MAY 2024
CITY OF FOSTER CITY
2024 BUSINESS LICENSE
TAX UPDATE PROPOSAL
Agenda
City Council Vision & Mission
Why Foster City?
City Services
City Infrastructure
City Budget
Current Business License Tax
Structure
2024 Draft Business License Tax
Models Proposed
Timeline/Key Dates
Feedback/Questions
Vision Statement
“Create a vibrant and
sustainable Foster City
community through
smart, inclusive , and
efficient actions to
preserve and enhance
our quality of life for
current and future
generations
.”
The mission of the City of Foster
City is to deliver services, invest in
quality infrastructure and
implement policies that prioritize
public safety, smart planning, a
vibrant economy, fiscal stability,
community connections, and a
sustainable environment. In
pursuit of this mission, we use
community engagement and
data to make decisions and
measure progress based on
economic, social, and
environmental factors.
Mission Statement
Why Foster City?
Foster City is unique, diverse,
innovative, and has a big vision for
the future. It is the destination of
choice for residents and businesses.
Consistently rated among top
safest cities
Well-maintained roads and
infrastructure
Ideal location with proximity to
Silicon Valley and San Francisco
Highly skilled work force and
world-renowned businesses
Vibrant community with robust
recreational amenities, such
as parks, waterways, and access
to the beautiful Bay Trail
CITY SERVICES
Fire & EMS
San Mateo
Consolidated Fire
Department
Foster City
Police
Department
Parks and
Recreation
Public
Works
Planning &
Building
Safety
Library
JPA
Public Safety & Emergency Services
The Foster City Police Department’s authorized staffing levels are for 39 Sworn Police Officers, as well as support staff & Community Service Officers. Historically rated among the safest cities in California and the nation. Broader trends in commercial burglaries have not left the City untouched, however.
The Police Department responded to over 26,000 calls for service in 2023, a slight increase from the prior year.
Foster City contracts with the San Mateo Consolidated Fire Department for fire and emergency medical response.
Fire and EMS for service have increased approximately 10% per year over the last several years, and approximately 65% of fire calls are for medical emergencies.
Public Safety
& Social Equity
Crime Statistics
CITY
INFRASTRUCTURE
• 120 Miles of Streets & Roads
• Four (4) Bridges
• Over 2,000 Street Lights
• Recreation Center & 24 Parks
• Police Station & Fire Station
• Library/Community Center
• Stormwater & Flood Control Systems
• Water Distribution Systems (EMID)
• Wastewater Collection Systems
(EMID)
• Foster City Lagoon & Levee
• Buildings, Fleet & More
Levee Bay Trail
Foster City maintains the 8-mile
levee along the Bayfront, which protects
the City from flood hazards and storms.
In 2014, the Federal
Emergency Management Agency
(FEMA) conducted a coastal flood
hazard study and determined that roughly
85% of the City’s levee system did not
meet FEMA requirements.
The City recently completed a $95 million
upgrade to the levee through Measure P.
The upgraded levee will protect
the community from future sea level
rise, reinforce the levee
against earthquake damage, and
enhance the popular regional Bay Trail
for the enjoyment of its users.
Facilities and Infrastructure Needs
Waste Water Treatment Plant (WWTP) Improvements
Project
Recreation Center Rebuild Project
Adding a third Lagoon Pump
Rehabilitate Lagoon Intake Structure and Pump Station buildings including seismic upgrades
Maintain newly improved levee bay trail
Water Tanks and Facilities Improvements
Replace Emergency Generators
Rehabilitate Shell Bridge Sanitary Sewer Force Main
Rehabilitate Streets and Park Pathways
Water Transmission and Distribution System Improvements
CITY BUDGET
Foster City’s
General Fund
Budget for 2023-24
is just over $58
million
Police
31%
Fire
20%
Parks and Rec
19%
Comm. Dev.
8%
Public Works
8%
Admin Svcs
3%
Financial Services
3%
Library Services
1%
All Other
7%
Where the Money Goes
City Revenue Sources
Property Taxes (inc
ERAF/In Lieu, Etc)
70%
Transient Occupancy Tax
6%
Sales Tax
7%
Business License Tax
3%
Charges for Service (Rec/CDD/Oth)
3%
Permits 2%
Franchise Taxes
2%
Interest Income
3%Rentals (Parks/Rec, CMID, etc)
2%
Intergovernmental (SB90, Grants, etc)
0%
Fines/Other
1%
Other taxes (real property tax transfer)
1%
Approx. 26% of
Property Tax dollars
stay local
o Property Tax rates
governed by
Prop 13
Foster City Tax Structure
Sales Tax
Approx. 1 in 9 sales tax dollars stays
local.
The City of Foster City has no local
add-on sales tax and is tied for the
lowest Sales Tax rate in San Mateo
County.
