More on the business/rental tax conversation

Well, it was tough trying to follow that March 24 Finance Committee discussion via Zoom – I was afraid to open another page on my computer at first, afraid I’d lose the meeting. I’m no techie. So I tried to take notes by hand. Here’s what I got.

Scott Dowell – “We started this [business tax update] a year and a half ago… to update an old ordinance written in the 1970’s…” After a few more comments assuring us that the ordinance needed to be “updated,” Dowell turned the floor over to the consultant, HdL. According to their website, “The HdL Companies is a pioneer and leader of auditing, operations, and revenue … HdL’s ECONSolutions team provides economic development consulting …”

The consultant’s report begins, “In an effort to identify methods of generating additional local funds and to garner efficiencies of process by modernizing the code, the City commissioned the HdL Companies.” Please note that the first reason for this ordinance overhaul is to raise “additional local funds,” and Honey, wake up, that means TAXES.

Furthermore, “Each of the three options for modifying the tax structure provide increased revenues to the City while striving to create an equitable outcome for the business community by not placing the burden of increased rates solely on any individual category. ” If you read the report you see that’s a lie, they want to “place the burden” on landlords and tenants.

Josh from HdL told the group that currently Chico uses a “tax-based” business license, not a “regulatory” license. A regulatory license would allow the city council to decide which type of businesses, specifically, are allowed to operate in Chico. Of course a good example that we’ve been hearing a lot about is the cannabis industry, which came up later on the agenda. But the type of businesses allowed in town was not the only type of “regulation” the consultant brought up.

Josh the consultant went on to describe Chico revenues as “flat,” which didn’t make sense, given the report delivered at the end of the meeting by Finance Department staffers. I think what Josh really meant was that the revenues are not coming in far enough of expenses. Instead he said, “your business tax is not keeping up … it should follow your sales tax receipts.”

Let’s think about that. He’s saying what we already know from staff reports over the past couple of years – revenue streams like property taxes and sales tax are up, up, way up. At the end of this meeting the finance dept staff said we could expect other upticks in future, since property values in Chico are way higher than the surrounding county, and then there’s the stimulus check money. At the January meeting Dowell reported an “unexpected” $30 million uptick in sales tax revenues.

So the consultant is saying, businesses are making more money, let’s exploit that with a new business tax ordinance. He chastised the committee – Chico has the highest population of nearby cities and town, but the LOWEST per capita business tax revenue – $3.80 per person per year. His chart showed a list of local municipalities, with Chico on the bottom of the dog heap, under Yoooooba City! Disgraceful! Well, I don’t know – that almost sounds Business Friendly. Apparently that’s not what the consultant is shooting for.

Josh also reported that the burden of paying the business tax has fallen on the smaller businesses in town, but did not explain why. But, later, he suggested that the city could take the “burden” off retail businesses by adding rentals to their scheme.

The current business tax schedule is pretty interesting – you can see it on pages 12 and 13 of the consultant’s report. Most businesses are taxed based on the number of employees they have. Employee taxes have never made sense to me – do we not want jobs? Why would you penalize an employer for paying good wages? And besides, that option does not provide enough revenue to cover the salaries and pensions Downtown.

The consulting firm is pushing for a “gross receipts” option – and you heard that right – they want to tax businesses based on how much money they make. An income tax for businesses, that goes to a city that does not provide services, only penalties.

And this, “The City currently excludes residential property rentals where the total units are less than 3. The current ordinance also appears to exclude commercial property rental. Given the make-up of the City, this leaves many potential businesses without being taxed. The City could consider removing the unit exemption entirely requiring even renters of single family homes to pay the tax. Furthermore, the definition could be changed to residential and non-residential property, picking up any property rental within the City.”

Evil never sleeps. They are suggesting penalizing the people who provide housing as well as people who need housing, just because they can. That’s why I’d call it a “tenant tax,” which is a little easier to say than “a tax because you don’t own your own house...”

The three options the consultant laid on the table were

1. increase the amount of Employee Tax
2. go to a gross receipts model
3. go to a gross receipts model and include all rentals in town, including all those backyard units the city was encouraging people to build, under the guise of encouraging more and cheaper housing

The third model included the language about rent control, but the consultant denied any such thing. I hope you will read that section again, very closely, I think you’ll see RENT CONTROL DUMMY! See Attachment A – Business Tax Analysis and Ordinance Review, near the very end of the consultant’s report.

I could talk about the consultant’s report for a week, but I hope you’ll read it too.

https://www.chico.ca.us/sites/main/files/file-attachments/3.24.21_fc_agenda_packet.pdf?1616179820

Instead I’d like to cut to the committee discussion to which you were probably not privvy. Andrew Coolidge recently accused me of taking his words out of context – well, I took notes as fast as I could during that meeting – if he wants to know who said what, maybe he should order the clerk to make a recording available to the public.

Scott Huber took the floor briefly to say that he favored the third option, which would include all rentals in the gross receipts model.

Sean Morgan reminded us that they are just trying to modernize this ordinance and “make it more equitable,” still insinuating that some businesses are not paying their way. He said that was why council made the Waste Hauler Franchise deal – the garbage tax – “because some were paying unfairly…” That remark did not make sense. Who was not paying fairly? The consumers are the ones who got stuck with the increase. And that’s who this burden will fall to – the consumers and the renters.

Coolidge surprised me, saying he did not like the gross receipts model, going so far as to claim, “I have stopped doing business in jurisdictions that use the gross receipts model...” He also said he knew business owners here that “make a lot of money but don’t pay…” He didn’t explain either remark.

The consultant quickly shifted gears to say the Employee Tax was the “most popular” in California jurisdictions, but opined that the gross receipts model is the “most equitable”. Again, I’m hearing, “let’s stick it to the landlords and the tenants!”

There were about 23 attendees hanging around on Zoom, I couldn’t see them all on my screen, but one was current Chico Chamber CEO and former CEO of the Jesus Center, Katy Thoma. For once she asked a good question: “Does this tax go to the General Fund?” To which Scott Dowell answered a very brief and almost inaudible “Yes.” Nobody had to explain that the General Fund is an almost unregulated cookie jar out of which Council and staff can withdraw funding for just about any whim.

At this point the audio began to cut out, I was “timed out”, and had to sign back in. From what I could understand, the committee voted to have the consultant make a report to the full council, but I can’t be sure about that. I did get back in time to listen in on the sales tax increase measure conversation, and I’ll report that – Next Time! On “This Old Lady Goes to a Zooooom! Meeting”