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Home My WebLink About10/04/1990 BAKERSFIELD Kevin McDermott, Chair Patricia DeMond Ken Peterson Staff: John Stinson AGENDA BUDGET AND FINANCE COMMITTEE Thursday, October 4, 1990 12:00 Noon City Manager's Conference Room 1. Business License 2. CDBG Amendment 3. Booking Fees and Property Tax Collection Assessment Impact to Budget 4. Bakersfield Courthouse/Gannon MEMORANDUM OCTOBER 4, 1990 TO: BUDGET AND FINANCE COMMITTEE FROM: GREGORY J. KLIMKO, FINANCE DIRECT SUBJECT: BUSINESS LICENSE RATE ANALYSIS Attached is a memorandum from Bill Descary to myself dated August 10, 1990 which was provided to you at our previous meeting. Bill has done additional investi- gation in the area of Business License and the information obtained is provided in the memorandum to me dated October 3, 1990 which is also 'attached. In summary'there does not appear to be any consistent basis or method of estab- lishing rates for business license taxes in California or nationwide. Our rec- ommendations of changing the current rate structure are included in Bill's memorandum of October 3, 1990 with some details yet to be finalized. Further, the question regarding a maximum dollar amount was proposed. Since the ordinance establishing the business license tax specifies that this is a revenue raising measure, setting a maximum dollar tax amount (i.e. $5,000 or $10,000) would seem to contradict this intent. The efforts, via referendum, to limit the City's ability to raise existing taxes or implement new taxes may restrict the City Council's ability to amend our current Business Tax Ordinance. The establishment of maximum dollar tax may preclude the City from raising the maxi- mum limit once the effect of inflation has taken place. Any maximum dollar tax would be arbitrary at any particular point in time. If the establishment of a maximum tax is to facilitate annexations and to encourage economic development, I believe the same can more nearly be accomplished by changing the rate and rate base per staff's proposal. An alternative method of encouraging annexations and economic development may be by establishing a method of exempting existing busi- nesses or new businesses in areas to be .annexed from the tax. i request the Committee give full consideration to our 'proposal and keep in mind that this issue may be moot if Proposition 136 passes in November of this year. Thank you for your considerati-on. We are available to assist you at any time. krc GJKlO0490 cc': City Council Mayor .... Dale 'Hawley CITY OF BAKERSFIELD COMPARATIVE RATE SCHEDULE BUSINESS LICENSE TAX CLASS DESCRIPTION CURRENT(I) PROPOSED(2) B Manufacturing: $ 1,000,000 $ 278 $ 300 9,000,000 1,530 1,800 90,000,000 15,300 9,000 100,000,000 17,108 11,100 400,000,000 68,000 4,000 $500,000,000 $85,108 $15,100 C Retail: $ 1,000,000 $ 244 $ 300 9,000,000 1,440 1,800 90,000,000 14,400 9,000 100,000,000 16,084 11,100 400,000,000 64,000 4,000 $500,000,000 $80,084 $15,100 D Wholesale: $ 1,000,000 $ 210 $ 300 9,000,000 1,350 1,800 90,000,000 13,500. 9,000 100,000,000 15,060 11,100 400,000,000 60,000 4,000 $500,000,000 $75,060 $15,100 (1)Rates in effect as of 10/1/90 (2)Rates .as follows: $1-1,000,000 : $ .30 per 1,000 1',000,001-10,000,000 = $ .20 per 1,000 10,000,001-100,000,000 = $ .10 per 1,000 100,000,001 and more~ : $ ..01 per 1,000 krc GJK1004901 OCTOBER 3, 1990 TO: GREGORY J. KLIMKO, FINANCE DIRECTOR FROM' BILL DESCARY, TREASURER ~ SUBJECT: BUS~NESS LICENSE RATE CHANGE ANALYSIS The Budget and Finance Committee requested additional detail concerning the dol- lar amounts of increased or decreased tax that would be paid by businesses under a changed rate structure. This information is presented in Exhibit A. The analysis previously presented concerned business license ordinances of vari- ous California cities. It was not apparent that the ordinances had been amended to accommodate either annexation or economic development. The Committee requested the research be expanded to cities in other states to gain possible insight into annexation and economic development as related to business license tax. National organizations were contacted and data banks were queried. Organizations contacted included the International City Manager's Association (ICMA), National League of Cities, National Urban League, American Planning Association, and National Bureau of Business Licensing Officials. Other organizations con- tacted were the Center for Urban Policy Research at Rutgers University, Institution of Governmental Studies at U.C. Berkeley, State of California Office of Planning and Research, and California Municipal Business Tax Association. The City of Eugene, Oregon was contacted directly. ICMA was the most responsive. Its Inquiry Service provided abstracts titled as follows: *Municipal Annexation in Maryland, Land and Practices Report looks at the laws and practice that surround annexation. ~Change.s in Licenses and Fees, City of Auburn, Maine *General 'Revenue Sources - Management Policies in Local Government Finance Selective sales and gross receipts taxes, licenses and other taxes... occupational and business privilege levies .... The Fiscal Impact of 'Flying M Ranch Development, City of McKinney, Texas -Business Licensing Proposal, City of Auburn, Maine *Annexation Agreement, City of Gaithersburg, Maryland Annexation agreement between-the City and General Electric Information Services Company. GREGORY J' KLIMKO OCTOBER 3, 1990 PAGE TWO *Municipal Business Licensing, A Rebort and Rate Survey South Carolina report on business licensing *The Evaluation of Annexation Proposals Annexation Handbook for Cities and Towns in Washington State *Business License - Friend or Foe Annexation Agreement, City of Greenbelt, Maryland Occupational Taxes and Business License Fees Colorado Municipal League Asterisks above indicate materials that were reviewed. This search generated no additional information. Therefore, staff reiterates its original concerns. 1. Effects of a maximum tax: _ Maximum tax would create an artificial ceiling limiting revenue growth. _ Maximum tax would create a tax preference for large businesses. 2. Change the rate structure as proposed (Exhibit B). _ Regressive after $100,000,000 of gross receipts. Virtually becomes a maximum tax at the rate of .01¢ per $1,000 after $100,000,000 gross receipts. - Revenue projected to increase $35,0007. 