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Seaport Industrial Association Business License Tax Comments July 19, 2024 2 Process Considerations The fact that the business license tax was not updated for fifteen years led to a decision- making process marked by a sense of crisis. This, along with serious questions about the data analysis in the City’s consultant report, undermined early confidence in the process. Transparency and predictability are key factors in business decision making, including choices about where to locate and whether to invest in a community. To maintain a healthy economic ecosystem, it is essential that the City embrace these values in its policymaking. SIA urges you to take these steps to restore confidence going forward: • Take a phased approach. Whatever level of revenue increase the City seeks to achieve, implement it in increments over more than one year. Specifically, increase the maximum cap gradually over several years to allow for business planning. • Commit to a schedule for reviewing the tax to give certainty regarding how long any measure approved by the voters will remain in effect. • State what the City will do with a surplus if the new tax yields more revenue than anticipated. Excess revenue should be directed to services that directly benefit businesses or held in reserve to reduce the need for future tax increases. This will ensure accountability and promote business confidence. • Extend the time to make your decision. The public has two business days to review the staff recommendation. You will hear many comments on July 22. Because the stakes are high, the data imperfect, and the issues complex, both you and the community deserve time to consider your options following public comment and council discussion. Especially if the staff recommendation does not pass, it seems unreasonable to expect you to develop and select an alternative at the same meeting. Substantive Considerations Regarding the content of the proposal, the high rates for professional service businesses and the increase in commercial lease rates would impact the Port. In addition to its central role as a working industrial waterfront, the Port leases commercial office space to small businesses. Considering that the Port is a department of the City, the increased tax on these businesses combined with the increased square footage tax on the Port’s contracted lessor would affect not only the tenants themselves but potentially the ability of the Port to lease this space and generate revenue for the City. SIA also associates itself with the comments from Chamber San Mateo County: • While we appreciate the value of tax equity, the proposed measure leans heavily on large businesses with an extremely high cap. Companies with the most employees in Redwood City could see a tax increase on the order of 5,000%. These workers sustain small businesses (restaurants, entertainment, retail, etc.) and contribute to the vitality of the community, especially downtown. • The proposal also doubles the rate for the smallest professional service businesses in the health care and other sectors compared with retail.