Agenda Index City of Vancouver

POLICY REPORT

LICENSING

TO:

Standing Committee on City Services and Budgets

FROM:

The Chief License Inspector

SUBJECT:

Amendments to License By-Law No. 4450: Vending Machines

 

RECOMMENDATIONS

GENERAL MANAGER'S COMMENTS

The General Manager of Community Services RECOMMENDS approval of A and B above.

COUNCIL POLICY

Council, by way of License By-Law No. 4450, regulates the payment of fees for business licenses in the City of Vancouver, and includes regulations pertaining to the licensing of vending machines.

PURPOSE & SUMMARY

The purpose of this report is to propose amendments to License By-Law No. 4450 which
change the method of license fee collection for certain types of vending machines, resulting in additional revenue for the City and a more streamlined and efficient internal operation with less demand on City resources.

BACKGROUND

Currently, License By-Law No. 4450 states that all vending machines must be licensed under the provisions of the By-law and have attached thereto a certificate or plate supplied by the Inspector (a decal is presently used) which indicates that the machine is licensed for the current year. Vending machines are defined to include all machines, with the exception of those in an arcade, that require a coin or slug to operate and are used to sell or dispose of any goods, merchandise or articles for the purpose of providing music, games, amusement or services of any kind whatsoever. This includes washers and dryers, machines dispensing merchandise, bank machines, newspaper vending machines and other coin-operated machines offering specialized services such as shoe shining or body massages.

Vending machines are located throughout the City in apartment/condominium buildings, commercial retail and liquor license establishments, shopping malls, unlicensed areas such as office building lobbies, schools and hospitals and on city streets. Most of the machines are normally leased by their owners to the businesses in which they are located. Many vending machines are also moved around from one location to another on a regular basis. Currently, the City charges vending machine owners an annual license fee of $24.00 per machine, with the exception of bank machines which are charged an annual license fee of $95.00 per machine. Upon receipt of payment, the City mails out decals to be attached to each licensed vending machine.

Although vending machine license fees are currently received directly from the owner, the Vancouver Charter also gives the City permission to obtain these monies from the occupiers of the premises in which the machines are operated. Specifically, Section 272.1(m) of the Vancouver Charter states that "Council may from time to time make by-laws....(m) for licensing persons who make available for the operation by other persons any lawful automatic or slot machine used, or intended to be used, for the purpose of vending merchandise or services. The persons so licensed may be the owners of such machines or may be the occupiers of the premises where they are operated."

DISCUSSION

Collection of Vending Machine License Fees

At $24.00 per machine (not including bank machines), the annual license fee for vending machines is small relative to other business licenses. As a result, it is more cost effective for City Inspectors to focus most of their time tracking down unpaid business licenses and less time and effort following-up on vending machine decals. The fees collected from unpaid business licenses bring in considerably more revenue for the City. Furthermore, collecting fees for unlicensed vending machines is a difficult and time-consuming process which necessitates gaining access into apartment buildings and/or commercial establishments to ascertain the license status of vending machines on-site. Only then can appropriate fees for all unlicensed machines be collected. Gaining access into commercial establishments during business hours is not a problem, however, entering an apartment building is normally more difficult as arrangements with the owner/landlord must be made beforehand. Often, the appointment is canceled or the landlord/manager fails to show up and call-backs are frequently required.

Collecting fees for unlicensed bank machines is also a frustrating and time-consuming process as often, very little information is available on the owner(s) of those machines not connected to a chartered bank or credit union. As well, the owner(s) may be located out of province, making it even more difficult to track them down. For this reason, City Inspectors place a lower priority on unlicensed bank machines, preferring to focus on unlicensed businesses with easy access and higher fees.

As the collection of vending machine license fees has historically been a low priority, the number of vending machines licensed by the City every year is substantially less than the number of machines actually in operation throughout Vancouver. This conclusion was substantiated in a random survey of vending machine licenses conducted by staff in early 2002. One hundred and ninety three (193) buildings were surveyed and approximately
45 % operated washers and dryers that were not licensed. An extrapolation of the numbers derived from this survey to account for the entire City would indicate that Vancouver is underlicensed with respect to vending machines.

