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HomeMy WebLinkAboutFS 2011-04-19 Item 2A - Ordinance - Business License and Revenue Generating Regulatory License (RGRL) Revision .�ILAp 4sy Ci ty of Tukwila t 0 Jim Haggerton, Mayor \N_.. 290 INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety Committee FROM: Shawn Hunstock, Finance Director DATE: April 13, 2011 SUBJECT: Business License and RGRL Regulatory Changes REVISED ISSUE At the March 22, 2011 Finance and Safety Committee meeting committee members requested additional information regarding the impact of proposed changes on participation at City sponsored events, as well as additional information on the effect of non profit exemptions on revenue for the Revenue Generating Regulatory License (RGRL) fees. BACKGROUND The City Council adopted the Revenue Generating Regulatory License fee on July 19, 2010 with Ordinance No. 2297. The Council also adopted several changes to the business license provisions in the Tukwila Municipal Code with Ordinance No. 2315, adopted November 15, 2010. Staff is proposing several changes to both the business license and RGRL regulations to address inconsistencies between the two, to make various housekeeping changes to the regulations, and to codify some past practices. DISCUSSION In addition to the changes noted on the Informational Memorandum dated March 18, 2011, several other additional changes are being proposed at this time. Each item will be addressed below. Parks and Recreation Feedback One of the items requested by Finance and Safety committee members was feedback on the impact of a $20 temporary license fee on City sponsored events, such as the Backyard Wildlife Festival, Tukwila Days, etc. Parks and Recreation staff was of the opinion that a $20 fee for the temporary license could discourage participation in City sponsored events. It is important for the City to capture the information about who is at these events, what types of equipment and materials they will be bringing, what types of facilities they will be operating out of, etc. Requiring a license from vendors at these events facilitates the collection and circulation of that information to the relevant departments within the City. Charging a fee of $20, though, was thought to be burdensome on the vendors, so staff is now proposing no fee be assessed with the temporary license. The length of time that a temporary license would be good for was also discussed. Staff originally proposed less than five days for the temporary license, but it was noted that some events could go on for longer than that, such as SeaFair activities, so the license was changed to be effective for less than fifteen days instead of five days. 1 INFORMATIONAL MEMO Page 2 The RGRL exemption for businesses eligible for a temporary license was also changed from five employees to ten employees based on feedback received from Parks and Recreation staff. With the exception of vendors with a large number of employees, this change will mean most vendors at City sponsored events will pay no fee for the business license, and they will be exempt from the RGRL fee. Temporary License As mentioned above, staff changed the terms of a temporary license to be effective for one to fourteen days. To mitigate a potential loss of revenue, the definition of temporary license was also updated to specifically exclude outside contractors, those physically located outside Tukwila but providing services here, from being eligible for a temporary license. Business License Required Staff is proposing an amendment to TMC Section 5.04.015 that specifically states a business license is required even if the business does not have to pay a fee. This clarifies an area of confusion regarding exemptions from the business license fee. The exemption applies to payment of the fee, but does not exempt the business from obtaining a license without a fee. It is important that the City know which businesses are operating within the City, what types of materials and equipment they are utilizing, whether the business will be dealing with hazardous materials, etc. Collection of the information on the business license application or renewal form is the mechanism for collecting and routing that information to the appropriate departments within the City, and can be done regardless of whether a fee accompanies the application or renewal. Business License Fee Non Refundable The change to TMC Section 5.04.040 clarifies that business license fees are non refundable if the business closes during the year, or the license is denied, revoked or suspended with cause. Business License Late Fees Staff is proposing changes to TMC 5.04.050 which would make the late fee calculations the same for business license fees as they are for RGRL fees. Currently the late fees are different for the business license fee and the RGRL fee. This inconsistency causes significant confusion on the part of business owners, it creates difficulties in calculating the total late fee due, and it unnecessarily complicates staff administration of the two fee programs. A significant amount of time is spent by Finance staff answering questions related to how the two different fees are calculated. Business owners are often confused by the difference in calculating the late fees, and are sometimes frustrated by the inconsistency. Changes that Require a New Application Staff is proposing changes to TMC 5.04.070 that clarify the circumstances under which a new business license application is required. These changes include the following: 1. Change in the nature of the business being conducted. 