Agenda Index City of Vancouver

POLICY REPORT

Licensing

TO: Standing Committee on Planning and Environment

FROM: Chief License Inspector and the Chief Constable in consultation with the Director of Legal Services and the Director of Finance.

SUBJECT: Secondhand Dealers and Pawnbrokers By-law No. 2807 and License By-Law No. 4450 Update and Changes.

RECOMMENDATION

CITY MANAGER'S COMMENTS

The City Manager observes that the proposed X-Tract contract with XML-Global Research Inc. is a significant investment with annual licensing costs of $42,000, which did not go to public tender. While City policy requires public tender unless there is a business case for sole sourcing, the Police Department advise that other Internet based systems do not have the same functionality and could not be used for evidentiary purposes.

Since the total cost of this system will not be covered by the proposed increase in license fees, this will impact the operating budget. The City Manager suggests that since this system assists ICBC and other insurance companies in the recovery of stolen property, that funding for the system be pursued from them. Therefore, the City Manager suggests an additional Recommendation.

J. THAT Council instruct the Chief Constable to seek alternate forms of funding for future program upgrades and system improvements from corporations that benefit from this system, such as ICBC, the Insurance Industry and large retailers, as well as other government agencies that benefit from this city initiative, and report back in one year on progress.

The City Manager RECOMMENDS approval of A, B, C, D, E, F, G, H, I, and J.

GENERAL MANAGER'S COMMENTS

The General Manager of Community Services and the Chief Constable RECOMMEND approval of the foregoing and the Director of Legal Services RECOMMEND approval of amendments to License By-law No. 4450 and Secondhand Dealers and Pawnbrokers By-law No. 2807.

COUNCIL POLICY

On November 1, 2001, at the Standing Committee on Planning and Environment, Council approved the following recommendation:

PURPOSE

The purpose of this report is to update Council on the performance of the X-Tract Internet reporting system and other amendments to the Secondhand Dealers and Pawnbrokers Bylaw No. 2807 made in November of 2001. This report also proposes amendments to License Bylaw No. 4450 to create new classes of Secondhand Dealers and a new fee structure to support the X-Tract system.

SUMMARY

Significant by-law amendments to the Secondhand Dealers and Pawnbrokers By-law No. 2807 were approved by Council on November 1, 2001. These changes restricted the property recording and reporting of Secondhand Dealer and Pawnbroker businesses.

The majority of these businesses are reporting online through the X-Tract Internet reporting system and there appears to be general consensus within the industry that the system works reasonably well.

The Vancouver Police Department is very pleased with the system performance to date. Currently, not all businesses required to report transactions to the police department are reporting through the Internet, therefore the Police Department is requesting approval of one regular full-time data entry clerk to allow the existing officers to focus on compliance and investigations.

Council should be aware that the contract to license the X-Tract software did not go though the standard city tender process. The tender process was not used in this case due to the unique circumstances of how the software product was developed. It was purpose built and has unique functionality not found in other Internet based systems.

Staff are recommending the creation of six new Secondhand Dealer definitions and a revised Pawnbroker definition. These classes will allow a graduated business license fee structurerelated to the nature of the business and associated enforcement costs. The proposed fees will offset the anticipated annual costs of the X-Tract system and staff support.
BACKGROUND

On November 1 2001, Council approved amendments to the Secondhand Dealers and Pawnbrokers By-law No. 2807 which significantly changed how Secondhand Dealers and Pawnbrokers record business transactions in the City of Vancouver. These by-law amendments were enacted by Council on November 20, 2001. On March 12, 2002, Council enacted further amendments to the bylaw which revised the numbering and other minor wording in the bylaw.

A significant portion of Council's deliberations during the November 1, 2001 meeting centred on ensuring the proposed Internet reporting process and all associated staffing costs remained revenue neutral. Prior to the November 1, 2001 meeting, a proposal was made to the provincial government to cover the cost of the X-Tract software licensing fee for the entire province. Unfortunately, this payment option did not materialize. Subsequently, it was recognized that in order for the City to ensure revenue neutrality through cost recovery, new funding must be found to cover the ongoing costs of licensing the software, maintaining the supporting hardware, and operating the system. A portion of the operating costs has already been funded from the 2002 Operating Budget, however an amount of $202,200 in start-up costs will be incurred by the Police Department must be funded.

It was also recognized that if the province was not willing to pay for the software licensing fee, then the obvious cost recovery method was to increase the City's license fees for Secondhand Dealer and Pawnbroker businesses. A license fee increase was not requested at the November 1, 2001, meeting as staff were unable to accurately determine all of the costs at that time. Costing was difficult to estimate as staff had no way to determine in advance how many operators would use the on-line reporting system and how many would continue with the hand-written ledgers.

