A proposal by Palo Alto officials to raise the city's tax rate may be popular with potential voters, but it is already facing stiff opposition from the city's Chamber of Commerce.
Hal Mickelson, a member of the Chamber's board of directors, told the City Council this week that the organization will be urging voters to oppose the hotel-tax increase, should it appear on the ballot. Mickelson said the Chamber's position is "primarily based on economics." If the city raises its tax rate from the current level of 12 percent to 14 or 15 percent, it would risk driving visitors, particularly corporate clients, to Menlo Park, Mountain View or other areas where the rate is lower.
Recent surveys commissioned by the city indicated that raising the hotel tax, known as "transient-occupancy tax" is by far the most popular option, with more than 70 percent of survey respondents saying they would support such a tax to fund infrastructure repairs. Though the number dipped slightly when other revenue options were brought up in the survey, it consistently remained above 62 percent.
Given the poll results and the city's long infrastructure wish list, the City Council's Infrastructure Committee recommended on Friday that the city proceed with the hotel-tax hike and directed staff to begin outreach on the potential measure, which the full City Council is expected to consider in late spring.
The city estimates that a 2 percent increase would net the city $4.6 million in annual revenues, which could be leveraged to get $64.4 million in infrastructure funding. A 3 percent increase would bring in bout $5.7 million, which could be leveraged into $79.8 million to fund projects. The city's infrastructure backlog totals about $180 million and includes a new police building, two new fire stations and a slate of improvements to the bike infrastructure.
Mickelson argued that in recommending the tax increase, the committee was largely being driven by polls. It did not consider the issue of fairness and the unintended consequences of raising the tax rate. He predicted that large employers who will move their business elsewhere to save money.
"We're all distressed to hear about candidates whose positions are driven by what their campaign pollsters and spin doctors tell them will be politically popular and take a position only when they've heard from those people."
"I'd say with the utmost respect that this is kind of what's going on here."
Mickelson also criticized City Manager James Keene's suggestion during Friday's meeting of the Infrastructure Committee that the council first consider its various funding sources before proceeding with identifying the particular projects each should fund. At that meeting, Keene observed that the city has a "very long list of potential needs," with a price tag that is "more than any particular funding measure that we can advance right now."
Mickelson said the city, in proceeding with consideration of a tax, isn't asking the kinds of questions it should be considering: whether the tax would be fair, whether it's logical in relation to use and whether the people who would be paying the tax are currently paying their fair share. Rather, it is proceeding with the tax simply because it was told by a consultant the tax would pass.
Keene responded Monday that he had never suggested raising money without considering what the money would be used for. His Friday recommendation, he said, was meant to assist the council in managing its complex conversation over infrastructure improvements.
"I'd never make a recommendation that could at all be seen to look at any tax increase as something casual or something that should not be specifically dedicated to particular purpose," Keene said. "I think that's very clear our of the entire emphasis the council has put forward in the last three t ofour years on infrastructure."