Tulare seeks fix for ‘voluntary’ business tax

Photo by Rigo Moran

Tulare Downtown Business Association grapples with tax collection difficulties from businesses due to lack of enforcement system, city considers solutions

TULARE – An annual report from the Tulare Downtown Business Association has indicated ongoing difficulties when it comes to collecting taxes levied against businesses in the downtown area, which are intended to fund the maintenance of public parking lots.

The report indicates that the cost of maintaining downtown’s parking lots is not fully borne by the taxes that these businesses pay, leaving the Association no choice but to find other creative mechanisms to fund repairs. Among the most significant issues with this comes from the lack of an enforcement process to ensure that businesses pay the taxes. City Manager Marc Mondell explained to Tulare City Council on June 8 that the tax is essentially voluntary.

“In terms of a fix, I don’t know that we will ever have a perfect, precise fix,” Mondell said. “The biggest problem with the existing taxing districts is that it is an assessment on a business, not on a property, so that creates a problem. It is almost like a voluntary program.”

Over the last two fiscal years, the city has issued letters informing business owners of the obligation and has found that many are willing to pay the tax once they understand what services it provides. The assessments can range from a few hundred dollars a year to several thousand depending on the type, size and location of the business.

“The assessments that come in cover more things than just parking,” Mondell said.

However, Mondell pointed out that while some businesses pay the tax, others don’t. The lack of an enforcement process leaves the city with few options when a business that should pay the tax declines to do so.

To help in addressing this issue, the city council recently authorized the hiring of a consulting firm that is in the process of reevaluating the special tax district in the downtown region. The firm is expected to present the council with some options for rewording the current ordinance to ensure a more universal application to businesses. The process is still several months from being completed.

“This is a decades-old problem,” Mondell said in an interview with The Sun-Gazette. “The business owners are not obligated to pay it. The true test of obligation is ‘What are the teeth?’; so, we could say ‘You are obligated to pay this,’ and businesses would say, ‘Am I morally obligated, am I ethically obligated, or am I legally obligated?’ And the answer is really none of the above.”

The current ordinance allows the city’s finance department to label a business as a nuisance if it is determined they should be paying the tax but don’t; however, Mondell said the nuisance abatement process is neither efficient or effective in dealing with the problem and likely has never been used in Tulare.

Nuisance abatement is typically used when, for example, a vacant building is being used by vagrants or as a place where drugs and prostitution are happening and the property owner is unable or unwilling to properly secure the building. The process can result in buildings being torn down, which – as Mondell pointed out – is not an appropriate way to communicate with businesses that are operating.

He said one option being explored is to change the ordinance to allow the city to place a lien – which is a legal claim against properties or assets that are used as collateral to satisfy a debt – on businesses that fail to pay the tax, which would provide the city with a more efficient and effective option to ensure compliance.

The way the tax is computed is fairly complex and is determined in part by the location of the business. The ordinance establishes the Parking and Business Improvement region in which the tax funds are broken into two regions: Zone A and Zone B. These zones are further broken down into two Benefit Zones A and B, which have different rules applied for how the tax is computed.

Mondell said that a goal of the process to make changes to the ordinance is identifying ways to simplify the assessment process. No firm decisions have been made yet to identify how the assessment zones will be altered, but the process could result in the abandonment of the current zones, it could result in one, larger zone or even several smaller zones.

As Tulare continues to invest in the downtown corridor and attract more businesses as well as the nearing completion of Zumwalt Park, parking needs could change. Mondell said that the city has sufficient parking for the immediate future, but the funding for things like parking lot lighting maintenance and striping could become a factor.

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