3. Increase the minimum from $10..00 to $25.00 annually. - Minimum tax of $10.00 established in 1969. - ~ncrease would more nearly maintain the ordinance moal of raising revenue. _ ~ncrease would more nearly cover the cost of license issuance. _ Revenue projected to increase at least $48,000*. 4. Reduce the number of flat rate ca,ego, es. - Convert to gross receipts where ~ractical. _ ~ncrease remaining flat rates, unc~a~'ged since 1969. These increases would maintain the revenue raising goal of the ordinance. *This increased revenue would put Bakersfield more in line with other charter cities in terms of the percentage of .General Fund revenue gen- erated by business license tax. GREGORY J. KLIMKO OCTOBER 3, 1990 PAGE THREE By wa,v of information, Proposition 136, "Taxpayers' Right to Vote Act", which will be on the November ballot, could nullify any plans to adjust business license tax rates that include increases. The measure has four main components one of which is that any general purpose tax increase for local jurisdictions would reouire a majority vote by the people. Simply put, if 136 passes, all general fund tax increases will require a majority vote after November 6, 1990. The Committee has considered exempting annexed businesses from business license tax. An opinion concerning this alternative was obtained from the City Attorney's Office and is attached. ! interpret this legal opinion as not exDosin~ the current tax to any legal challenge which would be successful and exemption from the tax would be permissible if the City Council took appropriate action. krc BD100390 -- '. S~AFF RECOMMENDATIO~ IMPLEMENTED TAX CHANGE EXPERIENCED BY NUMBER OF BUSINESSES EXCEPT CLASS A NUMBER OF NUMBER OF NUMBER OF. BUSINESSES BUSINESSES PAYING BUSINESSES PAYING EXPERIENCING TOTAL CLASS MORE TAX L'ESS TAX NO CHANGE BUSINESSES B 75 917 1,694 2,686 C 577 15 2,110 2,702 10 71 323 D ~ 4__~.~ TOTAL 894 942 3,875 '5,711'~' RANGE OF IN ~CREASED TkX BY NLIVBER OF BUSIIF. S.~-S CLASS S .- O0 s m-200_ s2m-300 3mJoo _$ m-500 O_V R $5OO BUS .S.S B 60 8 7 -0- -0- -D- 75 C 441 ~ 24 21 -0- -0- 577 10 5 ! 2._~_~ TOTAL 668 145 44. 31 5 ll 894 ·*This business would experience an increase of $540. RA~E CF. DE ~CRF~ TAX B'Y NLI~BER 'OF BUSI' '~'NT-SS~-S ~[DTAL -CLASS ~-100 ~m.200 s20~_-3:)0 ?~0~_-400 $40~-~ .T60~_-z, ooo ov~ .t!_ooo B_USI'=N~SSEs B 912 1 -0- ,0- -0- 1 3 917 C 4 ~ 2 1 -0- 3 ~ 1 - ~ -- -- , 942 'TOTAL 917 6 4 2 1 5 7 N0~: No business would experience a tax ~crease greater than ~3,000. EXHIBTT A GROSS RECEIPT TIERS AND RATES (Rates Are Cents Per $1,000'of Gross Receipts) CURRENT PROPOSED · GROSS GROSS. CLASS RECEIPTS RATE RECEIPTS RATE B $1-600,000 .35 $1-1,000,000 .30 600,001 and more .17 1,000,001-10,000,000 .20 10,000,001-100,000,000 .10 100,000,001 and more .01 C $1-600,000 .30 $1-1,000,000 .30 600,001 and more .16 1,000,001-10,000,000 .20 10,000,001-100,000,000 .10 100,000,001 and more .01 D $1-600,000 .25 $1-1,000,000 .30 600,001 and more .15 1,000,001-10,000,000 .20 10,000,001-100,000,000 .10 100,000,001 and more .01 A $! and more .65 $1 and more .65 Examples of types of businesses in each class: (B) Manufacturing: Printers., dry cleaners., soft drink bottlers, ice cream plant's and-machine shops. (C) Retail: Restaurants, bowlin:g alleys, :department stores and specialty shops. (D) Wholesale: Businesses that sell wholesale including automobile dealers~ (A) Professional: Accountants, physicians, attor.neys, cons'ul~bants such as geologis%s and engineers. krc BD!OO390F EXHIBIT B MEMORANDUM October 2, 1990 TO: BILL DESCARY, Treasurer FROM: LAURA C. MARINO, Deputy City Attorney ~9~'~ SUBJECT: EXEMPTION OF ~ BUSINESSES FROM BUSINESS LICENSE TAXES AND EQUAL PROTECTION CONSIDERATIONS You requested an opinion regarding whether a policy of .exempting annexed businesses from business license taxes would expose the tax on other city businesses to an equal protection or other legal challenge. My opinion is that it would not. In Park 'N Fly of San Franciscor Inc. v. City of South San Francisco 11957) 188 Cal. App.3d 1201, the court held that a tax directed at "all similarly situated businesses, for fiscal and equalization purposes" satisfies equal protection requirements. In regards to equal protection considerations as applied to business license taxes in general, the court stated: "'IT]he party who challenges the constitutionality of a legislative classification scheme in a tax statute bears a very heavy burden ... 'Tax statutes are generally not subjected to close scrutiny, and distinctions can be justified on the basis of administrative convenience and promotion of legitimate state interests. [Citation~]'" (Cohen v. Alvord (!984) 162 Ca!.App.3d 176, 181-182 [208 Cal. Rptr. 421].) Moreover, "a municipality may impose license ~ees at differing ra%es upon different classes provided the classif~cation created is reasonable." (United Business Com. v. City of San Diego (1979) 91 Cai. App.3d !b6, 178 [154 Cal.Rp~r. 263].) 'in Times M~rror Co. v. City of Los Anceies (1987) 192 Cal.App.3d 170, ~he court held that, as ~ar as equal protection requirements are concerned,-"[W]e must only determine whether the varying rates established by the taxing scheme are 'founded on natural, intrinsic or fundamental distinctions which are reasonable in their relation to the object, of the legisia~ion .... ' (Fox etc- Corp. v. City of Bakersfield, supra, 36 Ca!.2d at p. 142)." It went on to state: Memo to Bill Descary Re: Exemption of annexed businesses Irom business license taxes and equal protection considerations October 2, 1990 Page 2 "The power of a municipality to classify for the purpose of taxation is very broad. Neither due process nor equal protection impose a rigid rule of equality in tax legislation. (Henry's Restaurants of Pomona, Inc. v. State Bd. of Equalization (1973) 30 Cal.App.3d 1009, 1016) ... 'It is well settled that occupations and businesses may be classified and subdivided for purposes of taxation, and it is within the discretion of the Legislature to exact different license taxes from different classes or subclasses of businesses, subject only to the limitations of the state and federal Constitutions in regard to equal protection of the laws. No constitutional rights are violated if the burden of the license tax falls equally upon all members of a class, though other classes have lighter burdens or are wholly exempt, provided that the classification is reasonable, based on substantial differences between the pursuits separately grouped, and is not arbitrary.' (Fox etc. Corm. v. City of Bakersfield, supra, 36 Cal.2d at p. 142; Gutknecht v. City of Sausalito (1974) 43 Cal. App.3d 269, 276 [117 Cal.Rptr. 782]; Associated Rome Builders etc.r Inc. v. City of Newark (1971) 18 Cal.App.3d 107. 