View Finance Supplemental Report 4/19/2022 — Rules & Legislation Committee, March 31, 2022

April 21, 2022

AGENDA REPORT

TO: Edward D. Reiskin FROM: Erin Roseman
City Administrator Director of Finance
SUBJECT: Fiscal, Economic & Administrative
Impacts from Proposed Changes to
Business Tax Structure
DATE: April 18, 2022

City Administrator Approval Date: Apr 18, 2022

RECOMMENDATION

Staff Recommends That The City Council Receive An Informational Report Regarding The Possible Fiscal, Economic And Administrative Impacts From Several Proposed Ballot Measures That Would Change The Oakland’s Business License Tax Structure.

EXECUTIVE SUMMARY

This report provides the possible fiscal, economic, and administrative impacts to the Business License Tax (BLT) structure that are projected to result from voter approval of each of the following five (5) proposals, which include two citizen initiatives, two City measures, and the Blue Ribbon Task Force recommendations:

1. The 2020 City Council Tax Measure previously approved for placement on the November 2022 ballot (“Proposal A”)

2. The recommendations of the Blue Ribbon Equitable Business Tax Task Force for a Tax Measure for the 2022 November ballot (“Proposal B”)

3. The 2022 Tax Measure proposed by Councilmembers Bas and Fife for the 2022 November ballot (“Proposal C”)

4. The voter initiative “The Invest in Our Oakland Small Business Tax Fairness Act” proposed for the November 2022 ballot (“Proposal D”)

5. The voter initiative “The Progressive & Equitable Oakland Business Gross Receipts Tax Ordinance” proposed for the November 2022 ballot (“Proposal E”).

All proposals would change the business tax structure from a fixed rate to a tiered, progressive tax rate that has tax brackets in which the tax rate increases as the taxable amount increases.

These proposals have different tax brackets and tax rates, with proposal B, C and D having an additional administrative headquarters tax levied on businesses with more than 1,000 employees nationally and $1 billion in revenue.

Rules & Legislation Committee

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 2
Rules & Legislation Committee
April 21, 2022

FIGURE 1: SUMMARY OF FISCAL AND ECONOMIC IMPACTS FOR THE FIVE

PROPOSALS
Proposal
A
Proposal
B
Proposal
C
Proposal
D
Proposal
E
Estimated Revenue Raised
($M)

$30.5

$32.7

$35.2

$10.6
Businesses with Tax
Decrease:

% of Businesses in Affected
Sectors 69.9% 83.2% 82.4% 83.2% 39.0%
Avg Change per Business ($) ($138) ($62) ($62) ($62) ($56) Avg Change per Business (%) (33%) (10%) (10%) (10%) (24%) Estimated Revenue Decrease
($M)

($2.4)

($1.3)

($0.5)
Businesses with Tax
Increase:

% of Businesses in Affected
Sectors 29.3% 6.0% 6.5% 5.6% 10.3%
Avg Change per Business ($) $5,069 $24,739 $25,769 $29,984 $4,479 Avg Change per Business (%) 91% 107% 121% 121% 29%
Estimated Revenue Raised
($M)

$32.9

$34.0

$36.4

$11.1
Top Ten Business Share of
Revenue

18.1%

22.0%

24.7%

14.0%
Top Ten Business Avg
Increase ($M)

$1.0

$1.3

$1.7

$0.3

With all proposals, it is important to note several macroeconomic factors which could prevent revenue estimates from being realized. These include important factors that relate to local economic conditions: the increase in inflation, the aftereffects of the Covid-19 pandemic, the ongoing geopolitical instability in Europe, and the business response to such factors.

BACKGROUND / LEGISLATIVE HISTORY

On June 18, 2020, Councilmembers Fortunato-Bas, Kalb and Thao brought forth a progressive tax ballot measure to revise the City’s business license tax structure.

On July 14, 2020, City Council adopted Resolution No. 88227 C.M.S., to: 1) place the measure on the November 8, 2022 ballot in the City’s General Municipal Election, and 2) create an 11- member Blue Ribbon Equitable Business Tax Task Force to gather extensive community and stakeholder engagement and input, and deliver to the Council by October 31, 2021 “a comprehensive recommendation for a modernized progressive business tax structure that achieves the City’s goals for revenue enhancement, reduction of race and equity disparities, tax code modernization, equitable economic development, and living wage job creation.” Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 3
Rules & Legislation Committee
April 21, 2022

On October 21, 2021, the Blue Ribbon Equitable Business Tax Task Force completed its work and issued a report titled, City of Oakland Blue Ribbon Equitable Business Tax Task Force Analyses and Recommendation (“Task Force Report”).

On January 4, 2022, staff issued an informational report providing additional analysis of information in the Task Force report and suggested other factors to consider when making changes to the Business License Tax structure.

On January 18, 2022, the City Council received and filed the Task Force report.

On February 23, 2022, The City Clerk’s office issued a City Attorney title and summary to proponents of a voter proposed ballot initiative, titled “Proposed Ordinance Repealing and Replacing the Business Tax Ordinance, Allocating the Revenue Increases for Restricted Purposes and Creating an Oakland Business Tax Commission.

On March 1, 2022, the City Clerk’s office issued a City Attorney title and summary to proponents of a voter proposed ballot initiative titled “Proposed Ordinance Repealing and Replacing the Business Tax Ordinance, Imposing Progressive Increases in the Tax Rates for Businesses Based on the Amount of their Gross Receipts, and Eliminating the Five-Year Exemption from Taxes for Construction or Major Renovation of Property Leased for Commercial or Industrial Use.

On March 17, 2022, Council President Fortunato Bas and Councilmember Fife proposed a new tax measure that amended the 2020 tax measure that the Council had placed on the November 2022 ballot.

On March 31, 2022, the Rules Committee directed the City Administrator to prepare a report on the fiscal and other impacts of the proposed City measures and initiatives if voters were to approve any of them in November.

ELECTIONS CODE SECTION 9212

This report is presented pursuant to Elections Code Section 9212, which, among other things, authorizes a public agency legislative body to request a report addressing the fiscal and other impacts of voter initiatives during circulation of petitions for voter initiatives. Elections Code Sec. 9212.

