Pismo Beach City Council
September 16, 2025

PISMO BEACH CITY COUNCIL STAFF REPORT
Agenda Item #12.C
Meeting Date: September 16, 2025
TITLE:

Business Licensing Overview
RECOMMENDATION:

Receive an overview of the City’s business licensing ordinance, Pismo Beach Municipal Code Chapter 5.04.

DISCUSSION:

The City of Pismo Beach engaged HdL Companies (HdL) to audit the City’s business licenses to ensure that businesses are in compliance with Municipal Code Chapter 5.04, which requires all businesses operating within City limits to obtain a business license from the City. HdL was selected to perform this work because it has extensive expertise in business license administration and discovery services.

As part of the audit, HdL identified various businesses that have been operating in the city without a required business license. Historically the City did not have sufficient staffing to conduct business license auditing in-house. This audit and its outreach to non- compliant businesses was intended by the City to ensure that the requirements of the Municipal Code are applied in a fair and equitable manner and to maintain consistency of compliance across all businesses.

The purpose of this staff report and presentation is to provide an overview of the business license ordinance and compliance with the ordinance.

History of Business Licenses
The City adopted its first business license ordinance (Ordinance O-001) on May 20, 1946, establishing a system of license requirements and fees. Over the following decades, amendments were made to include new rates and business types. The most significant update occurred on March 9, 1987, when the City Council adopted Ordinance O-1987- 10, creating the current gross receipts–based payment structure codified in Chapter 5.04 of the Municipal Code. Since that time, only minor updates have been made, resulting in rates that remain among the lowest in San Luis Obispo County. The Municipal Code specifies flat rates for certain types of businesses that are specifically listed in the Code as having flat rates. Similarly, the Municipal Code specifies a per-unit rate for residential rentals. However, for businesses that are not specifically subject to a flat or per-unit rate, the rate is based on the gross receipts of the business.

Purposes of Business Licenses
Business licenses provide numerous purposes to benefit the City, business owners, consumers, and the community at large, including:
Provide regulatory oversight, ensuring compliance with zoning, building, fire, and health/safety codes.

Council Agenda 9-16-2025 12.C-1

Supply accurate information for public safety and emergency response, enabling first responders to know what businesses are operating and where. Offer consumer protection, assuring the public that businesses meet minimum City standards and providing accountability for fraudulent or unsafe practices. Promote equity among businesses, ensuring that all businesses, including home- based and rental property businesses, contribute fairly to services they use. Facilitate community engagement, providing the City with up-to-date contact information for outreach regarding policy changes, emergencies, or economic development.

Revenues from business licenses support the City’s General Fund, which provides essential services including police and fire protection, street and sidewalk maintenance, public facilities, and restrooms.

During the course of the business license audit, a subset of business operators representing commercial property rentals questioned why their business licensing payments were based on rental income.

Why Gross Receipts for Commercial Rentals?
It is generally considered most equitable that larger businesses pay a larger amount than smaller businesses of a similar type. A flat amount per business often does not achieve this goal because a very large business will pay the same amount as a much smaller business. Gross receipts-based rates help ensure this sort of equity. Otherwise, a small landlord would pay the same amount as a landlord of a huge space that uses more services and requires more regulation. , Thus, the use of gross receipts as a measure of business size helps prevent small business from subsidizing large business operators.

Business License Enforcement
The City is conducting a business license audit to ensure that all businesses are complying with the City’s business license ordinance. The City contracts with HdL for administration and auditing services related to business licenses, consistent with common practice among California municipalities. The original agreement was authorized by the City Manager and Administrative Services Director under their contracting authority. HdL administers business licenses for the City as well as performing discovery services to identify businesses that are currently operating in the City without a license. HdL began this process in February of 2025. When HdL began the process, HdL noticed that the a low amount of their property rentals located in the city were licensed, a common issue with business licensing in many cities.

Once HdL identified this issue, HdL sent notices to these property owners based on a couple of different data points. The first is that the property tax records from the county reflected that these businesses owned property in the city and the second was that there appeared to be a commercial tenant at the location via Google searches and miscellaneous other records including business license records.

Council Agenda 9-16-2025 12.C-2

For reference, the City has 14 commercial property building owners that are registered.

