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HomeMy WebLinkAboutSS5 - Business License Tax - CorrespondenceLBH° :oMHS. BERKSHIRE HATHAWAY HomeServices California Properties 140o Newport Center Drive, Ste. 200 Newport Beach, CA 9266o If real estate agents were to be exempted from the City's business license requirements, the initial legal concern is that we could face challenges from other types of independent contractors seeking exemption. This concern is unfounded. Other Independent Contractors do not have the same restrictions placed on their state license that prevent them from acting as independent contactors. Since 2008 the City of Huntington Beach has had no problems from other contractors because the language is specific to reflect the unique situation of Real Estate licensees. (see below) Real Estate Agents. Persons licensed by the California Bureau of Real Estate and having their license placed with a broker licensed by the Bureau of Real Estate for the purposes of supervision and control, as required by state law, shall not be subject to taxation under this title if their broker pays the tax in accordance with provisions of this title and includes the real estate agent as one of his employees for the purposes of computation of the tax. The list they are showing of cities that charge every Realtor® as independent contractor license is not a clear picture. Almost every city has in their code that if you are 1099'd then you are an independent contractor but reality is that most cities do not charge individual agents. The list they are showing of the following cities do not charge individual agents: Cypress, Fountain Valley, Garden Grove (every once in a while they will for a week or so then they stop) La Habra, La Palma, Los Alamitos, Westminster All of the cities above might have the ordinance on their books for 1099s people but it is not enforced. Realtors are the only 1099s people that workers compensation is paid on. That is why the City of Anaheim was the first city to start the change and since then, Long Beach, Tustin, Orange and Huntington Beach has done the same. The only cities I am aware of that charge the BLT in my area is Buena Park ($64) and Carson (a couple hundred dollars Another point that has worked in the past is a true independent contractor can work for whomever they would like, a real estate agent can only work for one broker, they are not a true independent contractor. That with the workers comp seem to work in most of my cities as the top arguments. Phil Hawkins Executive Vice President Pacific West Association of REALTORS° 1601 E. Orangewood Ave Anaheim, CA 92805 714 - 245 -5522 Direct 714 - 245 -5500 Main philh @pwr.net * Costa Mesa, Irvine, Laguna Beach (these 3 added by George Schroeder) Attad -iment 5b THOMAS N. JACOBSON ATTORNEY AT LAW 3750 SANTA F£, SLATE 105 RivmsrmE, CAuFoRmA 92507 (953) 582 -7882 • FACSIMILE (951) 682 -7884 tomatonelacobson la w.com July 7, 2008 The Honorable Debbie Cook and Members of the Council City of Huntington Beach 200 Main Street Huntington Beach, CA 92548 Re: Huntington Beach Municipal Code, Sections 5.08.010 et. sett -, Business License Tax assessed against Real Estate Salespersons and Brokers not acting in the capacity as the Broker of Record Dear Mayor Cook and Members of the Council: I represent the Orange County Association of REALTORS(®, the trade association representing over 10,000 real estate professionals in Orange County, including Huntington Beach. We have been having discussions with the City = concerning the imposition of the Business License Tax on real estate licensees who are not acting in the capacity of the office broker and submit that the Business License Tax should not be imposed upon such individuals because it discriminates against a particular class of employee. We support the City's efforts to collect Business License Taxes from brokers employing salespersons and employing brokers working in the capacity as salespersons (both categories of which will be hereafter referred to sometimes as "agents!), and submit this is the fair and non - discriminatory n1anner to address responsibility for the Business License Tax. Currently, the City of Huntington Beach is proposing to levy the Business License Tax upon every licensee having an address in Huntington Beach. Staff has determined the tax should be levied upon every licensee who reported to the State Franchise Tax Board an address in Huntington Beach and filed a Schedule C with their personal tax return. The basis for the Staff's determination is that Schedule C is traditionally filed in California by independent contractors and is not generally a form used by employees to report income for income tax purposes. We acknowledge that for many purposes a distinction between an employee and an independent contractor can be ascertained by examining whether the individual filed a Schedule C with the State Franchise Tax Board. Like most generalizations, there are always exceptions, and not everything will fit into the category made by the generalization. This is one of those cases_ 13 AttachTnent 5b Thomas N. Jacobson Page 2 An examination as to why meal estate professionals file Schedule C is helpful to understand how this issue arose. Many years ago the real estate industry and the IRS reached an understanding that because of the unpredictability and irregularity of receipt of income by real estate professionals, and the irregularity of the business expenses incurred by real estate professionals, it was in the best interest of the taxing authorities and the individuals if real estate professionals reported income as though they were independent contractors_ in general, the problem faced by the real estate professional and such entities as the IRS were that if a real estate professional received a large commission, and it were treated as ordinary income, it would be annualized and possibly too much tax would be withheld_ On the other hand, in those periods when a real estate professional received a lesser amount of commission, the amount of withholding would be too little_ To best address the irregularity of income and expenses, the real estate industry and IRS agreed to have real estate professionals report income as independent contractors, even though, as addressed below, none of the other attributes of an independent contractor are present in the relationship between the agent and the broker_ As the Council is well aware, real estate professionals are issued licenses by the California Department of Real Estate. There are two categories of licenses_ (1) Broker's f icemse, and (2) Salesperson's License. One of the concepts of the license is that a Salesperson must always work under the direct supervision