News

Brouhaha continues over city's business licenses

More complaints emerge from residents targeted in sweep

Mountain View's ongoing dragnet targeting unlicensed businesses operating in the city may be creating more problems than it is solving. Since the effort launched last year, the city has netted just over $10,000 in new license fees, but it is burning through the goodwill of many residents.

The Voice detailed Mountain View's efforts to rein in noncompliant businesses last year. Since then, complaints have been mounting from hobbyists and professionals who say they are being unfairly targeted. Some have hinted they might take legal action against the city.

Take the example of Roy Mize, a longtime Mountain View resident who received a letter in the mail last month indicating he could need a business license. The message came from HdL Companies, a Los Angeles County firm hired by Mountain View to track down unlicensed businesses for a cut of the proceeds.

In the letter, HdL representatives noted that Mize's company, Workplans, was conducting business in Mountain View and should get a license.

That notice left Mize scratching his head. Now 82 years old, he's been retired for more than 15 years. Workplans was never a business, he said. It's an old dummy website of garden pictures that he and his wife created years ago while they were taking a HTML class.

As he mulled the letter, Mize became more incensed. How did they get his information? Why didn't they visit his site before sending a letter? How many others had paid the fee just to avoid the hassle?

Mize now believes HdL was scouring website URLs and spamming any sites they could trace to Mountain View. Needless to say, he is refusing to pay.

"This is ridiculous -- all they would have to do is look at my website to see that I'm not operating a business," Mize said. "They aren't asking for much money, but it's the principle of the matter."

City finance staff defend the program. They point out that the letters sent out on behalf of the city are only suggesting that the recipient may need a business license. Anyone who thinks he or she was contacted in error can call up HdL and explain the mistake, wrote Assistant Finance Director Suzy Niederhofer in an email. In the case of Mize, she believes that a phone conversation would have cleared up the issue.

"People or organizations who believe they are not subject to the business license requirement have the opportunity to explain why they are not subject to it," she said. "After a brief conversation, (HdL) would likely inform Mr. Mize he is not required to have a business license."

But even some who are clearly running a business say they feel wronged by the new enforcement. Gregory Baum, a 70-year-old resident, also received a warning letter from HdL. The letter was sent last year regarding his sales of Western-themed art and antiques.

Baum describes his trade as more of a hobby. For years, he's occasionally hawked items at local flea markets and events, earning maybe $3,000 a year after expenses, he says. He can't recall ever selling an item in Mountain View -- all of his transactions have been in other cities, he says.

Baum went to City Hall to explain this, but he was told he still needed a city license since his business was "emanating" from Mountain View. He decided not to put up a fight because he was told it would cost only $31 to register.

But that turned out to be wrong. The bill from HdL that arrived in the mail was for $178. He was charged for four years of business-license fees plus late penalties.

"At this point, I've only done about $250 worth of business through the year," Baum said. "This isn't me getting rich; it was always just a hobby of mine."

HdL was hired in 2015 to audit the city's business licenses. The job involved tracking down unlicensed businesses and persuading them to come into compliance. Under the deal, the city doesn't directly pay HdL, but the firm is entitled to keep 35 percent of any new business fees it helps capture.

In an interview, HdL professional services director Josh Davis declined to give specifics on how his company tracks down unlicensed businesses. Basically, the company's methods involve searching through state and county databases for clues of business activity, he said.

But how could this database search mistake Mize's website of gardening photos for a business?

"I can't give any specifics on how this popped up, but there must have been something," Davis said. "It's inherently an investigative process and sometimes people have absolutely no legitimate business. But most times they do, and we help them get compliant."

Yet some organizations with clear business ties to Mountain View seem to slip through the dragnet. As noted in the Voice story published last year, HdL was lacking a Mountain View license even though it was conducting business activity within the city. Since then, the firm has apparently paid its fees back to 2013 and is now listed in the city's license database.

Similarly, many obvious names of large global companies operating within the city are conspicuously absent in the city's listings, including Airbnb, Uber, and Amazon. Asked about this, City Finance Director Patty Kong said retail websites like Amazon fall outside the city's purview since they use third-party shippers to deliver packages. She suggested that companies that use independent contractors, like Airbnb and Uber, could be required to get licenses for each contractor, but she couldn't say whether the city has tried to compel the contractors to pay the fees. Davis declined to say whether these companies had been contacted.

"If a business has no physical presence in the city, then no license is required," Kong wrote. "However, a business that is located in Santa Clara, but comes to Mountain View to conduct business, is still required to have a license."

