Measure U – Business Tax
Fiscal Impact Estimates
February 1, 2022
Presented by
Anil Comelo, Interim Deputy City Manager
Belinda Brown, Director of Finance
Antonio Banuelos, Accounting Manager
Agenda
Business Tax Estimates
Transition Year
Revenue Comparisons
Administrative Rulings and Procedures
Council Action
Business Tax Estimates
Original estimate was $9.5 million
Transition year (FY 2022) revenue loss estimated to be $2.0M Allowing Rent Board fees for small residential rental properties as credit towards Business Tax will reduce revenue by $1.6M (FY 2022) Rent Board fees are typically adjusted in May and new rates go into effect in July
Ongoing revenue estimate is $7.9 million
Council of Industries estimate of ongoing revenue is $12 million* * Does not include revenues from rental properties or cannabis businesses Transition Year
One-time shortfall from original projections in FY
2022 by approximately $2 million.
Revenue loss stems from the postponement of
the implementation date
Business Licenses expiring before 12/31/2021
will not get transitioned to the new
methodology until after their current license
expires in 2022
Revenue Comparisons
City of Richmond Council of Business and Industries
Calculation methodology Estimate based on 2020 sales tax data Estimate based on national and regional census
data and local per-employee revenue generation
assumptions
Data sources 1Q 2020 sales tax data from City’s tax consultant, Avenu Insights & Analytics
Small business revenue statistics (2020): Annual
sales and earnings, published by Fundera
City’s business license data (companies,
categories, and employee counts)
US Census data on number of firms,
establishments, employment, annual payroll, and
preliminary receipts by enterprise employment
size for the US, all industries (2017)
Number of Richmond-based businesses used in
calculation 1,037 2,273
Assumes gross receipts only from sales tax
revenue sources
National statistics and industry composition that
may not be reflective of Richmond-based
businesses
Methodology limitations Ignores gross receipts from non-sales tax-paying sources US Census data not available after 2017
Number of businesses included in model nearly
70% lower than current BUSINESS TAX database
(actual in 2021 database is 3,505*)
Number of businesses included in model nearly
35% lower than current BUSINESS TAX database
(actual in 2021 database is 3,505*)
Estimated Revenues based on Measure U
approved rates and calculation methodology $3,438,000 $12,050,000 Administrative Rulings and Procedures
New situations will arise and will have to be addressed in a consistent and fair manner
Administrative Rulings
Used to add clarification & transparency to definitions Added on an as needed basis
Procedures
Needed to deal with recurring issues in a consistent
and fair manner
Allows new staff to more easily assume Business Tax
duties
Amnesty on Late Fees
All business taxes are due on the renewal date.
Council action on November 23, 2021 established late
fee amnesty until June 30, 2022.
Public Information Tools
Review the frequently asked questions
(FAQ) list
Sending business information requests to
prepare for December mailing of
renewal notices
Leave questions for staff on the business
tax certificate hotline 510-620-6555
8 Public Information Tools
http://www.ci.richmond.ca.us/2913/Measure-U---Gross-Receipts-Ballot-Measur