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Resolution No. 2013-001RESOLUTION NO. 2013-01 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON, CALIFORNIA SUBMITTING TO THE VOTERS OF THE CITY AT THE CITY'S APRIL 9, 2013 GENERAL ELECTION A MEASURE REGARDING THE CITY'S BUSINESS LICENSE TAXES WHEREAS, the City of Vernon (the "City") has suffered a decline in amounts available for general fund expenditures and a depletion of its reserve funds due to, among other causes, increased expenditures, the recession, substantially reduced economic activity during the last several years, the -dissolution of the Vernon Redevelopment Agency and reductions in transfers from the City's Light and Power Department; and WHEREAS, the City projects that there will be a structural budget deficit due to a shortfall in general fund revenues in the current fiscal year and in the next several fiscal years; and WHEREAS, the City Council of the City (the "City Council") has determined that, without additional sources of revenues, it will be necessary for the City to make substantial reductions in the City's municipal services and projects; and WHEREAS, to address the City's revenue shortfall, there has been proposed to the City Council the submission to the voters of the City of a package of taxes and tax increases, which includes the increase of the City's existing business license taxes to be submitted to the voters pursuant to this Resolution, -a special parcel tax to be submitted to the voters pursuant to Resolution No. 2013-02 adopted concurrently herewith, and a utility users tax to be submitted to the voters pursuant to Resolution No. 2013-03 also adopted concurrently herewith; and an WHEREAS, by its Resolution No. 2012-208, adopted on November 6, 2012, the City Council called a general municipal election in the City to be held on April 9, 2013 by all mail ballot; and WHEREAS, Section 2(b) of Article XIII C of the California Constitution permits the election on a general tax measure to be consolidated with a regularly scheduled general election for members of the governing body of the local government; and WHEREAS, the April 9, 2013 general municipal election is a regularly scheduled general election at which there will be elected one member of the City Council; and WHEREAS, the City Council desires to submit to the voters of the City at the City's April 9, 2013 general municipal election, a measure to increase the rates of the City's existing business license taxes (the "Business License Taxes") and to change certain methodology for calculating the.Business License Taxes; and WHEREAS, the proposed increase to the Business License Taxes, as well as the proposed changes in the methodology for calculating the Business License Taxes, are more completely described in the ordinance attached hereto as Exhibit A and incorporated herein by reference (the "Tax Ordinance"). NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: Recitals. The City Council hereby finds and determines that the foregoing recitals are true and correct. SECTION 2: Proposal. The City Council hereby proposes the Business License Taxes as revised by the Tax Ordinance. The Business License Taxes will be administered and collected by the City in the manner set forth in Article I and Article II of Chapter 5 of the Code -2- of the City of Vernon, as amended by the Tax Ordinance. Said Articles are incorporated herein by reference. SECTION 3: Election. Pursuant to Section 9222 of the California Elections Code (the "Elections Code"), the City Council hereby orders that the Tax Ordinance be submitted to the voters of the City at the City's April 9, 2013 general municipal election. SECTION 4: Ballot Question. The measure submitted by Section 3 of this Resolution (the "Measure") shall appear on the ballot as follows: MEASURE K: Shall an ordinance be adopted to increase the YES rates of the City's existing business license taxes and to modify the method for calculating such taxes? NO SECTION 5: Approval. (a) Pursuant to Section 2(b) of Article XIII C of the California Constitution, the Measure requires approval by a majority vote of those casting ballots on the Measure. (b) If the Measure is not so approved, the existing Business License Taxes of the City shall continue in effect without change. SECTION 6 Conduct of Election; Consolidation. (a) The Measure shall be submitted to the voters of the City at the City's April 9, 2013 general municipal election and shall be consolidated with the election for a member of the City Council and any other measures to be submitted to the voters on such election date. The Interim City Clerk, designated as the elections official (the "Elections Official"), shall conduct such election and is required, and is hereby requested, -3-- to take all steps to hold the election in accordance with law for the holding of a general municipal election in .the City. (b) The Elections Official shall render all services to the City relating to the election: The Elections Official is hereby authorized, instructed and directed to procure and furnish any and all official ballot notices and printed matter and all supplies and equipment that may be necessary to prepare and lawfully conduct the general municipal