BTAC Members Have One More Tax Reform Proposal Politics by Jacqueline Fox Members of the Business Tax Advisory Committee (BTAC) have come up with four options for replacing the city’s Gross Receipts Tax and plan to huddle May 13 to pick at least one to pass on to the Los Angeles City Council. This is great news for business owners who’ve long pushed for changes to the city’s tax structure. That includes the folks at the Valley Industry and Commerce Association, which launched an aggressive “ax the tax” campaign earlier this year and managed to even get Mayor Jim Hahn to throw his weight behind a reform effort. “We came up with 10 or 11 ideas for replacing the tax. Then we broke it down to about four, two of which will probably be the dominant choices,” said BTAC member Marv Selter. Under the current system, all businesses are required to pay taxes on their gross receipts, regardless of whether they make a profit. Not only does that system create a lopsided playing field for businesses, particularly small ones, it provides absolutely no incentive for larger companies to set up shop here since they need only jump the Glendale border to get out of that fiscal booby trap. Meanwhile, enforcement of the tax has been so shiftless, it’s estimated roughly 40 percent of the business owners in the city haven’t been paying it. So BTAC’s mission? Offer the council an alternative that is fair to business owners, provides an incentive to attract new companies and have it come with some kind of built-in mechanism for tracking down tax scofflaws. Here are the four proposals: – The CCR Tax: That’s Collect, Cut and Rebate. The tax would continue to be collected, but the $17 million collected through the tax amnesty program last year and anticipated funds from other programs would allow the city to cut taxes and offer rebates to those who have been paying and continue to do so. – The Flat Tax: Pretty straightforward; would be set up in tiers with several different levels for either categories of industry or the size of the company. – The Combo Tax: This is essentially the same system in place now but, under reforms, would offer business owners more than one tax code to file under and a lower number of business categories. For example: a business with more than one service could use gross receipt numbers from the lowest revenue-producing unit of the company, rather than be forced to pay a percentage of combined revenues from all units. – The Rent Tax: This would be based on the rent of the building in which the business is set up. The landlord would collect the tax and then remit it to the city. If the business owner also owns the building, the tax would be based on surrounding rents. The same would go for home-based businesses. According to Selter, the rent tax plan is likely to emerge as one of the top two and, frankly, it’s easy to see why. The system would automatically catch tax scofflaws because most business owners pay rent on their facilities. It’s also a fair system because those business owners that can afford high-rent districts would be charged more than those who operate in lower-rent districts. And, the system provides a real incentive to businesses outside the city, not only to come on over, but maybe consider setting up a business in areas with lower rents, where commercial activity is needed most, like the Northeast Valley. Naturally, the city council could reject all four proposals when it finally gets them. Meanwhile, Selter said the city and the state franchise tax board have finally gotten around to creating the software program that would allow the two to share data with one another. The plan there, drafted under measure AB63 in 2001, would allow the tax board to share filing information with the city so it can do a better job of tracking the businesses up and running and who’s paying their taxes and who isn’t. Because of budget cuts at City Hall, rumor has it that the city has had a tough time coming up with money to train employees to work the AB63 program. Selter said the program is now expected to be up and running by 2003. Lot of Nothing The Ford Motor Company has taken an 8.14-acre chunk of land in Burbank off the market again in an apparent effort to bring in a dealership, which would be music to the ears of city officials who’ve fought tooth and nail to get an auto dealer in town and give nearby Brand Boulevard of Cars a run for its money. The land on Front Street, known as the Zero Property, is next to the freeway and roughly four acres of city-owned property. Ford once cut a deal with Galpin Motors owner Burt Boeckmann to bring in a dealership, and the city was willing to toss in $12 million to sweeten the deal. When that deal fell through, Ford took the property off the market. It then began looking for a large retailer or hotel to sell to, but it also faced an uphill battle with the city council, which would have had to approve a zone change from automotive in order for a retailer to come in. Both Wal-Mart Stores Inc. and Sam’s Club Warehouse were said to be talking with the city and Ford representatives last fall but, according to John Clinard, a Ford spokesman, “We just didn’t get any suitable offers.” Maybe it was the price tag: Ford wants $15 million for the land. Regardless, it’s once again up in the air whether Ford will allow one of its own dealers to move in or offer the land to a competitor. The first option is tricky because apparently Boeckmann managed to get Ford to agree not to let a competing Ford dealer come in should his deal fall through. It’s not likely Ford is going to sell to a competitor, so the only other two options are to let the land sit, or ask for a zone change and try again in a year or two to sell to a non-automotive retailer when the market improves. Letting it sit is a bad idea: it’s estimated monthly maintenance of the land costs Ford about $35,000. Meanwhile, the city has sent a letter to Ford asking it to clean up the site and tear down the dilapidated building on the property. The city is also asking Ford to move quickly on its plans and, if the company hasn’t yet decided whether to bring in an auto dealer, it may sell its four acres to a competitor. Jacqueline Fox is politics reporter for the San Fernando Valley Business Journal. She can be reached by e-mail at [email protected].
