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CC Exhibit 06-19-2018 Item No. 5 Employer-Based Revenue Measure Business License Tax PresentationPotential Restructuring of the Business License TaxJune 18, 2018Employer-Based Revenue Measure Background•March 2018: 2018-19 Work Program - Employer-based revenue measure to address traffic congestion•May 2018: voter poll•June 5, 2018: study session on potential revenue measures•June 18: Business Forum Poll Summary●71% support increasing the BLT●63% support increase for general services●69% support for specific purposes Business License Tax Structures●Square Footage (current)●Payroll ●Base + rate per employee Over 3,800 Business Licensees70%25%4%1%0 SF1‐5,000 SF5,001‐25,000 SF25,001‐75,000 SF75,001‐100,000 SF Current Structure - $800,000 FY17-18Square Footage Range Rate Tax RangeHome Occupations - 0 0 $1441-5,000 0.0380 $144-$3345,001-25,000 0.0331 $334-$99625,001-75,000 0.0287 $996-$2,43175,001-100,000 0.0237 $2,431-$3,024100,001-150,000 0.0189 $3,024-$3,969150,001+ 0.0048 $3,969+ Payroll TaxesAgencyPayroll Expense ThresholdPayroll Tax RateSan Francisco, CA>$300,000 0.711%Newark, NJ>$2,500 1%Jersey City, NJ (Proposed) TBD1% (Proposed)Tri-Met Transportation District (Oregon)All wages 0.7537%Lane County Mass Transit District (Oregon) All wages 0.73%New York City Metropolitan Transportation Authority (MTA) >$312,500 to $375,000>$375,000 to $437,500>$437,5000.11%0.23%0.34%• Tax rate applied to salaries/wages• SF is transitioning away from a payroll tax to tax on gross receipts Employee-Count Business Tax●Employers pay a per employee (EE) amount●Flat rates for small businesses ●Progressive per-EE rate increases as EE count increases Employee-Count Model Assumptions●3,500 non-exempt business licenses with 39,000 employees●2,200 out-of-town businesses●Data from CA EDD, US Census, and City BL database●No EE rate for first 99 employees●No cap Few Medium to Large Businesses●One business employs 2/3 of Cupertino workers●Only about 30 businesses would be subject to per-employee rate0 5,000 10,000 15,000 20,000 25,000 30,0001-1011-5051-100101-250251-500501-1,0001,001-5,0005,001+Estimated Employees by Business Size Model 1: per EE rate up to $150Employee Range # BusinessesEstimated # Employees Base RateEmployee RateTotal BL Tax1‐9 3,128              3,400               150‐                   469,200$         10‐49 300                  4,000               250‐                   75,000$           50‐99 40                    2,400               500‐                   20,000$           100‐249 25                    3,350               500 50$              56,250$           250‐499 5                      1,350               500 75$              47,625$           500‐999 1                      500                   500 100$           26,725$           1,000‐4,999 500 125$            ‐                         5,000+ 1                      24,000             500 150$           3,426,550$     Total 3,500              39,000             4,121,350$      Model 2: per EE rate up to $300Employee Range # BusinessesEstimated # Employees Base RateEmployee RateTotal BL Tax1‐9 3,128              3,400               150‐                   469,200$         10‐49 300                  4,000               250‐                   75,000$           50‐99 40                    2,400               500‐                   20,000$           100‐249 25                    3,350               500 50$              55,000$           250‐499 5                      1,350               500 100$           50,000$           500‐999 1                      500                   500 150$           33,000$           1,000‐4,999 500 200$            ‐                         5,000+ 1                      24,000             500 300$           6,608,000$     Total 3,500              39,000             7,310,200$      Model 3: per EE rate up to $425Employee Range # BusinessesEstimated # Employees Base RateEmployee RateTotal BL Tax1‐9 3,128              3,400               150‐                   469,200$         10‐49 300                  4,000               500‐                   150,000$         50‐99 40                    2,400               500‐                   20,000$           100‐249 25                    3,350               500 75$              78,125$           250‐499 5                      1,350               500 100$           68,875$           500‐999 1                      500                   500 200$           36,775$           1,000‐4,999 500 300$            ‐$                  5,000+ 1                      24,000             500 425$           9,411,500$     Total 3,500              39,000             10,234,475$    Model 4: per EE rate up to $1,000Employee Range # BusinessesEstimated # Employees Base RateEmployee RateTotal BL Tax1‐9 3,128              3,400               150‐                   469,200$         10‐49 300                  4,000               