TO: MAYOR AND CITY COUNCIL MEMBERS, CITY OF CHINO
FROM: LINDA REICH, CITY MANAGER
SUBJECT
title
Business License Reform and Small Business Protection Measure - Resolution 2026-049 calling the Election for the Ballot Measure to Reform the Existing City of Chino Business License Tax.
end
RECOMMENDATION
recommendation
(1) Adopt Resolution 2026-049, to approve the following: a. Call and give notice of a General Municipal Election for the purpose of submitting to the City’s qualified voters “The City of Chino Business License Reform and Small Business Protection Measure.” b. Request the Board of Supervisors of the County of San Bernardino to consolidate the Municipal Election with the Statewide General Election to be held on Tuesday, November 3, 2026; c. Provide and set the rules for the filing of arguments for and against the measure and rebuttal arguments; d. Direct the City Attorney to prepare the impartial analysis of the ballot measure; and e. Provide for other election matters as required by law. (2) Conduct first reading of Ordinance 2026-011 to be submitted to City’s voters, entitled, "AN ORDINANCE OF THE CITY OF CHINO, CALIFORNIA, SUBMITTED TO THE VOTERS BY THE CITY COUNCIL PURSUANT TO ELECTIONS CODE SECTION 9222, ADDING CHAPTER 5.03 TO THE CHINO MUNICIPAL CODE RELATING TO MODERNIZING CITY’S BUSINESS LICENSE TAX, AND PROVIDING THAT THE ORDINANCE SHALL TAKE EFFECT ONLY IF APPROVED BY A MAJORITY OF THE VOTERS VOTING ON THE MEASURE AT THE MUNICIPAL ELECTION HELD ON NOVEMBER 3, 2026,” reading by title only and waiving further reading. (3) Authorize the Mayor, on behalf of the City Council, to prepare and file a written argument in favor of the proposed measure. (4) Authorize the City Manager to execute all the necessary documents on behalf of the City and (5) Appropriate $100,000 from current year General Fund budget surplus to fund the Business License Reform and Small Business Protection Measure election and voter information activities.
body
FISCAL IMPACT
The proposed Business License Reform and Small Business Protection Measure is estimated to increase current General Fund revenues by approximately $4.8 million, from $1.1 million to $5.9 million annually, to support essential City services. If approved by voters, the changes to the business license tax would go into effect on January 1, 2027, with adjustments to revenues to be incorporated into the Fiscal Year (FY) 2026-27 Budget during the mid-year budget review.
The San Bernardino County Registrar of Voters provided the City with an estimated cost of $132,000 to put a measure on the November 3, 2026, General Election ballot. This expenditure is included in the adopted FY 2026-27 budget.
An additional $100,000 allocation in the FY 2026-27 budget is requested for public outreach and education to inform residents, businesses, and the public about the proposed measure.
Approval of this item would adjust the FY 2026-27 Budget as follows:
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above further the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built, by fostering:
• Positive City Image
• Financial Stability
• Responsible Long-Range Planning
|
Revenue: |
Expenditure: |
|
Transfer In: |
Transfer Out: |
BACKGROUND
Summary
The City of Chino requires businesses operating in Chino to obtain a business license and pay an associated annual tax to support general essential municipal activities, such as roads, infrastructure, and services used by local businesses and residents. The City Council is asked to consider placing a measure on the November 3, 2026 ballot to reform the existing Business License structure.
Staff’s goal in developing the proposed Business License Reform and Small Business Protection Measure was to create a structure that does not tax residents, but protects small businesses through a low minimum tax, and provides revenue to support the City services and infrastructure used by the business community. The proposed structure is intended to ensure that businesses contribute in a fair and balanced manner based on their size and level of activity, while helping maintain the public safety, infrastructure, and business support services that benefit Chino’s local economy.
Like many California cities, Chino continues to experience rising costs for public safety, street and infrastructure maintenance, and other essential City services that residents and businesses rely on every day. As part of its ongoing commitment to responsible financial planning, the City regularly evaluates its revenue structure to ensure it reflects today’s economy, supports long-term financial sustainability, and maintains the high-quality services the community expects. The proposed Business License Reform and Small Business Protection Measure is a key part of that broader effort, modernizing a business license structure that has remained largely unchanged for nearly 40 years and establishing a more equitable framework that better reflects today’s business community.
The Current Chino Business License Ordinance
As part of the City’s effort to modernize the business license tax, protect small businesses, and help offset the cost of City services impacted by the larger businesses operating in Chino, staff conducted a comprehensive review of the existing City of Chino business license program and ordinance to identify areas for improvement. On January 20, 2026, HdL Companies, the City’s revenue and economic development consultant, presented to Council on the status of the City’s 39-year-old business license tax and potential alternative models to reform and modernize it.