and control of a Broker and cannot operate a business independent of the Broker_ The commordy used phrase to describe the broker responsible for all of the activities of a particular business, and for supervision of all of the agents in the office (irrespective as to whether they hold a Salesperson's .license or a Broker's license) is the "Broker of Record". As mentioned to above, one of the areas of confusion that arises from time to time involves those individuals who obtain a Broker's license, but for reasons that are personal to theta, elect to join a firm and work for the Broker of Record. Though in possession of a Broker's license they perform the same services as a Salesperson and subject themselves to the same rules of supervision as a Salesperson. For all practical purposes they are equivalent to the Salesperson, especially in the requirement of supervision and their relationship to the Broker of Record_ A Salesperson and a Broker not acting in the capacity as a Broker of Record cannot be true independent contractors for several reasons: 1. The Department of Real Estate requires that licensees affiliated with a particular broker must be fully supervised in all activities relating to their activities in the real estate industry_ An agent cannot contract in their own name and can only be employed by a licensed real estate broker. California Business and Professions Code, Section 14132. 13 -34 Attachment 5b Thomas N. Jacobson Page 3 2. The listings that are taken by the agent belong to the Broker of Record. Absent a specific agreement to the contrary, those listings cannot be taken by the agent if they leave the fuTn and place their license with another Broker of Record. The listings belong to the original broker. 3. All of the acts of the agent must be approved and authorized by the Broker of Record. All advertising and marketing must be approved by the Broker of Record, and as is the case of any employer, the Broker of Record is responsible for all of the acts and omissions of the agent_ 4_ Workers' Compensation insurance is carried by the Broker of Record based on the number of agents working for the Broker of Record. 5. The commissions payable on a transaction are paid to the Broker of Record, even if disbursed through escrow, and the split payable to the agent is a matter of agreement and payable by the Broker of Record to the agent when the commission is paid to the Broker of Record. Gipson v_ Davis Realty Company, 215 Cal. App. 2"d 190, 243 (1963) The State of California has taken the position that it can take jurisdiction over a commission dispute between a Broker of Record and an agent in the same manner as any employee complaining about compensation issues. If the agent were a true independent contractor the State would not have jurisdiction and it would be a pure civil matter, such as when a homeowner has a dispute with a home improvement contractor. Resnik v. Anderson and Miles, 109 Cal App_ P 569, 572 -573 (1990) 6_ There is no scenario under which an agent (except an agent holding a broker's license if they elect to open their own business) can function as an independent business_ A salesperson must always have their license "hung" with a broker in order to transact the business contemplated by their license. The legislature of this state recognizes the salesperson as an employee of the broker "as a matter of lax "_ Resnik v. Anderson and Miles. 109 Cal_ App_ 3d 569,572 (1984)_ 7. Errors and Omissions Insurance is carried through the Broker of Record_ Carriers do not write E&O insurance for individual agents because the broker must be covered for each transaction in which an agent is involved. 8_ Agents cannot work for two Brokers of record at the same time. California Business and. Professions Code, section 10137 9. The California courts have held the Broker of Record is responsible for all of the acts and omissions of the licensee. Grubb & Ellis Co. v_ Spengler, 143 Cal_ ,app. 3d 890,895 (1983). 13 Attachment 5b Thomas N. Jacobson Page 4 10. Courts have held the agent is an agent of the Broker of Record but may not be an independent contractor_ As noted in Payne v_ White House Properties, 112 Cal. App. 3d 455, 471 (1980)_ "Yhe conclusion is that a real estate salesperson may not be an independent contractor, and is an agent as a matter of law. " My client does not oppose the proper application of the Business License Tax. My client believes that Brokers of Record and their office should be the focus of the Business License Tax. By focusing the tax on the office, the City will be consistently enforcing the tax and the incidence of taxation_ The City does not currently tax, nor propose to tax, employees of businesses just because the employee has an address in the City of Huntington Beach. It should not make an exception for real estate professionals and tax their activities at any other sites than the office from which business is transacted and at which the Broker of Record resides_ Our discussions with the City have noted the difference between a real estate professional and the home improvement contractor that enters the City to undertake a remodeling job. The contractor is the "boss" of his or her business. They make all of the decisions and their license from the State of California allows them to act without the supervision of another individual. Such is not the case with the real estate agent. The real estate agent has an umbilical cord attached to its Broker of Record. No other profession operating in Huntington Beach has that umbilical cord and the ten factors listed above. We have taken the liberty to prepare a proposed clarification to the ordinance. The proposed clarification is attached to this letter. We are available to meet concerning the proposed clarification and welcome any questions or suggestion the Council or Staff may have concerning this matter. VC yours, Thom . Jacobson I3 -36 Agenda Item 8 Reviewed. AGENDA REPORT City Manager Finance Director A MEETING DATE: NOVEMBER 19, 2013 TO: MAYOR AND CITY COUNCIL FROM: JEFFREY C. PARKER, CITY MANAGER SUBJECT: BUSINESS LICENSE PROGRAM SUMMARY: At the City Council's October 22, 2013, City staff requested policy direction from the City Council regarding the implementation of Tustin Municipal Code, Chapter 5, Section 2512 Business License which requires any person that transacts and/or does business in the city must procure a City License. The City Council directed staff to conduct the following course of action: 1. Authorize a penalty/business registration amnesty program for businesses that are contacted by either MAS or the City that do not have a business license but are doing business within the City. Unlicensed businesses will not be required to pay