CITY OF HAWAIIAN GARDENS
CITY COUNCIL
STAFF REPORT
Agenda Item #C2
DATE: July 22, 2026
TO: Honorable Mayor and Members of the City Council
FROM: Ernesto Marquez, City Manager
BY: Linda Hollinsworth, Finance Director
RECOMMENDATION:
RECOMMENDATION THAT THE CITY COUNCIL CONSIDER ADOPTING
RESOLUTION NO.022-2026 PLACING A BUSINESS LICENSE TAX MEASURE ON THE NOVEMBER 3, 2026 GENERAL MUNICIPAL ELECTION BALLOT
SUMMARY
In an effort to update and simplify the City’s business license tax structure, and yield revenue that can provide improved services to the community, the City is proposing a business license tax ballot measure.
The City of Hawaiian Gardens business license tax structure was adopted in 1993 by Ordinance No. 412 and is codified in Chapters 5.04 and 5.06 – Business License Fees of the Hawaiian Gardens Municipal Code (HGMC). The current business license tax structure has remained largely unchanged since 1993 and the City determined that a review and update was necessary.
Under the current framework, the tax is applied to various businesses with different types of rates including flat rates, percentage of revenue, number of employees, number of rental units or number of seats in a restaurant. There are approximately 34 categories of business types. Currently, annual average business license tax revenue collected is approximately $140,000. This revenue is recorded in the City’s General Fund and is used to fund City services including public safety, fire services, animal control and maintenance of public infrastructure, including streets, sidewalks, traffic signals, landscaping, and street lights.
The City engaged HDL to review the business license taxes and prepare an analysis of the current tax structure, the businesses within the City, and revenue trends for Hawaiian Gardens businesses, with a comparison of surrounding cities. Using the results of this Agenda Item #C2
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analysis, HDL proposed three models that would update and modernize the business license tax framework and provide an adjustment to revenue to reflect the increased costs for municipal services.
At the July 8, 2026 City Council meeting, City Council provided direction to staff on updating the business license tax structure and placing a business license tax measure on the November 3, 2026 General Municipal Election ballot. The proposed model per Council direction applies a gross receipts structure to all businesses other than contractors and a flat rate for contractors. The simplified structure reduces the number of categories and applies the same rate to all business types to spread the tax burden. The updated business license tax structure is expected to provide additional revenue for the City to use in providing these municipal services for the business community.
New Business License Tax Structure
The City Council considered three models proposed by HdL for an updated and more streamlined Business License Tax structure. The City Council selected the Single Gross Receipts and Contractor Flat Rate structure. This applies a single gross receipts structure to all businesses other than “contractors”, consisting of a $50 flat rate for businesses with up to $30,000 in gross receipts, followed by a fixed rate per $1,000 of gross receipts above $30,000. Under this structure, businesses classified as “contractors”, without a business location in the City, would be charged a flat rate of $175. Applying a rate of $0.95 per thousand of gross receipts over the base of $30,000, this model is projected to generate an estimated annual revenue of approximately $563,810 annually, representing an estimated increase of $423,810 over current estimated revenue using current rates.
The updated structure is projected to increase revenue above the current levels and improve the City’s long-term ability to support municipal services, administrative programs, and fiscal planning.
This structure applies a flat annual tax for “contractors” for those businesses performing work in the City for which a California contractor’s license is required that generally work in the City for limited periods of time, but may have multiple projects throughout the year. A flat rate would allow for multiple projects in one calendar year without requiring business licenses for every project while still providing revenue to cover costs for municipal services. Contractors made up approximately 12% of the business license tax revenue for FY 24-25. Of the comparison cities, two cities also have a flat rate for contractors. Under the current tax structure contractors pay $120 annually. This rate would increase to $175.
Agenda Item #C2
July 22, 2026
Ballot Measure
This report returns a general tax measure for the Council’s consideration for placement on the November 3, 2026 General Municipal Election ballot. The proposed measure would:
Amend Section 5.04.100 of Chapter 5.04 and various sections of Articles I and II of Chapter 5.06 of the Hawaiian Gardens Municipal Code to update and simplify the City’s Business License Tax rate structure for the purpose of raising revenue to provide City services and supplement the General Fund.