2. Change in the Unified Business Identifier issued by the Washington Department of Licensing. 3. Change in the physical location of the business. 4. Change in ownership of the business. W:12011 Info Memosl BusinessLicenseAndRGRLChanges _Revised.doc 2 INFORMATIONAL MEMO Page 3 All of the items above may be cause for the business license application to be routed throughout the City again to the relevant departments prior to issuance of a new license. For this reason, a new application will be required for the four changes listed above. Business License Denial Staff is proposing language be added to TMC Section 5.04.110 that specifically provides for the denial of any business license application from businesses that are inherently illegal and a violation of any local, state or federal laws. RGRL Fee Calculation Staff is proposing removal of the language in TMC Section 5.62.020.D that requires a business stay indefinitely with the RGRL calculation method originally selected. Businesses have the option initially of calculating the fee based on employee hours worked or based on the number of full -time equivalent employees. The requirement in the TMC to stay with the original fee calculation method is not necessary as the software program we are using to administer the business license and RGRL fees will accommodate changes in the selected method from year to year. Also, there is essentially no difference between the two methods if the calculation is performed correctly, so it is expected there would be no loss in revenue to the City if businesses changed their method of calculating the RGRL fee. Staff is also recommending a technical correction to TMC Section 5.62.020.F. The correction replaces the term "minimum fee," which is defined elsewhere as $55, to be the hourly equivalent of $0.028646 per employee hour worked. RGRL Fee Exemption The changes proposed in TMC Section 5.62.040.B would provide consistency between the business license exemptions and the RGRL exemptions. There is currently an exemption from the business license fee for farmers who raise their own produce, dairy products and similar items themselves and sell those goods within the City. This is a codification of a state regulation. The change proposed at TMC 5.62.040.B would extend that same exemption to the RGRL fee. Non Profit RGRL Exemption Another item that was discussed at the Finance and Safety Committee meeting on March 22, 2011 was the issue of non profit exemptions for the RGRL fee. The second largest employer in the City is a tax exempt 501(c)(3) organization. Discussions ensued amongst the committee members regarding the propriety of an exemption from the RGRL fee for non profit organizations, particularly the larger employers. One of the intentions in adopting the RGRL fee originally was to recover some of the cost of maintenance and infrastructure replacement that is necessitated by employees of the businesses in Tukwila. Exempting large employers prevents the City from collecting RGRL fees from these businesses to pay for that maintenance and improvements. There are currently 73 businesses in Tukwila operating under a non profit exemption employing over 4,000 employees. Following is some detail on the number of businesses and the respective number of employees: W:12011 Info Memos \BusinessLicenseAndRGRLChanges _Revised.doc 3 INFORMATIONAL MEMO Page 4 of of Total Employees Businesses Employees 7 1 7 7 2 4 8 3 6 18 4 6 24 5 3 15 6 3 18 7 1 7 8 3 24 9 3 27 10 2 20 12 1 12 13 1 13 14 1 14 15 2 30 18 2 36 19 1 19 20 1 20 21 1 21 22 2 44 23 1 23 34 1 34 42 1 42 43 1 43 49 1 49 60 1 60 62 1 62 69 1 69 70 1 70 80 2 160 111 1 111 132 1 132 200 1 200 664 1 664 1,940 1 1,940 Grand Total 75 4,036 If all of the businesses who qualified for a non profit exemption had paid the RGRL fee, the City would have received over $220,000. However, some of these "non profit" organizations are governmental agencies. Removing the governmental agencies, if the City Council decided to remove the non profit exemption from businesses with more than 20 employees, the City would receive approximately $133,000 in RGRL fees. If the exemption applied to businesses with more than 100 employees, the City would receive approximately $118,000 in RGRL fees. Staff is making no recommendation at this time regarding a change in the exemption for non- profit organizations. RECOMMENDATION Staff is recommending adoption of the attached ordinance amending the business license and RGRL regulations. This item is scheduled for the April 19 Finance and Safety Committee meeting, the April 25 Committee of the Whole meeting, and the May 2 Regular Council meeting. ATTACHMENTS Draft Ordinance in strike through underlined format Informational Memorandum, dated March 18, 2011 (from 3/22/11 FS packet) W:12011 Info Memos \BusinessLicenseAndRGRLChanges _Revised.doc 4 DRAFT AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, AMENDING ORDINANCE NO. 2315, §1 (PART), AS CODIFIED AT VARIOUS LOCATIONS IN TUKWILA MUNICIPAL CODE CHAPTER 5.04, TO ADD "TEMPORARY BUSINESS LICENSE" TO THE DEFINITIONS AND FEE SCHEDULE, TO REVISE APPEAL PROCEDURES AND TO REDEFINE BUSINESSES EXEMPT FROM FEES; AMENDING ORDINANCE NO. 2297, §1 (PART), AS CODIFIED AT TUKWILA MUNICIPAL CODE SECTION 5.62.020, TO CLARIFY THE CITY'S REVENUE GENERATING REGULATORY LICENSE FEE FOR A PERSON OPERATING MULTIPLE BUSINESSES AS SOLE PROPRIETORSHIPS AND FOR BUSINESSES ELIGIBLE FOR A TEMPORARY BUSINESS LICENSE; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, the current business license ordinance defines nonprofit