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About this blog: So much is right — and wrong — about what is happening in Palo Alto. In this blog I want to discuss all that with you. I know many residents care about this town, and I want to explore our collective interests to help ...  (More)

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Palo Alto’s business tax: A forever tax that we will be paying for

Uploaded: Jun 7, 2022
“So, what if Palo Alto imposes a business tax on all retail businesses in this city? That’s fine with me if they pay money to run Palo Alto – as long as I don’t have to. And it also means the chances of my paying more taxes in the future will be reduced.”

That’s the sentiment of some residents – maybe you -- about the proposed new business tax for Palo Alto, to be voted on in the November election.

Are you sure you won’t be paying more? Well, you’re wrong.

Why? Because once businesses get their new tax bills, some in the five-and-six-digit range, they will inevitably pass on these extra costs to consumers – us. They will raise the prices of their goods and services because if they don’t, they will lose money – and may be forced to close down or move out of Palo Alto.

I came across a report from the city council’s Finance Committee of probable tax amounts that will be levied on businesses, if this measure is approved by voters. While the amounts are still fluid, depending on whether the city charges a 10- or 12-cents per-square-foot fee, the proposed tax would make the first 5,000 square feet of every business largely exempt, subject only to a $50 annual fee. But businesses with more than 5,000 square-feet would be a different animal, subject to a major year-after-year payout.

And how much will that tax cost various businesses? A projected $165,600 levy for Nieman Marcus and a tax of $313,920 tax charge for Macy’s -- both in the Stanford Shopping Center, which is in Palo Alto. Macy’s has shuttered several of its stores around the country in recent years.

While start-up groceries would be exempted, established ones currently are on the taxable list. Estimated yearly taxes: Country Sun, $7,200; Grocery Outlet, $15,624; Whole Foods, $17,971; Safeway, $33,574; the Market at Edgewood, $30,672, and Mollie Stones, $88,645.

Need I mention that grocery prices around the country have escalated the past two months, which is causing a lot of consumer concern and grocery owners a great deal of angst, since the profit levels for groceries range from 1 to 3 percent.

Of course, your grocery bills will ratchet up further and further if the business tax is approved.

City Manager Ed Shikada estimates the business tax will bring in between $22 and $26 million to city coffers annually, depending on the square-footage charge. Keep in mind this city has an annual budget of nearly $1 billion.

Shikada also announced last week that the five biggest businesses in the city would pay 20 percent of the total business tax revenue, thus creating a bigger burden for the medium-sized businesses. Perhaps this is because the city manager fears that bigger businesses may move out. While his report did not name the top five, Hewlett-Packard and VMware are included. However, by comparison, in Mountain View, the five biggest businesses pay 77 percent of the business taxes, while in East Palo Alto, they pay 79 percent, according to the Daily Post.

Mountain View has a business license, based on the number of employees. But businesses pay he most annually – Google, $3,528,095; Microsoft, $160,445; Intuit, $222,320. Obviously, Mountain View’s philosophy of relying on the big companies to pay the most differs from what Shikada is proposing. Mountain View raises about $5 million a year from business taxes. As I said, Palo Alto would raise an estimated $22 to $26 million.

Menlo Park has a business license tax, based on gross receipts, and the maximum amount a company with up to $30 million in gross receipts is $8,000 per year.

Palo Alto City Council will discuss its business tax proposal this coming Monday, June 13, and a final vote as to whether it will be put on the ballot will occur at the council’s June 20th meeting.

Six of the council members have continually – and pretty steadfastly – supported imposing a business tax, along with City Manager Shikada, probably because the tax means they will have more to spend on anything they want. Only council member Greg Tanaka has been adamantly opposed.

At first, the city council was unsure of how the money they collected would be spent. After residents demanded to know how is this money going to be used, the council came up with a big wish-list. That’s been refined now to six categories – grade separation and rail safety; affordable housing and homelessness; public safety; improvements to University and California avenues; public safety, and downtown improvements. No details of how the money will be spent to achieve those goals, but it‘s a great sales pitch list to convince people that somehow new tax will provide solutions to all these issues. Don’t be fooled.

Remember, this tax will not be earmarked and revenues will go into the general fund, so in the future, it can be spent anyway the city manager and council want – including more money for city employees and a hike in their handsome pensions.

