COUNTY OF SAN MATEO

Inter-Departmental Correspondence

 
 

DATE:

July 14, 2008

BOARD MEETING DATE:

July 22, 2008

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Four-Fifths

 

TO:

Honorable Board of Supervisors

FROM:

Finance and Operations Committee

Supervisor Mark Church and Supervisor Rich Gordon

   

SUBJECT:

Consideration of Whether to Introduce, and Introduction of, an Ordinance Regarding Imposition of a Business License Tax on Operators of Vehicle Rental Businesses and Submitting to a Vote of the Electorate a Proposed Ordinance to Impose a Business License Tax as a Percentage of Gross Receipts of Vehicle Rental Businesses in the Unincorporated County

 

RECOMMENDATION:

Introduce an ordinance regarding imposition of a business license tax on operators of vehicle rental businesses and submitting to a vote of the electorate a proposed ordinance to impose a business license tax at the rate of five percent (5%) of gross receipts of vehicle rental businesses in the unincorporated county.

 

VISION ALIGNMENT:

Commitment: Responsive, effective and collaborative government

Goal(s): Number 20: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.

 

BACKGROUND:

The County does not presently impose a business license tax on vehicle rental businesses, although, through a preliminary survey, we have determined that many other California jurisdictions do impose a business license tax on vehicle rental businesses. Information that the County Manager’s Office has received appears to indicate that operators of vehicle rental businesses in the unincorporated area of the County generated gross receipts of up to approximately $308,788,100 during the year ending December 31, 2007.

 

DISCUSSION:

The California Revenue and Taxation Code vests counties with the authority to impose a license tax upon every kind of lawful business transacted in the unincorporated area of the county.

 

Although the County may adopt a business license tax such as the one discussed above for the purposes of generating general fund revenues, Proposition 218 (and related provisions of the California Government Code) provides that, because it is a general tax, it may be imposed only if it is approved by a majority vote of the County electorate in an election consolidated with a regularly scheduled general election for members of the Board of Supervisors, which is November 4, 2008. Similarly, the Government Code provides that a local governmental agency may not present a proposal for a general tax to the electorate unless the agency’s governing board has approved, by a two-thirds vote, an ordinance or resolution proposing the tax. Consequently, any ordinance to impose a business license tax on vehicle rental businesses would need to be approved by no fewer than four members of this Board before it may be submitted to the County electorate.

 

FISCAL IMPACT:

As noted, vehicle rental businesses in the unincorporated area of the County generated up to an approximate amount of $300,000,000 during the year ending December 31, 2007. The amount of revenue generated by a business license tax would depend on the percent of gross receipts at which the tax rate is set. However, based on 2007 figures and by way of example, each one percent of tax rate would generate approximately $3,000,000 in general fund revenues. Thus, a business license tax at the rate of five percent of gross receipts would generate approximately $15 million in general fund revenues. The cost of placing this measure on the November 2008 ballot, as required under Proposition 218, could be as high as $550,000, if no other county-wide measures are placed on the ballot. A second measure would add an additional $100,000 in election-related costs. This amount would not be recoverable if the measure fails.