109-110 [95 Cal. Rptr. 648]; Clark v. City of San Pab!o (1969) 270 Cal.App.2d i21, 126-127 [75 C-~_I~ Rptr. 7 2 6 ]. )" LCM/meg BUS-~AX.MEM cc: Bob Sherry Attorney Opinion File Q M E/V~ 0 R A N D U IV~ AUGUST 10, 1990 TO: GREGORY J. KLIMKO, FINANCE DIRECTOR FROM: B]~LL DESCARY, TREASURER ~ SUBJECT: BUSINESS LICENSE ORDINANCE ANALYSIS This report is in response to a Budget and Finance Committee request to analyze the revenue impact of a $5,000 maximum annual business license tax per busi- ness, to analyze the revenue impact of several rate structure alternatives and to provide other business license information. Business License Ordinances from the following 21 California cities were reviewed and analyzed: Anaheim Richmond Concord Riverside *Sacramento Fremont *Fresno San Bernardino Los Angeles San Jose *Merced San Mateo *Modesto *Stockton Monterey Torrance *Tul are Oxnard '*Visalia Pasadena Pittsburg The list is diverse in terms of population size and geographic location. The list includes seven San Joaquin ValleY* cities. No consistency was found in either the rates or the rate base. Business license ~ya'x i's based upon gross receil~ts., number of employees, gross payroll, flat rates, number of years in business as a prof'essional and space occupied. Most ordi- nances include combinations of these taxing methods~ The most common base is gro'ss receipts. However~ mross receipt tiers differ substantially. Therefore, it is not practical to do ~ rate comparison betwee~ cities. Copies of the ordi- nances obtained are available in the City Treasurer's Off-ice. After a quick perusal, the myriad of rate bases and gross r~ceipt tiers will be apparent. -Fhe Leauue of California Cities was contacted with the purpose of obtaining a statewi~e study of business license ordinances or :a model o.rdinance. They could =o:nl-y provide copies of business license ordinances from several cities and gen- era] information that is included as the last two l~ages of this report. Schedule A .summarizes those cities surveyed with maximum business license taxes. If a $5,000 maximum tax were adopted in Bakersfield, the taxes currently paid by .eight businesses would be reduced. One .business is in classification "A", pro- fessional; three are in "B", manufac-turing; and four are in classification "D", GREGORY J. KLIMKO August 10, 1990 Page Two wholesale. Lost revenue would be approximately $21,500. While the immediate revenue impact of a maximum tax is perhaps minimal, the long range effects of limiting this revenue source is potentially significant. There are an additional ten businesses that pay between $4,000 and $5,000 in business license tax annually. As prices increase these businesses can be expected to join the over $5,000 group. During the business license renewal period in July it was noted that at least two tax payers paid in excess of $10,000 each. This was an increase of approximately $1,000 and $2,000 respec- tively over their prior year tax. Schedule B reveals that business license rev- enue has increased in each of the last ten years and more than doubled in the decade. Without the restriction of a maximum tax, business license revenue can be expected to increase each year. In order to retain viable revenue growth from this source, a maximum tax is not recommended. The City of Pasadena has a maximum annual tax of $30,000 per business. The City is in need of revenue and is attempting to repeal the maximum tax provisions of its ordinance. The City of San Jose currently has a per employee business tax base with a maximum annual %ax per business of $25,000. In order to enhance revenue from this source and replace the loss of federal and state funds in the 90's, the Treasury Division in San Jose anticipates converting to a gross receipts business tax base and repealing their maximum tax provision. According to a 1987 survey, 420 of 447 California cities had Business License Tax Ordinances. Generally those cities without Business License Tax Ordinances are non-commercial, primarily residential or bedroom type communities. An anal- ysis of the State Controllers Report (1987-88) for California charter cities, indicates that business license tax revenues represent 5.8 per cent of general fund revenues statewide. Bakersfield is considerably below the State average at 2.04 per cent. This suggests that Bakersfield's business license rates need to be increased to keep pace with other cities in the State. The results of the analysis are shown in Schedule C. Before the possibility of a maximum business license tax became an issue neces- sitating a survey and analysis of business license ordinances in other cities, it was the Treasury Divi~sqon's plan to do a similar survey later in the ~iscal year. Our purpos.e in planning a survey .was to gain information relative to busi:ness license minimum rates and ~lat rates. Depending on the res~ul'ts of the analysis, our plan was to recommend ordinance changes to be effective July 1, 1991~ It seems appropriate to utilize the current analysis and to dis- cuss these two items at this time. Ordinance No. 1785, adopted March 3], ]969-, established business license tax rates that are still in el-fecaL ~Z1 years later. The tax base for about '75 per- cent of the businesses is gross receipts. As gross receipts have incre~-s'ed o-vet the years the City's revenue has increased and budget requirements have been accomplished without increasing rates. However, the minimum tax of $10.00 has become otrcdated. Bakersfield's $10.00 minimum tax is the lowest of the 21 cities surveyed. The next lowest minimum is $18.75 in the City of Los Angeles. However, the fig- ure is misleadinQ because all eross receipts over $15,000 are taxed at the rate of $1.25 per thousand. In Bakersfield, at a tax rate of .30¢ per thousand, gross GREGORY J. KLIMKO AUGUST 10, 1990 PAGE THREE receipts would have to exceed $33,333 in order to pay more than the $10.00 mini- mum~ Five cities have the next lowest minimum tax of $25.00. They are Concord, Modesto, Sacramento, San Mateo and Tulare. Monterey has a $26.00 minimum. Fresno has a $28.00 minimum. Other cities in the survey have higher minimums up to the highest of $150~00 in San Jose. It is Bakersfield's low minimum tax tbat significantly contributes to its being well below the statewide charter ci't~ average for percentage of general fund revenue generated by business license tax (2.04% vs. 5.8%). At June 30, 1989 Bakers-field's business license revenue represented only 1.85 per-cent of General Fund revenue. It is recommended that Bakersfield's minimum business license tax be increased from $'10.00 to $25.00 which is a 150 per cent increase. However, in the 21 years that the $10.00 minimum has been in effect the Consumer Price Index (CPI) for Los Angeles-Anaheim-Riverside increased 268 per cent. This CPI data is used in City salary negotiations and in indexing payment schedules in City contracts. An increase based solely upon the CPI would result in a minimum tax of $36.80. A further justification for an increased minimum is processing costs. The costs for processing a license application or renewal for a small business that pays the minimum are approximately the same as for a large business paying a much higher tax. At a rate of .30~ per thousand of gross receipts, the threshold for paying more than the minimum $10.00 tax is $33,333 in gross receipts. A minimum tax of $25.00 would increase this threshold to $83,333. Approximately 3,200 busi- nesses, or one third, currently report $33,333 or less in gross receipts and pay the minimum $10.00 tax. A minimum tax of $25.00 would generate $48,000 addi- tional revenue from these 3,200 businesses. Additionally, about 700 businesses that generate gross receipts over $33,333. but less than $83~333 would also pay the minimum tax of $25.00. Therefore, total revenue generated from an.increased minimum would actually exceed $48,000. The next ~area to be addr.essed is flat rates. Currently about 2,050 businesses in 38 different categories, as defined by the Municipal Code~, pay a flat annual tax and ~about 250 businesses in 12 categories pay a flat quarterly tax_. Quarter'ly renewal's .are costly and cumbersome administratively. At 1-east 200 businesses in 9 of the 12 categories paying quarterly renewal~s, that d6 not require a 90 day permit to operate, could be converted to annual renewals with the tax based upon gross ~receipts. Likewise, approximately 1,_800 businesses in 3'3 of the 38 categori-es paying a flat annual tax could be conve~rted to a gross receipt tax base virtually eliminating float rate taxes. There is no apparent .reason for float 'rates to be in effect particularly from an equity payment standpoint. For example, barbershops and beauty shops are tax~ed at the flat rate of $6.00 'per chair annually, ridiculously low, yet a secondhand furniture dealer is taxed $100.00 annually. The impact on the City's revenue and cost figures for the individual businesses effected by this conversion are not readily avail- able because flat rate businesses do not report gross receipts. It is recommended, based upon an equity payment philosophy, that flat rate cate- eories be further analyzed in order to make specific recommendations to elimi- nate what appears to be tax preference categories. GREGORY J. KLIMKO AUGUST 10, 1990 PAGE FOUR In order to establish a more equitable business license tax and raise needed additional revenue, changes to the tax rate structure are necessary. Schedule D shows current business license revenue by class and the number of businesses in each class. Schedule E shows the current gross receipt tiers and rates on the left side. The right side reflects a proposed change to the tier structure and two rate alternatives labeled RATE 1 and RATE 2. There are no proposed changes to the professional classification A. Gross receipts are not tiered in this classification and the rate is .65 per thousand. Schedule F compares current business license tax revenue generated in combined Classes B, C and D with pro- jected revenue under rate options I and 2. Since a general fund revenue loss of $60,501 from RATE 1 cannot be absorbed in the General Fund, RATE 2 is the. recommended rate structure. Schedule G indi- cates how the changed rate structure effects businesses in terms of the number of businesses paying more or less tax. This situation is caused by gross receipts being tiered differently and taxed at different rates than previously. It is important to note that under the recommended rate structure classifica- tions B, C and D are eliminated. All businesses except professionals and flat rates, discussed earlier, would pay at the same rate. While the criteria for classification is described in the Municipal code, it is a clerk's judgement that ultimately determines the classification assigned to a business at the time a license application is filed. As a result of personnel turnover during the last two decades, similar businesses are in different classifications which causes inequities. The proposed rate structure would correct all these situations. This problem does not exist with the professional classification because the nature of such businesses is more readily discernible. In terms of the future.development of the City's business community, the long range implication of the RATE 2 structure is illustrated below by the tax that would be paid by businesses with extraordinarily high gross receipts. RATE 1 RATE 2 GROSS RECEIPTS TAX PAID TAX PAZD $250,000,000 7,650 12,600 $500,000,000 10,150 15,100 $750,000,000 12,650 17,600 $1_,000~_000~000 15,!50 20,100 The extremely regressive nature of this proposed tax structure is highlighted by the abo~e ex~mp]e_s~ Under RATE 2 gross receipts quadruple_, yet the tax paid is less than double. The amount of business license tax paid would be an incentive for businesses to locate in Bakers-field when co~ared to the tax that would be paid in many other California cities. GREGORY J. KLIMKO AUGUST 10, 1990 PAGE FIVE ~n summary staff'makes the following recommendations relative to the Business License Tax Ordinance: 1. There should not be a maximum tax. - Maximum tax would create an artificial ceiling limiting revenue growth. - Maximum tax would create a tax preference for large businesses. 2. Change the rate structure to RATE 2. - Improves payment equity. - Extremely regressive after $100,000,000 of gross receipts. Virtually becomes a maximum tax at the rate of .01¢ per $1,000 of gross receipts. - Revenue projected to increase $35,000*. 