Business and government leaders divided on Measure U
November 3, 2020
Sergio Rios, who owns Bob’s Cleaners on the 23rd Street Corridor, believes Measure U will bring in much-needed cash that can be reinvested into Richmond and bolster the city’s budget. It will help “save one of our local firehouses,” he said, adding that the revenue will help improve the community.
But Gonzalo Ochoa, who owns and operates G&O Tires on the same street, believes Measure U will tax small businesses too heavily at exactly the wrong time. “We are in the middle of a pandemic and small businesses have been hit hard,” said Ochoa, the president of the 23rd Street Merchants Association. “This tax will more than double what we will have to pay.”
Though they are neighbors, Rios and Ochoa are on opposite sides of a measure that would change how businesses are taxed and potentially bring in millions of dollars for the city.
Currently, Richmond businesses pay a business license tax in the form of a flat-rate, per-employee payroll fee. If Measure U passes, businesses would instead pay a tax based on a percentage of their gross receipts – their total annual revenue – starting July 1, 2021.
The change in the tax code could increase the city’s revenues by nearly $6 million dollars, according to a financial analysis by the city attorney. The city, according to a finance department presentation from October 6, is currently operating on a $6 million deficit.
Mayor Tom Butt said “we need the revenue,” but objects to how Measure U was prepared and presented to the city council.
At the end of 2019, city council authorized city staff to study revenue-generating measures, which included a potential overhaul of the business license tax.
“What happened was instead of our city staff doing this, they basically abdicated their responsibility and turned the whole thing over to the unions,” Butt said.
“It was like a black box. Nobody heard anything from [the unions] until the week before the deadline for putting it on the ballot,” he said. “The business community went ballistic.”
Two prominent business associations, the Richmond Chamber of Commerce and the West Contra Costa County Council of Industries, oppose Measure U. Representatives from both organizations were not available for comment.
“We cannot tax ourselves out of a financial crisis,” he said. “The only way out is to bring more cash in. We can do this by offering incentives to small and large businesses to generate business growth.”
Supporters of the measure argue that most small businesses will not experience a tax increase and that the measure primarily targets big business.
“Big companies aren’t paying their fair share,” said Chris Flink, a spokesperson for the Service Employees International Union (SEIU) Local 1021, which represents local government employees and helped craft Measure U.
Andrea Mullarkey, a Richmond resident and member of SEIU Local 1021, says the measure aims to modernize the city’s tax system, putting it on par with Berkeley and San Francisco which also use a gross receipts model.
“We’re operating on a very outdated system,” Mullarkey said. “There are a lot of ways in which our community has been defunded and underinvested in and this is one of the ways we can lift Richmond back up.”
City Councilmember Melvin Willis worked with Alliance of Californians for Community Empowerment (ACCE) in crafting the ideas behind Measure U. He worries about the city’s finances without additional revenue from the measure.
“We’ve had to cut a lot of our budgets,” he said. “We’re going to be in a position where we have to figure out how to keep our budget balanced and our services in place.”