The 2002 Business License fee for Secondhand Dealers and Pawnbrokers is $211 each and a Retail Dealer with Ancillary Secondhand 2002 business license fee is $306 (this fee is comprised of the $95 Retail Dealer business license which allows for the sale of new goods and $211 for the Ancillary Secondhand business license which allows for the sale of limited types of secondhand goods in a size-restricted display area). See Appendix C for a list of business license fees charged by other Lower Mainland municipalities.

Performance of the X-Tract System and other bylaw amendments to date

There are approximately 23 grand fathered combined Pawnbroker and Secondhand Dealers, 64 Secondhand Dealers and 34 Retail Dealers with Ancillary Secondhand operating in the City of Vancouver. At present, all but approximately 12 of the businesses currently reporting under the by-law are using the X-Tract reporting system. Occasionally, one or two stores that use the X-Tract system for the majority of their transactions will hand-deliver hand-written registry reports. The X-Tract system registers approximately 10,000 plus transactions per month.

Hand-delivered registry sheets result in an additional several thousand transactions per month. All of these transactions are entered on to the X-Tract system by a Data Entry Clerk in the Property Crime Unit. As Internet reporting for all businesses is optional, data entry by the Property Crime Unit will still be required to enter the information contained in the paper reports but also to provide assistance to those using Internet reporting. The clerk also provides various clerical duties within the office as required and as time permits.

It is difficult to separate the functions of criminal investigations and by-law enforcement and administration; the two functions are inextricably linked in a symbiotic relationship.

Criminal investigations are based on the data provided through the by-law, and the by-law is enforced largely through the police actions.

Through the X-Tract system, all Pawnbroker and Secondhand Dealer transactions are now searched against the CPIC (Canadian Police Information Centre) database and preparations are underway to incorporate X-Tract into the Vancouver Police Department and regional PRIME (Police Records Information Management Environment) database. At least four police officers are assigned full-time to the "anti-fencing" function, using X-Tract data to recover stolen property and, through this process, enforce the City by-law.

The police estimate approximately one million dollars worth of stolen property has been recovered through X-Tract information which would not have been identified under the previous paper reporting system. Other police agencies, with the assistance of the Vancouver Police, throughout BC and Canada regularly use X-Tract to locate stolen property and assist with their investigations.
An unforeseen benefit of the X-Tract system has been a greater insight into the movement of stolen property. It has enabled the Property Crime Unit to target offenders who are trading in substantial amounts of stolen goods, who never previously came to the attention of the police.

Industry Input

A general meeting was held with the licensees, store operators and other stakeholders on September 18, 2002 (See Appendix D for detailed concerns). The general consensus at this meeting was that the Internet reporting system was working reasonably well. However, some suggestions were made as to possible system enhancements that would make the software more user friendly. Staff advised that such suggestions should be submitted in writing to the Anti-fencing Unit (part of Property Crime Unit) where they can be assessed and where feasible, possibly implemented into the program.

Concerns were also expressed by some operators that the holding period was too long. Staff advised these individuals that it is too soon to review any reduction in the property holding period. The Police Department feels that a sufficient level of synergy has not yet been reached between the crime reporting systems (Canadian Police Information Computer [CPIC] and PRIME reporting - VPD reporting system) and the X-Tract system to enable a reduction in the property holding period for those businesses using the X-Tract Internet reporting system. It was, and still is, hoped that as the Crime Reporting system utilized by the Police Department is better integrated with the X-Tract system, the required property holding period can be reduced for those businesses using the Internet property reporting system.

A request was made by operators, with a number of participants concurring, to receive some form of feedback to the users of the X-Tract system. The desired feedback would be in the form of statistics on a variety of items, such as percent/quantity of returned stolen property and number of transactions. The operators felt this information would be helpful to their operations. In response to this request, the Vancouver Police Department in 2003, will conduct a study of the Internet property reporting process to gain empirical data to measure program outcomes.

Participants at the meeting were also advised of Council's previous direction to staff that these by-law changes were to remain revenue neutral to the city (i.e. all costs are to be recovered over and above the existing revenue generated by these business license fees). When presented with an estimated annual cost recovery of approximately $200,000 and the likelihood that this would translate into significant fee increases for existing license holders, most license holders were concerned about how this would impact their ability to pay the new fee.

Meeting participants were provided "ballpark" estimates of 2003 business license fees for the various license types based on the graduated fee increase model. The fee estimatesranged from $450 (Secondhand Dealer - Class 6) to approximately $6000 [combined Pawnbroker ($3500 est.) and Secondhand Dealer - Class 1 ($2500) annually]. Concern was expressed about the cost for the combined license and the proposed fee differential between the Pawnbroker business license and the Secondhand Dealer - Class 1 business license.