Other Bay Area cities have higher
rates as well. Hayward (10.75%),
Oakland (10.25%), Fremont
(10.25%), Emeryville, (10.5%), San
Leandro (10.75%), and others.
Cities in San Mateo
County
Sales Tax Rate
Belmont 9.875%
Daly City 9.875%
Redwood City 9.875%
San Bruno 9.875%
South San Francisco 9.875%
Brisbane 9.875%
East Palo Alto 9.875%
San Mateo 9.625%
Burlingame 9.625%
Atherton 9.375%
Foster City 9.375%
San Carlos 9.375%
Foster City Tax Structure
Transient Occupancy Tax (TOT)
In 2018, the City increased its transient
occupancy tax (TOT) paid by hotel
guests from 9.5% to 11% effective
January 1, 2019, then to 12% effective
July 1, 2019
FY 2018-19 - $4.39 million
FY 2019-20 - $3.5 million
FY 2020 -21- $992,616
FY 2021-22 - $1.98 million
FY 2022-23 - $3.44 million
FY 2023-24 - $3.56 million (estimate)
Cities in San Mateo County TOT Rate
Half Moon Bay 15%
Belmont 14%
Brisbane 14%
Millbrae 14%
San Bruno 14%
San Carlos 14%
San Mateo 14%
South San Francisco 14%
Daly City 13%
Burlingame 12%
Foster City 12%
Redwood City 12%
Pacifica 12%
Foster City Tax Structure
Utility User Tax (UUT)
The City of Foster City has no Utility Users Tax, which can apply to gas, electric, water and telephone,
cable/internet bills.
Numerous Bay Area cities impose UUTs at 5% or
higher of these expenses. As an example, Palo
Alto generates nearly $16 mil/yr in UUT.
According to CaliforniaCityFinance.org: “On
average, the UUT provides 15 percent of general-
purpose revenue in cities that levy it. In some
cities, the UUT provides as much as one third of the
General Fund,” and “roughly half of California
residents and businesses pay a utility user tax.”
City UUT Rate*
Pacifica 6.5%
Daly City 5%
Palo Alto 5%
East Palo Alto 5%
Redwood City 5%
San Jose 5%
Portola Valley 4.5%
Foster City 0%
CA State Controller: California Cities Utility Users Taxes Revenue and Tax Rate Fiscal Year 2021-22
What has the City done to manage its
budget?
Periodically reviewing the organizational structure and restructuring as necessary for cost savings and/or improved operational efficiencies. Implementing a hiring freeze during the pandemic.
Seeking grant opportunities for capital replacement and infrastructure projects. Pursuing grant opportunities that offset staffing costs. Using consultant services to augment staffing needs.
Periodically evaluating & prioritizing capital projects that need replacement and maintenance and defer/extend non-critical projects.
Renegotiating contracts wherever possible.
Leveraging the use of technology in City Operations.
Taking positions on legislation that will adversely impact City revenues and operations
The City is projecting economic volatility for several of its key revenue streams that support its General Fund.
Transient occupancy tax (TOT/hotel) revenues in Foster City have improved steadily since the COVID-19 pandemic, however, the ability to conduct virtual/remote meetings has likely reduced business travel and therefore hotel occupancy. TOT revenues continue to trail pre-pandemic levels. Higher interest rates have had multiple impacts as the City's investment income has expanded but so has the cost of service and supplies as well as supply chain disruptions. Development activity within the City has decreased due to high interest rates, lack of vacant land, high labor costs and difficulty obtaining bank loans.
Continued trend in State mandates that place additional burden on existing resources. State potentially withholding millions of dollars in revenues from Vehicle License Fees (VLF) to San Mateo County cities due to State Budget deficits.
Increasing personnel costs due to cost-of-living adjustment (COLA) each year coupled with increasing pension and health insurance costs.
Fiscal Challenges
Projected
General Fund
Deficit
$4.54
$6.78
$8.31
$7.70
$6.35
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
2023-24 24-25 25-26 26-27 27-28
Millions
Projected GF Deficit
Note: These numbers are estimated projections. Final numbers will be part of the Final Budget Need for additional revenues
Maintaining 911 emergency medical, police/ crime
prevention and fire response services
Continue to maintain local streets, pathways, bike lanes and public sidewalks
Maintaining and repairing infrastructure to
prevent flooding and other hazards
Keep existing parks and recreation facilities safe, clean, and well-maintained
Maintaining the City's Long Term Fiscal Sustainability
Current Business License Tax Structure
The Business License Tax Ordinance was updated in November 2013 based on voter approval.
The current tax rate is 0.075%, or 75 cents per thousand dollars of Gross Receipts.
Nearly 1,300 of the City’s 1,651 businesses report less than $250,000 in Receipts and pay $200 or less annually.
