South City is one step closer to updating its business license tax, hoping to bring in more than double of last year’s $2.3 million figure.
Updating the BLT revenue stream has been a frequent topic of discussion among several Peninsula cities as of late — including Foster City, Belmont and Redwood City — especially as budget deficits abound and other income sources, such as property-tax-in-lieu-of-vehicle license fees, were recently put in a precarious position. The city’s BLT currently comprises about 1.9% of its total general fund revenue, compared to the 4% to 5% median rate for comparable cities in the Bay Area.
Currently, South San Francisco uses about four taxation methodologies dependent on the type of business, ranging from a per employee to gross receipts and per unit model, with the employee model most prevalent.
But whether to remove its current tax limit was a frequent discussion point. Though Councilmember Flor Nicolas was hesitant on removing a limit, stating it could place additional and unnecessary burden on firms, others disagreed.
“Our largest businesses should be treated fairly, just as much as our medium-sized business and small businesses, in that if they have more employees, each of them should be taxed at the same rate. However, I do recognize that there are some businesses that might be facing a big cliff,” Mayor James Coleman said. “I would be supportive of a ramp, however I’m not sure if I would be supportive of a definitive cap that would be in place for perpetuity.”
According to staff estimates, increasing the BLT limit to $500,000 per year would increase revenue by about $2.3 million, while removing the cap entirely would raise it by an additional $3 million. The council also suggested simplifying the number of business categories in the employee-based model, from the originally proposed nine down to about two to three. Depending on the final updates, there would also be a ramp-up period for any increases in BLT, likely implemented over a five-year period.
“We could structure the ordinance to say that, in the last year, the cap disappears but the City Council has the authority to leave it in place,” said City Attorney Sky Woodruff. “So if you did have a five-year ramp-up, at the end of year five, council could evaluate economic conditions at the time and decide whether or not to let the cap disappear or not.”
The council will hold one more hearing on the issue before a final council decision is made, at which point the issue will go before voters in the November election.