3. Increase the minimum tax to $25.00. - Improves payment equity. - Revenue projected to increase at least $48,000*. 4. Drastically reduce the number of flat rate categories. - Improves payment equity. - Improves efficiency of administration.. *This increased revenue would put Bakersfield ~more in line with other charter ci%ies in terms of't'he pew. centage of General Fund revenue gen- erated by business license tax. krc 1:BD081090 CITIES WITH MAXIMUM BUSINESS LICENSE TAXES TAX BASE GROSS FLAT MAXIMUM TAX CITY RECEIPTS FEE OTHER PER YEAR Fresno X X Retail* 18,000 Wholesale* 12,500 Professional 5,000 *Manufacturer included in either category Pasadena X 30,000 Riverside X X Retail N/A Wholesale 4,000 Manufacturer 4,000 Professional-Flat Fee N/A Sacramento X X 3,000 San Jose X 25,000 Torrance X X 70,000 Tulare X X X 1,000 Visalia X X Retail 868 Whol-esale/ Manufacturer 496 Serwice 20.0 Professional 120 krc 1:BD0810901 SCHEDULE A BUSINESS LICENSE REVENUES LAST TEN FISCAL YEARS Business Revenue Fiscal License Increase Year Population Revenue Percent 1980-81 105,611 $ 566,424 -0- 1981-82 113,000 624,722 10.3 1982-83 117,822 748,239 19.8 1983-84 129,686 777,861 4.0 1984-85 138,518 868,402 11.6 1985-86 148,227 894,193 3.0 1986-87 153,399 957,121 7.0 1987-88 157,423 990,163 3.5 1988-89 161,750 1,076,102 8.7 1989-90 169,501 1,143,195 6.3 1:BD0810902 SCHEDULE B Comparing business license tax revenues :,L~ a percentage of general fund revenues is one of' man)' indicators to determine whether or not your business license tax ordinance is due for revision. 'l-ne most recent State Controllers Report (198'7-88) indicates that business license tax revenues represent 5.8% of general revenues statewide. To see how you compare, below are the comparison figures for all charter cities in California. CALIFORNIA CHARTER CITIES: COWfPAKISON OF BUSINESS LICENSE *lAX REVENIJES AS A PERCENTAGE OF GENEKAL FUND REVENUES' ..... % BLT .of %'BLT of ~enerml Fun.d ~ ~enr~,l F~n~l CiD' 2.98 Alameda '2.92 Pacific Grove 2.24 Pasadena 4.06 ~20 Albany Pctaluma Alhambra .2.25 1.02 Piedmont . · Anaheim 1.86 '7.55 · Arcadia ] .49 'Plaeentia 3.89 ~BakersfSeld ~ Pomona Ponervilie . .3.63 'Berkeley . ~8.33 3.'78 ~Burba~k .::2_08 l~r~iondo Brmeh ' Ca:rritos 1.70 P,~dwood City 0.85 F_,.i:fi r,o ~ Kir. hmond 2_65 Chuta 'V'i~ta 2.29 'Riversid: 2-37 3..19 Compto= ~.~2 'Rosevilic 2_% CnN, er City 3D-Ot Sam'amento Cypress Z322 Saimas Del Mar 4~1 San Bcrnardino .4.96 i.TS Downey ~.27 San Buenavenmra 1.07 Eureka 1.94 San Diego 2.49 Presno 7.06 San Francisco Giiroy 2.68 San 3osc _5.10 2.10 Gtendatc 0.~9 San Lcandro ~65 Gra.ss 'Valiey l A9 San Luis Obk?o 2.72 San Marco 13.96 ]ngiswood 6.2~ Santa Aaa ]~-in e ~.79 Sa'n t~ Barbara }rwinda}: 32.41 Santa Clara 0.67 - bom, Beach 5.38 Santa Cruz 273 Los ,,Mami~os ~.72 ·Santa Monic2 .1.0.02 Los Angeies 34.(f/ 'Santa M a'n, svilie 248 Sc. al B~ 3:60 -,, ~, Stocklon Me_re,ed .~.3., Moriasto 9.~ SunnD'alc i.-Q9 Monthly 5.3'7 q-~mpi: City 5216 M ountain View 0,55 7orran~ 3_05 Napa 5.60 Tuiarc 1.51 -Needies 2.8i '¥alicjo 2.99 Newport Beach 3.7~ Visaiia Oakiand _1_3.67 NVatsonvili: 2.S5 Oro~5.Li: 1.2zl Whinicr -' Source: Fi~;onciM Transactions Conccrnin£ Cilics, 29~;-~ SCHEDULE C BUSINESS LICENSE REVENUE BY CLASS AND BUSINESSES PER CLASS NUMBER OF CLASS REVENUE BUSINESSES A $ 35t,148 2,204 B 132,055 2,686 C 410,214 2,702 D 123,593 323 Flat Fee 126,185 2,333 Exempt * -0- 348 TOTAL $1,143,195 10,596 * Exempt by Government Code: Banks, insurance companies and charitable organizations. krc 1:BD0810903 SCHEDULE D GROSS RECEIPT TIERS AND RATES (Rates Are Cents Per $1,000 of Gross Receipts CURRENT PROPOSED GROSS GROSS CLASS RECEIPTS RATE RECEIPTS RATE 1 RATE 2 B $1-600,000 .35 $1-1,000,000 .30 .30 600,001 and more .17 1,000,001-10,000,000 .15 .20 10,000,001-100,000,000 .05 .10 100,000,001 and more .01 .01 C $1-600,000 .30 $1-1,000,000 .30 .30 600,001 and more .16 1,000,001-10,000,000 .15 .20 10,000,001-100,000,000 .05 .10 100,000,001 and more .01 .01 D $1-600,000 .25 $1-1,000,000 .30 .30 600,001 and more .15 1,000,001-10,000,000 .15 .20 10,000,001-100,000,000 .05 .'10 100,000,001 and more .01 .01 A $1 and more .65 $1 and more .65 .65 Examples of types of businesses in each class: (B) Manufacturing: Printers, dry cleaners, soft drink bottlers, ice cream plants and machine shops. (C) Retail: Restaurant% bowling alleys, department stores and special-ty shops. (D) Wholesale: Businesses that sell wholesal-e including automobile dealers. (A) Professional: AcCountants, physicians, attorneys, consultants such as geologists and engineers. krc 1:BD0810904 SCHEDULE E CURRENT REVENUE COMPARED TO PROJECTED REVENUE UNDER RATE 1 AND RATE 2 Rates Are Cents Per $t,000 of Gross Receipts) PROJECTED PROJECTED GROSS RECEIPTS RATE i REVENUE RATE 2 REVENUE $1-1,000,000 .30 2384,547 .30 384,547 1,000,001-10,000,000 .15 186,87t .20 249,167 10,000,00t-100,000,000 .05 33,943 .10 67,882 100,000,001 and more .01 -0- .01 -O- TOTAL PROJECTED REVENUE $605,361 $701,596 CURRENT REVENUE CLASSES B,C & D (665,862) (665,862) ESTIMATED CHANGE ( 60,501) 35,734 1:BD0810905 SCHEDULE F NUMBER OF BUSINESSES EXPERIENCING INCREASE/DECREASE IN TAXES PAID UNDER RATE 1 AND RATE 2 RATE 1 RATE 2 NUMBER OF NUMBER OF TOTAL BUSINESSES PAYING BUSINESSES PAYING BUSINESSES PAYING CLASS BUSINESSES MINIMUM TAX MORE (LESS) TAX MORE (LESS) TAX B 2,686 1,671 47 ( 968) 75 ( 940) C 2,702 778 541 (1,383) 577 (1,347) D 323 76 ,236 ( 11) 242 ( 5) TOTAL 5,711 2,525 824 (2,362) 894 (2,292) krc 1:BD0810906 SCHEDULE G A~.hor~¥: Sec~cio~ 37!01 of the Gove---~ent Code~ SecJ~io~ 16000 et seq. of t_be Business and ~ofessio~s code. Descri~ion: ~he ~us~ess ~.~ cerise ~ is ~posed on businesses ~or ~e privilege of conducting bus.ess wi~in ~e city. The =~ is mos= cO. only based on ~oss receipts or levied at ~ flat n~ of ~ployees, n~h~ of v~icies, or some co. ina=ion of le~ ~is =~ =or .bo~ re~a=o~ ~d revenue rais~g p~oses. reda=ion ." ~er 420 Ca!!fo~ia ci=ies assess ~is ~xemp=ions: Cafe musicians; weterans engaged in ven~ing goods: rea! es:a:e auc:ioneer~g; r~=ing, leasing ~a~e, se!l, ~ase, posess or ~po~ ~!coho!i= bev~es; ~d b~, ~s~ce c~p~es, ~e~ agnus ~d o~er Use of ~ev~ues: ~e~i~ed, 'b~ ~ be received Yield Revenues ~evious ~ ~BD-B! $ 209, B55,!4! 2.92 ~ !gS!-S2 225,575,769 2.28 -.'!2.2-6 ~ ~E2-E3 2~,TB0,64U 2.40 ~ ~E3-84 305 , B69,329 2.