(a) During the circulation of the petition, or before taking either action described in subdivisions (a) and (b) of Section 9215, the legislative body may refer the proposed initiative measure to a city agency or agencies for a report on any or all of the following:
(1) Its fiscal impact.
(2) Its effect on the internal consistency of the city’s general and specific plans, including the housing element, the consistency between planning and zoning, and the limitations on city actions under Section 65008 of the Government Code and Chapters 4.2 (commencing with Section 65913) and 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 4
Rules & Legislation Committee
April 21, 2022

(3) Its effect on the use of land, the impact on the availability and location of housing, and the ability of the city to meet its regional housing needs. (4) Its impact on funding for infrastructure of all types, including, but not limited to, transportation, schools, parks, and open space. The report may also discuss whether the measure would be likely to result in increased infrastructure costs or savings, including the costs of infrastructure maintenance, to current residents and businesses. (5) Its impact on the community’s ability to attract and retain business and employment. (6) Its impact on the uses of vacant parcels of land.
(7) Its impact on agricultural lands, open space, traffic congestion, existing business districts, and developed areas designated for revitalization. (8) Any other matters the legislative body requests to be in the report. (b) The report shall be presented to the legislative body within the time prescribed by the legislative body, but no later than 30 days after the elections official certifies to the legislative body the sufficiency of the petition.

ANALYSIS AND POLICY ALTERNATIVES

The information presented in all of the analyses is in comparison to the baseline data presented in Figure 2.

FIGURE 2: NUMBER OF BUSINESSES AND GROSS RECEIPTS BY BUSINESS SIZE *Includes all businesses that reported gross receipts or taxable permits or payroll for Tax Year 2020.
**Including fees and penalties, total amounts owed exceed $90 million. ***Includes all Taxicab, Ambulance/Limousine, and Trucking/Transportation businesses, which pay business taxes based on permits issued or employees on payroll. Firms in these industries officially report $0 of gross receipts.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 5
Rules & Legislation Committee
April 21, 2022

In FY 2019-20, more than 53,000 businesses paid taxes in Oakland. Of that total, 49,611 businesses (nearly 94 percent of all firms) reported less than $1 million in gross receipts. Only 52 firms, (0.10 percent of the total), reported more than $50 million in gross receipts, but these businesses accounted for 12.5 percent of total revenues, as shown in Figure 2 above.

FISCAL, ECONOMIC & ADMINISTRATIVE IMPACTS OF POTENTIAL NOVEMBER 2022

BALLOT MEASURES

In order to inform the City Council with respect to potential changes to the BLT, we have prepared an analysis of the fiscal, administrative and some economic effects of the 2020 and 2022 City measures, the two voter initiatives and the recommendations of the Blue Ribbon Committee as identified in Proposals A through E above.

INTENTIONALLY LEFT BLANK
Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 6
Rules & Legislation Committee
April 21, 2022

PROPOSAL A:

On July 14, 2020, the City Council adopted Resolution No. 88227 C.M.S. to, among other things, place a measure on the November 2022 ballot that would repeal and replace Chapter

5.04 the Oakland Municipal Code to revise the City’s Business License Tax structure.

The 2020 City Council Tax Measure previously approved for placement on the November 2022 ballot (“Proposal A”)

FIGURE 3: PROPOSAL A TAX RATES

Key Elements
• Tiered, progressive rate structure
• Creates 5 tiers (Tax Brackets) based on gross receipts o $0-$1M
o $1.M to $2.5M
o $2.5M to $50M
o Above $50M

• Varying Increasing amounts based on business sector
• Changes rates for 14 Business Categories
• Eliminates minimum payment for 17 business categories • Creates a $100 flat fee for businesses with gross receipts less than $250,000

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 7
Rules & Legislation Committee
April 21, 2022

Overall Fiscal Impact
Service Impact
To implement a tax change, there is a necessary implementation period. The Finance Department has analyzed the proposal and determined that the implementation period for Proposal A would be 18 to 24 months based on the added complexity of the tiered tax structure for 14 different business categories. The implementation cost is estimated at $2,400,000 over a 24-month period, with $1,900,000 being one-time and $500,000 being on-going.

Category FY21-22 FY22-23 FY23-24 FY24-25 Totals
Staffing -Limited Duration - - 750,000.00 750,000.00 1,500,000.00 Staffing -Permenant - - - 450,000.00 450,000.00
Technology & Supplies - 200,000.00 200,000.00 50,000.00 450,000.00 Totals - 200,000.00 950,000.00 1,250,000.00 2,400,000.00

The implementation costs consist of Limited Duration staff to implement and increased permanent staff to handle increased customer service volume. Staff does not estimate an increase in overall account volume however estimates an increase in customer contacts as the proposal requires intense education. Staff estimated that revenue collection would not occur prior to January 2024 based on timing of the ballot election, implementation, and taxing cycles.

Revenue Receipt Impact

Staff analysis estimates the impact the tax proposal could have on business license tax receipts and the resulting annual tax revenue to the City in a fiscal year. Revenue receipts impact analysis is in comparison to the current law, revenue generated based on the current law, and using the current business filings, using “Blue Sky” dynamic elasticity model, and holding all other variables constant.

Category FY21-22 FY22-23 FY23-24 FY24-25 Totals
"A" Additional Receipts - - 30,500,000.00 30,500,000.00 61,000,000.00 Totals - - 30,500,000.00 30,500,000.00 61,000,000.00

Economic Impact

Economic Impact analysis is defined as the community’s ability to attract and retain business and employment. To that end, Staff reviewed the Proposal to determine the impact on the current listing of businesses. The City has a current listing of 53,133 businesses. This proposal would affect, 24,979, a little less than half (46%) of all current businesses.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 8
Rules & Legislation Committee
April 21, 2022

Change in Business Taxes
Decrease No Change Increase Overall
Number of Businesses 17,466 193 7,320 24,979
Pct of All Businesses (Affected Sectors) 69.90% 0.80% 29.30% 100.00% Avg Change per Business ($) ($138) $0 $5,069 $1,389
Avg Change per Business (%) -33% 0% 91% 72%
Total Dynamic Revenue Change ($M) ($2.40) $0.00 $32.90 $30.50

1. Reduce taxes on the smallest businesses by an average of $138 for affected businesses.

2. Increase taxes on larger businesses; those earning over $50 million in gross receipts annually.

3. Some businesses with less than $1 million in gross receipts would see an increase (e.g. admin HQ); see Figure 3 above

4. Businesses with a tax increase would see an average increase of just over $5,000 per business, with the largest businesses seeing significantly higher annual increases.

