49921 / 65.8% Yes votes ...... 25891 / 34.2% No votes

See Also: Index of all Measures

This measure would also clarify that businesses with administrative headquarters in the City of Oakland pay taxes based on all business activity conducted within the City of Oakland.

First Part: The first part of this measure will amend Section 5.04.390 of the Oakland Municipal Code, which presently taxes manufacturers differently, depending on whether they are located within the City of Oakland or outside it. This measure will tax all manufacturers the same way.

Presently, manufacturers that are located within the City of Oakland have the ability to deduct from their tax base the value of raw materials used in the manufacturing process. On the other hand, these manufacturers are taxed on all their sales, and not on just those sales that are made within the City.

The opposite is true for manufacturers that are located outside the City of Oakland. They do not have the ability to deduct from their tax base the value of raw materials used in the manufacturing process. However, they are taxed on only the sales made within the City of Oakland.

Second Part: The second part of this measure will amend section 5.04.400 of the Oakland Municipal Code. This amendment will clarify that businesses with administrative headquarters in the City of Oakland will be taxed for each business activity taking place at the administrative headquarters location.

Presently, some businesses that have administrative headquarters in the City of Oakland are not taxed on those activities that are other than administrative activities. For example, some businesses that engage in both administrative and revenue-producing activities do not pay taxes on the revenue-producing activities if the number of employees who perform administrative activities exceed those who perform revenue-producing activities. This amendment will provide that all revenue-producing activities will be taxed.

FISCAL IMPACT

Based on data available within City offices, we estimate that the City will lose approximately $947,000 in revenue annually through passage of the first part of the measure. However, it is difficult to make such estimates with precision, and the actual results may vary from our estimates.

There was not enough data available for us to estimate the impact of the passage of the second part of the measure.

s/ROLAND E. SMITH, CPA City Auditor

If adopted, this measure would amend two provisions of the business tax ordinance to ensure that businesses receive the same tax treatment regardless of their location in or outside of the City. The United States and California Constitutions require that cities impose the same tax treatment on businesses regardless of their location inside or outside of a city.

First, the measure would amend the City's manufacturing tax (Municipal Code Section 5.04.390). Under the current ordinance, local manufacturers may deduct the value of raw materials from their gross receipts. The amendments would extend such deduction to all businesses engaged in manufacturing regardless of business location. This would reduce eligible manufacturers' tax liability. The amendments also would clarify that Oakland manufacturers are not subject to taxation on business activities conducted outside of Oakland.

Second, this measure would amend Oakland's administrative headquarters tax (Municipal Code Section 5.04.400). Currently, some businesses with administrative headquarters in Oakland may pay taxes based only on payroll and may not pay gross receipts taxes on revenue from some of their other business activities at the administrative headquarters location. The amendment would clarify that businesses with administrative headquarters in the City of Oakland will pay taxes on all business activities at the administrative headquarters.

s/JOHN RUSSO City Attorney

This rewriting of our business tax laws results in a modest decrease for some companies, but a slight increase for a few corporations. Because of these very minor changes, state law under the Howard Jarvis Initiative requires Oakland voter approval.

Please vote YES on JJ to keep essentially the same level of revenue coming into the city and thereby avoid even further cuts in city programs. In these hard economic times, the city is facing deficits and cannot afford to have this measure defeated.

It is hard to explain but simply put, we had to rewrite our business tax law under pressure of a lawsuit and the only way we could accomplish this is to put a revised version of our business tax law on the ballot for your approval.

Please vote YES on JJ. It is important for our city.

s/JERRY BROWN Mayor of Oakland
s/HENRY L. GARDNER Former City Manager

(No arguments against Measure JJ were submitted)

WHEREAS, the City Council of the City of Oakland desires to amend Section 5.04.400 of the Oakland Municipal Code in order to clarify that businesses with Administrative Headquarters in the City of Oakland will be taxed for each business activity taking place at the Administrative Headquarters location; and

NOW, THEREFORE, BE IT RESOLVED:
That the City Council of the City of Oakland does hereby submit to the voters at the November 5, 2002 special election the text of the proposed ordinance, which shall be as follows:

SECTION 1. The Municipal Code is hereby amended to add, delete, or modify sections as set forth below (section numbers and titles are indicated in bold type; additions are indicated by underscoring and deletions are indicated by strike through type; portions of the regulations not cited or not shown in underscoring or strike-through type are not changed).

SECTION 2. Section 5.04.390 of the Municipal Code is hereby amended in its entirety to read as follows:

5.04.390 Manufacturer.
A. Every person manufacturing or processing in Oakland any goods, wares, merchandise, articles or commodities at a location within or outside of the City of Oakland and selling such items at retail and/or wholesale in the City of Oakland shall pay an annual business tax of sixty dollars ($60.00) per year or fractional part thereof for the first fifty thousand dollars ($50,000.00) or less of gross receipts less the value of raw materials, plus one dollar and twenty cents ($1.20) for each additional one thousand dollars ($1,000.00) of gross receipts less the value of raw materials or fractional part thereof in excess of fifty thousand dollars ($50,000.00), or the value of the partially completed product at the time it enters the manufacturing process within the city.

B. Subject to the Apportionment provisions set forth in Section 5.04.570 of this Municipal Code, whenever the process of manufacturing process goods, wares, merchandise, articles or commodities at a location within the City of Oakland does not result in a finished product, or its results in a finished product, but does not result in gross receipts, the following alternate method of calculating business tax under this section shall be used:

Each person taxed under this subsection shall pay a business tax of sixty dollars ($60.00) per year or fractional part thereof for the first fifty thousand dollars ($50,000.00) or less of all expenses incurred in the manufacturing process at the business location within the city, plus one dollar and twenty cents ($1.20) for each additional one thousand dollars ($1,000.00) or fractional part thereof in excess of fifty thousand dollars ($50,000.00) on the total of all expenses incurred in the manufacturing process at the business location within the city, including, but not limited to payroll, utilities, depreciation, and rent.

SECTION 3. Section 5.04.400 of the Municipal Code is hereby amended to read as follows:

5.04.400 Administrative headquarters.
A. Every person conducting or carrying on the operation of an administrative headquarters shall pay a business tax of sixty dollars ($60.00) per year or fractional part thereof for the first fifty thousand dollars ($50,000.00) or less of gross payroll plus, one dollar and twenty cents ($1.20) for each additional one thousand dollars ($1,000.00) of gross payroll or fractional part thereof in excess of fifty thousand dollars ($50,000.00), of all persons employed by the business at such administrative headquarters.

B. "Administrative headquarters" means a location where the principal business transacted consists of providing administrative or management related services such as, but not limited to, recordkeeping, data processing, research, advertising, public relations, personnel administration, legal and corporate headquarters services, to other locations where the operations of the same business are conducted which lead more directly to the production of gross receipts.

C. A business shall be taxed as an administrative headquarters if the number of employees engaged in administrative activities exceeds the total number of employees engaged in activities at the same location which would be otherwise taxable under this chapter. The gross payroll on which the business tax is to be computed shall include those employees engaged in those activities otherwise taxable under this chapter.

D.C. "Gross payroll" means and includes the total gross amount of all salaries, wages, commissions, bonuses, or other money payment of any kind which a person received from or is entitled to receive from or be given credit for by his or her employer for any work done or personal service rendered in any trade, occupation or profession, including any kind of deductions before "take home" pay is received; but shall not mean or include amounts paid to traveling salespersons or other workers as allowance or reimbursement for traveling or other expenses incurred in the business of the employer, except to the excess of such amounts over such expenses actually incurred and accounted for by the employee to the employer.