UPDATE: Regional Coalition Defeats Proposed Headcount Tax

On behalf of The Silicon Valley Organization (The SVO), we are writing to voice our strong opposition to the newly proposed business tax, under consideration by the Cupertino City Council at your July 31st special meeting. By way of background, The SVO is the Silicon Valley’s premier business advocacy organization representing 1,400+ companies that employ nearly 300,000 workers and we represent our membership as the region’s largest Chamber of Commerce.

We have serious concerns and reservations about the City of Cupertino’s lack of transparency and community engagement in the development of this new business tax. The city staff report notes that approximately 30 businesses were engaged over a time period of several weeks. In 2012, the United States Census Bureau estimated that there are 5,960 businesses in the City of Cupertino and it is likely that there are even more businesses today, due to sustained and strong economic growth over the past five years. Put into perspective, Cupertino city staff conducted outreach to less than 0.5% of all businesses that could be impacted by the proposed employee headcount/business tax. In addition, the city conducted two business forums where attendees expressed that the process was rushed without much time for meaningful engagement from stakeholders. Given that the City of Cupertino is seeking to multiply their business tax revenues by at least 10 times, it would behoove the City Council to consider a more deliberate community engagement process.

Furthermore, while it has been indicated that the increased business tax revenues will fund transportation improvement projects, there is no guarantee that the funds will be used for that purpose. The revenue measure resolution is drafted to direct tax monies into the city’s general fund, which can be spent at the discretion of the current and future City Councils. Even if the Council adopts a resolution, it is not binding and future City Councils can change their spending priorities, at any time for any reason. Without a clear link as to how increased revenue will fund the stated transportation improvement projects, there is no relationship between the tax and its justification.

For an ideal community and stakeholder input process, we can look to the City of San Jose’s Business Modernization Tax in 2016. City leaders engaged with the business community, and other key stakeholders, through at least a six month long process that resulted in a balanced approach to an increased business tax with a maximum cap. The negotiations yielded a fair tax structure that encourages economic growth, without punishing our local job creators.

For these reasons, we urge the Mayor and City Council to take a more deliberative process for community engagement and do not place the business headcount tax on the November 2018 ballot. By partnering with the business community, there are more options to deliver essential city services and critical transportation projects that Cupertino residents deserve.

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