Will Emeryville Join the Rest of the Bay Area? Will Taxes Reflect Our Worth?

How Much Should We Charge Business to Operate in Our Town? 

Should There Be a Rational Basis?

Opinion
The City Council has been looking into raising revenue from lots of different sources recently after Sacramento two years took away the Emeryville Redevelopment Agency, formerly City Hall's main funding source.  Emeryville is left with drastically reduced revenue but the same old list of required maintenance expenditures and discretionary capital improvement projects.  It's caused the Council to think outside the box as far as new revenue is concerned.  What was formerly off limits for this Council majority; making businesses pay more including looking at raising developer impact fees the City charges, is now openly being bandied about.
These public investigations into our revenue streams has laid bare just how low taxes are for Emeryville business.  When it comes to revenue, Emeryville stands alone; business here pays far less than in neighboring cities.  It's the same story across the board: from the hotel occupancy tax to the business tax rate to the real estate transfer tax to impact fees and to outright give-a-ways like the business tax cap which allows the largest corporations in town to pay taxes at a much lower rate than smaller businesses do.  It's sort of a Robbin Hood in reverse thing going on.

"We should charge what 

the market will bare"

Make no mistake, this 'lower by orders of magnitude' taxation culture at City Hall is not an accident, it's not an oversight; it represents the will of this Council majority....at least up until now.
But besides being plain old bad public policy, this low tax thinking has no rational basis.  For rationality to be at play, there needs to be some evidentiary demonstrability in effect.  It needs to be measurable.  But there seems only to be vague and unsubstantiated ideas of the ambiguous benefits of low taxation for business driving the three person majority.  Republican Party folklore about Adam Smith's invisible hand seems to be the animate force guiding this.  The only thing missing are the normally ubiquitous 'trickle down' and 'all boats rising' memes being trotted out.

There's simply no good reason to charge so little.
A rational basis argument for how we can set business taxes in Emeryville would take into account what the prevailing rates are plus the value specifically we represent for business.  Value can be defined in numerous ways like location, access, crime, resident demographics, government services and the local neighborhood desirability in terms of restaurants and parks and the like.  The knee-jerk 'we must keep business taxes low' mantra takes none of this into account.  To set business taxes with these factors accounted for would be to levy taxes based on what the market will bare.  It represents a rational basis that businesses understands.  It's a basis we understand.  To put it simply, we should charge what we can get.  To charge any less is to give a gift of public money to business that's not warranted.

We charge far less than what Oakland charges.  There's something obviously wrong with that.

Another rational basis would be to take into account our 'positives' but charge a little less than what the market will bare.  This argument makes sense if we're trying to pump up the business sector in our town due to some previous deficit.  But it's hard to make this argument in Emeryville, being so laser focused on attracting business as we have been for the last 25 years or so.  The deficit we face can be found in livability, not attracting business.  Among the many metrics, Emeryville is below our neighbors in acres of parkland per resident; far below.  That's a manifestation of a livability deficit.

But what's impossible is to make a rational argument for what the Council majority has been doing until now: giving away the store.  Just watch Council Members Nora Davis and Kurt Brinkman especially.  They arrive at each Council meeting with a barely hidden agenda of 'how can I serve Emeryville business today?'  At almost every turn they devalue the commons to the benefit of business, especially big business. But the loss of funds at City Hall is getting existentially hazardous. The new paradigm of post Redevelopment is something they're clearly struggling with.  When the Council voted to look into raising the transfer tax on March 18, Mr Brinkman almost went out in a blaze of glory; voting NO to even consider allowing Emeryville residents to vote on the idea in November.  But the specter of a 4-1 vote on the Council dais, with Kurt Brinkman standing alone against democracy with this vote as he faces the electorate this fall, brought him back.  Councilwoman Davis to her credit seems to be taking the financial threat at City Hall more seriously; she's been a bit more pragmatic.

