Tom Butt
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  Proposed Business License Tax Reform
August 4, 2020

Tomorrow, August 4, 2020, the City Council will consider placing a measure on the November 2020 ballot that will reform the way business license taxes are computed in the City of Richmond. For many years, the City of Richmond has had a comparatively low business license tax schedule compared to other nearby cities like Berkeley and Oakland.

Over a decade ago, the City Council was also considering revising the tax structure, a move that requires a ballot measure. In 2008, the ascending Richmond Progressive Alliance hatched an idea to substantially raise business license tax revenue by drastically raising the taxes of a single taxpayer – Chevron. The RPA drafted a measure that actually reduced the tax on every other business but would raise Chevron’s share by as much as $21 million! The measure was approved as an initiative with the RPA circulating petitions to get it on the ballot.

The proposed new Richmond Business License Tax, Measure T ballot question, was on the November 4, 2008 ballot where it was barely approved with 51 percent of the vote.

The ballot question asked whether voters wanted to adopt a Richmond Business License Act (effective January 1, 2009) to define what a manufacturer is and to establish "a license fee equal to one fourth of one percent (0.25%) of the value of the material used in the manufacturing process during the immediately preceding calendar year for large manufacturers."
Chevron was the only business in Richmond large enough to be classified as a large manufacturer. In 2009, the Chevron refinery paid taxes that accounted for 33-50% of Richmond's $144 million 2009 budget. Under Measure T Chevron would pay as much as an additional $21 million more in taxes every year.

In order to discourage any opposition from the larger business community, the measure provided for lowering taxes on all other businesses. The strategy was, not surprisingly, successful.

In February 2009, Chevron filed a lawsuit in Contra Costa County Superior Court. They said that Measure T violates state and federal laws.

In December 2009, Contra Costa Superior Court judge David Flynn ruled that Measure T is unconstitutionally discriminatory. Flynn ruled that Measure T violates the commerce clause of the U.S. Constitution, as well as violating a California law that prohibits taxing the value of raw materials rather than the volume of raw materials. As a result of Judge Flynn's ruling, the City of Richmond was not be allowed to collect the $16 to $21 million a year that it hoped to generate under the provisions of the Measure T tax.

In March 2010, the Richmond City Council by a 4-3 vote decided to appeal that loss to a state appeals court. The city later decided to drop that appeal.

Later, because of Measure T and a separate lawsuit filed against the company to halt construction on a new refinery it had planned, Chevron executives said that they may leave Richmond.

Mayor Gayle McLaughlin was unconcerned, saying, "We have solidarity with communities in Nigeria and indigenous folks in Ecuador who are also going up against Chevron for destroying their home in the Amazon" and Richmond is "growing in its awareness of its own empowerment."

Unfortunately, the part of the ballot measure that lowered all other business license taxes remained in effect, so all Richmond businesses, including Chevron, enjoyed a nice tax break that has endured for over a decade.

For more background on this saga, see:

·  Contra Costa Times, "Fate of Richmond's Measure T headed for state court," March 10, 2010
·  New York Times, "Richmond and Chevron Choose Fork in the Road," October 31, 2009
·  Contra Costa Times, "Chevron the target of tax measure effort in Richmond," January 17, 2010
·  Contra Costa Times, "Judge declares Richmond's Measure T unconstitutional," December 17, 2009
·  Contra Costa Times, "Sit down and talk," December 29, 2009
·  The Cunningham Report, "Chevron And City Of Richmond Reach Agreement Over Taxes," May 17, 2010 (timed out)
·  Berkeley Daily Planet, "Richmond and Chevron Reach Agreement," May 10, 2010

The current move to revise the City’s business license tax started more than a year ago as an exploration of a number of revenue enhancing and cost-recovery measures to address Richmond’s looming deficits. On December 3, 2019, I introduced Item H-2, approved unanimously by the City Council.


DIRECT the city manager and staff to explore potential revenue enhancement and cost recovery measures, including researching and preparing potential ballot measures for City Council consideration, and AUTHORIZE the city manager to hire a consultant for an amount not to exceed $25,000 to analyze potential revenues and expenditures for Kids First - Office of the Mayor (Mayor Tom Butt 620-6503).

Instead of City staff doing the job they were directed by the City Council to do, they were convinced by the public employee unions to let them do it instead. After hijacking the process, The unions allied themselves with anti-business nonprofits like Alliance of Californians for Community Empowerment (ACCE), Asian Pacific Environmental Network (APEN), RYSE and Contra Costa Central Labor Council, forming a murky organization called “Lift up Richmond.” Lift up Richmond proceded to pay for and conduct polling, decide which ballot measures to pursue, and then draft the selected measure, all without any public or business Community participation.

With one week to go before the City Council’s August break and two weeks to go before the deadline for placing the measure on the ballot, and without consulting the business community at all, Lift up Richmond sprung their secretly crafted measure. Instead of being based on a proven existing business license tax ordinance like Berkeley’s or Oakland’s, it was based on a proposed ballot measure for Oakland written by Oakland radicals. As it turned out, the measure was even too radical for Oakland’s radical City Council to move forward, and it will not be on the November 2020 ballot.

On July 28 the Richmond City Council declined to move forward with the Lift up Richmond measure and instead instructed City Staff to engage with the business community and come up with something more like Berkley’s or Oakland’s ordinance by August 5, the last day the City Council could act.

This time, I hope staff was listening to the City Council.