DISCUSSION

The most difficult task facing staff and Council is how to distribute the cost of the X-Tract system and the associated program costs fairly across a relatively small number of licensees. In the past, the Chief License Inspector has recommended substantial increases to Secondhand Dealer and Pawnbroker business license fees in the annual Business License Fee report. These fee increases often faced stiff opposition from licensees. The most vocal of these opponents were often various charities that operated thrift secondhand stores, used music and memorabilia stores (typically LP's, CD's, magazines, posters, etc..), and used sporting goods store operators. In light of this, Council did not support the large increases. (Refer to Appendix C for a breakdown of fees charged by other Lower Mainland municipalities, including Vancouver's 2002 business license fee).

Currently, Vancouver has some of the lowest business license fees for these two types of businesses in the Lower Mainland. The city of Surrey charges a flat $3,000 business license fee for Secondhand Dealers or Pawnbrokers and the District of North Vancouver has a graduated fee system based on the square footage of the business with a maximum license fee of $3,300.

To address these issues, staff recommend that the License Bylaw should provide a greater distinction between the various levels or types of Secondhand Dealers that operate in the city. The question of how to best prorate the required fee increase between the new business license types is reviewed later in this report.

1) Proposed Amendments for License By-law Definitions and Other Regulations

The current License bylaw definitions do not allow for any distinction between types of goods sold by a particular secondhand dealer. The only bylaw that distinguishes what goods can be sold within a premise is the Zoning & Development Bylaw. The Secondhand Dealer
and Pawnbrokers Bylaw basically defines what goods must be reported to the Chief Constable. See Appendix B for a list of all the existing relevant bylaw definitions for Secondhand Dealers and Pawnbrokers.

Staff are proposing a revised Pawnbroker definition as the existing definition has become invalid due to the provincial government repealing the Pawnbroker's Act. Staff are also proposing new definitions for 6 classes of Secondhand Dealers. Please refer to Appendix A Part 1 for the specific wording recommended for each definition.

The proposed system of graduated Secondhand Dealer Business License classifications reflects the present divisions within the business community and the city's existing Land Use regulations for Secondhand Dealer and Pawnbroker uses. These new license types also reflect the level of police monitoring/resources assigned to each type of secondhand dealer/pawnbroker operation.

The proposed Class 1, Class 3 and most of Class 2 Secondhand Dealers all trade in goods that are of interest to the Police Department as these goods are often targeted in most thefts and are the primary focus of the Secondhand Dealers and Pawnbrokers Bylaw. These goods are also included within the Zoning definition of a Secondhand Store and, as such, the approval of new Class 1 and Class 3 stores would require the operator to proceed through the development permit process.

Secondhand Dealer - Class 1

A Secondhand Dealer - Class 1 has no limitations placed upon what secondhand goods the operator could trade in, with the exception of some goods that are federally or provincially regulated. Operators of this business license type would satisfy the definition of "Secondhand Store" as defined in the Zoning & Development Bylaw and therefore the approved use for the space is considered "Secondhand Store" not "Retail". All Pawnbroker businesses within the city would require this type of business license. There would also be a number of `stand-alone" (i.e. the secondhand store is not operated in conjunction with a pawnbroker's business) Secondhand Dealer - Class 1 businesses within the city. Staff estimate that approximately 47 of the existing secondhand dealers licenses would be converted to this classification.

Secondhand Dealer - Class 2

A Secondhand Dealer - Class 2 would be limited to trading in one type of used merchandise, except electronic equipment. Establishments qualifying for this type of business license would not require a development permit as the business would still be considered a Retail use under the Zoning & Development Bylaw. Examples of businesses that would be included in this license type include bicycle shops that sell both new and used bikes, as well as new and used sporting goods stores. Staff estimate that approximately 13 of the existing secondhand dealers licenses would be converted to this classification.

Secondhand Dealer - Class 3

A Secondhand Dealer - Class 3 would be limited to trading the following types of usedmerchandise: CD's, DVD's, tapes (video and cassette), LP's ( Vinyl Records), Video Games or music/concert/movie/television memorabilia. These businesses typically require development permit approval as the bulk of the goods would be considered `audio or video accessories' and as such satisfy the zoning definition of Secondhand Store. Existing businesses that would be included in this license type would include Used CD stores and the Record Collectors and music memorabilia stores. Staff estimate that approximately 9 of the existing secondhand dealers licenses would be converted to this classification.

