Councilman questions city income source

Alicia Robinson

If you file a business tax return with a Newport Beach address,

chances are the city will find you, thanks to technology.

By cross referencing data from the state Franchise Tax Board, the

city of Newport Beach has brought in nearly $800,000 from new

business-license fees in the last two and a half years. Because of a

state law passed in 2001, the city can use those state records to

find businesses that operate in Newport Beach but don’t have a

business license.

But all that data -- not to mention the money -- coming under the

city’s auspices gives City Councilman John Heffernan pause,

especially in light of recent computer security breaches at national

corporations such as ChoicePoint. He requested more information about

the practice from city staff members, and the council will get it on

April 12.

“This is a huge new revenue source,” Heffernan said. “Where is

this going, what is the right of the city to do it, and more

importantly ... who’s controlling all this information?”

When the issue of business-license data mining came up about a

year ago, Councilman Tod Ridgeway had another concern -- that people

who use a Newport address but don’t actually do business here are

being asked to pay a business-license fee. Ridgeway and Heffernan

have both received letters from the city requesting that they apply

for business licenses they didn’t need.

The leads the city gets aren’t always businesses that require a

license, and there’s a dispute process when people disagree with the

city’s judgment, said city revenue manager Glen Everroad.

Everroad said the money from the licenses goes into the city’s

general fund.

In fact, since the city began the program in September 2002, about

2,100 new business licenses have been issued out of about 11,150

possible leads, he said.

The city gets very little information -- a name, a business

address, a tax identification number and a code denoting the business

type -- from the state, and some of it is required to be destroyed

after a year, Everroad said. Cities aren’t given information about

businesses’ income or expenses.

“There were actually greater safeguards imposed by the state in

this bill, AB 63, than we have in any of the other sources of data

that we obtain for tax records,” he said.

Heffernan said he’s not criticizing what the city is doing. He

just thinks residents have a right to know about it.

“When you get this amount of intrusion into people’s affairs ...

then we better have a policy,” he said. “It’s not just them combing

the Yellow Pages anymore. It’s much more broad.”

* ALICIA ROBINSON covers government and politics. She may be

reached at (714) 966-4626 or by e-mail at alicia.robinson

@latimes.com.