Foster City is moving ahead with upping revenue from its business license tax by potentially increasing the flat rate as well as the maximum amount paid by businesses.
The current rate, 75 cents per $1,000 in gross receipts, is applied across all businesses, no matter the industry or size, and it generates on average $1.7 million per year. Staff and council have agreed on multiple occasions that the amount paid by businesses, including maximum limits, should be increased, as they haven’t seen substantial changes in about a decade.
Solidifying the best approach for upping the tax structure has yet to be determined. But during a meeting Monday, May 20, most councilmembers agreed to explore potential revenue implications if the rate increased to $1 or $1.25 per $1,000 and if the maximum changed to $500,000 from the current $28,000 cap. The new tax would likely have a three-year phase-in.
Changing the cap to half a million dollars is estimated to generate an additional $1 million per year to the city, which Councilmember Jon Froomin said was not sufficiently steep.
“My greatest concern with moving [the cap] to $500,000 is that we’ll be moving the goal post again, and we will be looking at this again in three or four years,” Froomin said. “If we started this in 1972 and did progressive increases, we’d be well beyond where we are right now. I think we need to do more. As much as I didn’t want to impact the small businesses, I think maybe we need to just a little bit.”
Despite the roughly 1,700 paying businesses in the city, revenue from the tax has remained stagnant over the last several years, and with the city facing budgetary concerns, the updated structure could prove particularly consequential.
“It’s important for everybody who will be impacted by this to know that the city is not thinking of the business community or taxpayers in general as their ATM but … the city is undoubtedly facing a structural deficit over the next five years,” Councilmember Sam Hindi said. “And in general, what does the city do with the monies it collects with the taxes? The city reinvests those monies to provide services and infrastructure to our community.”
The council will have to vote to add the increases as a voter-approved ballot measure for the upcoming November election. The issue will be further discussed at the meeting Monday, June 17.
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