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.
The proposal is as follows: a Business License Tax increase to $75, increasing incrementally between $15 to $135 per employee or rental unit, with larger businesses paying more, generating approximately $9,000,000 annually until ended by voters with independent financial audits.
This item was heard on July 5, 2022, and it will be taken up for a vote on July 12, 2022, after outreach with the business community concludes. The council appointed a council subcommittee to meet with the Chamber and other stakeholders to develop a tax that will be either supported or not opposed.
The Santa Clara City Council meeting is on Tuesday, July 12th at 5:30 pm, where a potential placement on the November Ballot will be discussed.
If you are interested in getting involved in the Business Stakeholder group, please inform Edesa at [email protected] or directly at 408-230-6093. They will most likely meet by the end of this week.
The ballot language proposed is:
1) City of Santa Clara Business License Update / Tax Equity Measure
“To protect Santa Clara’s financial stability and maintain essential services such as 911 emergency/public safety/crime reduction services, safe/clean public areas, pothole repair, parks and libraries, shall an ordinance to update Santa Clara’s 1992 business license tax to $75, increasing incrementally between $15 to $135 per employee or rental unit, with larger businesses paying more, generating approximately $9,000,000 annually until ended by voters with independent financial audits, all funds staying local, be adopted?”
The revenue projection in the proposed ballot language is based on recent business license tax data which includes self-reported employee counts. Because the accuracy of the information could not be verified, the actual amount of revenue will differ.
Proposed Elements of a Modernized Business License Tax (BLT) Program:
Based on this engagement process, Staff is recommending the following elements of a modernized BLT:
- Adoption of a tiered, employee-based head count model with a base rate of $75 with incremental increases of $15 to $135 per employee or rental unit with larger businesses paying more, up to a maximum cap of $350,000 (approximately 2,800 employees).
- Inclusion of a CPI adjustment provision to be reviewed annually by the City Council, with a cap of 5%.
- An exemption to the business license tax for businesses with gross receipts under $5,000 per year.
- An effective date of no sooner than January 1, 2024.
- Use of $330,000 in settlement funds in the City Manager’s Office budget to help small businesses transition to tax rates in Year 1 of the new program (2024). Businesses with 1 to 4 employees would be eligible to receive a one-time subsidy in the amount of $80.
- A reduction in the number of alternative tax rates and the elimination of multiple business categories.
- The adoption of a base rate of $75 for rental units with an additional flat rate of $15 per unit.
- The adoption of a base rate of $75 for out-of-town businesses with a per-employee tax pro-rated based on the number of days work is performed in the City.
- The consolidation of business license tax requirements such that licenses are no longer required by site but by tax identification number
- Use of Employment Development Department definitions related to the proper accounting for remote workers with the delegation of authority to the City Finance Director to develop specific criteria related to compliance with reporting requirements and the authority to make necessary adjustments that reflect accurate employee counts.
The following chart illustrates the application of the proposed schedule on a per employee count basis:
Range of Employees & Business Tax Rate
- 1-4 Employees: $75+ $15/employee
- 5-9 Employees: $135 + $30/employee over 4
- 10-19 Employees: $285+ $45/employee over 9
- 20-49 Employees: $735+ $60/employee over 19
- 50-99 Employees: $2,535+ $75/employee over 49
- 100-249 Employees: $6,825+ $90/employee over 99
- 250-499 Employees: $19,785+ $105/employee over 249
- 500-999 Employees: $46,035+ $120/employee over 499
- 1000+ Employees: $106,035+ $135/employee over 999
Impact Analysis on Current City of Santa Clara Business License Holders
| Employee Range | # of Businesses | Est. Revenue | Avg. Per Business |
|---|---|---|---|
| 0-4 | 3,838 | $366,315 | $95 |
| 5-9 | 842 | $173,820 | $206 |
| 10-19 | 559 | $268,620 | $481 |
| 20-49 | 445 | $584,255 | $1,313 |
| 50-99 | 151 | $540,705 | $3,581 |
| 100-249 | 87 | $921,162 | $10,588 |
| 250-499 | 34 | $1,031,845 | $30,348 |
| 500-999 | 32 | $2,190,920 | $68,466 |
| 1000+ | 15 | $3,211,340 | $214,089 |
| 6,003 | $9,288,985 |
The City of Santa Clara is also proposing a utility transfer tax. The proposed language is as follows: transfer tax, called the “Utility Transfer Charter Amendment.”
“City of Santa Clara No Tax Increase/ Services Protection Measure. To protect essential services without raising taxes, such as 9-1-1 response; police patrols, fire protection; street/storm drain repair, and maintaining reliable local utility service; shall Section 1320 of the Charter continuing the annual budget transfer of funds from City utilities to the general fund at 5% of gross receipts until ended by voters, generating approximately $30,000,000 annually, with independent audits, all funds local, be reaffirmed/adopted?”
The revenue projection in the proposed ballot language is based on recent revenue projections. The actual amount of revenue may differ.
Looking Ahead
To place an item before the voters, the Council must adopt a resolution. The next steps are:
- Conduct outreach and conduct negotiations with the Business Stakeholder Group.
- Approve the ballot language to be presented to the voters of the City of Santa Clara.
- Hold a Special Election on November 8, 2022, and request consolidation with the Gubernatorial General Election and the services provided by the Registrar of Voters to conduct the election.
- Direct the City Attorney to prepare an impartial analysis for the measure.
- Provide direction on ballot arguments to the City Clerk, to be printed in the Sample Ballot.
- Approve a draft amendment to the City Charter or Municipal Code, as applicable, to incorporate the proposed changes if the voters approve the measures.
Do you have questions about public policy? Please contact [email protected]