5. Rates for larger businesses would be higher than current rates, with rate increases of more than 500% for the largest businesses in some sectors.

6. the Retail Sales and Wholesale Sales sectors would have rates lower than the current rates for all businesses with annual sales below $2.5 million.

7. Proposal is estimated to result in $2.4 million in tax reductions

8. Proposal is estimated to result in $32.9 million in tax increases

9. Net total of $30.5 million in additional annual BLT revenue in the first year of full implementation.

Category FY22-23 FY23-24 FY24-25 Totals
> $50M Gross Receipts (Small Businesses) - 9,100,000.00 9,100,000.00 18,200,000.00 <$50M Gross Receipts (Larger Businesses) 21,400,000.00 21,400,000.00 42,800,000.00 Totals - 30,500,000.00 30,500,000.00 61,000,000.00

Concentration Effect

Staff additionally reviewed the number of businesses affected based on the change and the resulting concentration of revenues by business accounts and sector. This analysis looks at the diversity of businesses in the upper bounds to assess vulnerability in the tax base as diversity in businesses and business sectors shields revenue loss in economic downturns. Under current law, the top ten taxpayers are expected to contribute a total of $5.4 million annually, or an average of $540,000 each. Proposal A would increase the total BLT revenues from the top ten businesses to $15 million or an average of $1.5 million each. These top ten businesses account for 11.3% of the BLT revenue from the affected business sectors under the current system and just over 18% of the BLT revenue under Proposal A.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 9
Rules & Legislation Committee
April 21, 2022

Business Taxes Paid by Top 10 Business Accounts ($M)
$25

$20

15.0 $15

$10

$0
Current Law Proposal

Share of Affected Sectors' Business Taxes
Paid by Top 10 Business Accounts
30%

25%

20% 18.1%

15%

11.3%
10%

0%
Current Law Proposal

FIGURE 4: REVENUE CONCENTRATION FOR PROPOSAL A

5.4 Figure 4 illustrates revenue generated under the current BLT and Proposal A from the largest ten taxpayers.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 10
Rules & Legislation Committee
April 21, 2022

PROPOSAL B

The 11-member Blue Ribbon Equitable Business Tax Task Force (“Task Force”), created by Resolution No.88227 C.M.S., met from April through October 2021 and delivered its recommended business tax proposal in an October 21, 2021 report.

“City of Oakland Blue Ribbon Equitable Business Tax Task Force Analyses and Recommendation (“Task Force Report”) referred to as (“Proposal B”).

FIGURE 5: PROPOSAL B TAX RATES
Current Law C
Min
Payment
urrent Law
Tax per
$1,000

Min
Payment
Prop
$0 -
$1M
osal Tax Ra
$1M -
$2.5M
tes by Brac
$2.5M -
$10M
ket (Gross
$10M -
$25M
Receipts, m
$25M -
$50M
il $)
$50M -
$75M

Above
$75M
Retail Sales $60 $1.20 $50 $0.90 $1.08 $1.25 $1.50 $1.75 $2.00 $2.50 Auto Sales $60 $1.20 $50 $1.20 $1.25 $1.50 $1.75 $2.00 $2.25 $2.75 Wholesale Sales $60 $1.20 $50 $1.08 $1.14 $1.25 $1.50 $1.75 $2.00 $2.50 Manufacturing $60 $1.20 $50 $0.90 $1.20 $2.25 $2.75 $3.00 $3.25 $4.80 Admin Headquarters $60 $1.20 $50 $3.50 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 Alt. Large Admin Headquarter Tax † $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 Media Firms $60 $1.20 $50 $1.80 $2.80 $3.20 $3.80 $4.80 $5.00 $5.50 Miscellaneous $60 $1.20 $50 $3.50 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 Grocers $60 $0.60 $50 $0.45 $0.54 $1.00 $1.35 $1.50 $1.75 $2.00 Business / Pers Svcs $60 $1.80 $50 $1.62 $1.71 $3.25 $4.00 $5.00 $5.25 $6.00 Contractors $60 $1.80 $50 $1.80 $2.75 $4.00 $4.50 $5.00 $5.50 $6.00 Hotel, Motel $60 $1.80 $50 $1.62 $1.71 $3.80 $4.80 $5.00 $5.25 $5.50 Prof/Semi-prof Svcs $60 $3.60 $50 $3.24 $3.42 $5.00 $5.00 $5.50 $6.50 $7.50

Key Elements
• Tiered, progressive rate structure
• Creates 7 tiers (Tax Brackets) based on gross receipts o $0-$1M
o $1.M to $2.5M
o $2.5M to $10M
o $10M to $25M
o $25M to $50M
o $50M to $75M
o Above $75M
• Varying Increasing amounts based on business sector
• Adds an Alternate Large Headquarters Tax for large national firms with administrative functions in Oakland; applies only to firms with more than 1,000 employees nationally and $1 billion in revenue.
• The Alternate Large Headquarters tax rate would be $15 per $1,000 of Oakland-based payroll, regardless of Tax Bracket of Gross Receipts
• Changes rates for 14 Business Categories
• Reduces minimum payment for all business categories from $60 to $50 or $10 Rec & Entertainment $60 $4.50 $50 $4.50 $4.70 $4.70 $4.70 $4.80 $5.00 $5.50 Public Utility $60 $1.00 $50 $4.00 $4.50 $5.00 $5.00 $5.00 $5.00 $5.00

Color Coding for Rate Increases:
† Proposal includes alternative payroll tax at $15 pe
No change
Decrease
1,000 of O
to Taxi/Lim
No Change
akland payroll
o/Ambulanc
1% to 100%
for Admin He
e or Trucking/Transpota
101%-200% 201%-300%
adquarter firms with 1,000+
tion rates.
> 300%
US employee

s and $1B+ i n US sales.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 11
Rules & Legislation Committee
April 21, 2022

Overall Fiscal Impact

Service Impact

To implement any tax change, there is a necessary implementation period. The Finance Department has analyzed the proposal and determined that the implementation period for Proposal B would be 18 to 24 months based on the added complexity of the tiered tax structure for 14 different business categories and the addition of a category. The implementation cost is estimated at $2,400,000 over a 24-month period, with $1,900,000 being one-time and $500,000 being on-going.

