Public Comment Sessions Set for City Tax Report By JACQUELINE FOX Staff Reporter Business leaders across the Valley and citywide are expected to begin compiling their comments on the city’s report released Jan. 14 announcing recommended changes to its widely despised business tax system. Public hearings are scheduled for January 26 and Feb. 2 downtown, where city officials and members of the Business Tax Advisory Committee, established in 1999 under former Mayor Richard Riordan to study changes to the city’s antiquated tax system, will take comments about the report as they prepare a final draft of recommendations for changes to be handed off to Mayor James Hahn and the city council. From there, the council and the office of finance will ultimately have the last word over what changes to the tax codes are made, if any, and if those changes require any increases, as they now propose, and whether a ballot measure be put to the voters in 2005. While some components of the report are positive for many businesses it has already begun stirring up business owners who would be taxed at higher rates than others, should the current recommendations be approved. On the plus side, the report, which officials are calling a “work in progress,” recommends axing the gross receipts tax, which currently nets the city some $300 million annually, and instead tax businesses on their net income at a flat rate of $3.50 per $1,000. The flat rate plan also offers some relief for businesses who now pay what are called pass-through taxes on revenues earned by their subsidiaries and eliminates the 67 filing categories currently in place. But the $420,000, two-year study conducted by Fresno-based MBIA MuniServices Co. suggests the city tax businesses based on square footage of their operation, beginning at 2 cents a foot for some sectors, such as grocery stores, doctors and auto dealers, but going as high as 30 cents a square foot for others, such as commercial landlords, restaurants and apparel manufacturers. The latter element aims to keep officials from having to dip into the city’s coffers. But business owners and even some city officials have been asking for and expected some form of tax cuts as part of the recommendations. They say lowering taxes in one place and then raising them in another is not going to fly. “I equate it to rearranging all the deck chairs on the Titanic,” said City Councilwoman Wendy Greuel. Pass-through motion Anticipating final approval of the report to take several months, just prior to its release Greuel introduced a motion calling for the elimination of the pass- through taxes. “It (the report) has some good components, but I’m disappointed overall that it’s not reducing taxes at all,” Greuel said. “And we are particularly concerned about how long it might take before real reforms that make this city more business friendly are made.” BTAC Chairman Mel Kohn said he welcomed the criticisms of the MBIA report because they indicate that his committee will receive plenty of feedback, which he views as an essential next step in pushing for final changes. “I look at this report as a blueprint for what we do next,” said Kohn. “We are going to be asking for input from all of the various sectors out there. We want them to come to us with ideas and suggestions for changes and that includes looking into the issue of revenue neutrality and whether or not we can do something to lower the tax rates, not just shift the tax around.” Greuel agreed that input is crucial and said although the report will be heavily consulted, there will continue to be a strong emphasis on lowering taxes as the final draft is being compiled. “We’ve been pushing all along with ideas that may not be revenue neutral,” said Greuel. “I believe that if Los Angeles is business friendly, they won’t need to worry about the impact of lowering business taxes.” Ricky Gelb, owner of Gelb Enterprises, Inc. in Encino, operates a commercial real estate firm inside a 33,000-square-foot facility. He says, due to new taxes he’s just recently begun paying to cover community college renovations and a bond to fund county trauma centers, he’s looking at a current annual tax liability of close to $70,000. Tax cuts sought Like Greuel, he says tax cuts, not revenue neutrality mechanisms need to be considered if the city is serious about retaining businesses. “Making a change revenue neutral is not going to offer any kind of an incentive for people to come here,” said Gelb. In the meantime, BTAC’s five-year mission is coming to an end in June. Kohn said he and others have already begun to inquire about forming a replacement commission to oversee preparation of the final draft report.
