The Hermosa Beach City Council Tuesday night rejected the proposal to place an initiative on this year’s November ballot to increase the city’s business license tax as a way to balance future city budgets.

“On behalf of all businesses, I would like to suggest the city take a hard look at its expenses in the city budget,” said Carla Merriman, Hermosa Beach Chamber of Commerce executive director. “I think an examination of the city’s budget should take place before the council places a measure like this one on the ballot.”

At its July 10 meeting, the council agreed to hold off on whether to place the measure on the ballot until it had more detailed data on the various rates for each type of business.

“There are two reasons why I’m considering this issue,” said Councilman J.R. Reviczky. “First, it’s just not about the budget. The problem with any government is that unless you do something now, you won’t be able to do something later. This measure can only be placed on the ballot of a general municipal election so we are stuck with our decision for two years. Second, I think there is a huge inequity in the way we assess business license fees. Some businesses that are generating $2 million per year are paying the same rate as a business that generates $35,000 per year.”

The city proposed raising taxes as a way to generate revenues to balance its budget that could experience a shortfall exceeding $1 million.

The last business license tax was revised in 1986 and approved by voters in 1989. The present business taxes generate about $680,000 with the number of licensees issued totaling 2,700.

“You all know where I stand on this issue. This was the first time in 12 years that I didn’t approve the budget because I felt like the city hasn’t made an effort to balance it,” said Councilman Sam Edgerton. “I think with this tax, you’re killing the golden goose of a municipality. With this kind of a projected shortfall, I think it would be prudent for the city to figure out how to cut spending.”

The revenue change from such a proposal is about $304,000 per year. Added to the $680,000, the new revenues would total about $986,000.

One of the most significant rate increases associated with the measure would have been to change the fixed rate for restaurants and bars to a rate proportional to individual gross receipts.

“Our businesses generate sales tax, we generate property tax, we bring people to this city who use the parking meters and the taxis, and look at all of the jobs we create,” said Aloha Sharkeez owner Ron Newman. “We have more regulations in the bar and restaurant business than any other business, and we spend money promoting. Just because we are generating a large volume of revenues doesn’t mean it’s all going into our own pocket.”

The city would have charged $100 for the first $10,000 and $2 per $1,000 for amounts more than $10,000.

“The reason for the increase is to help meet the budget gap that we have projected for the 2004-05 fiscal year,” said City Manager Steve Burrell. “The projected shortfall is expected to be around $1 million and could get worse depending on the action of the state when it adopts its budget.”