Palo Alto looks to narrow down its infrastructure priorities

As Palo Alto marches toward placing a hotel-tax increase on the November ballot, city officials are still trying to figure out exactly what to buy with the revenues, should the measure prevail.

A committee of City Council members will consider on Tuesday morning a staff recommendation for spending the roughly $30.8 million that the city expects to brining in by leveraging a 2 percent increase in hotel taxes. The amount is a reduction from the $46.2 million that the council’s Infrastructure Committee was projecting to get from the tax increase in March, when it recommended a 3 percent jump from the current rate of 12 percent.

The revenues from the new tax would supplement nearly $90 million from other sources that the city has earmarked for infrastructure fixes. This includes more than $12 million from recent and projected budget surpluses, $8 million from the city’s Infrastructure Reserve and more than $30 million from the city’s development agreement with Stanford University Medical Center, a deal that includes $22.1 million for “infrastructure” and $12.3 million for “sustainability.” Revenues from new hotels (even without the tax increase) could also be leveraged into $33.6 million through certificates of participation, a long=terdebt-financing mechanism.

Overall, the city expects to have about $118 million on hand for infrastructure projects if voters pass the measure in November. Exactly how this money will be spent is the question that the Infrastructure Committee will take up Tuesday night.

The largest and most urgent item on the city’s shopping list remains a new public-safety building that would replace the cramped and seismically unsound police headquarters at City Hall. With an estimated cost of $57 million, the project represents roughly half of the city’s infrastructure budget. The council plans to pursue this project, as well as the rehabilitation of an outdated fire station near Rinconada Park, even if the tax measure doesn’t pass. Council members are also designating a new downtown garage, with an estimated price tag of $13 million, as a top priority that should be addressed as soon as possible.

Other projects leave room for debate. With the city looking to trim about $15 million from its initial infrastructure budget, City Manager James Keene recommends in a new report reducing funding for Byxbee Park improvements from $3.6 million to $2.8 million and to trim the allotment for bike projects from $21 million to $20 million. And while the city still plans to rehabilitate the outmoded fire station near Rinconada Park, staff is now recommending deferring to a future date the proposed modernization of the Mitchell Park fire station, a $7.5 million project.

Keene is also recommending that the council remove from the infrastructure menu $4.6 million that was previously allocated for “parks catch-up.” This work, like the landscaping upgrades at Byxbee Park, “can be either delayed or funded within the city’s capital plan,” he wrote.

His recommendation preserves other infrastructure projects previously endorsed by the committee, including a $1.7 million contribution toward a new bike bridge over U.S. Highway 101, $7.5 million for improvements to Arastradero Road and $9.6 million for a new garage around California Avenue.

If voters approve raising the hotel-tax rate from 12 percent to 14 percent, Palo Alto would join San Francisco and Oakland in having among the highest rates in the Bay Area. Most surrounding cities, including East Palo Alto, Menlo Park and Redwood City, have 12 percent rates. Mountain View’s is 10 percent.

The council had also considered in March raising the hotel-tax rate by 3 percent, but members ultimately agreed by a 5-4 vote to pursue the smaller increase.