REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution to Authorize Business License Tax Adjustment for Annual Inflation Increase Effective July 1, 2025
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City of Santa Clara's Business License Tax was last updated through a voter-approved ballot measure on November 8, 2022 (Measure H). Prior to this, there had been no business tax adjustments for 30 years. The approved measure implemented a new tax structure effective July 1, 2023, with an annual inflation adjustment mechanism outlined in Section 3.40.160 of the Santa Clara City Code (City Code). This ensures that the business tax keeps pace with inflationary changes to support essential city services.
DISCUSSION
The Business License Tax is structured to provide equitable revenue contributions from businesses operating in Santa Clara while ensuring that tax burdens remain aligned with inflation. The 2022 voter-approved Measure H established a tax framework that allows for an annual inflation adjustment based on the Consumer Price Index (CPI) for the San Francisco-Oakland-Hayward Area. As mandated by Section 3.40.160 of the City Code, these adjustments are subject to approval by the City Council and are capped at a maximum increase of 5% per year to prevent excessive financial impact on businesses.
For Fiscal Year 2025-26, the February 2025 CPI report published by the U.S. Bureau of Labor Statistics (BLS) reflects an annual inflation rate of 2.7%. Accordingly, it is proposed that Business License Tax rates will be adjusted by 2.7%, resulting in the following changes:
* The current tax of $45 per employee will increase to $46.22 per employee.
* The current tax of $15 per rental unit will increase to $15.40 per unit.
* The annual cap of $350,000 per business will increase to $359,450 to reflect the 2.7% CPI adjustment.
The Business License Tax provides funding for public safety, infrastructure maintena...
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