Headcount Tax to be on the Ballot this November in the City of Santa Clara

NAIOP Silicon Valley reported last week that taxes are on the table with the City of Santa Clara and their interest to increase its business tax. The last time Santa Clara’s business license tax was updated was 1992.

On Tuesday night, a decision was made.

The City of Santa Clara voted to place a head count tax measure on the November ballot.  After more than 3 hours of discussions, City Council voted 5-2 (Mayor Gillmor and Council Member Watanabe voting against it) to place a flat $45 per employee head tax on the ballot.  In this proposal, all businesses would be charged a flat fee of $45 to ease administration and compliance.  This proposal will include a cap of $350,000, CPI with 5% increase, and every business paying the same per employee.

What this means: Larger businesses would not have the burden of paying higher headcount tax as was proposed by staff.    The original staff proposed revenues to be generated were estimated at $9.3 million but the proposal passed will generate roughly $6.0 million. The implementation start date will be in July 2023 with a rolling implementation and the rental unit will be a flat $15 per unit.  While a subsidy would continue to be offered, given the low rate of $45, businesses eligible for a subsidy is as follows:

Employee Range	Subsidy Per Business
0-4	$30
5-9	$75
10-19	$100
20-49	$200

Where the discussion began: On July 5, 2022 staff presented a progressive tax that would have raised over $9 million.  The staff’s report would have increased the Business License Tax to $75 and added a headcount tax that would increase incrementally from $15 to $135 per employee or rental unit, with larger businesses paying more per employee.  This would have generated more than $9,000,000 annually until ended by voters with independent financial audits.

The Council deferred the item by one week and created a council subcommittee appointed by the City Council to negotiate a compromise with the business community.  The subcommittee was comprised of Councilmembers Raj Chahal, Kevin Park and Karen Hardy. The working task force also included Silicon Valley Central Chamber of Commerce, NAIOP SV, SVLG, and members of the community. After several meetings, the Council Subcommittee reduced the total dollar amount generated to $6 million from $9 million and reduced the impact to larger companies by creating a flat $45 rate to each employee. The proposed headcount tax was presented to the City Council on July 12^th and was voted to be placed on the November Ballot.

The Original Proposal by Staff

To read more about the original proposal, click here.

About NAIOPSV’s Involvement:

Edesa Bitbadal, Chief Public Policy Strategist for NAIOPSV, has informed the Public Policy Committee, the Board of Directors, and keeps the membership informed.  She has also worked with individual companies that have properties or vested interest in Santa Clara to provide them up to date information and internal information.  Edesa has attended the City of Santa Clara’s outreach meetings and worked hard to divert the City’s tax proposal from charging either property owners or businesses square footage to a head tax that will only charge per employee count.  During those meeting, she requested that the tax remain lower than neighboring cities to attract businesses in the future.  The head tax is much more to the business community’s advantage rather than a square footage tax.   For reference, the City of Palo Alto will be placing a tax increase that could charge as much as 20 cents per square foot per month which is $2.40 per year per square footage.  After months of business community input, they are now exploring 12 cents per square footage per month with no cap. Although this is still much higher than all cities, NAIOPSV has a voice at the table during negotiations.