Secondhand Dealer - Class 4 & 5

Staff have put forward two new definitions to address the large number of antique, used furniture and used clothing stores (Secondhand Dealer - Class 4) throughout the city and a number of charity thrift stores (Secondhand Dealer - Class 5). The type of used goods retailed in these stores are not often the subject of thefts and are not high on the list of commonly traded stolen property. However, there have been some cases of entire homes being "cleaned out" of all belongings though this is rare and involves a level of criminal sophistication that is beyond the scope of the city's ability to regulate. In these instances the city would have to rely on standard police investigations and sections of the criminal code.

Staff are recommending amendments to the Secondhand Dealer & Pawnbrokers By-Law regulations for these two Secondhand Dealer license types that would exempt these businesses from reporting to the Police Department as required under the bylaw. Refer to Appendix A Part 2 for a description of the proposed Secondhand Dealers and Pawnbrokers By-law regulations.

Secondhand Dealer - Class 6

The Secondhand Dealer - Class 6 definition is proposed to address the common practice of many Retail Dealers of accepting used goods in trade on the purchase of new similar goods. The definition proposed simply reflects, in most respects, how staff have been instructing new Retail Dealers with Ancillary Secondhand licensees to operate over the past number of years. The only variance from the existing practice is the limitation that all secondhand transactions must be trade-in only.

While most of the serious issues surrounding stolen property are associated with businesses staff would classify as Pawnbrokers and Secondhand Dealer - Class 1, staff must stress that the Police Department has also had serious issues relating to businesses that would be licensed under the Class 2 and Class 3 license categories and to a lesser extent the Class 6 license type. The nature of crime and stolen property is such that all businesses that deal insecondhand goods are susceptible to abuse by customers fencing stolen property. Staff's intent is to establish reasonable regulations to monitor the operation of these businesses, although it is recognized that much of the control over how well a business screens stolen property is within the hands of the operator/owner.

2) Cost Recovery of X-Tract Licensing and Associated Staffing Expenses

Council must be advised that the development of the X-Tract system software did not proceed through the standard tender process. The software developer and Police Department initially connected as the result of a police investigation that returned some stolen property to the software development company. This connection grew into a collaborative effort between the members of the Anti-Fencing Unit and the developer to design a productive, modern system to aid the police department in the recovery of stolen property. As a result, over a period of 3 to 4 years, a purpose-built software system was developed for the express needs of the Vancouver Police Department. The software enables a wide variety of search capabilities and report printouts which aid police investigations and by-law enforcement.

The primary focus of the X-Tract system is the combined Pawnbroker - Secondhand Dealer businesses and stand-alone Secondhand Dealers that are permitted to deal in all types of used goods. A secondary focus was all other businesses that are permitted to deal in secondhand goods. The previous bylaw definitions did not differentiate between the variety of secondhand stores operating within the city and the wide range of monitoring these businesses required by police and license inspection staff. As a result, license fees could not be adjusted to address this disparity in staff resources without adversely affecting operations that required little monitoring. Staff believe that with the proposed additional license classifications, a fee structure can be developed that addresses this disparity.

Staff feel that as Secondhand Dealers Class 4 & 5 do not trade in the kind of goods that the police department are interested in tracking, these businesses should not be required to report to the Chief Constable. Therefore, staff feel that these businesses should be exempt from bearing the cost of the X-Tract system and additional staff.

The costs of the bylaw changes (staffing, hardware and software expenses) can be divided into two categories; annual expenses ($107,200) and one-time fees/set-up costs ($349,200). See Appendix E for details on these costs.

3) Cost Recovery Options

Staff have analysed two different cost recovery options: i) a graduated (increasing) feesystem based on the proposed license definitions noted above; versus ii) an equal distribution of the annual costs across all license categories (equal license fee).

Graduated Fee Increase

A graduated fee structure would place the heaviest burden of cost recovery on the businesses that primarily deal with all types of secondhand goods (i.e. purchasing or pawning) and a progressively lesser burden on those businesses that trade only in small volumes of secondhand goods (usually the result of trading in an old good in favour of a credit on a new purchase from the same store).

The strength of this method of cost sharing is that the percentage for each license type is weighted towards the businesses that make the most use of the system. Furthermore, it recognizes the variety of businesses that deal in secondhand goods and the manner in which they operate, resulting in an equitable distribution of the cost sharing based on the focus of
each type of business.

The police have recovered stolen property from most, if not all, types of secondhand businesses, this is the nature of stolen property. While Secondhand Dealer Class 2 and Class 3 license types can deal primarily in used goods, these businesses are restricted in the types of goods that can be sold and typically result in fewer opportunities for trafficking in problem goods. The frequency of required inspections and/or monitoring inspections for the businesses that would fit these two categories is less than those required for a Secondhand Dealer - Class 1.