Proposed Method of License Fee Collection for Vending Machines

As the current method of collecting license fees for vending machines is clearly ineffective, staff recommend that fees for certain types of vending machines be collected directly from the owner/occupier of the premises in which the machines are operated. This process would provide additional revenue for the City as it would account for a greater number of unlicensed machines. It would also streamline the current internal operation, reducing demand on City resources and eliminating the requirement for license decals for each machine, a cost-saving measure for the City.

The sections below outline the recommended license fee collection process for each type of vending machine.

Vending Machines Dispensing Merchandise or Providing Services

As Inspectors presently spend most of their time following up on unpaid business licenses which bring in more revenue for the City, fee collection for vending machines has been seriously neglected. In an effort to address this problem without additional pressure on City resources, staff recommend that each business licensed in the City of Vancouver which operates a vending machine(s) dispensing merchandise or providing services on their premises pay to the City $15.00 per year for each machine. The current license fee of $24.00 per vending machine was appropriate in the past when there were only one or two vending machines operating on a premises. With so many products, merchandise and services being sold through vending machines today, businesses normally have many more machines available to their patrons and therefore, a lower license fee is justified. If store owners were paying $24 per machine, the cost for licenses could exceed the business license for the establishment. A lower fee of $15 will be easier to collect and will not result in significant new enforcement costs.

It is recommended that the number of vending machines at each commercial establishment be indicated directly on the business license. The Inspectors would then ensure that all businesses in their respective districts have paid the respective vending machine license fee. A print-out listing all the licensed vending machines per business would be provided to the Inspectors and any unlicenced machines discovered during regular visits would be recorded, with the business owner being subsequently billed.

It is also recommended that the current vending machine definition be amended to enable the use of cards along with coins or slugs to operate and to exclude washers and dryers and bank machines from the definition. As discussed, below, a different licensing process and fee is proposed for these two types of machines.

Washers and Dryers

Historically, fees for unlicensed washers and dryers have been very hard to collect because of difficulties in gaining access into individual buildings. For this reason, staff recommend that the individual licenses for washers and dryers be eliminated and an additional fee of $2.00 per apartment unit be applied on top of the existing annual license fee for the building. The City currently collects an estimated $100,000 in annual revenue from washer and dryer vending decals. Multiplying the total number of apartment units in the City by $2.00 per unit would provide the City with approximately $120,000 in revenue.

The current requirement for staff to follow-up on decals within each individual apartment building would no longer be necessary under this process, saving the City the expense of printing and mailing out decals and allowing Inspectors to focus on business licenses.

Bank Machines

Currently, owners of bank machines are required to pay the City a license fee of $95.00 per year for each machine. Although licenses for most machines owned by a chartered bank or credit union are paid by the financial institution's head office, very little licensing revenue is normally received from owners of bank machines not connected to a financial institution. Tracking down these owners can be a very time-consuming process that ultimately brings in less revenue than concentrating on those businesses with comparatively larger annual license fees.

To rectify this situation, staff recommend that bank machines be licensed based upon the location of the machine. Other business licenses are treated similarly in that the same business operated from two different locations requires two separate licenses for each address. Therefore, bank machines physically connected to the premises of a chartered bank or credit union would be considered part of the business operation on that property and would not require a separate license.

Bank machines not physically connected to a financial institution would be considered a business operating at a separate location. As many of these machines are not tied to a financial institution, tracking down the owner is difficult. Therefore, it is recommended that license fees for bank machines not physically connected to a bank/credit union be paid by the owner/occupier of the business the machine is located in. This would eliminate the problem of having to track down the owner(s) of the machines to collect required monies. As many businesses may operate a number of vending machines, in addition to a bank machine, and will be required to pay a fee of $15.00 for each (as discussed earlier in report), it is recommended that the license fee for bank machines be reduced from the current $95.00 per year to $40.00 per year. This will pose less of a financial burden on the smaller business owner. To ensure no adverse impact on the City's revenue, the general license fee for the chartered bank/credit union is to be increased accordingly.