However, the City has much more commercial rental activity that is part of normal business activity such as: barber shops renting to barbers, hotels renting out conference room space or other event space, grocery stores leasing out spaces to coin operated machines and other companies such as Starbucks. HdL believes there are potentially 80 commercial property building owners that may be unlicensed.

Confidentiality of Business License Data
All financial information submitted for business license applications, including gross receipts, is treated as confidential taxpayer data and is not shared publicly. HdL’s outreach includes clear contact information for questions by phone or email, and businesses are encouraged to work directly with City staff or HdL to clarify requirements.

HdL communication to businesses that currently do not have a business license HdL has reached out to hundreds of businesses that do not have a business license, including some commercial property owners. Through HdL’s research through publicly available data, HdL identified potential businesses operating without a license. This communication began in 2025 with a letter (see attached sample letter Attachment 1) and a business license application (Attachment 2), followed by two additional letters. The letters provided contact information for any questions via email or phone number. The letter asked for the business to complete the business license application and submit it, or present a valid business license, or explanation why the business does not qualify for a business license. The application for gross receipts includes a section to fill out gross receipts for the past 3 years, if applicable, and the resulting required payments to the City for all three years.

While the letters sent as a part of the audit are routine in nature, staff acknowledges that they may not meet the standards that we have within our community. Upon notification about the communication method, staff notified the vendor and ensured that moving forward all communications would need to be approved by the City, which has now been instituted.

Business Licenses Enforcement in Other Cities
Staff has reviewed business license requirements in places elsewhere in San Luis Obispo County. While methodologies vary, most cities impose either a gross receipts-based rate or a hybrid flat rate. The City’s Administrative Services Department Finance Division is staffed to support ongoing operations for collection of all revenues, accounts payable, payroll, utility billing, budget development and administration, purchasing policy administration, financial reporting, investments, and debt management. The small team hires external auditors for various aspects of financial operations, including City-wide annual financial audits and multi-year transient occupancy tax audits.

Commercial landlords are conducting a business activity in the city, and the point of a business licensing is to require a license and payment to the City by each business operating in the City. HdL has indicated that of the 175 local government entities in California that HdL provides business license services, 170 of those local governments Council Agenda 9-16-2025 12.C-3

require a payment by a business that engages in the rental of commercial property in the jurisdiction.

Compared to peer cities, Pismo Beach’s rates remain low due to the 1987 structure as illustrated in Table 1.

Table 1: Comparison of Business License Fees Across San Luis Obispo County Cities Jurisdiction Fee Structure Description
Pismo Beach Gross receipts–based; tiered by gross receipts amount
San Luis Obispo (City) Gross receipts-based; 0.05% of gross receipts, with a $25 minimum)
Arroyo Grande $30 flat fee
Grover Beach
Based on square footage of their property $60.00-
$950.00 plus other fees that may be owed with the
tax
Paso Robles Gross receipts–based
Atascadero Flat $50 plus $10 each per full-time employee and $5 each per part-time employee
Morro Bay Gross receipts-based
Santa Barbara
Gross receipts-based; tiered by gross receipts
amount ($1.00 per thousand dollars of gross
receipts)
Council Agenda 9-16-2025 12.C-4

Current Pismo Beach Rate
Under the current ordinance, commercial property owners are required to obtain a business license for the activity of leasing property. The amount that must be paid to the City is based on gross receipts from rental income as listed in Table 2.

Table 2: Business License Gross Receipts Amount
Amount of Business Gross
Receipts
(exclusive of liquor sales)
Annual
Amount Comments
New applications $45.00 plus:

SB 1186 Fee $4.00 plus:
00,000–25,000 $ 20
25,001–50,000 30
50,001–75,000 40
75,001–100,000 50
100,001–125,000 60
125,001–150,000 65
150,001–175,000 70
175,001–200,000 75
200,001–225,000 80
225,001–250,000 85
250,001–275,000 90
275,001–300,000 95
$ 300,001–750,000
$ 95 plus $10 for each additional
$50,000 or portion thereof over
$300,001.
$ 750,001 and up
$ 230 plus $20 for each additional
$50,000 or portion thereof over
$750,001.

