Assessment of Incubator Program - City of San Jose

B. Revenue ImpactsRevenue impacts measure the amount of local tax revenue that incubator tenants and local graduatesare generating. In this case the revenue impact includes sales, business license, franchise and utilitytaxes. Some of these revenues are generated by the companies directly, while some are generated bytheir employees. It is also important to note that the analysis only includes revenue impacts to City ofSan Jose. Other revenues may be generated to other jurisdictions.2008 ANNUAL REVENUE IMPACTSSoftware BusinessClusterEnvironmentalBusiness ClusterSan JoseBioCenterLocalEmployeesLocal PayrollDirectBusiness TaxIndirect (Employee Based)Sales TaxFranchise &Utility TaxTotal TaxRevenues296 $32,924,448 $10,812 $102,066 $74,706 $187,58423 $1,669,427 $2,400 $5,175 $5,914 $13,48966 $6,062,952 $4,044 $18,795 $16,734 $39,573US MAC 63 $5,255,867 $4,200 $16,293 $15,848 $40,241Total Incubator 448 $45,912,694 $21,456 $142,329 $113,202 $280,887Revenue ImpactsCity of San Jose 37 2008-09 Fiscal Year TaxRevenues$12,000,000 $152,536,000 $125,311,000 $289,847,000Assumptions: Local employees include the percentage of direct and indirect jobs from the economic impact for workers at incubatortenant and graduate companies that are also living in San Jose. Based on survey data, 22 percent of SBC employees live in SanJose, 33 percent of EBC employees and 27 percent of US MAC employees. The direct business taxes are based on the city's currentbusiness license tax schedule and the number of employees at current tenant and graduate companies in San Jose. Sales taxcalculation assumes 31 percent of income is spent on taxable goods per the Consumer Expenditure Survey and shows the 1 percentof sales taxes retained by the City of San Jose. Franchise and utilities taxes are based on current per capita rate in the city.Note: the results of this ROI analysis, Sections 3.3 & 3.4 and Table 3, are quite different from theresults of the previous analysis conducted in 2004. There are a number of significant methodologicaldifferences described below. Because of the numerous differences in methodology it is not possible todirectly compare this analysis to the previous ROI analysis.This analysis includes only local economic impacts to San Jose. It does not consider the economicimpacts generated by suppliers made outside the City because the economic multipliers used here arespecific to the City of San Jose. This analysis is also limited to economic and revenue impacts ofincubator graduates that are still located in San Jose. Likewise, in terms of employee-based revenueimpacts, only impacts for employees living in San Jose are reflected in the revenue impact.This analysis accounts for the fact that about one third of graduates overall are no longer in businesses(88% of the graduates were reported by Incubator Managers as still in business, only 68% could beverified as being in business in 2008). Thus the number of jobs and other impacts created bygraduates over time is reduced. It does not appear that graduate survival rates over time were takeninto account in the previous analysis.37City of San Jose Proposed RY 2009-10 Budget, except as notedSan Jose Incubator Impact Assessment – June 2009 Page 42 of 62