398 / 57.18% Yes votes ...... 298 / 42.82% No votes

See Also: Index of all Measures

Pursuant to state law, most cities charge a business license fee as a revenue generating measure. In addition, cities generate revenue from other business ventures that use public rights of way (cable franchises, parades, etc.). Ferndale has adopted a business license fee in the past and recently the City council, in response to ongoing funding reduction from the State of California, directed staff to look into the matter and report back with a proposal to increase the business license fees.

There are numerous methodologies to generate funds under a business license, with no clear "right or wrong" way established either under the law or practice. Researching both active Business License programs of other cities and the literature reveals that there are three main methodologies used: Flat Rate, Employee Rate and Gross Profit. The City Council at the June 3, 2004 City Council meeting choose the flat rate. The flat rate is described below along with a brief discussion of the advantages and disadvantage.

Flat rate: This methodology is currently in place in Ferndale and numerous other cities both small and large. Under this method, a fixed annual rate is established by the City Council with provisions for "one day" and "special event". This structure often contains different "classes" of businesses, based upon the intention of the City to charge different rates for different types of businesses (for example, whether or not the business generates sales taxes, or whether the community is trying to make the rates an incentive for a type of business the community is trying to draw into the community). This method is the simplest to use in its basic forms. Although many jurisdictions have "classes" of businesses, administration is simple and straightforward and revenue projects are consistent, provided that business losses and gains can be reasonable predicted. Arguments against this methodology include "equity" issues (a large business pays the same rate as a sole-proprietor) and correctly identifying, without "singling out" classes of businesses. In light of the comments received to date, staff is inclined to support a flat structure that has provisions for special events as well as distinguishing between businesses that generate sales taxes and those that do not. In additional, a new category for "Chamber Sponsored Events" that include vendors is proposed.

Staff attended several Chamber meetings as well as distributing the proposed business license information to each of the businesses. The majority of the comments received favor a simple structure as well as provisions to charge daily licenses a significantly higher fee if they are proposing to sell a product that directly competes with a "brick and mortar" business.

While certain portions of the business license proposal are not necessarily subject to "Proposition 218" the vast majority of the fees are, hence it will require a vote. This is a general tax, therefore it requires 50% + 1 of the vote to pass.

The proposed increase will result in approximately $5,700 in increased revenueannually. The first full year of increase will offset the cost of the election.

Resolution 04-04, which puts the issue to vote of the citizenry on the November election, was passed at the City Council meeting on June 3, 2004.