City staff could not say exactly how much staff time has been spent managing the business-license audit. The practice of cities outsourcing business-license enforcement is nothing new. Many municipal contractors reportedly offer the service, and Davis estimated that about one-third of California cities retain an outside firm to do it.

But in Mountain View, the business-license sweep has apparently touched a nerve. The backlash started last summer when HdL officials argued that Mountain View resident Jan Johnston-Tyler was obliged to get a business license because she telecommuted for her Santa Clara business from her Mountain View home. The city later dropped the case, but Johnston-Tyler remains bitter over the episode.

"This is overreach and it must be stopped," she wrote to the Voice. "HdL's primary objective is to make money out of fear. How my city, in which I have lived for over 30 years, continues to work with them is unthinkable."

Comments

14 people like this
Posted by @HdL
a resident of Sylvan Park
on Jul 13, 2017 at 2:23 pm

Has HdL paid their business licensing fees to operate in MV?

I remember this article from last year stating that HdL had not paid while they were trying to force others who at time work from home.


22 people like this
Posted by Otto Maddox
a resident of Monta Loma
on Jul 13, 2017 at 2:34 pm

Seen this before with the private management of redlight cameras.

I'm not against a company seeking to make money. I'm all for it in fact.

But law enforcement and profits should never cross paths. You end up with bad results.

The motivation should be compliance with the law. HdL is motivated to maximize profits.

If the City of Mountain View is unable to enforce their own laws it's time to either get rid of the law or hire more people to enforce them.

My vote is to get rid of the law. What is this license really doing? It's just a money grab.


2 people like this
Posted by @ @Hdl
a resident of Another Mountain View Neighborhood
on Jul 13, 2017 at 2:34 pm

Please read the article before commenting. Your question, although a good one, is addressed.


21 people like this
Posted by Jeff
a resident of Old Mountain View
on Jul 13, 2017 at 2:47 pm

Once set up, surely it costs HdL very little to spam first and ask questions later. The City has engaged a vendor with incentives to be blindly aggressive and puts the burden of negative proof on the accused citizen. This is one step better than phishing. It sure feels slimey when executed as is apparently happening.

With no intervening human examination, probably very many of these attempts are unwarranted. Retroactive fee and penalty demands are another thing that should be evaluated in a reasonable manner.

By the way, I have two current MV small business licenses. While cheap, these are essentially worthless to me in terms of any value that the City provides directly. One is for a home business that is on the scale of a hobby, the other is really independent of location, but I happen to live in MV. I maintain licenses simply as evidence of legitimacy for banking and insurance purposes, along with one Franchise Tax Board resale permit.

Jan Johnston-Tyler, as quoted in the article, puts it very well: "How my city, in which I have lived for over 30 years, continues to work with them is unthinkable."


7 people like this
Posted by Resident
a resident of Cuesta Park
on Jul 13, 2017 at 2:55 pm

These letters belong in the shredder.


26 people like this
Posted by Varsity Park
a resident of Cuesta Park
on Jul 13, 2017 at 3:50 pm

A year or so ago I received a letter from HdL, they contacted me because I have a Resale Number from the State and moved to Mountain View in late 2012. HdL said I need to pay for the license plus three years of penalties, I sent HdL proof that I did not do business in Mountain View (my 2013 resale tax return show no business activity). HdL then contacted me and informed me that it did not matter that I did not do any business in Mountain View in 2012 or 2013 BUT JUST THE FACT THAT I HAD A RESALE NUMBER MEANT THAT I NEEDED A BUSINESS LICENSE, in fact the woman at HdL then told me to "google it". We did and guess what, you don't, they outright lied. Of course we then when to the City and it was taken care of but who knows how many people were fraudulently charged for business licenses and penalties by the City's hired agent.


20 people like this
Posted by SRB
a resident of St. Francis Acres
on Jul 13, 2017 at 4:21 pm

SRB is a registered user.

Has anybody done a cost/benefit analysis?
Per the article, that program has netted less than 10K. How much has it cost us so far? (Hdl fees + City staff time spent on this)
Meanwhile ... isn't the City forgoing $1M in yearly "airbnb" taxes?


12 people like this
Posted by Alex M
a resident of Willowgate
on Jul 13, 2017 at 6:45 pm

Yeah. Years after I was briefly a freelance contractor doing all my work OUTSIDE of Mtn View, I got a couple of those letters, probably because I still have my bank account using a legally registered fictitious business name. I replied by email explaining their error and never heard from them again. If I do get another letter, I'll consider legal remedies for harassment.


