CITY COUNCIL STAFF REPORT
Meeting: February 21, 2024
Subject
Potential November 2024 Revenue Tax Measure Opinion Research.
Recommended Action
Forego opinion polling and additional efforts at a November 2024 revenue-generating ballot initiative.
Reasons for Recommendation
Background
On December 5, 2023, staff sought Council direction to explore the feasibility of potential revenue tax measures through opinion research, in alignment with the current work program. The City’s consultant, Urban Futures, Inc (UFI) presented various revenue tax measure options, highlighting the advantages, disadvantages, comparisons with neighboring cities, and projected revenue impacts of each option. UFI ranked TUT as the top option, followed by TOT, Parcel Tax, and Business Operations Tax. The Council decided to revisit the issue in early 2024, directing staff to engage the business community regarding potential measures. In addition to this outreach, the landscape specific to the November 2024 ballot has evolved. Specifically, several measures that are likely to be included on the ballot could impact the application of a Cupertino measure.
Business Community Survey and Outreach
To engage the business community, staff conducted three forms of outreach – an online survey, a small focus group meeting, and individual meetings. As outlined below, the feedback from the business community was mixed, with an overall negative perspective.
The link to the survey was emailed to all 2,843 business license holders in the City with a valid email on file. The survey opened on December 20, 2023, and closed on January 15, 2024. The survey was accompanied by a dedicated webpage that described the City’s financial challenges and included videos describing each revenue tax measure under consideration.
In addition, the City’s Economic Development Division organized a small focus group meeting on December 20, 2023, as well as individual meetings between the months of January and February 2024 to ensure adequate representation from the business community was achieved.
Business Engagement Results
Out of the 2,843 business license holders, the City received 112 responses to the survey. A detailed breakdown of the results is available in Attachment A. 43.5% of the surveyed businesses supported a revenue tax measure. The breakdown indicates specific preferences among respondents:
35.7% supported a 0.25% TUT.
54.0% supported a 2-3% increase in the TOT.
35.7% supported a parcel tax.
19.1% supported a business operations tax.
November Ballot Landscape
Three ballot measures could potentially complicate the November ballot, making it challenging to introduce a local measure. Ballot complexity can create confusion and lead to an increase in “no” votes.
Assembly Constitutional Amendment 13 (ACA 13) – This measure focuses on vote thresholds necessary to pass revenue measures. Specifically, the measure stipulates that any measure seeking to increase the voter approval rate, must itself pass at that level. This measure also sets forth that advisory ballot measures are permissible. This measure has been supported by the League of California Cities. Although not specifically relevant to the efforts in Cupertino, this measure, in combination with the next two, could create confusion around ballot measure approval thresholds.
Assembly Constitutional Amendment 1 (ACA 1) – This measure would lower the threshold for General Obligation Bonds and special taxes from two-thirds to 55 percent for infrastructure project funding, including affordable housing. If successful, this measure could influence the selection of any initiative Cupertino would want to consider. For example, an infrastructure measure for specific uses might receive greater public support than a general measure.
Taxpayer Protection and Government Accountability Act (TPA) – Also known by the name of the sponsors, the California Business Roundtable (CBRT), this measure would significantly impact any measure Cupertino might put forward. This effort would redefine revenue that a city collects, broadening the definition of “tax,” and provide for significant requirements associated with any local measure. Should a measure not align with these requirements, the measure would be void after twelve months, requiring a duplicative effort to gain approval, including relevant costs to the City.
These three measures are likely to garner significant spending on advertising and outreach, both in support and opposition. Given this level of activity, another measure may have difficulty standing out and gaining enough support to be successful.
Staff Recommendation
Given the existing uncertainty in the City's budget, staff advises against proceeding with opinion research at this time. While recognizing the importance of a targeted survey to better understand the City's voter demographics, the current budget uncertainties may hinder the feasibility of such an effort. It's prudent to reassess and monitor the City's financial situation before committing to additional expenses.
Furthermore, the complexity of ballot measures and the ensuing uncertainty create an environment where a tax increase would face significant challenges.
Next Steps
The staff recommendation would cause staff to cease exploration of any revenue-generating measure for the November 2024 ballot.
Sustainability Impact
No sustainability impact.
Fiscal Impact
Foregoing a ballot initiative will save the city an estimated $13,000 in polling costs and an additional $58,000 for putting a measure on the ballot and supporting it through outreach.
California Environmental Quality Act (CEQA)
Not applicable.
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Prepared by: Thomas Leung, Budget Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services Matt Morley, Assistant City Manager
Approved for Submission by: Pamela Wu, City Manager
Attachments:
A – Business Community Survey on Potential Revenue Tax Measures – Survey Results