In order to provide an estimate of what the fee would be beyond $300,001, Table 3 provides a sample of fees ranging from $350,001 to $2,000,000.

Council Agenda 9-16-2025 12.C-5

Table 3: Business License Gross Receipts Annual Amount Examples from $350,001 to $2,000,001
Amount of Business Gross Receipts
(exclusive of liquor sales) Annual Amount
New applications $45.00 plus:

SB 1186 Fee $4.00 plus:
$350,001 $ 105
$500,001 135
$750,001 230
$1,000,001 330
$1,500,001 530
$2,000,001 730
$2,500,001 930
$5,000,001 1,930
Adjustments to Business License Ordinance
Under Propositions 218 and 26, changes to the ordinance(other than administrative, implementing policies or practices, and accounting measures) likely would require voter approval.

Communication between Commercial Property Owners and the City The City received multiple emails from commercial property owners all copied in the same email to express their concerns with having to obtain a business license. Although the group emails requested communication with the City Council, elected officials are prohibited by state law (the Brown Act, Government Code Section 54950 et seq.) from engaging in what is called a serial meeting, when multiple elected officials communicate about a topic within their body’s decision-making purview, outside of a noticed City Council meeting, which email chains like this one can quickly become, even inadvertently.

City staff responded with this information and have provided information to address any questions.

In response to the group’s concerns, the City offered the following changes (Attachment 3):

1. Paused enforcement of commercial property owner business license requirement.

2. One license for multiple units: If a commercial property owner owns multiple commercial rental properties or units in Pismo Beach, they now only need one business license covering all related rental operations, as long as all units are included in gross receipts reporting.

3. No retroactive penalties: The City will waive all past penalties and interest as long as commercial property owners obtain their license by October 1, 2025.

4. Extended compliance deadline: The deadline to obtain a business license is extended to October 1, 2025.

Council Agenda 9-16-2025 12.C-6

Conclusion and Recommendation
The City’s approach to auditing and enforcing business licenses, including for commercial property rentals, is consistent with statewide practices, is based on a long-standing ordinance adopted in 1987, and is essential for ensuring fairness among businesses.

Gross receipts-based taxation is the standard method across California cities, reflecting the scale of business activity and aligning the contributions of property owners with the services they receive.

Staff recommends that Council accept a presentation on the City’s business license ordinance and practices.

FISCAL IMPACT:

This is an informational presentation only. No fiscal action is requested at this time.

ATTACHMENTS:

1. Letter to businesses that may not have a business license

2. Pismo Beach business license application to unlicensed businesses

3. Letter to commercial property owners business license requirement Prepared by:

Nadia Feeser, Administrative Services Director
Dean Pucci, City Attorney
Submitted by: Jorge E. Garcia, City Manager
City Manager Approval:

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Attachment 2
Council Agenda 9-16-2025 12.C-9