Since 1987, the City’s business community has expanded and diversified, yet the tax structure has continued to rely on gross receipts categories subject to a maximum fee capped at $1,250, which do not accurately reflect modern business activity and the growing cost of administering and providing essential municipal services.
Additionally, under the current structure, larger businesses pay the same or a similar business license tax as much smaller businesses, despite their larger operations which has generally placed greater demands on City services and infrastructure. Larger businesses often generate heavier traffic, including truck traffic on local streets, increased wear on roads, and greater need for police, fire, emergency response, and crime prevention services. These impacts may include calls related to cargo theft, fraud, burglaries, retail theft, and other business-related public safety concerns. As a result, smaller businesses that have a smaller operational footprint effectively cover a larger share of the cost of City services relative to the impacts they create, while larger businesses may contribute less than their proportional use of City infrastructure and services.
At Council’s direction, staff explored the feasibility of including the Business License Reform and Small Business Protection Measure, based on the Variable Gross Receipts Model, on the November 2026 General Municipal Election ballot. Based on that analysis, staff recommends placing the measure before Chino voters to modernize the City’s nearly 40-year-old business license structure, create a more equitable framework that better reflects today’s business community, align business license obligations more closely with business size and activity, and support long-term financial sustainability while helping maintain the essential services residents and businesses rely on every day.
Variable Gross Receipts Model
The proposed Variable Gross Receipts Model imposes a flat $25 tax on businesses with gross receipts under $75,000, and gross receipts tax rates of $0.60 to $1.50 per $1,000 on receipts over $75,000 based on classification. This model:
• Addresses inequities and imbalances in the current model.
• Reflects current and projected future business trends.
• Creates a comparable structure to that used in similar neighboring cities.
• Uses only five categories, making the structure easier to navigate.
• Streamlines and simplifies the framework to facilitate the license process for business and improve program implementation and administration
• Provides a low base rate that supports microenterprises.
In addition to reforming and updating the business license framework, the proposed measure would provide the City of Chino with an additional estimated $4.8 million annually to cover the costs and mitigation efforts associated with the impacts of the modern landscape of large businesses operating in Chino.
ISSUES/ANALYSIS
Staff analysis and the consultant’s study revealed numerous issues with the existing tax, an outdated structure that relies on gross receipts categories with capped fee that do not accurately reflect modern business activity or the scale or diversity of Chino’s modern business environment.
The current business license tax calculation method depends on the type of business activity established by the City's business license ordinance and fee schedule. Under the current structure, specified in Chapter 5.04 of the Chino Municipal Code, factors such as caps and calculation methods affect how tax liability is distributed among businesses. For certain business categories (manufacturing, warehousing, and administrative headquarters), the fee is based on the number of employees. Overall, under the existing framework, tax obligations have not kept pace with business growth, changes in industry mix, or regional economic conditions.
The analysis revealed several structural issues that would be rectified with the recommended variable gross receipts model:
1. Revenue Imbalance Between Business Size and Contribution
Based on available data, some businesses with higher reported gross receipts contribute a smaller share of total business license tax revenue relative to their share of total receipts. The result is a regressive system in which small and mid-sized businesses shoulder most of the tax burden, while larger, high-volume enterprises contribute disproportionately less relative to their economic footprint.
A review of the business license structure shows that economic activity is concentrated among the largest reporting businesses. The top 100 businesses account for 6.29% of reported employees, 65.29% of all reported gross receipts, but only 12.45% of total taxes charged, with the remaining making up the balance of each category. This imbalance demonstrates that the current system does not scale effectively with business size, with most of the tax revenue being generated by small and mid-sized businesses despite larger businesses accounting for the majority of the economic activity.
While the proposed Business License Reform and Small Business Protection Measure will increase the tax on large businesses, the tax is unlikely to prompt residents and non-residents to shop in nearby cities rather than Chino, as these “big box” stores generally already pay higher business license taxes in those cities than what is being considered in Chino.
2. Flat Revenues
Over the past five fiscal years, annual business license tax revenue has remained relatively flat, ranging from $982,825 to approximately $1.1 million, despite steady economic growth within the City. The City currently has approximately 4,656 active businesses across multiple sectors, including construction, retail, services, medical, transportation, and professional industries, yet revenues have stagnated. As noted above, the current capped system does not scale with business activity and does not allow the City to capture revenue in proportion to economic output. Removing the cap will ensure that the largest businesses contribute their equitable share without shifting the costs to smaller businesses. To further support smaller businesses, the proposal reduces the current $40 minimum fee for businesses earning up to $25,000 in gross receipts to a $25 flat fee for those earning up to $75,000, benefiting the approximately 56% of Chino businesses that fall within this category.
