Leece seeks review of business taxes

Costa Mesa’s business license tax seems poised again for City Council discussion.

Following Councilwoman Wendy Leece’s request Tuesday afternoon for the Finance Advisory Committee to examine the annual tax, its members decided to wait for council direction.

The scope of the newly renamed committee — it was previously the Investment Oversight Committee — requires such direction, they contended.

“This is a big issue when you start talking about tax increases,” said Mayor Pro Tem Steve Mensinger, who serves on the committee as the mayor’s designee.

City businesses pay the license tax according to a tier structure that’s gone unchanged since 1985. The maximum is $200, paid by the city’s largest businesses, those with more than $500,000 in annual gross receipts.

The city anticipates receiving about $850,000 from the tax in fiscal 2012-13, according to the mid-year revised budget.

Any increase to the tax would require voter approval during a municipal election, the earliest of which is in November 2014.

Potentially raising the tax, especially for high-revenue businesses like those at South Coast Plaza, has been a recent topic of political debate. The council last looked at doing so in July, though failure to reach a consensus postponed such an initiative.

Leece said Tuesday that the council “ran out of time” during last summer’s debate. With the proposed city charter and election happening around the same time, it was a dilemma for the council to disseminate all the information and make a decision in time for the November ballot, she added.

Leece also said she is open-minded, acknowledging that the tier structure — despite the disparity it presents between what Bloomingdale’s pays compared with a small business — may not need adjustments.

“Whatever you find, maybe we don’t change ours at all because of the way it attracts new businesses, and it’s a selling point for businesses to come to Costa Mesa,” Leece said to the committee.

She also referenced an email from resident Perry Valantine, who wrote that the tax’s 1985 changes were minimal. The basic tax rates actually have been in place since 1961, he wrote.

“I think this is important to note, as it shows how long it’s been since any real changes,” Valantine wrote.

Mensinger suggested examining who is actually paying.

“We need to look at it,” he said. “The question is whether we increase the fees or we really, fully collect what we have.”

Mensinger expressed doubt that all firms are paying all their required taxes. He specified Mayor Jim Righeimer’s business in Newport Beach, which has about eight limited liability companies, each of which requires its own business license tax payment.

He called the potential revenue “a lot of low-hanging fruit here that should’ve been addressed a long time ago.”

Leece said Wednesday that she had hoped the Finance Advisory Committee would have been able to discuss the tax without the council’s direction, but that she plans to informally mention the topic during Tuesday’s council meeting.

“It behooves us to look under every possible stone” for revenue sources, she said.