Revenue Receipt Impact

Staff analysis estimates the impact the tax proposal could have on business license tax receipts and the resulting additional annual tax revenue to the City in a fiscal year. Revenue receipts impact analysis is in comparison to the current law, revenue generated based on the current law, and using the current business filings, using “Blue Sky” dynamic elasticity model, and holding all other variables constant.

Category FY22-23 FY23-24 FY24-25 Totals
"B" Additional Receipts - 32,700,000.00 32,700,000.00 65,400,000.00 Totals - 32,700,000.00 32,700,000.00 65,400,000.00

Economic Impact

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 12
Rules & Legislation Committee
April 21, 2022

Business Taxes Paid by Top 10 Business Accounts ($M)

$25

$20 18.4

$15

$10

5.4 $5

$0
Current Law Proposal Proposal Current Law
10%

11.3%
20%

15%

22.0%
30%

25%
Share of Affected Sectors' Business Taxes
Paid by Top 10 Business Accounts

Change in Business Taxes
Decrease No Change Increase Overall
Number of Businesses 20,779 2,704 1,496 24,979
Pct of All Businesses (Affected Sectors) 83.20% 10.80% 6.00% 100.00% Avg Change per Business ($) ($62) $0 $24,739 $1,430
Avg Change per Business (%) -10% 0% 107% 76%
Total Dynamic Revenue Change ($M) ($1.30) $0.00 $34.00 $32.70

1. Reduces taxes on the smallest businesses by an average of $62, with 83% of businesses in the affected sectors receiving a tax reduction.

2. Increases taxes on larger businesses by an average of $24,739 per business, with 6% of businesses in the affected sectors receiving a tax increase.

3. Proposal is estimated to result in $1.3 million in tax reductions

4. Proposal is estimated to result in $34.0 million in tax increases

5. Net total of $32.7 million in additional annual BLT revenue in the first year of full implementation.

Concentration Effect

Staff additionally reviewed the number of businesses affected based on the change and the resulting concentration of revenues by business accounts and sector. This analysis looks at the diversity of businesses in the upper bounds to assess vulnerability in the tax base as diversity in businesses and business sectors shields revenue loss in economic downturns. Under current law, the top ten taxpayers are expected to contribute a total of $5.4 million annually, or an average of $540,000 each. Proposal B would increase the total BLT revenues from the top ten businesses to $18.4 million or an average of $1.8 million each. These top ten businesses account for 11.3% of the BLT revenue from the affected business sectors under the current system and 22% of the BLT revenue under Proposal B.

FIGURE 6: REVENUE CONCENTRATION FOR PROPOSAL B
Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 13
Rules & Legislation Committee
April 21, 2022

PROPOSAL C

At the March 17, 2022 Rules Committee, this proposed tax measure was presented by Council President Fortunato Bas and Councilmember Fife.

Tax measure proposed by Council President Fortunato Bas and Councilmember Fife for placement on the November 2022 ballot referred to as (“Proposal C”)

FIGURE 7: PROPOSAL C TAX RATES
r i

Key Elements
• Tiered, progressive rate structure
• Creates 8 tiers (Tax Brackets) based on gross receipts o $0-$1M
o $1.M to $2.5M
o $2.5M to $10M
o $10M to $25M
o $25M to $50M
o $50M to $75M
o $75M to $100M
o Above $100M
• Varying Increasing amounts based on business sector
• Changes rates for 15 Business Categories
• Adds an Alternate Large Headquarters Tax for large national firms with administrative functions in Oakland; applies only to firms with more than 1,000 employees nationally and $1 billion in revenue.
• The Alternate Large Headquarters tax rate would be $15 per $1,000 of Oakland-based payroll, regardless of Tax Bracket of Gross Receipts
• In the Transportation Category, Increases the rate per vehicle for Limousines and Ambulances
Current
Min
Payment
Current
Tax per
$1,000

Min
Payment
P
$0 -
$1M
roposal Tax
$1M -
$2.5M
Rates by B
$2.5M -
$10M
racket (Gro
$10M -
$25M
ss Receip
$25M -
$50M
ts, mil $)
$50M -
$75M

$75M -
$100M

Above
$100M
Retail Sales $60 $1.20 $50 $0.90 $1.08 $1.25 $1.50 $1.75 $2.00 $2.50 $2.50 Auto Sales $60 $1.20 $50 $1.20 $1.25 $1.50 $1.75 $2.00 $2.25 $3.50 $3.99 Wholesale Sales $60 $1.20 $50 $1.08 $1.14 $1.25 $1.50 $1.75 $2.00 $2.75 $3.99 Manufacturing $60 $1.20 $50 $0.90 $1.20 $2.25 $2.75 $3.00 $3.25 $6.00 $6.65 Admin Headq $60 $1.20 $50 $1.20 $4.50 $5.00 $5.50 $6.00 $6.50 $8.00 $9.50 Alt. Large Admin Headquarter Tax † $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 Media Firms $60 $1.20 $50 $1.20 $2.80 $3.20 $3.80 $4.80 $5.00 $8.50 $9.50 Miscellaneous $60 $1.20 $50 $1.20 $4.50 $5.00 $5.50 $6.00 $6.50 $9.00 $10.40 Grocers $60 $0.60 $50 $0.45 $0.54 $1.00 $1.35 $1.50 $1.75 $2.00 $2.24 Business / Pers Svcs $60 $1.80 $50 $1.62 $1.71 $3.25 $4.00 $5.00 $5.25 $9.50 $10.08 Contractors $60 $1.80 $50 $1.80 $2.75 $4.00 $4.50 $5.00 $5.50 $7.00 $9.00 Hotel, Motel $60 $1.80 $50 $1.62 $1.71 $3.80 $4.80 $5.00 $5.25 $5.50 $5.60 Prof/Semi-prof Svcs $60 $3.60 $50 $3.24 $3.42 $5.00 $5.00 $5.50 $6.50 $8.50 $9.00 Rec & Entertainment $60 $4.50 $50 $4.50 $4.70 $4.70 $4.70 $4.80 $5.00 $7.00 $9.00 Public Utility $60 $1.00 $50 $1.00 $4.50 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00

Color Coding for Rate Increases:
† Proposal includes alternative payroll tax at $15 p
Taxi/Lim
Decrease
er 1,000 of
o/Ambulanc
No Change
Oakland pay
e and Trucki
1% to 100%
oll for Admin
ng/Transpor
101%-200%
Headquarter f
tation rates
201%-300%
rms with 1,00
are also ad
> 300%
0+ US empl
justed (see detail).

oyees and $1B+ in US sales.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 14
(https://oakland.legistar.com/View.ashx?M=F&ID=8666116&GUID=65599DBC -D3AC-4DA3-A8EB-72E6F08869FD).