With this option, the revenue neutral fee increases required to achieve 100 % cost recovery will be significant for all license types except for the Secondhand Dealer Class 4 and 5 licenses which will not bear any of the cost sharing burden and will only be subjected to the general fee increase. Please refer to Appendix A Part 3 for a detailed analysis of the fee increase for all Pawnbroker and Secondhand Dealer license types.

Staff recommend this graduated fee structure as it is based on the overall focus or nature of the various types of businesses trading and pawning secondhand goods.

Equal Distribution of Cost Recovery Fee Increase

A second option to achieve cost recovery would be through a `flat rate' increase for pawnbrokers and all secondhand dealer license types, excluding the Secondhand Dealer Class 4 and 5 licenses. A flat rate fee increase means that all license holders trading or pawning secondhand goods (i.e. Pawnbroker, Secondhand Dealer Class 1, 2 ,3 & 6) will pay the same business license fee. Therefore the annual cost of $107,200 would be split equally between 126 business licenses. This would result in an increase of $ 851 for each licensetype (the total license fee would equal $1,068) or roughly a 5 fold increase in the 2002 business license fee. The primary argument in support of this approach is that all businesses dealing in secondhand goods pay the same license fee, ensuring a level of fairness between licensees.

Unfortunately, this method of distributing the program cost does not recognize the difference between licensees and the emphasis licensee's place on their secondhand goods operations. The ancillary trading of secondhand goods is a legitimate practice for a wide variety of businesses within the city.

FINANCIAL IMPLICATIONS

The proposed by-law changes and associated graduated fee structure should generate revenue equalling approximately $138,600. This will equate to an increase in revenue of approximately $107,200 over the revenue generated by these license types in 2002 (allowances have been made for the general fee increase of 2.25% for 2003).

Staff note that revenue predictions can be affected to the positive or negative by the following events:

As previously explained, staff predict that the by-law changes will result in additional staffing and hardware/software expenses of approximately $ 107,200 annually (refer to Appendix E for details). The breakdown of these expenses are as follows:

It is important to note that agreements with XML Technologies (Software Vendor) and ECOMM have not yet been finalized. Figures provided for the purposes of this report are estimates that represent a staff best approximation of the contracted costs. Staff are presently negotiating these agreements and expect to negotiate these service agreements within these projections. Should staff not be successful in negotiating service agreements within the budgeted figures, then future fee increases may be necessary to offset these ongoing expenses. Any revision to license fees would be included in the annual business license fee report for 2004 business license fees.

Staff expect that a significant portion of an unforeseen budget shortfall may be mitigated through increased revenue generated by the Temporary Property Use Inspector licensing new businesses trading in secondhand goods.

2002 One Time Expenses

Council's original instructions to staff were that the costs must be recovered through fee increases if the bylaw changes are to remain revenue neutral to the city. Staff have pursued the cost recovery analysis on the premise that these costs should be born by the businesses that have caused the city to implement these changes, specifically the Secondhand Dealer and Pawnbroker businesses, and not be deferred among all business license holders.

However, due to system requirement changes (the primary change being the need to move the hardware and database behind a police system firewall and the hardware upgrade to make the system meet "court level confidence" evidence standards) staff do not believe it will be possible to satisfy this Council direction. The complete one time set up costs (hardware and software) is $349,200. A portion of this cost has been funded out of the 2002 Operating Budget ($117,000) and through a donation to the Vancouver Police Department by ICBC ($30,000), leaving a net, currently, unfunded portion of $202,200.

The main cost item, licensing the software, changed as a result of the new systemrequirements. Originally the license software cost was based on a subscription (the contract company was providing software, database management and hardware support to VPD supplied hardware). The hardware system change resulted in the software company suggesting a more traditional software licensing arrangement. That is, a one time licensing fee and a lower ongoing Service and Maintenance contract.

Further reasons the set-up costs are much higher than staff had originally anticipated are: the purchase of additional hardware to meet court evidence requirements (back-up/mirror system), system relocation to ECOMM for 24/7 monitoring and police firewall protection of the database, and the initial cost of licensing the software. As noted above some of these costs have already been funded but $ 202,200 remains unfunded.

To require the existing licensees to bear the entire financial burden of all the one-time/set up costs ($ 349,200) or even the remaining unfunded portion of ($202,200) in addition to the annual ongoing costs ($107,200), would create a significant financial hardship for a number of the smaller operators. It is quite possible that such a financial burden could result in some businesses discontinuing operations putting a heavier financial burden on the remaining businesses. Therefore, staff feel using the contingency fund to pay for the one-time/set up costs is a reasonable alternative even though it is not consistent with Council's original direction.

Staff feel there is also a secondary argument for using the contingency fund to pay for these one time costs. That is, the primary intent of the Secondhand Dealer & Pawnbroker bylaw changes that implemented the Internet reporting system was to provide the Police Department with a significant tool with which they can begin to combat the property crime that is plaguing the city. Therefore, this greater public good provides some justification for using funds from the greater tax base to fund a portion of this program.

Finally, staff note that the police department hired a temporary clerk position for 2002 at a cost of $ 43,300 to assist with the clerical functions and implementation of the reporting system. This position has been funded out the Police Department's existing budget. To ensure that future investment in the replacement of the system infrastructure is not overly burdensome to businesses, provision has been made for an annual replacement charge that will be needed on a four-year cycle.

Personnel Implications

Full Time Data Entry Clerk (VPD)

This position would report to the Property Crime Unit in the Vancouver Police Department.

The paper reporting process under the by-law was ineffective. Police could manually search only a small proportion of the thousands of transactions and even this was extremely labour intensive. Under the paper reporting process, it would have been cost-prohibitive for the City to hire sufficient numbers of staff to manually enter the thousands of records. As a result, X-Tract was developed to allow for Internet reporting.

Although X-Tract is an automated process, human administration and data entry for the remaining paper reporting is necessary. The current temporary data entry position is responsible for entering the paper reports into X-Tract and also provides service and assistance for the businesses using the X-Tract system. Notwithstanding X-Tract, the ability to enter paper reported data is essential if the by-law is to be effective.

We are therefore recommending that Council approve 1 VPD Full Time Employee to be dedicated to the X-Tract program at an annual cost of $43,300 including benefits. If this position is not approved, data entry would have to be done by sworn officers in that section, reducing their investigative effectiveness and incurring a higher labour cost.

Temporary Property Use Inspector I (2 month position):

This position would be filled and conducted in a manner consistent with the current practice for casual, summer business license inspection staff. The primary focus of this position will be to ensure that existing businesses trading in secondhand goods are appropriately licensed and to collect the appropriate fees. This would result in additional revenue to the city. This will also increase the number of businesses and, therefore, the amount of secondhand property being recorded through the Internet reporting system.

The inspector may also, when time permits, participate in joint investigations with members of the Property Crime Unit. It is hoped such investigations will improve the integrity of the by-law regulations and remove poor operators from businesses.

ECOMM

As this initiative has evolved from a pilot project to a police data system, the necessary integrity and security of the program data require the program to be installed at ECOMM. Once in place, the system will utilize a mirrored server which will provide back-up security. ECOMM has the support services to provide twenty-four hour service. However, an agreement between ECOMM and VPD has not yet been finalized in terms of responsibilities and funding. We are therefore recommending that staff be instructed to finalize this agreement as soon as possible.

CONCLUSION

Staff feel that due to the Police Departments success and confidence with the Internet reporting system and the general support and acceptance of the system by the operators within the industry, the cost of the system should be transferred to the licensees of the affected establishments through an increase in the business license fee. Staff also acknowledge the overall public benefit of a property crime strategy that improves Police Department efficiency in recovery of stolen property and successful investigations of property crime. Staff believe that the recommended graduated fee method is the fairest method of annual cost recovery and results in a business license fees that are consistent with those of other Lower Mainland municipalities.

* * * * *

ph010913.htm

APPENDIX A
PART 1

AMENDMENTS TO THE LICENSE BY-LAW RE
PAWNBROKER AND SECONDHAND DEALER DEFINITIONS

APPENDIX A

PART 2

AMENDMENTS TO THE SECONDHAND DEALERS AND
PAWNBROKERS BY-LAW RE APPLICABILITY OF ACT
TO CERTAIN TYPES OF SECONDHAND DEALERS

From section 1.2 of the Secondhand Dealers and Pawnbrokers Act, delete the definition of "secondhand dealer", and substitute:

" "secondhand dealer" means a person who carries on the business of retailing or wholesaling used or secondhand property, or who operates a secondhand dealer's premises, except for a person who carries on the business of retailing or wholesaling used property limited to:

To Section 2 of the Secondhand Dealers and Pawnbrokers Act, add:

"2.22 A secondhand dealer who retails or wholesales any new property in the same premises where the retailing or wholesaling of used or secondhand property occurs must obtain a Retail Dealer business license under the License By-law.

