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With a unanimous vote, the City Council of Redwood City decided it will place a business license tax modernization measure on the November 2024 ballot for voters to consider.
After months of study to put the modernization of this tax to a vote, citizens will be the ones who give the last word on this tax that, among other things, seeks to reduce the persistent budget deficit of 9 million dollars.
?Redwood City's current business licensing structure is old and outdated. "Some of the city's small businesses pay much higher rates than large companies," said City Manager Melissa Stevenson Díaz.
In that sense, he said that, if approved, the modernization of the business license tax will guarantee that large companies pay their fair share for the city's general services, in addition to generating additional income to support them, including those of the police, firefighters and paramedics; parks, recreation and community; as well as libraries.
Stevenson explained that small businesses are of special interest to the city because 70 percent of those established in Redwood City have fewer than four employees.
?If the measure passes, smaller retail and general trade businesses would pay less taxes than they currently do, and larger businesses would pay more. Taking into account the high costs of housing and child care in the region, the measure does not increase per unit taxes on housing and all child care providers would be exempt from the tax?, he said in a statement.
Subject to voter approval, the measure is expected to generate approximately $7.2 million in net new revenue for the City's General Fund when fully implemented.
The city specified that the General Fund covers City services, which include emergency response to 911; on-duty firefighters, paramedics and police officers; housing and homeless initiatives; and programs for children, youth and seniors.
The city detailed highlights of the measure include reducing the tax burden on small businesses by charging larger businesses higher rates, up to $250 per employee for professional services firms in Redwood City.
In turn, it would increase the limit or maximum commercial payment to $250,000 annually to align with comparable cities; a two-year phase-in, with a 50 percent rate starting July 1, 2025 and a 100 percent rate starting July 1, 2026, plus consumer price index increases starting in July of 2027.
Likewise, the city said, it would support housing and child care by exempting affordable housing with deed restrictions and for-profit child care from the tax and making no changes to the per-unit tax paid by housing providers with more than three units.
While the estimated new revenue would not fully offset projected structural deficits of approximately $9.3 million annually, it would ensure that city services remain intact for both residents and the business community.
In that sense, he explained that it would ensure that Redwood City maintains local control over the funds raised by taxes, and that the profits would be dedicated to city programs and services and would not be shared with the state.
Finally, he highlighted that, if the measure is approved, staff will present periodic reports to the City Council to monitor tax impacts and trends in commercial activity.
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