Title
Staff Report for Update on the Business License Tax Holiday (Information Only)
Staffreport
SUMMARY AND RECOMMENDATIONS
This report provides an update on the results of the Business License Tax Holiday, which was initiated on September 1, 2013 and runs through December 31, 2014.
BACKGROUND
Beginning September 1, 2013, the City of San Leandro instituted a Business License Tax Holiday, waiving business license fees for new businesses through August 2014.The Business License Tax Holiday was extended on July 7, 2014 to run through December 31, 2014.
Under the Tax Holiday program, businesses that are new to San Leandro, including start-ups and businesses re-locating from other areas, have been exempt from paying the tax through the 2014 calendar year. The City has also waived a zoning conformance review fee of $107 for new businesses. The Business License Tax Holiday excluded out-of-City contractors, businesses not located in San Leandro, rental property owners, amusement devices, and waste disposal sites.
The intent of the program was to capitalize on the improving economy as well as major economic drivers such as the Kaiser Permanente San Leandro Medical Center and Lit San Leandro to ensure that the City did everything possible to attract new businesses.
Initial Outreach and Media Coverage
A primary benefit of the Business License Tax Holiday has been the message it sends regarding San Leandro’s willingness to support new businesses. Combined with a robust program of business incentives, the One Stop Permit Center, and a business-friendly attitude by staff, the Tax Holiday helps to proclaim that San Leandro is open and ready for business. Toward that end, publicity for the Tax Holiday was important as the City sought to spread the word about this program. Outreach was very successful and the coverage helped to draw attention to the numerous positive developments occurring in San Leandro.
Press coverage of the Business License Tax Holiday included the following media outlets:
July 11, 2013 San Leandro Times
September 3, 2013 San Leandro Patch
September 3, 2013 Bay Area News Group
September 4, 2013 California Political News and Views
October 18, 2013 San Francisco Business Times
February 23, 2014 KTVU News (television)
February 24, 2014 The Daily Caller
July 14, 2014 San Leandro Patch
New Businesses and Financial Impact
As of December 2, 2014, 394 new San Leandro businesses qualified for the Business License Tax Holiday. Those businesses employ 2,063 people. Total revenue foregone is $158,990, including both business license and zoning conformance fees that were waived. The cost of the program is not likely to rise significantly between now and December 31, 2014 because Business License activity is typically slow during this time of year.
Staff compared this data to previous years and found that the pace of new business openings during the Tax Holiday was roughly equal to the two years before the introduction of the program.
Time Period New Businesses New Employees
per month per month
2011 calendar year 28 71
2012 calendar year 35 96
Business License Tax Holiday
(9/1/13 - 12/31/14) 26 138
(excluding Kaiser) 26 89
The primary reason for the current year having fewer new businesses but more employees is that the Permanente Medical Group obtained its first business license in November 2013. With over 700 employees, this operation is highly atypical for a new business. The average number of employees for a new business in San Leandro is typically around four.
The types of new businesses that opened during the Business License Tax Holiday varied extensively. The table below shows a summary by business type.
New Businesses: 9/1/13 through 12/2/14
Business Type Businesses Employees
Wholesale 23 133
Service 232 703
Retail - Cottage Food 5 8
Retail 84 273
Recreation/Entertainment 3 7
Professional 12 780
Manufacturing 9 48
Contractor 12 89
Miscellaneous 14 22
Conclusions
For most businesses the annual San Leandro business license tax is a base fee of $121.60 plus a per-employee charge ranging from $36.50-$91.40, depending on the business type. These amounts compare favorably to most other cities in the region. At these rates, the tax does not represent a significant operating expense for most businesses and it is not likely, on its own, to influence business location decisions. Moreover, it is difficult to pinpoint any one factor as the sole reason a business would open in a given location.
The greatest benefit from the Business License Tax Holiday was not that it induced new businesses to locate in San Leandro, but rather that it reinforced San Leandro’s reputation as a great place to do business. With an improving economy, the business climate in San Leandro is currently extremely strong. Numerous desirable companies have chosen to locate here in the past year and vacancy throughout the City has declined.
Previous Actions
• On July 15, 2013, the City Council authorized the Business License Tax Holiday to run from September 1, 2013 through August 31, 2014.
• On July 7, 2014, the City Council extended the Business License Tax Holiday through December 31, 2014.
PREPARED BY: Jeff Kay, Business Development Manager, Community Development Department