500‐                   150,000$         50‐99 40                    2,400               500‐                   20,000$           100‐249 25                    3,350               500 50$              56,250$           250‐499 5                      1,350               500 100$           50,250$           500‐999 1                      500                   500 250$           33,100$           1,000‐4,999‐                   ‐                    500 500$            ‐                         5,000+ 1                      24,000             500 1,000$        21,158,100$   Total 3,500              39,000             21,936,900$    Model 5: per EE rate up to $1,500Employee Range # BusinessesEstimated # Employees Base RateEmployee RateTotal BL Tax1‐9 3,128              3,400               150‐                   469,200$         10‐49 300                  4,000               500‐                   150,000$         50‐99 40                    2,400               500‐                   20,000$           100‐249 25                    3,350               500 75$              78,125$           250‐499 5                      1,350               500 100$           68,875$           500‐999 1                      500                   500 250$           36,825$           1,000‐4,999‐                   ‐                    500 750$            ‐                         5,000+ 1                      24,000             500 1,500$        31,662,075$   Total 3,500              39,000             32,485,100$    Model 6: per EE rate up to $700Range # BusinessesEstimated # Employees Base RateEmpoyee RateTotal BL Tax1‐9 3,128              3,400               150‐                   469,200$         10‐49 300                  4,000               500‐                   150,000$         50‐99 40                    2,400               500‐                   20,000$           100‐249 25                    3,350               500 50$              56,250$           250‐499 5                      1,350               500 100$           50,250$           500‐999 1                      500                   500 200$           33,050$           1,000‐4,999 500 350$            ‐                         5,000+ 1                      24,000             500 700$           14,833,000$   Total 3,500              39,000             15,611,750$    Other Key Parameters●General vs. Specific●Part-time employees●Other business types●Inflation index●Annual audits●Timeline and phasing Potential Projects●Transportation●Public infrastructure●Potential partnerships for affordable housing development Electric Community Shuttle●6 shuttles operating weekdays 8 am to 6 pm ~$1.5M/year●6 shuttles operating daily8 am to 6 pm ~$2M/year Library Expansion●“Perch” Addition●Approximate Size: 4,420sf●Estimated Cost: ~$8.5M New City Hall●Approximate Size 40,000 sf●Two Floors with Underground Parking●Estimated Cost: ~$75-95M Enhanced Community FacilitiesPotential Amenities include:●Aquatic Center (2 pool): ~$25-50M●Multistory Gym (50k s.f.): ~$50-100M●Multistory Arts / Performance/Community/ Incubator Space (100k s.f.): ~$80 - 120M●Renovated Sports Center: ~$15-18M●Expanded Senior Center: ~$10-15M Bicycle Transportation Plan●Stevens Creek Class IV BikeLanes, Phases 2 & 3: ~$5-6M●McClellan/DeAnza IntersectionReconfiguration: ~$1-2M●Bike/Ped Overcrossing ofHwy 85 at the Oaks: ~$10-20M●Carmen Rd Bridge: ~$2-4M●Junipero Serra Trail: ~$7-52M●Regnart Creek Trail: ~$5-6M●UPRR Bridge to Snyder-Hammond: ~$2-6M●UPRR Trail - ~$10-20M Hwy 85 Transit Guideway Study – Hwy 101 in San Jose to Hwy 101 in Mt. ViewAlthough $350M is currently included in the Santa Clara County Measure B Program, this funding could bridge any gaps to expedite planning and design -~$5-10M Automated Guideway Transit Study – Mt. View Transit Station to I-280/Wolfe RdStudy to connect future Mountain View system (North Bayshore to downtown transit station) to Apple/Vallco area. Study cost - ~$1.5-2M Transit Study – Stevens Creek Corridor to Downtown San JoseStudy to connect Cupertino and Santa Clara to downtown San Jose with timely and viable transit, possible subway system. Conceptual Study cost -~$1.5-2M Leveraging Revenue Model EE RatesEst. Rev(in millions)Est. COP(in millions)1 $50-150 $4.1 $41.0 2 $50-300 $7.3 $73.0 3 $75-425 $10.2 $102.0 4 $50-1,000 $21.9 $219.0 5 $50-1,500 $32.5 $325.0 Tax Agreements●Council may enter into tax agreements to refund BLT for:●community benefit●public-private partnerships Business Outreach●Continuing discussions with Chamber of Commerce●Targeted largest businesses for one-on-one meetings●Business Forum on June 18th Initial Business Feedback●Timeline seems rushed●Not enough business outreach●Revenue should be tied to a transportation solution Next Steps●July 3: Ballot language approval to meet November 2018 deadline (due to Council recess)●Arguments & rebuttals (Council designee)●Resolution on expenditure priorities (TBD)