SCOTTS VALLEY – The Scotts Valley City Council voted Wednesday to place a business tax modernization measure on the city’s November ballot.
“The reason this is being considered is because the City Council’s goal is to generate additional revenue streams to support a thriving city,” Scotts Valley City Manager Mali LaGoe said at the meeting. “We have been very focused on the long-term financial stability of the city without cutting services to the community. A decade of deferred maintenance on roads, parks and facilities has complicated our financial situation, as have labor market challenges to attract and retain employees.”
According to the meeting’s staff report, “Like many communities in California and the Bay Area, the economic fallout from the COVID-19 pandemic has exacerbated the challenge of funding the City of Scotts Valley’s critical municipal services. Without increased revenue, deep budget cuts will be required beginning in fiscal year 2025-26. These cuts would further degrade community-prioritized services, including road repairs, park maintenance, wildfire preparedness, and public safety.”
Lagoe said at the meeting that the city is projecting an annual budget deficit of $2 million, which could be addressed by modernizing the business tax, and that a number of other options are being considered.
“The city looked at a lot of different options and thought about what we could do to address this budget shortfall,” Lagoe said. “In Scotts Valley, we are a low property tax city and only receive about 6.5% of the property tax that our residents pay annually. Our sales tax was recently updated with Measure Z in 2020, and that really helped drive all of the improvements we were able to make throughout the city and with our staff and services.”
Lagoe mentioned that other strategies to increase city revenue were seriously considered, such as changing the excise tax, but staff and the city council ultimately decided on updating the business tax.
“The last update was in 1992,” Lagoe said. “Companies have paid the same amounts for the past 32 years without any increase in the cost of living or the consumer price index, which has increased 250% over that 32-year period.”
If voters pass the measure in the fall, the new tax rates would be phased in on a two-year, phased approach, with 50% of the new rates taking effect on May 1, 2025, and 100% taking effect on May 1, 2026. The initiative would increase the property tax rate on business licenses from $90 to $150 per business, with rates for larger businesses gradually increasing based on gross receipts. The initiative is expected to generate $1.1 million annually for the City of Scotts Valley.
The ballot initiative states that the tax revenue will be used to maintain city services, such as pothole and road repairs, wildfire prevention programs, park and playground maintenance, and other essential government services.
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