SALINAS, Calif. - Business licenses are the 5th largest revenue source for the city of Salinas bringing in about $4.5 million dollars a year. The Center for Investigative Action uncovered how the city of Salinas is having a difficult time keeping track of who's paying up and following the rules when it comes to business licenses.
David teeter, makes a living off repairing airplanes, and says he's always played by the rules since opening his shop fourteen years ago. "I paid the two business license because I paid my taxes and want to pay what I have to pay," he said.
Four months ago, when he finally realized he was unfairly paying for two business licenses, he brought his story to Central Coast News. "I had a dialogue every year I renewed. The clerk reassured me every year that I was wrong."
The city claimed Teeter was operating two businesses and had to pay for two business licenses. "I repair airplanes. I need to purchase parts to put on airplanes. They say if I do that, that's another businesses. That's not true. I cannot repair the airplanes if I don't sell them the parts to fix them," explained Teeter.
Central Coast News went to the city to find answers and initially talked to City Finance Director Matt Pressey who referred us to the business license code which states, "a separate license must be obtained by each branch establishment or location of the business transacted and carried on and for each separate type of business at the same location."
That language in the code was confusing and not specific enough for us to discern what qualified as a separate business, so imagine a business owner's confusion.
Next we asked City Manager, Ray Corpuz. "Its very difficult to read for many people. We are looking at the application of multiple business licenses," he told us.
The Center for Investigative Action discovered that even though the city relies on revenue from business licenses, it has a very antiquated way of tracking down local business. The city doesn't have a master list of every business in Salinas, licensed or not. No one at the city could even tell us how much money they think Salinas is losing in unpaid licenses.
Central Coast News reporter Cassandra Aresenault asked to see the computer system the city uses to track businesses. It's was obvious the software hadn't been update for decades. Also, the database only lists which business have a license. The only way to know if a business doesn't have a license is to literally type in a name to see if it's in the system.
In 2008 the city admitted it had a problem, and hired a collection agency to find the businesses that were operating without a license. From 2008 to 2011 the company found that Salinas was loosing $1.4 million dollars from business that did not have a license.
Neither the city nor the collection agency would tell us how much of that money the city actually got in back-pay. But whatever the total was, Salinas was only getting half because the rest went to audit agency.
Now the city is finishing up a second round of business license audits, this time the agency will get less than the 50 percent they got last time.
Regardless of the efforts made by the city to find these businesses, some businesses have been skating by for years. We decided to do our own unscientific test to see if things were any better since we brought the city's attention to the business license problem four months ago. We searched every 13th business on Yelp and gave Pressey a list of twenty businesses to type in to his antiquated system. It turned out that two of them did not have a business license.
We asked Pressey if the city would be contacting those two businesses to see if they had a license. He responded with an e-mail saying "all indications say that they are probably out of business".
We checked and both businesses still had working phone numbers, and one even had an updated website. So we paid them a visit to see if they were still operating. Both businesses were open and less than a mile from city hall.
We asked Pressey if there were any consequences for businesses without a license. He said the city is just asking for voluntary compliance. Even though the municipal code says the city could take those people to court to force them to pay up.
Remember David Teeter and his two licenses? After Central Coast News pressed the city for answers about why he was paying for two, both sides finally sat down and got things straightened out.
"I was made to feel like I was the bad guy because I was saying hey this isn't right. Nobody in the city said hey were sorry this happened to you. It was like I was the bad guy to make waves on it," said Teeter. The city did end up reimbursing Teeter nearly $5,000 dollars it incorrectly took from him.