Council Orders Overhaul of Tax Proposal : Business: In response to bitter clash among rival merchant groups, officials seek further study of special levy to advertise two shopping areas.

WEST HOLLYWOOD —  Facing a bitterly divided business community, the West Hollywood City Council rejected a proposal Monday to establish a special business tax to pay for advertising two shopping areas.

The council voted 5 to 0 to send the proposal back to the drawing board after members of two rival business groups clashed over whether the marketing tax would help bring new shoppers or simply place another burden on merchants.

The decision was a victory for the West Hollywood Community Alliance, a group of frequent City Hall critics who had gathered petition signatures to fight the districts. For one of the business areas they had enough signatures to automatically block the tax under the state law governing special assessment districts.

The proposal had called for owners in the two so-called business-improvement districts--along western Santa Monica Boulevard and in a commercial area near the Pacific Design Center--to tax themselves. A merchants committee would spend the pooled money to promote the zones through logos, events or other marketing methods.

The council abandoned for at least a year the proposal on the Santa Monica Boulevard district, which received protest letters from more than half of the business owners. Although the signatures were not officially verified, council members cited the unusually rancorous debate as a sign that the idea was probably doomed.

In the previous week, the alliance’s sparring with the city’s Chamber of Commerce had produced mutual charges of lying and dirty tactics. During Monday’s hearing, the city staffer presenting the proposal faced a barrage of sharp attacks, including one from Mayor Sal Guarriello, who already opposed the plan.

“There’s been enough disharmony with this so that it’s just not going to successful,” Councilman Paul Koretz said.

Officials were more hopeful that the second district, called Avenues of Design, might be revived sooner because it received fewer letters of protest. The council directed the business committee there to return with a new proposal.

Business leaders who devised the plans were stunned by the fierce show of opposition organized by the alliance. They also criticized themselves for failing to promote the plan more aggressively among neighboring businesses who might have been supporters.

“That was probably our major flaw,” said Ed Steinberg, owner of Roche Bobois, a furniture shop on Beverly Boulevard. “We didn’t market the marketing.”

One after another, opponents said the assessment amounted to a new and burdensome tax that would be unlikely to help many businesses that would be paying up to $2,400 a year.

“To me it’s like throwing money down the toilet,” one accountant said.

Promoters, led by members of the chamber, had argued that similar collective marketing had worked wonders for shopping districts in Pasadena and Santa Monica by sculpting and advertising a unique image.

The assessment would have produced $170,000 from 445 businesses in the Santa Monica Boulevard district, the commercial center of the city’s large gay community from Doheny Drive to Crescent Heights Boulevard. The Avenues of Design area includes many design showrooms and restaurants along Melrose Avenue and San Vicente, Beverly and Robertson boulevards.

The Pacific Design Center was excluded from the plan because its 225 tenants already contribute to a private joint marketing program, and they do not necessarily share the goal of increasing pedestrian shoppers on the nearby streets.

The council also rejected a suggestion to make the districts voluntary. Councilwoman Babette Lang argued that it would be unfair for some businesses to pay to benefit non-paying neighbors.