penalties for the Tax due if they pay the total Tax due within 30 days of the date of the first notice requesting the business become compliant with the City's ordinance; and, 2. Relative to this program, authorize the refund of all penalties collected by MAS from newly found businesses under this program. This would not include licensed business in delinquent status; and, 3. Relative to this program, authorize the refund of business license fees collected by MAS for the years 2000 -2010 which is prior to the reinstatement of the City's original 2011 amnesty program. This would not include licensed business in delinquent status; and, 4. Prepare several options for the City Council to consider relative to the licensing of brokers and realtors. BACKGROUND: Staff contacted Pacific West Association of Realtors (PWR) and met with Mr. Phil Hawkins, Executive Vice President. PWR represents many realtors and brokers In the Orange County area. Mr. Hawkins provided additional input and comments on behalf of his constituency to City staff. The Association of California Cities Orange County (ACCOC) conducted a survey of 28 Orange County cities to determine business license law and practice. One city exempts realtors, seven cities do not require business licenses, and 20 cities require a business license. The purpose of the City Business License is to insure businesses are in the appropriate location and within guidelines associated with their specific activity. The Business License tax also helps fund critical city services that are utilized by those businesses, such as Police and Fire protection, street rehabilitation and paving, and sidewalk maintenance. Staff has drafted several options for the City Council to consider. Two of the options consider efforts to reduce staff time, increase efficiency both with staff and the customer, increase a business friendly environment, and to allow for consistency within the program. In no particular order, one option is to maintain the current system of requiring Real Estate Brokers obtain a business license based on total gross receipts; however, exempt Real Estate Agents from obtaining a business license per California State Code Section 3200 which indicates that realtors are employees of brokers. A second option is to modify the program to set a flat fee of $25 annually for both Real Estate Brokers and Real Estate Agents. Lastly, the City Council may determine to not change the current program. RECOMMENDATION: It is recommended that the City Council: 1. Maintain the current system of requiring Real Estate Brokers obtain a business license based on total gross receipts; however, exempt Real Estate Agents from obtaining a business license per California State Code Section 3200 which indicates that realtors are employees of brokers, KO 2. Modify the program to set a flat fee of $25 annually for both Real Estate Brokers and Real Estate Agents, OR 3. Make no changes to the existing program. FISCAL IMPACT: The fiscal impact is unknown at this time. CORRELATION TO THE STRATEGIC PLAN: The review of the Business License program correlates to the Strategic Plan Goal C Financial Strength, 2. Explore opportunities for new or increased revenues, b. Evaluate the City's business license program to ensure fairness and equity for all businesses. Attachments: ACCOC Survey of Orange County Cities Department of Real Estate Article Referencing California State Labor Code Section 3200 Attachment 1 THE FOR ONLINE N GOOD i! f a , POLICY Orange County Business Licenses: Brokers and Realtors Overview: In general, most cities throughout Orange County require any individual who files their federal taxes using a 1099 form to acquire a business license. Due to the real estate business' inherent business structure, both brokers and realtors usually have to acquire a business license. The largest exception to this general rule is found in Huntington Beach. In recent years, the City Council voted to exempt real estate agents from acquiring a business license even If they technically file their federal taxes using a 1099 form. The city requires only brokers to obtain a business license because the Council felt that, since the agent works under the broker, they would not technically have a business without the broker. Therefore, realtors /agents that are technically classed as an independent contractor but work under a broker in the city do not require a business license. 1. Afiso Viejo a The city does not require a business to obtain a business license. 2. Anaheim • The city requires every entity that does business to have a license. if an agent is working under a broker, only the broker would require a license. • Realty services are classified under the "services" category and the license fee costs $68 plus $10 per employee. There is an additional $32 processing fee. 0 Fees are due annually. 1 3. Brea • The city requires a broker to have a business license, but the real estate agent does not need a business license. • The business license feels calculated using a formula that takes the past year's gross receipts into consideration. The entire processing typically takes 7 -10 days. • Fees are due annually. 4. Buena Park • Both brokers and realtors are classified under the "professional" category and require a business license. • The fee for the business license is $64 plus $4 for each additional employee. • Fees are due annually. S. Costa Mesa • The city requires business licenses for all those filing their federal taxes with a 1099 form (W -2 employees do not require a business license). • The fee for a business license starts at $26 if the business' gross income is under $25,000. Any income higher than $25,000 requires the license fee to be based on a calculation that takes the year's gross income into consideration. • Fees are due annually. 6. Cypress • As long as a reactor or broker is working within the city limits and files their federal taxes with a 1099 form, they both require a business license. Those working as a W -2 employee do not require a business license. • The business license fee for the first year is $41. Each year after the fee is based on the previous year's gross receipts of money made within the city limits. 7. Dana Point • The city does not require a business license. S. Fountain Valley • As long as a reactor or broker files their federal taxes with a 1099 form, they both require a business license. Those working as a W -2 employee do not require a business license. • The business license fee for the first year is $86 (base fee, plus processing fee, plus state fee) for the first person and $4.25 for each employee thereafter. The second year the fee goes down to $76 plus $4.25 for each employee thereafter. • Fees are due annually. 