Council Memo

Discussion of City's Business License and Vacation Rental Registration.




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Item Summary


This is a discussion of the City’s Business License and Vacation Rental Registration that was passed by Council in 2017.   This will be an opportunity for Council to discuss the future of programs.


Meeting History

Sep 10, 2019 2:00 PM  City Council Study Session Meeting
draft Draft

Finance Director Mark Woodfill provided a presentation to Council regarding the Business License and Vacation Rental Registration process which was adopted three years ago and commented that the purpose of today’s discussion is to review the process.

Current License Demographics:

* Businesses located inside City Limits - 2,157

* Home based businesses inside City Limits - 889

* Commercial Properties - 109

* Special Events - 736

* Contractors - 511

* Businesses located outside City Limits - 596

* Total - 4,998

Reasons for Establishing Business Licenses:

* Identify and regulate sober living homes

* Track businesses for safety inspections

* Identify and regulate vacation rentals

* Obtain demographics of business community for Economic Development

* Tax compliance after movement of tax administration to State

Sober Living Homes:

* State legislature moved regulation to Department of Health Services

* Effective 7/1/19 the City is prohibited from licensing

Tracking for Life Safety:

Fire Chief Dennis Light addressed Council regarding issues that spurned the use of business license information to maintain fire safety. He reviewed how inspections are done to ensure proper exits and safety of first responders is maintained. It is important for staff to be familiar with businesses and they do rely on inspection process to do so.

* Safety inspections are required for permanent, brick and mortar businesses open to the public by the adopted International Fire Code. The inspection requirement predated the business license program and will exist with or without business licenses

* Focus is to ensure safety of customers and employees alike. The primary focus is to prevent loss of life

* Focuses on aspects such as exiting, housekeeping, electrical overloading and other safety items that could effect neighboring occupancies in the event of an emergency

* Meant to keep business up and running and avoid interruptions in operations - bad for business owner and employees alike.

* Allows pre-planning so responders can be familiar with occupancy and premises (egress plans, etc) in case of an emergency

* Keeps city records up to date with business contact information in case of an emergency

Councilman Lamerson asked if business licenses are the only means that we have to do these inspections and how the Fire Department obtains contact information of the business owners.

Chief Light stated that they would able to go in and conduct inspections, however, prior to business license issuance obtaining "after hours" contact information was more difficult and they need to be able to maintain that connectivity.

City Manager Michael Lamar commented that the Fire Department would be able to track and obtain that type of contact information through utility billing as well, and reiterated that any weaknesses which may exist could be strengthened should the Business License program be eliminated.

Councilman Sischka asked if every business operating in Prescott is currently licensed.

Mr. Woodfill stated that approximately 90% of the city's businesses are licensed.

Vacation Rental Registration:

* Vacation rental registration is separate from business license

* Only required for rentals located in areas zoned residential

* Vacation rentals in commercial zoned areas are not registered

* We have received one complaint in the last three years in regard to vacation rentals

* Property contact information is available to Code Enforcement through utility billing

Councilman Blair commented that he feels it is important for people to be aware of vacation rentals in their neighborhoods and for potential new homeowners to know what is in the neighborhoods they are looking into. He feels it would be important to keep this program especially as it is separate from business licenses.

Demographics for Economic Development:

* Business licenses provide demographics

* Other sources are now available:


- Local businesses from Localintel which is being presented on the Economic Development website

- Consumer credit card demographic provided by the Buxton Report

Tax Compliance:

* Business licenses help with tax compliance

* Since adoption of the program, other options for tracking compliance have been developed:

- Business canvassing program negotiated with Department of Revenue

- Business intelligence system started by the City of Phoenix

Business Directory:

* As part of the Business License, a directory is provided on the City’s website for public information

* Directory web traffic over the last 30 days:

- Unique page views - 213

- Average time on page - 1 minute

- Review of search criteria reveal 66 unique searches (staff is using this system to look up businesses on a daily basis)

