Redwood City to study business tax reform

The council voted 6-1, with Mayor Jeff Gee as the sole opponent, to continue with research toward changing its business license tax to a gross receipts model. The measure could be considered on the November ballot. The council opted to no longer move forward with a study on a property transfer tax because of a lack of community support. 

The hypothetical business license reform measure states that between 0.1% and 0.3% of gross receipts from businesses to generate approximately $13.5 million annually. Around 60% of survey respondents said that if the measure preserves essential city services indicated as priorities, they would “probably” or “definitely” vote in support.

The gross receipts tax model aims to support and reflect the needs of small businesses, as the tax will grow as a business makes more money from its sales. The current model is based on the number of employees but has a cap, so smaller companies ultimately pay a disproportionate tax amount. 

“Business tax has not been updated since we had sideburns and bell bottoms and avocado green refrigerators in the 1970s,” Councilmember Kaia Eakin said. “It’s time to update because we want to be equitable and we want to help small businesses.”

The poll gauged 603 Redwood City residents and measured residents’ satisfaction with city services as well as how they would feel about proposed legislative measures related to such city services. 

Many residents chimed in on the issue with 152 public comments emailed in ahead of the meeting. Though they were not read aloud during the meeting, Councilmember Chris Sturken emphasized they would be taken into account toward the council’s decision-making process. 

“In the event that anyone is concerned about their communication not being read during the council meeting, it is in the record and we just want to make sure that we end on time so that staff and members of the public present and my colleagues can get home safely.”

With such a large number of public comments on the motion, Eakin said it was important to remind residents that a final decision on the tax change was not being voted upon, just further study of the subject. 

“I want to emphasize that we’re studying ways to recalibrate some of our fees and taxes,” Eakin said. “We’re not deciding to do anything tonight. If we decide after study to do something, it’s the voters who will decide, we don’t decide. I want to reassure everyone, the community, ultimately, the decision is theirs.”

Gee said that he would not support specifically the gross receipts model because he felt he didn’t have enough information on exactly how it would be applied to business owners. 

“We really need to engage heavily with our business partners. … If we do something that takes away from [profits], if we do it intentionally that’s one thing, but if we do it without understanding the consequences, that’s something else,’’ Gee said. “We really need to do a lot more work to look at not only gross receipts but define it and who it applies to and how it applies.” 

His concern was primarily based on the city being in a major deficit. 

“If businesses leave, I can tell you one thing, the hole will be bigger,” Gee said. “If we’re struggling right now, just imagine if some of our major employers left and how big that hole would be.” 

The rest of the council maintained the motion as is and said it allowed room for any change needed in the future.

“When we do our outreach and we go to all the businesses, if we hear something different and hear additional information on a possible other method, I would like to believe that that would be brought back to us at a later date for us to consider,” Councilmember Diane Howard said.