2 9. Garden Grove Both brokers and realtors are licensed in the same way, whether or not they have a physical location within the city. As long as they are conducting business within city limits, they must obtain a business license. There is an additional form to fill out if the business is within city limits in order for the Planning Department to approve the business' location. • The business license fee for the first year is $68.50. Each year after the fee is based on the previous year's gross income. • Fees are due annually. 10. Huntington Beach • For real estate businesses that are located within and conducting business within city limits: In recent years, the City Council voted to exempt real estate agents from acquiring a business license even if they technically file their federal taxes using a 1099 form. Only brokers are required to acquire a business license because the Council felt that, since the agent works under the broker, they would not technically have a business without the broker. Therefore, realtors /agents that are technically classified as an independent contractor but work under a broker in the city do not require a business license. • For real estate businesses located outside city limits but conducting business within city limits: Any realtor or broker is required to acquire a business license. • Business license fees are charged according to how many employees are in the business, starting at $100, rather than what the gross income is. • Fees are due annually. 11. Irvine « Any person conducting business within the city limits is required to obtain a business license — both realtors and brokers. • Along with the $51 business license fee, the city requires a copy of the realtor /broker license. • Fees are due annually. 12.I.a Habra • The city requires all those that file their federal taxes using a 1099 form to acquire a business license —this includes both realtors and brokers. • While the owner of the real estate company (broker) is required to pay for the entire business license fee, any agents /realtors that are contracted by the broker (1099 employees) must also pay partial fees for a business license. • Any W -Z agent, realtor, or other employee is not required to acquire any form if business license. 91 13. La Palma • The city requires all those that file their federal taxes using a 1099 form to acquire a business license —this includes both realtors and brokers. • The business license fee for the first year is $35 while the following year's fee is based on the business' gross receipts. • Fees due annually. 14. Laguna Hills • The city does not require a business license for anyone. If, however, a business has a physical location within the city, the business is required to obtain a Certificate of Use and Occupancy — this applies to both brokers and realtors who have a physical business location within the city. • The Certificate of Use and Occupancy costs $95 to obtain and is valid as long as the business remains in the same location. 15. Laguna Niguel • The city does not require a business license. 16. Laguna Woods • The city does not require a business license. 17. Lake Forest • The city does not require a business license. 18. Los Alamitos • Both brokers and agents /realtors are required to have a business license, but the fee for agents /realtors (independent contractors) is less than the brokers fee. • if an agent /realtor is a W -Z employee, then the broker is the only one that needs a business license. 4 The fees are as follows and are due annually: 19. Mission Viejo • In general, the city does not require a business to obtain a business license. 20. Newport Beach • The requirement for a business license is determined by how an individual files their federal taxes. Therefore, both a broker and a realtor would require a business license if they file their federal taxes using a 1099 form. W -2 employees do not require any form of business license. The fees are as follows: Thad Coy B=AaSs LIMMe, ax s an as i"I tax, bared on a hsta yxar It is numvuble dairy 12 marah& The baonws kme t 4 baSed can ft lacy Wn Of wfh re yt husmess operates to Ole City Every , kity, the by tax 1t ad tk raf?a¢ , a8 tnaa�tred by Y7td , Q,a+,,,_= 1*� The 2612/20§3 tax year rates are: in - Town C l 3n-, Cakq s $ t,$1 0-- V54 101 = Genera! Buslnees tl-3 S 237.33 1XX 118.67 0-33 501500 Rttalt mist� Stores 429 $ 459.78 33231 234.84 117.45 SOI.501 Eating WWOrinkinptPlacesiRestaura,ttj 30.99 $1,17455 SW,91 587.75 293.64 701,700 impoft/EaportRurclnest 100} $2,352.45 1.754.34 9,1.'423 SW 11 801 -M CoremerciA&igW Mantiacturry 301.320 tatardry/Onl Cleaning Business RatrS107,n IM 53.12 21LZ1 30&321 Cohr Laundry to A+ dP —Wtpar roaghline a -lacy 5{11.500 Professional— taeEAMC5.04ior:stnK 5 237.33 178DO 175.67 5433 Ntsr,frpfgssbtfat : s 15.68 -... We 7,84 8,92 Real EsCata arok, S 237.33 I 115.67 55 -33 (Conti tRealEttata AReni -Late $ zrp3,- tseeoOe1201 Pert -Tirne Is a mraticmum rE 20 hoses per week tititmaRatesskmae 511817 8900 59.34 29.67 Part -TwA Non- Ftafessbnal $ 7.84 $-a 192 195 !4. _ 170-310 Contract Ernplayee (Beauty, nad and hair sadort/shopi ,03 $ 74A3 53.27 3.932 19.76 114131 Contract Instructor (Teacher, trainers of the arts, music.. rah, dance physical fltnesc,a, professlorW 110.140 Massage Practltbner 19. Mission Viejo • In general, the city does not require a business to obtain a business license. 20. Newport Beach • The requirement for a business license is determined by how an individual files their federal taxes. Therefore, both a broker and a realtor would require a business license if they file their federal taxes using a 1099 form. W -2 employees do not require any form of business license. The fees are as follows: Thad Coy B=AaSs LIMMe, ax s an as i"I tax, bared on a hsta yxar It is numvuble dairy 12 marah& The baonws kme t 4 baSed can ft lacy Wn Of wfh re yt husmess operates to Ole City Every , kity, the by tax 1t ad tk raf?a¢ , a8 tnaa�tred by Y7td , Q,a+,,,_= 1*� The 2612/20§3 tax year rates are: in - Town C l 3n-, Cakq s $ t,$1 0-- V54 ho Sales Tax Welled $159 ResidentbAl SSS1 Out of Tetra Based WA post office Box; 088 5193 • Fees are due annually, 21.Orange $1 $U'Otr, 3n-, $t gtd.QO sI.545 3 NiA td A ¢; at1.1k u/A at WA WA • Brokers are required to have a business license, but any agents /reahors working under a broker does not require a business license. • The business license fee for the broker only Is $112, for a broker plus an additional agent/realtor the fee is $122, and for a broker plus more than one additional agent/realtor the fee is $142. w Fees are due annually. 