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Proposed Ballot Measure to Restructure Business License Tax Code May 17, 2022 Page 3 II. Phase Two is the Voter Ballot Measure that would act to convert all regular brick and mortar businesses from a steeply regressive set of gross receipts tax rate structures to a proportional set of single gross receipts tax rates with reduced minimum basic tax rate amounts and a maximum gross receipts tax cap amount. This phase would also propose movement of various Fixed Flat Rate Assessment and Variable Flat Rate Assessment business types onto the Gross Receipts Assessment methodology (e.g. ambulance services, professional offices, pawnbrokers, etc.). ➢ The attached Business License Tax Rate Change Matrix outlines the changeover from the current historic business license tax structure to the new proposed business license tax structure (Exhibit 1). Concurrently, staff recommends ending several voluntary business license tax "exclusions" given under SAMC Chapter 21 for public utilities making franchise payments to the City and ending voluntary business license tax "exemptions" for attorneys and private physicians maintaining offices in the City or on hospital premises in the City, while doing business in the courts, or while engaging in surgeries or consultations in city hospitals. Furthermore, staff recommends that a limitation on the City's ability to assess business license taxes on interstate and non -domestic telephone services be lifted, as this limitation no longer reflects current law. Staff, however, does recommend establishing a special public policy tax "exemption" for individuals providing immediate and extended family member in -home childcare services. ➢ Elimination of tax exclusion for public utilities making franchise payments. Franchise payments relate directly to public utilities' authorization to work in the public right of way. The 1905 Broughton Act and the Franchise Act of 1937 authorize granting a franchise to a public utility to use public streets and highways for public utility purposes. The franchise granted is not a general authorization to do business or to use anything other than public streets and highways. Thus, public utility franchisees are not excluded by state statute from City business license requirements even though they pay an annual franchise fee to the City for use of the public right of way. Their exclusion from Santa Ana business license taxation has been entirely a voluntary one, granted by City ordinance that reflected an earlier desire to facilitate the expansion of public utility services in the first half of the last century. Excepting Santa Ana, only one other of California's most populous 13 cities (Riverside) grants such an exclusion. ➢ Elimination of exemption for private physicians maintaining patient offices on hospital premises. The exemption for private physicians maintaining patient offices on hospital premises also reflected an earlier model for the provision of hospital care where hospitals were organized on a nonprofit City Council 37 — 3 5/17/2022