Palo Alto plans to beef up enforcement of new business registry

Palo Alto’s new business-registry program rolled off to a rocky start in March, with meager participation and widespread confusion about various questions on the city’s registration survey.

Despite the fact that it’s a mandatory program, only about 30 percent of the companies had registered by June 1 and only 69 percent had done so by the end of August, according to city staff.

Some business owners complained that the questions about parking allocations are too difficult to answer, particularly when shared parking arrangements and parking-district assessments are taken into consideration. Sole proprietors, meanwhile, protested the city’s requirement that they provide their Federal Employer Identification Number (FEIN). Though this is a standard feature of business registration, sole proprietors often use their social security number for their federal identification.

These obstacles notwithstanding, the program has seen a dramatic turnaround at the end of the year, with an estimated 86 percent of local businesses participating as of Nov. 15, according to the city’s Economic Development Manager Thomas Fehrenbach. And with the city preparing to launch the second phase of the program next March, officials hope to boost the participation rate even further by making survey questions clearer and increasing penalties for non-compliance.

The City Council and city planners have long lauded the business-registry program as a key tool for answering critical questions about local employees, their commuting habits and parking needs. After discussing it for several years, the council officially launched the program in March and staff has been considering refinements ever since.

Last week, the council’s Policy and Services Committee recommended a series of changes that they hope will make it clearer than ever that participation is mandatory. Currently, the city charges a $25 penalty to businesses that are 30 days late with their payments (a flat fee of $50 to cover administration expenses) and an additional penalty for those that are 60 days late. The city has also recently established an administrative penalty of $250 for businesses that don’t comply with the registry.

According to a recent staff report from the City Manager’s Office, 401 businesses were late by more than 60 days as of Nov. 15. Earlier this month, each received a letter notifying them of their tardiness and informing them that they may be subject to an administrative penalty.

Until now, staff wasn’t clear on whether to take an aggressive stance on enforcement or to base it on complaints. During its Dec. 15 discussion, the committee leaned heavily toward the former option and made a case for clearly defined penalties that would include late fees and, if necessary, referral to a collection agency.

Committee members also indicated that in future phases of the program they would be interested in tying the business registry to use permits, which local businesses are required to obtain to legally function in Palo Alto.

Councilman Pat Burt, who chairs the committee, argued that simply charging a late fee would be a “hollow enforcement mechanism” in dealing with large companies. Telling companies that they cannot legally occupy a premise without a use permit (which would not be issued if they don’t register) would, by contrast, be a “pretty big hammer.”

“All we’re saying is that we want compliance,” Burt said. “We’re not trying to put anyone out of business. We’re not trying to make money off it. We just want them to fill out the form.”

Burt also argued that if enforcement were based on complaints, there would essentially be no enforcement because they would probably be no complaints. Few people, if any, would ever go through the trouble of reporting to the city the fact that some businesses didn’t register.

“If you’ve got leaf blowers, you’ve got complaints,” Burt said. “But to look at a data list and try to find someone who didn’t register and then file a complaint? That doesn’t make good sense to me. I don’t think that’s effective.

“We really run the risk of people realizing that it’s not being enforced and not complying,” he added.

Councilman Tom DuBois also agreed with Burt that enforcement of the program should be consistent and not based on complaints.

“We’ve been very cooperative in the first year,” DuBois said. “We did a lot of encouraging. I don’t think we were very heavy-handed at all. I think we need some clear, consistent policies that we’d implement in (the second phase) and it should just be the same for everybody and not complaint based.”

Even as it looks to clamp down on the large businesses, the city also plans to back off the smallest ones. The new revisions include exemptions for very small businesses (those with fewer than one full-time employee), very small nonprofits and religious organizations with no ancillary business on site. These exemptions were proposed by the City Council in mid-September, when the council discussed the next phase of the business-registry program.

The next phase of the program is set to launch in March, when all businesses will be required to either register for business certificates or renew their existing registration. As of mid-November, about 2,355 businesses have registered out of an estimated pool of 2,955.

In discussing the next phase, the committee agreed that despite the confusion, the parking questions need to remain in the questionnaire.

DuBois noted that the goal of solving the problem of inadequate parking was one of the drivers behind the business-registration program. The city needs to keep these questions in the survey and figure out why they’re causing confusion, he said.

Councilman Marc Berman agreed and suggested that while there might be a way to word these questions more clearly, they should not be abandoned.

“I don’t want to give up on questions because they’re difficult for people to answer if those questions yield valuable information for us,” Berman said. “And I think parking is definitely one of the most valuable pieces of information that we can get.”

Councilman Cory Wolbach concurred and suggested that the questionnaire also ask businesses whether they are undertaking any transportation-demand management policies (incentives for workers to give up cars for other modes of transportation) and whether they participate in the city’s Transportation Management Association, a newly formed nonprofit that aims to shift people from cars to other modes.

Wolbach also suggested that the city consider other questions about employee numbers, including the maximum number of workers that are typically on site throughout various times of the day. He acknowledged, however, that the city should avoid making the list of questions too long.

“We want people to fill it out and not just throw up their hand in frustration,” he said. “But having a sense of the number of employees in a couple of different ways I think is important.”