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Alameda Business-to-Business Sales Tax Continues Decline

Business-to-Business sales tax revenue to the City of Alameda continued it’s quarterly year-over-year decline in the quarter ended December 31, 2007, as reported in this memo from City of Alameda staff to City Council.

Business-to-Business sales tax revenue to the City of Alameda for the quarter ended December 31, 2007 was $263,525, down 8.1% from $286,640 in the same quarter of 2006. In this memo earlier this year, city staff reported that business-to-business revenue for the prior quarter ending September 30, 2007 was also down – 7.2% – to $229,492 from $247,318 for the same quarter in 2006.

For the quarter ended December 31, 2007, the Business-to-Business sales tax revenue category ranked fourth behind the the Transportation, Food Products, and General Retail categories in generating sales tax revenue to the City of Alameda. With Park Street set to lose the automobile dealers, the City is scrambling to replace lost sales tax revenue – as much as $400,000 in some quarters from the Transportation category alone. But capturing sales tax on retail sales will hardly make up for lost Transportation category sales tax revenue – a study commissioned by Catellus for Alameda Landing estimated that taxable sales leakage in Alameda was $41 million per year. But the situs-based sales tax revenue to Alameda is only 1% – capturing all of that taxable sales leakage would mean only $410,000 in sales tax revenue to the city – just enough to cover one quarter’s worth of Transportation sales tax revenue. To generate enough retail sales tax revenue to make up for lost Transportation revenue, the City of Alameda would have to increase taxable sales spending in Alameda by four times that $41 million – to roughly $164 million on top of the existing taxable spending within Alameda. Not likely to happen.

The one realistic hope for generating sales tax revenue in Alameda is to increase the contribution of business-to-business sales tax. But as reported earlier, a majority on Alameda City Council seem hell-bent on driving out businesses like Peet’s Coffee who specifically re-located to Alameda and may contribute to our sales tax revenues.

To learn more about the challenge that municipalities face when fighting each other over sales tax revenue, read this report from the Public Policy Institute of California.

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