I would hope many of you will present your views on this proposed business tax to the council at next Monday’s meeting, June 13. You can participate via Zoom. (Check the city’s web site for specifics.) If adopted, it will affect how much you will spend on groceries and retail products for years to come, since this tax has no end date, no sunset. It will be a forever tax in our fair city,

Community.
What is it worth to you?

Comments

 +   25 people like this
Posted by I+miss+my+small+town+feel, a resident of another community,
on Jun 7, 2022 at 12:20 pm

I+miss+my+small+town+feel is a registered user.

They could exempt low margin grocery stores since high rent and low profits have already caused us to lose "The Milk Pail Market" and "Sprouts". They could also exempt ALL retail since non-food retail brings in sales tax which goes up with more traffic. What you really want to do is target the tax on office work that brings in high paying workers who live outside the area and don't contribute much but push housing prices higher to avoid long commutes.


 +   2 people like this
Posted by Raul Mendoza, a resident of Ventura,
on Jun 7, 2022 at 2:45 pm

Raul Mendoza is a registered user.

The average annual household income in Palo Alto is $232,524, while the median household income sits at $158,271 per year.

Palo Alto residents earning above the average & median income levels should also be assessed a supplemental citywide income tax as well.

They could easily afford to do so by limiting frivolous/self-serving purchases & lavish personal expenditures focused on appearances and vanity.

My family of four lives comfortably on $105,000 per year (before taxes) and we have accomplished this feat by not buying into a superficial and commercialized existence.


 +   24 people like this
Posted by Bruce Lampkin, a resident of Midtown,
on Jun 7, 2022 at 3:14 pm

Bruce Lampkin is a registered user.

(1)...target the tax on office work that brings in high paying workers who live outside the area and don't contribute much but push housing prices higher to avoid long commutes.

(2) Palo Alto residents earning above the average & median income levels should also be assessed a supplemental citywide income tax as well.

The solution....do not tax Palo Alto residents any further but create a supplemental citywide income tax on all of the office-based employers and employees who work in Palo Alto but who do not reside here.

A 5% income tax hike should suffice.

This will discourage aspiring and current employees from commuting to and working in Palo Alto which in turn will force their employers to relocate their offices elsewhere.

Isn't contained development what most Palo Altans cherish and support?

This measure will also encourage the Palo Alto City Council to learn the meaning of fiscal austerity.


 +   22 people like this
Posted by Brenda Conklin, a resident of Adobe-Meadow,
on Jun 7, 2022 at 3:53 pm

Brenda Conklin is a registered user.

@Raul Mendoza...
"Palo Alto residents earning above the average & median income levels should also be assessed a supplemental citywide income tax as well."

"They could easily afford to do so by limiting frivolous/self-serving purchases & lavish personal expenditures focused on appearances and vanity."

^ Not all Palo Altans fall into this category...the majority are just basic folks (of all colors and ethnicities) trying to get by in these trying times.

And while some are richer than others, who's keeping score?


@Bruce Lampkin...
"Isn't contained development what most Palo Altans cherish and support?"

^ Only the ones devoted to preserving 'quality of life' in Palo Alto.

The pro-development faction does not care one way or the other.

Economic growth and preserving quality of life are like two runaway trains headed on a collision course.

So which one are you gonna choose?


 +  Like this comment
Posted by Eric Filseth, a resident of Downtown North,
on Jun 7, 2022 at 4:16 pm

Eric Filseth is a registered user.

I think the really basic questions are:

(1) Do we all collectively need it in order to finance our community?

(2) If (and only if) we need it, where should it come from?

We can problem-solve on details, mechanisms and implementations, but fundamentally it should flow from these two questions.


 +   18 people like this
Posted by Erica Rothstein, a resident of Old Palo Alto,
on Jun 7, 2022 at 4:41 pm

Erica Rothstein is a registered user.

> I think the really basic questions are:

> (1) Do we all collectively need it in order to finance our community?

^ Isn't this a decision that the PACC usually defaults to the City Manager's directives?

>> (2) If (and only if) we need it, where should it come from?

^ Ideally, only those entities who can easily afford to pay for doing lucrative business in Palo Alto...there are many of them, both large and small.