Implementing this process of license fee collection for bank machines requires the creation of a definition differentiating between those machines physically connected to a financial institution and the stand-alone machines operating separate from a chartered bank or credit union. It is recommended that a bank machine be defined in the License By-Law similar to "means a device which permits access to certain services normally associated with a financial institution including, and without limiting the generality of the foregoing, the withdrawal of money, but excludes those bank machines on, or connected to, the premises of a financial institution." Bank machines physically connected to a financial institution would not require a separate definition as their fee would be incorporated into the general license fee for the chartered bank/credit union.

Newspaper Vending Machines

Newspaper vending machines throughout the City will continue to be licensed individually by the owner of the machine at the existing $24.00 license fee. However, the requirement for license decals for each machine will be eliminated. Owners of the individual machines will be required to provide the City with a listing indicating the location of each machine.
It is recommended that a "newspaper vending machine" license category be created in the License By-Law, along with a corresponding annual license fee of $24.00.

Proposed Amendments to License By-Law

To implement the proposed changes in the collection of license fees for certain types of vending machines, it is proposed that License By-Law No. 4450 be amended generally as set out in Appendix A to this report subject to such changes as the Director of Legal Services considers necessary.

Financial Implications

The following table shows the revenue for all vending machines and bank machines in the City for the past three years and the projected 2003 revenue when the new proposed license collection methods and fees are implemented.

YEAR

Vending Machines
(amount for Year 2003 excludes washers & dryers)

Bank Machines

Apartment Surcharge for washers/dryers

TOTAL
REVENUE

1999

$189,100

$11,340 (126 machines x $90)

  

$200,440

2000

$185,700

$12,194 (134 machines x $91)

  

$197,894

2001

$176,480

$12,276 (132 machines x $93)

  

$188,756

2002 (to July 1st)

$177,000 (approx. $100,000 is from washers/dryers)

$12,635 (133 machines x $95)

  

$189,635

2003 (projected)

$77,000*

$5,320 (using 133 machines x $40)*

$120,000 ($2.00 per 60,000 apt. units)

$202,320**

Notes:
* Vending machine (excluding washers/dryers) and bank machine license fee revenue for Year 2003 is not possible to estimate as the number of machines that will be licensed under the proposed new licensing method in 2003 is unknown. Therefore, the projected 2003 revenue amounts for each of these machine categories have been derived using 2002 figures. These revenues may ultimately be higher.

** As noted in the companion licensing report concerning 2003 Business License Fees, an additional approximate $100,000 will also be realized from an increase in the license fee for financial institutions.

CONCLUSION

The proposed amendments to the License By-Law No. 4450 as outlined in this report will
change the method of license fee collection for certain types of vending machines resulting in additional revenue for the City and a more streamlined internal operation, reducing demand on City resources.

- - - - -

APPENDIX A

Proposed Amendments to License By-Law No. 4450:
Vending Machine Licensing Changes

1. Amend vending machine definition to enable the use of cards along with coins or slugs to operate the machines and exclude washers and dryers and bank machines.
2. Delete the requirement for a certificate or plate (a decal is presently used) to be attached to each licensed vending machine.

3. Require that each business licensed in the City of Vancouver which operates a vending machine(s) dispensing merchandise on their premises pay to the City $15.00 per year for each machine.

4. Amend the vending machine fee in Schedule A from the $24.00 per annum to $15.00 per annum.

5. Include definition of bank machine (similar to definition proposed in report) in Section 2 and include a separate "bank machine" license category in Schedule A with a corresponding fee of $40.00 per annum.

6. Include a separate "newspaper vending machine" license category in Schedule A with a corresponding fee of $24.00 per annum.

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