organizations but does not exempt them from paying the business license fee; and WHEREAS, the City Council desires to exempt qualified nonprofit organizations from both the business license fee and the Revenue Generating Regulatory License fee; and WHEREAS, a temporary business license will provide an alternative license for businesses operating within the City on a very short -term basis; and WHEREAS, changes to the appeal procedures are needed for clarification and efficiency, and revisions are required to clarify application procedures and late fee penalties; and WHEREAS, the City Council desires to apply the Revenue Generating Regulatory License fee only once for a person operating multiple businesses as sole proprietorships within the City, and to revise fee calculation requirements and the penalty period; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY ORDAINS AS FOLLOWS: W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 1 of 11 5 Section 1. TMC Section 5.04.010, "Definitions," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.010, is hereby amended to read as follows: For the purpose of this chapter, the following definitions shall apply: 1. "Business," means any operation performed by any person which involves the manufacturing or processing of materials of any type, the sale of goods, wares or merchandise, the rendition of services or the repair of goods, wares or merchandise to the general public or a portion thereof for any consideration at each established place of business, store, office, shop or yard within the City limits. 2. "Department," means Finance Department. 3. "Director," means the Finance Director or his or her designee. 4. "License or licensee," as used generally in this chapter, means and includes respectively the words "permit" or "permittee" or the holder for any use or period of time of any similar privilege, wherever relevant to any provision of this chapter or other law or ordinance. 5. "Nonprofit organization" includes individual person(s), partnerships, joint ventures, societies, associations, churches, clubs, trustees, trusts or corporations; or any officers, agents, employees, factors or any kind of personal representatives of any thereof, in any capacity, acting either for himself or any other person under either personal appointment or pursuant to law who qualifies under definition of and certification by the Internal Revenue Service as nonprofit. 6. "Person," means any individual, receiver, agent, trustee in bankruptcy, trust, estate, firm, co- partnership, joint venture, company, joint stock company, business trust, corporation, society, or group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit or otherwise. 7. "Person engaged in business" means the owner or one primarily beneficially interested in lawful business for profit and not employees. 8. "Home occupation" means any business conducted in a residence within the corporate city limits of Tukwila, such business being subject to the requirements set forth in TMC 18.06.430. 9. "Temporary business license" means any business conducted within the corporate limits of the City for less than 15 consecutive days in a calendar year. Businesses with a physical location outside the corporate limits of the City that provide professional services on a contractual basis within Tukwila are not eligible for a temporary business license. Section 2. TMC Section 5.04.015, "Business License Required," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.015, is hereby amended to read as follows: W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 2 of 11 6 No person or persons shall conduct, maintain, operate, or engage in any business within the City without first applying for and obtaining a business license and paying the fee(s) as prescribed herein unless the business is exempt. The exemption is only from the need to data- n-a pay a fee for issuance of the business license and shall not be construed as relief from compliance with other requirements of the Tukwila Municipal Code. All businesses operating within the City are required to submit a business license application or renewal. as appropriate. regardless of whether a business license fee is due to the City. Section 3. TMC Section 5.04.020, "Application and Fees Required," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.020, is hereby amended to read as follows: A. Any person desiring to establish or conduct any business enterprise or undertaking within the corporate limits of the City shall first apply to the Finance Department for a license to conduct such business. The application shall be upon a form furnished by the Finance Department on which the applicant shall state the company name and address; the nature of the business activity or activities in which he desires to engage; the place where the business will be conducted; the number of employees, whether full or part-time, on the payroll as of January 1, or, if a new business, the number to be employed on the opening date; and other information pertaining to the business as required by the City. B. The application must be accompanied by a chcck, cash or money order payment for the amount of the license fee. All fees will be based on the number of employees, whether full or part-time, as follows: 0 to 10 $100.00 11 to 20 $150.00 21 to 50 $300.00 51 to 100 $400.00 101 and up $600.00 Home Occupation (pursuant to TMC 5.04.010) $50.00 Temporary business license f pursuant to TMC 5.04.010) $0.00 Section 4. TMC Section 5.04.040, "Prorating fee," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.040, is hereby