This is not economic rocket science.


 +   20 people like this
Posted by Priscilla Beckham, a resident of Palo Alto Hills,
on Jun 7, 2022 at 5:48 pm

Priscilla Beckham is a registered user.

"Do we all collectively need it in order to finance our community?"

"Isn't this a decision that the PACC usually defaults to the City Manager's directives?"

• Saavy Palo Altans know who's actually calling the shots at City Hall.

Or as Jerry Seinfeld used to say, "not that there's anything wrong with it."


 +   1 person likes this
Posted by Eric Filseth, a resident of Downtown North,
on Jun 7, 2022 at 8:36 pm

Eric Filseth is a registered user.

>> "Do we all collectively need it in order to finance our community?"

>> "Isn't this a decision that the PACC usually defaults to the City Manager's directives?"


No, that's not true. It gets a great deal of scrutiny from Council. Alison and I are probably the two biggest Excel-slingers doing the “what if this happens, what if that happens" nerd-out and generally pestering City Staff (a very good Finance team), but the others, especially Tom and Pat, are all over it as well. We don't always agree, and Government has constraints we didn't have in the private sector, and also we don't all have the same tolerance for risk, and it's not like we don't make mistakes; but it isn't for lack of attention.


 +  Like this comment
Posted by Menlo Dave, a resident of Menlo Park: Fair Oaks,
on Jun 7, 2022 at 9:44 pm

Menlo Dave is a registered user.

The long term effect of this business tax needs scrutiny as to the economy for the area and city.
If you were the CEO of a successful company, would you really elect to stay in Palo Alto.
If you were starting a Start Up, would you choose PA? Sooner or later the "not here" attitude will result in more business moving out or not moving in.

Some of the "nabobs of negativisms" [NIMBYS] will rejoice, but who will go to the local businesses - like restaurants and boutiques when these companies leave town?

For me - not a big effect, as I moved my business from PA to Menlo Park last year!


 +   34 people like this
Posted by Annette, a resident of College Terrace,
on Jun 7, 2022 at 11:35 pm

Annette is a registered user.

The elephant in the room that is being largely ignored is that the tax will be a general tax rather than a specific one. If we had a different city governance model and a different spending history a general tax might be okay. But we are what we are and b/c of that it would be foolish to enact a business tax that flows to the general fund.


 +   32 people like this
Posted by Albert Prescott, a resident of Another Palo Alto neighborhood,
on Jun 8, 2022 at 7:35 am

Albert Prescott is a registered user.

> "If we had a different city governance model and a different spending history a general tax might be okay. But we are what we are and b/c of that it would be foolish to enact a business tax that flows to the general fund."

Despite the extensive use of Excel spreadsheets and illuminating private discussions with the city's esteemed Finance Department, many Palo Alto residents do not have faith (or trust) in the PACC decision-making process.

A 'different city governance model' would be a step in the right direction as Palo Alto city governance is more akin to the 'British model' which is characterized by excessive taxation to cover previous fiscal oversights and future wastes of money.

The PACC are coming! The PACC are coming!


 +   28 people like this
Posted by Harriet Steinman, a resident of Community Center,
on Jun 8, 2022 at 7:48 am

Harriet Steinman is a registered user.

"Government has constraints we didn't have in the private sector, and also we don't all have the same tolerance for risk, and it's not like we don't make mistakes; but it isn't for lack of attention."

^ Is this an excuse or a reassurance?

An accepted 'tolerance for risk' involving someone else's money (i.e. taxpayer's) raises some red flags.


 +   38 people like this
Posted by Shane Richards, a resident of Old Palo Alto,
on Jun 8, 2022 at 9:23 am

Shane Richards is a registered user.

The City of Palo Alto is like a computer overloaded with bloatware (i.e. questionable and useless apps).

And so the only solution is to add more storage capacity (via taxes) as the PACC apparently does not know how to delete or uninstall the useless applications (e.g. certain city employees and various municipal programs) that do not fully serve all Palo Alto residents on a reasonable and equal basis.

The City Manager is the CPU (central processing unit) that makes the demands and the PACC meekly complies.


 +   4 people like this
Posted by Bystander, a resident of Another Palo Alto neighborhood,
on Jun 8, 2022 at 10:41 am

Bystander is a registered user.

