Santa Clara will seek voter approval in the November election to increase taxes on local businesses.
During a study session Tuesday night, the Council directed City employees to look into drafting a ballot measure that would cast a wider dragnet aimed at collecting more money to address a massive budget shortfall caused by the COVID-19 pandemic.
With a nearly $18 million deficit looming on the horizon despite significant cuts that include a 26% reduction in employees, the City will try to draw in more money while maintaining a “business friendly” atmosphere.
The Council considered the topic following a presentation by Kenn Lee, the City’s Finance Director. Lee detailed the City’s need to drum up revenue to stop the bleeding caused by the pandemic.
The five-year capital improvement plan, for instance, shows the City needs roughly $300 million in infrastructure improvements and another $1 billion in needs beyond that plan.
The business tax collects money from businesses based on the number of employees, ranging from $15 to $500, but Lee said that model has remained stagnant since 1992 and is out of step with the current climate. The tax collects roughly $900,000 a year.
Of the 8,500 business licenses in the City, only about two-thirds are subject to the tax. Only 50 businesses in the City employ more than 500 employees but account for 50,000 of the roughly 137,000 people working in Santa Clara.
The Council did not opine much on other options, such as a 2% to 5% utility tax that would generate an estimated $4 to $6 million annually or real estate tax that would rake in roughly $7 million a year.
Mayor Lisa Gillmor, who makes her living in real estate, opposed the real estate tax, saying it just passes the “skyrocketing cost of real estate” onto buyers.
Christian Pellechia, Chair of Silicon Valley Chamber of Commerce, implored the Council to continue to maintain a “business-friendly” atmosphere.
That request was codified in a motion by Councilmember Kathy Watanabe, who said companies like Oracle and Tesla are already fleeing California because of draconian government regulation. She doesn’t want Santa Clara to go down the same path. The motion passed unanimously.
“If we are looking to achieve a goal of economic recovery, we can’t afford to lose any of those businesses that are in Santa Clara,” Watanabe said.
Councilmembers Kevin Park, Karen Hardy and Vice Mayor Raj Chahal all noted how upping the tax based on number of employees burdens small businesses while not collecting enough money from larger-revenue businesses with few employees, such as data centers.
Chahal said he would like to see a tax that targets the massive tech giants in Santa Clara like NVIDIA, Advanced Micro Devices, Inc. (AMD) and Intel, whose collective worth stretches to nearly $1 trillion. He said requiring them to pay more taxes is “peanuts,” adding that these companies will not flee the City if they are required to pay higher taxes.
Councilmember Anthony Becker suggested singling out data centers for a special tax similar to a tobacco tax, but Gillmor said that “sounded discriminatory.” The consensus among the Council seemed to support increasing the business tax on the City’s biggest earners while attempting to keep taxes low for its small businesses.
Taxes such as a utility tax, business tax or real estate tax would require a majority, while a general obligation bond to fund infrastructure would require a two-thirds majority of voters. However, Lee said support for a general obligation bond had previously polled short of the supermajority needed for it to pass.
City Manager Deanna Santana said the City has already begun soliciting bids from consultants. The City will strive to “strike a balance” between competing goods and return to the Council in February for an update.
State to Put Homeless Development in Santa Clara Whether Residents Like it or Not
The Council also got an earful of public comments on an item not on the agenda. During the public presentations, the Council heard more than an hour of public testimony — even after the mayor reduced speakers’ time from three minutes to two minutes — about a homeless development.
A state-funded Project Homekey development located near the Sunnyvale border drew much public ire, prompting a groundswell of comments from residents. Most speakers raised concerns about safety in the area, questioning the choice of location given its proximity to a population dense area.
The Project Homekey location, one of two slated to be built in Santa Clara, is Bella Vista Inn, 3550 El Camino Real. It will host 64 transitional rooms at the hotel during the first phase and 120 permanent and affordable rooms during its second phase.
Andrew Crabtree, Santa Clara’s Director of Community Development, said since the project is a partnership between the state and county aimed at ending homelessness, it circumvents local land-use authority. The City has the option to add local money to the pot to help fund the project but will have no say in whether the development is built.
Mel Foody said the whole process is “undemocratic and opaque.” He said the City should try contacting the owners, developers, county or state officials to make its concerns known and reach an amenable solution.
Many residents implored the Council to reject the project, but Gillmor emphasized that such requests are misguided since the City is impotent to halt construction. She said those comments are better directed at county or state officials.
Despite this, Gillmor seemingly supported the project just over a month ago.
“We are committed to ensuring Santa Clara is a livable city for everyone,” Gillmor said in a County press release touting the project dated Sept. 30. “Through the collaborative leadership of our many partners, we will continue to help our unsheltered neighbors in our regional efforts to get our unhoused residents out of temporary shelters, off the streets, and into permanent homes.”
The Council will discuss the project in greater detail during a study session at its Nov. 9 meeting.
Consent Calendar Spending
- A $1.2 million, five-year contract with up to five one-year options with Siemens Industry for services to upgrade the EnergyIP (EIP) Meter Data Management (MDM) software system, plus subscription;
- A three-year extension to a contract with Smart Energy Systems, Inc. for a cloud-hosted Customer Self-Service Portal. Contract amount increased by $369,124 to a total of $1.65 million;
- A two-year extension to a contract with InfoSend, Inc. for bill print and mail services. Contract amount increased by $680,000 to a total of $2.38 million;
- A five-year, $1.5 million contract with Hill Brothers Chemical Company for as-needed ammonia delivery and related services;
- A three-year, $656,543 contract with First Shield Security and Patrol Inc. to provide security guard services at sites managed by the public works department;
- A $5,520 purchase order to EYEP Solutions, Inc. for Genetec Omnicast training and Synergic Technical certification.
The next regularly scheduled meeting is Tuesday, Nov. 9, in the Council Chambers at City Hall, 1500 Warburton Ave. in Santa Clara.
Members of the public can participate in the City Council meetings on Zoom at https://santaclaraca.zoom.us/j/99706759306; Meeting ID: 997-0675-9306 or call 1(669) 900-6833, via the City’s eComment (available during the meeting) or by email to PublicComment@santaclaraca.gov.
Once again, the citizens fund the excesses of elected officials. Hey stupid! Businesses DO NOT pay taxes. That is an expense just like rent, insurance and utilities, and is passed on to consumers – that’s us citizens.
I truly hope the ballot measure that is put together regarding the increase in business tax does not include multiple actions within the measure. When the City drafted Measure C regarding Council Members/Districting there were 3 items included in the ballot measure but only one ‘YES’ or ‘NO” vote for the entire measure. Voters may have agreed with one part but not the other, therefore they likely voted ‘NO’. When the measure gets drafted, KEEP IT SIMPLE. However, although the City has eliminated various positions in order to save money, it still needs to look at the high salary of the City Manager and the new managers she has hired. If her salary and her new-hires were reduced to something more in line with similar managers in other cities, Santa Clara could have saved over $1.2 million dollars in the last 4 years. Santa Clara also has the on-going obligation of retirement costs of these exorbitant salaries. When will the City Manager’s salary get reviewed and adjusted to be in-line with similar cities?