all mail ballot election, including the preparation of the ballot. The Elections Official shall take all steps necessary to place the Measure on the ballot and to cause the Measure to be printed, and shall act as the filing authority for arguments. The full text of the Measure shall not be printed in the ballot, but a statement shall be printed in the ballot pursuant to Section 9280 of the Elections Code advising voters that they may obtain a copy of the Measure upon request made to the Elections Official. (c) Pursuant to Section 4101 of the Elections Code, the Elections Official shall mail the mail ballot materials not sooner than 29 days before the election date and not later than 10 days before the election date. (d) At the next meeting of the City Council occurring after the returns of the election have been canvassed and certified by the Elections Official, the City Council shall adopt a resolution reciting the fact of the election and a statement of the results of the election. SECTION 7: Arguments and Analysis; Public Examination. (a) The last day for submission of direct arguments for or against the Measure shall be by 5:00 p.m. on January 22, 2013. Direct arguments shall be submitted to the Elections Officials, shall not exceed 300 words and shall be signed by not more than,five persons. (b) The last day for submission of rebuttal arguments for or against the Measure shall be by 5:00 p.m. on February 4, 2013. Rebuttal arguments shall be submitted to the Elections Official, shall not exceed 250 words and shall be signed by not more than five persons. Those persons may be different persons than the persons who signed the direct arguments. (c) Pursuant to Section 9285 of the Elections Code, when the Elections Official has selected the arguments for and against the Measure, which shall be printed and distributed to the voters, the Elections Official shall send a copy of the argument in favor of the Measure to the authors of any argument against the Measure, and a copy of the argument against the Measure to the authors of any argument in favor of the Measure, immediately upon receiving the arguments. Rebuttal arguments shall be printed in the same manner as the direct arguments. Each rebuttal argument shall immediately follow the direct argument which it seeks to rebut. (d) Pursuant to Section 9280 of the Elections Code, the City Attorney is hereby requested to prepare an impartial analysis of the Measure showing the effect of the Measure on the existing law and the operation of the Measure. Said analysis shall not exceed 500 words and shall be submitted to the Elections Official by January 22, 2013. Said analysis shall be printed preceding the arguments for and against the Measure. (e) Pursuant to Section 9295 of the Elections Code, the Elections Official shall make a copy of the arguments and analysis referred to in this Section available for public examination in the Election Official's office for a period of ten calendar days 26'2 immediately following the filing deadline for .the submission of such arguments and analysis. The Elections Official may charge a fee to any person obtaining a copy of such materials, but such fee may not exceed the actual cost incurred by the Elections Official in providing the copy. SECTION 8: Notice of Election. The Elections Official is hereby requested to publish or post notice of the election, including notice to file arguments and of the public examination period, as required by law. SECTION 9: Certification. The Interim City Clerk shall certify to the passage, approval and adoption of this Resolution, and the Interim City Clerk shall cause this Resolution and the Interim City Clerk's certification to be entered in the File of Resolutions of the City Council. ATTEST: 1� Dana APPROVED and ADOPTED this 8th day of January, 2013. Name:- William J. Davis Title: Mayor / Ma ar -6- 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 Resolution, being Resolution No. 2013-01, was duly passed, approved and adopted by the City Council of the City of Vernon at a special meeting of the City Council duly held in the City of Vernon on Tuesday, January 8, 2013, and thereafter adopted at a meeting of said City Council by the following vote: AYES: Councilmembers: Mayor Davis, Mayor Pro- Tem McCormick, Maisano, Martinez, Ybarra NOES: Councilmembers: None ABSENT: Councilmembers: None And thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this )n day of January, 2013, at Vernon, California. (.SEAL) - 7 - EXHIBIT A ORDINANCE NO AN ORDINANCE OF THE CITY OF VERNON, CALIFORNIA AMENDING SECTION 5.22 AND SECTION . 