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Ordinance 2013-06I ORDINANCE NO. 2013-06 AN URGENCY INTERIM ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GILROY ESTABLISHING A TEMPORARY MORATORIUM ON THE ESTABLISHMENT, EXPANSION, OR RELOCATION OF PAYDAY LENDING AND CHECK CASHING BUSINESSES WITHIN THE CITY OF GILROY DECLARING THE URGENCY THEREOF, TO TAKE EFFECT IMMEDIATELY WHEREAS, Government Code Section 65858 provides that a city may, with or without following the notice and public hearing procedures otherwise required prior to the adoption of a zoning ordinance, "adopt as an urgency measure an interim ordinance prohibiting any uses that may be in conflict with a contemplated general plan, specific plan, or zoning proposal that the legislative body, planning commission or the planning department is considering or studying or intends to study within a reasonable time "; and WHEREAS, the City Council finds that this Ordinance is not subject to the California Environmental Quality Act (CEQA) because the activity is not a project as defined by Section 15378 of the CEQA guidelines. The Ordinance has no potential for resulting in physical change to the environment either directly or indirectly. Furthermore, pursuant to Section 15060(c)(2) of the CEQA Guidelines, the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment because this Ordinance prevents changes in the environment pending the contemplated review of City of Gilroy Zoning Ordinance amendments applicable to payday lending and check cashing businesses. THE CITY COUNCIL OF THE CITY OF GILROY DOES HEREBY ORDAIN AS FOLLOWS: SECTION I Findings and Purpose. In accordance with California Government Code section 65858, the City Council finds and declares that this Ordinance is deemed necessary for the following reasons: 1. The inability of low- income consumers with poor credit history to obtain certain services from federally - insured banks has resulted in a two - tiered financial services industry. More financially - stable consumers are generally able to use traditional banks, which charge low fees 1JH11147364.3 030713- 04706083 ORDINANCE NO. 2013-06 2 for checking and issue loans regulated by the federal government, while lower- income, financially - vulnerable consumers often have to rely upon the alternative financial services (AFS) industry for the same services. Payday lending and check cashing businesses are part of the growing AFS industry. 2. Payday lending businesses typically offer small, 14 -day loans for which they charge effective interest rates upwards of 460% annual percentage rate (APR). California law currently caps individual payday loans at $300, from which a 15% fee can be deducted. As a result, payday lending businesses in California generally charge $45 for a two -week $300 loan. According to a 2007 survey conducted by the California Department of Corporations, 48% of payday loan borrowers in California take out payday loans at least once per month. Because payday loan consumers tend to engage in cyclical borrowing, research has demonstrated that the typical borrower ultimately pays $800 for a $300 loan. 3. Check cashing outlets cash checks for a large fee, a significant percentage of the amount of the check, or deposit funds on to prepaid debit cards that incur a per - transaction fee. The fees withdrawn from cashed checks are generally significantly higher than the fees that would be charged by most federally- insured banks. 4. In the face of limited state and federal legislation restricting payday lending and check cashing, the growth of these industries has been extremely rapid. Since 1997, when payday lending became legal in California, more than 2,000 payday lending businesses have been established. In 2010, California payday lenders issued $12 million in loans to 1.6 million borrowers. The check cashing industry has experienced similarly rapid growth. A study by the Consumer Federation of America found that the check cashing industry doubled in size between 1994 and 2000, and again between 2000 and 2005. 5. The proliferation of these businesses has had significant detrimental effects on the financial stability of low - income communities throughout California, and low - income neighborhoods in the surrounding cities. These businesses operate almost exclusively in low - income neighborhoods and prey upon the City of Gilroy's most financially vulnerable residents, drawing them into a cycle of debt or causing them to lose a significant share of their income to exorbitant fees for simple financial transactions. 6. The City of Gilroy's Zoning Ordinance does not adequately regulate the establishment, expansion, or relocation of payday lending and check cashing businesses within the City of Gilroy. 