Rules & Legislation Committee
April 21, 2022

• For the Trucking/Transportation category, which is based on the number of employees, the proposal both adjusts the tiers and raises the rates.1 • Reduces minimum payment for all business categories from $60 to $50 or $10

OVERALL FISCAL IMPACT

Service Impact

To implement any tax change, there is a necessary implementation period. The Finance Department has analyzed the proposal and determined that the implementation period for Proposal C would be 18 to 24 months based on the added complexity of the tiered tax structure for 15 different business categories. The implementation cost is estimated at $2,400,000 over a 24-month period, with $1,900,000 being one-time and $500,000 being on-going.

The implementation costs consist of Limited Duration staff to implement and increased permanent staff to handle increased customer service volume. Staff does not estimate an increase in overall account volume however estimates an increase in customer contacts as the proposal requires intense education. Finally, Staff estimated that revenue collection would not occur prior to January 2024 based on timing of the ballot election, implementation, and taxing cycles.

Revenue Receipt Impact

Category FY22-23 FY23-24 FY24-25 Totals
"C" Additional Receipts - 35,200,000.00 35,200,000.00 70,400,000.00 Totals - 35,200,000.00 35,200,000.00 70,400,000.00

14 The proposed changes are identical to those proposed by Councilmember Kalb in a memorandum with the subject “Amendments to the Equitable Business Tax Structure Resolution” dated July 12, 2020 Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 15
(https://oakland.legistar.com/View.ashx?M=F&ID=8666116&GUID=65599DBC -D3AC-4DA3-A8EB-72E6F08869FD).

Rules & Legislation Committee
April 21, 2022

Economic Impact

Economic Impact analysis is defined as the community’s ability to attract and retain business and employment. To that end, Staff reviewed the Proposal to determine the impact on the current listing of businesses. The City has a current listing of 53,133 businesses. Excluding the Transportations Services, this proposal would affect, 25,236, a little less than half (47%) of all current businesses. Transportation Businesses total 344.

FIGURE 8: ESTIMATED EFFECTS FOR PROPOSAL C
Change in Business Taxes
Decrease No Change Increase Overall
Number of Businesses 20,798 2,787 1,651 25,236
Pct of All Businesses (Affected Sectors) 82.40% 11.00% 6.50% 100.00% Avg Change per Business ($) ($62) $0 $25,769 $1,635
Avg Change per Business (%) -10% 0% 121% 87%
Total Dynamic Revenue Change ($M) ($1.30) $0.00 $36.40 $35.20

1. Reduces taxes on the smallest businesses by an average of $62, with 82% of businesses in the affected sectors receiving a tax reduction.

2. Increases taxes on larger businesses by an average of $25,769 per business, with 6.5% of businesses in the affected sectors receiving a tax increase.

3. For the Trucking/Transportation category, which is based on the number of employees, the proposal both adjusts the tiers and raises the rates.2 These changes together are estimated to generate additional annual revenue of approximately $230,000 annually.

4. Proposal is estimated to result in $1.3 million in tax reductions

5. Proposal is estimated to result in $36.4 million in tax increases

6. Net total of $35.2 million in additional annual BLT revenue in the first year of full implementation.

Concentration Effect

Staff reviewed the number of businesses affected based on the change and the resulting concentration of revenues by business accounts and sector. This analysis looks at the diversity of businesses in the upper bounds to assess vulnerability in the tax base as diversity in businesses and business sectors shields revenue loss in economic downturns. Under current law, the top ten taxpayers are expected to contribute a total of $5.4 million annually, or an average of $540,000 each. Proposal C would increase the total BLT revenues from the top ten businesses to $21.9 million annually or an average of $2.2 million each. These top ten businesses account for 11.3% of the BLT revenue from the affected business sectors under the current system and 24.7% of the BLT revenue under Proposal C.

2 The proposed changes are identical to those proposed by Councilmember Kalb in a memorandum with the subject “Amendments to the Equitable Business Tax Structure Resolution” dated July 12, 2020 Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 16
Rules & Legislation Committee
April 21, 2022

Business Taxes Paid by Top 10 Business Accounts ($M) Share of Affected Sectors' Business Taxes Paid by Top 10 Business Accounts
30%
$25

21.9 24.7% 25%
$20
20%
$15
15%
$10
10%

5.4 $5 5%
$0 0%
Current Law Proposal Current Law Proposal

FIGURE 9: REVENUE CONCENTRATION FOR PROPOSAL C

11.3%

Figure 9 illustrates revenue generated under the current BLT and Proposal C from the largest ten taxpayers.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 17
Rules & Legislation Committee
April 21, 2022

PROPOSAL D

Currently in the signature gathering stage and not yet certified for the November 2022 ballot.

“The Invest in Our Oakland Small Business Tax Fairness Act” voter initiative referred to as (Proposal “D”)

FIGURE 10: PROPOSAL D TAX RATES
Current Law C
Min
Payment
urrent Law
Tax per
$1,000

Min
Payment
Pro
$0 -
$1M
posal Tax R
$1M -
$2.5M
ates by Bracket (Gross Receipts, mil $)
$2.5M - $10M - $25M - $50M -
$10M $25M $50M $75M

