Chip Johnson’s column in today’s San Francisco Chronicle provides a good lead in for my endorsement of Measure T.

 

Measure T is actually an amendment to Richmond’s business license ordinance, which is at least several decades out of date, if not a century, and well due for an overhaul. The current ordinance reads like something out of “Deadwood,” including fees for such arcane endeavors as “Itinerant shows, circuses, carnivals, rodeos and hawkers (ninety-one dollars and ninety-six cents ($91.96) per day for a hawker, payable in advance where the article sold is not a patent or other medicine)” and $91.96 per day for oil wells (Where are you Jed Clampett of the Beverly Hillbillies?).

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The name “business license” is somewhat of a misnomer because, like all municipal business license programs, Richmond’s is both a tax on business and a means of tracking business activity for regulatory purposes.

 

Business license revenue for Richmond, without the passage of Measure T, is budgeted at $2.6 million for FY 2006-2007. The estimated new revenue that would result from the passage of Measure T is estimated at about $8.5 million, with about $ 8 million coming from oil refining.

 

The primary reason the ordinance needs revision is that it currently places an unequal burden on small businesses, which in aggregate, provide the most jobs in Richmond and employ the most Richmond residents.

 

Following is the city attorney’s impartial analysis of Measure T:

 

CITY ATTORNEY’S IMPARTIAL ANALYSIS OF MEASURE T

 

The City of Richmond currently requires all businesses in the City to

obtain a business license and pay a business license fee, which is tax for

general revenue. Most businesses are now taxed based on the number

of employees. Most current business licenses run for 12 months from

the date of issue but some businesses may obtain licenses for shorter

periods.

 

This Measure, if approved, would result in a 10% increase in the

business license tax for most categories of business, and a change to

the method of taxation for manufacturing businesses (including oil

refining) and for landlords (including both residential and commercial

properties). Taxes for movie theatres and child care centers would not

increase. All annual licenses would be for a calendar year starting

January 1, 2007. Licenses issued in 2006 would expire December 31,

2006 and a credit would be given for the remaining term of the old

license. New businesses would receive up to an 18-month exemption.

 

Manufacturing business would be taxed under a new formula, which

would be the greater of (1) the tax that would be paid by other general

businesses (the prior method with a 10% increase) or (2) a flat fee of

$282.70 plus one eighth of one percent (0.125%) of the value of the raw

materials used in the manufacturing process. For example, a

manufacturing business which has 50 employees would pay the greater

of $2,908.95 or the sum of $282.70 plus 0.125% of the value of the raw

materials it used. It therefore would have to use more than $2,101,000 in

raw materials before its tax would be increased over the general rate.

Only raw materials actually used in the manufacturing process are

counted for purposes of calculating the tax. Any materials merely

owned, stored in inventory, warehoused or transported are not included

in the calculation. Because the tax must be paid at the beginning of

each year, the calculation for each tax year is based on the total value of

raw materials used in the prior year. The proposed measure contains

definitions of manufacturing, raw materials and a method of valuation in

order to implement this new approach.

 

The current system of taxing landlords based on the number of sites and

employees would be replaced. Under the new system, residential

landlords would pay $90 for the first 25 units, $75 per unit for the next 35

units and $55 per unit for units over 60. Non-residential landlords would

pay three cents per leasable square foot of space. Residential landlords

with less than three units would pay less under the new system than

under the current system.

 

Other changes include the elimination of separate categories for part-time

businesses and junkyards, an increase in the tax for live

entertainment events to $1 per ticket, and a change in the annual

inflation adjustment to the consumer price index.

The City estimates this measure will generate about $ 8,501,000 in new

revenue beginning in 2007, of which about $ 8,000,000 will come from oil

refining.

 

/s/ John Eastman

City Attorney

 

Local residents and business owners who have signed arguments in favor of Measure T in the official Voter Information Pamphlet include former Mayor (and Rosemary Corbin, Laurel Park Neighborhood Council President and Recreation and Park Commissioner  Myrtle L. Braxton, Richmond Improvement Association President Rev. Andre L. Shumake, Sr., Richmond Police Officers President Andre Hill, local business owner Jesse G. Kray of Kray Cabling, Inc., Marilyn Langlois, Tenants’ Rights Advocate, Apartment Owner Carmen Mariscil,  Torm Nompraseurt of the Laotian Organizing Project and Jeanette Mahoney of El Sobrante Hills Neighborhood Council.

 

Opposition comes from lobbyists for owners of large apartment complexes and from members of RichPAC and the Richmond Chamber of Commerce, which, I am sad to say, have become tools of the Council of Industries, which in turn, is a front for Chevron. Individuals who have signed arguments in opposition to Measure T in the official Voter Information Pamphlet include Theresa M. Karr, Chairman CAA (California Apartment Association), Kris Hunt, Executive Director of the Contra Costa Taxpayers Association, neither of whom are Richmond residents or business owners.