amended to read as follows: The license fee set forth in this chapter shall be for the calendar year, and each person engaged in business must pay the full license fee either for the current year-of --e-e- Business license fees are non refundable, regardless of whether the business operates for the entire calendar year, or whether the business license is denied, revoked or suspended with cause. W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 3 of 11 7 Section 5. TMC Section 5.04.050, "Fee for late acquisition or renewal," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.050, is hereby amended to read as follows: The licence fec shall be incrcaccd for failurc to acquirc a- hecncc within 30 days of commcncing busincc: e- e. ..le; 0. A. Monetary Penalty. Failure to pay the business license fee within 30 days after the day on which it is due and payable pursuant to TMC Section 5.04.020 shall render the business subiect to a penalty of 5% of the amount of business license fee for the first month of the delinquency and an additional penalty of 5% for each succeeding month of delinquency, but not exceeding a total penalty of 25% of the amount of such business license fee, plus any accounting, legal or administrative expenses incurred by the City. No business license for the current period shall be granted until the delinquent fees. together with penalties. have been paid in full. The Finance Director or his /her designee is authorized, but not obligated, to waive all or any portion of the penalties and interest provided herein in the event the Director or his /her designee determines that the late payment was the result of excusable neglect or extreme hardship. B. Collection. Any business license fee due and unpaid under this chapter, and all penalties thereon. shall constitute a debt to the City and may be collected in court proceedings in the same manner as any other debt in like amount. which remedy shall be in addition to any and all other existing remedies. C. Revocation of License. The Finance Director may revoke any business license issued pursuant to this chapter to any business or other person who is in default in any payment of any business license fee hereunder. or who shall fail to comply with any of the provisions of this chapter. Notice of such revocation shall be mailed to the license holder by the Finance Director. and on and after the date thereof any such business who continues to engage in business shall be deemed to be operating without a license and shall be subject to any and all penalties herein provided. D. There shall be a penalty of not less than $50.00 to reinstate any business license revoked through nonpayment of the business license fee. Section 6. TMC Section 5.04.070, "Change in nature of business," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.070, is hereby amended to read as follows: The license granted in pursuance hereof shall be used to conduct the business or type of business at the designated address for which such license is issued. Any change in the nature of the business, a change in the Unified Business Identifier issued by the Washington State Department of Licensing, a change in the physical location of the business, or a change in ownership of the business shall W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 4 of 11 8 necessitate a renewed application to the Finance Department. A chance in the nature of business or a chance in ownership will also require payment of the applicable business license fee. Section 7. TMC Section 5.04.090, "Exemption," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.090, is hereby amended to read as follows: A. Nothing in this chapter shall be construed to require a license for any farmer, gardener, or other person to sell, deliver or peddle any fruits, vegetables, berries, butter, eggs, fish, milk, poultry, meats or any farm produce or edibles raised, caught, produced or manufactured by such person in any place within the State. B. Any business exempt from paving the Revenue Generating Regulatory, License fee. in accordance with TMC Section 5.62.040. shall also be exempt from paving the business license fee in TMC Section 5.04.020. Section 8. TMC Section 5.04.110, "Denial Revocation," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.110, is hereby amended to read as follows: A. The Finance Director may deny any business license application pursuant to TMC Section 5.04.105. B. The Finance Director may deny or revoke any license under this chapter where one or more of the following conditions exist: 1. The licensee is in default of any fee, charges or amounts due and payable to the City of Tukwila, as outlined in the Tukwila Municipal Code or City policy. 2. The license was procured by fraud or by a false or misleading representation of fact in the application, or in any report or record required to be filed with the Finance Department; 3. The building, structure, equipment, operation or location of the business for which the license was issued does not comply with the requirements or standards of the Tukwila Municipal Code; 4. The license holder, his or her employee, agent, partner, director, officer or manager has knowingly violated any provisions of any chapter of the Tukwila Municipal Code, or has knowingly permitted, failed to prevent, or has otherwise allowed a violation of any of the provisions of any chapter of the Tukwila Municipal Code to occur on his or her business premises. 