City Manager, Jorge E. Garcia
August 1, 2025
Re: Commercial Property Rental Business License Requirement Dear Commercial Property Owners,
tĞĂƉƉƌĞĐŝĂƚĞLJŽƵƌĐŽŶƟŶƵĞĚŝŶǀĞƐƚŵĞŶƚŝŶWŝƐŵŽĞĂĐŚĂŶĚƚŚĞŝŵƉŽƌƚĂŶƚƌŽůĞLJŽƵƉůĂLJŝŶƐƵƉƉŽƌƟŶŐ ŽƵƌůŽĐĂůĞĐŽŶŽŵLJ͘tĞĂƌĞǁƌŝƟŶŐƚŽĨŽůůŽǁƵƉŽŶƌĞĐĞŶƚĐŽŵŵƵŶŝĐĂƟŽŶƐƌĞŐĂƌĚŝŶŐƚŚĞŝƚLJ’s business ůŝĐĞŶƐĞƌĞƋƵŝƌĞŵĞŶƚƐ͕ƉĂƌƟĐƵůĂƌůLJĂƐƚŚĞLJƉĞƌƚĂŝŶƚŽƚŚĞŽƉĞƌĂƟŽŶŽĨĐŽŵŵĞƌĐŝĂůƌĞŶƚĂůƉƌŽƉĞƌƟĞƐ͘ tĞŚĂǀĞŚĞĂƌĚLJŽƵƌĐŽŶĐĞƌŶƐĂŶĚƵŶĚĞƌƐƚĂŶĚƚŚĂƚƐŽŵĞŽĨLJŽƵĨĞĞůƚŚĞďƵƐŝŶĞƐƐůŝĐĞŶƐĞƌĞƋƵŝƌĞŵĞŶƚ ĐŽŶƐƟƚƵƚĞƐĚŽƵďůĞƚĂdžĂƟŽŶ͘,ŽǁĞǀĞƌ͕ƚŚĞŝƚLJ’ƐďƵƐŝŶĞƐƐůŝĐĞŶƐĞƚĂdžŝƐŶŽƚĂĚƵƉůŝĐĂƟǀĞƚĂdž͘tŚĞŶĂ ƚĞŶĂŶƚŽďƚĂŝŶƐĂďƵƐŝŶĞƐƐůŝĐĞŶƐĞ͕ŝƚŝƐĨŽƌƚŚĞŽƉĞƌĂƟŽŶŽĨƚŚĞŝƌŝŶĚŝǀŝĚƵĂůbusiness. Separately, property ŽǁŶĞƌƐǁŚŽůĞĂƐĞĐŽŵŵĞƌĐŝĂůƐƉĂĐĞĂƌĞĂůƐŽĞŶŐĂŐĞĚŝŶĂďƵƐŝŶĞƐƐ—ƚŚĞďƵƐŝŶĞƐƐŽĨƌĞŶƟŶŐŽƌůĞĂƐŝŶŐ property—ĂŶĚĂƌĞůŝŬĞǁŝƐĞƐƵďũĞĐƚƚŽƚŚĞďƵƐŝŶĞƐƐůŝĐĞŶƐĞƌĞƋƵŝƌĞŵĞŶƚƵŶĚĞƌŚĂƉƚĞƌϱ͘ϬϰŽĨƚŚĞWŝƐŵŽ ĞĂĐŚDƵŶŝĐŝƉĂůŽĚĞ͘
tĞĂůƐŽƌĞĐŽŐŶŝnjĞƚŚĂƚƚŚŝƐƌĞƋƵŝƌĞŵĞŶƚŚĂƐŶŽƚďĞĞŶĐŽŶƐŝƐƚĞŶƚůLJĞŶĨŽƌĐĞĚŝŶƚŚĞƉĂƐƚ͕ǁŚŝĐŚŚĂƐ ƵŶĚĞƌƐƚĂŶĚĂďůLJůĞĚƚŽĐŽŶĨƵƐŝŽŶ͘,ŽǁĞǀĞƌ͕ƚŚĞƵŶĚĞƌůLJŝŶŐůĂǁŚĂƐƌĞŵĂŝŶĞĚŝŶĞīĞĐƚ͕ĂŶĚƚŚĞŝƚLJ ƌĞƚĂŝŶƐƚŚĞĂƵƚŚŽƌŝƚLJƚŽĞŶĨŽƌĐĞĐŽŵƉůŝĂŶĐĞ͘dŚĞĐƵƌƌĞŶƚĂƵĚŝƚĞīŽƌƚ͕ĐŽŶĚƵĐƚĞĚŝŶƉĂƌƚŶĞƌƐŚŝƉǁŝƚŚ,Ě> ŽŵƉĂŶŝĞƐ͕ŝƐƉĂƌƚŽĨŽƵƌďƌŽĂĚĞƌŝŶŝƟĂƟǀĞƚŽĞŶƐƵƌĞĂůůďƵƐŝŶĞƐƐĞƐŽƉĞƌĂƟŶŐŝŶWŝƐŵŽĞĂĐŚ͕ŝŶĐůƵĚŝŶŐ ĐŽŵŵĞƌĐŝĂůƉƌŽƉĞƌƚLJƌĞŶƚĂůďƵƐŝŶĞƐƐĞƐ͕ĂƌĞĂƉƉƌŽƉƌŝĂƚĞůLJůŝĐĞŶƐĞĚ͘ ůůďƵƐŝŶĞƐƐƚLJƉĞƐĂƌĞƌĞƋƵŝƌĞĚƚŽ obtĂŝŶĂďƵƐŝŶĞƐƐůŝĐĞŶƐĞ͕ŝŶĂĚĚŝƟŽŶĂůƚŽĂŶLJŽƚŚĞƌƉĞƌŵŝƚƐŽƌůŝĐĞŶƐĞƐĂƐƌĞƋƵŝƌĞĚďLJƚŚĞŵƵŶŝĐŝƉĂů ĐŽĚĞ͕ĐŽƵŶƚLJ͕ƐƚĂƚĞ͕ŽƌĨĞĚĞƌĂůůĂǁ͘
dŽĐůĂƌŝĨLJĂĐŽŵŵŽŶƋƵĞƐƟŽŶǁĞΖǀĞƌĞĐĞŝǀĞĚ͗ŝĨLJŽƵŽǁŶŵƵůƟƉůĞĐŽŵŵĞƌĐŝĂůrental ƉƌŽƉĞƌƟĞƐǁŝƚŚŝŶ City limits, is a ƐĞƉĂƌĂƚĞďƵƐŝŶĞƐƐůŝĐĞŶƐĞŝƐƌĞƋƵŝƌĞĚĨŽƌĞĂĐŚĚŝƐƟŶĐƚďƵƐŝŶĞƐƐůŽĐĂƟŽŶ͍tŚŝůĞŽƌĚŝŶĂƌŝůLJ yes, ŝĨLJŽƵŽǁŶŵƵůƟƉůĞĐŽŵŵĞƌĐŝĂůƌĞŶƚĂůƉƌŽƉĞƌƟĞƐŽƌƵŶŝƚƐŝŶWŝƐŵŽĞĂĐŚ͕LJŽƵĂƌĞŽŶůLJƌĞƋƵŝƌĞĚƚŽ ŽďƚĂŝŶŽŶĞďƵƐŝŶĞƐƐůŝĐĞŶƐĞĐŽǀĞƌŝŶŐĂůůƌĞůĂƚĞĚƌĞŶƚĂůŽƉĞƌĂƟŽŶƐ͘tŚĞŶ ƌĞƉŽƌƟŶŐŐƌŽƐƐƌĞĐĞŝƉƚƐ͕ĂƐ ĚĞĮŶĞĚŝŶ^ĞĐƟŽŶϱ͘Ϭϰ͘ϬϭϬŽĨƚŚĞDƵŶŝĐŝƉĂůŽĚĞ͕ƚŚĞƚŽƚĂůŐƌŽƐƐƌĞĐĞŝƉƚƐĨƌŽŵĂůůƌĞŶƚĂůůŽĐĂƟŽŶƐŵƵƐƚ ďĞŝŶĐůƵĚĞĚŝŶƚŚĞĐĂůĐƵůĂƟŽŶ͘ dŚŝƐŝƐĂƐĞůĨ-ƌĞƉŽƌƟŶŐŽďůŝŐĂƟŽŶ͘tŚŝůĞƚŚĞŝƚLJĚŽĞƐŶŽƚŝŶƚĞŶĚƚŽ ƌŽƵƟŶĞůLJƌĞƋƵĞƐƚƚĂdžŝŶĨŽƌŵĂƟŽŶ͕ŝƚƌĞƐĞƌǀĞƐƚŚĞƌŝŐŚƚƚŽĚŽƐŽŝĨƐŝŐŶŝĮĐĂŶƚǀŝŽůĂƟŽŶƐĂƌĞƐƵƐƉĞĐƚĞĚ͘ Any ƐƵĐŚ ƌĞƋƵĞƐƚǁŝůůďĞůŝŵŝƚĞĚƚŽŽŶůLJƚŚĞŝŶĨŽƌŵĂƟŽŶŶĞĐĞƐƐĂƌLJ͕ĂŶĚƚŚĞŝƚLJŝƐůĞŐĂůůLJƌĞƋƵŝƌĞĚƚŽ ŬĞĞƉĂůůƐƵĐŚŝŶĨŽƌŵĂƟŽŶĐŽŶĮĚĞŶƟĂů͘