5 22. Placentia • Whether a broker /realtor is licensed by the state determines what kind of business license fee the broker /realtor pays. • If a broker /realtor is licensed by the state then they are classified under the "professional" category and pay a fee of $60 /professional (it is $72/professional if business is outside city but business is being conducted within city limits) in the business, plus $13 for any "non- professionals" (like receptionists), plus a $14 administrative fee, plus $1 in state fees. The following years are determined by the business' grass receipts. • If a broker /realtor is not licensed by the state then they are classified under the "services" category and, for the first year, pay a fee of $48, plus a $14 administrative fee, plus $1 in state fees. The following years are determined by the business' gross receipts. • Fees are due annually. 23. Rancho Santa Margarita • The city does not require a business Dense. 24.San Juan Capistrano • The city requires all those that file their federal taxes using a 1099 form to acquire a business license --this includes both realtors and brokers. • The business license fee for the first year is $37.30 for out -of -town realtors (those that sell property within the city limits) and $70.48 for those with an office within city limits. The following year's fee is $37.30 for both. • Fees due annually. 25. Santa Ana • The city requires both brokers and realtors to have a business license and defines them in the following manner. a "Real estate agent shall mean any person licensed as such by the state and engaged wholly or in part in transacting and carrying on the sale of real estate." o "Real estate broker shall mean any person licensed as such by the state and engaged wholly or in part in transacting and carrying on the sale of real estate Including soliciting or offering to buy, self or lease real property for others; negotiating and collecting loans for borrowers or lenders; dealing in real property sales contracts and promissory notes; receiving advance fees for real estate listings; and dealing in real estate syndicate securities." • In general, any person filing their federal taxes using a 1099 form must have a business license. • Brokers and realtors are charged differently for their business license fee. 0 26.V111a Park • The city treats any professional service the same way when it comes to businesses licenses -- this includes both brokers and realtors. • The business license fee is a flat rate of $107.95 for the first year. The fee for the following years Is based on the business' gross income. 27. Westminster • Anyone who does business in the city and who file their federal taxes with a 1099 form is required to have a business license. W -2 employees do not require a business license. • The business license fee is a fiat fee of $211 for the first year and the renewal rate is dependent on gross receipts with a minimum fee of $141. 28. Yorba Linda Real estate brokers must acquire a business license that is classified under the "professional services" category and must pay an annual $41 flat rate fee which is prorated quarterly. Large real estate agencies must acquire a business license that is classified under the "retail safes" category and must pay an annual fee that is based on gross receipts. 7 Attachment 2 Page 10 -- Real Estate Buklfa California real estate brokers and compensation insurance from the Department offnAntrial Relations alifomia`law requires real estate brokers to provide workers' compensation insurancecovemse for their real estate sales agents, even when those agents arc independent con- trawsors For purposes of workers' com- pensation insurance, the relationship be- tween a real estate broker and a real estate salesperson is governed by Section 3200 et seq.''of the California Labor Code, available at www.leginfiLcegov (click an California Lew). The law mandating that employers carry workers' compensation insurance carne into existence as an exclusive rem- edy for on the job injuries, which would save than from personal injury lawsuits that could devastate their businesses and employment opportunities for agents. In meat months, the failureofsome real cstatebrokersto comply with this law has come to the attention of the Depart- ment of Industrial Relations (DIR), the state agency that oversees en forcement o f the LaborCode, underscoringthe need to educate brokers about their responsibili- ties. Fatlam to comply carries stiff penaMies If an agent of an uninsured broker gets injured while working and cannot collect the workers' compensation ben. efitsto which they oreentitkxithrough the broker's policy, the agent receives ben- efits from the state's Uninsured Employ- ers Fund (UEF), administered by the De- partment of Industrial Relation's Divi- sion of Workers' Compensation (DWC) The DWC, in tum, makes every attempt to collect from the broker on behalf ofthe UEF. The DWC takes steps to recoup funds using the same methods the state uses to collect overdue taxes, child sup• port and student loans, which= include Ilene against real property and asset at- tachments. Additionally, when an investigation conducted by the Department of Indus- trial Relation's Division of Labor Stan- dards Enforcement (DLSE) determines an employer is illegally uninsured, DLSE issues orders preventing the employer from conductingbusiness until they show proof of valid workers' compensation insurance, alongwith civil citations. Civil citations for failure to carry workers com- pensation insurance carry fines of up to S100,000. Real estate brokers who erroneously require agents to cant' their own workers' compensation insurance may also be li- able For potential claims for reimburse- ment and lawsuits from current or former sales agents. Con inued on pop 12 Education and Research Section The Education and Research Sec - tion is responsible for the review and approval of all real estate license continuing education course offerings as well as pre - license qualifi- cation courses offered by private schools. It also administers a research program authorized under Section 10451.5 of the Business and Profes- sions Code and assists the Real Estate Commissioner with the advancement ofeducation and research in the field of real estate. Accomplishments > Reviewed and approved 536 con- tinuing education course offerings and pre - license qualification courses. D Revised and updated the applica- tion forms for continuing educa- tion offerings and pre- license course approval. > Placed all Education Section forms on the DRE Web site providing easier access for course sponsors. Z Implemented the provisions of re- vised Regulations 3000 and 3006 FnH2094 Financial Statement ast year, actual revenue received for the 2003 -04 fiscal year totaled $35,444,538. DRE's actual expenditures for the 2003 -04 fiscal year were $30,999,3 