Foster City Seeks Comments on Business Tax Increase | Local News


Foster City Council is considering an increase to its business license tax cap through a November election ballot measure, but the city will be taking input from affected businesses to gauge their willingness before deciding.

Foster City is considering raising its business license tax cap and gross revenue rate through a ballot measure aimed at boosting city revenue amid financial instability. However, the board is trying to balance its financial needs with the needs of big business, which led it to ask staff at its April 4 meeting to raise awareness.

“I understand the financial situation we find ourselves in as a city and we need to generate more revenue, but I think we need to reach out to the business community and understand their tolerance. If you put it on the ballot, who will vote on it? The people of Foster City, not the businesses that will be affected,” said council member Sam Hindi.

Hindi said he could not decide to add a ballot measure to raise the cap until more awareness and transparency to the business community. As of April 4, Foster City had contacted one of the 20 businesses that would be affected. The 20 companies have a gross revenue greater than $36 million.

Council member Patrick Sullivan agreed with Hindi and wanted more information about a breaking point for a company. He said he didn’t want to put companies in a bad position. He suggested a survey or more data.

“We would hate to see someone suddenly change headquarters so they’re not here in Foster City,” Sullivan said.

The city has a gross receipts rate of $0.00075 and a receipt cap of $35.9 million, resulting in a maximum business license tax for a business of $26,985. Raising the receipt cap, for example, to $50 million would increase the maximum business license tax to $37,500, a potential increase in citywide revenue of $163,000. The city’s revenue from business license taxes was approximately $1.5 million in 2021, ranging from $1.7 million to $1.6 million in previous years.

The city is considering tax increases due to projected multi-year structural deficits in the General Fund over the next five years due to declining revenues caused by the pandemic. He also faces unfunded pension liabilities and cost increases due to inflation. In March, tax challenges led the council to consider business license tax increases.

Council member Sanjay Gehani and Vice Mayor Jon Froomin said it was important to identify what other nearby towns with similar businesses were doing around license fees to benefit the community and businesses. Other cities base their license tax on the number of employees or on a combination of the number of employees and gross receipts. In comparison to other cities, Foster City was in a middle range of tax rates.

Gehani agreed that the board was not yet ready to decide. However, he wanted a decision before the timing of the August 12 ballot measures. He noted that small family businesses pay full price. He also wanted to think about how to increase the increases in subsequent years to ensure that a discussion was not necessary every few years.

“I would like to have a very transparent conversation with them about the challenges we face and how the cap has benefited a lot of these companies over the past nine years,” Gehani said.

Mayor Richa Awasthi suggested looking at cities that have increased the business license tax, such as Oakland.

“It’s lessons learned that we should be looking at, as well as awareness raising,” Awasthi said.

Staff said the city will contact businesses about the impact and potential concerns and eventually come back with different models of recommendations.


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