Tax on Restaurants, Bars to See Ballot

A proposed initiative to raise city taxes for restaurants and bars in Hermosa Beach has been approved by the City Council to continue on its way to the Nov. 8 municipal election ballot, despite strong opposition from local business owners.

In its meeting Tuesday night, the council publicly stood against the initiative, but unanimously decided not to block it as, under election code, the only fair reason to do so is if the initiative is clearly illegal.

Plus, the initiative to be placed on the ballot.

"I’m convinced by the description of what our role is this evening that it’s our duty to put this on the ballot," said City Councilman Michael DiVirgilio. "While I question some of the legality… particularly the claim that this isn’t a tax on alcohol… I also don’t think that it rises to the threshold of being clearly illegal."

Some opponents have argued that the initiative could be illegal, because it appears to be a tax on liquor as it taxes restaurants that sell alcohol—and taxing liquor can only be done by the state, not municipalities.

But, "I didn’t regard it as a tax on liquor," said City Attorney Michael Jenkins to the council. "The case law makes a distinction on a direct tax on liquor and tax on all businesses… the issue might come up if [the initiative] passes… then we’ll have to address it."

The initiative, prepared by Hermosa Beach resident Jim Lissner, argues that local eateries selling alcohol "have been making extraordinary, and increasing, demands on city services, while the city’s business license tax on the categories... is a flat $2,268 annually. 

"For many years the City Council has discussed asking the voters to approve a substantial increase in this tax, but thus far has not put the matter on the ballot," the initiative reads.

By increasing taxes on the businesses, the initiative estimates to raise an extra $4.7 million for the city.

Among other changes, the initiative proposes that businesses pay $6 per person in their maximum occupancy limit each year—then the fee could go up based on various factors, such as whether alcoholic beverages are sold, dancing is allowed, and closing time.

"The idea that we’re going to collect $4.7 million from this thing is equal to or greater than the chances of a comet falling out of the sky and hitting me right now," said City Councilman Kit Bobko at the council meeting. "We need to do everything we can to make sure it doesn’t pass."

Bobko has been working with the to draft its own ballot initiative for the November election. Hermosa residents and business owners serve on the panel. 

"There will be, hopefully, an alternative that will come through the Business License Tax Committee and there will be another ballot there that, in my opinion, will be fair and equitable," said City Councilman Howard Fishman in support of Bobko and the committee.

Restaurant owners told the council Tuesday that if Lissner's proposed tax hikes are passed by voters in November, it could put them out of business.

"Everybody knows we’re in a recession, I’ve been funding the club out of my savings for a few years," said Mike Lacey, who owns the famed  on Hermosa Avenue. "This will likely close the club."

Business owner Mike Sribney said, "these numbers are absolutely outrageous and will put a lot of people out of business."

He told the council that neighboring Manhattan Beach places an annual fee cap on businesses. For example, the cap could be $8,000 per year for all businesses, he said.

"I just... hope that we can get together as a group and work together to get these numbers more at a reasonable amount," he said.

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