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Adopt a resolution calling an election, requesting consolidation with the November 3, 2026, Statewide General Election, and requesting election services from the Registrar of Voters to submit to County voters a proposed ordinance amending Article XII of Chapter 11 of the Solano County Code to modernize and expand the County's business license tax structure for commercial energy production, resource extraction facilities, and data centers and increase business license tax rates (4/5 vote required); Delegate authority to the Registrar of Voters, County Administrator and County Counsel to take all actions necessary to place the measure on the November 3, 2026, ballot
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Published Notice Required? Yes ___ No __X__
Public Hearing Required? Yes ___ No __X__
RECOMMENDATION:
The Department of Resource Management recommends the Board of Supervisors:
1. Adopt a resolution calling an election, requesting consolidation with the November 3, 2026, Statewide General Election, and requesting election services from the Registrar of Voters to submit to County voters a proposed ordinance amending Article XII of Chapter 11 of the Solano County Code to modernize and expand the County's business license tax structure for commercial energy production, resource extraction facilities, and data centers and increase business license tax rates (4/5 vote required); and
2. Delegate authority to the Registrar of Voters, County Administrator and County Counsel to take all actions necessary to place the measure on the November 3, 2026, ballot.
SUMMARY:
On June 9 and June 23, 2026, the Board considered proposed amendments to the County’s business license tax ordinance. At the June 23 meeting, the Board directed staff to further evaluate an appropriate methodology and tax rate for data centers while maintaining a single ballot measure. Staff now recommends imposing a business license tax on data centers based on gross floor area at a rate of $5.00 per square foot. Gross floor area would include equipment pad areas occupied by ancillary behind-the-meter battery energy storage systems and natural gas turbines supporting operation of the data center. All other components of the proposed ordinance remain as previously presented.
FISCAL IMPACT:
Staff estimates the proposed ordinance would generate approximately $353,000 in annual revenue. The estimate is based on existing commercial energy production facilities that are subject to the business license tax. This estimate excludes revenue from future commercial solar energy systems, front-of-the-meter battery energy storage systems, natural gas extraction facilities, and data centers because no additional facilities are currently operating in the unincorporated county. Actual revenues would depend upon future development activity within the unincorporated area.
The costs associated with preparing this agenda item are nominal and are included in the Department’s FY2026/27 Working Budget. The estimated cost for a countywide ballot measure is approximately $138,651.
DISCUSSION:
County staff presented the proposed business license tax measure to the Board on June 9, 2026. Following Board direction, staff evaluated revised tax rates, annual inflation adjustments, and the inclusion of data centers. Staff returned to the Board on June 23, 2026, at which time the Board directed staff to further evaluate an appropriate methodology for calculating a business license tax on data centers while maintaining a single ballot measure.
Since the June 23, 2026 Board meeting, staff evaluated several topics, which can generally be grouped into three categories. First, whether it would be appropriate to consider air rights in calculating a business license tax on data centers. Second, whether it would be appropriate to include behind-the-meter BESS and natural gas turbines used to operate a data center in the square footage to calculate the business license tax. Third, whether a reasonable business license tax rate can be identified based on what could be generated if the County imposed a utility users’ tax (UUT) that would generate revenue from data centers.
Air Rights
Staff did not identify any California or national examples of a local business license tax that calculates liability using air rights or airspace. Business license taxes are intended to measure the privilege of conducting business through an objective, administratively practical methodology. Business license taxes may be structured as a flat tax, gross receipts tax, per-employee tax, or per-unit tax tied to a measurable business activity. These tax structures provide a clear nexus between the tax and the privilege of conducting business within the jurisdiction. By contrast, a tax based on air rights or airspace is not directly tied to operation of the business and would be difficult to define and administer. For instance, air rights vary depending on property ownership, Federal Aviation Administration jurisdiction, zoning limitations, building height restrictions, avigation easements and other regulatory constraints. Staff therefore do not recommend using air rights or airspace because they are not directly tied to measurable business activity and would be difficult to administer.
Inclusion of Behind-the-Meter BESS and Natural Gas Turbines supporting Data Centers
Staff evaluated whether it would be appropriate to include in the business license tax calculation any ancillary behind-the-meter BESS and natural gas turbines located on the same legal parcel and which support use of the data center. Because these facilities are integral components of the data center campus and exist solely to support operation of the data center, staff recommends including their developed equipment pad areas within the gross floor area used to calculate the business license tax. Square footage is proposed rather than a per unit cost to be consistent across site development.
Staff have proposed revisions to the definitions of Data Center and Gross Floor Area in the ordinance in accordance with this recommendation. This approach provides a single, consistent methodology for calculating the tax based on the total developed footprint supporting the data center.