This is a tricky situation and there are pros and cons both ways.

I was under the impression that food stores and restaurants along with businesses under a certain size (in square footage or employees) would be exempt. Is this the case?

I was under the impression that other nearby cities taxed businesses larger than a certain size. Is this the case?

Of course retail or service businesses are going to pass the tax on to customers and we want useful retail and service businesses nearby to survive. Anything that causes them to close is detrimental to our quality of life. Isn't this partly why we don't have big box stores in Palo Alto and have to travel to Mountain View or Menlo Park for a decent sized Safeway or Costco?

Can we favor small, independent businesses that are serving Palo Alto residents and just put the tax on large high tech businesses that are causing traffic and parking problems?

Or again, with that make them move to Texas?


 +   30 people like this
Posted by Roger Pence, a resident of Adobe-Meadow,
on Jun 8, 2022 at 11:18 am

Roger Pence is a registered user.

"Can we favor small, independent businesses that are serving Palo Alto residents and just put the tax on large high tech businesses that are causing traffic and parking problems?"

Sounds reasonable but the PACC cannot see the forest through the trees.

Our only recourse as Palo Alto residents is to vote them all out of office when election time arrives or initiate a referendum for immediate removal from office.

The PACC no longer governs but is governed by the City Manager's office.


 +   32 people like this
Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Jun 8, 2022 at 11:31 am

Online Name is a registered user.

Yes, we've long needed a business tax. BUT that tax should be focused not on retail which serves the community but on office workers/commuters who drastically outnumber residents and cost us in money (parking permits), time (traffic congestion) and pay no sales tax.

The city's failure to create and manage a business registry is no reason to penalize retailers!

Until the CC starts more aggressively managing the City Manager and the staff, I'm hesitant to give them more money to waste expanding the City Manager's bloated staff and wasting 6 years of highly paid staff and consultant time failing to ask the right questions on Casti AND only fining Casti $265,000 --one year's tuition for 4 girls -- during all the years of their violations of their enrollment cap, falsified presentations, tree-cutting etc.

Where's the accountability? Where's the CC oversight?


 +   28 people like this
Posted by Justine Patterson, a resident of Barron Park,
on Jun 8, 2022 at 11:37 am

Justine Patterson is a registered user.

Excel spreadsheets and PowerPoint presentations are all fine and dandy but when it comes to the Palo Alto City Council members putting their foot down on questionable municipal expenditures at the cost of increased sales taxes to PA residents, will they actually challenge and refute these costs or merely ask some more questions prior to rubber-stamping the proposals as mandated by the City Manager?


 +   12 people like this
Posted by Tom Collingsworth, a resident of Leland Manor/Garland Drive,
on Jun 8, 2022 at 11:52 am

Tom Collingsworth is a registered user.

PACC = no backbone & seemingly happy just to be there.

Is this what Palo Alto residents want or deserve?


 +   30 people like this
Posted by Carrie Anderson, a resident of another community,
on Jun 8, 2022 at 1:52 pm

Carrie Anderson is a registered user.

Here's the scoop on Palo Alto's current City Manager. He was forced to resign by the San Jose City Council in 2014 rather than being fired.

And then he was hired by the PACC and provided with a lucrative severance package to discourage getting fired.

Another rubber stamp decision by the PACC...your local government at work.
Web Link


 +   2 people like this
Posted by Mike Bechler, a resident of Midtown,
on Jun 8, 2022 at 2:01 pm

Mike Bechler is a registered user.

"some in the five-and-six-digit range, they will inevitably pass on these extra costs to consumers"

It is not inevitable at all. It is a false and specious assumption used to argue against any and all taxes, and it assumes that their profits are not part of the equation.

Guess what. Their profits ARE part of the equation. Now if they are operating close to the margins and they can't pay the tax, they might be forced to raise prices or go bust. But if they are operating with decent margins, they can pay the tax out of profits, and if they raise their prices, that is an excuse, not a necessity.

Also, I presume they analyzed their cost vs. market share and made their pricing decisions before the tax. The new tax should not change that calculation; if the price was right before the tax it will be equally right after the tax, again unless it makes them unprofitable.