9 people like this
Posted by Waldo
a resident of Waverly Park
on Jul 13, 2017 at 7:44 pm

Waldo is a registered user.

I legally registered a fictitious business name with Santa Clara County about fifteen years ago and worked a consulting business from my MV home. When HdL sent their first letter to me, I replied that the business ended ten years ago. Even so, they sent me the exact same form letter a couple months later, to which I replied again with the same information, adding that all future correspondence from them was going unopened into recycle. That was few months ago and no more letters from them, so maybe they got the message.


12 people like this
Posted by Otto Maddox
a resident of Monta Loma
on Jul 14, 2017 at 7:35 am

It has cost the City nothing according to the article. HdL gets 35% of any funds they recover.

If the City creates a law it cannot enforce they should repeal the law as ineffective.. not sick a collection agency on its citizens.


12 people like this
Posted by Resident
a resident of Cuesta Park
on Jul 14, 2017 at 9:44 am

@Otto: This has probably taken hundreds of hours of city employees' time to (a) realize that there was an "issue," (b) convince superiors that there was an issue, (c) put out bids or seek contracts for the work, (d) review the contracts, (e) run the contracts through legal and negotiation, (f) run the contracts up the chain for approval, (g) chase for approval, (h) initial kick-off with the contractor, (i) monitor the contractor, (j) answer 500 questions from the contractor, (k) deal with 200 angry, complaining residents or residents with questions, (l) prepare internal reports on progress, etc.

All while inflaming people with this ridiculous nickle-and-diming from an outside agency. If this were a letter mailed by the city that explained the business license requirement with a simple Q&A (and perhaps an explanation as to what the fees go toward, embellished as I suspect they would have to), it would have been much better received.


2 people like this
Posted by Brewhaha
a resident of Another Mountain View Neighborhood
on Jul 14, 2017 at 2:01 pm

What a great name for a cannabis beer!


10 people like this
Posted by Dhdhxndodnd
a resident of Castro City
on Jul 14, 2017 at 8:11 pm

What's this BS about "could have been resolved with a simple phone call"?
Not happening. Why should I spend my valuable time calling them to try to fix their error? If I don't have a business and you send me one of these letters - that's not my problem. You fix it.


2 people like this
Posted by Otto Maddox
a resident of Monta Loma
on Jul 17, 2017 at 7:09 am

@Resident: How naĂ¯ve of me.. all your points are most likely 100% correct.

There I was thinking the City was being efficient. What a rookie mistake.


8 people like this
Posted by Dave Platt
a resident of Monta Loma
on Jul 17, 2017 at 4:01 pm

HdL definitely seems to be a bit out of touch with the actual law.

My wife has had a (professional) city business license at our home address for about 15 years. HdL has written her twice over the past few years, and she's sent them a current copy each time. This year, they're claiming that she needs a second business license (to cover her small hobby art-sale business from our home) and needs to pay a second fee. The city law says otherwise: SEC. 18.12 specifically says that only a single license is required for two or more businesses by the same owner at the same location, and that only one fee needs to be paid (the higher of the rates, which are the same in her case).

Also, FYI, SEC. 18.5 says "Every person commencing, transacting and carrying on in the city any business in a home in a residential zone, whose annual gross receipts from such business is five hundred (500) dollars or less, shall be exempted from the payment of a license tax hereunder." So, small "home hobby business" or casual-sales businesses don't require paying a fee to the city, even if you have a reseller's permit. I suspect that HdL isn't telling people that when they write/call.

I encourage anyone contacted by HdL to actually go read the city code and find out what your obligations really are:

Web Link


Like this comment
Posted by a MV resident
a resident of Old Mountain View
on Jul 18, 2017 at 12:28 pm

Did I miss something? Nowhere in the article did I read what kind or size of business is required by the City to have a business license. I guess I'll have to contact the appropriate City office to get that information.


2 people like this
Posted by Another MV resident
a resident of Old Mountain View
on Jul 18, 2017 at 1:28 pm

No, "MV resident," you only need to read the comment preceding yours (always a good policy anyway!). It has an explanation and a link for authoritative info. So it seems the answer to your opening question is yes.


Like this comment
Posted by a MV Resident
a resident of Old Mountain View
on Jul 18, 2017 at 3:44 pm

Thanks to Another MV resident for pointing me to the comment just before mine, that gives the information for which I'd been looking. I had not read that comment carefully enough to get it. I do think it would have been useful and pertinent for the MV Voice to have included who is required to have a business license.


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