Facing discontent from the business community and a narrowing timeline for a November ballot addition, Belmont’s City Council is heading back to the drawing board to look at lower rates for business license tax reform.
The city is considering a change of its business license tax from a flat rate to gross sales receipts, resulting in a smaller minimum for small businesses. The city has faced recent pushback from stores who say a rise in expenses will result in them passing the added costs on to customers, along with concerns about a lack of outreach. At a June 28 council meeting, the Belmont City Council did not follow city staff recommendations and instead asked staff, businesses and select councilmembers to find an option acceptable for businesses and the city. The council asked a subcommittee of Vice Mayor Davina Hurt and Councilmember Charles Stone to work with city staff and businesses on options.
“I think we have to thread the needle on this, but we do need to go back and change,” Hurt said, who suggested lowering the rates.
City staff has said the changes would address inequities in the current structure for small businesses, meet current business trends, align with other cities, and streamlines the process. For example, the city said the smallest minimum tax under the new policy is $15, while the old rate was $376. Over 70% of businesses would also pay less than the current rates. The city also faces falling revenue over the next 10 years in its general fund that will require using reserves to balance the budget, necessitating the change. The city has worked on the tax for the last three years, with the previous update in 1990. Belmont uses business license tax revenue to pay for city services, including roads, firefighters and police.
Under the current proposal, restaurants and general businesses would pay $1.50 per $1,000 in gross receipts. Contractors would pay $2, and professional services and property rentals $3. Alternative proposals offered a phased approach over three years or lower rates for restaurants and other businesses. Mike Picone, the Carlmont Village Shopping Center operations manager, said several shops had serious concerns with the changes, noting the extreme haste was not appropriate, especially for owners coming out of pandemic restrictions. Picone said one large shopping center merchant would go from $2,500 a year in business license tax to $25,000 yearly. Another small professional office tenant would go from $545 to $9,000.
“During our discussions with our business owners, there was an underlying attitude that if the city did not take a more cooperative approach, they could always move to another city that is more BLT friendly,” Picone said.
Councilmember Warren Lieberman agreed a growth tax receipts modernization is needed, suggesting lowered rates than proposed. However, he called it unforgivable that the city might send something to the ballot box without sufficient outreach to businesses at the Carlmont Shopping Center.
“To do something where we’ve got this type of concern and opposition makes no sense to me,” Lieberman said.
Stone noted the current system is inequitable for small businesses and is unacceptable. He wanted to tinker with it and try something closer to a phased proposal over three years.
“This is trying to make a system more equitable, and in trying to do so, in my opinion, some of the changes aren’t palatable because they are just too extreme,” Stone said. “I don’t know where that leaves us because we are pretty far down the path.”
Mayor Julia Mates suggested more creative solutions specific to Belmont, noting the city doesn’t have the same options as San Carlos, which has a downtown. She stressed that the city and businesses must collaborate to bring something to the voters.
“As it is, it’s not ready to go,” Mates said.
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