5. Conduct of the business would be in violation of any local, state or federal law, rule or regulation prohibiting the conduct of that type of business. W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 5 of 11 9 C. Upon determination that grounds for denial, suspension or revocation of a license exist, the Finance Director shall send the license holder a Notice of Denial, Suspension or Revocation. Grounds for denial, suspension or revocation include, repetition of a violation of any provision of City policies or the Tukwila Municipal Code that has been accompanied by a warning notice of such violation or previous notice of the violation. The Notice of Denial, Suspension or Revocation shall set forth the grounds for and terms of the denial, suspension or revocation and a statement advising that the person may appeal from the Notice of Denial, Suspension or Revocation to the Hearing Officer, provided that the appeal is made in writing and filed with the Finance Director within 10 days from the date of receipt of the Notice of Denial, Suspension or Revocation, and that failure to so appeal shall constitute a waiver of all rights to any additional administrative hearing or determination on the matter. Upon issuance of such Notice, the license is suspended or revoked and is no longer valid and current, unless appealed as provided in this chapter, in which case the effect of the suspension or the revocation is stayed pending the outcome of the appeal. D. Receipt of the Notice of Denial, Suspension or Revocation. The Notice of Denial, Suspension or Revocation shall be served upon the license holder either personally or by mailing a copy of such Notice by certified mail, postage prepaid, return receipt requested to such license holder to his or her last known address as provided in the license application. Alternatively, the Notice may be posted upon the premises where such license holder conducts his or her business, which is the subject of the denied or revoked license. Section 9. TMC Section 5.04.112, "Appeal of Notice of Denial, Suspension or Revocation," Amended. Ordinance No. 2315, §1 (part), as codified at TMC Section 5.04.112, is hereby amended to read as follows: A. App als from a Notice of Denial, Smpcncion or Revocation under this chapter shall be conductcd in th9 ;amc manner as app ale from a "Notice and Order" under app al fce of $250.00. A. Whenever the Finance Director. or his /her designee, determines there is cause for suspending, denying or revoking any license issued or applied for pursuant to this chapter. the Finance Director. or his /her designee. shall notify the person holding the license, by registered mail or hand delivery, of his /her determination. Notice mailed to the address on the license shall be deemed received three business days after mailing. The notice shall specify the grounds for suspension, denial or revocation. W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 6 of 11 10 B. The licensee or applicant may appeal the decision of the Finance Director. or his /her designee, to suspend, deny or revoke a business license by filing a written appeal to the City Clerk within 10 calendar days of the decision. The appeal must state the grounds for appeal and the basis for why the decision was incorrect. To be accepted the appeal must be accompanied by an appeal fee of $200.00. C. Upon receipt of the notice of appeal, the Finance Director shall set a date for hearing the appeal before the City's Hearing Examiner. Notice of the hearing will be mailed to the licensee or applicant. D. The hearing shall be de novo. The Hearing Examiner may affirm. reverse or modify the Finance Director's. or his /her designee's. decision. E. The decision of the Hearing Examiner shall be final. Any appeal from the administrative hearing shall be to King County Superior Court within 14 calendar days of the Hearing Examiner's decision. Section 10. TMC Section 5.62.020, "Revenue Generating Regulatory License Fee (RGRL)," Amended. Ordinance No. 2297, §1 (part), as codified at TMC Section 5.62.020, is hereby amended to read as follows: A. General. In addition to the business license fee, the highest applicable RGRL in this section shall be paid for the annual license issued under this chapter. 1. A business with Tess than $12,000.00 of average annual gross receipts shall be exempt from any RGRL. 2. For the purposes of this section and in determining the applicable RGRL, the term "employee" means and includes each of the following persons who are not required by the City to have his /her /its own separate City of Tukwila business license: a. Any person who is on the business's payroll, and includes all full -time, part-time, and temporary employees or workers; and b. Self- employed persons, sole proprietors, owners, officers, managers, and partners; and c. Any other person who performs work, services or labor at the business, including an independent contractor who is not required to have a separate City of Tukwila business license. 