However, while we're busy comparing Emeryville's low business tax guiding principles to Adam Smith and what's going on in red states nation wide, we should consider how American worker's dramatic productivity gains over the last 30 years have not been matched in wage gains.  Indeed, wages have been flat or even falling despite labor's prodigious productivity rises.  We're still the wealthiest nation on Earth but the plutocrats have pocketed all the gains....done by design.
It's like what's happened to Emeryville during the same time period; as our desirability here dramatically increases, City Hall is stuck.  We're not benefiting; we can't seem to enjoy anything that we've worked for.  All the gains go to businesses...again, done by design.

It would appear a new majority on the Council is rising up and they're not willing to see the town sink.  They're at least now talking about securing enough revenue to keep us afloat.  So that's encouraging.  But as far as employing a rational basis for determining how to set business taxes in Emeryville, that would require a leopard changing its spots.  Rationality in business tax policy here is going to have to wait.  It's going to have to be imposed by us...at the ballot box...this November.  Kurt Brinkman will be seeking re-election and the idea of raising real estate transfer taxes will also be on the ballot.  We're going to have to make the right decisions amid the coming flurry of propaganda from the Chamber of Commerce.

Measure D: The End Game Of Broken Politics

Measure D: Brought To You By The Calculating Cynicism Of Nora Davis (& Kurt Brinkman)

Opinion

In post John LaCoste Emeryville history, the modern era as it were, never has so much cynical political calculating been embodied in one voter initiative as this year's shameful Measure D.  What we have here is the unseemly spectacle of two council members, Nora Davis and Kurt Brinkman swooping in to stop the people of Emeryville from deciding for themselves, the wisdom of continuing a tax cap on the largest businesses, a gift so to speak to the largest corporations and unprecedented in the Bay Area.  

Never mind the arguable prudence of eliminating this regressive cap in this time of harsh budget austerity, these two elected council members have disenfranchised the people of Emeryville.

Earlier in the year, citizens started a petition drive to place this business tax cap on the November ballot.  The city council caught wind of it and they voted 5-0 to place it on the ballot themselves, saving the citizens all the work getting the proper number of signatures.  Nora Davis and Kurt Brinkman, would be populists, voted with their colleagues: the people should be allowed to vote on this cap for themselves they said with their vote.
But that was then.

After this council vote to enfranchise the people, Pixar, an Emeryville corporation that benefits hugely from the tax cap and upset at the prospects of paying the same rate as small business in town,  called secret closed door meetings with city staff and council members.  Something was said to the staff and attending council members...precisely what, we'll never know, but we've got a pretty good idea.

Later, after it was too late for citizens to re-start a petition drive about eliminating the cap, Nora Davis and Kurt Brinkman took it upon themselves to make a motion to void the council's earlier 5-0 vote and make a new vote to raise the business tax cap a little bit but to keep the cap on the books.  The other three council members went along, subverting their earlier vote to let the people decide for themselves. 

And Measure D was born.

This reversal by Nora Davis and Kurt Brinkman, with help from their council colleagues (and cheered on by the Chamber of Commerce) tells us who really matters in Emeryville; it's the large corporations.  And that's what this betrayal to the people says in a loud and clear voice.

So it's to remain high taxes for small business and low taxes for big business in Emeryville and democracy be damned, at least until we overrun the ideologues Nora Davis and Kurt Brinkman.   These two should be taken to task for this outrageous disenfranchisement, Republican in its cynical subversion of the people's interests.  

When your local city council members start acting like the most extreme tea party wing of the Republican Party in Washington, you know you've got a problem in your town.  No one should listen ever again to these two crow about how we need to all tighten our belts and how we'll have to learn to live with less owing to the budget crisis...these two have lost all credibility on that score.

Council Treachery On Business Tax Cap

Councilman Kurt Brinkman on business tax 

council double-cross:

"NO COMMENT"

The city council promised to let the people decide on the November ballot about our big business friendly tax cap but then reneged after they killed a grassroots citizen drive to rescind the unfair tax cap.  The council has taken away the people's right to decide for themselves about this corporate give-a-way tax scheme.

