Council Mulls Business Tax Hike

The Burlingame City Council Tuesday discussed whether to place a measure on the November 2011 ballot to increase the business license tax for large businesses. 

Council members complained that the tax hasn’t changed since 1975, and all businesses are paying $100 a year, which is unfair to small businesses with only a few employees.

Mayor Terry Nagel said large businesses should have to pay a higher business license tax. “To me that is just a no brainer that they should be paying more than $100,” Nagel said.

City staff recommended discontinuing discussion of tax increases to help win property owners support of a Burlingame Avenue assessment district.

The city wants to replace aging water and sewer infrastructure on Burlingame Avenue and make street and landscape improvements.

The improvements are expected to cost $9 million and the city is looking to fund $600,000 in annual debt service through an assessment district and possibly an increase in parking rates.

The assessment district, which would include 50 parcels on Burlingame Avenue, would be approved unless it receives protests from a majority of property owners.

Councilwoman Ann Keighran said there should be some exception to the business license tax increase for businesses in the assessment district. “My concern is I didn’t want to double dip the same people,” Keighran said.

City Manager Jim Nantell said the business tax generates about $800,000 in annual revenue and could possibly be doubled with increases to large businesses.

Councilman Jerry Deal cautioned against a business tax increase, even if it targets large businesses. “People don’t read the fine print,” Deal said. “All they are going to see is tax.”

It’s unclear how many large businesses the city has, however, and staff will bring that and other information back to council for further discussion.

The council also had a study session to receive financial forecasts for the next five years.

At its current rate of spending, the city needs revenue growth of 6.6 percent to make budget next fiscal year and 4 percent revenue growth in fiscal years 2013 and 2014, said Finance Director Jesus Nava.

“When revenue is growing it’s easy to add new things, but as you can see, you have to hold your own,” Nava said.

If the city only sees a 2 percent revenue increase, the city could face a $1.8 million shortfall next fiscal year.

Nantell said he expects a 5 percent revenue increase next fiscal year, but that still leaves a $627,000 shortfall.

Adding to problems is that the city is expected to pay 33 percent more for CalPERS retirement costs next fiscal year compared to this fiscal year, a difference of nearly $600,000.