SOLANA BEACH — At its annual review of municipal fees on Nov. 18, the Solana Beach City Council unanimously waived business license renewal fees through 2021, but increased fees for short-term vacation rentals.
Last spring, the council waived a $48 fee businesses pay to renew their certificates for 2020 to provide COVID-19 relief. It also reduced from $56 to $17 the fee to renew permits for operating short-term vacation rentals.
As a result, the city cut its aggregate expected revenues in those categories for FY 2020 by 56%, from $172,000 to $75,000, according to a May 6 budget report.
Council had to decide whether to continue or alter these subsidies for next year before the city government sends out business certificate renewal notifications this month. Councilmembers opted to return the short-term vacation rental fee to $56 but to continue waiving the business license renewal fee, and also to defer a 0.3% inflation adjustment.
“If we can afford this, and I think that we can, I think that we need to support our businesses right now. It’s a really tough time for people,” Mayor Jewel Edson said.
The city’s many fees aim to break even on the cost of providing certain services by charging those services’ users.
“The city established a policy for recovering the full costs reasonably borne for providing special services of a voluntary and limited nature, such that general taxes are not diverted from general services of a broad nature and thereby utilized to subsidize unfairly and inequitably such special services,” according to an accompanying resolution.
A 2018 fee study found at that time, the city had subsidized businesses and short-term vacation rentals by charging too little for the administrative costs of processing their permits — to the tune of about $26,000 and $6,000 annually, respectively.
But COVID-19 hasn’t hurt all businesses equally.
The $48 business license renewal fee represents “nominal” cost in many cases, said Rod Greek, the city’s finance director.
Earlier this year Governor Gavin Newson allowed businesses to defer payment of sales tax if necessary to weather lost revenues due to the pandemic. But “not a lot of businesses took advantage of that,” City Manager Greg Wade said.
The construction and business services industries, as well as grocery and food stores, “have been doing very well,” he said. Whereas restaurants and certain retailers have been harder hit.
Councilmembers discussed waiving the business license renewal fee only for the hardest-hit categories, or else allowing businesses to apply for case-by-case waivers. But they decided the juice wasn’t worth the squeeze.
“It probably would cause more staff time then it would be worth to separate it out between the businesses who are struggling and those that aren’t,” Edson said.
“A lot of places don’t look at staff time as a cost, and it really is a cost,” Councilwoman Kristi Becker said.
“The dollar revenue that we would realize by trying to differentiate is probably not worth trading off against the benefit of … just keeping it easy and simple in a very clear and straightforward message,” Councilman Dave Zito said.