5.31 AND REPEALING SECTION 5.28 OF ARTICLE II OF CHAPTER 5 OF THE CODE OF THE CITY OF VERNON, AND ADDING SECTION 5.17 TO ARTICLE I OF CHAPTER 5 OF THE CODE OF THE CITY OF VERNON TO INCREASE THE CITY'S BUSINESS LICENSE TAXES AND MODIFY THE METHODS FOR CALCULATING SUCH TAXES THE PEOPLE OF THE CITY OF VERNON DO ORDAIN AS FOLLOWS: Sectionl. Code Amendment Regarding Business License Taxes. (a) Section 5.22 of Article II of Chapter 5 of theCodeof the City is amended to read as follows: Section 5.22. Business License Tax Rates. (a)(1) Every person doing business or engaged in any business, profession, trade or occupation, or performing any act, or otherwise dealing in or with goods, wares or merchandise, and not elsewhere specifically licensed by other provisions of this Chapter, shall pay a license tax, which license tax is based on the average number of persons employed by the licensee in the City, for each calendar year or portion thereof for the privilege of doing business in the City as follows: FOR EVERY PERSON EMPLOYING: 0 or 1 employee 2 to 1'0 employees 11 to 25 employees 26 to 50 employees 51 to 75 employees 76 to 100 employees 101 to 150 employees 151 to 200 employees 201 to 250 employees MAXIMUM TAX RATE $ 750.00 1,150.00 1,550.00 2,150.00 2,875.00 3,575.00 4,250.00 4, 975.00 5,700.00 A-1 FOR EVERY PERSON EMPLOYING: 251 to 300 employees 301 to 400 employees 401 to 500 employees 501 to 600 employees 601 to 700 employees 701 to 800 employees 801 to 900 employees 901 to 1,000 employees 1,001 to 1,100 employees 1,101 to 1,200 employees 1,201 to 1,300 employees 1,301 to 1,400 employees 1,401 to 1,500 employees 1,501 to 1,600 employees 1,601 to 1,700 employees 1,701 to 1,800 employees 1,801 to 1,900 employees 1,901 and more employees MAXIMUM TAX RATE 6,425.00 7,150.00 7,850.00 8, 600.00 10,000.00 11,425.00 12,850.00 14,275.00 15,700.00 17,100.00 18,500.00 19,950.00 21,350.00 22,775.00 24,175.00 25,625.00 27,025.00 $28,450.00 (2) Absent some other business activity, the leasing of real property by the owner of that property does not constitute a business that is subject to the license tax imposed by this Chapter. (b) Business License Tax For Warehousing. (1) In lieu of the per -employee tax set forth in Subdivision (a) of this Section, every person engaged in warehousing in the City, including refrigerated warehousing shall pay the tax set forth in this Subdivision (b). (2) For purposes of this Subdivision (b), "warehousing" means the storage of goods intended for distribution to other locations. "Warehousing" does A-2 not include (i) the storage, at a location, of materials for use by a manufacturing business conducted at that location, or (ii) the storage, at a location, of products manufactured at that location. (3) Where a person both warehouses at a location and conducts some other business at that same location, he or she shall pay both the tax required by this Subdivision (b), calculated based on the square footage used for warehousing, and the tax required by Subdivision (a) of this Section, calculated based on the employees engaged in the other business. "Square footage used for warehousing" shall include all square footage used in warehousing operations, including the square footage of offices, break rooms and similar spaces used in warehousing operations. "Employees engaged in the other business" shall exclude employees engaged in warehousing operations. Where areas or employees are used for both warehousing and non - warehousing operations, such areas and employees shall be apportioned based on the percentage of time used for each type of operation. The City Clerk may promulgate regulations relating to such apportionment. (4) The minimum warehousing license tax per location shall be $1,200.00 per year and the maximum warehousing license tax per location shall be $11,950.00 per year. (5) The tax rate per square foot for warehousing shall be as follows: ANNUAL TAX First 5,000 sq. ft. $1,200.00 All square footage over 5,000 sq. $0.21 per sq. ft. ft. in addition to the $1,200.00 (6) For purposes of this Subdivision (b), "square footage" includes (i) the square footage of all buildings (or portions of buildings) and (ii) outdoor square footage used for storage as part of a warehousing operation. "Square footage" does not include outdoor square footage used for parking of motor vehicles. A-3 (7) The tax under this Subdivision (b) is measured by the square footage used for warehousing because the magnitude of a warehousing operation is reasonably measured by the amount of square footage used by the operation. The tax under this Subdivision (b) is not a tax on real property. (c) The rates for the business license taxes imposed in Sections 5.23 through 5.29 are as follows: CATEGORY MAXIMUM TAX RATE (1) Central Station Industrial Protective Service (§5.23(a)) (minimum tax) $2,125.00/yr. (2) Auctioneer (§5.24(a)) $725.00/day (3) Still Photography (§5.24(b)) $400.00/day (4) Taxicab Service (§5.24(c)) $1,075.00/yr. (5) Vehicle Towing Service (§5.24(d)) $1,075.00/yr. (6) Peddler (§5.25(a)) $1,325.00/yr. (7) Catering Vehicle -Cold Food (§5.25(b)(1)) $1,150.00/yr. (8) Catering Vehicle -Hot Food (§5.25 (b) (1) (i) ) (§5.25(b)(1)(ii)) $1,400.00/yr. (9) Catering Vehicle -Daily (§5.25(b)(2)) $325.00/day (10) Peddler/Caterer-Transfer (§5.25(d)) $400.00 (11) Peddler (§5.25(e)) - $3,800.00/yr. (12) Fruit/Vegetable Vendor (§5.25(f)) $1,150.00/yr. (13) Junk/Scrape Metal Dealer (§5.27(a)) $8,550.00/yr. (14) Rag or Paper Dealer (§5.27(b)) $5,600.00/yr. (15) Secondhand Pipe Dealer (§5.27(c)) $8,550.00/yr. (16) Shows, Circuses, etc. (§5.29(a)) $1,075.00/day (17) Sideshow (§5.29(b)') $725.00/day M CATEGORY MAXIMUM TAX RATE (18) Structure Moving (Deposit).