Business tax proposal igniting fall candidates Business tax proposal igniting fall candidates (September 16, 2005)

Issue to come before Finance Committee

by Bill D'Agostino

An issue sharply dividing this fall's candidates for the Palo Alto City Council -- whether or not the city should begin charging a new fee on all its businesses -- is coming before the council's Finance Committee next week.

In recent years, city leaders have discussed creating a business license registry and charging all businesses a mandatory fee to be included.

Palo Alto is one of the very few cities in California without such a fee and, as a result, it doesn't know how many businesses are in the city or have a way to track those that come and go, according to city officials. It's also lacking a revenue source common to other cities.

The council could either start a "business registry fee," which would only raise enough revenue to cover the cost of generating the list, or a "business license tax," which would raise additional revenue for other city projects or services.

According to a city staff report, a registry tax would require a vote of the electorate but a registry fee would not. The report notes that a registry fee would cost businesses approximately $35 to $50 a year.

The candidates have a range of opinions on the issue. Environmental activist Peter Drekmeier felt the business license tax could be "a good source of revenue."

"If some of the funding is used to revitalize our business climate, everyone would benefit," Drekmeier noted via e-mail.

Councilwoman Yoriko Kishimoto, a Finance Committee member, feels a modest annual tax -- from $50 to $75 per business -- could give the city financial stability as other revenue sources dwindle. Retailers already paying other city fees could be exempted, she added.

Candidates favoring a business license registry include John Barton, a school board member; Karen Holman, a planning commissioner; and Roger Smith, the founder and former CEO of Silicon Valley Bank.

Barton, who's also on the board of the Palo Alto Chamber of Commerce, said the city should be friendlier to businesses. A registry would be useful to see exactly what kind of businesses are in the city, and monitor trends, he argued. But the city's planning process should be improved so it doesn't take as long for businesses to get permits, he added.

"Until that gets streamlined a business license tax is counterproductive," Barton said.

Candidate Harold "Skip" Justman, a real estate lawyer, argued against both the registry and the tax. The business community sees a revenue-neutral fee as a first step toward a larger tax, he noted.

If the city wants data about the businesses in town, Justman added, "we could get it in a voluntary, non-threatening way."

According to the staff report, other databases that gather information about city businesses "are often out of date, incomplete in terms of important information, and cumbersome to integrate."

There are five seats on the City Council up for grabs this fall, and 11 candidates. Election day is Nov. 8.

There is no recommendation from the city administrators on the issue. When they bring the matter before the Finance Committee on Tuesday night, they will merely be seeking initial direction.

"It's starting a conversation, really," Administrative Services Director Carl Yeats said.

The full council is scheduled to review the issue in January, after the election.

Staff Writer Bill D'Agostino can be e-mailed at bdagostino@paweekly.com.

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