03. Thus, DBE's revenues exceeded ex- penditures by $4,445,235. With rmv- enue and expenditures as they were DRE's reserve balance at the end of fiscal year 2003 -04 was $23,190,177. Fiscal Year 2003 -2004 Revenue Examinations $ 5,785,858 Licensing $ 17,939,048 Subdivisions $ 9,929,918 Other $ 1,789,714 Total Revenue S 35,444,538 Expenditures Personnel $ 21,080,108 Facilities $ 7,461,913 Other $ 2,500,000 — Reimbursements $ 42,718 Total Expenses $ 30,999,303 Net Result $ 4,445,235 Expenditure Comparison (Nei' of rWmbursements) Actual FY 02 -03 $ 29.807,437 Actual FY 03-04 $ 30,999,303 Reserves Comparison * Actual FY 02-03 $ 17,465,920 Actual FY 03.04 $ 23,190,177 ' Ra lecta the $10.9 million /am to the General Fund establishing instructor qualifica- tions for continuing education of- ferings and prelicense courses. >> Implemented an online evaluation form allowing students of continu- ing education offerings and pre - license courses to electronically submit an evaluation of courses and instructors to DRE. > Prepared and distributed to propri- etary schools the course content criteria for the new optional pre - Ii cease course in Common Interest Developments. 111� NOVEMBER 19, 2013 CLOSED SESSION MEETING 5:30 P.M. CALL TO ORDER — Meeting #2332 at 5:30 p.m. ATTENDANCE - Present: Mayor Al Murray, Mayor Pro Tern Charles E. "Chuck" Puckett and Councilmembers John Nielsen, Rebecca "Beckie" Gomez and Allan Bernstein Absent: None City Clerk: Jeffrey C. Parker, City Clerk Others Present: David E. Kendig, City Attorney PUBLIC INPUT — None CLOSED SESSION ITEMS - The Brown Act permits legislative bodies to discuss certain matters without members of the public present. The City Council finds, based on advice from the City Attorney, that discussion in open session of the following matters will prejudice the position of the City in existing and anticipated litigation: 1. CONFERENCE WITH LEGAL COUNSEL — INITIATION OF LITIGATION [Government Code § 54956.9(d2)] — Department of Finance and One Case 2. CONFERENCE WITH LEGAL COUNSEL — EXPOSURE TO LITIGATION [Government Code § 54956.9(d2)] — Two Cases 3. CONFERENCE WITH LEGAL COUNSEL — EXISTING LITIGATION [Government. Code § 54956.9(d1)] — One Case a. Marie Sales, Individually and on behalf of the Estate of Paul J. Quintanar v. The City of Tustin a Governmental Entity, Chief of Police Scott Jordan, Officer A. Gleason, Officer J. Monsoor, and Officer Roque and DOES 1- 10; Case No. SACV12 -01834 CJC (MLGx) City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 1 of 10 4. CONFERENCE WITH REAL PROPERTY NEGOTIATORS [Government Code § 54956.8] — Three Cases 1. Property Lots 1,2,3,4,5,6,7,8,9, 10,11, 11, D, Final Map 17144; Address /Description Lots 32, 34, Tentative Tract Map 17404; a portion Agency APN's 430 -27 -31 and 33 and a portion of APN 430- City Negotiators 37 -10 Agency City of Tustin City Negotiators Jeffrey C. Parker, City Manager, Elizabeth Binsack, Under Negotiation Community Development Director, and John 3. Property Buchanan, Deputy Director of Economic Address /Description Development Negotiating Parties O.C. Property Company, LLC, represented by Rick Agency Kaplan, Mark Smith, John Tran and Mark City Negotiators McGranahan, Cushman Wakefield of California, Inc., Irvine, CA. Under Negotiation Price and terms of payment 2. Property � APN: 430 -391 -12, 430 -391 -09, and 430- 391 -03 Address /Description Agency City of Tustin City Negotiators Jeffrey C. Parker, City Manager Negotiating Parties Tustin Unified School District, represented by Gregory Franklin, Superintendent Under Negotiation Price and Terms of Payment 3. Property 2345 Barranca Pkwy, APN: 434 - 021 -22, Army Address /Description Reserve Center and 15 acres of the Northeast comer of Red Hill Avenue and Warner Avenue Agency City of Tustin City Negotiators Jeffrey C. Parker, City Manager, Matt West, Principal Management Analyst and David E. Kendig, City Attorney Negotiating Parties United States Government acting through the Department of the Army, represented by Stan Wallin, - Jeremy Hollis and Cheryl Connett of the Army Corps of Engineers Under Negotiation Price and terms of payment _ RECESSED at 5:31 p.m. RECONVENED at 7:03 p.m. City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 2 of 10 JOINT COUNCIL, CITY • THE TUSTIN COMMUNITY REDEVELOPMENT AUTHORITY i0 "u CALL TO ORDER — Meeting #2332 at 7:03 p.m. INVOCATION — Councilmember Gomez PLEDGE OF ALLEGIANCE — Mayor Pro Tem Puckett ROLL CALL — City Clerk Present: Mayor Al Murray, Mayor Pro Tem Charles E. "Chuck" Puckett and Councilmembers John Nielsen, Rebecca "Beckie" Gomez and Allan Bernstein Absent: None City Clerk: Jeffrey C. Parker, City Clerk Others Present: David E. Kendig, City Attorney CLOSED SESSION REPORT — City Attorney David E. Kendig — No reportable action PRESENTATIONS o Certificate of Recognition presented to Donna Marsh Peery, Executive Board Member and Secretary of the Board of the California Association of Parks and Recreation Commissioners and Board Members o Government Finance Officers Association Award presented to Pam Arends -King, Director of Finance and the Finance Department o Proclamation presented to outgoing Audit Commissioner Richard Hilde for service i : -3W00 F, It71►1[arisi[+ ► �i►i >I f� o John Gallie o Harold Katzman City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 3 of 10 CONSENT CALENDAR ITEMS 1 -5 It was moved by Councilmember Bernstein and seconded by Mayor Pro Tern Puckett to pull items 3, 4 and 5 and approve the balance of the consent calendar items on the agenda as recommended by staff. Motion carried: 5 -0 APPROVAL OF MINUTES — JOINT REGULAR MEETING OF THE CITY COUNCIL, SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY AND HOUSING AUTHORITY HELD NOVEMBER 5, 2013 Recommendation: That the City Council, Successor Agency and Housing Authority approve the Action Minutes of the Joint Regular Meeting of the City Council, Successor Agency to the Tustin Community Redevelopment Agency, and Housing Authority held on November 5, 2013. 2. APPROVAL OF DEMANDS AND RATIFICATION OF PAYROLL The City Council has approved the use of Government Code Section 37208 to expedite the payment of City of Tustin and Successor Agency to the Tustin Community Redevelopment Agency obligations that are in accordance with the approved budget or continued operations authorizations. Recommendation: Approve Payroll in the amounts of $10,156.46 -and $611,290.53; and Demands in the amount of $ 2,439,855.17. 