(§5.26) $1,650 per structure moved (19) Structure Moving Permit Fee $100 per (§5.26) structure moved into, in or through the City (b) Section 5.28 of Article II of Chapter 5 of the Code .of the City is hereby repealed. (c) Section 5.31 of Article II of Chapter 5 of the Code of the City is amended to read as follows: Section 5.31. Adjustment for Inflation. The rates established by this Article shall be adjusted annually based upon changes in the Consumer Price Index for All Urban Consumers (CPI-U), All Items Index, Los Angeles -Riverside -Orange County, California Area (1982-84=100) (hereinafter "CPI") published by the United States Department of Labor, Bureau of, Labor Statistics. For each tax year, commencing on January 1, in which the CPI for the month of March of the immediately preceding year is greater than the CPI for March, 2013, the tax rates for such tax year shall be equal to the product of (i) the tax rates set forth in Section 5.22 of this Article multiplied by (ii) a fraction, the numerator of which is the CPI for the applicable month of March and the denominator of which is the CPI existing for March, 2013. For each tax year in which the CPI for the month of March of the immediately preceding year is not higher than the CPI for March, 2013, the tax rates shall not be reduced and shall be as set forth in Section 5.22 of this Article. If, in the future, the CPI is changed so that the CPI for March, 2013 differs from the CPI for such month used as of January 1, 2014, the CPI for such month shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. The City Clerk shall annually, no later than December 1 of each year, submit a written report to the City Council setting forth the tax rates for the following year calculated pursuant to this Section. Such adjusted A-5 rates shall be effective automatically, without action by the City Council, unless the City Council, by ordinance or resolution, chooses to set the taxes at lower rates. (d) Section 5.17 is added to Article I of Chapter 5 of the Code of the City to read as follows: Section 5.17. License Tax For Contractors Payable Quarterly. Any person who is required to obtain a license pursuant to this Article may opt to be licensed on a quarterly basis, provided that (i) the person does not maintain a fixed place of business within the City and (ii) no taxes are due from the person other than the tax calculated pursuant to Section 5.22(a) of this Chapter. Licenses issued on a quarterly basis shall be issued on a calendar quarter basis (i.e.. January 1-March 31, April 1-June 30, July 1-September 30 and October 1-December 31). The tax for each quarter shall be due on the first day of such quarter and delinquent on the first day of the second month of such quarter. The quarterly tax shall be ,one-fourth of the applicable annual tax. In all other respects, quarterly taxes shall be administered in the manner set forth in this Chapter for annual taxes. Section2. Effective Date. The amendments and modifications to the City's business license taxes adopted pursuant to this Ordinance shall take effect commencing on January 1, 2014. Section 3. Other Provisions Not Amended. No other sections or provisions of Article I and Article II of Chapter 5 of the Code of the City shall be amended or repealed by this Ordinance. Such sections and provisions shall remain in full force and effect as in effect on the date hereof, including those provisions relating to the method of collection of the City's business license taxes, except as otherwise set forth herein. Section 4. Severability. If, for any reason, any portion of this Ordinance is rendered or declared invalid or unenforceable by a court or an administrative body of competent jurisdiction or by reason of any preemptive legislation, the remaining portions of this Ordinance shall remain in full force and effect. A-6 This Ordinance was approved and adopted by the People of the City of Vernon at the City's April 9, 2013 general municipal election. ATTEST: Dana Reed, Interim City Clerk William Davis, Mayor NIVI CITY CLERK'S OFFICE INTEROFFICE MEMORANDUM DATE: January 10, 2013 TO: Dana Reed, City Clerk Nicholas Rodriguez, City Attorney Mark Whitworth, City Administrator FROM: Deborah Juarez, Records Management Assistant RE: Resolution No. 2013-01 — A Resolution of the City Council of the City of Vernon, California Submitting to the Voters of the City at the City's April 9, 2013 General Election a Measure Regarding the City's Business License Taxes Transmitted herewith is a copy of Resolution No. 2013-01 referenced above, which was approved by City Council on January 8, 2013; Thank you. Attachment c: Ana Barcia Scott Porter Resolution No. 2013-01 Background In line with the good governance reforms respecting the City's budgeting policies and practices, City staff has been working diligently in recent years to develop a long-term solution to the General Fund's structural deficit. After significant participation and input from the business and residential communities, the City has developed a viable, long-term solution in the form of the three -pronged tax proposal explained in this staff report. Simultaneously, the City has drastically reduced its operating costs to reduce the deficit that needs to be met through additional revenues. The structural deficit has existed for decades, exceeding $20 million in certain years. Previously, the City was