Westminster City Council
SUBJECT
Title
Business License Administration and Application Process Update.
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publichearing
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From: Adolfo Ozaeta, Assistant City Manager
Requested by: Administration
Prepared by: Ryan Salz, Senior Management Analyst
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RECOMMENDED ACTION
Recommendation
Receive and file this report.
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BACKGROUND
On October 14, 2020, the Mayor and City Council approved the contracting of business license administration to HdL Companies (HdL) as part of a multi-faceted approach to restructure and optimize the Community Development Department (Attachment 1). HdL Companies is an industry leader of auditing, operations, and revenue solutions for public agencies. HdL partners with over 700 government agencies across the U.S. and has recovered more than $3 billion in revenue for their clients over the course of their 40-year history. The City had already been contracted with HdL for property and sales tax administration services for decades before the initiation of business license administration services. Eight other cities in Orange County also contract HdL to provide business licenses administration services, including Fountain Valley.
On April 12, 2021, HdL began administration of business licenses following months of collaboration between City and HdL staff to ensure a smooth transition for customers. The change provided the Westminster business community more modern options to apply for and renew business licenses, as described in the “How to Apply” Flyer (Attachment 2). The expanded application options were welcomed by many businesses, most notably out-of-town contractors and corporate businesses, that had been requesting more flexible application options for years prior to the implementation. Previously, applicants would be required to visit City Hall in-person to apply for a business license and could only renew in-person or via mail. In addition to those immediate process improvements that were enabled for customers following the change, HdL has continued to expand their offerings to benefit the Westminster community. In 2022, HdL contracted with a translation service to ensure they can successfully assist Vietnamese and Spanish speakers through the application process via telephone. This helpful feature is available to all applicants and was initiated at no additional cost to the City. The transition to HdL administration was especially simple for renewing businesses that had previously applied for the business licenses directly with the City. Those businesses were immediately enrolled in the current renewal process rather than needing to fill out another application.
The shift to HdL administration of business licenses increased staff productivity and granted City staff time for other essential duties; however, staff still has an essential role in the approval process. As depicted in Attachment 3, the business license approval process involves the Planning Division, Building Division, and Police Department to varying degrees depending on the business type. The Planning and Building Division are involved in most business license application reviews while the Police Department only evaluates certain business types, as designated in the Westminster Municipal Code. The application process applies only to new business license applications. Each year following the original issuance of the business license, a new application will not be required assuming the ownership and use remain the same. The vast majority of the approximately 4,800 active business licenses in the City go through the streamlined annual renewal process rather than the full application process.
On average, less than 40 new business licenses were processed on a monthly basis so far in 2024, excluding business licenses for out-of-town contractors doing work inside the City. Of those newly issued business licenses, on average approximately 15 were home-based businesses and 25 were brick and mortar businesses. Although the majority of business licenses are processed in a timely manner and without extensive review, there are unique situations where staff engagement with the applicant is necessary for approval. The standard Planning and Building Division approval process is completed within five business days, with an additional five business days if the business requires Police approval. Increased processing times can occur when incomplete or inconsistent information is provided to Planning staff, or when a Tenant Improvement is determined to be necessary by the Building Division due to a major change in operation or change in use. In the event that more information or clarification of the provided information is needed, staff quickly contacts the applicant to communicate what is needed to keep the application moving forward.
To support applicants that may be facing unforeseen obstacles during the business license application process, the City and HdL have adopted a solution to address these uncommon circumstances. In the past, applicants with outstanding application information would need to wait for approval from all applicable departments before receiving a business license. The City has received feedback from some applicants that proof of a business license is essential to obtain financing or aid a leasing process. In these cases, the City may now issue a “Disclaimer Business License” (Attachment 4) following the payment of the license tax but preceding the full departmental approvals. As shown in red font at the bottom of the license, a note will clearly state that “The business identified on this business license tax certificate has not completed the zoning clearance and/or tenant improvement requirement necessary to operate legally in the city. Upon completion of the applicable requirements, a new business license tax certificate shall be issued to this business.” This new option for applicants will ensure that the business license application process will not hinder a business’ ability to obtain financing or otherwise adequately prepare for operation of the business in the near future.
In addition to the various process improvements and increased productivity achieved by HdL business license administration, the partnership has generated a significant amount of revenue for the City. On June 8, 2022, the Mayor and City Council approved the activation of HdL’s discovery and compliance services (Attachment 5) to find businesses operating in the City without a license and make them pay their current license tax and up to three years in back taxes if applicable. The discovery and compliance services began in August 2022 following Council’s approval. HdL recently provided an update of the revenue generated for the City from these supplementary business license services, as shown in Attachment 6. As of April 30, 2024, HdL has recovered $319,180 from previously noncompliant businesses since August 2022. The cost to the City for administering these services was $87,717, resulting in a net revenue of $231,463 that will continue to increase. City staff would not have the necessary resources and capacity to implement this tax recovery service in-house. The implementation of HdL business license administration services has not only improved overall customer experiences, it has also contributed to substantial increases in revenue for the City.
FISCAL IMPACT
There is no fiscal impact associated with this item.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
HdL began administration of business licenses on April 12, 2021 as part of a multi-faceted approach to restructure and optimize the Community Development Department. The integration of HdL’s services helped to modernize the business license application customer experience, increase staff productivity, and increase City revenue through the activation of discovery and compliance services.
ATTACHMENTS
1. City Council October 14, 2020 Staff Report
2. “How to Apply” Flyer
3. Business License Approval Processes
4. Disclaimer Business License Template
5. City Council June 8, 2022 Staff Report
6. Business Tax Compliance Report
REVIEWED BY
Erin Backs, Finance Director
Christian Bettenhausen, City Attorney
Christine Cordon, City Manager