$75M -
$100M

Above
$100M
Retail Sales $60 $1.20 $50 $0.90 $1.08 $1.25 $1.50 $1.75 $2.00 $2.50 $2.50 Auto Sales $60 $1.20 $50 $1.20 $1.25 $1.50 $1.75 $2.00 $2.25 $3.50 $3.99 Wholesale Sales $60 $1.20 $50 $1.08 $1.14 $1.25 $1.50 $1.75 $2.00 $2.75 $3.99 Manufacturing $60 $1.20 $50 $0.90 $1.20 $2.25 $2.75 $3.00 $3.25 $6.00 $6.65 Admin Headq $60 $1.20 $50 $1.20 $4.50 $5.00 $5.50 $6.00 $6.50 $8.00 $9.50 Alt. Large Admin Headquarter Tax † $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 Media Firms $60 $1.20 $50 $1.20 $2.80 $3.20 $3.80 $4.80 $5.00 $8.50 $9.50 Miscellaneous $60 $1.20 $50 $3.50 $4.50 $5.00 $5.50 $6.00 $6.50 $9.00 $10.40 Grocers $60 $0.60 $50 $0.45 $0.54 $1.00 $1.35 $1.50 $1.75 $2.00 $2.24 Business / Pers Svcs $60 $1.80 $50 $1.62 $1.71 $3.25 $4.00 $5.00 $5.25 $9.50 $10.08 Contractors $60 $1.80 $50 $1.80 $2.75 $4.00 $4.50 $5.00 $5.50 $7.00 $9.00 Hotel, Motel $60 $1.80 $50 $1.62 $1.71 $3.80 $4.80 $5.00 $5.25 $5.50 $5.60 Prof/Semi-prof Svcs $60 $3.60 $50 $3.24 $3.42 $5.00 $5.00 $5.50 $6.50 $8.50 $9.00 Rec & Entertainment $60 $4.50 $50 $4.50 $4.70 $4.70 $4.70 $4.80 $5.00 $7.00 $9.00 Public Utility $60 $1.00 $50 $1.00 $4.50 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00

Color Coding for Rate Increases:
† Proposal includes alternative payroll tax at $1
No change
Decrease
5 per 1,000
to Taxi/Limo/Ambulanc
No Change 1% to 100%
for Admin Headquarter f
e or Trucking/Transpota
101%-200% 201%-300%
i rms with 1,000+ US empl
tion rate
> 300%
oyees an
s.

$1B+ in US sales.

Key Elements
• Tiered, progressive rate structure
• Creates 8 tiers (Tax Brackets) based on gross receipts o $0-$1M
o $1.M to $2.5M
o $2.5M to $10M
o $10M to $25M
o $25M to $50M
o $50M to $75M
o $75M to $100M
o Above $100M
• Varying Increasing amounts based on business sector
• Changes rates for 14 Business Categories and includes Miscellaneous Category • Adds an Alternate Large Headquarters Tax for large national firms with administrative functions in Oakland; applies only to firms with more than 1,000 employees nationally and $1 billion in revenue.
• The Alternate Large Headquarters tax rate would be $15 per $1,000 of Oakland-based payroll, regardless of Tax Bracket of Gross Receipts
• Reduces minimum payment for all business categories from $60 to $50 or $10 Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 18
Rules & Legislation Committee
April 21, 2022

OVERALL FISCAL IMPACT

Service Impact

To implement any tax change, there is a necessary implementation period. The Finance Department has analyzed the proposal and determined that the implementation period for Proposal D would be 18 to 24 months based on the added complexity of the tiered tax structure for 14 different business categories. The implementation cost is estimated at $2,400,000 over a 24-month period, with $1,900,000 being one-time and $500,000 being on-going.

The implementation costs consist of Limited Duration staff to implement and additional permanent staff to handle increased customer service volume. Staff does not estimate an increase in overall account volume however estimates an increase in customer contacts as the proposal requires intense education. Finally, Staff estimated that revenue collection would not occur prior to January 2024 based on timing of the ballot election, implementation, and taxing cycles.

Revenue Receipt Impact

Category FY22-23 FY23-24 FY24-25 Totals
"D" Additional Receipts - 35,200,000.00 35,200,000.00 70,400,000.00 Totals - 35,200,000.00 35,200,000.00 70,400,000.00

Economic Impact

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 19
Rules & Legislation Committee
April 21, 2022

Business Taxes Paid by Top 10 Business Accounts ($M) Share of Affected Sectors' Business Taxes Paid by Top 10 Business Accounts
30%
$25

21.9 24.7% 25%
$20
20%
$15
15%
$10
10%

5.4 $5 5%
$0 0%
Current Law Proposal Current Law Proposal

FIGURE 11: ESTIMATED EFFECTS FOR PROPOSAL D
Change in Business Taxes
Decrease No Change Increase Overall
Number of Businesses 20,795 2,780 1,404 24,979
% of Businesses in Affected Sectors 83.20% 11.10% 5.60% 100.00% Avg Change per Business ($) ($62) $0 $29,984 $1,634
Avg Change per Business (%) -10% 0% 121% 87%
Total Dynamic Revenue Change ($M) ($1.30) $0.00 $36.40 $35.20

1. Reduces taxes on the smallest businesses by an average of $62, with 83% of businesses in the affected sectors receiving a tax reduction.

2. Increases taxes on larger businesses by an average of $29,984 per business, with 5.6% of businesses in the affected sectors receiving a tax increase.

3. Proposal is estimated to result in $1.3 million in tax reductions

4. Proposal is estimated to result in $36.4 million in tax increases

5. Net total of $35.2 million in additional annual BLT revenue

Concentration Effect

Staff reviewed the number of businesses affected based on the change and the resulting concentration of revenues by business accounts and sector. This analysis looks at the diversity of businesses in the upper bounds to assess vulnerability in the tax base as diversity in businesses and business sectors shields revenue loss in economic downturns. Under current law, the top ten taxpayers are expected to contribute a total of $5.4 million annually, or an average of $540,000 each. Proposal D would increase the total BLT revenues from the top ten businesses to $21.9 million annually or an average of $2.2 million each. These top ten businesses account for 11.3% of the BLT revenue from the affected business sectors under the current system and 24.7% of the BLT revenue under Proposal D.

FIGURE 12: REVENUE CONCENTRATION FOR PROPOSAL D

11.3%

Figure 12 illustrates revenue generated under the current BLT and Proposal D from the largest ten taxpayers.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 20
Rules & Legislation Committee
April 21, 2022

PROPOSAL E

Currently in the signature gathering stage and not yet certified for the November 2022 ballot.

