UPDATE: Scott Myers-Lipton said he supports combining the mayor’s compromise with Councilman Rocha’s proposal. Below is his statement in full.
Dear Mayor and City Council,
I am writing in support of Mayor Liccardo's and Council member Rocha's memos that recommend to the City Council to put the "alternative model" on the ballot. In my previous letter of June 20th to the City Council, I argued that the staff's proposal needed to adjust the rates for the business tax, as they fell heavily on rental properties. The alternative model accomplishes this by decreasing the residential rental tax rate by one-half, increasing the business tax rate by $5 per employee, and increasing the assessment of commercial property to $0.025 per square foot rate.
I want to thank Mayor Sam Liccardo, Budget Director Lee Wilcox, and Council member Don Rocha for their work on coming to a positive resolution. Unfortunately, I will be unable to attend this Tuesday’s City Council meeting as I am currently out of the state, but I wanted to inform you that I am in support of the alternative model.
Dr. Scott Myers-Lipton
When San Jose State professor Scott Myers-Lipton pitched the idea of upping the city’s business tax for the first time in decades, he suggested linking the ballot measure to annual gross receipts. Worried that the initiative would scare away business, Mayor Sam Liccardo made a counter-offer to eschew the gross-receipts tax but double yearly business license revenue from $12.7 million to $25.4 million.
The hitch in Liccardo’s compromise—which comes up for discussion at the first City Council meeting of the new fiscal year—is that it shunted the burden from mobile tech firms to residential landlords. To Councilman Don Rocha, that’s a problem.
The proportion of licensing taxes paid by residential landlords would go from 7 percent of city revenue to 16 percent under the mayor’s plan, while the share borne by businesses that pay per employee would actually decrease.
“My concern is that I still don't think that it's equitable to place such a large proportion of the burden on just one sector of our business community,” Rocha wrote in a memo urging colleagues to adjust the initiative before voting to place it on the Nov. 8 ballot. “There's a legitimate question as to what equity means in this case: how should we apportion the tax between residential landlords, commercial landlords, and employers? In my opinion, the fairest approach would be to try to match the proportion of the tax borne by each sector to the relative size of each sector within our economy.”
The below chart shows how San Jose’s current rates stack up to those proposed by Mayor Liccardo and Councilman Rocha.
In the last council meeting before the July recess, Liccardo directed city staff to compare how San Jose’s tax on rental properties compare to surrounding cities. That research, Rocha noted, found that San Jose’s proposed rental property tax would be far higher than any South Bay jurisdictions.
City staffers justified the disparity by saying that residential rentals are a “more significant business” in San Jose than nearby communities, and that rentals consume more services.
Rocha questioned the logic of that argument, saying the city presented no data to back up the claim that residential rentals comprise 16 percent of the local economy.
“If staff has data that supports the idea that residential rentals are that significant, then they should absolutely provide it to the council, but in the absence of such data I think we need to adjust the rates to a more reasonable level,” he wrote.
Rocha also took issue with the city’s claim that rental housing sucks up more public services than other businesses. To purport as much oversimplifies the complex symbiosis between jobs and housing, he said.
“It has become fashionable within City Hall over the past decade to try to enforce a rigid fiscal distinction between jobs and housing, but the real world is nowhere near as simple,” Rocha said. “Jobs and housing depend on one another, and cannot be so easily pulled apart.”
Another factor to consider is public sentiment. Polling conducted earlier this year showed that likely voters overwhelmingly supported upping the business tax for larger businesses. But fewer than half supported the idea of a tax increase on landlords.
San Jose voters will decide the fate of the proposed business tax increase along with a regional transportation tax, a $950 million housing bond measure and an initiative that would require employers to offer additional hours to part-time workers before hiring on new staff.
More from the San Jose City Council agenda for August 2, 2016:
- Yet another measure on the Nov. 8 ballot would put an end to San Jose’s pension wars. The city released the final language of the initiative that would replace Measure B, which voters approved in 2012 in an effort to rein in runaway public pension costs. The replacement measure hammered out by City Hall and its labor unions last year will save taxpayers $3 billion over the next three decades, according to the mayor’s office.
- San Jose will open up bids for $8.1 million in upgrades to beef up security at the city’s notoriously porous Mineta San Jose International Airport.
- The city will renew a commitment to Vision Zero, a global campaign to reduce the number of traffic fatalities. San Jose has long reported high numbers of traffic deaths, including pedestrian fatalities, and those numbers appear to have only increased in recent years. In 2015, 60 people died in traffic collisions, putting traffic fatalities well over the city’s homicide rate.
WHAT: City Council meets
WHEN: 1:30pm Tuesday
WHERE: City Hall, 200 E. Santa Clara St., San Jose
INFO: City Clerk, 408.535.1260