3. An entity that is entirely exempt from paying the business license fee shall be exempt from any RGRL. 4. An entity with some activities or functions that are exempt from the business license fee and some that are not exempt shall pay an RGRL based on the number of its employees that are involved in the functions or activities that are not exempt. W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 7 of 11 11 5. An individual person operating more than one business as sole proprietorships, including leasing of non owner occupied housing, within the corporate limits of the City shall pay only one RGRL fee, at an amount equal to the highest RGRL fee for any one of the multiple businesses. if not otherwise exempt from paying the RGRL fee. pursuant to this chapter. TMC Section 5.62.020.A.5 shall not be applicable if any one of the businesses owned by the sole proprietor has three or more full -time equivalent employees. B. Amount of RGRL: 1. Revenue Generating Regulatory License (RGRL) Fee Method. Except as otherwise provided by this chapter, every person engaging in business within the City shall pay an RGRL based upon the number of employee hours worked in Tukwila during the previous year. Annual employee hours are calculated based on the sum of the 4 quarterly reports submitted to the Washington State Department of Labor and Industries (L &I) for the previous year. It will be the responsibility of the employer to determine the number of hours worked within the City from these reports. Businesses that did not file quarterly reports with the Washington State Department of Labor and Industries shall determine the number of hours worked within the City and demonstrate, if required, to the satisfaction of the Finance Director or his /her designee, that the number of employee hours worked is correct. 2. The annual RGRL fee shall be calculated by multiplying the minimum fee, as defined in subsection (F) of this section, by the number of full- time equivalent employees that worked in Tukwila. The approved fee per full -time employee is $0.028646 (which represents a RGRL multiplier of $0.028646 per employee hour worked), as may be adjusted herein. Employers without a full year history would need to estimate the number of employee hours that will be worked in the current calendar year. 3. If a business has more than one location in Tukwila, the annual business license fee calculation must include a minimum fee for each location and the RGRL for annual employee hours at all locations. C. Alternative FTE Method. A business may choose to calculate its annual RGRL fee by multiplying the minimum fee by the number of its employees. The number of employees shall be based on the sum of the employees in the 4 quarterly reports submitted to the Washington State Department of Labor and Industries (L &I) for the previous year divided by four. It will be the responsibility of the employer to determine the number of employees working within the City from these reports. Businesses that did not file quarterly reports with the Washington State Department of Labor and Industries shall determine the number of employees working in the City and demonstrate, if required, to the satisfaction of the Finance Director or his /her designee, that the number of employees is correct. Employers without a full year history would need to estimate the number of employees that will work in the City for the current calendar year. W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 8 of 11 12 D. Once the FTE methodology has bccn selected, it must be used for future renewals. same mcthod of calculation for all locations. D. For businesses with employees who work less than 1,920 hours per year (the work hour figure used by the Washington Department of Labor and Industries) the total number of hours worked by all such employees during the 4 quarters of the previous year shall be added together and divided by 1,920 to determine the FTE equivalency. E.It will be the responsibility of the business to determine the total number of FTEs (or equivalency) and demonstrate if required, to the satisfaction of the Finance Director or his /her designee that the calculation is accurate. G F. The RGRL fee for a business required to be licensed under this chapter and not located within the City's corporate limits shall be calculated by multiplying the minimum fee the RGRL fee multiplier of $0.028646 per employee hour worked by the number of employee hours worked within the City, but in no event shall the license RGRL fee be less than the minimum fee set forth in this chapter. If the number of employee hours worked is not known at the time of renewal, the business shall estimate the maximum number of employee hours they anticipate using in Tukwila during the year. -14 G. Businesses doing business in the City that have no employees physically working within the City shall pay the minimum fee required under this chapter. I H. The minimum fee under this chapter shall be $55.00, and may be amended from time to time. J 1. Payment made by draft or check shall not be deemed a payment of the RGRL fee unless and until the same has been honored in the usual course of business, nor shall acceptance of any such check or draft operate as a quittance or discharge of the fee unless and until the check or draft is honored. Any person who submits a RGRL fee payment by check to the City pursuant to the provisions of this chapter shall be assessed an NSF fee set by the Finance Director if the check is returned unpaid by a bank or other financial institution for insufficient funds in the account or for any other reason. J. Businesses eligible for a temporary business license, pursuant to TMC Section 5.04.010, shall be exempt from payment of an RGRL fee for businesses with fewer than 10 employees. Section 11. TMC Section 5.62.040, "Exemptions," Amended. Ordinance No. 2297, §1 (part), as codified at TMC Section 5.62.040, is hereby amended to read as follows: W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 9 of 11 1 3 A. Exemptions. The following entities may claim an exemption from the license fee, but if exempt under this subsection such entities shall still register under this chapter: 1. Certain Organizations Exempt from Federal Income Tax. An organization that files with the city a copy of its current IRS 501(c)(3) exemption certificate issued by the Internal Revenue Service. 