3. QUARTERLY INVESTMENT REPORT FOR THE CITY OF TUSTIN AND THE SUCCESSOR AGENCY FOR THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY Government Code Section 53646 requires that the Treasurer make an Investment Report to the City Council at least quarterly showing balances by authorized investment and certifying its compliance with the adopted Investment Policy. It was moved by Councilmember Gomez and seconded by Mayor Murray to receive and file the quarterly investment report and direct staff to provide a more detailed report in the future, including a graph displaying a concentraion of investments. Motion carried: 5 -0 City Council/Successor Agency /Housing Authority November 19, 2013 Minutes Page 4 of 10 4. CITY OPTION TO RETAIN OR DELEGATE AUTHORITY FOR AWARD OF AMBULANCE CONTRACT Orange County Fire Authority (OCFA) has contacted the City of Tustin requesting a determination as to whether or not the City would like to retain or delegate its authority for award of its ambulance contract. Currently, the City retains the authority; however, OCFA is requesting that the City make this determination for the current Request for Proposal (RFP) process anticipated for 2014. Attached is a letter from OCFA describing the two options for City Council review. It was moved by Councilmember Gomez and seconded by Mayor Murray to retain contract award authority and direct staff to provide more information regarding the vetting process. Motion carried: 5 -0 5. AB 109 - MASTER MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN THE CITY OF TUSTIN AND THE COUNTY OF ORANGE FOR PUBLIC SAFETY REALIGNMENT AND POSTRELEASE COMMUNITY SUPERVISION ENHANCED LAW ENFORCEMENT OVERTIME SERVICES AND OTHER AUTHORIZED EXPENDITURES Assembly Bill 109, titled "2011 Realignment Legislation Addressing Public Safety" became effective on July 1, 2011, and provided for the enactment of the "2011 Postrelease Community Supervision (PCS) Act." In October 2011, the Orange County Community Corrections Partnership (OCCCP) developed an implementation plan, which included an" allocation of state funding for enhanced municipal law enforcement services. The purpose of the proposed Memorandum of Understanding (MOU) is to continue with established policies, procedures, and cost reimbursement requirements for local agencies, including the City of Tustin, who provide such enhanced law enforcement services. It was moved by Mayor Murray and seconded by Councilmember Bernstein to: 1. Approve the AB 109 MOU between the City of Tustin and the County of Orange for public safety realignment and postrelease community supervision enhanced law enforcement services; 2. Authorize the Chief of Police to sign any AB 109 MOU related paperwork on behalf of the City of Tustin, to allow for the reimbursement of funds; 3. Authorize the Chief of Police to sign subsequent MOU agreements and renewals unless there are proposed substantive changes; and City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 5 of 10 4. Direct the Chief of Police to notify Council if the amount of funding available under this or subsequent MOU agreements changes. Motion carried: 5 -0 REGULAR BUSINESS ITEMS 6 -8 6. APPROVE AGREEMENT WITH THE CITY OF IRVINE, IRVINE RANCH WATER DISTRICT, COUNTY OF ORANGE, ORANGE COUNTY FLOOD CONTROL DISTRICT, AND THE CALIFORNIA DEPARTMENT OF TRANSPORTATION TO FUND THE PETERS CANYON WASH CHANNEL WATER CAPTURE AND REUSE PIPELINE The Agreement provides for joint funding for the construction of the Peters Canyon Wash Channel Water Capture and Reuse Pipeline (PCW Pipeline Project). The construction of the pipeline will enable the City of Tustin to continue to comply with the provisions of the Selenium Total Maximum Daily Load (TMDL) and the Time Schedule Order No. R8- 2009 -0069, as adopted by the United States Environmental Protection Agency and the Santa Ana Regional Water Quality Control Board. The document is a cooperative arrangement between the County of Orange, the Orange County Flood Control District, the Irvine Ranch Water District (IRWD), California Department of Transportation (Caltrans), and the Cities of Irvine and Tustin. It was moved by Councilmember Bernstein and seconded by Councilmember Nielsen' to: 1. Appropriate the first installment Backbone Fee (Fund 187) for the Capture and Reuse Pipeline; and payment of $181,518 from MCAS Peters Canyon Wash Channel Water 2. Approve the Peters Canyon Wash Water Capture and Reuse Pipeline Funding Agreement, and authorize the Mayor and City Clerk to execute the document on behalf of the City. Motion carried: 5 -0 7. RECOMMENDATION OF THE FINANCE DIRECTOR'S APPOINTMENT AS THE CITY TREASURER City Council is asked to consider the recommendation to appoint the Finance Director as the City Treasurer. City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 6 of 10 It was moved by Councilmember Nielsen and seconded by Mayor Pro Tem Puckett to move forward with appointment of the Finance Director as the City Treasurer, who shall be responsible for investing City funds in accordance with the City's Investment Policy that is adopted by the City Council annually, and increase the Finance Director's annual salary by 5% from $165,651 to $173,933 and direct staff to return with a Resolution for City Council's consideration. Motion carried: 5 -0 ; At the City Council's October 22, 2013 meeting, City staff requested policy direction from the City Council regarding the implementation of Tustin Municipal Code, Chapter 5, Section 2512 Business License which requires any person that transacts and /or does business in the City must procure a City License. The City Council directed staff to conduct the following course of action: 1. Authorize a penalty /business registration amnesty program for businesses that are contacted by either MAS or the City that do not have a business license but are doing business within the City. Unlicensed businesses will not be required to pay penalties for the Tax due if they pay the total Tax due within 30 days of the date of the first notice requesting the business become compliant with the City's ordinance; and, 2. Relative to this program, authorize the refund of all penalties collected by MAS from newly found businesses under this program. This would not include licensed business in delinquent status; and, 3. Relative to this program, authorize the refund of business license fees collected by MAS for the years 2000 -2010 which is prior to the reinstatement of the City's original 2011 amnesty program. This would not include licensed business in delinquent status; and, 4. Prepare several options for the City Council to consider relative to the licensing of brokers and realtors. Public Input: City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 7 of 10 • Phil Hawkins • Chris Barr • Michael McCain • Judy Barr s Al Richie City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 7 of 10 RECESSED at 8:12 p.m. RECONVENED at 8:17 p.m. It was moved by Mayor Pro Tern Puckett and seconded by Councilmember