Kurt Brinkman:
Emeryville citizens
must not be allowed
to vote on this.

On July 19th, Council members Kurt Brinkman and Nora Davis convinced their colleagues to reverse a unanimous council vote made in May, to allow Emeryville citizens to decide for themselves about the infamous business tax cap.  The cap, a codified limit that means the most companies pay in tax annually to the city is $117,000 or .08% on the maximum gross receipts of $146 million, is unprecedented in the Bay Area and leaves the smaller businesses in town on the hook for a much higher rate.

The previous unanimous council vote on May 17th, stopped an incipient citizen's petition drive to get the issue before Emeryville voters in November lead by Emeryville resident Scott Donahue and others.  Mr Donahue noted after the unanimous council vote, that because the council had agreed to take up the cause and place the issue on the ballot by fiat, there was no need to continue with the citizen's petition and he withdrew the petition drive.  However, two months later when it was too late to restart the petition drive, Mr Brinkman and Ms Davis moved to reverse the previous council decision and disenfranchise the citizens in November.

Nora Davis (undated photo):
Glad to have derailed
the citizen's drive to 

rescind the tax cap.

Council members Brinkman and Davis never explained publicly why they reversed themselves and why they took away the citizens right to decide for themselves.  Councilman Kurt Brinkman sat down with the Tattler recently to tell his side:

Tattler:  Why do you think it's important for Emeryville to keep the business tax cap?

Brinkman: "Like it or not, businesses shift revenue to avoid taxes.  It happens all the time.  From a revenue standpoint, if we were to get rid of the cap entirely, we might lose everything".

Tattler:  Meaning these corporations might be incensed by such a move and seek their revenge by ordering their accountants to show no taxable Emeryville income?

Brinkman:  "It could happen".

Tattler:  Nevertheless, Emeryville is the only city in the Bay Area with a tax cap on business.  Additionally, the tax rate for receipts under the cap and subject to levy is lower than its neighbors.  If you're concerned about scaring away business, why can't we raise revenue like every other city by getting rid of the cap and then simply keep the tax rate (now at .08%) lower than our neighbors?  Can't we have a low flat rate for everybody and attract and retain business?

Brinkman:  "It's important to separate from other cities.  We need to make sure Emeryville remains a marketable, viable city"

Tattler:  Right now the business tax cap only effects two or three businesses, Pixar especially.  Aren't you concerned that Pixar pays such a pittance with the cap, essentially a much lower tax rate than other businesses in town?

Brinkman:  "Well, if we got rid of the cap it would really have no effect on Pixar, they only paid $8000 last year to Emeryville".

Tattler:  So to protect $8000 from Pixar, you're going to keep this regressive cap in effect?  We're going to get even less from them if we get rid of the cap?  What about other large corporations in town that reap huge benefits from the cap like Novartis?

Brinkman:  "Look, the cap is necessary"

Tattler:  Previously you voted to let the people decide about this.  So why now reverse yourself? Why not let the people decide?  Why did you and your colleague Nora Davis lead a move to disenfranchise the people?

Brinkman:  "No comment".

Scott Donahue, the initiator of the withdrawn citizen's petition on the business tax cap agreed with Mr Brinkman that Pixar, for one, has gotten very creative with sheltering their money from City Hall's grasp.  Hinting that an audit of Pixar's books might be in order, Mr Donahue said, "Multi-national corporations are always going to find a way to realize their revenue where ever it is most beneficial to them. So a cap on Pixar will probably not have much effect on them, as they demonstrated with their $108,000 tax refund they recently got from the city".
However, Mr Donahue said that the city shouldn't allow itself to be so manipulated and any creative fiscal legerdemain by Pixar should not be held up as a reason to give up on tax fairness; to wit he noted, "We ought not have a special law to the benefit of only one or two corporations in town, it's essentially a handout to multi-billion dollar corporations that's totally unnecessary.  The rest of Emeryville's businesses are in effect subsidizing these few large corporations".