[1] Gross receipts represented in the tables is based on the reported gross receipts, * Table Reflects Calendar Year Calculations
Category
Minimum
Tax
Gross
Receipt
Rate
2023
Maximum
Tax
Business
Count
Total Reported[1
Gross Receipts Tax Collected
General
Contractor $200
$0.75 per
thousand $28,597
449 $204,000,000 $203,000
All Other
Businesses $100 1,202 $59,895,000,000 $1,448,000
Totals 1,651 $60,099,000,000 $1,651,000
In calendar year
2023, the
City’s gross
receipts cap was
$38,129,333 for a
maximum tax of
$28,597.
The cap for 2024
increased by 2.8%
(annual CPI
adjustment)
to $39,196,000 for
a maximum tax of
$29,397.
Comparison to other Cities
Sample Business
Gross Receipts/
Employee/Units Foster City Belmont Burlingame Daly City Hayward San Mateo Outside Sub-Contractor $6,000 / 1 Emp $100 $376 $200 $110 $53 $40 Home-Based Cottage
Food / Retail $22,000 / 1 Emp $100 $376 $200 $110 $16 $25 General Contractor -
Remodeling $85,000 / 3 Emp $200 $446 $200 $110 $53 $100 Business Service $450,000 / 5 Emp $338 $516 $300 $385 $120 $366 Engineering Firm $500,000 / 5 Emp $375 $516 $300 $440 $632 $394 Restaurant Chain $625,000 / 50 Emp $469 $1,391 $300 $578 $167 $466 Family Dentistry $2,000,000 / 10 Emp $1,500 $691 $750 $2,090 $2,627 $1,249 Apartment Complex $5,000,000 / 20 Emp /
150 Units $3,750 $5,500 $750 $5,390 Repealed $2,959
Large Retailer -
Grocery Store $20,000,000 / 300 Emp $15,000 $10,841 $750 $21,890 $5,399 $11,509 Business Services –
Large Firm
$350,000,000 / 400
Emp $28,597 $14,341 $750 $384,890 $94,499 $199,609
$50,428 $34,994 $4,500 $415,993 $103,567 $216,718
San Bruno
$75
$100
$100
$478
$530
$630
$1,480
$3,130
$8,080
$116,980
$131,583
Current Tax Structure - Effective Rate
The City’s current tax code results in a regressive tax structure, where larger (red) businesses are paying proportionally less than the smaller businesses (green) based on estimated gross receipts.
2024 BUSINESS LICENSE TAX UPDATE PROPOSAL
Maintain the minimum Business License Tax of $100 per year for small business (businesses making up to
$250,000 yearly in gross receipts)
Increase the gross receipt rate modestly
Create tiers so that medium to large businesses pay a lower rate than the largest businesses
Have larger businesses pay more of their fair share by increasing the existing cap.
1. Equity – Ensuring that
businesses of various size and
across industries are assessed
properly.
2. Fairness – Crafting a system
that is fair to Foster City
businesses and the demands
for local services
& infrastructure
provided and maintained by
the City.
3. Fit for Purpose – An
instrument that reflects
changing dynamics in
the workplace and local/
regional economy.
2024 DRAFT BLT Models Proposed
MODEL #1
Maximum Gross Receipts Tax: $250,000
Estimated Revenue Increase: Approx, $2.1 million
Gross Receipts Cap will increase annually based on SF Bay Area CPI-U
2024 DRAFT BLT Models Proposed
MODEL #2
Maximum Gross Receipts Tax: $500,000
Estimated Revenue Increase: Approx, $3.4 million
Gross Receipts Cap will increase annually based on SF Bay Area CPI-U Phasing proposed over 3 years
2024 DRAFT BLT Models Proposed
MODEL #3
Maximum Gross Receipts Tax: $500,000
Estimated Revenue Increase: Approx, $2.2 million
Gross Receipts Cap will increase annually based on SF Bay Area CPI-U Phasing proposed over 3 years
2024 DRAFT BLT Models Proposed
MODEL #4
Maximum Gross Receipts Tax: $500,000
Estimated Revenue Increase: Approx, $2.5 million
Gross Receipts Cap will increase annually based on SF Bay Area CPI-U Phasing proposed over 3 years
Next Steps/Key
Dates
Continued stakeholder outreach
including 1-on-1 meetings, group
meetings, surveys, polling, townhalls
from April through June.
Staff to seek Council direction at the
May 20th Council Meeting on the
models.
Final City Council action required
by June (4/5th vote) to place
on November 2024 ballot.
Business License Tax changes must go
to voters during a general election
where a governing board position is
up for election.
Simple Majority Vote (50%+1)
required, but funds may not be
restricted for any specific purpose.
Feedback
& Questions
Thank You
All Images Source: google.com