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Proposed Ballot Measure to Restructure Business License Tax Code May 17, 2022 Page 5 and (2) licensed businesses who are past due for the current year or who have been under -assessed may come current with their tax obligations without penalty. Staff recommends that the Tax Holiday Program be for a period of not less than 12 months. Staff also recommends that the commencement and conclusion of the flexible Tax Holiday Program be at the administrative discretion of the City Manager. In exercising this discretion, Staff recommends that the program conform to the differing tax periods reflecting participating businesses' underlying business license tax assessment categories. III. Phase Three is an optional Reconciliation Ordinance, to be adopted after the approval by Santa Ana voters of the proposed Voter Ballot Measure, which would act to comprehensively reconcile the procedural processes of the Business License Tax Code to successfully administratively implement Phase Two (Approved Voter Ballot Measure). Annual Cost Price Index ("CPI") adjustment of gross receipts tax rates will cease with the adoption of the proposed of proportional rates. However, annual CPI adjustment of the minimum basic gross receipts tax rate amount, application and renewal processing charges, and other miscellaneous charges, together with flat rates, and In Lieu Deposit amounts, qualifying threshold amounts will continue as these rates, charges, and amounts will otherwise erode in value over time due to the effect of inflation. Proportional rates do not require adjustment as they rise and fall with the volume of business done and so naturally account for inflationary/deflationary effects. Flat rate tax assessments are recommended to continue for business types where long standing customary industry practice and ease of customer compliance and City administration warrant; e.g. state - license contractors, residential rentals, home occupations, free-lance independent contractors, etc. Certain of these flat rates are proposed to be adjusted for various individual occupational categories where the prior cumulative CPI rate adjustment was effectively overstated and ultimately not in keeping with a correspondingly increased business revenue or personal income. Staff welcomes questions and discussion concerning these recommendations as well as guidance and direction from City Council regarding staff's proposal for the following: (1) A Voter Ballot Measure for the November 8, 2022 General Election to restructure non - cannabis business license tax rates under SAMC Chapter 21; and (2) A flexible Tax Holiday Program for unlicensed, past due, or under -assessed Santa Ana businesses. ENVIRONMENTAL IMPACT There is no environmental impact associated with this action. City Council 37 — 5 5/17/2022