Mirroring countywide trends, South San Francisco is contemplating business tax changes to narrow projected budget deficits, which largely stem from the state’s recent refusal to reimburse cities over $70 million from last year alone.
With the start of a new fiscal year beginning in five weeks, local budget discussions are in full swing across the county. This year, a recurring theme involves vehicle license fee revenue, which is directed to the state and subsequently reimbursed to cities, typically by the following fiscal year.
But for the first time, as a way to temper its own deficit, the state is withholding cities’ reimbursements, stating it technically is not obliged to pay them back. By the end of next year, it’s projected the state will owe cities within San Mateo County a total of about $114 million. And if it continues claiming it no longer owes jurisdictions such payments moving forward, deficits could reach $300 million countywide over the next decade. The state owes South San Francisco what amounts to almost 9% of its total general fund budget.
But the city is still faring slightly better than others in the area, largely buoyed by its robust biotechnology and commercial hub. And due to additional property tax revenue and one-time fund transfers, the city anticipates a $3 million budget surplus for this fiscal year, though shortfalls are expected next year.
“Some of the strategies that we present are essentially one-time measures that don’t address what is essentially a structural deficit, meaning the use of one-time funding sources does not fix ongoing expenditure gaps for future years,” said City Manager Sharon Ranals during a City Council budget discussion Wednesday, May 22.
Without the last of the American Rescue Plan Act funds, coupled with VLF shortfalls and increased pension and health care premiums, the 2024-25 budget shows a projected $11 million deficit. The proposed budget did not recommend layoffs or reductions in city services but did suggest hiring halts to certain positions.
The city is also joining other cities, such as Foster City and Belmont, in re-evaluating its business license tax, which hasn’t seen substantive changes since 2008. South City collects about $2.5 million annually from the tax and currently uses a per employee model to calculate each company’s owed amount, rather than a rate based on revenue.
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But with some tweaks recommended from city staff — which would increase both the base and per employee rates — the city could start collecting almost $4 million more each year.
“The current tax structure really puts a burden on our small businesses. Improving this would do a lot of good for our small businesses. I’m in favor of a more progressive approach,” Councilmember Mark Nagales said.
Currently, smaller firms pay about a quarter of the total BLT revenue collected but, under the proposed changes, their share would be reduced to about 10%.
The anticipated change would have to be approved by voters in the upcoming November election. The next budget discussion will take place in June.
Perhaps the City Manager can take a look at the city's expenditures and start wacking superfluous or nice to have programs and projects. Why is the immediate reaction always to raise revenues? I wonder what she does when her income does not cover her expenses at home?
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Perhaps the City Manager can take a look at the city's expenditures and start wacking superfluous or nice to have programs and projects. Why is the immediate reaction always to raise revenues? I wonder what she does when her income does not cover her expenses at home?
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Keep the discussion civilized. Absolutely NO personal attacks or insults directed toward writers, nor others who make comments.
Keep it clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't threaten. Threats of harming another person will not be tolerated.
Be truthful. Don't knowingly lie about anyone or anything.
Be proactive. Use the 'Report' link on each comment to let us know of abusive posts.
PLEASE TURN OFF YOUR CAPS LOCK.
Anyone violating these rules will be issued a warning. After the warning, comment privileges can be revoked.