Whether we need this tax or not is an open question, but it is misleading to start that discussion by assuming that it will inevitably be passed to customers in the form of higher prices. It ain't necessarily so.


 +  Like this comment
Posted by Mondoman, a resident of Green Acres,
on Jun 8, 2022 at 2:12 pm

Mondoman is a registered user.

@Eric
Re: "I think the really basic questions are:
(1) Do we all collectively need it in order to finance our community?
(2) If (and only if) we need it, where should it come from?"

I think the order is backwards here, and should be:
1) Is our current distribution of sources for City tax money equitable?
2) If not, what tax(es) should be introduced or changed to improve equity?


 +   18 people like this
Posted by Nicole Watson, a resident of Another Palo Alto neighborhood,
on Jun 8, 2022 at 2:47 pm

Nicole Watson is a registered user.

> City Manager Ed Shikada estimates the business tax will bring in between $22 and $26 million to city coffers annually...Keep in mind this city has an annual budget of nearly $1 billion.

>> Shikada also announced last week that the five biggest businesses in the city would pay 20 percent of the total business tax revenue, thus creating a bigger burden for the medium-sized businesses. Perhaps this is because the city manager fears that bigger businesses may move out.

• The City Manager is trying to convert whatever is left of Palo Alto into a city that will resemble an expansive and overdeveloped metropolis similar to San Jose.

To some (i.e. supportive & acquiescent PACC members with Excel/PowerPoint abilities), this is considered a viable strategy towards promoting a renewed economic resurgence in Palo Alto.

The question is, will all of this proposed tax revenue directly benefit all Palo Alto residents?

Think again.


 +   2 people like this
Posted by Evergreen Park Observer, a resident of Evergreen Park,
on Jun 8, 2022 at 6:06 pm

Evergreen Park Observer is a registered user.

This is one of the more disappointing columns by Ms. Diamond.

Please, Ms. Diamond, spare me the crocodile tears for the small retailers and small businesses.

We don't even know what the final business tax will look like -- so it is ridiculous to start crying about the sky falling just yet. If indeed the major burden falls on companies like HP and other commercial firms, then so be it. Those companies do not produce much in the way of sales tax (just what their employees spend for lunch if they don't have access to a company cafeteria), and they don't produce that much in the way of property taxes since they are covered by Prop 13 and the ever-wise voters elected recently not to correct that mistake.

Small retailers may face a new cost IF their landlords are covered by the business tax. That is not yet clear to me. The landlords are already require high rents -- mostly because of the increase in the price of land due to all of the Class A office buildings that have been built.

Since every other city around us has a business tax, either the businesses will have to move very far away -- like Texas -- or they will face the same dilemma in Menlo Park, Mountain View, etc. Why should Palo Alto be the only City that does not require large commercial firms to pay some of the costs required to service their presence here, e.g., increased water and traffic infrastructure, increased traffic management, etc.?

If HP wants to move to Texas, then they have to weigh a lot of other factors -- like not being in Silicon Valley, not being next door to Stanford University, etc. A business tax may or may not be the deciding factor.

Ms. Diamond apparently wants the residents to suck up and pay for all of the costs of businesses that return very little to the City. Please. Many residents who moved here more recently that she most likely did are pay very high property taxes -- more than Ms. Diamond who most likely moved here long again and more than me.


 +   3 people like this
Posted by Evergreen Park Observer, a resident of Evergreen Park,
on Jun 8, 2022 at 6:10 pm

Evergreen Park Observer is a registered user.

To say that 'rich' Palo Alto residents can afford to pay for services benefiting businesses is to ignore (1) whether it is fair for us to pay so they can make profits, and (2) that many Palo Alto residents do not benefit from pre-Prop 13 relatively low property taxes and already pay more than their fair share.

Why don't we just wait and see what this tax really will be -- and then we can discuss this more rationally.

I agree that the City Manager has way too much power in Palo Alto -- that's what happens when you have a City Manager form of government and a part-time citizen Council. I know most of the City council members spend an incredible amount of time on City business -- and I am very grateful to them for that. But, it is impossible for them to keep up with City staff who basically see their major client as the large businesses and large property owners.

Residents have to keep up the pressure to be sure their interests are heard and that Council members who do try to represent residents' interests are supported.