Pixar Warns Council: Don't Let The Rabble Take Over

Business Tax To Be Decided By Emeryville Voters

Pixar Invokes Specter Of Rancor With Business Tax Ballot Initiative

Last night, the Emeryville city council ignored the pleadings of Pixar and instructed the city attorney to begin preparations for a November ballot initiative so that voters may decide if business taxes should be raised.  In a stunning 5-0 vote that featured two reversals, the council moved forward two issues for voter's consideration: a raising of the business tax rate and a removal of the infamous business tax cap, a tax scheme designed to protect the largest corporation's upper gross receipts from taxation.

City Council: Unintelligent & Irresponsible
Before the council vote, Pixar corporate attorney Anna Shimko told the assembled throng that chaos would result if the people were so empowered.  Ms Shimko warned of a coming season of "rancor" from the business community as the election draws close.  She reminded the council of their duty to not let Emeryville descend in a baleful and chaotic state where the rabble would decide such important public policy as business taxes, "I know you to be a responsible and intelligent council" she intoned.

The Pixar Attorney offered the council a way out in the form of a delayed vote until the next council meeting so that the business community could give the council additional information and properly apprise the citizens of the disastrous results of a business tax hike in the interim.  The opportunity was seized upon by Mayor Nora Davis and Councilman Kurt Brinkman, "I think we could have one more meeting" Ms Davis said.  Council members Jennifer West and Ruth Atkin rebuffed however, "This has been in the works for over a year" Ms West said.

The council decided to take up the issue of a tax waiver for the smallest businesses under $100,000 gross receipts at a later council meeting.  Ms West noted that tax lowering can be done by a direct council vote and a plebiscite is not needed.

The people of Emeryville will be asked in November if the business tax cap, unprecedented in the Bay Area and extant for 18 years should be lifted.  On the ballot also will be a provision for voters to decide if the business tax rate should be raised from .08% to .1%, a rate still lower than our neighbors Berkeley or Oakland.  Council member West held out for a tax rate the same as Oakland, at .12%, noting four other taxes imposed on businesses there would still keep Emeryville the lowest in the area but her motion died for lack of a second.

Business License Tax: Fortnight of Back Room Deals

Residents Must Wait Two Weeks For A Decision

Will The Council Let The Citizens Decide On Taxes?  

Last night the Emeryville city council voted to postpone for two weeks, a decision over the idea of a business license tax ballot initiative so Pixar/Disney and other large corporations can have time to negotiate more advantageous back room deals with the city staff.  At Pixar's request, the 4-1 (Nora Davis dissenting) council vote gives Emeryville's largest corporations two weeks longer, after more than a year of wrangling about the issue, to lobby the staff regarding the tax raising plan.

At issue is whether the residents should be allowed to vote in November on the infamous business license tax cap; whether it should be done away with and whether the tax rate should be raised.  The tax as it is now puts a cap on taxes owed for any gross income over $146 million and is unique in the entire Bay Area.  Formerly, the city had estimated a revenue enhancement of millions of dollars annually if the cap were to be raised.
The cap now effects only three businesses in town , including Pixar.  The highly regressive tax cap has the net effect of making the small businesses in town pay much more in taxes than the largest businesses.  The existing tax rate, above and beyond the cap, is .08%; also lower than what the neighboring cities charge.

Pixar Threatens City

Should Emeryville's taxes be similar to
other Bay Area cities?
Should the people decide?

Pixar's attorney last night warned the council to "slow down" and urged them not to make a decision yet, raising concerns that the whole tax increase ballot initiative is rash and needs to be more though out, regardless of the previous year of debate about the issue in the council chambers.  Further, the specter of litigation was raised by Pixar when council members were warned that they should take a step back "before this thing becomes divisive".

