See Also: Index of all Measures

Impartial Analysis from Nicholas George Rodriguez, City Attorney

Measure K would increase the rates of the City's existing business license taxes to raise revenue for general City purposes, and it would also make some changes in the method for calculating such taxes.

The City of Vernon currently imposes business license taxes on most business entities and persons who conduct business in the City. Most businesses pay an annual tax, per location, based on the number of employees that work for the business at that location. Warehousing businesses pay a tax for each location based on the square footage of building space used at that location for warehousing. Certain other businesses, primarily itinerant businesses or businesses that operate from vehicles (such as taxicabs and food trucks), pay a flat rate.

Measure K proposes a tax ordinance that increases each of the rates of the business license taxes. For example, the annual tax on a business location with 2 to 10 employees, if taxed on a number-of-employees basis, would increase from $230 to $1,150. The annual tax on a business location with 1,001 to 1,100 employees, if taxed on a number-of-employees basis, would increase from $3,140 to $15,700. For businesses taxed on a square foot basis, the tax for a main location (currently $240 for the fi rst 5,000 square feet, plus 4.2 cents per additional square foot up to a maximum square footage tax of $2,390), would increase to $1,200 for the first 5,000 square feet, plus 21 cents per additional square foot, up to a maximum square footage tax of $11,950. Each rate would automatically further increase, annually, based on the change in the Consumer Price Index, according to a formula specifi ed in the ordinance. A complete list of tax rates is included in the tax ordinance.

Measure K would also change how taxes are calculated and collected. With respect to the warehousing tax, it would eliminate a distinction made between square footage at main and "offsite" locations, applying the same rate structure to each location.

Contractors could opt to pay their taxes quarterly rather than annually. Measure K would also clarify the methodology for taxing businesses that conduct both warehousing and some other business at a single site by requiring that such businesses pay both a tax based on square footage (for warehousing operations), and a tax based on employees (for other operations), and that square footage and employees be apportioned for tax purposes among the two types of businesses. It would formalize the City's existing practice of not treating the leasing of real property by its owner as a business and make several other miscellaneous clarifi cations.

Proceeds of the business license tax are, and would continue to be, placed in the City's general fund and available for any municipal purpose. Business license taxes collected by the City for 2011 totaled $1.3 million. If Measure K is approved, City staff estimates that the business license tax will yield $5.7 million annually. The new rates, if approved, would go into effect January 1, 2014.