~i +!9.61 - 12 - Tax Ordinance Drafting TiPS ......... d --! At the February Continuing Education Seminar, Bob Flandrick provided a hetpfu] "check list" of issues to consider m drafting or reviewing tax ordin:~nces. The), are as follow~: 1. Does the ordinance clearly spell out what the Iaxable event is? Does the event occur inside or outside dry 2. ~Does it dearly indicate who the tarva¥¢r is.? This is especially important with ufiliry users :ax and n'ansient occupancy mx ordinances, where the tax colle~or is typically a private entity. 3. Does it specify'who the tax collector is? Again, riffs is especially important for utility users and rramient occupancy taxes. · 4. What remedj~,~ does the ordinance provide for enforcement and collection procedures? The ordinance should clearly define.the consequences of not paying the ~ mciudmg civil and criminal pen~ries, interest charges (when interest sran accruing and what is the interest rate) and so on. Note: Cities are subjem to usury laws. 5. Does -the ordinance contain a clear statement of ;a~' rates and any ~ from or cars on the taxes .imposed? The ordinance should be explicit on how one qu~t~fies for exemvfiom, mctnfling the procedUre and r~rn~ng for documenting one's eiitgbiliv) therefon 6. Watc?~ out for stavatorv and/or cons-riruti0na! exernprign~ (e_~% insm-ance co~vanies). 7. Watch oat for Proposition !5 and 62 "specia] mx" issues. Do not "earmark" mx proceeds for certain purposes. The staff report should say "the city attorney advises thru the proceem of the mx, since it is a genera] tax, be devosited to the ci,rfs general fund and will be subjec~ zo me city coma~'s genera] budge~ authonw." S. Does the mx sam~ consfin~TiOna] reqniremems (~., due proces_~, amen~em, equal protection, commerce clause)? Watch out for m:~ reducriorz: Aa amenament to a g~ven mx ortS~nance increase or decrease a tax may qualify as a new :ax ~evy. A better approach is zo suspend ~ or ~ pomon of a mx :for a ~ized z~vne period and v. ]~rn~ed, amount,,-moreover, ff ~e ,stop. ens~o~ is void or m~,:aiid for any reason, the ori~nn~ mx is deemed 10. Co~-sider 'the use ofyaiidarion proceedings, .see, e_~, Cai. Code Civ. Proc. 860, to protein the city against challenges zo mx ordinaries. Bob notes that. one of the easies~ ways ~o educate a judge presiding over a .case .chaiien.~ng a tax ordinance is ~o hav~ a well-drafted ordinance. Covering the above ~ssues ~s a good fizs~ stop to having such mn ordinance. S~.ccramenzo, Cal~C_-nia SSgl4 5.02.3'00 Flat Rate Class No. ' ........ Quarterly Annually I. Producing oilwells, in addition to other " business licenses re. quired, each producing well within the city: 1st 100 wells (Per well) $ 20.00 2nd 100 wells (per Well) 10.00 in excess of 200 wells (per well) 5.00 2. Heavy industrial servicing and oilfield repair organizations .20.00 4. Operators of pinball and marble games and other amusement devices (each device) 12.00 6. Auctioneer (see Chapter 5.06) ',. 60.00 8. Bail bond broker 100.00 10. Barbershops, each chair 6.00 11. Beauty shop, each operator 6.00 12. Barber college or school 96.00 13. Beauty college or school 96.00 15. Billiard or pool tables, each table (see Chapter 5.40) 12.00 17. Cardroom, first table each room $100.00 Each table in excess of one per room (see Chapter 5.16) 35.00 19. Christmas tree lot 20.00 21. Construction' $30 per year or fractional part thereof for first $150,000 of gross receipts; $60 per year or fractional part thereof over $150,000 to $1 million of gross receipts; S 120 per year or fractional part thereof over $1 million of gross receipts _a. Curb 'painting (see Chapter 5.28) 10.00 25. Public dances (see Chapter 5.44) 10.00 ~"~ Health club 40.00 29. HoIels, lodginghouses and auto courts per room (see Chapter 5.26) .75 31. Ice cream, soft drink, fruit and vegetable, etc. peddling ] 0.00 33. Itinerant merch'~t 20.00 .3-5. Secondhand furniture dealers (see Chapter 5.46) 100.00 .z ,. Pawnbroker (see Chapter 5.46) 200.00 3:9. Junk colJector (see Chapter 5.46) 40.00 ' 41. Junk dealer (see Chat)ret 5.46) 100.00 43. Personal loans by other than pawnbroker 100.00 (Bakersfield 9-83) ] 8 2 5.02.300 ' Flat Rate ~' Class No. Quarterly Annually 45. Purchasers of commercial paper or factors $100.00 49. Masseur (see Chapter 5.32) 15.00 50. Miniature golf course 20.00 52. Music boxes, each device 10.00 54. Newspapers. daily 500.00 56. Palmist, fortuneteller, clairvoyant, etc. (*except at conferences, seminars, or similar gatherings of a duration of four or less days, attended by 20 or more such palmists, fortunetellers, clairvoyants, etc., . each person performing services for compen- sation shall pay a license fee of $15.00) 300.00* 58. Coin-operated photograph machines, each machine 20.00 60. Private detective, process .server 20.00 61. Private patrol, each business (see Chapter 5.42) ~- 20.00 62. Private patrol watchman, etc., each person (see Chapter 5.42) 10.00 63. Savings and loan associations 100.00 · t 64. Solicit6rs of advertising for radio and T.V. .. (see Chapter 9.32) 50.00 66. Taxi, each vehicle (see Chapter 5.50) $ 15.00 ~ 70. Schools, dancing 20.00 71. Schools, secretarial, 'trade, etc. 20.00 72. Shoeshining, first chair each stand 6.00 Each chair in excess of one per stand 2.00 74. Shooting gallery (see Chapter_5.40) 100.00 76. Professional sporting events, etc. 15.00 78. Srockbroker, securties and commodities broker, per agent 40.00 80. Door-to-door or telephone soh'citors, retail. each solicitor ( excludes salesman for licensed dealers) 10.00 82. Traveling open-air and tent shows, circus and exhibits (see Chapter 5.36) 500.00 84. Amusement riding devices only (.food and drink stands included) 12.50 85. Carmva-1 amusement games, 'rests :of skill, etc. 750.00 86. Amusement rides as permanent business in city 50.00 88. Weighing machines, each machine 1.00 ) 8.~ (Bakersfiuld 5.02.300 Flat Rate Class No. Quarterly Annually 90. Administrative office and/or other similar quarters of business not subject under this chapter to a business license tax by the city other than for oil wells, storage and ware- housing space, each 100 square feet or portion thereof of usable floor space within the city ($10 minimum) 1.0'0 91. Storage and warehousing by businesses, not subject under this chapter to a business license tax by the city other than for. oil · wells and administrative office quarters, each 100 square feet or portion thereof of floor space or open yard storage space within the city ($10 minimum) Indoor floor space $ .50 Open yard storage space .10. 