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Minutes 77-05-02MINUTES OF AN ADJOURNED REGULAR MEETING OF THE CYPRESS CITY COUNCIL HELD May 2, 1977 The adjourned regular meeting of the Cypress City Council was called to order at 7:40 p.m. on Monday, May 2, 1977 at the Cypress Community Center, 5700 Orange Avenue, Cypress, Calif- ornia, Mayor Donald Hudson presiding. PRESENT: ABSENT: Councilmen Lacayo, MacLain and Hudson Councilmen Sonju and Harvey COUNCILWOMAN SONJU ARRIVED AT 7:41 P.M. The City Manager reported that he received a request from the Chamber of Commerce for the City Council to approve a proclama- tion for the Mother of the Year Award which is sponsored by the Cypress Junior Women's Club and is scheduled to be presented during the May Festival this weekend. It was moved by Councilman Lacayo, seconded by Councilwoman Sonju and unanimously carried to approve a proclamation for the Mother of the Year Award. The City Manager reported on the introduction of a State Senate bill by Senator Dills which proposes to limit the assessment of admissions tax and/or parking tax at race tracks to twenty- five cents. Cypress and other cities opposed this same type of bill last year. He reported a hearing is scheduled before the Senate Government Organization Committee on May 10 at which representatives from race track cities may wish to give testimony. He stated Mayor Hudson has indicated he would be available to attend the hearing. It was moved by Councilwoman MacLain, seconded by Councilman Lacayo and unanimously carried to oppose the senate bill and authorize the attendance of the Mayor, City Manager and City Attorney at the May 10 hearing in Sacramento. Mayor Hudson distributed a calendar of monthly City Commission meetings. The Finance Officer distributed various supplemental materials with the proposed Business License Ordinance which the Council requested at the April 25 meeting. These included the current City ordinance, the League model ordinance, a business license tax rate matrix, and a dollar comparison of the tax proposed by Cypress with several other cities which use the same tax rate method proposed by staff. The Finance Officer recommended that, even if the proposed tax rate structure is not adopted, a new ordinance be adopted which completes and organizes the existing ordinance. The second goal besides organization would be to eliminate inequities in the existing ordinance. Under the current ordinance, small businesses in the City pay a higher percentage tax rate than larger businesses and, further, different types of business pay the same tax rate regardless of their profit margins. The Finance Officer stated that staff does not anticipate additional revenue coming to the City with adoption of the proposed tax rates, however, revenue will increase in proportion to growing economic activities in the City. He felt the Business License Ordinance will be of less concern to businessmen who are considering locating in Cypress than factors such as: the market situation, availability of trans- portation, labor costs, development costs and property taxes. Council Minutes May 2, 1977 He reported that profit margins were used to establish different categories of business to which a tax rate could be assigned which reflects the businesses' ability to pay. Mr. Rudy Lloyd, chairman of the Business Development Committee of the Chamber of Commerce and controller of Hyatt Die Cast and Manufacturing Corporation, stated they have reviewed the proposed tax rate schedule and strongly oppose it but they support the remainder of the ordinance. They felt the tax rate is discriminatory towards large businesses and will be a deter- rent towards attracting large business. He felt Cypress should remain competitive with other cities by having a regressive tax rate. Mr. Lloyd stated he discussed the proposed ordinance with several persons. The Warmington Company which purchased 21 acres at Walker and Cerritos felt it would have an adverse impact on development of the property but not as severe as on the Arlan property. Cypress Skateway felt the City should retain a regressive tax rate. Mr. Lloyd stated the committee mailed a letter to Chamber members requesting comments on the ordinance but did not receive much response. He reported that persons in the professional services category, like doctors and real estate brokers, had objected to providing the City with gross receipts figures. Mrs. Daryle Ellwart, Chamber Mana- ger, reported that the Buena Park Board of Realtors, which has 20 members in Cypress, expressed opposition to the ordinance. The Chamber representatives pointed out that the ordinance is misleading since it does not specify any exceptional businesses such as Systems Reefer and the Texaco tank farm. Staff stated that exceptions are included in the ordinance but not reflected in the tax table. In response to questions regarding the profit margins, the staff reported profit margin is based on net receipts and was determined by using information available from the Fed- eral Internal Revenue Service. These were nation-wide figures since none are available for California. The Finance Officer explained how the proposed tax rate for the General Retail category was determined. He reported the current business license tax revenue from all business cate- gories is between $80,000 and $90,000 per year. He reported the majority of businesses in the City already report their gro~s receipts and the major exception is the Professional category. Mr. Lloyd felt the Professional Services category has a higher profit margin than retail businesses since the business usually involves only one person. He suggested that if the City wants to attract business then the business tax should be reduced. Mayor Hudson expressed concern that under the current schedule small businesses are penalized. He was also concerned that thc Professional category receives municipal services but escapes paying a sales tax as other business categories. He also questioned whether the City benefits by charging more tax other than the actual licensing fee. Councilmen MacLain and Lacayo also felt that the fee charged should be the processing cost for the business permit. Mr. Robert Si. mmons suggested lowering the tax For those busin- esses which the City wishes to encourage and perhaps change the tax for groups like the Professional category which provide little revenue. The City Manager pointed out that there are many industrial uses which require municipal services which do not produce sales tax. Mr. H]lliard Warren stated that since the City is interested in industrial development on the Arian property then the indus- trial tax should not be the highest but should be the lowest or average in comparison with other cities. -2- City Council ~inutes May 2, 1977 The City Manager stated staff's intent was to develop a more equitable ordinance which is better organized and clear and the intent was not to raise revenue. He suggested that, since concern has been expressed about future business and the impact of the proposed tax rates, and if the Council is comfortable with the current ordinance, that the current ordinance be clarified and the same tax rates be maintained. He stated the rate structure can be evaluated after development occurs on the Arian property. Councilwoman Sonju supported this recommendation. Mayor Hudson disagreed with maintaining the same tax rates since he felt small businesses should not pay at a higher rate than large businesses. He suggested that the City perhaps could impose a new tax rate based on taking the highest current fee in each business category, calculate the tax rate for that busi- ness, and then apply the same tax rate to the rest of the busi- nesses. In this way, larger businesses would not pay any more tax but the smaller businesses would not be faced with a regres- sive tax rate structure. Mayor Hudson asked that staff compute the net revenue loss to the City with such a change. The remain- der of the Council agreed with these recommendations. Mr. Robert Simmons stated the City will lose revenue but it will be made up by improving public relations for business. Councilwoman MacLain stated she would like the small businesses reviewed and a hearing on the language alone without the tax rate figures. Mayor Hudson suggested that the hearing scheduled for May 9 be closed and that a separate workshop be held to discuss the language of the ordinance and another to discuss the proposed tax rate schedule, with one hearing held to con- sider the entire ordinance. ADJOURNMENT: It was Sonju moved by Councilman Lacayo, seconded by Councilwoman and unanimously carried to adjourn the meeting at 9:20 ATTEST: MAYOR OF THE ~TY OF CYPRESS~ CITY CLERK OF WE CITY OF CYPRESS -3-