The complaints about Atherton's expensive formula for calculating the business license fees charged to building contractors started in 2003. Now, nearly six years later, the town will be offering refunds to people who have been overcharged.

The City Council acted in closed session on Dec. 17 to offer refunds for the fees, going back two years, said City Attorney Marc Hynes.

"I was happy to end the business license tax, but not about how far it would go back," Councilman Charles Marsala told The Almanac after the meeting.

By changing the methodology for calculating fees, some contractors and residents say they've been charged for dozens more subcontractors than they've actually employed. The new Sacred Heart student center was charged $55,000 in business license fees, officials at the private school said in an e-mail.

Mr. Marsala, who has been pressing town officials on the issue for the past year, in October sent out an e-mail to residents warning them to make refund requests as soon as possible or risk having them rejected for not being timely.

Prior to 2003, Atherton charged a flat business license fee of $250 to general contractors and $150 to their subcontractors on an annual basis, in accordance with its municipal code.

That changed March 19, 2003, when the council voted unanimously to begin charging .36 of a percent of the value of the construction project as a business license fee. Then-finance director John Johns was quoted in an Almanac story as saying that the change was intended to address "widespread noncompliance" by subcontractors who didn't pay. As a result, Atherton saw its revenues from business licenses jump from $150,000 to $450,000 annually.

This fall, threatened with legal action, Atherton hired MuniServices LLC to review its business license fees. That report was not made public, but the council reviewed it in closed session, Mr. Marsala said. Whatever the result, the MuniServices review apparently prompted the City Council to rescind the town's percentage-based calculation and go back to its flat fees.

General contractors may apply for refunds of business license fees paid in the past two years — Dec. 17, 2006, to Dec. 17, 2008 — less the $250 annual flat fee, according to Mr. Hynes.

Mr. Marsala said the town is legally obligated to offer refunds only for fees paid in the past year, but the council opted to extend it to two years. He said he is reflecting on his closed-session vote, and may ask to revisit the topic.

"If we knew about it in 2003, based on (The Almanac's) story, do we have an obligation to take action and go back further?" Mr. Marsala said.

A press release explaining the process for seeking refunds is posted on the town's Web site, www.ci.atherton.ca.us.

Are you receiving Express, our free daily e-mail edition? See a sample and sign-up for Express.