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HomeMy WebLinkAboutAgenda Item - 2024-10-15 - Number 12.1 - Business License Fee Structure 12.1 V o� 0 E 0 COUNCIL REPORT � — GREGO\--" Subject: Business License Fee Structure Meeting Date: October 15, 2024 Staff Member: Quin Brunner, Management Analyst Report Date: October 4, 2024 Department: City Manager's Office Action Required Advisory Board/Commission Recommendation ❑ Motion ❑ Approval ❑ Public Hearing ❑ Denial ❑ Ordinance ❑ None Forwarded ❑ Resolution , ❑X Not Applicable ❑X Information Only Comments: ❑ Council Direction ❑ Consent Agenda Staff Recommendation: NA Recommended Language for Motion: NA Project/ Issue Relates To: 2024 Council Initiative: Develop a funding strategy for a longer- term contract with the Chamber of Commerce to implement a portion of the 2022 Economic Development Strategy. Evaluate the possibility of the business license fee as funding option. Issue before Council (Highlight Policy Question): ❑X Council Goals/Priorities ❑Adopted Master Plan(s) ❑Not Applicable EXECUTIVE SUMMARY The business license fee is a viable funding option for the Chamber of Commerce contract. Staff recommends a base fee increase ranging from $36-$61 for small businesses (20 or fewer employees) and a base fee increase of$90 for larger businesses (21+ employees), along with structural changes. Respect cv el'erce. Trust. Se-iv 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 2 BUSINESS LICENSE BACKGROUND Purpose and Scope of the Business License Program. The City administers a business license program to ensure compliance with local land use regulations. It is primarily a function of the Planning Department, although it also initiates review by the Fire Marshall. The City's business license program is not connected to other state or industry licensing requirements for businesses (Food Handler's License, Liquor License, etc.) There are 2007 businesses with active licenses operating in Lake Oswego. LOC 20.02.025 requires that everyone conducting business within city limits obtain a business license unless specifically exempted by state law (Real Estate Agents, Insurance Agents) or in possession of a Metro Contractor's Business License. Included in the City's licensing requirement are individuals conducting business out of their home, short-term rental property owners, non- profits based in Lake Oswego, and businesses based outside of Lake Oswego that operate within the city. Purpose and Structure of Business License Fees. Business license applicants are charged a fee. The primary purpose of this fee is to cover the cost of administering the program. The secondary purpose of this fee is to provide operating dollars for the Planning Department. The current fee structure is linked to the number of people employed by the applicant: Table 1. Current Business License Fee Structure (FY25) Renewal New/Late All Nonprofits $0 $0 1-3 Employees $64 $80 4-10 Employees $84 $110 11+ Employees $110 $150 Non-Compliance Fee $500 Business License Cost, Revenue, and Distribution In FY24, the business license program cost approximately$125,000 to administer. This cost estimate includes staff time, software, vendor fees, and administrative supplies. In FY24, the business license program generated $167,587 in revenue. Of the total, approximately $18,700 was generated by the premium charged to new/late business license applicants and $0 was generated from enforcement action against non-compliant businesses. The City received an additional $34,236 in revenue from Metro as a part of Metro's regional Contractor's Business License program, which allows contractors and landscapers to conduct business in all Metro cities. Metro proportionally distributes revenue from this program to all participating cities. Respect. c . �!e Trust - , 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 3 All business license program revenue is distributed to the Planning Department, which then "pays" the Finance Department for the costs they incur as the primary program administrators. All told, this program covers the cost of administering the licenses and provides approximately $75,000 in operating support to the Planning Department. This revenue source is built into the Planning Department's budget for the 2023-25 biennium and cannot be reallocated without impact. CHAMBER CONTRACT BACKGROUND In December 2022, the City Council entered into a contract with the Chamber of Commerce to carry out elements of the City's new Economic Development Strategy and Resource Plan (Attachments 1 and 2). The term of the contract is one year, with two annual options to renew through December 2025. The first year of the contract was funded with $50,000 of one-time funds from the American Rescue Plan Act. At the beginning of 2024, the City Council directed staff to "develop a funding strategy for a longer-term contract with the Chamber of Commerce to implement a portion of the 2022 Economic Development Strategy. Evaluate the possibility of the business license fee as funding option." DISCUSSION Funding the Chamber of Commerce contract with revenue from the business license fee requires generating an additional $50,000 per year (plus annual adjustments to stay ahead of inflation). This is a viable option only if it