News

Palo Alto Chamber officially opposes hotel-tax hike

Measure on the November ballot, if passed, would increase tax from 12 percent to 14 percent

The Palo Alto Chamber of Commerce Monday took an official stance against the city's proposed hotel-tax hike, a 2 percent increase that the City Council has unanimously agreed to send to the voters in November.

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Posted by citizen
a resident of Another Palo Alto neighborhood
on Jun 23, 2014 at 4:35 pm

"somebody ought to mention fairness"

Well, in Measure D, a neighborhood asked whether it was fair for residents of a small neighborhood to be asked to essentially bear the burden of the costs through densification, traffic, and loss of safety and neighborhood character, and the Chamber sided against them. Interesting that the Chamber would forget this now that the shoe is on the other foot.

Don't worry, Chamber, the neighbors dislike this Council far more and will have a hard time trusting anything they put forward no matter the noble goals.


Like this comment
Posted by Joe
a resident of Barron Park
on Jun 23, 2014 at 6:06 pm

Elena,

The article contains a glaring error. The story says that $30 million will be obtain though COPS (Certificates of Participation):

> The city plans to leverage the new funds to obtain roughly $30 million
> through "certificates of participation," a borrowing mechanism commonly
> used by municipalities. When coupled with other funding sources, such as
> the city's Infrastructure Reserve and the Stanford University Medical
> Center development agreement, the measure would raise the amount the city
> has to spend on infrastructure to about $125.8 million.

This is not correct. The June 2 staff report to Council (see: Web Link) on page 3 says:

> $64.5 million will be financed using COP’s. The revenue streams necessary
> to support this annual debt service will be derived from new hotels tax
> receipts and the two percentage point TOT increase.

So, more than half of the City's proposed infrastructure projects will be financed by COP's, over what' likely to be 30 years. The extremely volatile transient occupancy tax (TOT) will be used to pay this debt. If the TOT isn't sufficient to cover the debt obligation, the City's general fund will be required to make up the difference.

COPs are a horrible way for Palo Alto to finance this large amount of debt. Leveraging the transient occupancy tax to support the COPs is stupid because the revenue generated can vary greatly with the condition of the economy and the area hotel market. Both are beyond the City's control.


Like this comment
Posted by Joe
a resident of Another Palo Alto neighborhood
on Jun 24, 2014 at 8:51 am

> COPs are a horrible way for Palo Alto to finance this large
> amount of debt. Leveraging the transient occupancy tax to
> support the COPs is stupid because the revenue generated can
> vary greatly with the condition of the economy and the area
> hotel market. Both are beyond the City's control.

While the premise might be true—that the revenue from the TOT can not be reliably predicted—the conclusion—that the difference between a yearly COP payment and the TOT must be made up out of the General Fund—is not necessarily true.

The City has reserves, which can be tapped for making up small, yearly, deficiencies; the TOT can be increased; new hotels will increase the TOT revenue beyond what the City has projected; and, finanally, the good citizens of Palo Alto can elect to pass a parcel tax to help pay off the COPs.

COPs are, at the least, an end-around the California Constitutional requirement that taxes be approved by a vote of the people.


Like this comment
Posted by Jason
a resident of Ventura
on Jun 24, 2014 at 10:58 am

In addition to not being fair, the tax is not guaranteed to go toward the projects listed. The ToT goes in to the general fund.

Klein is being disingenuous at best by saying that other options were not offered. There was a discussion regarding bonds and an overall sales tax increase. His response was that no tax is fair so it doesn’t matter if one is more fair or not, and that better alternatives do exist, but that the council decided they were too difficult to pass and therefore would go after the low hanging fruit. I’m sure you can check the minutes from the Chamber meeting to verify.


Like this comment
Posted by SteveU
a resident of Barron Park
on Jun 24, 2014 at 12:37 pm

SteveU is a registered user.

As others have stated. A higher Tax than surrounding areas will drive away these customers.
A side effect is this will now CREATE MORE TRAFFIC back into PA for people attending Business or visiting friends and relatives.

Another Tax without direct (payer) representation


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