Reduce the number of categories and establish a business tax rate based on a gross receipts structure for most businesses and a flat annual tax rate for contractors so that the tax rates will be based only upon three classes of business: (i) all businesses other than contractors will pay an annual $50 baseline flat rate plus a rate of ninety-five cents ($0.95) per $1,000 of gross receipts earned by the business above $30,000, (ii) contractor businesses will pay a single flat rate of $175 annually, and (iii) exempt businesses will not pay the tax.
Consistent with California Government Code Section 53724 and Elections Code Section 9222, the placement of the business license tax measure on the ballot requires a twothirds (2/3) vote of the City Council (four affirmative votes), and as a general tax, the measure requires approval by a simple majority of voters.
The City faces sustained cost pressures for public services that have outpaced existing revenue. If passed, this proposed measure would support the City of Hawaiian Gardens’ long-term fiscal planning objectives by strengthening the City’s revenue framework.
Modernizing the business license tax structure promotes:
• Responsible long-range fiscal planning;
• Alignment between economic activity and revenue generation; and • Improved sustainability of City services.
Staff recommends that the City council adopt the accompanying Resolution placing the measure on the November 3, 2026 ballot.
The ballot question and the City Attorney’s impartial analysis are intended to convey, in plain and neutral language and within the applicable word limits, what the tax does and who ultimately pays it. Staff will engage its consultants to prepare a public information effort to educate voters on the measure if the Council elects to proceed.
Agenda Item #C2
July 22, 2026
Process Timeline
In order to change the business license tax structure, a vote of the registered voters in Hawaiian Gardens is required. A simple majority is required to approve the proposed business license tax structure. Once the Resolution is approved, the City will forward it to the Los Angeles County Registrar of Voters/Elections Department to process the measure for the ballot in November. Staff will work with Englander, Knabe & Allen (EKA) and HDL to do community outreach to provide information and to answer questions from the local businesses and residents. The schedule for placement on the November 2026 ballot is as follows:
Resolution calling for placement on the ballot July 22, 2026 Submit to County Registrar-no later than August 7, 2026 Election November 3, 2026
If the ballot measure is successful, a resolution certifying the election results and that the voters approved the Ordinance will be presented for Council adoption.
The City Attorney’s Office has reviewed this staff report and prepared the accompanying resolution and ordinance. The City Attorney will prepare an impartial analysis for the measure as described in the Resolution.
ENVIRONMENTAL ANALYSIS
The recommended action is not a project subject to the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15378 because it involves calling an election and placing proposed general tax measures before the voters, which does not commit the City to a specific project and will not result in a direct or reasonably foreseeable indirect physical change to the environment. Alternatively, the action is exempt under CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility that the action may have a significant effect on the environment. Any future projects funded by revenue from the measures, if approved by the voters, would be subject to separate environmental review as required. No further environmental review is required for this action.
FISCAL IMPACT
The proposed business license tax structure is projected to produce approximately $563,810 annually. As a general tax, the additional revenue would be deposited in the General Fund and would have a positive impact on the City’s ability to pay for important Agenda Item #C2
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general City services. Actual revenue will depend on approval by the voters and implementation of the new business license tax structure. Election costs are budgeted in FY 2026-2027 with a sufficient amount to include costs related to this ballot measure.
SUGGESTED ACTION
It is recommended that the City Council adopt the attached Resolution calling for the placement of a general tax measure on the November 3, 2026 General Municipal Election ballot for the submission to the qualified voters of a proposed ordinance amending section
5.04.100 of Chapter 5.04 and various sections of articles I and II of Chapter 5.06 of the City’s municipal code as it relates to business license taxes; requesting the County of Los Angeles to consolidate said election with the Statewide General Election of even date; and setting rules and deadlines for arguments and rebuttals for and against the measure.
ATTACHMENTS
A. Resolution 022-2026
B. HdL Presentation - July 8, 2026