APPENDIX A
PART 3

GRADUATED FEE INCREASE BASED ON THE
LICENSE TYPE

Secondhand Dealer Class

Number of Licenses

Existing Fee 2002

2 1/4 % Gen. Fee Increase

A

2003 Fee w/out cost recovery

Graduated Fee % share of Cost recovery by License Type

B

Proposed 2003 Cost recovery Fee increment

Total of Column A and B

Recommended 2003 License Fees

Total Fees

                   

Pawnbroker

23

$211

$6

$217

28.0%

$1,305

$1,522

$1,520

$34,960

Secondhand Dealer Class - 1

47

$211

$6

$217

57.0%

$1,300

$1,517

$1,520

$71,440

Secondhand Dealer Class - 2

13

$211

$6

$217

7.5%

$618

$835

$835

$10,855

Secondhand Dealer Class - 3

9

$211

$6

$217

3.0%

$358

$575

$575

$5,175

Secondhand Dealer Class - 4

8

$211

$6

$217

0.0%

$0

$217

$217

$1,736

Secondhand Dealer Class - 5

10

$211

$6

$217

0.0%

$0

$217

$217

$2,170

Secondhand Dealer Class - 6

34

$211

$6

$217

4.5%

$142

$359

$360

$12,420

                   

TOTAL:

144

  

Cost Recovery =

100.0%

      

$138,581

                   

Estimated Annual Cost
recovery expense = $107,200

         

APPENDIX A
PART 4

FEE INCREASE SPLIT EVENLY AMONG ALL
LICENSE TYPES (I.E. SAME INCREMENT)

Secondhand Dealer Class

Number of Licenses

Existing Fee 2002

2 1/4 % Gen. Fee Increase

A
2003 Fee w/out cost recovery


% share of Cost recovery by License Type

B
Proposed 2003 Cost recovery Fee increment

Total of Column A and B

Recommended 2003 License Fees

Total Fees

                   

Pawnbroker

23

$211

$6

$217

18.3%

$851

$1,068

$1,070

$24,610

Secondhand Dealer Class - 1

47

$211

$6

$217

37.3%

$851

$1,068

$1,070

$50,290

Secondhand Dealer Class - 2

13

$211

$6

$217

10.3%

$851

$1,068

$1,070

$13,910

Secondhand Dealer Class - 3

9

$211

$6

$217

7.1%

$851

$1,068

$1,070

$9,630

Secondhand Dealer Class - 4

8

$211

$6

$217

0.0%

$0

$217

$217

$1,736

Secondhand Dealer Class - 5

10

$211

$6

$217

0.0%

$0

$217

$217

$2,170

Secondhand Dealer Class - 6

34

$211

$6

$217

27.0%

$851

$1,068

$1,070

$36,380

                   

TOTAL:

144

  

Cost Recovery =

100.0%

      

$138,726

                   

Estimated Annual Cost
recovery expense = $107,200

         

APPENDIX C

2002 BUSINESS LICENSE FEES FOR LOWER MAINLAND MUNICIPALITIES

MUNICIPALITY

BUSINESS TYPE

# OF SHOPS

LICENSE FEE

Burnaby

Secondhand dealer & Pawnshops classified the same.

11 Total (6 - 2ND Hand & 5 - Pawn)

$426 1st Year
$125 renewal

Surrey

Secondhand Dealer

37

$3,000

Pawnbroker

5

$3,000

Richmond

Secondhand and Pawnshops are not defined separately from new retail dealers

Cannot provide separate statistical information

ranges from $103 to $932 based on square footage.

District of North Van.

Pawnbroker (1-25 employees) Secondhand dealers same as retail

No pawnbrokers.
No stats available for 2nd hand dealers

$1019
1st 70 sq. metres $122
for every 90 sq. metres over--$74 up to a max of $3300

City of North Van.

Pawnbrokers not allowed. There are 2 grand fathered.

2

$520

Secondhand (1-25 employees)

0

$520

West Vancouver

No Pawnshops. Secondhand/Antique dealers

N/A

$122 <=750 sq. ft
$75 more per 1000 sq. ft. to a max of 10,000 sq. ft.

New Westminster *

* Secondhand stores MUST donate 10% of their annual income to a charity of their choice.

Secondhand same as regular business license

2

Up to 3 employees = $135
4-10 employees = $196

Pawnbrokers same as regular business license

30

Up to 3 employees = $135
4-10 employees = $196

Delta

Pawnbroker

Unknown

$536

Secondhand

Unknown

1-5 employees $97
6-10 employees $220

Coquitlam

Secondhand

Under 10

$770

Port Coquitlam

Secondhand
Pawnbrokers not allowed.

  

$70.50 for 1st 300 sq. ft. and $15 per 100 additional sq. ft.