2. A governmental entity that engages solely in the exercise of governmental functions. Activities that are not exclusively governmental, such as some of the activities of a hospital or medical clinic, are not exempt under this chapter. 3. A nonprofit business operated exclusively for a religious purpose, upon furnishing proof to the Finance Director of its nonprofit status. For the purposes of this chapter, the activities that are not part of the core religious functions are not exempt. 4. Civic groups, service clubs, and social organizations that are not engaged in any profession, trade, or occupation, but are organized to provide civic, service, or social activities in the City. a. Examples of such organizations include but are not limited to: Soroptomists, Kiwanis, Lions' Rotary, American Legion, children's and adults' athletic leagues and similar types of groups, clubs or organizations. B. A business exempt from obtaining a business license under TMC Section 5.04.090.A shall also be exempt from paving an RGRL fee. Section 12. TMC Section 5.62.050, "Penalties," Amended. Ordinance No. 2297, §1 (part), as codified at TMC Section 5.62.050, is hereby amended to read as follows: A. Monetary Penalty. Failure to pay the RGRL fee within 20 30 days after the day on which it is due and payable pursuant to TMC Section 5.62.020 shall render the business subject to a penalty of 5% of the amount of RGRL fee for the first month of the delinquency and an additional penalty of 5% for each succeeding month of delinquency, but not exceeding a total penalty of 25% of the amount of such RGRL fee, plus any accounting, legal or administrative expenses incurred by the City. No business license for the current period shall be granted until the delinquent fees, together with penalties, have been paid in full. The Finance Director or his /her designee is authorized, but not obligated, to waive all or any portion of the penalties and interest provided herein in the event the Director or his /her designee determines that the late payment was the result of excusable neglect or extreme hardship. B. Collection. Any RGRL fee due and unpaid under this chapter, and all penalties thereon, shall constitute a debt to the City and may be collected in court proceedings in the same manner as any other debt in like amount, which remedy shall be in addition to any and all other existing remedies. W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 10 of 11 14 C. Revocation of License. The Finance Director may revoke any business license issued pursuant to this chapter to any business or other person who is in default in any payment of any RGRL fee hereunder, or who shall fail to comply with any of the provisions of this chapter. Notice of such revocation shall be mailed to the license holder by the Finance Director, and on and after the date thereof any such business who continues to engage in business shall be deemed to be operating without a license and shall be subject to any and all penalties herein provided. D. There shall be a penalty of not less than $50.00 to reinstate any business license revoked through nonpayment of the RGRL fee. Section 13. Severability. If any section, subsection, paragraph, sentence, clause or phrase of this ordinance or its application to any person or situation should be held to be invalid or unconstitutional for any reason by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of the remaining portions of this ordinance or its application to any other person or situation. Section 14. Effective Date. This ordinance or a summary thereof shall be published in the official newspaper of the City, and shall take effect and be in full force five days after passage and publication as provided by law. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of 2011. ATTEST /AUTHENTICATED: Christy O'Flaherty, CMC, City Clerk Jim Haggerton, Mayor APPROVED AS TO FORM BY: Filed with the City Clerk: Passed by the City Council: Published: Effective Date: Shelley M. Kerslake, City Attorney Ordinance Number: W: Word Processing \Ordinances \Business lic -RGRL revisions -2nd submission strike -thru 4 -8 -11 SH:bjs Page 11 of 11 15 16 LA REFERENCE FROM 3/22/11 FS PACKET I "'4s City of Tukwila i t c) Jim Haggerton, Mayor j' Igo: INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety Committee FROM: Shawn Hunstock, Finance Director DATE: March 18, 2011 SUBJECT: Business License and RGRL Regulatory Changes ISSUE Since implementation of recent business license ordinance changes, and implementation of the Revenue Generating Regulatory License (RGRL) fee, several things have come to our attention that need to be addressed in the implementation of both fees. The attached ordinance is intended to address some of those issues, and additional changes will be coming later this year. Some inconsistencies between the business license regulations and the RGRL regulations were identified after implementation of the RGRL fee. For instance, both regulations defined what non profit organizations were, but only the RGRL ordinance specifically exempted non profits from that fee. The business license regulations did not specifically exempt non profits from the business license fee. There were also inconsistencies between organizations that would be exempt from either the business license fee or the RGRL fee. BACKGROUND The City Council adopted the Revenue Generating Regulator License fee on July 19, 2010 with Ordinance No. 2297. The Council also adopted several