94. Arts and Crafts Fair Or similar activities in which more than five vendors not exceeding five calendar days in duration. Five to ten participants - $25.00; ten to twenty-five participants - $50.00: twenty-five to fifty participants - $75.00: over fifty participants - S 100.00. (Ord. 2936 § 1, 1984: Ord. 2918 § 1, 1984: prior code § 6.20.700). {.Bakersfield 5-85) ] 84 TDTAL BUS ~ OF BUS REV PER CO ¢.' CITY TYPE* T.TCENSF. REV LIC-~NSES LICF. N$~ POPULATION ~"-- I A~ed& GR 800,000 5,600 .i43 77,000 ... !9 ~.lha~bra , GR 420, O00 7 ,O00 ~0 75,000 ~9 ~ca~ia ~~ 600~00 5 rSOO 109 , 49, OOO ~5 ' ~akmr~f~el~ .: : ~ ~, DOD, 000 ~0,000 ~O0 ~6~., ODD ~9 Baldwin ~ark F~E- 360,000 2,8'00 95 63,00O 36 .~!no G~+~ , 335,000 2,000 16B ~;, O00 ID Cl'mvls " GR 598,000 2,500 2~9 47,DOC =9 C~=on GR+F~ 1,200,'000 5,600 2!4~ . 93,000 '. 30 O~ress % ~ · ~75,000 .. '3,2'00' ~i7 ~5,DOD .... !9 ~ ~ GR ' ' '~OO,OOO 4 ,~0O · !~ 95, DO0 ' '36 ~O~=~ " ~ ": 625,000 ' 7.,000 ~9 ~8,OOD 20 ~resno GR+IL 7,3 OD, DOD ' ~4, DOg -~ D4.~Z~.~iB~.D D.0-. ~' 500 4~ i55,000 30 Galen Gr~e ~Z 53S, O00 _~, !~ G~ena GR+~~ ~,105, O0D 8,0DD !3B 51,000 IS Ma~rne GR · !,lOg,0O0 5,300 208 67,000 19 ~e~osa 3e~h GR+~L 425,000 2,700 !'57 20,000 30 ~=ing=on Bch ~E 937,000 i6,736 56 !89,000 !9 Eunt~n P~rk G2 650,000 4,500 144 52,000 !S !nclswood '~ ~,~D:0,0-00. !0. O0-0 ' ::~20 ..... 3-0 ' ~--~e ~ 9'00,000 i!, 000 82 !DO 000 3'0 ~ ~ G~!~ 3Li,'000 ~ t 800 '. ~2 49 -OOO 19 ~kewood .GR~'~ ~94,O0'0 .~, 3'00 .... 1'!9 .77 000 !9 Laddie , ~L 250,000 .2,2 00'/.'~'. 114 27 000 ! ~~ore GR 834,000 3,400:::{'.'~,. 245 57 000 ~ Los ~'geie~ ~ ~.DD, DDD, gDO 300., 000 ":::T? ~ .. ~4 00, DOD ~ OOO =,6OD' ' 223 3~,DOO 36 Mcn%ul~ GR~L 500,000 4,000 125 26,000 !9 Mon%~ei!o GR+~ 803,000 3,500 229 iS ~=~ ~rk ~+~ 750,000 4,300 iU4 55, O0C 30 Ne~o% Bsa~b GR~ 966,000 13,900 69 70,000 ~ ~ Nc~alk GP.+~ 450,000 3,500 ~c c~ 000 ! Oared G2 20,500,000 47,000 ,436 27 Oce~e F~ 600,000 6r300 95 -~- , 000 36 O~iO GR ~50,000 7,200. ~ i!8 · -- ~ ........ 94 ~06 / ' 30 Or=~ge S~+FL 1 ,.500, 000 16 ,-000 '" ~ D6 Ox~nrd GR+~L 1 ,~37,000 6,195 ~-s~.248 '---~-=2~w;OD'O ' .$ 500,000 6,800 ~4 '~ lB,D00 30 Placen=ia GR+FL 500,000 3,800 132 4~, O00 19 Pomona GR !, 110,000 ~, 000 ~ 19 Re~ndo Beach ~~ .. 1,200,000 12,600 95 65,000 36 Rial=o GR 617,000 5,000 123 64,00~ U3 Riverside ~R+F~ 3,O00,000 15,000 34 SaoramenUo GR 3 t300,000 28,000 ' 3 6 S=n ~e~mr=~o GR+FL 4, I00,000 1O, 000 ~0~.~54~0D:. 30 S~ Ci~=e GR 250,000 3,500 ?! .... :.;~ D7 Sa~ · Diego ~ 2,000,000 '69,000 29 !}086,000 lD Sa~ ~e~do' GR+FL 713,000 2,800 .'255 21, OD0 . _'_~.._~'43 Ban Dose . ~ 11,300,000. 45,000 %~5=~ 42 San=a B~rbarm gR+~L .. !,300~000 14,000 ~3 '~ B0,000 - '!9 San='a '~oni'=a ~R - ~, ~00,000 i~ ,DO0 ~TS ~, 000 49 San=a Ro~a '~R ~ ,400,000 9,300 ~:~!:~ 44 ~Scu==~ ~a~iey ~ 308 ~ 000 900 ~42':' .9,000 30 Se~! Beach GR+~L ~70,.000 BOO ~!~ =7, DO0 ' 54 T~m ~+~~ ~54, DOD !, 600 '159 .... 3 0 ~ Dog - DO ~i~ ~ ~42, DOD '4 ,DOD ~2 4~, DOD " 48 ~leJO ~ .380~ O00 · 4,500 B4 10D; DOD 56 ~==a .~+~ 75D, 000 9,300 '~! D4,000 ~7 ~is~ ~ '450 ,'000 6 ,.!O0 U4 ~2, COO ~ W~nut' ~e~ ~R ~,980,000 ..' '5,900 ~36 63,000 ~9 ~e~= C~ GR~T~ !, 072,000 ' 4,200 25~ 94, D00 30 '~~~ ~T 320,000 3,600 89 U4,000 34%, 735 ~ 000 1,~7,593' 3.06 ~annon enterprises inc ':~ c':'~ ~ ',-*:,-~_~: ~t 4101 UNION AVENUE BAKERSFIELD, CALIFORNIA 93305 Telephone 805/322-3091 CITY ~ ..... ~T -- ~.'L~ October 01, 1990 · City of Bakersfield 1501 Truxton Avenue Bakersfield, GA 93301 Regarding: The Lease for thc Comthousc Raquetball Club Dear Council Members, .' We would like to request that the assignment of our lease with the City of Bakersfield be transferred to Easton and Moran Physical Therapists. Thc terms and condiitom of the new lease are indicated in thc offer which is attached. We request that tiffs assignment be referred to thc Budget and Finance Committee. 'Tl~an~ you for your assistance in this matter. Sincerely, Tim Gmmon TG/ma Enclosures gannon enterprises " RF_.~I~ ESTATE PUI~CSSE CONTi~/~CT BAKERSFIELD, CALIFORNIA SEPTEMBER 11, 1990 I FINANCIAL TERMS OF SALE Received from Black' and White Company, a fictitious Partnership to be appropriately designated at a later time, which is comprised of William J. Easton, Cathy Easton, James P. Moran and Kristine Moran as General Partners (hereinafter Buyers), a fully refundable deposit of ,ONE THOUSAND DO?.?3~RS ($1,000.00) in the form of a personal check payable to Gannon Reality Trust Account, to be held uncashed until acceptance of this offer and thereafter deposited into an interest bearing Escrow Account at First American Title Company in Bakersfield, California, and to be applied toward the purchase price of FIVE HUNDRED AND .FIFTY THOUSAND DO~ ($550,000.00) for the purchase of certain real property situated in the city of Bakersfield, County of Kern, State of California, described as 3500 .21st Street, Bakersfield, California. Upon acceptanqe of this offer by Seller, Buyers hereby agree to place into escrow on or before =he closing of escrow, an additional fully refundable deposit in the amount of NINETEEN THOUSAND DOT.?3%RS ($19,000.00), to also be applied toward the total purchase price of the property. The balance of the purchase ~rice is the amount of FIVE HUND~ AND T~TRTY THOUSAND DO?3~RS ($530,000.00), and Buyers will pay this sum to Seller upon the following terms: 1. The total amount shall be paid by Buyers to Seller in equal monthly installments over two hundred and forty (240) ,, months with interest at nine percent (9.0%) accruing on the unpaid principal balance during the term of the payment. The monthly payments Shall be fully amortized over twenty years (240 months). 2. Buyers may pay in full the balance of the purchase price at anytime without any prepayment penalty whatsoever. 