires very little electricity but their process takes up considerable space and causes considerable truck traffic; they will be exempt from paying the Special Parcel Tax. The apportionment process that is proposed seeks to answer these questions but it does so in a way that is neither fair, just nor inline with the original intent of Ordinance #1076. The complication arises when the Staff begins to quantify or apportion the use of the facility in order to impose the Special Parcel Tax. Nearly all manufacturing facilities have space set aside for storage. How much of that storage should be exempt from the Special Tax? With the proposed apportionment language in place you will be, in effect, requiring City Staff to assess each business needs for ancillary storage. That would, in turn force businesses to justify their requirements and business model to City Staff in an effort to avoid paying the tax. The end result would be a series of ad hoc taxing decisions with the obvious specter of abuse of discretion and inequitable treatment of similarly situated parcels. Do you really want Vernon to go down this road of inevitable litigation? Furthermore, with the new Utility User Tax that has recently passed, Company "A" will be paying an additional $20,000. on top of the Special Parcel Tax that they would be required to pay for the percentage of building that was used for dry storage. In effect, double taxing the type of company that has supported Vernon for so many years. In closing, I would urge you to reconsider the original intent of Ordinance 1076 and rework the new sections to comply with that intent. . J. Corselli Growers Cold Storage Inc.