7. In light of the foregoing, the City Council finds that the establishment, expansion, or relocation of payday lending and check cashing businesses within the City of Gilroy presents a current and immediate threat to public health, safety and welfare. The City Council further finds that a temporary moratorium on the establishment, expansion, or relocation of payday lending and check cashing businesses within the City of Gilroy is warranted so that the City Council may review and consider possible amendments to the City of Gilroy Zoning Ordinance to address this threat on a permanent basis. WH11147364.3 030713 - 04706063 ORDINANCE NO. 2013-06 3 SECTION II A. Scope This Ordinance prohibits the establishment, expansion, or relocation, which includes, but is not limited to, the issuance of any use permit, building permit, variance, subdivision or any other applicable permit, approval, or entitlement for use for development, of any payday lending business or check cashing business within the City of Gilroy B. Applicability This Ordinance shall apply to the following uses: Payday Lending Businesses and Check Cashing Business. For purposes of this Ordinance, the terms "payday lending businesses" shall mean retail businesses owned or operated by a "licensee" as that term is defined in California Financial Code section 23001(d), as amended from time to time. The term "payday lending business" as used herein means retail businesses owned or operated by a "licensee" as that term is defined in California Financial Code section 23001(d), as amended from time to time. The term "check cashing business" as used herein means a retail business owned or operated by a "check casher" as that term is defined in California Civil Code section 1789.31 as amended from time to time. SECTION III This Ordinance is declared to be an urgency measure adopted pursuant to the provisions of Government Code section 65858. Pursuant to Government Code section 65858, this Ordinance is effective immediately and shall be in full force and effect for forty -five (45) days from the date of its adoption. After notice pursuant to section 65090 of the Government Code and a public hearing, the Council, by four -fifths (4/5) vote, may extend the effectiveness of this Ordinance for twenty -two (22) months and fifteen (15) days in accordance with the provisions of Government Code section 65858. The City Council finds that this Ordinance must be adopted as an urgency measure because the establishment, expansion, or relocation of payday lending and check cashing businesses within the City of Gilroy presents a current and immediate threat to public health, safety and welfare. The City Council further finds that a temporary moratorium on the establishment, expansion, or relocation of payday lending and check cashing businesses within the City of Gilroy is warranted so that the City Council may review and consider possible amendments to the City of Gilroy Zoning Ordinance to address this threat on a permanent basis. Absent the adoption of this urgency Ordinance, it is likely that the establishment, expansion, or relocation of payday lending and check cashing businesses within the City of Gilroy will result in the harmful effects described above. W1 147364.3 030713 - 04706083 ORDINANCE NO. 2013-06 4 SECTION IV The City Clerk shall cause this Ordinance to be published in a newspaper of general circulation as required by state law. SECTION V If any section, subsection, sentence, clause or phrase of this Interim Urgency Ordinance is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Gilroy hereby declares that it would have passed and adopted this ordinance, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases may be declared invalid or unconstitutional. PASSED AND ADOPTED this 18t` day of March, 2013, by the following roll call vote: AYES NOES: ABSENT: COUNCILMEMBERS: ARELLANO, AULMAN, BRACCO, LEROE- MUNOZ, TUCKER, WOODWARD and GAGE COUNCILMEMBERS: NONE COUNCILMEMBERS: NONE APPROVED: 4id J, �� Donald Gage, Mayor ATTEST: 1 S awns Freels, City Crerk 1JH11147364.3 030713-04706083 ORDINANCE NO. 2013-06 I, SHAWNA FREELS, City Clerk of the City of Gilroy, do hereby certify that the attached Ordinance No. 2013 -06 is an original ordinance, or true and correct copy of a City ordinance, duly adopted by the Council of the City of Gilroy at a regular meeting of said Council held on the 18th day of March, 2013, at which meeting a quorum was present. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of the City of Gilroy this 19th day of March, 2013. n. hawna Freels, MMC '� ity Clerk of the City of (Seal)