Public Comment

I am a member of the Housing Advisory Commission (HAC), writing to [the council] in my individual capacity.

As you know, the HAC and the City Manager have expressed conflicting views about financing the purchase of real properties at 1001, 1007, 1011 University Ave., and 1925 Ninth Street.

I am writing to suggest a "third way" -- an alternative means to pay for the purchase of these properties -- with the hopes of reconciling the competing concerns of the City Manager and the HAC.

The HAC recommended against using U1 money to purchase those properties because their purchase will not help to address the real and present housing affordability crisis anytime soon. The City Manager disagrees, pointing to the long term possibility of redeveloping the properties as housing.

(Let me be clear: I think the City was very wise to purchase these properties. My only concern is how best to pay for them.)

I propose that Berkeley institute (by ballot, in 2018) a new revenue source to fund long-term strategic acquisitions of real property: an occupational privilege tax.

As outlined below, a very modest occupational privilege tax in Berkeley could add a net revenue of $2M-$3M per year, allowing rapid repayment of the purchase of the properties around University and 9th, and establishing a perpetual revenue stream to finance future strategic purchases of real property as other exceptional opportunities arise. 

Occupational Privilege Taxes in General

A municipal occupational privilege tax is either a per-employee (employment head-count) tax, or a fractional tax on total payroll. 

Some example jurisdictions which collect such a tax: 

• Pittsburgh, PA collects a "local service tax" from employees. Employees are taxed at $52 per year, pro-rated for the number of pay periods worked. State law limits the total payment by one person to a maximum of $52.00 per year, regardless of the number of employers that person has.
• San Francisco, CA collects a "payroll tax" which in 2016 was 0.829%. Exemptions are made for small businesses.
• Aurora, CO collects an "occupational privilege tax" collecting $2 per month from each employee, and $2 per month per employee from each employer. (Thus, the tax total $4 per month per job.) For employees with more than one employer, tax is collected only for the job with the largest number of hours. Thus, the total tax per person employed in Aurora is $48 per year, $24 from an employer, and $24 from the employee.

An Occupational Privilege Tax in Berkeley

For back-of-an-envelope purposes, Berkeley has about 70,000 jobs. 

Suppose that Berkeley were to collect an Aurora-style Occupational Privilege Tax of $48. Then gross revenue from the tax would be $3.36M. 

A net income of even half as much, $1.68M, would be enough to repay the entire purchase price of the 1001, 1007, 1011 University Ave., and 1925 Ninth Street in just four years. If such a tax were passed in 2018, and began collection in FY 2019-2020, the purchase would be fully repaid by the end of 2023. 

A laughably small tax that can do a world of good

Occupational privilege taxes are easy to make fun of because, superficially, they seem a bit absurd. They are, mathematically speaking, regressive. Further, these are taxes on something normally considered desirable -- jobs. 

In Berkeley, the superficial absurdity is even greater because three of our largest employers are public entities: The University of California, the City of Berkeley, and Berkeley Unified School District. 

The key to these taxes is that -- when they are done well -- they are necessarily and permanently of small incidence. 

In Pittsburgh, it costs employees a buck a week for the privilege of working in the City limits. 

In Aurora, the rate is $2 a month for each employee and another $2 for her employer. 

As shown above, Berkeley could put that level of revenue to very good use, and in ways that can specifically benefit people who rely on jobs here. 

(San Francisco's payroll tax -- not a head tax -- works out to a much higher rate. Perhaps it is suitable for a large city with many private employers that have very high revenues. The percentage-of-payroll approach would not seem to be appropriate for Berkeley.) 

Recommendation

There are many possibilities but to name one: 

Ask the City Manager that the Annual Appropriate Ordinance will: 

1. Allocate $406,952 General Fund Excess Property Transfer Tax to the purchase for each FY 2017-18 and FY 2018-19.
2. In consultation with the HAC, consider allocating $125,000 of U1 revenue in FY 2017-18 to help repay staff time developing an Occupational Privilege Tax ballot item for the 2018 election.

Whatever exact approach is taken, it should be simple both to hedge against the possibility that a tax item will not pass at the ballot, and at the same time try to develop a tax proposal that will pass.