“The Progressive & Equitable Oakland Business Gross Receipts Tax Ordinance” a voter initiative referred to as (Proposal “E”)

FIGURE 13: PROPOSAL E TAX RATES
Current
Min
Payment
Current
Tax per
$1,000
Proposal Tax Rates by Bracket (Gross Receipts, mil $)
Min $0 - $1M - $2.5M - $20M - Above
Payment $1M $2.5M $20M $50M $50M
Retail Sales $60 $1.20 $0 $1.00 $1.25 $1.49 $1.74 $2.00 Auto Sales $60 $1.20 $0 $1.00 $1.25 $1.49 $1.74 $2.00
Wholesale Sales $60 $1.20 $0 $1.20 $1.32 $1.50 $1.80 $2.00 Manufacturing $60 $1.20 $0 $1.20 $1.32 $1.50 $1.80 $2.00 Admin Headquarters $60 $1.20 $0 $1.20 $1.44 $1.68 $2.40 $3.60 Media Firms $60 $1.20 $0 $1.20 $1.32 $1.50 $1.80 $2.40
Miscellaneous $60 $1.20 $0 $1.20 $1.32 $1.50 $1.80 $2.40 Grocers $60 $0.60 $0 $0.55 $0.60 $0.65 $0.90 $1.20
Business / Pers Svcs $60 $1.80 $0 $1.80 $1.98 $2.25 $2.70 $3.15 Contractors * $60 $1.80 $0 $1.80 $1.98 $2.25 $2.70 $3.06 Hotel, Motel $60 $1.80 $0 $1.80 $2.25 $2.52 $2.88 $3.60 Prof/Semi-prof Svcs $60 $3.60 $0 $3.60 $3.96 $4.32 $4.68 $5.00 Rec & Entertainment $60 $4.50 $0 $4.50 $4.64 $4.73 $4.82 $5.00 Public Utility $60 $1.00 $0 $1.00 $1.10 $1.25 $1.50 $1.75

Color Coding for Rate Increases:

No change to Taxi/Limo/Ambulance or Trucking/Transpotation rates.

Decrease No Change 1% to 100% 101%-200% 201%-300% > 300% * This proposal includes a rate of a flat $60 for the first $33,335 plus $1.80 for every additional $1,000 of gross receipts for contractors/construction firms who meet certain requirements for apprentice programs, health insurance, and Oakland resident hiring practices.

Key Elements
• Directs additional revenues generated to Special Fund (not the General-Purpose Fund) • Determines Set Asides for additional Revenues
o 1%: The Direct and Indirect Administrative Expenses Associated with the Business Tax
o 50%: Homeless Shelters and Supportive Services
o 30%: Grants to Local Small Businesses (max grant of $100K per business) o 20%: Capital Expenditures and Support for Services to Maintain a Clean City • Tiered, progressive rate structure
• Creates 5 tiers (Tax Brackets) based on gross receipts o $0-$1M
o $1.M to $2.5M
o $2.5M to $50M
o Above $50M
• Varying Increasing amounts based on business sector
• With the exception of Admin Headquarters, the rate increases held to no more than a 100% increase
• Changes rates for 13 Business Categories
• Eliminates minimum payment for 13 business categories • Creates 2 new Business Categories
Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 21
Rules & Legislation Committee
April 21, 2022

o Real Estate Developers- defined as those who either (a) subdivide, (b) sell 2 or more buildings they have built or caused to be built within a calendar year, or (c) sell apartment or commercial building within 3 years of receiving their certificate of occupancy.
o Real Estate Rehabilitators- defined as those who sell real property they have rehabilitated or on which they have had rehabilitation performed. • Alternative Structure for Contractors
o Contractors who meet specific apprenticeship, healthcare and local hiring requirements would not be subject to the progressive rate structure o $60 for the first $33,335 in gross receipts and $1.80 for each $1,000 above that. • Residential and non-residential landlords would receive a rate reduction of $5 o (from $13.95 to $8.95 per $1,000) for new buildings if either  (a) the construction firms who built these new buildings met specific apprenticeship, healthcare and local hiring requirements or  (b) the building was constructed under a project labor agreement (PLA) with the Building and Construction Trades Council of Alameda County. • Two Phase-in provisions over the first three years.
o The first appears in section 5.04.030 (E), which states: “Any increases which this Chapter makes to the tax liability of a business shall be phased in over a three- year period, with businesses paying 40 percent (40%) of any business tax increase in the first year, 70 percent (70%) of any business tax increase in the second year, and 100 percent (100%) of any business tax increase in the third year.”
o The second provision addressing this phase-in period appears in section

5.04.070 (B): “Businesses which have gross annual receipts of $1 million or less and whose tax rates are increased by this ordinance shall not be subject to or pay the gross receipts tax set forth herein until 2026, but shall pay an annual minimum business tax of $60 until then. Businesses which have gross annual receipts of $1 million or less whose tax rates are not increased by this ordinance shall pay the business tax at the rate provided for herein.”

OVERALL FISCAL IMPACT

Service Impact

To implement any tax change, there is a necessary implementation period. The Finance Department has analyzed the proposal and determined that the implementation period for Proposal E would be 18 to 24 months based on the added complexity of the tiered tax structure for 15 different business categories. The implementation cost is estimated at $2,550,000 over a 24-month period, with $1,900,000 being one-time and $600,000 being on-going.

Category FY22-23 FY23-24 FY24-25 Totals
Staffing -Limited Duration - 750,000.00 750,000.00 1,500,000.00 Staffing -Permenant - - 600,000.00 600,000.00
Technology & Supplies 200,000.00 200,000.00 50,000.00 450,000.00 Totals 200,000.00 950,000.00 1,400,000.00 2,550,000.00
Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 22
Rules & Legislation Committee
April 21, 2022

The implementation costs consist of Limited Duration staff to implement and increased permanent staff to handle increased customer service volume. Staff does not estimate an increase in overall account volume however estimates an increase in customer contacts as the proposal requires intense education. This proposal requires set aside or programmatic administration. Staff estimated that revenue collection would not occur prior to January 2024 based on timing of the ballot election, implementation, and taxing cycles.

Revenue Receipt Impact

Category FY22-23 FY23-24 FY24-25 FY25-26 Totals
"E" Additional Receipts - 4,000,000.00 7,300,000.00 10,600,000.00 21,900,000.00 Totals - 4,000,000.00 7,300,000.00 10,600,000.00 21,900,000.00

Economic Impact

Economic Impact analysis is defined as the community’s ability to attract and retain business and employment. To that end, Staff reviewed the Proposal to determine the impact on the current listing of businesses. The City has a current listing of 53,133 businesses. This proposal would affect, 24,981, a little less than half (47%) of all current businesses.

