In most California cities, a business license is one of those necessities of getting any business up and running.
The problem, of course, has been in the details, and to some extent, the purpose.
Other cities implemented business-license programs long ago, primarily as a way to raise revenue. This taxing purpose quickly gets complicated and controversial, as Palo Alto found in 2009, when a poorly constructed business-license tax was put on the ballot by the City Council and was rejected by 59 percent of voters.
Earlier, in 2005, another proposal couldn't get any traction and never made it to the ballot.
When devising a business-license tax, the mechanics get very complicated and virtually every business sector and type has an argument as to why it is disproportionately and unfairly impacted.
For example, should the tax be based on revenues, employees or square footage? How would a venture-capital firm or a startup be treated, compared to a cafĂ© or an art gallery? Should home-based businesses be included? What about businesses not located in Palo Alto but transacting business or providing services here? The list of legitimate and debatable questions grows as one attempts to formulate an equitable scheme, and it quickly becomes a controversial mess.
In the 2009 election, we urged defeat of the tax because it was so poorly drafted and created a ridiculously complicated structure. And after its defeat we suggested the city staff bring back a much simpler proposal that could garner community support.
But as political bodies are prone to do after embarrassing defeats, the issue was put away for another day.
It now appears likely that the Council will move forward as early as next Tuesday with direction to city staff to take a very different, and we think better, approach: a straight-forward business registry instead of a business-license tax. One key advantage is that a registry, with no taxing element, does not require voter approval.
Council members Karen Holman, Pat Burt, Larry Klein and Marc Berman pressed for the new approach in a memo to their colleagues in February and with only one more vote needed to move forward, the simplified approach seems well on its way to adoption.
While some business owners will continue to resist any attempt to impose a licensing or registry system out of fear it could easily morph into a tax in the future, we think most will be easily persuaded of the value from the city finally knowing who is doing business here.
As things exist today, there is no dependable way to know such important information as the number and types of businesses, number of employees, from where and how employees commute, and the square footage of the offices, stores or facilities of each business. And equally important, there is no simple way of communicating with business owners.
Some have argued that a combination of utility-billing records and business property-tax statements could be used to generate a list of businesses, but that data would not only be a nightmare to sort through but also prone to significant error. Utility account holders are often the owners of buildings, not the businesses that occupy them.
A simple business registry, requiring all businesses with a physical location in the city to file an annual data report along with a small administrative fee, would provide essential information and inform many important planning issues.
Recent discussions about the number of employees working downtown, the density of workers in commercial offices and their commute and parking habits all suffered from the lack of hard data, leaving it to consultants, city staff and the City Council to merely speculate.
With the stakes of planning, zoning and transportation decisions so high, the Council should move forward in creating a simple online process for business registration and licensing.
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