VANCOUVER

SECONDHAND DEALERS

95

$211

PAWNBROKERS

24

$211

APPENDIX D

DETAILED CONCERNS FROM PAWNBROKER & SECONDHAND DEALER OPERATORS
SOURCE: PUBLIC MEETING/E-MAILS/LETTERS

X-Tract System:

· In support of reducing crime, but would like statistics on the retrieval of stolen property, redemptions and how well the system is working
· More time required to enter information onto X-Tract
· Auto logoff is too short (currently 10 minutes)
· X-Tract does not recognize caps lock
· Serial # entry field required
· The X-Tract system chosen by the City is the most expensive
· The operators had no say into which system to use
· The use of X-Tract should mean savings to the City
· What is the cost per transaction for X-Tract

New Secondhand Dealer Class System:

· Salvation Army/Value Village: selling of VCRs, TVs, etc...
· Clarification of ancillary uses for London Drugs, Blacks Cameras (have both cameras and video cameras)
· Distinction in music retailers should be considered
· Distinction for collectors stores
· Non-Profit/Thrift Store in favour of new class definitions

Fee Increase:

· Secondhand Dealer - Class 5 (charitable organizations) should also register on X-Tract
· Auction Halls/Flea Markets - fee structure
· Dispute over which business operation requires more enforcement (Pawnbroker vs. Secondhand)
· Raising fees for Pawnbrokers as well is not fair (alleged claims that VPD say that Pawnbrokers are not the problem)
· No consultation with the industry prior to increasing the fees
· Should be graduated fee increase over several years

APPENDIX D (continued)

Miscellaneous Comments:

· Were told that the X-Tract system was going to save money and reduce costs, now City wants to charge the small businesses
· Pushing small business out, creating unemployment
· Stolen goods are not just sold in Pawnbroker and Secondhand Dealer stores
· When items seized from the shop, the operator is the victim

Suggestions:

· Increase other license fees as well
· Phase the fee increase for Pawnbroker and Secondhand Dealers over time
· Sliding scale of price/transaction

APPENDIX E

TABLE 1: List of Expenses associated with the 2002 Amendments to the Secondhand Dealers and Pawnbrokers By-Law 2807

Item #

Description of Expense/Cost item

One-Time Cost

Annual Cost

ONE TIME EXPENSES/COSTS

    

1

X-Tract License Fee

$136,500

  

2

E-Comm Set-up & Installation

$46,800

  

3

Initial hardware purchase and software development costs

$160,900

  

4

One time equipment cost

$5,000

  

Total One Time Costs =

$ 349,200

  

Less funding received: City of Vancouver

($117,000)

  

Donation from ICBC

($30,000)

  

Net Costs

$ 202,200

  

ANNUAL EXPENSES

    

5

Software licensing costs

  

$42,000

6

Data Entry Clerk II (salary & benefits)

  

$43,300

7

Equipment replacement provisions

 

$12,400

8

Temp. Property Use Inspector I (2 months)

  

$9,500

Total Annual Expenses =

  

$107,200

The following is a brief explanation of each cost item noted in Table 1 above:

1. X-Tract License Fee: a one time license fee for the city-wide use of the X-Tract Internet reporting software and codecs.

APPENDIX E (continued)

2. E-Comm set-up and installation: a one time cost to provide the set-up and installation of a computer system at E-Comm that will be under the complete control and security of the Vancouver Police Department. The system design will be sufficient to meet the judicial system's "court level confidence" standard to enable the information contained on the system to be used in bylaw or criminal prosecutions.

3. Initial hardware purchase and software development costs: initial server with associated hardware and software development costs.

4. One time equipment cost: Computer and desk for new full time Data Entry Clerk II position.

5. Software Licensing Costs: The X-Tract Service & Maintenance contract and the ECOMM PRIME data download servicing.

6. Data Entry Clerk II: new staff position to enter Secondhand Dealer & Pawnbroker registry sheets that are hand written and delivered to the police station. (See Recommendation E. The duties of the position are listed in Appendix F.

7. Equipment replacement provisions: future capital replacement of required hardware based on a 4 year replacement cycle.

8. Temporary Property Use Inspector I (2 month position): temporary inspector position to concentrate on licensing new businesses dealing in secondhand goods and the inspector may participate in special joint investigations with the Anti-fencing and Property Crime Unit. The cost noted includes both salary and benefits.

APPENDIX F

Clerk II - Property Crime Unit
Position Description

The areas of responsibility include: researching and updating criminal activity; adding information to files in PRIME; entering and querying persons of interest information such as vehicles, addresses and phone numbers; administering all facets of the X-Tract Property reporting System; data entry; typing; handling sensitive material for court and maintaining files and databases.

Specific Duties would include:

· Review information coming into the PCU concerning X-Tract
· Data entry for X-Tract
· Perform administrative duties for the X-Tract System
· Review and update PRIME report files relating to X-Tract data
· Prepare reports and information for other sections and outside agencies as may be requested regarding X-Tract data
· Type reports, including Crown Reports, letters, memos, presentation packages and CPIC narratives regarding X-Tract data
· Deal with victims by phone or in person concerning X-Tract files
· Prepare X-Tract material for archives
· Perform other duties as assigned
· Provide X-Tract guidance for users

* * * * *

ph010913.htm

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