Richmond auto dealers plead with Council to reduce massive tax hike

Richmond auto dealers plead with City Council to reduce massive tax hike
Hilltop Ford, 3280 Auto Mall Plaza, Richmond (Map data ©2019 Google)

A new CBS News Bay Area report about a massive business tax increase in Richmond that threatens to drive businesses and jobs from the city is turning heads throughout the Bay Area.

Starting July 1, according to CBS, Hilltop Ford will see its business license fee increase by a whopping 7,000 percent — from $3,000 last year to $210,000 per year. Meanwhile, the business license fee for Hilltop Toyota will skyrocket by 12,000 percent, the report states.

It’s because of Measure U, a new tax increase on businesses that was supported by City Councilmembers who are also members of the Richmond Progressive Alliance (RPA), and approved by voters in November 2020, despite numerous warnings from the city’s business community that its impacts haven’t been adequately studied.

The CBS report focused on impacts to auto dealers, which are “pleading with the city to lower the rates, which they can legally do, but so far, the council members aligned with the Richmond Progressive Alliance are refusing to budge.”

Measure U has changed the business license tax from one based upon number of employees to one based upon gross receipts. The new tax rate progressively increases for businesses with gross receipts over $250,000 and is expected to add $3.2 million in new revenue to city coffers.  But, as Council of Industries Executive Director Katrinka Ruk stated prior to Measure U’s passage, “Gross receipts and net profits are two different things.”

While an auto dealer may have relatively high gross receipts, that doesn’t necessarily mean the dealership is raking in profits, Hilltop Ford GM Leon Thomas points out to CBS

“The problem is, even though a car may sell for $40,000, Thomas will make less than $1,000 on the deal, but he’s taxed on the total sales price, so he said Richmond will be taking about 40 percent of his profit,” the CBS report states.

After Measure U passed, Richmond Mayor Tom Butt, who voted against the measure, warned it would inflict a “double-whammy” for businesses already struggling from impacts of the pandemic.

In a statement to the Standard Tuesday, James Lee, president of the Chamber of Commerce, said city staff and some of the city councilmembers fail to realize that “imposing outrageous business taxes on larger businesses such as auto dealers will affect the small businesses.”

“When my son turned 18, I took him to Hilltop to buy his first car,” Lee said. “After purchasing the car, I took my family to a local restaurant and shopped while the vehicle was being prepared to drive off the lot. If the auto dealers leave the city of Richmond, so will others.”

Lee said more research and collaboration with the business community is needed to determine the impacts of the current tax structure to the city’s economy. Along with risking losing businesses over this increase, the city may also have a difficult time convincing other businesses to relocate to Richmond.

“One of the frustrating factors in working with the staff on Measure U was that they kept saying, ‘we don’t have data,'” Lee said. “We need more data on how the tax increase will affect small to midsize businesses and how the increase to larger businesses will affect the smaller businesses’ ecosystem.  We need more time to collaborate with different industries and develop a solution to increase revenue for the city and strengthen our local economy.”