Chino Businesses at or Below $75,000 Gross Receipts (all non-exempt businesses under the minimum gross receipts are assumed to be paying $25)
Revenue Impact of Recommended Variable Gross Receipts Business License Reform and Small Business Protection Measure
3. Regional Competitiveness Concerns
Regional comparisons show that peer cities such as Ontario, Redlands, Pomona, Upland, and Whittier generate significantly more revenue per business under modern gross-receipts-based tax systems. Despite having a large and diverse business base, Chino’s revenue per business remains among the lowest in the region, further emphasizing the need for comprehensive reform.
Jurisdiction Comparison of Business License Tax Revenue Per Capita
The proposed measure will keep Chino competitive with other cities in the region, many of which already have business license tax rates equal to or higher than those being proposed for Chino. The additional revenue generated by these cities has allowed them to make important investments in their communities, including providing additional support for their businesses.
Revenues from the reform measure would be available to fund programs that benefit businesses and the larger Chino community, such as:
• Business crime prevention programs that keep business areas safe, helping attract customers.
• Business support programs help local employers grow and stay in Chino.
• Retail theft prevention programs that help protect businesses, employees, and customers.
• Homeless outreach efforts that address impacts in commercial areas.
4. Structural and Administrative Limitations
The current ordinance has many outdated categories, special rules, and limits that make it hard to manage. These rules can make the process confusing for businesses, create chances for businesses to be placed in the wrong category, and make it harder for City staff to apply the rules consistently.
The proposed measure would move the business license tax to a simpler system based on a business’s gross receipts, or total revenue, and the type of business activity in Chino. This would better reflect the businesses operating in Chino today and make the tax easier to understand and administer.
Proposed Business License Reform - Variable Gross Receipts
The Variable Gross Receipts Model applies tiered rates across five business categories: Contractor, General/Retail, Property Rental, Professional, and Services, while retaining an exempt category and a $25 minimum tax for business with up to $75,000 in gross receipts, with the tiered rates ranging from approximately $0.60 to $1.50 per $1,000 of gross receipts, based on business type.
When these tiered rates are applied to the City’s business profile of 4,656 businesses and $9.40 billion in estimated taxable receipts, the model generates an estimated $5.893 million in annual revenue. This represents an increase of $4.795 million over the current 1987 framework. The model aligns tax obligations with business activity type and captures revenue proportionate to economic scale.
The Business License Reform Measure provides for needed updates and improvements in the ordinance, including:
• Updating business definitions and classifications to provide clearer and more standardized categorization of business activities
• Specifying administrative procedures for assessing and correcting taxes
• Clarifying exemptions
• Providing for renewal adjustments when actual gross receipts differ from estimated
• Incorporating an appeal process
Next steps
On June 2, 2026, the City Council adopted Resolution No. 2026-035, calling for a General Municipal Election to be held on Tuesday, November 3, 2026, for the election of certain City officers, and requesting the San Bernardino County Board of Supervisors to consolidate the City of Chino General Municipal Election with the Statewide General Election.
To provide Chino voters the option to reform and modernize the City’s business license structure as proposed, the Chino City Council must approve Resolution No. 2026-049, authorizing the additional placement of the City of Chino Business License Reform and Small Business Protection Measure on the ballot. If Council adopts the resolution, staff will work with the City Clerk and City Attorney to submit all required documentation by the deadlines noted in Exhibit B of the resolution.
For the proposed measure to pass, a majority +1 vote is required.
The resolution additionally directs the City Attorney to prepare an impartial analysis of the measure and authorizes the Mayor to prepare an argument in favor of the measure and a rebuttal of an argument filed against the measure if required.
A two-thirds (i.e., 4 Councilmembers) vote of all members of the City Council (Gov. Code Section 53724(b) will be required to pass Resolution No. 2026-049 to order the submission of the proposed business license tax ordinance to the voters.
On November 3, 2026, City of Chino qualified voters will vote on the following ballot question:
Accountability
The proposed Business License Reform and Small Business Protection Measure includes accountability provisions, such as public disclosure of all spending and annual independent financial audits, ensuring that funds from this measure will be used efficiently, effectively, and as intended. The City is required to publicly report on the expenditure of revenues, including the revenues generated by the proposed measure.
Attachments: Resolution 2026-049; Exhibit A Ordinance 2026-011