 

The Richmond Chamber of Commerce argues, “Measure T gambles with the economic improvement that Richmond desperately needs. When potential new businesses hear there is a tax on manufacturing, they will go elsewhere.” If they are correct, I regret that Richmond may have to take a pass on another refinery.

 

I can’t imagine how any Richmond resident could resist taxing the $100 billion Chevron Corporation to keep some of those skyrocketing oil profits in the hometown where all that high-priced gasoline is made. Measure T will add no new taxes to Richmond residents, and its impact on most businesses will be inconsequential.

 

Finally, anybody who says we don’t need the money has to be mentally impaired. For example, according to information we received today from the 2006 Richmond Pavement Management Program, Richmond has a $184 million unfunded street maintenance shortfall needed to address an overall Pavement Condition Index (PCI) of 53 (just above “poor”) on a scale of 100. The study recommends a $12 million increase over present annual expenditures just to maintain the status quo. And that’s just one category of municipal needs that is going unmet.

 

Following is Chip Johnson’s column:

 

Chevron unhappy with cash-strapped Richmond's manufacturers' tax measure
- Chip Johnson
Friday, October 13, 2006

Richmond city officials are hoping that voters there will pass a first-of-a-kind tax in next month's general election. But there is one rather large obstacle:

The giant Chevron refinery, which would pay most of the estimated $8 million the city would collect from the tax each year.

"It's unlawful," said refinery spokeswoman Camille Priselac, referring to Measure T, a city-sponsored ballot measure that is the cash-poor city's latest attempt to raise taxes to pay for services.

In this case, some of the revenue from the one-eighth cent sales tax could be used to hire more officers for the understaffed police force.

The measure, which would tax the value of the raw resources used to produce finished products, is a no-brainer for city residents. Along with another provision in the measure that would increase fees for rental units, the measure intends to provide a lot of money for city services.

The manufacturers' tax would affect about a dozen companies in the city, said Jim Goins, the city's finance director, but Chevron would pay by far the most.

It's pretty obvious why Chevron would take a special interest in this one, the price of crude oil being what it is these days. What I can't understand is why an oil company, of all institutions, would claim the city can't make tax adjustments according to its costs, just like the company does.

It's pretty obvious that Chevron or the rest of Big Oil believes passing on the higher cost of its raw materials to customers is legitimate, even though the California attorney general's office remains unconvinced.

In a separate tax dispute with the city last month, Chevron officials accused Richmond officials of breaking the law when the City Council publicly discussed a change in the company's utility tax payments that would cost the city an estimated $4.6 million a year.

In a sharply worded letter sent by lawyers representing the company, city officials were informed that public discussion of the company's' proprietary information was a violation of the law.

In that matter, city officials have signed a confidentiality agreement and will hire an independent firm to review the company's energy-use records.

And while Chevron's argument against the Measure T is less clear, the company is not alone in its opposition to the tax boost.

The Richmond Chamber of Commerce opposes the measure because there is no spending plan to accompany it, said John Ziesenhenne, who chairs the business organization.

The tax measure is also opposed by the Contra Costa Taxpayers Association, a group of about 300 business and private citizens. Kris Hunt, executive director of the taxpayer group, said Measure T was thrown together to get a tax measure -- any tax measure -- on the November ballot.

Hunt attended at least one of the committee sessions for the measure and said that with the next general election two years away, participants were "under the gun" to find a way to raise revenues.

She said her organization's official position is the Richmond measure taxes company inventories and will not withstand a legal challenge.

On that point I agree with Hunt. Richmond is under the gun to raise revenues, and it was one of the key recommendations in a financial restructuring of city government that began in late 2004 when the city faced a $35 million budget deficit.

Taxes are one of the ways in which you do that, and Chevron and the handful of other large manufacturers will always gripe about tax increases because they disproportionately represent the city's industrial tax base.

City Manager Bill Lindsay said that taxes from the manufacturing section of the city's economic base were disproportionately low compared to retail and other tax revenue sources.

"They're a large taxpayer," Lindsay said, "but they're a big company that covers a lot of acreage and it's not unusual for a company that size to pay a lot in taxes," he said.

As for Chevron, Priselac said the company would reserve its right to participate in the political process, which Richmond City Council member Tom Butt said would translate into campaign contributions to fund any group opposing the measure or pay for a media campaign, or both.

The company's strategy to defeat the city's latest tax request is unclear, and John H. Knox, an outside attorney working with the city, said the city is within its legal rights to pass a business tax that lays out special requirements for any particular business sector.

Knox said while it was "a unique method of measuring the tax levied on manufacturers" it was no different than a gross receipts tax, license tax or other methods of generating public revenue.

"Chevron can bring in all the crude it wants, let it sit or put it in truck and transport it somewhere else and it won't affect the tax they pay," Knox said, "but if they use it to produce oil, gasoline or other products, well that's manufacturing."

Chip Johnson's column appears on Tuesdays and Fridays. E-mail him at chjohnson@sfchronicle.com