3. Buyers shall commence making monthly installment payments to Seller within one hundred and twenty days (120) after the close of escrow and delivery of possession to Buyers, or five (5) days after Buyers first operate the subject property for public use, or whichever occurs first. -1- REPaiRS OF PROPERTY Within sixty days (60 days) after Seller's acceptance of this agreement, Buyers shall have the right, at Buyers' expense to select a licensed contractor(s) or other qualified professional(s) including but not to inspect and investigate the subject property, . . . '~ limited to structural, plumbing, hea~in~, ~lec~rlcal,. bull~-ln a pliances, roof, soils foundation, mecnanlca£ systems, ]acuzzles, .P .... : ~--~-~ ~ters and-Dumps, air conditioning units and any the Seller harmless from a£z zzaozzzny, or costs, and repair all damages to the proper~y arising inspections. Ail claimed defects concerning the con=i=ion cz :ne property as revealed bythe aforementioned inspections or otherwise shall be reduced to writing, supported by written repo_rts,.lf ~Y, and delivered to Seller within seventy oays (70 days) az=er Seller's acceptance of this agreement. .Seller shall make the premises available for all inspections: Sell~r.~ereb~y. · ' ion at Seller's some cos~. mz mezz~ ~=~ - . Buyers 3_nspect ....... ~:---~--~ dezec~ive ele to do .eider of following: 1. ·Cancel this agreement: or 2. Correct .or otherwise repair ~he defective · condition(s) at Buyers' sole cost and expense, and reduce (subtract) accordingly from the total purchase price of FLUTE ~DREDANDFIFTYTMOUSANDDO~ ($550,000.00) the aggregate cost of such repairs and corrections. III CONTINGENCIES This purchase is contingent on the following conditions: 1. The City·of Bakersfield,'as owner and lessor of the subject real property and improvements thereon, consent~ to the assignment by Seller (current lessee) of. the written lease agreement pertaining to the subject real property to Buyers, and 'further agrees to amend the subject lease as follows: (a) The inclusion of. language in the lease to the effect that "The Lessee has the right to change the type of recreational use of the building in order ~o keep current~withthe changing needs and interests of the public"; -2- (b) The term of the lease shall be extended to six ~hundred months (600 months) from the date the assignment is accepted by the City of Bakersfield; (c) The City agrees to allow Buyers, as assignees of the lease, to sublease up to eight thousand (8,.000) square feet or fifty percent (50%) of the available space, whichever is greater, to a Physical Therapy business and/or other medical personnel for the purpose of providing onsite Sports Medicine or Sports Training services; (d) The inclusion of an option in t_he Lease, exercisable by Buyers, to increase the square footage of real property available for onsite improvements up 'to an additional maximum of 89,170 square feet, to be leased to Buyers at the same · cost per square foot that is then current for the original property; (e) The inclusion of an option in the lease, exercisable by Buyers, allowing for the construction of fences or fencing around the perimeter of the property, consistent with all applicable Codes as prescribed by the City; (f) Inclusion of language in the lease reserving the right to Buyers to assign the lease in its entirety, with written consent of the'City of Bakersfield; (g) Inclusion in the lease of language providing for lighting and paved parking, sufficient in Buyers' discretion and well maintained by the City, to support the intended business operations. (h) The City of Bakersfield agrees to allow not more than two four feet by eight feet monument signs to be located on the subject property in front of the existing building. (1 sign to be available for any sublessee of Buyers); and (i) Inclusion of language in' the lease that all recreational use space will be made available tothe public during hours of operation on a first-come, first-serve reservation, basis. 2. Any existing lien holders or holders of any interest in the subject property adverse to Buyers', including but not limited to Valley Federal Savings & Loan and California Republic Bank, agree to a restructuring of any existing notes secured by the subject property, consistent with the terms of payment of T_he purchase price by Buyers as outlined above. 3. The total cost of all tenant 'improvements and .renovations necessary for the.conversion of the existing property to suit the intended uses of Buyers shall not exceed one hundred and eighty thousand dollars ($180,000.00). BUyers shall have ~ ninety (90) days from the date ~his agreement is accepted by Seller to determine the total amount necessary for such tenant improvements. 4. The obtaining of Buyers" financing for the aforementioned tenant improvements and renovation, not to exceed one hundred and eighty thousand dollars ($180,000.00). -'5. The subject property is free of .any termite infestation or other wood destroying pests or organisms, as provided by a written reportof inspection by a licensed Structural Pest COntrol Operator. 6. The subject property is free and clear of all delinquent property taxes or other charges or liens .against the property on or before the close of escrow. ADDITIONAL TERMS Title is to be free of liens, encumbrances, easements, restrictions, rights and conditions of record or known to Seller other than those rights and restrictions held by the City of Bakersfield, unless ~easonably disapproved by Buyer in writing within ten (10) calendar days of receipt of a current Preliminary Report of Title furnished at Seller's expense within fifteen (15) days after the date of Seller's acceptance of this agreement. Seller shall also furnish Buyers at Seller's expense a Standard California Land Title Association policy issued by any reliable Title Company on or prior to the close of escrow. Buyers are aware that Seller is a licensed Real Estate Broker. Buyers agree to act diligently and in good faith to obtain all applicable financing. Seller agrees to comply with civil Code section 1102 et seg., by providing Buyers with a Real Estate Transfer Disclosure Statement within fifteen (15) calendar days of Seller's acceptance of ~his agreement, after which Buyers shall have Three (3) calendar days after delivery to terminate this agreement by delivery of a written notice of termination to Seller. · ·Time-.is of the essence. All'p~ior agreements between the parties are incorporated in this agreement.wh$ch constitutes the entire contract. -4- prevailing party shall be entitled to reasonable attorney's fees and. costs. Unless Seller accepts this agreement in writing on or before Ocr~..ober il, 1990, this offer and agreement will be deemed revoked and void, and any deposit tendered by Buyers shall be returned in · its entirety. -, ~ ~ mS,ON, BUr~ · ' CATH~"EASTON, BUYER '/ '/ ' JAM~S P. MORAN, BUYER KR~STINE MORAN, BUYER DATED: TIM GANNON,