SCOTTS VALLEY — The Scotts Valley City Council voted Wednesday to place a business license tax modernization measure on the city’s November ballot.
“The reason that this is being considered was the City Council has a goal to pursue additional revenue sources to support a thriving city,” said Scotts Valley City Manager Mali LaGoe at the meeting. “We have been focused heavily on the long-term financial stability of the city while not cutting services to the community. A decade of deferred maintenance on streets, parks and facilities has made our financial situation challenging as well as labor market challenges to attract and retain staff.”
According to the meeting’s staff report, “Like many California and Bay Area communities, the economic fallout from the COVID-19 pandemic has exacerbated the challenge to fund the City of Scotts Valley’s critical community services. Without increased revenue, deep budget reductions will be required starting in Fiscal Year 2025-26. These reductions would further degrade services prioritized by the community, including street repairs, park maintenance, wildfire preparedness, and public safety.”
Lagoe said in the meeting that the city is projecting an annual $2 million budget deficit, which the business license tax modernization measure could help to remedy and that a number of other options were explored.
“The city looked at lots of different options and what could we do to address this budget deficit challenge,” said Lagoe. “In Scotts Valley, we are a low property tax city receiving only about 6.5% of the property tax that our residents pay on an annual basis. Our sales tax was recently updated with Measure Z in 2020 and that has really helped spur all of the improvements that we have been able to make across the city and with our staffing and our services.”
Lagoe mentioned other strategies to increase the city’s revenue were seriously considered such as modifying its utility users tax but the staff and City Council ultimately decided to update the business license tax.
“It was last updated in 1992,” said Lagoe. “Businesses have been paying the same dollar amounts for the last 32 years with no cost of living or consumer price index increase, which over that 32-year period would have increased 250%.”
If the measure is approved by voters this fall, the new rates would be implemented in a two-year phased approach, with 50% of the new rates effective May 1, 2025, and 100% effective May 1, 2026. The initiative would raise the base business license tax rate from $90 to $150 per business and with rates increasing incrementally for larger businesses based on gross receipts. The initiative is expected to raise $1.1 million for the city of Scotts Valley annually.
The ballot initiative states that the tax revenue is intended to maintain city services, such as repairing potholes and streets, wildfire prevention programs, maintaining parks and playfields and other critical governmental services.