The West Hollywood City Council plans to enact the city's first business license tax, hours before voters go to the polls Tuesday to decide on a statewide initiative that would require the city to place such a tax on the ballot.
For weeks, a vote on the new tax, which would raise $1 million a year in much-needed revenue, had been delayed by a 2-2 deadlock. Councilwoman Babette Lang, the third and deciding vote, had been unable to attend meetings because of surgery in September to repair a broken hip.
The deadlock was finally broken Monday night when Lang, with the aid of a walker, attended the first council meeting since her injury. Lang cast the crucial vote to tentatively approve the new tax, despite widespread opposition from the audience. Mayor John Heilman and Councilwoman Abbe Land joined Lang in voting for the new tax. Councilmen Sal Guarriello and Paul Koretz voted against it. A final vote is expected Monday, just hours before the polls open. On Tuesday's ballot is Proposition 136, which, if passed, would require the council to put the tax proposal before the voters.
"This (tax) is something that is really needed, and we have to do it now," Lang said. "Besides, the tax is minimal. I don't believe it will really hurt the business community."
Lang's vote brought a round of boos from community and business leaders in the audience, many of whom attended the meeting with hats and signs carrying the slogan, "no new taxes."
"This is a slam job that is going to drive a tremendous spike into a wound between the city and the business community," said Thomas Crail, executive director of the West Hollywood Chamber of Commerce.
Mike Radcliffe, a member of the West Hollywood Community Alliance, said the new tax will "drive businesses out of the city at a time when most are already hurting because of the recession."
"At a time when the city needs new businesses, they are inflicting a tax," he added.
Several business leaders accused the city of trying to rush the tax through without adequate public debate.
City officials have been pushing for the new tax to cover a $1.5-million shortfall expected next year that would curtail capital improvement projects. The officials argue that the rates set by the new tax--ranging from 48 cents to $1.44 per $1,000 in gross receipts--would be the lowest of any city on the Westside.
"Any tax is controversial, particularly when the business community feels things could be better," said Assistant City Atty. Michael G. Colantuono. "This tax is a very small burden when compared to other cities on the Westside."
For example, a restaurant with annual sales of $565,000 would pay $270 in West Hollywood, while a restaurant with similar gross receipts would pay $564 in Culver City and $705 in Los Angeles, Santa Monica and Beverly Hills, city officials say.
At Monday's meeting, the council voted to charge lower rates to small businesses with less than 1,200 square feet of space. Under the business-license tax law, new businesses would not be charged in their first year of operation, then would be required to pay half the required amount the second year and would be taxed the full amount the third year of operation. The council dropped a plan to institute a 10% admission tax on nightclubs and decided to exempt telephone companies from the tax.
Heilman said the city had to act now to raise needed revenues to cover a the projected shortfall. If Proposition 136 is approved, the City Council would be forced to put the matter on the ballot.
"We have to do it now because (if Proposition 136 passes), we won't have much of an option," Heilman said.
In opposing the measure, Koretz said the tax sends the "wrong message to the business community. . . . People see it as a kick in the teeth from the council."