City Council and Authorities Concurrent
April 21, 2026

City of Santa ClaraAgenda Report1500 Warburton AvenueSanta Clara, CA 95050santaclaraca.gov@SantaClaraCity25-367 Agenda Date: 4/29/2025REPORT TO COUNCILSUBJECTAction on a Resolution to Authorize Business License Tax Adjustment for Annual Inflation IncreaseEffective July 1, 2025COUNCIL PILLARDeliver and Enhance High Quality Efficient Services and InfrastructureBACKGROUNDThe City of Santa Clara’s Business License Tax was last updated through a voter-approved ballotmeasure on November 8, 2022 (Measure H). Prior to this, there had been no business taxadjustments for 30 years. The approved measure implemented a new tax structure effective July 1,2023, with an annual inflation adjustment mechanism outlined in Section 3.40.160 of the Santa ClaraCity Code (City Code). This ensures that the business tax keeps pace with inflationary changes tosupport essential city services.DISCUSSIONThe Business License Tax is structured to provide equitable revenue contributions from businessesoperating in Santa Clara while ensuring that tax burdens remain aligned with inflation. The 2022 voter-approved Measure H established a tax framework that allows for an annual inflation adjustmentbased on the Consumer Price Index (CPI) for the San Francisco-Oakland-Hayward Area. Asmandated by Section 3.40.160 of the City Code, these adjustments are subject to approval by theCity Council and are capped at a maximum increase of 5% per year to prevent excessive financialimpact on businesses.For Fiscal Year 2025-26, the February 2025 CPI report published by the U.S. Bureau of LaborStatistics (BLS) reflects an annual inflation rate of 2.7%. Accordingly, it is proposed that BusinessLicense Tax rates will be adjusted by 2.7%, resulting in the following changes:The current tax of $45 per employee will increase to $46.22 per employee.The current tax of $15 per rental unit will increase to $15.40 per unit.The annual cap of $350,000 per business will increase to $359,450 to reflect the 2.7% CPIadjustment.The Business License Tax provides funding for public safety, infrastructure maintenance, economicdevelopment programs, and community services. By implementing this inflation-based increase, theCity upholds its commitment to long-term fiscal sustainability without imposing sudden, large-scaletax hikes.This annual CPI-based adjustment is critical to preventing the erosion of City revenue due to inflationwhile ensuring that businesses continue to contribute fairly to the cost of maintaining high-quality cityCity of Santa Clara Printed on 3/18/2026Page 1 of 3powered by Legistar™ 25-367 Agenda Date: 4/29/2025services.As contemplated by City Code Section 3.40.250, the Director of Finance Department is currentlyworking on drafting rules and regulations to facilitate the implementation of the Business License Tax.Topics addressed include operational and administrative details for staff to implement the BusinessLicense Tax Program, and provisions for providing notice to affected taxpayers. Once finalized, theserules will be brought back for Council consideration and approval.Although a formal amendment to the City’s business license tax ordinance is not legally required, theCity Attorney’s Office will work with Finance staff and the City Clerk to add a note within the CityCode sections containing the original business license tax rates indicating that any new tax rateapproved by the City Council for the applicable fiscal year will be posted on the City’s businesslicense tax webpage.ENVIRONMENTAL REVIEWThe action being considered does not constitute a “project” within the meaning of a CaliforniaEnvironmental Quality Act (“CEQA”) pursuant to pursuant to section 15378 (b)(4) of Title 14 of theCalifornia Code of Regulations in that it is a fiscal action which does not involve any commitment toany specific project which may result in a potentially significant physical impact on the environment.FISCAL IMPACTBased on the estimated total business tax revenue of $6 million per year, the 2.7% CPI-basedincrease will result in an additional $162,000 in revenue for FY 2025-26.COORDINATIONThis report has been coordinated with the Finance Department and City Attorney’s Office.PUBLIC CONTACTOn April 2 and April 9, 2025, notices of the proposed increase were published in the Santa ClaraWeekly in the manner set forth in Government Code Sections 6062a and 66018.Public contact was made by posting the Council agenda on the City’s official-notice bulletin boardoutside City Hall Council Chambers. A complete agenda packet is available on the City’s websiteand in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to aSpecial Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’sOffice at (408) 615-2220, email [email protected] or at the public information desk at anyCity of Santa Clara public library.RECOMMENDATIONAdopt a resolution authorizing the annual inflation adjustment for the Business License Tax, effectiveJuly 1, 2025, as allowable under Santa Clara City Code Section 3.40.160Reviewed by: Kenn Lee, Director of FinanceApproved by: Jovan D. Grogan, City ManagerATTACHMENTS1. Resolution No. 22-9130City of Santa Clara Printed on 3/18/2026Page 2 of 3powered by Legistar™ 25-367 Agenda Date: 4/29/20252. Resolution Adjusting the Business License Tax to be effective July 1, 20253. RTC 22-936 City of Santa Clara Printed on 3/18/2026Page 3 of 3powered by Legistar™