able to meet its General Fund needs through transfers from the City's Light & Power Fund and one-time stop gap measures, such as the sale of real estate and other assets. Due to a depressed economy, depleted assets, and bond covenant restrictions, those options are no longer available, nor are they long-term solutions. The City receives no or significantly less in General Fund revenues from sources traditionally experienced by other cities (i.e. hotel tax, gas tax, vehicle license fees, sales and use tax, and property tax). As a prime example, Vernon receives only 7% of its property tax revenues collected by the County in comparison to the 20+0/o received by cities like Los Angeles, Pasadena, Long Beach, South Pasadena, and Pomona. With limited ability to increase revenues from these sources, Vernon must seek alternative sources of revenue and levy them amongst its taxpayers in the most equitable manner. Recognizing that cost-cutting measures are of supreme importance in the City's efforts to address the General Fund's structural deficit and achieve a balanced budget each fiscal year, over the last three years, the City has reduced its current operating expenditures by over $6 million and continues to seek ways to father reduce costs. The City is currently in the process of implementing an early retirement incentive program that would further reduce costs by $8.1 million over the next five fiscal years. With the anticipated success of the early retirement program, as of July 1, 2013, the City will have reduced its workforce by 25% (81 employees) over the last five years. Through these reductions, along with reductions to employee retirement and health care costs, and significant reductions in consultant and outside legal costs, the City is saving $10 million annually. The City is operating at its leanest possible staffing levels and continues to reevaluate and reorganize in order to provide the most efficient and cost-effective service model Following are summaries of the three tax measures proposed in the attached resolutions. Because of the "Exclusively Industrial" nature of the City, public safety services are uniquely designed to meet such needs. In order to ensure the appropriate distribution of General Fund costs among residential and non-residential uses, the City commissioned a cost -benefit analysis study from NBS. The study concluded that non-residential properties and uses account for more than 99% of all police and fire calls for service and General Fund expenditure allocations. As such, the proposed Special Parcel Tax and Utility Users' Tax would be levied on non-residential uses only. Measure K — Business License Tax (Resolution No. 2013-01 Measure K proposes to the voters adoption of an ordinance to increase the City's existing Business License Tax rates in accordance with Exhibit A of the resolution. The proposed ordinance would also modify the method for calculating business license taxes on additional square footage, multiple business activities at one location, and for contractors. Additionally, the ordinance clarifies that leasing of real property by the ownef of that property, absent some other business activity, does not constitute a business that is subject to this tax. The proposed increases to the Business License Tax rates are expected to generate an additional $4.5 million in revenues. Measure L — Special Parcel Tax (Resolution_ No. 2013-02 Measure L proposes to the voters adoption of an ordinance to levy an annual Special Parcel Tax on non-residential parcels at a rate of $0.03 per square foot to fund public safety services and projects. The proposed tax would be levied only on those parcels or portions thereof not subject to the City's existing Warehouse Parcel Tax. The tax is proposed to sunset in 10 years (Fiscal Year 2022-23). The proposed Special Parcel Tax is expected to generate $1.9 million to fund essential Fire, Health, and Police services and projects. Measure M — Utility Users' Tax (Resolution No. 2013-03) Measure M proposes to the voters adoption of an ordinance to levy a 1% Utility Users' Tax on non-residential electricity, gas, telecommunications, video and water utility services. The proposed tax would sunset 10 years after the date it takes effect. The proposed Utility Users' Tax is expected to generate $1.6 million. Fiscal Impact The three -pronged tax proposal presented in this staff report is expected to generate approximately $8 million in additional General Fund revenues to fund essential governmental services, including public safety and health services. Conclusion The General Fund deficit is a decades -long problem that can only be resolved through comprehensive, long-term revenue solutions and strict cost reductions and controls. City staff has thoroughly examined all available options to reduce expenditures and generate revenues. The expenditure reductions discussed in this staff report, along with additional projected reductions to outside legal costs, represent a 22% decrease in General Fund operating costs over a five to six -year period. The tax measures proposed in this staff report represent what we believe to be an appropriate distribution of the revenue burden among Vernon's various industries and taxpayers.