We aĐŬŶŽǁůĞĚŐĞƚŚĂƚƐŽŵĞŽĨƚŚĞƌĞĐĞŶƚůĞƩĞƌƐŝƐƐƵĞĚďLJ,Ě>ŵĂLJŚĂǀĞĐŽŵĞĂĐƌŽƐƐĂƐĂďƌƵƉƚŽƌ ŽǀĞƌůLJĂŐŐƌĞƐƐŝǀĞ͘dŚĂƚǁĂƐŶĞǀĞƌŽƵƌŝŶƚĞŶƟŽŶ͕ĂŶĚǁĞĂƉŽůŽŐŝnjĞŝĨLJŽƵŽƌLJŽƵƌƚĞŶĂŶƚƐĨĞůƚƚŚƌĞĂƚĞŶĞĚ ŽƌĐĂƵŐŚƚŽīŐƵĂƌĚ͘KƵƌŐŽĂůŝƐƚŽďƌŝŶŐĞǀĞƌLJŽŶĞŝŶƚŽĐŽŵƉůŝĂŶĐĞŝŶĂĨĂŝƌĂŶĚƚƌĂŶƐƉĂƌĞŶƚŵĂŶŶĞƌ—not ƚŽƉĞŶĂůŝnjĞŽƌŝŶƟŵŝĚĂƚĞ͘ tĞŚĂǀĞĚŝƌĞĐƚĞĚĂĐŚĂŶŐĞŝŶĐŽŵŵƵŶŝĐĂƟŽŶƐƚƌĂƚĞŐLJƚŽĂĚĚƌĞƐƐƚŚĞĐŽŶĐĞƌŶƐ ƌĂŝƐĞĚƚŽƚŚĞŝƚLJ͘
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2 dŽĞŶƐƵƌĞĐŽŶƐŝƐƚĞŶƚĐŽŵƉůŝĂŶĐĞ͕ǁĞĂƌĞƌĞƋƵŝƌŝŶŐĂůůĐŽŵŵĞƌĐŝĂůƌĞŶƚĂůŽƉĞƌĂƚŽƌƐƚŽŽďƚain a business ůŝĐĞŶƐĞŶŽůĂƚĞƌƚŚĂŶKĐƚŽďĞƌϭ͕ϮϬϮϱ͘ƐĂŽŶĞ-ƟŵĞĐŽƵƌƚĞƐLJ͕ƚŚĞŝƚLJǁŝůůŶŽƚƐĞĞŬƉĞŶĂůƟes as long as ƚŚĞůŝĐĞŶƐĞŝƐƐĞĐƵƌĞĚďLJKĐƚŽďĞƌϭ͕ϮϬϮϱ͘
dŚĂŶŬLJŽƵĂŐĂŝŶĨŽƌLJŽƵƌĐŽŶƟŶƵĞĚƉĂƌƚŶĞƌƐŚŝƉĂŶĚĨŽƌŚĞůƉŝŶŐƵƐŵĂŝŶƚĂŝŶĂƚŚƌŝǀŝŶŐďƵsiness ĐŽŵŵƵŶŝƚLJŝŶWŝƐŵŽĞĂĐŚ͘/ĨLJŽƵŚĂǀĞĂŶLJƋƵĞƐƟŽŶƐŽƌǁŽƵůĚůŝŬĞƚŽĚŝƐĐƵƐƐƚŚŝƐĨƵƌƚŚĞƌ͕ƉůĞĂƐĞĨĞĞů ĨƌĞĞƚŽĐŽŶƚĂĐƚŵLJŽĸĐĞĚŝƌĞĐƚůLJ͘/ĨLJŽƵŚĂǀĞĂŶLJƋƵĞƐƟŽŶƐŽƌǁŽƵůĚůŝŬĞĂƐƐŝƐƚĂŶĐĞŶĂǀŝŐĂƟŶŐƚŚŝƐ ƌĞƋƵŝƌĞŵĞŶƚ͕ƉůĞĂƐĞĚŽŶ’ƚŚĞƐŝƚĂƚĞƚŽĐŽŶƚĂct us at (805) 773-ϰϲϱϱŽƌĞŵĂŝůďůΛƉŝƐŵŽďĞĂĐŚ͘ŽƌŐ.

Sincerely,
Jorge E. Garcia
ŝƚLJDĂŶĂŐĞƌ
ŝƚLJŽĨWŝƐŵŽĞĂĐŚ
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