The Foster City Council has spent years trying to reduce a once $4.8 million deficit by eliminating 30 full-time positions since 2010, establishing a second tier of reduced benefits for new hires and sharing fire personnel with neighboring cities.
Two recent events, however, have caused the deficit to climb back up to a projected $1.35 million in the coming years — the loss of the city’s biggest sales tax producer and an increase in the contributions the city has to make to fund retiree pensions.
To eat into the deficit, the City Council will consider Monday night whether it should ask city residents to update the city’s business license tax on the November ballot. Updating the business license tax will raise an extra $700,000 by fiscal year 2015-16 for the city’s general fund.
To get the item on the ballot, however, four of the five on the council must approve the action Monday night.
The Chamber of Commerce worked alongside officials in the finance department to reach out to the city’s largest businesses Visa, Pacific Gas and Electric and the Crowne Plaza Hotel before bringing the item to the council. None told the city they would support an increase to the tax but none said they would oppose it either, according to a staff report.
“The business license tax has not be changed for 40 years. I believe we may have come to a solution whereby we would gradually increase the tax over a period of time so that businesses will not be hit with a large tax bill,” Councilman Steve Okamoto wrote the Daily Journal in an email.
The city implemented its current business license ordinance with a “gross receipts” based tax structure. Businesses are required to pay 75 cents per $1,000 (0.075 percent) of gross receipts collected as a result of conducting business in Foster City. A minimum floor tax rate of $25 was imposed with it being $50 for general contractors) and a maximum ceiling tax amount of $3,750 was established by limiting the amount of gross receipts, $5 million, used in the calculation of the tax. Floor and ceiling amounts were established based on 1972 commerce trends.
The update would cap gross receipts from the current $5 million to $30 million by 2016 and the maximum ceiling tax from the current $3,750 to $22,500 by 2016.
The Foster City Council meets 6:30 p.m., Monday, City Hall, 620 Foster City Blvd., Foster City.
(650) 344-5200 ext. 106