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
Community Outreach
Revenue Comparisons
Rate Comparison
Administrative Rulings and Procedures
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
Community Outreach
9,000 data sheets sent to both
businesses and rental properties
1,900 Renewal Notices sent to
businesses expired in December 2021
4,044 flyers mailed to businesses
Updated website
Created online appointment system
https://calendly.com/measure_u_info
Community Meetings
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 Rate Comparison
Approved Richmond Rates
Current Rates (no
marginal tax rates
currently in place)
Class Industry Under
$1M **
$1M to
$2.5M
$2.5M
to
$25M
$25M
to
$50M
Over
$50M Industry
Current
Oakland
Rates
Current
Berkeley
Rates
A Retail Sales 0.12% 0.16% 0.20% 0.24% 0.32% Retail Sales 0.12% 0.12% B Grocers 0.06% 0.10% 0.13% 0.015% 0.20% Grocers 0.06% 0.06% C Automobile Sales, Manufacturing 0.12% 0.22% 0.31% 0.41% 0.50% Automobile Sales, Manufacturing 0.12% 0.12%
D Recreation and Entertainment 0.45% 0.46% 0.47% 0.48% 0.50% Recreation and Entertainment 0.45% 0.45%
E Hotel Motel 0.18% 0.28% 0.38% 0.48% 0.50% Hotel/motel 0.18% 1.081%-
2.880%
F Construction contractor 0.18% 0.21% 0.24% 0.27% 0.30% Construction contractor 0.18% 0.18%
G Business and personal services 0.18% 0.27% 0.36% 0.50% 0.54% Business and personal services 0.18% 0.18%
H Professional/semi-professional service 0.36% 0.41% 0.45% 0.50% 0.68% Professional/semi- professional service 0.36% 0.36%
I Administrative headquarters (payroll
based, not gross receipts) 0.12% 0.15% 0.19% 0.22% 0.24% Administrative
headquarters
(payroll based, not
gross receipts)
0.12% 0.12%
J Miscellaneous 0.24% 0.31% 0.38% 0.45% 0.48% Miscellaneous 0.12% 0.24% Sales Tax Data
Class
Under
$250k
Under
$1M
$1M to
$2.5M
$2.5M to
$25M
$25M to
$50M
Over
$50M Totals
A Retail Sales 429 139 57 57 4 3 689
B Grocers 28 16 8 5 - - 57
C Automobile Sales, Manufacturing 85 33 22 18 2 1 161
H Professional/semi-professional service 80 28 13 9 - - 130 Totals 622 216 100 89 6 4 1,037
Number of Employees
Class 2 or less 3 to 10 11 to 25 26 to 50 51 to 100 101 to 500 Over 500 Total A Retail Sales 151 697 41 28 10 7 - 934
B Grocers 71 14 6 1 3 - - 95
C Automobile Sales, Manufacturing 120 42 26 11 6 6 1 212 E Hotel Motel 6 8 1 1 1 - - 17
F Construction contractor 393 95 21 11 5 - - 525
G Business and personal services 667 88 25 9 6 - 1 796
H Professional/semi-professional service 944 129 36 10 11 6 - 1,136 I Administrative headquarters (payroll based,
not gross receipts) 31 3 3 - 1 - - 38
N Taxi and limousine service 11 1 12
O Transportation, trucking 65 15 4 3 4 1 - 92
Totals 2,459 1,092 163 74 47 20 2 3,857
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
Created online appointment system
https://calendly.com/measure_u_info
Sent business information requests to prepare for
December mailing of renewal notices
Leave questions for staff on the business tax
hotline 510-620-6555 or email at
[email protected]
12 Public Information Tools
http://www.ci.richmond.ca.us/MeasureU
Small Landlord Rent
Control Fee Credit
Proposed Ordinance allows landlords of
1 to 4 residential units to get credit for all
Rent Board Fees paid against their
Business Tax
Estimate impact is $1.6M. Calculation
based on:
5,637 partially covered units paying the
Just Cause Eviction yearly fee of $123
4,380 fully covered units paying the Rent
Ordinance yearly fee of $218
Units Fee
Total RC
Revenue
5,637 $123 $693,351
4,380 $218 $954,840
10,017 $1,648,191