FIGURE 14: ESTIMATED EFFECTS FOR PROPOSAL E
Change in Business Taxes
Decrease No Change Increase Overall
Number of Businesses 9,733 12,667 2,581 24,981
% of Businesses in Affected Sectors 39.00% 50.70% 10.30% 100.00% Avg Change per Business ($) ($56) $0 $4,479 $441
Avg Change per Business (%) -24% 0% 29% 26%
Total Dynamic Revenue Change ($M) ($0.50) $0.00 $11.10 $10.60

1. Reduces taxes on the smaller businesses by an average of $56, with 39% of businesses in the affected sectors receiving a tax reduction.

2. Increases taxes on larger businesses by an average of $4,479 per business, with 29% of businesses in the affected sectors receiving a tax increase.

3. No effect on 51% of business in the affected sectors

4. Proposal is estimated to result in $500,000 in tax reductions

5. Proposal is estimated to result in $11.1 million in tax increases

6. Net total of $10.6 million in additional annual BLT revenue Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 23
Rules & Legislation Committee
April 21, 2022

Business Taxes Paid by Top 10 Business Accounts ($M)

$25

$20

$15

$10 8.3

5.4 $5

$0
Current Law Proposal

Share of Affected Sectors' Business Taxes
Paid by Top 10 Business Accounts
30%

25%

20%

15% 14.0%

11.3%
10%

0%
Current Law Proposal

Proposal E has a Set-Aside Provision of additional receipts generated by the proposal.

Of the set-aside provisions 30% is to be provide grants to Local Small Businesses as such, of the estimated dynamic revenue in a fully implemented year, approximately $3.18M would have direct economic impact.

Category FY22-23 FY23-24 FY24-25 FY25-26 Totals
1% Direct and Indirect Administrative Expense 40,000.00 73,000.00 106,000.00 219,000.00 50% Homeless Shelters and Supportive Services 2,000,000.00 3,650,000.00 5,300,000.00 10,950,000.00 30% Grants to Local Small Businesses 1,200,000.00 2,190,000.00 3,180,000.00 6,570,000.00 20% Capital Expenditures and Support Services for Clean City 800,000.00 1,460,000.00 2,120,000.00 4,380,000.00 Totals - 4,000,000.00 7,300,000.00 10,600,000.00 21,900,000.00

Concentration Effect

Staff reviewed the number of businesses affected based on the change and the resulting concentration of revenues by business accounts and sector. This analysis looks at the diversity of businesses in the upper bounds to assess vulnerability in the tax base as diversity in businesses and business sectors shields revenue loss in economic downturns. Under current law, the top ten taxpayers are expected to contribute a total of $5.4 million annually, or an average of $540,000 each. Proposal E would increase the total BLT revenues from the top ten businesses to $8.3 million annually or an average of $830,000 each. These top ten businesses account for 11.3% of the BLT revenue from the affected business sectors under the current system and 14.0% of the BLT revenue under Proposal E.

FIGURE 15: REVENUE CONCENTRATION FOR PROPOSAL E
Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 24
Rules & Legislation Committee
April 21, 2022

FIGURE 16: SUMMARY OF FISCAL AND ECONOMIC EFFECTS
Proposal
A
Proposal
B
Proposal
C
Proposal
D
Proposal
E
Estimated Dynamic Revenue
Change ($M)

$30.5

$32.7

$35.2

$10.6
Businesses with Tax Decrease:
% of Businesses in Affected
Sectors 69.9% 83.2% 82.4% 83.2% 39.0%
Avg Change per Business ($) ($138) ($62) ($62) ($62) ($56) Avg Change per Business (%) (33%) (10%) (10%) (10%) (24%) Estimated Revenue Change ($M) ($2.4) ($1.3) ($1.3) ($1.3) ($0.5) Businesses with Tax Increase:
% of Businesses in Affected
Sectors 29.3% 6.0% 6.5% 5.6% 10.3%
Avg Change per Business ($) $5,069 $24,739 $25,769 $29,984 $4,479 Avg Change per Business (%) 91% 107% 121% 121% 29%
Estimated Revenue Change ($M) $32.9 $34.0 $36.4 $36.4 $11.1 Revenue Concentration on Top
Ten Business

18.1%

22.0%

24.7%

14.0%
Top Ten Business Avg Increase
($M)

$1.0

$1.3

$1.7

$0.3
Service Impact (Implementation
Cost)

$2.4M

$2.6M

FISCAL IMPACT

This is an informational report about the effects of proposed legislation and does not have a direct fiscal impact in and of itself.

PUBLIC OUTREACH / INTEREST

Given the community participation, complexity, and importance of the tax rate policy issue, enhanced outreach to the business community and commercial property owners and special study sessions may be warranted.

COORDINATION

This report was prepared in coordination with the Blue Sky Consulting Group and the City Attorney’s Office.

Edward D. Reiskin, City Administrator
Subject: Fiscal, Economic & Administrative Impacts from Proposed Changes to Business Tax Structure
Date: April 18, 2022 Page 25
Rules & Legislation Committee
April 21, 2022

SUSTAINABLE OPPORTUNITIES

Economic: For almost four decades since the majority of business license tax structure was last updated, the number of types of local businesses in Oakland has changed significantly. In particular, the number of home-based businesses has increased and there has been a shift from light manufacturing to global high-tech companies.

Environmental: There are no environmental opportunities associated with this project.

Race and Equity: A racial equity impact analysis has not been conducted.

ACTION REQUESTED OF THE CITY COUNCIL

Receive An Informational Report Regarding The Possible Fiscal, Economic And Administrative Impacts From Several Proposed Ballot Measures That Would Change The Oakland’s Business License Tax Structure.

For questions regarding this report, please contact Rogers Agaba, Acting Revenue & Tax Administrator, (510) 238-7009.

Respectfully submitted,

ERIN ROSEMAN
Director of Finance Dept.

Prepared by:

Rogers Agaba, Acting Revenue & Tax
Administrator
Finance Department

Rules & Legislation CommitteeMarch 31, 2022

Rules & Legislation Committee
March 31, 2022