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Uploaded: Monday, June 22, 2009, 7:12 AM

Palo Alto faces surge of opposition to new tax
City Council scheduled to discuss new business-license tax tonight; busineses urge caution

Listen to the Palo Alto City Council meeting live when the council is in session (usually Monday nights at 7 p.m.) via the KZSU Webcast.

by Gennady Sheyner
Palo Alto Online Staff

Posted by pat, a resident of the Midtown neighborhood, on Jun 22, 2009 at 8:58 am

Why the big rush, since this won't take effect until 2011?

And why is there still talk of creating a database/registry: "The chamber also recommended creating a registry of local businesses ...."?

From a Palo Alto Daily Article, May 1 2007 titled Business district fees face challenge: Sherry Bijan, executive director of the business improvement district, said the group's greatest accomplishment this year was the completion of its Web site, which includes a comprehensive database of all downtown businesses "that serves as a built-in resource for everyone."

Can it be possible that neither the city nor the Chamber of Commerce has a database of all businesses? If not, how is the city calculating estimated business tax revenue?

Posted by dapaschultz@earthlink.net, a resident of the Palo Verde neighborhood, on Jun 22, 2009 at 10:16 am

With reference to the proposed business tax.

I would definitely vote against any business tax if it was put on the ballot.

Any tax that would discourage Palo Alto's business community is setting

a bad precedent. Dick Schultz

Posted by Karen White, a resident of the Duveneck/St. Francis neighborhood, on Jun 22, 2009 at 10:25 am

It's time for Palo Alto to adopt revenue measures that nearly all other cities use. But before approving a business license tax measure, it seems critical to fully analyze the real estate transfer (document transfer) tax as an additional or alternative means to produce revenue. Good information facilitates good decisions.

The real estate transfer tax would seem to have minimal impact on current Palo Altans and might thus be most strongly supported on Election Day. It would make sense to conduct a randomized poll of likely voters to gauge support for this and business license tax alternatives before putting any taxing method on the ballot.

If a business license tax measure is put forward, it should be based on employee count. Out-of-town employees who work in Palo Alto impact our services and infrastructure on a per-capita basis; so the nexus to a per-capita tax is clear. Further, employees in Palo Alto impact our services and infrastructure whether they work for a for-profit or a non-profit, such as Stanford. It is important for the tax base to include all workers, regardless of their employer's status in this regard. And with a broader tax base -- including workers at for-profit and non-profit institutions -- the tax rate can be lower.

As a practical matter, the business community earlier endorsed an employee-count model. It seems important to have business support for a measure to be approved on Election Day and for long-term compliance once the election is over. But before the City Council finalizes any decision on revenue-generating alternatives, the real estate (document) transfer tax should be fully analyzed.

Posted by Mary Carlstead, a resident of the Duveneck/St. Francis neighborhood, on Jun 22, 2009 at 10:30 am

Our dentist said he would have no choice but to raise fees. Few people have dental insurance- and Medicare doesn't pay dental either. Ditto the shoe repair and barber - they both said prices would go up if they have to. The plumbing company? Yes. The home-owned cleaners? Yes. What about the PA Clinic? Stanford Hospital? The auto repair? The Shopping Center? McDonald's? (What a bookkeeping nightmare that would be). Next thing you know it will be the summer lemonade stands. The Weekly is running a poll - and it's 80%-20% against.

This will be a TAX on residents and non-resident customers who even now are going elsewhere. City Council, LISTEN to what we are saying. THIS is "civic engagement" loud and clear., and it is not costing $6,000 a month to Peak Democracy. It's free on Town Square.

Posted by Jimmy, a resident of the Downtown North neighborhood, on Jun 22, 2009 at 10:46 am

I wish Palo Alto would adopt revenue generating ideas like other cities! Just not a business tax of any kind! A gross recepit would force businesses to raise prices, making Palo Altoans to seek cheaper services in other cities. An employee count tax would cause layoffs at a time of skyrocketing unemployment. Instead, Palo Alto should PROMOTE businesses, like supporting Stanford Shopping Center's planned expansion, passing Alma Plaza development, promote the businesses and lower taxes by buying Palo Alto! Through the generation of more SALES TAX, everyone wins!

Posted by energyman, a resident of the Midtown neighborhood, on Jun 22, 2009 at 10:59 am

A business tax based on gross receipts is not likely to get compliance by small businesses, especially those under 10 employees, seasonal businesses, and businesses that employ part-time or temporary employees. Will the City employ auditors to check time-card records? At what cost? At Palo Alto's gold plated compensation levels, an auditor should cost the city around $150K per year, minimum. Add for an assistant, an admin, a clerk, all of whom eat into the net "take" of any tax scheme based on number of employees. Ditto for a gross receipts based tax scheme.

How about independent consultants, attorneys, etc. who generate substantial revenue from fees but only hire independent contractors for admin, bookkeeping, etc?

Posted by Rachel, a resident of the Midtown neighborhood, on Jun 22, 2009 at 11:07 am

While an additional tax of fee might be painful to businesses as well as the people who purchase goods or services from them, if we as a community want the services we need from our city government, we must find the money to pay for them. Many of us can afford to pay a bit more for services from a dentist or from a retail business. I think we have to stop this mantra of "no more taxes" and recognize that public services are crucial and we as a community need to pay for them with some combination of fees and taxes.

Posted by Mike-Crescent Park, a resident of the Crescent Park neighborhood, on Jun 22, 2009 at 11:28 am
Mike-Crescent Park is a member (registered user) of Palo Alto Online

The real problem is that if Palo Alto doesn't change its spending habit, all the taxes that can be thought of in the future will not be enough.

The various individual city supplied services that are treasured by individual citizens have the same root expense-highly compensated workers on the city payroll, with pension and other benefits that must be paid for.

We have a spending problem. Interesting how above a poster suggests another tax that will not affect 'current' Palo Altans so it can't be bad.

Maybe we should emulate many valley companies annual employee performance evaluation-have Palo Alto residents rank each current city service and eliminate the resulting bottom 10% (or more) of them until we balance the budget.

Posted by Incredulous, a resident of the Old Palo Alto neighborhood, on Jun 22, 2009 at 12:03 pm

"The real estate transfer tax would seem to have minimal impact on current Palo Altans"

Yes. That's exactly what we need. Yet another reason on top of Prop 13 to watch all our neighborhoods age until oblivion. The next thing people will want are paths for golf-carts.

Palo Alto. Your retirement community.

I agree with Mike. We have a spending problem, not a tax revenue problem.

Posted by fireman, a resident of another community, on Jun 22, 2009 at 12:10 pm

Mike, So simple. Like counting the chickens before you let the wolf take care of them. Wolfs can't count and do not like that idea. wonder why?

Posted by Marvin, a resident of the Charleston Gardens neighborhood, on Jun 22, 2009 at 12:12 pm

Our city council has rarely seen an expenditure it did not like (saying no may upset people and we cannot have that), nor have they ever said no to giving extravagant bonuses to city employees for just doing their job. They are too wrapped up in their "green" world, too busy talking about 'civic engagement" for 2 years and recently spending meeting after meeting apologizing to Pat Briggs, while passing the buck to employees no longer here to defend themselves.

Posted by Carroll Harrington, a resident of the Community Center neighborhood, on Jun 22, 2009 at 1:02 pm

I have said this before and will say it again: I urge the Palo Alto City Council and staff to model a task force or advisory group based on my experience with two similar groups that dealt with complex issues facing the city:

1) The Future of Single Family Neighborhoods Advisory Group in 2001, which developed the Individual Review Guidelines for two-story rebuilt and remodeled homes. We included a "sunset" clause in our recommendations and consequently, these Guidelines are reviewed periodically and have been quite successful.

2) The Reusable Bag Task Force, which met from April to September 2008 with representatives from Palo Alto grocery stores and drugstores, plus the California Grocery Store Association, American Chemical Council, Chamber of Commerce and private citizens. Phil Bobel, Manager Environmental Compliance Division, fairly and thoroughly facilitated the almost biweekly meetings of this diverse group as they dealt with this multifaceted issue.

Along these lines, the City Council appointed the Compost Task Force, and it, too, is handling a complicated topic. Ditto for the Website Committee, whicd has met for more than 700 hours, while the City has met with the business community only about 30 hours!

I urge the City Council to send this proposal back to staff with a strong recommendation to work with the business community to fully discuss this issue.

The City Council has civic engagement as one of its top four priorities...here is another opportunity to do just that!

Posted by Paula Sandas, PA Chamber CEO, a resident of Another Palo Alto neighborhood, on Jun 22, 2009 at 1:10 pm

I'd like to clarify: The working group mentioned in paragraph 5 of this story was NOT a formal Chamber committee, but a small group of business representatives, both Chamber members and non-Chamber members. The group came together with City leaders to discuss and share ideas on the Business License Tax. The group did not vote on the BLT tax methodology; the meetings were informal, they were NOT negotiations. The group was queried that, if there were to be a BLT, if given the option, which methodology would be preferable for both SMALL and LARGE businesses. Each member of the informal group indicated that the "per employee" methodology was preferable. The great thing to come out of the informal meetings was the proof that open, honest discussion can be effective. More business people would have liked to have been in on the discussions.

The Chamber has consistently opposed the Gross Receipts Tax and has championed the formation of a Blue Ribbon Task Force to discuss the BLT. The Council has refused a Blue Ribbon Task Force because it would delay bringing the BLT to the ballot for another 2 years and the City needs the capital now. At the moment, there is limited support in the community for a BLT and great opposition to it. Will the City have to spend $100K to put this on the ballot and lose the BLT in order to establish a Blue Ribbon Task Force that will work out the details for the ballot in 2 years? Remember the Storm Drain situation? Only after a Blue Ribbon Task Force came together did the Storm Drain Fee get the support it needed to finally pass.

The Chamber advocates for the immediate establishment of a Business Registry for all Palo Alto businesses. This is a revenue neutral option that will let the City gather the most complete data on how many and what types of businesses are in our city. From there, a more informed discussion can ensue. Let's support our local businesses in this difficult economy. Let's start with a registry and a Blue Ribbon Task force and formally work TOGETHER.

Posted by Sid, a resident of the Professorville neighborhood, on Jun 22, 2009 at 2:00 pm

I have yet to see any number for proposed taxes. How much tax are we talking about for a small business?

Posted by chris, a resident of the University South neighborhood, on Jun 22, 2009 at 2:12 pm

What happened with all of the people complaining about too many jobs in Palo Alto? The city wanted Stanford to build 600 units because it thought the new hospital would add jobs.

Now we hear people wailing about a tax on employees because it will cause jobs to go down.

It's pretty clear Palo Alto is schizophrenic. How about a city-wide group therapy session to work these issues? Does Palo Alto have too many jobs or not enough jobs?

Posted by Resident, a resident of the Community Center neighborhood, on Jun 22, 2009 at 3:41 pm

This proposed business tax will not only force businesses to move out of PA, but will discourage any new businesses from moving into PA.

Posted by Sylvia, a resident of the Midtown neighborhood, on Jun 22, 2009 at 5:52 pm

Resident: Where do you think these "forced out" businesses are going to relocate? Every city on the Peninsula EXCEPT Palo Alto has a business license tax.

Posted by Marvin, a resident of the Old Palo Alto neighborhood, on Jun 22, 2009 at 10:23 pm

In the worst economic downturn since the great depression, the city council has decided to increases taxes on businesses. What planet do they live on? I am reminded of a question recently asked of me by one of my very liberal Palo Alto friends (are there any other kind of Palo Alto friends?). The conversation centered on the state's budget problems and the objections to increasing taxes during this current serious recession. My liberal friend asked "how are you going to give a rebirth to the state?" (if we don't increase taxes.)

Liberal politicians like our city counsel, and folks like this friend, believe it is the state that creates wealth. They are intentionally oblivious as to how wealth (and state's revenue) is created. Hence, the rush to increase taxes on businesses during the worst recession since 1930. Beam me up Scotty.

P.S. We will forever owe Councilman Klein our gratitude - he's the author of our utility user's tax that severely punishes us all as energy prices escalate.

Posted by Old Palo Alto, a resident of the Old Palo Alto neighborhood, on Jun 22, 2009 at 10:52 pm

What recourse would the city have if businesses banned together and refused to pay? I don't think the city would have any recourse other than imposing fines/penalties, which business could refuse to pay as well.

Posted by Paul, a resident of the Downtown North neighborhood, on Jun 23, 2009 at 8:18 pm

Boy, don't you just know every rational business in town will spend tens of thousands of dollars to relocate to another town with a business license fee rather than pay an few hundred dollar business license fee in Palo Alto.

Posted by Anna, a resident of the Downtown North neighborhood, on Jun 24, 2009 at 5:03 am

This is a little off-topic, but Marvin brought up Councilman Klein and the Utility Users Tax. It's been around so long that most people don't remember the debate surrounding its passage. It was very controversial at the time, and received a bare majority (I think around 52%) from voters. A big inducement for many to vote for it was that the City Council at the time promised that the issue would be revisited within a decade and that it would be put up for re-approval by the voters.

Naturally they conveniently forgot this promise when 10 years rolled around. Now everyone assumes that this tax is permanent and incorporated into the city revenue projections as such.

This proves the adage that there's nothing so permanent as a temporary tax.

And Marvin is right: Klein was on the council at the time and a big pusher of the tax. ... Proving that politicians - even at the local level - are big liars. (Does that really need proof?)