remains in service of the City Council's strategic goal to "support business investment and job creation in Lake Oswego." Given that the business license fees have remained fixed since 2013, the Council has an opportunity to adjust our fee schedule with the regional conditions and ensure an equitable distribution of costs based on business size. Revenue Generating Options. In recalibrating our fee structure, there are five dials we can adjust: • Base rate—the across-the-board fee that all businesses have to pay for a license; adding $5 to our base rate generates $10,000. • Incremental cost per employee—the variable fee rate based on business size; this is how we ensure equitable distribution of cost based on business size; ranges help avoid undercounting of employees. • Premiums for businesses based outside of the City—some cities charge a premium to businesses based outside of City limits; 251 of our licensed businesses fall into this category; a 5% premium generates $3,000. o This is likely the business type least likely to apply for a business license. There is likely a threshold at which this premium would drive additional non-compliance. • Premiums or exemption for certain business types—the City currently exempts non- profit organizations from the business license fee, while still requiring they hold a business license; some cities charge premiums to specific business types; unless we are Respect. Excellence. Trust. Service 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 4 introducing additional review to specific business types, this premium would add complexity while delivering marginal financial returns. • Enforcement—beyond the scope of this review; there are approximately 3,224 business based in Lake Oswego (as of 2022) with an unknown number of businesses based outside the city also operating; only 2007 are licensed; systematic enforcement action could drive additional revenue but would likely be off-set by the cost of increased enforcement; a change in enforcement practices should be evaluated from a program efficacy perspective, not as a prospective revenue source. Peer Community Reference Points A survey of business license programs in peer communities revealed no standard structure or pattern in rate structure. Two communities, West Linn and Oregon City, charge higher licensing fees to businesses based outside city limits. Gresham and Beaverton both have incremental fees, charging businesses a premium ($3, $12) for each employee above a threshold (2, 4). Tigard's business license fee supports their Police Department's Commercial Crimes unit. Salem (not depicted in Figure 1) sets fees based on business type, while Portland (also excluded from Figure 1) levies a 2.6%tax on net business income. Business License Cost per Employee $1,600 $1,400 —Tigard o $1,200 B:: 7tyoutside O $1,000 —Oregon City-Inside • $800 —Gresham c $600 ' Tualatin • $400 West Linn-Outside $200 — West Linn-Inside $0 —Lake Oswego-Proposed 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 -Lake Oswego Current Number of Employees Figure 1. Lake Oswego's business license fee is the lowest in the Portland Metro region. RECOMMENDATION To generate enough revenue to fully fund the Chamber contract, staff recommend the rate structure outlined in Table 2 on the next page. This change is projected to generate an additional $60,000 per year. Respect. Excellence. Trust. Service 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 5 Table 2. Proposed Business License Fee Structure (FY26) Flat Fee % of BLs All Nonprofits $0 1.7% 1-3 Employees $100 62.2% _ 4-10 Employees $125 20.6% _ 11-20 Employees $150 8.8% _ 21+ Employees $200 6.7% New/Late Applicants + $50 Non-Compliance Fee $500 Implementation If Council agrees with this recommendation, staff will include these proposed fees in the Master Fees and Charges resolution that will come to Council for consideration in November and December. If approved, these revised fees would take effect in July 2025. Staff proposes continued communication with the Chamber, light public outreach, and notifying business license holders of this change at the time of their license renewal. Staff also recommends that the City examine business license fees more often than once every ten or eleven years. If Council agrees, staff will regularly asses and adjust the rate structure to keep pace with inflationary pressures on both the Chamber contract rate and business license program administration costs, in conjunction with the annual Master Fees and Charges recommendations. FISCAL IMPACT The projected fiscal impact of this proposal is an increase of$60,000 in annual revenue. This would enable the City to fund the Chamber of Commerce contract without additional budget impacts. ATTACHMENTS 1. Economic Development Strategy and Resource Plan 2. Scope of Work for Chamber Contract Respect. c . �!e Trust -—1._. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY ATTACHMENT 1 (o* COMMUNITY DEVELOPMENT Or ORLD ECONOMIC DEVELOPMENT STRATEGY AND RESOURCE PLAN December 2022 1. Business Information Collection and Dissemination. The City can support and encourage business investment and job creation by staying informed on the needs of existing and prospective local businesses and other firms with a local presence.This includes maintaining a business inventory, including commercial vacancies, periodically interviewing property managers and business owners, and monitoring market conditions and trends. Strategy: Collect and disseminate information on existing and prospective businesses and business locations to support business investment and job creation in Lake Oswego: a. Conduct biennial business community surveys (Chamber) b. Maintain list of businesses in Lake Oswego (Chamber) c. Annual business visits/walk and interviews (Chamber) d. Periodically update the City's Retail and Office Market Studies (City) e. Information sharing between City and Chamber(City-Licenses; Chamber-above data) f. Provide resources to assist businesses interested in locating, expanding or remaining in the city (Chamber-Marketing; City-Permitting) Resources: The City's role will be accomplished with existing resources in Community Development and Finance. Initial support for the Chamber's work will be from a $50,000 American Rescue Plan Act Nonprofit Grant by the City.The Retail and Office Market Studies are prepared by a consultant. Metrics: • Business Investment o Building permit valuation, new business licenses, and commercial vacancy rates o Assessed value of real property including appreciation in the urban renewal districts o Retail spending (multiplier)from community events • Job Creation o Business license data o Data from the US Economic Census (5-year cycle) Reporting: Quarterly meetings between Chamber and City to discuss work plan progress. An annual report to include: o An analysis of the specific steps taken to perform the tasks discussed above; o A summary report of businesses that received direct assistance from the Chamber for business retention or expansion.This report should include the total number of businesses that contacted the Chamber or that were contacted by the Chamber; o The number of businesses that received technical or educational assistance either directly from the Chamber or through an agency with which the Chamber has a partnership; Respect. I Trust. 1 503-635-0215 380 A AVENUE PO Box 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 2 of 4 o A summary report of prospective businesses the Chamber talked with about relocating or opening in Lake Oswego; and o A report on the variety of specific promotion activities executed for the purpose of attracting visitors to Lake Oswego, especially to attend significant community events. 2. Direct Business Assistance. City staff will assist businesses in accessing city services in the most efficient and helpful way possible while also practicing continuous process improvement with limited resources. Whether issuing permits for building tenant improvements, managing business access during road construction, assisting people at the library as they apply for employment, or managing the Farmer's Market, city employees play an important role in creating a business-friendly environment. Although Lake Oswego does not have a single point-of-contact, an economic development specialist or manager,for businesses, city staff are responsive and provide high-quality services consistent with the City's Mission and Values of, Respect, Excellence,Trust, and Service. Because the City does not have inhouse expertise or capacity to provide specialized business assistance, such as connecting business owners to grants and loans offered by county, state, and federal agencies,workforce training, and assistance for dislocated workers, we partner with other entities who have this expertise. Strategy: Provide strategic business assistance including education and training to support business investment and job creation in Lake Oswego: a. Host trainings and workshops to help businesses thrive (Chamber) b. Provide business counseling,technical assistance, business education and business plan review services to small businesses. Develop and maintain relationships with agencies and governments that provide aforementioned services to businesses (Chamber) c. Maintain and disseminate information about available grants and other funding sources in coordination with other agencies, government and nonprofits (Chamber-lead; City-support) Resources:The City's role will be accomplished with existing resources in Community Development and the City Manager's Office. Initial support for the Chamber's work will be$50,000 in American Rescue Plan Act funds. Reporting/Metrics: Same as under Strategy#1. 3. Coordination and Networking.Just as private businesses must network to stay informed and remain competitive, local governments need to engage with other agencies in order to best serve the public, including the business community.This was particularly important during COVID-19, as City staff attended numerous county, regional, and state economic development meetings to secure financial resources and assist the business community. Current partners and resources include Greater Portland, Inc., Business Oregon, and Clackamas County, among others. Strategy: Coordinate with other governments and nongovernmental organizations to support business investment and job creation in Lake Oswego. a. The City will continue to interact with Greater Portland, Inc., and other governments, including counties,the State of Oregon, and federal agencies. Respect• tx•::el c:r . . Trust. Se vice. 503-635-0215 380 A AVENUE PO Box 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 3 of 4 b. The Chamber will take the lead on business-to-business networking and education.The Chamber should also continue to coordinate with the City when they apply for governmental grants. c. The City should continue to designate high-level management who can attend Chamber of Commerce and Lake Grove Business Association meetings to answer questions and provide updates on City projects and programs. Resources:The City's role will be accomplished with existing resources in the City Manager's Office. Reporting/Metrics: Same as under Strategy#1. 