Data Center Tax Rate
Staff initially proposed a $0.12 per square foot tax on data centers as a very conservative tax rate based on similar business license taxes. In response to direction from the Board, staff evaluated a revised tax rate using utility-related revenues in comparable jurisdictions as a reference point.
In general, a UUT is a tax imposed on the consumption of utility services. A county may levy a UUT on the consumption of electricity, gas, water, sewer, telephone, telegraph and cable television services in the unincorporated area. Cities also utilize UUTs and locally the City of Fairfield imposes a 2% utility users’ tax, Benicia imposes a 4% utility users’ tax, and Vallejo imposes a 7.5% utility users’ tax. For data centers, an electric UUT would likely provide the most direct method for capturing revenue associated with high electricity consumption. Accordingly, staff reviewed jurisdictions where utility-related revenues provide insight into the magnitude of revenues that large data centers may generate.
Staff evaluated the City of Santa Clara because it hosts approximately 55 operating data centers and publicly reports information regarding the revenues associated with those facilities through Silicon Valley Power (SVP), its municipal electric utility. Although Santa Clara does not impose a traditional UUT on data centers, the City receives General Fund revenue through SVP equal to approximately five percent of gross utility receipts. A commissioned study prepared for the City found that, across Santa Clara's existing data center portfolio, each megawatt (MW) of electrical demand generates approximately $52,000 annually in General Fund revenue.
For illustrative purposes, staff evaluated a hypothetical data center consisting of approximately 396,914 square feet of gross floor area with an estimated electrical demand of 77 MW. Applying Santa Clara's annual estimate to that hypothetical facility suggests General Fund revenues of $4 million annually. This example is intended solely to illustrate the order of magnitude of revenues associated with a large data center.
Staff does not recommend attempting to replicate Santa Clara's gross receipts revenue model because that revenue is derived through its ownership and operation of a municipal electric utility, a revenue structure that is not available to Solano County. Instead, staff recommends a business license tax based on gross floor area. Gross floor area is objective, readily verified from approved construction plans, and provides a predictable annual tax obligation without requiring ongoing monitoring of electrical consumption or operating characteristics.
Based on the comparative information reviewed, staff recommends a business license tax of $5.00 per square foot of gross floor area. This rate reflects a policy judgment that balances revenue generation, predictability for operators, administrative efficiency, and the County's economic competitiveness. Santa Clara's experience and local utility users tax rates were considered as illustrative comparisons to provide context regarding the potential magnitude of revenues but were not used as direct mathematical equivalents in establishing the recommended rate.
Re Legal Framework and Ballot Requirements:
The attached resolution would call an election and submit the proposed ordinance to the voters pursuant to Government Code section 53724, Revenue and Taxation Code section 7284, and Elections Code section 9140. Government Code section 53724 authorizes submission of a county general tax ordinance to the voters. Consistent with the current tax structure, revenues generated by the business license tax are deposited into the County General Fund and may be used for any lawful governmental purpose. Because the measure would amend a general tax, voter approval requires a simple majority vote pursuant to Article XIII C of the California Constitution (Proposition 218).
The measure would apply to facilities located within the unincorporated area of Solano County. Because the tax is a county general tax, all registered voters within Solano County would be eligible to vote on the measure, regardless of whether they reside within a city or the unincorporated area.
The resolution proposes the following ballot question:
"Shall Solano County update its business license tax to raise the commercial wind turbine rate ($0.00003 to $0.00008 per kWh) and extend the tax to commercial solar energy systems ($0.00008 per kWh), battery energy storage systems ($1.50 per MWh), natural gas extraction facilities ($0.30 per McF), and data centers ($5.00 per building square foot), with annual inflation adjustments, generating approximately an additional $353,000 annually, until ended by the voters?"
To qualify for the November 3, 2026 General Election ballot, the Board must approve ballot placement no later than August 4, 2026.
Public Outreach:
Staff will prepare informational materials regarding the proposed measure and election process. All materials and communications prepared using County resources will be reviewed by County Counsel to ensure compliance with applicable laws prohibiting the use of public resources for campaign advocacy. The County’s communications will be limited to factual and informational content and will not advocate for approval or rejection of the measure.
Environmental Review:
The proposed ordinance amendments are exempt from the California Environmental Quality Act (CEQA) Public Resources Code §21000, et seq., pursuant to CEQA Guidelines (Cal. Code Regs., tit. 14, §15000 et seq.) Section 15378(b)(4) and Section 15061(b)(3) (Common Sense Exemption).
ALTERNATIVES:
The Board could choose not to adopt the resolution and instead direct staff to evaluate alternative tax structures or tax rates, or return with a revised proposal. The existing business license tax structure would remain in effect, and the County would not realize the additional revenues associated with the proposed amendments unless approved through a future ballot measure.
OTHER AGENCY INVOLVEMENT:
None.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION