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.
Though the ballot measure is billed as critical to funding a host of badly needed infrastructure improvements throughout the city, local merchants and hotel owners have spoken out against what they see as an unfair burden on their slice of the local economy.
"One can imagine the city initiating its consideration of any tax increase by asking whether it would be equitable whether the particular tax proposed would be logical in relation to the intended uses of the money, whether the people to be taxed are somehow not paying their fair share, whether the tax might result in unwanted changes in people's behavior," a statement from the Chamber reads. "The city simply is not asking those questions."
Hal Mickelson, chair of the Chamber of Commerce's Business Advocacy and Public Policy Forum, said he understands the city's infrastructure needs, but a more equitable conversation about how to address them must be had.
"I think the argument is a strong one that if you're considering a tax policy for the city, somebody ought to mention fairness," he said Monday.
Councilmember Larry Klein, who chairs the council's Infrastructure Finance Committee, said the Chamber's announcement, though "hardly a surprise," was disappointing.
"While they ... acknowledged the city's infrastructure needs, they didn't send any alternatives," he said.
"We're moving forward," he said of the bid to increase the rate from 12 percent to 14 percent. "It doesn't change anything. We're certainly hopeful (and) optimistic that the voters will see it the way the council has ... and that we'll get the increase and we'll be able to move forward with infrastructure improvements."
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.
Projects in the pipeline include a new public-safety building, the rebuilding of two outdated fire stations, new garages in downtown and on California Avenue and improvements to the city's bicycling infrastructure.
Garden Court Hotel General Manager Barbara Gross, against whom Klein argued the merits of the hotel-tax bump during a recent debate sponsored by the Chamber of Commerce, said Monday that she's "delighted" the Chamber officially opposed the increase.
"We feel that there is an inordinate amount of pressure put on the hospitality community to contribute to the general fund," she said, arguing that the increase to 14 percent has been pushed forward "without any supporting information that the hotel industry contributes to the infrastructure problem anymore than any other industry."
She also said that an increase would put hotel guests at a disadvantage, upping the "total spend" for companies paying for employees' travel accommodations.
"If corporate travel departments re-direct visitors to other cities, Palo Alto stands to lose some of their restaurant and retail business as well as the money they spend on lodging," the Chamber's statement reads.
"If the hotel business has a dent in it, then everybody who's in business in Palo Alto is at risk," Mickelson said.
But the greatest impact, Gross said, will be on "more rate-sensitive hotels" along El Camino, who could lose business to equivalent hotels south in Mountain View or north in San Mateo.
"If the TOT (transient occupancy tax) rate in Palo Alto will be 14 percent or 15 percent and the corresponding rate in Santa Clara, Sunnyvale and Mountain View is 10 percent, there's every reason to worry that corporate travel departments will notice the difference and book rooms in those other places," the Chamber's statement reads.
"By the time this measure goes before the voters, there may be studies on this issue; all we can say right now is that the assumption there will be no effect on business activity is merely wishful thinking."
Mickelson echoed the statement's conclusion, which advocates for finding a more even-handed way to support the city's infrastructure projects.
"If it is necessary to have new taxes or additional taxes, why don't we sit down and figure out something that applies more broadly and applies more equitably and doesn't single out a particular business?" Mickelson asked.
The next meeting of the Chamber of Commerce's Business Advocacy and Public Policy Forum will be Wednesday, July 9, at noon at Boston Private Bank & Trust, 420 Cowper St., Palo Alto.