4. Permitting.The City of Lake Oswego is known as having a friendly and customer-service oriented staff but an overly complicated development code and high fees.The Planning Department annually prepares amendments to the development code to comply with state mandates, improve the code's clarity and predictability, and to address issues identified by staff and the public in applying the code.The City also reviews its fees annually and typically increases them based on a regional cost- of-living index. However,the permit process can still be cumbersome,time-consuming, and in some cases cost-prohibitive, particularly for small tenant improvements and other commercial projects that require land use review.Typical impediments to businesses include: o Zoning/Use restrictions. For example, a bakery owner that wanted to open in the Industrial Park zone but could not because the code did not allow bakeries (code has been updated); o Parking requirements can be an impediment where a change of use triggers additional parking,though (effective January 1, 2023)the State of Oregon's Climate-Friendly and Equitable Communities Rules reduced or repealed some requirements; o Lack of public parking in Lake Grove, as compared to Downtown Lake Oswego; o Development standards that are complex and frequently require design variances, particularly in the Downtown, and lack of flexibility in some zones for granting variances; o Time-costs associated with development review and appeals; o Fees and system development charges. Strategy: Conduct a comprehensive review/audit of the development code and fee schedule as they apply to businesses, and remove impediments to business investment and job creation while maintaining high-quality design and livability. Resources:This initiative would take at least one year to complete and will require additional resources in the Planning Department, possibly including consultant services. Allow$100,000 for a regulatory review and initial recommendations/concepts. Reporting/Metrics: Business investment and job creation. Establish metrics with community input as part of the Audit. 5. Planning and Redevelopment.The City can support local business investment and job creation by making sure that its various land use and urban renewal master plans are current and relevant. For example,the East End Urban Redevelopment Plan was adopted in the 1986, has been updated several times, and has reached its debt limit while several planned projects have not been completed.The Foothills District Framework Plan, adopted in 2011,will need to be updated if the Respect. excel t:rc Trust. .... 503-635-0215 380 A AVENUE PO Box 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 4 of 4 Tryon Creek Wastewater Treatment Plant(TCWTP) is replaced with a new facility.The Lake Grove Village Center(LGVC) Plan and LGVC Urban Renewal Plan should also be reviewed and updated as needed due to completion of the Boones Ferry Road Project and lack of public parking. Strategy: Review and update as needed: a. The East End Urban Renewal District Plan—Update or retire the plan and district. b. Foothills Framework Plan—Revise or replace the Plan and Foothills District Overlay (implementing regulations)following approval of a plan for replacing the TCWTP. c. Southwest Employment Area Plan—Review and update the Plan, including its project list and Southwest Overlay District, as needed. d. Lake Grove Village Center Urban Renewal Plan—Review and update the Plan as needed. Review and update the LGVC Parking Management Plan as needed, and develop a funding strategy for public parking in Lake Grove. Resources:This strategy requires several years to complete and additional resources on the order of $100,000-$300,000 per year, depending on Council priorities and timing.The work would be led by Community Development and the City Manager's Office (Redevelopment), with consultant support. Reporting/Metrics:TBD -Goals and metrics with vary by project. 