Nielsen to maintain the current system of requiring Real Estate Brokers obtain a business license based on total gross receipts; however, exempt Real Estate Agents from obtaining a business license per California State Code Section 3200 which indicates that realtors are employees of brokers. Motion carried: 5 -0 CITY MANAGER JEFF PARKER Announced the Tustin Ranch Road Extension Ceremony will be held on Saturday, November 23 at 9:00 a.m. • Attended the Gift of History event at the Angel Stadium of Anaheim on November 7 • Toured the pumping stations with the Municipal Water District of Orange County on November 8 • Attended the Tustin Area Republic of Women Federated dinner on November 8; guest speaker was Dinesh D'Souza author of "2016: Obama's America" • Commented on Veteran's Day on November 11; thanked those who serve our county; shared quotes from President John F. Kennedy • Attended the Association of California Cities of Orange County Local Government Innovation Task Force on November 12 • Attended the Tustin Chamber of Commerce breakfast on November 13; congratulated the Tustin Police Department; guest speaker was Assemblyman Don Wagner • Attended the Orange County Local Agency Formation Commission on November 14; congratulated Councilmember Gomez on being selected to serve on the Senior Citizens Advisory Council • Attended the Association of California Cities of Orange County Legislative and Regulatory Committee meeting on November 15 • Announced that the Mayor's Thanksgiving Breakfast will be held on November 21 • Announced that the Tustin Ranch Road Extension Opening Ceremony will be held on November 23; congratulated Doug Stack • Wished- all a.Happy Thanksgiving COUNCILMEMBER GOMEZ • Attended the Ideal Spine and Rehab ribbon cutting on November 6 • Attended the American Association of University Women meeting on November 6 City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 8 of 10 • Attended the Veteran's Day lunch at the Senior Center on November 8; local American Legion participated in the celebration e Attended the Tustin High School versus Yorba Linda High School football game • Attended the Tustin Chamber of Commerce breakfast on November 13; guest speaker was Assemblyman Don Wagner Attended the Association of California Cities of Orange County meeting on November 14; guest speakers was Dan Schnur, Director of the Jesse M. Unruh Institute of Politics at USC Honored to install the new Board of Directors Tustin Dollars for Scholars on November 18 Thanked CR &R for compost giveaway Looking forward to the Mayor's Thanksgiving Breakfast on November 21 Looking forward to the Tustin Ranch Road Opening Ceremony on November 23 Wished the Tustin community a Happy Thanksgiving and reminded all the count their blessings COUNCILMEMBER NIELSEN • Attended the Orange County Sanitation District Board of Directors and Steering Committee meeting on October 23 • Attended the Orange County Sanitation District Legislative and Public Affairs Committee meeting on November 12 • Attended the Association of California Cities of Orange County Legislative meeting • Attended the Orange County Council Boy Scouts of America Executive Board of Directors meeting on November 19 • Looking forward to the Tustin Ranch Road Opening Ceremony; thanked Doug Stack for tour and former Mayor Amante MAYOR PRO TEM PUCKETT • Due to traveling, was unable to attend CR &R's compost giveaway • Attended the Transportation Corridor Agencies Board of Directors meeting and three ad hoc committee meetings • Attended the Tustin Chamber of Commerce breakfast; guest speaker was Don Wagner; congratulated Police Officer of the Month • Presented a Proclamation for Scouting for Food on November 9 • Attended the Bonefish Grill ribbon cutting on November 19 • Announced the Tustin Community Foundation Mayor's Thanksgiving Breakfast will be held on November 21; keynote speaker is Erin Runnion • Announced the Enderle Center holiday kickoff event will be held on November 19 • Looking forward to the Tustin Ranch Road Opening Ceremony on November 23 • Wished all a Happy Thanksgiving City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 9 of 10 • Attended the Association of California Cities of Orange County Meet and Greet Event with Neil Peterson, CEO of the Transportation Corridor Agencies on November 6 • Attended the Orange County Transportation Authority Regional Board meeting on November 8 • Attended the Spurgeon Awards luncheon; Chief Richter and Chief Small were honored for their service • Attended the Tustin Area Republic of Women Federated annual dinner; honored to administer oath of office to new board members for 2013 -2014 • Attended the Tustin Chamber of Commerce breakfast; congratulated Police Officer of the Month Royce Del Merari; guest speaker was Assemblyman Don Wagner • Attended the Association of California Cities of Orange County City Selection and Business meeting on November 14; appointed as 3`d District Representative for Orange County Transportation Authority; Councilmember Gomez was appointed to serve on the Senior Citizens Advisory Council • Attended the Association of Califomia Cities of Orange County Legislative Committee meeting on November 15 • Interviewed with Time Warner local news to provide an update on the City • Met with San Juan Capistrano Mayor John Taylor • Attended the Bonefish Grill preopening dinner • Attended with daughter the Substation and Town Hall meeting with Chief Celano, staff and the Orange County Fire Authority on November 16 • Spoke at the Kinship Center event held at the Senior Center on November 17; encouraged all to visit their website: www.kinshipcenter.org • Attended the ribbon cutting for Bonefish Grill on November 19 • Announced SOCAL Water Polo 14 year -old, girls' team won the Gold Medal National Championship • Announced the Mayor's Thanksgiving Breakfast will be held on November 21 • Looking forward to the Tustin Ranch Road Opening Ceremony on November 23; congratulated Doug Stack; thanked former Mayors Jerry Amante and Tony Coco; former Councilmembers and the Orange County Transportation Authority • Announced following the Thanksgiving holiday, the City will light 60 trees along El Camino Real from Newport Avenue to First Street to celebrate the holiday season and the 25th anniversary of the Cultural Resources Overlay District • Wished all a safe Thanksgiving ADJOURNED at 8:49 p.m. — The next meeting is scheduled for Tuesday, December 3, 2013 at 5:30 p.m. or the Closed Session Meeting followed by the Regular Business Meetin at 7:00 p the Council Chamber, 300 Cente i Way, Tustin, mia. ELWYN A. PURRAY, JE F Y C. PARKER, Mayor C' y e City Council /Successor Agency /Housing Authority November 19, 2013 Minutes Page 10 of 10