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Smart Voter
Los Angeles County, CA April 13, 2010 Election
Measure ElSegundo-N
Business License Tax
City of El Segundo

Ordinance - Majority Approval Required
Final Results

Pass: 1508 / 68.0% Yes votes ...... 711 / 32.0% No votes

See Also: Index of all Measures

Information shown below: Impartial Analysis | Arguments |

Shall the ordinance amending El Segundo Municipal Code 4-2-1, 4-2-3, and 4-2-4 to allow annual increases to the business license tax to fund general municipal services including, without limitation, police protection and crime suppression services, fire prevention and suppression services, and park and recreation facilities and services be adopted?

Impartial Analysis from City Attorney Mark Hensley
Measure N proposes amending the City's existing business license tax regulations by (1) providing for an annual increase; (2) reducing a sales/use tax credit available to businesses; and (3) making text changes to clarify existing tax rates.

Measure N would provide for an annual business license tax increase based upon averaging the last ten years of the consumer price index for the Los Angeles/Riverside/ Orange County area as calculated by the United States Department of Labor, Bureau of Labor Statistics. This ten-year average percentage would be added to the City's current tax rates. Measure N identifies the annual increase as the "average consumer price index" or "ACPI."

According to public documents, the ACPI is needed because business license taxes have not increased since
1993. Consequently, the revenue derived from business license taxes continues to decline both as a percentage of the City's budget and in real dollars adjusted for inflation.

Based upon City estimates, using the ACPI would increase City business license tax revenue by approximately 2.5% annually. This translates to approximately $250,000 to $300,000 per year.

Measure N would result in the City increasing its business license taxes commencing on January 1, 2011 for the 2011 calendar year and each January 1st thereafter.

Existing regulations allow businesses to offset business license taxes by utilizing a credit based upon the amount of sales/use tax revenue the City receives generated by that business. Currently, a business can use up to 50% of the sales/use tax the City receives from the business as a credit against the amount of the business license tax it owes the City. For example, if a business generates $50,000 of sales/use tax for the City, it is entitled to apply 50% or $25,000 as a credit toward its business license taxes. Accordingly, if the business's business license tax liability totaled $25,000 or less, the business's actual business license tax owed to the City would be zero.

Measure N would reduce the business license tax credit for businesses generating sales/use taxes from 50% to 40%.

Measure N would also make text changes to the City's business license tax regulations to implement the business license tax rate calculations. There is no actual change to the tax rate; the dollar amounts refl ects the current amount the City charges based upon existing regulations.

Measure N would be a "general tax." Therefore, all tax revenue would be available for use by the City to pay for general City operations and services. The City would not be legally bound in any way to use the tax monies for any special purpose or for any particular facilities or programs.

Since this ballot measure proposes a "general tax" rather than a "special purpose tax," it requires approval by a simple majority of the City's voters.

A "yes" vote on Measure N favors the Measure.

A "no" vote on Measure N opposes the Measure.

  Official Information

City of El Segundo
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Arguments For Measure ElSegundo-N
Your entire City Council supports Measure N and we urge you to vote yes.

Residents of El Segundo are not subject to this tax and would not be taxed if this measure passes.

Measure N will stop the erosion of our Business License Tax (BLT). Our BLT has not increased a penny since
1993. Measure N will ensure the BLT adjusts a little each year according to the Consumer Price Index (CPI). The CPI average of the last 10 years is used so the increase is kept slow and steady. This is better for business. Currently the 10-year average is 2.99%.

Measure N also reduces the BLT Sales Tax Credit from 50% to 40%. The credit reduces the BLT amount businesses pay, based upon the sales tax their customers paid. Thus, Measure N reduces the money the City gives back to businesses that use this tax credit.

In 1993, the BLT was 43% of El Segundo's General Fund budget, which pays for our Police and Fire Departments, Library, Parks and more. Since infl ation erodes the real value of the BLT, it now only covers 16% of our General Fund. Measure N will keep the BLT close to 16% as we move into the future, otherwise it will continue to erode.

Many non-retail small businesses will see their BLT go from $88 to $90.63 in 2011, the first year. Many retail businesses will continue to pay no BLT due to the sales tax credit.

All five members of the City Council support this measure. We each signed this argument in favor of Measure N in order to fix this structural budget problem, without raising taxes on residents in any way.

We urge you to vote yes on Measure N to help the financial health of El Segundo. Thank you for your support.

/s/ Mayor Kelly McDowell
/s/ Mayor Pro Tem Eric Busch
/s/ Councilman Carl Jacobson
/s/ Councilman Bill Fisher
/s/ Councilman Dr. Don Brann

(No arguments against Measure ElSegundo-N were submitted)

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Created: June 1, 2010 14:35 PDT
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