6. Programming and Promotions. Multiple civic organizations produce cultural events and programming throughout the year that are important to Lake Oswego's quality of life and positively impact the local economy.These include the City, Chamber, Lake Oswego School District, Heritage Council, Lake Oswego Preservation Society,Arts Council of Lake Oswego, and Lakewood Center for the Arts, among others. While each organization is responsible for its own programming, these activities can be coordinated and cross-marketed to maximize benefits to the community including local businesses. Strategy: Coordinate and cross-promote local events to support local business. a. Coordinate an annual City and Chamber events and promotions (Chamber and City) b. Market local businesses to Lake Oswego community and visitors (Chamber) c. Leverage and cross-promote business and community events, including activities hosted by groups that receive grants from the City. Provide accurate and timely information to visitors about businesses and upcoming events (Chamber) d. Provide district-specific engagement with businesses in Lake Grove, Downtown, Kruse, and other areas(Chamber) Resources:The City's role will be accomplished with existing resources in the City Manager's Office with support from Parks and Recreation and Library. Reporting/Metrics: Same as under Strategy#1. Prepared December 2022 Respect• Excel cr Trust. Se!vice. 503-635-0215 380 A AVENUE PO Box 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY ATTACHMENT 2 Exhibit A:Scope of Work The partnership between the City of Lake Oswego (the City) and the Lake Oswego Chamber of Commerce (Chamber) aims to support ongoing tourism and economic development in Lake Oswego. The goal of the partnership is to strengthen the Lake Oswego business community through community partnerships,education and training, and marketing to business and visitor prospects. As a contracted service with the City of Lake Oswego,the Chamber will be implementing the scope of work outlined below in coordination with the City: Task 1. Business information collection and dissemination • Conduct biennial business community surveys to inform City's economic development strategy. • Maintain list of businesses in Lake Oswego, including non-Chamber members. • Host annual business walk and interviews. • Facilitate information sharing between City and Chamber. • Provide resources to assist businesses interested in locating, expanding, or remaining in the city limits. Task 2. Business education and training • Conduct trainings and workshops hosted or sponsored by Chamber. • Provide business counseling,technical assistance, business education, and business plan review services to small businesses. • Develop and maintain relationships with agencies and governments that provide aforementioned services to businesses. • Maintain and disseminate information about available grants and other funding sources in coordination with other agencies,government, and nonprofits. Task 3. Business outreach and engagement (includes but is not limited to visitor-serving businesses) • Market local businesses to Lake Oswego community and visitors. • Leverage and cross-promote business and community events, including activities hosted by groups that receive grants from the City. • Provide accurate and timely information to visitors about businesses and upcoming events. • Provide district-specific engagement with businesses in Lake Grove, Downtown, Kruse, and other areas. Reporting Requirements: • Quarterly meetings between Chamber and City to discuss work plan progress • An annual report that includes: o An analysis of the specific steps taken to perform the tasks discussed above; and o A summary report of businesses that received direct assistance from the Chamber for business retention or expansion. This report should include: • The total number of businesses that contacted the Chamber or that were contacted by the Chamber; • The number of businesses that received technical or educational assistance either directly from the Chamber or through an agency with which the Chamber has a partnership; • Summary report of prospective businesses the Chamber talked with about relocating or opening in Lake Oswego; and • Report on the variety of specific promotion activities executed for the purpose of attracting visitors to Lake Oswego, especially to attend significant community events. o Annual report may be a part of a presentation to City Council. Timeline& Budget This scope of work and contract serves a three-year pilot program between the Chamber and the City. The City and Chamber will have a one-year contract.The City has the option of renewing annually in December. To begin this effort for Year One,the City of Lake Oswego will pay the Chamber$35,000 upfront for provision of services, staffing, and facilitation of communication for fiscal quarter 1. For the remainder of Year One, an additional $5,000 will be paid at the end of each fiscal quarters 2, 3 and 4,following the completion of work and acceptance of quarterly work after the quarterly meetings between City and Chamber. Pay schedule—Year One: • Contract execution & beginning of Quarter 1 payment (December 2022)-$35,000 • Quarter 2 report& payment(June)-$5,000 • Quarter 3 report& payment (September)-$5,000 • Quarter 4 report& payment(December 2023) -$5,000 If the City elects to exercise the option for contract renewal,the contract budget will be$50,000 annually, indexed for inflation, paid equal distribution at the end of each fiscal quarter. Renewed contract pay schedule: • Quarter 1 report& payment(March) -$12,500 • Quarter 2 report& payment(June)-$12,500 • Quarter 3 report& payment (September) -$12,500 • Quarter 4 report& payment (December)-$12,500 If scope of work changes or expands, budget and contract will be reviewed by City of Lake Oswego and the Lake Oswego Chamber of Commerce.