 +   18 people like this
Posted by Gayle Ludlow, a resident of Old Palo Alto,
on Jun 9, 2022 at 8:05 am

Gayle Ludlow is a registered user.

"If indeed the major burden falls on companies like HP and other commercial firms, then so be it."

Footing only 20% as reported is NOT the major burden. The other 80% most likely will be a burden for smaller retail establishments depending on the structure of taxation.


"Why should Palo Alto be the only City that does not require large commercial firms to pay some of the costs required to service their presence here, e.g., increased water and traffic infrastructure, increased traffic management, etc.?"

And so the solution is to apply this proposed business tax ONLY on the large commercial/industrial businesses earning
multi-million/billions of dollars in annual revenue, not the smaller retail businesses regardless of how much rent they are paying.

And if HP moves to Timbuktu, who cares?
The company spun off into two different companies decades ago and no longer warrants the same legacy it once had.


"Residents have to keep up the pressure to be sure their interests are heard and that Council members who do try to represent residents' interests are supported."

The Council members you are vaguely referring to reminds one of the current administration in DC.

A lot of idealistic blather followed by an unwillingness to fully address and resolve a key municipal problem...the city manager's dominant and overwhelming sphere of influence (which often conflicts with the best interests of Palo Alto residents as a whole).

What is the PACC afraid of...incurring the public's wrath for having approved a lavish severance package in the event of a warranted firing?


 +   23 people like this
Posted by Trent Lawrence, a resident of Charleston Meadows,
on Jun 9, 2022 at 8:21 am

Trent Lawrence is a registered user.

The Palo Alto City Council bears full responsibility for any screw-ups that transpire within the City of Palo as they are the elected officials whose sole responsibility is to make sound and practical municipal decisions that benefit all Palo Alto residents.

They also have a responsibility to serve as an oversight committee pertaining to all administrative actions carried out by the city manager and his staff.

Being a council member requires more than just pounding a gavel and replenishing an ink pad to rubber stamp city manager directives.


 +   37 people like this
Posted by Haley Wardman, a resident of Downtown North,
on Jun 9, 2022 at 10:02 am

Haley Wardman is a registered user.

Outside of adding to the General Fund, does anyone have an idea where this projected $22-26 million dollars in tax revenue will eventually go towards?

If the money is being targeted to ensure that the City Manager can hire more city employees and consultants to expand his in-house 'empire', this would constitute a misuse of public funds and it is the sole responsibility of the City Council to scrutinize and deny all budgetary proposals pertaining to increasing the 'bloatware' in City Hall.


 +   14 people like this
Posted by Bystander, a resident of Another Palo Alto neighborhood,
on Jun 9, 2022 at 10:49 am

Bystander is a registered user.

Good question asked by the previous poster.

Can we ask that any money be used to bring back shuttle services, provide park and ride lots and shuttles from highway offramps, provide electronic signage to downtown garages showing where there is available parking, provide parking meters and simple pay by phone parking, grade separations and improving various intersections around town such as Loma Verde/Middlefield.

The CC have promised residents so many improvements over the past X number of years and with the exception of the new footbridge and some green paint and barricades on streets, we are still waiting on these promises to appear!


 +  Like this comment
Posted by Richard Lange, a resident of another community,
on Jun 9, 2022 at 12:21 pm

Richard Lange is a registered user.

Having arrived from upstate NY to attend my daughter's college graduation, we had an opportunity to visit the main shopping districts of Palo Alto including downtown/University Avenue, Stanford Shopping Center, and California Avenue.

Outside of Stanford Shopping Center, the plethora of repetitive and foo-foo dining establishments made me wonder, is gluttony the primary Palo Alto pastime?

The same could be said of Mountain View's Castro Street.

Most of the restaurants seem to be doing quite well since COVID restrictions have been lifted and considering their overpriced menus, a business tax on dining establishments would seem feasible along with an increase in lodging taxes.

Just pass the tax on to outside visitors who have nowhere else to dine or stay while in PA town as they will be gone shortly.

The mundane string of motels on El Camino Real in Palo Alto are nothing spectacular yet they charge exorbitant rates for what amounts to a mediocre room with minimal amenities (unless one considers cable TV, and room coffee + some stale breakfast rolls a noteworthy luxury).

