Last week's devastating court decision striking down East Palo Alto's parcel tax presents a deep challenge to the city that remains to be resolved. The San Mateo County Superior Court found that the city's so-called "excise tax," approved by voters in 1989 and renewed in 1994, amounts to a non-ad valorem property tax. Such a tax, under the terms of Proposition 13, requires a two-thirds majority of voters, not the simple majorities East Palo Alto's tax received.
The invalidated tax brings in about $900,000 a year, representing nearly one-fifth of the city's general fund. "It could have significant impact on us, and we'll have to address it," said City Manager Jerry Groomes.
Officials will need time to evaluate their options in this case, including the possibility of an appeal. But in its stormy 12-year history, the city of East Palo Alto has stared down such grave difficulties before--including a court challenge to its very existence--and survived. We are confident it will find its way through this challenge.
Though the immediate fiscal future appears dismal, a slightly longer-term horizon is more promising. Phase I of the Gateway 101 project, which will put a major shopping center, including a Home Depot, right off 101's East Palo Alto exit, remains steadily on track, with a grand opening envisioned a year from this month.
Once in place, Gateway 101 is expected to more than compensate for any lost revenue from the tax invalidated last week. In addition to the Home Depot, the shopping center will boast an Office Depot, a Good Guys electronics store and a SportMart as well as other, smaller stores.
The premise of Gateway 101 is simple and sensible: create a "regional" shopping center that will be perceived as safe and attractive enough to draw affluent shoppers from the entire Midpeninsula, generating sales tax revenue for a cash-starved city as well as construction, retail and service jobs for its residents. East Palo Alto residents also will benefit by being able to shop conveniently within their own city borders.
But it has taken three years of planning, and considerable financial investment, to come this far. East Palo Alto's political leaders, to their credit, have for the first time united behind a major development proposal, rallying the community as well. Retailers such as Home Depot and Good Guys, eager for a location in the Palo Alto area, have invested substantial sums that will cover infrastructure and relocation costs--money that the city of East Palo Alto itself otherwise did not have.
The community's determination will be tested in the coming months as residents of 187 apartment units and 52 single-family homes will face relocation to make way for the project. This undoubtedly will cause hardship for many individuals, despite the city's elaborate relocation and compensation programs.
But this is a time for resolve, not cold feet. The city must be prepared to patiently and fairly address individual difficulties with relocation. With so much already invested and so much to gain, it is crucial to press ahead with the Gateway project through the difficult times.
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