Emeryville Council backs study of business‑license modernization and parcel tax as part of 2026 revenue options

Emeryville — City staff and outside consultants laid out multiple options Tuesday for placing one or more revenue measures on the November 2026 ballot to address a projected structural general‑fund shortfall of about $8 million to $13 million over the next five years.

The presentation, led by Finance Director Sharon Fredriksen with consultants from RGS and HDL, showed the city’s business license tax currently raises about $6.6 million (roughly 14% of the general fund) under a $1 per $1,000 gross‑receipts formula and that the ordinance dates to 1984. Consultants modeled two primary modernization approaches: a single flat gross‑receipts rate for all businesses and a variable gross‑receipts model that groups businesses into five categories. The variable model produced larger revenue estimates in the staff scenarios — ranging from roughly $3.3 million up to $6.7 million in additional revenue under higher‑rate scenarios — while the flat single rate produced more modest gains in the staff examples.

The nut‑graf: the council directed staff to pursue further development of a business‑license modernization option (staff and advisory committees favored a variable gross‑receipts model) and to continue analysis of a parcel tax with a residential component in the $75–$100 range, while deferring additional discussion of sales tax, utility tax, and hotel‑tax increases until later outreach and polling results are available.

Most of the council’s questions focused on legal risk, fairness and compliance. Council member Preyfors asked whether variable tiers and rate differences could invite legal challenges; City Attorney Kennedy cautioned that detailed legal advice could not be given in open session but said jurisdictions commonly adopt distinctions so long as they are supported by a plausible rational basis. "Several cities do use different rate structures," Kennedy said, adding that staff and consultants had modeled lower rates for businesses that generate sales tax revenue as a rationale for distinctions.

Eric Myers of HDL told the council the financial models use the current list of 3,190 registered businesses and include a roughly 10% uncertainty discount to account for business churn. "Historically, in California, we have not seen a lot of businesses move at the margins because of a business license tax," Myers said, while acknowledging that broader state and regional tax burdens could change that pattern.

On compliance and audit work, Fredriksen said recent discovery and compliance audits produced about $1 million in additional business‑tax revenue. HDL staff said some of that revenue reflects businesses already brought into compliance; they also noted it is difficult to forecast the number of unregistered businesses the audits might discover in future cycles.

Staff also presented parcel‑tax options — flat per parcel, per building square foot, or land‑use based — and emphasized that a parcel tax would require a two‑thirds voter approval. Modeled parcel tax examples showed that a $721 per‑parcel flat rate would generate approximately $3.5 million annually; staff also showed a per‑square‑foot alternative (about $0.19 to $0.26 per building square foot depending on the revenue target). Other options presented included incremental transaction/use (sales) tax increases (a quarter‑cent could yield roughly $2.0–$2.5 million annually), a modest hotel‑tax (transient occupancy tax) increase (a two‑percentage‑point change was estimated at roughly $900,000 in additional revenue), and utility user tax adjustments (a two‑point increase from 5.5% to 7.5% was modeled at about $1.6 million).

Two advisory bodies — the Budget Advisory Committee and the Budget & Governance Committee — reviewed the proposals earlier and recommended support for the variable gross‑receipts business‑license modernization and for a residential parcel tax around $75–$100, with conditional support for targeted hotel tax increases and recommendation against higher sales or utility taxes.

Council member Solomon said he supported pursuing business‑license modernization and a parcel tax but cautioned that the modeled options would not fully close the projected deficit. "The budget deficit is $8 to $13 million, and these are the maximum I wrote down was 6.5 million," Solomon said, adding that the city may need a combination of measures or to revisit options later.

Staff asked for preliminary direction so they could proceed with community outreach, polling and ordinance drafting to meet county ballot‑filing deadlines. Fredriksen said that, if directed, staff would begin outreach with the Budget Advisory Committee, the Budget & Governance Committee, the Economic Development Advisory Committee, and the business community and return with draft ballot language in spring–summer 2026.

What happened next: Council members expressed general support for staff proceeding with variable gross‑receipts business‑license modernization and work on a parcel tax while asking for more detailed compliance and equity analysis and robust community outreach. No final ballot measures were adopted at the meeting; staff said further work would return to the council after outreach and polling.