Perhaps the key here is whom to tax and whom not to tax as some Palo Alto restaurants and motels would hardly be missed if they were forced to close business.

Palo Alto will never be a vacation destination or retreat unless vacation standards are reduced to the lowest common denominator.




 +  Like this comment
Posted by PH, a resident of Woodside: Emerald Hills,
on Jun 9, 2022 at 1:26 pm

PH is a registered user.

@Eric Filseth "Do we all collectively need it in order to finance our community?"

Even thought its a tax, it can be treated under the logic of AB1600 fees.

Is Palo Alto able to finance service levels?
What portion of service level cost is due to non-resident daytime population, i.e. employees.
Are traditional taxing mechanisms from daytime populations not covering those costs? (If they are already covering their costs, IMO, Palo Alto should not be asking for more.)

Any standard Fiscal Impact Analysis for a new development project will go through this logic. For example, table 12 (p16) of Menlo Park's downtown FIA shows percentage of total yearly service costs per capita for residents and employees.Web Link

It's a nice little tablet that illustrates the concept.

If Palo Alto goes through its own version of this logic to compute the total daytime population service costs, per capita dps costs, and then costs net of revenues, that would be a defensible figure solely on costs. You probably could pass muster with an AB1600 fee and not bother with a tax.

Assessing the tax(fee) per employee is a good proxy for daytime population and hence business impact, and the only carve-out you might consider would be to carve out sale tax producers, since they are probably paying more than they cost.

The sillier question of trying to figure out how such a tax/fee might impact individual daytimers is irrelevant to the question of whether or not PA residents are going to subsidize them. If not then charge each fairly according to actual cost, and trust the virtue of fairness.


 +  Like this comment
Posted by Lizette Daniels, a resident of Midtown,
on Jun 9, 2022 at 1:46 pm

Lizette Daniels is a registered user.

Why hasn't the Palo Alto City Council, City Manager's Office, or the City Finance Department further researched or reported on AB 1600?

Many cities throughout California have filed AB 1600 accountings.

A question for the PACC members, PA City Manager, and city Finance Department..."who's on first?"


 +  Like this comment
Posted by Eric Filseth, a resident of Downtown North,
on Jun 9, 2022 at 5:23 pm

Eric Filseth is a registered user.

Wow there's a lot here but let me try to field some, and please bear with us we're still working on details so nothing 100% final yet.

What it would be for: Tom and I wrote a piece on this, sorry I can't repeat much and stay under 2000 characters! The biggest need is basically (1) restoring and selectively expanding city services, esp Police/Fire where we've got some looming gaps; (2) Affordable Housing and homelessness " it's the only way it will get done; and (3) Transportation, esp Grade Separation " most must be County/State/Fed money, but we will have to contribute some of our own. More at Web Link

(1) Do we need it? Fiscal ‘23 looks manageable, but after that " end of the Stimulus, the gas-transfer, the Great Resignation impact, new public safety needs, permanent changes in our “visitor economy," inflation, all add up. Nobody likes it but it's reality. If we don't face it now, '24 and beyond look very scary to me. All of us remember Covid-era cost-cutting; nobody wants to close libraries and brown-out fire stations again. But the Community decides " that's why we vote on these things.

(2) Why large businesses, esp tech/office? Some discussion above; also, over time Palo Alto job growth has outpaced population growth, so Commercial almost certainly consumes a higher share of city services vs a decade or two ago.

Exemptions: small businesses, esp Retail / personal services, got hit hard in Covid and still not fully recovered. Hotels basically under a business tax already.

Square footage: intent is to sort for large businesses, but administrate-ability matters too. Sf is simple, easy to measure, “progressive," ie large businesses carry more vs small ones. It's not a perfect targeting, but we felt a good tradeoff with practicality. And with PA commercial rents typ $6-8+ per sf, $.10 is tiny. SVLG/Chamber "$60M" flyer was just trying to scare people.


 +   25 people like this
Posted by Becky Walters, a resident of Community Center,
on Jun 9, 2022 at 7:27 pm

Becky Walters is a registered user.

"The biggest need is basically...