Current Fee Schedule:

$35/year - In City Home Based, Commercial Landlords (per location), Out of City Business and Special Event, In City Business

$100/year - Vacation Rentals

Needed Improvements to Continue Business Licenses:

* Require proof of citizenship or alien status per ARS 41-1080

* Limit license to businesses located within the City limits

* Eliminate licensing for special event vendors

Council Direction Options:

* Business License

* Life safety inspections/registrations

* Vacation rental registration

* Any alternatives council would like to see

Mayor Mengarelli thanked Mr. Woodfill for the presentation and review of why the Business License Program was established. He stated that as long as we are covering our bases on getting information and life safety is addressed he is fine with eliminating Business Licenses.

Councilman Blair asked how many members of staff we have working on Business Licenses, and stated that in the 40 years he has been doing business here in the City he has had to do things outside of city scope that protects himself and his business as well as the public so he feels this is an unnecessary step. With that in mind though he does feel places like care homes need to be inspected and vacation rentals need to be known as well.

Mr. Woodfill said that there is not staff who is solely dedicated to Business Licenses, but approximately 1.5 full time equivalents do work on them throughout the year, particularly at renewal time and those resources could be used elsewhere.

Councilman Sischka asked if ultimately this is really just a gigantic pain in the rear end.

Mr. Lamar said yes it is.

Mr. Woodfill stated that there is a need with regard for public safety concerns that the Fire Department have the ability to be aware of after hours contacts and having access to buildings but the Business Licensing portion is a pain not just for the public but for the employees as well. He stated that the Program served a significant purpose during the issues with Sober Living Homes, but now that those are regulated by the State it is a non issue.

Mayor Pro Tem Orr thanked staff for the work they have done on Business Licenses and reiterated that we have come a long way since this was adopted particularly with regard to sober living homes. The state has taken this over so hopefully they monitor they way they should. She also commented that another issue was vendors during special events not charging sales tax and asked how we ensure that they are doing that. She echoed other Councilmember comments and said that she is all for moving on from Business Licenses even though they were necessary when they were implemented. However, she does feel that Vacation Rental Registration may be the reason we’ve only had one complaint, and that program should remain in place.

Mr. Woodfill commented that we work with special events very closely and could require that vendors be listed on application and have Prescott listed on Tax ID information to help make sure they are listed Prescott on their tax forms.

Councilman Lamerson said that as everyone is acknowledging that we have other ways of ensuring that we have the information that we need from businesses, these Licenses are just another add on expense that they should not have to incur and we do not need it.

Councilwoman Scholl commented that she has no issue with eliminating Business Licenses, but she does feel that we need to continue to monitor Vacation Rentals especially as that industry continues to grow. She also asked if we have looked at how other cities manage their life safety issues.

Chief Light responded that we have looked at how other cities are doing it, but we do have challenges like staffing and time that are impacting us, but the Department is working on getting their arms around that.

Councilman Goode stated that he agrees with other council members and feels it is another layer of tax on business that is not necessary and the Program is of minimal value. He also stated that making sure vacation rentals are safe and properly identified is still beneficial and important.

Councilman Sischka asked if it would have been possible to obtain information regarding Sober Living Homes without the implementation of Businesses.

Mr. Woodfill said most likely it would not have been.

Mayor Pro Tem Orr commented that it is impressive that at the time when Business Licenses were implemented there were approximately 200-300 and now there are only 27 Sober Living Homes.

Mr. Lamar commented that looking at this is a great example of acknowledging that there was a benefit to this at the time it was implemented, but the benefit has waned and it is ok for us to now re-evaluate and eliminate it. This is good practice.

Councilman Blair asked for confirmation that there are approximately 1.75 employees working on Business Licenses and how eliminating the program will impact them.

Mr. Woodfill said the employees working on Business Licenses are Utility Billing employees and there are a number of other projects they could be working on instead.