City Overwhelmed with Public Concern Over Business License Code

South Pasadena’s Finance Director David Batt and departing Interim City Manager Elaine Aguilar presided Monday evening over a City-sponsored public hearing meant, in Aguilar’s words, “to address and note citizens’ concerns regarding the City’s existing Business License Code (BLC).”

Held in the Council Chambers at City Hall, the event was precipitated by widespread community uproar after the City notified residents, most of whom were unaccustomed to obtaining a business license, that they have until December 31 to comply with the license requirement.

Many who received letters are freelance workers or contractors, including some folks who make little to no money annually. Many of these people are longtime South Pasadena citizens who have never had to obtain a business license in their life.

“There are councilmembers here who will hear your concerns,” said Aguilar, “and I ask you to remain a part of this process as we go forward in updating our current ordinance.

“I want to start by saying that this isn’t new,” she continued. “The City did not recently adopt a new business license ordinance and is [just now] implementing it. The City started six months ago, and really, the plan for updating the business license code began over a year ago.”

This explanation didn’t satisfy audience members who were skeptical of the timing of the letter in light of the $4.8M verdict that just weeks ago came down against the City of South Pasadena (Officer Timothy Green vs. City of South Pasadena).

Terry Cooper, a professor at the USC Price School of Public Policy, who has not done any business in South Pasadena, had a simple request for Aguilar and Batt when he stepped to the podium. “What do I need to do to prove I don’t need to pay?” he asked, before being directed to the back of the room where paperwork was available.

In an email to the Review sent prior to Monday’s meeting, Cooper said that “In my 42 years as a professor, I have NEVER heard that any of my colleagues needed a business license for the city in which they lived. This is clearly an attempt to generate revenue for the city that has gone wildly astray!”

“I may have responded to some emails related to this book, but the vast majority of the work was done in my office on campus,” Cooper continued in the email. Many who spoke Monday shared Cooper’s suspicion that the BLC maneuver was a money-grab.

Resident Kay Moradian captured the room’s frustration when she explained that she makes about $14 on book royalties annually. “Most of the time, I end up giving away my books rather than selling them,” said Moradian, before pausing and asking increduously, “Are you going to force me to pay $100?”

Moradian didn’t stick around for an answer.

Aguilar explained that the City obtained addresses and limited information about residents from a body called the Franchise Tax Board (FTB). “All cities,” she said, “have a reciprocal arrangement of contract agreement with the FTB. It’s routine, I’ve worked for five cities – all five have required a business license – for cities to cross reference people they know that have applied for a business license versus the FTB information.

“Don’t worry, they don’t send us your detailed tax forms. They just send us anybody with a 1099 because they are an independent consultant, or maybe they deducted some sort of home business expense on their taxes. The FTB sends just your name and address. We don’t get your details, we don’t know your tax information.”

However, the interim city manager continued, if the city receives an indication from and individual’s tax returns that they might be operating a business, [FTB] forwards that list to the City, which cross references it. If the City sees that there is an address and a name that it doesn’t have a business license for, it sends out the letter.

“I’ve received some phone calls afraid that we were looking at detailed business income tax returns,” said Aguilar. “We were not.

One resident said he “was surprised with the approach of this process, that usually South Pas has been pretty good about letting us know ahead of time. I called people a number of times and never heard back, and as you can imagine, that didn’t feel very nice.”

During the course of the meeting, Aguilar announced that the City would be refunding all the money to those who came early and paid retroactively the last two years of taxes.

Batt explained that the City gets roughly $400,000 from business licenses a year. After this enforcement, he said, the City may make up $450,000.

“This is not a money grab,” Batt said, “but an attempt to make the BLC fairer and easier to administer.”

The Finance Director was confident that many would find that they do not need to pay. “Basically 80 percent or more of people who received FTB letters probably won’t need a license,” he said.

Batt added that statutory exemptions would be granted to owners of nonprofits, honorably discharged service people who make products from home, domestic servants, dress makers, and music teachers, assuming they don’t have employees.

Resident Sharron Cavanagh is a freelance photojournalist who some years barely breaks even. Her lifestyle has its difficulties, especially because photojournalism for most doesn’t pay well. She was so upset by the letter that she said she has considered leaving South Pasadena entirely. On the neighborhood messaging app NextDoor, similar declarations from other residents prove she is not alone. 

“The staff is just really backlogged and the counter is swamped,” replied the Finance Director.

The meeting was attended by Mayor Pro Tem Dr. Richard Schneider, Councilwoman Diana Mahmud, Councilwoman Dr. Marina Khubesrian, and Councilman Bob Joe.