On Christmas Eve, Los Gatos-based Netflix was once again thrust into the national political spotlight as Kevin Spacey (as “House of Cards” character Frank Underwood) reminded the world that, “Netflix exists because of me. I put them on the map and they tried to put me in the ground,” during a fireside interview with ousted Fox News commentator Tucker Carlson.
Days earlier, the company’s name was inserted into the local political fray, during a pre-Christmas Council discussion about how to deal with a looming fiscal crisis.
“We have this behemoth of a company in our backyard that isn’t contributing very much,” said Councilmember Rob Moore, who recently marked his first year in elected office, but who—like Underwood—previously spent time in the political melee of Capitol Hill. “I’m especially sensitive to this.”
During its Dec. 19 meeting, Council was considering whether to send a consultant out to draw-up parameters for a new tax on residents.
Assistant Town Manager Katy Nomura reported an 1/8th-cent sales tax would raise $1.1 million annually; a parcel tax would bring in between $1-$4 million, suggesting the Town could charge $78.25 (on the low end) or $390.82 (on the high end) annually per parcel.
Moore wondered why local citizens would be asked to foot more of the municipality’s bills, when the Town could require blockbuster corporations like Netflix to pay more.
He said Netflix hasn’t been anywhere near as good of a corporate citizen as Apple has been to its home base of Cupertino, just a hop-skip-and-a-jump up the road.
“I went and looked at their philanthropy this past year and Apple was incredibly philanthropic,” he said. “They donated literally millions of dollars to your West Valley Community Services, your Second Harvest Food Bank.”
He added that Google has contributed tens of millions of dollars this year to Mountain View and San Jose.
“And we don’t get that from Netflix,” he said. “That’s just not their culture. That’s not the company they are.”
One of the places Moore grew up in Los Gatos, he shared, was the Charter Oaks neighborhood, right next to where Netflix is now located.
“The community members there really feel like they were sold a bill of goods when they were told that Netflix was coming into our community,” he said. “They were told, Netflix is going to generate all of this money; it’s going to bring all of these good things; it’s gonna be such a big, big player in our community. And for a short while, I think they did—with the sales tax on DVDs. And then their model changed. So, they no longer pay sales tax on those DVDs, which is essentially a cut to the money that the Town is bringing in.”
He said if Los Gatos required Netflix to pay an additional $600,000, that would represent around .002% of the firm’s annual revenue—and be like asking someone making $100,000 a year to pay $2 annually.
TheShareWay, an online directory of corporate donors, backs up Moore’s perspective about the Netflix approach.
“The short answer to the question, ‘Does Netflix donate to nonprofits?’ is no,” reads a recent blog post. “Netflix does not accept donation requests or offer any in-kind donation program. They choose to focus their resources and efforts on building new opportunities for underrepresented communities within the entertainment industry.”
The next day, Netflix would go on to post a press release about participating in the Asian New Media Summit, featuring Taiwanese filmmakers.
Moore suggested a Utility Use Tax or a Head Tax might be good ways of going about getting more out of the streamer.
“Right now, they don’t contribute anything, and I think that’s a huge, huge problem,” he said. “I have approached lots of folks at Netflix, lots of times, to try to get them to contribute literally anything—anything to any program, the schools, any service, any of our nonprofits—and they’re not interested. And that’s OK. They don’t have to be. But I think if they’re not interested, we need to compel them. Because I think that’s the role of government here.”
An inquiry to a Netflix spokesperson Dec. 26 was not immediately returned.
Councilmember Rob Rennie said a utility tax is really hard to implement.
“That was something we explored five, six years ago,” he said. “I am a little bit warm—maybe quite warm—on the idea of a commercial-only tax on the large businesses, but want to think (it) through.”
Rennie noted that the recent changes to the business-license tax actually hit-up Netflix for an extra half-million to $1 million annually.
“It was already a big number,” he said. “And we kind of worked out with them that they wouldn’t complain. We found something that worked out, and then we turn around and sneak another one in on them…maybe we do want to do that, I just wanted to point that out.”
However, Rennie’s bigger argument was that it’s unclear a tax is needed at all, because financial projections have swung around so much.
“I’m not comfortable with the parcel tax with the information we have,” he said. “It seems that we may be way over-taxing for what we need.”
Rennie says he thinks planners might’ve been too conservative (by more than $2.2 million) when forecasting property tax revenue and too liberal when plotting expenses (he pointed to a $7.9 million increase).
Vice Mayor Matthew Hudes agreed, pointing out how this year’s actuals were nowhere close to what was predicted.
“We ended up with significantly more funds than we projected,” he said. “That’s probably my biggest concern.”
Councilmember Maria Ristow said Los Gatos just spent around $270,000 to remove some eucalyptus trees, noting a tax could be a way to provide the services residents want from the Town.
“I am concerned that if we don’t do anything, we will start to feel the pinch,” she said. “That said, maybe our revenue will go up faster than our cost this year.”
She added there’s an education tax plan that residents are already going to be asked to support.
Moore didn’t find any takers for a motion that sought to examine how to force Netflix to contribute more funds.
Instead, Council voted unanimously to put-off a decision about a tax plan until more fiscal data emerges in the New Year.