'Oops, We Made A Mistake!'
Eyebrows were raised when Karan Reid, the city's chief financial officer revised the previous estimations for the city's take from a license cap lifting from millions of dollars annually to now only $152,000 per year.  This is a result of the largest businesses revisions in their reports to the city.  Apparently, now Pixar has found many exemptions and deductions to their gross income, lowering dramatically the amount they would owe in the event that the residents vote to lift the cap.  Pixar, being one of three businesses effected by the tax cap lift would presumably only owe some $50,000 according to the newly revised numbers.  One resident noted last night however if the amount Pixar would owe is now so small, why are they fighting lifting the cap so vigorously?

The Chamber of Commerce announced they are not supportive of allowing the residents to vote on the issue.  Chamber president Bob Canter told the council not to let the rabble put Emeryville at risk.  Emeryville needs to keep everything just as it is to keep and attract business to Emeryville, he said.

The issue is now to be voted on May 17th by the council so Pixar has time to push their interests in the back rooms at City Hall.

Emeryville's Assessed Valuation Percentage Dropping

New School Bond Possibly In Jeopardy:

Emeryille Corporations All Say They're Not Worth Much

Emeryville businesses spend a lot of effort to tell people how valuable they are and about how they contribute to our town especially when they want something from the taxpayers but recently they've begun playing a different tune; now they're busy devaluing their businesses, saying they're not really worth all that much after all.  When it comes time to pony up the taxes, suddenly it seems Emeryville's much touted mighty business force is sort of anaemic and sickly.

Seen better days: now they're worth

$90 million less.

The Alameda County Appeals Board has been receiving many requests from Emeryville businesses for significant reductions in the assessed value of their properties according to a report from City Hall.  The report is alarming in the depth of the devaluation being claimed.   Councilwoman Jennifer West noted with some concern, "Every year there are appeals to the County for reductions, but this year the percentage has definitely gone up".  Emeryville, it should be noted must continue to show at least a 4% growth in assessed valuation city-wide or the newly issued Measure J school bonds are in grave danger.

The average appeal rate this year is 25% according to Ms West but some businesses are claiming a much greater loss of value.  Hardage Hotels, owners of the Woodfin claims a 41% reduction on property the county says is worth $42 million making approximately a $20 million contested discrepancy.  Hilton Hotel claims a 54% reduction in value.  Even Disney Pixar with its string of Oscar rated films including tonight's 'Toy Story 3' is claiming a sizable loss in value.

The problem it would seem is that there's no downside for corporations to claim a loss in value; something Ms West noted, "There's no incentive to not appeal these taxes" as she puts it.

Wareham's proposed 'Transit Center':  Even with the approval

to build, they claim their value has dropped $124 million.

It remains to be seen how much reduced value Alameda County will grant these businesses but it should be noted that Emeryville will receive significantly less tax on these properties in future years if these appeals succeed.  Further, the payback of the $95 million Measure J school bond passed by voters last November would dramatically increase if Emeryville's aggregate assessed valuation dips below 4%.  In that case, taxpayers will be on the hook for much more money spread over more time.  If the assessed value stays above 4%, the best case scenario,  then the payback amount for the $95 million bond would be nearly $400 million over 50 years.

Novartis campus: almost worthless.
Brother, can you spare a dime?

Pixar has requested an assessed valuation reduction of $94 million while the report assumes a $30 million reduction based on their stated 2011-2012 revenue.  Novartis requests a $211 million reduction with a $58 million assumption from revenue and Wareham Development requests $124 million with a $41 million assumption from revenue.

The February 15 letter accompanying the report from Emeryville's Chief Financial Officer, Karan Reid noted that as a result of the businesses assessments downward adjustments anticipated, the amount of tax allocation bonds the city could issue has "decreased dramatically".

Emeryville Hilton:  chicken feed...
decidedly down market.

  The report can be viewed here:

http://emeryville.granicus.com/GeneratedAgendaViewer.php?view_id=2&event_id=39