The Morro Bay City Council voted Tuesday to recommend amnesty in the form of an ordinance change that will save business owners in violation of business licensing policies from having to pay penalties.
In a 4-0 vote, the council recommended allowing a 90-day grace period to businesses so they can meet licensing requirements.
And if they do, any penalties would be waived, though business owners would still be required to pay back taxes on business licenses.
City officials estimate that Morro Bay has lost about $200,000 in revenue per year in business license taxes — about 2 percent of the city’s general fund.
An audit conducted for the council expects the city to recoup about $1 million in unpaid taxes and penalties, Buckingham said. With a penalty waiver, that amount could drop to about $700,000.
Mayor Jamie Irons recused himself because of potential conflicts of interest as a property manager facing penalties.
The council also voted 5-0, with Irons participating in the second vote, to recommend charging low-income business owners such as artists and craftsmakers a nominal fee.
For example, City Manager David Buckingham said a business that shows gross receipts of $2,500 or less could be eligible for a $10-per-year business license tax. The council would have to make the decision on the specific tax.
Both recommendations will need to be passed by ordinance change in the next couple of weeks before a grace period commences, which could take place at the council’s Nov. 12 meeting.
Approval at that meeting would create a 90-day amnesty grace period ending March 12.
The business community in Morro Bay has been contacted in recent weeks with letters and calls from Municipal Auditing Services, hired by the council in July to conduct a compliance audit.
Businesses have complained that the city’s licensing code is confusing, the auditing firm was “rude” and the city’s communications on the issue were insufficient.
But city staff, including Buckingham, have listened to the audio of more than 20 phone calls between Municipal Auditing Services and business in Morro Bay and found no instances of rude treatment or inappropriate conduct.
The council vowed to work to clarify the code and ensure better communications on the licensing developments.
“Good government requires compliance, and we’d let our policy go for so long it was a shock to the system,” Councilwoman Christine Johnson said. “But I wish we’d started out (in July) with amnesty.”
Buckingham said as many as 1,000 businesses may not be in compliance — most of them out-of-town vendors who operate on consignment or offer services from an out-of-area home base.
“The services being provided by MAS will help us to ensure all businesses are ‘paying their fair share,’” Buckingham wrote in an Oct. 10 letter to all business license holders, which also was publicized through the Morro Bay Chamber of Commerce.
Business licenses vary in price depending on how many employees a business has — starting at $136 per year for a sole owner operated company and adding $30 annually per additional employee.
Buckingham wrote business license enforcement was one of the “less pleasant, but important roles of local government.”
About 10 speakers addressed the issue in public comment at Tuesday’s meeting, including members of the Chamber of Commerce who thanked the council for listening to their concerns.
“Clearly you have heard the voice of local businesses,” chamber President Jennifer Redman said. “You have heard voices, and you are responding.”
Mary VanZee, owner of Treasures Antique Mall in Morro Bay, said she works with about 75 vendors and consignors who pay fees for renting space in her store and processing the sales.
“A lot of people won’t remain in my store if they have to pay a business license fee,” VanZee said. “I’d have to close the doors of my store, and people would have to go to SLO or elsewhere to shop for the same items.”
VanZee recommended a $20 per year fee for consignments.
The council said it will be reviewing its code and working to fairly charge businesses appropriately with stakeholder input.