CUPERTINO -- The Cupertino City Council voted unanimously Tuesday to reduce the annual tax break it gives Apple (AAPL) -- America's most valuable company by market capitalization, with a net income last year of $41.7 billion -- by 15 percent. Having wrung that concession from its richest corporate resident, the council then voted unanimously to give its final blessing to Apple's proposed new headquarters. The spaceship-shaped building has now officially landed.
Back in 1997, when Apple was on the verge of collapse, the city agreed to return 50 percent of the taxes generated each year from Apple's business-to-business sales as a way to help maintain the company's health and, more importantly, its Cupertino address.
Under the new agreement, that rebate has been reduced to 35 percent, which based on 2012 tax revenues would mean the residents of Cupertino will pay Apple -- which recorded net sales of $156.5 billion during the last fiscal year, and has a cash hoard estimated at $100 billion -- only $4.4 million to stick around. It would have been $6.2 million under the old agreement. That's an extra $1.8 million for Cupertino, a city with only $51.4 million in projected general fund revenues this year, according to figures reported in the Los Angeles Times.
"There will be short-term and long-term impacts from this new development,'' Mayor Orrin Mahoney said Tuesday. "And as part of our negotiations, this change was just one way that Apple could continue to help us out in the long-term. This will give us some additional revenue, which will be nice to have.''
The City Council was so eager to formalize its deal with Apple that, upon realizing no one from the public was rising in resistance to the plan, the mayor blurted, "OK, we can vote," then quickly added, "Oops." With that, the clerk said the motion had passed unanimously, with Councilman Rod Sinks recusing himself, only to have to repeat the result when the council realized it had voted before officially proposing the ordinance.
"We're really proud that you decided to stay here in Cupertino," Councilman Gilbert Wong said, addressing Dan Whisenhunt, Apple's head of real estate and facilities. He then recalled that he was mayor when Steve Jobs, the company's co-founder, proposed building the new headquarters in what turned out to be one of his final public appearances before dying of pancreatic cancer.
The nearly $2 million in Apple sales tax that Cupertino will now get to keep its hands on is only a small part of a list of goodies that the company's presence provides the town every year, said analyst Tim Bajarin with Creative Strategies.
"Apple pours money back into the Cupertino economy in a lot of ways,'' he said. "And many of the city's other businesses also gain from Apple and its employees being there and taking advantage of the city's stores and restaurants. So while this extra money is certainly nice, Cupertino already benefits a great deal from having Apple in town.''
The approval of the project by the City Council on Tuesday was mostly a formality, since Apple's proposed new 2.8-million-square-foot headquarters was officially given the green light last month. The building, shaped like a Ferris wheel and sheathed entirely in curved glass, will be loaded with environmentally friendly features. Apple has said it expects to break ground on the project this year -- Mahoney said he saw heavy equipment moving on the site Tuesday -- and to open it in mid-2016.
Contact Patrick May at 408-920-5689 or follow him at Twitter.com/patmaymerc
April 2006: Apple begins buying land in the area.
June 7, 2011: Steve Jobs presents project to City Council.
Aug. 9, 2011: Apple submits proposal documents.
June 4: Apple releases Economic Impact Report.
June 6: City releases draft environmental impact report; public comment period opens.
July 22: Last day of public comment period for draft EIR
Sept. 23: Final EIR available
Sept. 26: Environmental Review Committee Meeting
Oct. 1: Joint City Council/Planning Commission Study Session
Oct. 2: Planning Commission recommends approval.
Oct. 15: City Council will take an initial vote on approval.
Nov. 19: City Council's final vote