Resistance to business tax emerges

“Yes, that’s something we are considering,” Sycomp General Counsel William Rainey said of a relocation. “It would be really unfortunate for us to leave. But that’s on the table for us.”

In a public letter to the council June 6, Rainey said Sycomp was talking with other companies about creating a litigation fund because it would be cheaper than paying for a tax increase. He also claimed the tax would force businesses to leave and failed to consider the business environment after the pandemic, rising inflation and new hybrid workplaces. Sycomp has not meaningfully occupied its leased space in over two years due to COVID-19 and pandemic restrictions. Rainey said raising the cap could lead to a 1,000% increase in tax, something it was not prepared to undertake. The Foster City Council held a special closed session meeting June 27 about concerns of potential litigation regarding the Sycomp letter, with no reportable action taken.

Foster City officials are considering an increase to its business license tax cap and gross receipts rate through a November ballot measure to increase city revenue amid financial instability. The council must decide by the August deadline, with a simple majority of votes needed for passage. The gross receipts cap increase targets about 20 large businesses. The city has a gross receipts rate of $0.00075 and a $35.9 million receipt cap, resulting in a maximum business license tax of $26,985. Raising the receipt cap, for example, to $50 million would increase the maximum business license tax to $37,500, a potential citywide revenue increase of $163,000. The city’s revenue from business license taxes were around $1.5 million in 2021.

The city is looking at tax increases to slow expected multiyear General Fund structural deficits over the next five years due to revenue declines caused by the pandemic. It also faces increased costs due to staff retirement pension increases and rising inflation costs, with the council exploring revenue options over the last few months. The city faces increased labor costs from its 2021 labor agreements and new annual funding commitments to reduce CalPERS liability. Since the council began looking at options, it has asked for more information and city outreach to businesses about the impact and potential concerns. Rainey said Sycomp is open to reasonable cap increases and discussions, but the company has not had contact from the city about possible options moving forward or plans for talks since it sent the letter.

“They haven’t put anything on the table tangibly,” Rainey said.

curtis@smdailyjournal.com

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