changes to the business license provisions in the Tukwila Municipal Code with Ordinance No. 2315, adopted November 15, 2010. The business license regulatory changes adopted in November were primarily housekeeping items, identifying the Finance department as the administrator of the fee. The ordinance also removed some provisions of the business license regulations that were no longer applicable. DISCUSSION Temporary License The business license regulations do not currently provide for a different type of license for businesses that operate within the City for a short period of time. The license is issued at any time throughout the year and is valid for the entire calendar year. There are several circumstances, for instance vendors at the Backyard Wildlife Festival or at Tukwila Days, where the business might operate within the City for only a short period of time. For these businesses, an annual license is not necessary and the fee collected by the City might make it prohibitive for the businesses to participate in these types of short term events. 17 INFORMATIONAL MEMO Page 2 Staff is recommending amending the business license fee schedule to allow for a temporary license for businesses operating in the City for less than five consecutive days. This would allow businesses participating in the shorter, maybe one -time events to operate with a valid City issued business license. Completion of the business license application would initiate the standard approval routing process for these applications. For instance, if the vendor was planning on using a temporary structure outdoors to sell goods from, the City could obtain information regarding maximum occupancy, placement and number of fire extinguishers (if required), location of access points for the public and emergency response personnel, etc. The proposed fee for the temporary license is $20. While this amount might not recover all possible costs for reviewing and approving the license application, it would still recover some of those costs and yet be low enough to not prohibit participation in these types of events, particularly for small vendors. Non Profit Exemption Ordinance 2315 defined non profit organizations in the business license regulations. However, nowhere in the business license chapter did it specifically exempt these businesses from paying the business license fee. Staff is recommending adding wording to the business license regulations that would tie the exemption to the RGRL exemption. In other words, a business exempt from the RGRL fee would also be exempt from the business license fee, and vice versa. Appeal Process and Fee After implementing the new RGRL regulations, it came to the attention of staff that there are inconsistencies between the appeal provisions for non issuance of a business license contained in the RGRL regulations in TMC Section 5.04.112 and the regulations in the Code Enforcement section, Chapter 8.45. Staff is recommending an amendment to the business license regulations in TMC Section 5.04.112 that would clarify the appeal process for denial of a business license, and the appropriate fee to be assessed for an appeal. Multiple RGRL Fees After implementation of the RGRL fee it became apparent that there are a number of businesses in the City that are owned by the same individual. One of the concerns that was expressed by these people was that they were paying more than one RGRL fee for essentially the same employee, themselves. With the current business license and RGRL regulations, these individuals are paying two or more business license fees, plus two or more RGRL fees. As you are aware, the RGRL fee is specifically based on the number of employees, and in the case of a sole proprietorship the owner is considered an employee for calculation of the fee. This means that if that person owns multiple businesses, they would be paying multiple RGRL fees even though the "employee" is the same person for each business. Staff is recommending an amendment to the business license regulations. The change would be applicable to sole proprietors who own and operate more than one business within the City. For businesses owned by the same individual, only one RGRL fee would be paid by that person. The fee paid would be the highest calculated fee for any one of the businesses. For instance, if a person owned a landscaping business with no employees, plus a janitorial business with three employees, the RGRL fee would be based on the three employees in the janitorial business. There would be no RGRL fee assessed on the landscaping business in this example. 1 8 W:12011 Info Memos\ BusinessLicenseAndRGRLChanges .doc INFORMATIONAL MEMO Page 3 Another example might be two businesses with no employees that are owned by the same person. In that case, the RGRL fee would be assessed to one of the two businesses, and would be calculated based on one "employee," the owner. The other business would not be assessed an RGRL fee. It should be noted that this amendment to the RGRL regulations would only be applicable to sole proprietorships with just one owner. As such, it would not apply to partnerships, corporations, limited liability corporations, or any other type of ownership. RECOMMENDATION Staff is recommending adoption of the attached ordinance amending the business license and RGRL regulations. This item is scheduled for the March 22, 2011 Finance and Safety Committee meeting, the March 28 Committee of the Whole meeting, and the April 4 Regular Council meeting. ATTACHMENTS Draft Ordinance W:12011 Info Memos\ BusinessLicenseAndRGRLChanges .doc 1 9