(1) restoring and selectively expanding city services, esp Police/Fire where we've got some looming gaps;

• Please clarify where the 'gaps' are and how expansion will benefit all Palo Alto residents including visitors.

• Where are these 'restorations' most needed and how will they be implemented?

(2) Affordable Housing and homelessness "it's the only way it will get done;

• Is there a master plan for creating more 'Affordable Housing's and what constitutes affordable housing?

• How will the PACC effectively deal with the homeless issue/problem?

These are straight forward queries that cannot be answered with nebulous abstractions and unsubstantiated wish lists.


 +   21 people like this
Posted by Kerrie Jacobsen, a resident of Adobe-Meadow,
on Jun 9, 2022 at 7:55 pm

Kerrie Jacobsen is a registered user.

(a) When it comes to future police hirings, will the Palo Alto City Council mandate more stringent hiring guidelines?

(b) And when it comes to police radio encryption, will the Palo Alto City Council enable the media and public to have reasonable access to these transmissions?

Or will the Palo Alto City Council acquiesce to the walking orders of the Police Chief?


 +   16 people like this
Posted by Barry Aronson, a resident of Midtown,
on Jun 9, 2022 at 8:06 pm

Barry Aronson is a registered user.

When it comes to PAPD improprieties and costly personal injury lawsuits against the City of Palo Alto, what is the PACC's comprehensive strategy towards curtailing such incidents?

Are lawsuits paid from the General Fund?


 +  Like this comment
Posted by John Lawson, a resident of Duveneck/St. Francis,
on Jun 10, 2022 at 7:11 am

John Lawson is a registered user.

? "Six of the council members have continually " and pretty steadfastly " supported imposing a business tax, along with City Manager Shikada, probably because the tax means they will have more to spend on anything they want. Only council member Greg Tanaka has been adamantly opposed."

What's next? A PACC initiated tax on dog ownership, sidewalk usage, breathable air, toilet flushing, and flatulence?


 +   18 people like this
Posted by Annette, a resident of College Terrace,
on Jun 10, 2022 at 8:05 am

Annette is a registered user.

@Evergreen Park Observer: of course the businesses, especially the big ones, should contribute to the cost of maintaining the infrastructure and services required to run this city. And it has been true for a long time now that it is absurd that Palo Alto has not addressed that. But there are NO ASSURANCES that the revenue from this tax will be spent on the expenses for which it is SUPPOSEDLY intended. The tax should be specific, not general. More votes are required to pass a specific tax, but SO WHAT? Not only should it be hard to pass a new tax it should not be easy to pass a general tax that "somebody else" will pay. At the end of the day "somebody else" is us. I think this CC is squandering yet another opportunity to get this right. We do not have the right governance model or spending history to justify a tax that will add to the general fund. That's unfortunate, but true.


 +   12 people like this
Posted by Chuck Breslin, a resident of Barron Park,
on Jun 10, 2022 at 8:12 am

Chuck Breslin is a registered user.

>> "Six of the council members have continually and pretty steadfastly supported imposing a business tax, along with City Manager Shikada, probably because the tax means they will have more to spend on anything they want. Only council member Greg Tanaka has been adamantly opposed."

^ A 6-1 margin is pretty much indicative of where the PACC stands on this issue.

They enjoy spending/wasting money that does not come directly out of their own pockets.

"What's next? A PACC initiated tax on dog ownership, sidewalk usage, breathable air, toilet flushing, and flatulence?"

^ Nothing should surprise Palo Alto residents anymore.


 +   16 people like this
Posted by Stephanie Buhle, a resident of Community Center,
on Jun 10, 2022 at 9:07 am

Stephanie Buhle is a registered user.

"Square footage: intent is to sort for large businesses, but administrate-ability matters too. Sf is simple, easy to measure, “progressive," ie large businesses carry more vs small ones. It's not a perfect targeting, but we felt a good tradeoff with practicality. "

Speaking of 'square footage' parameters, don't forget to apply a 'business tax' on the City Hall's interior/exterior 'square footage' along with all of Palo Alto's revenue-generating municipal facilities.

Be sure to include the golf course, all of the city's municipal utility facilities, and parking garages.

The City of Palo Alto is actually a business supported by a PACC that continually gives PA residents "the business."


 +   19 people like this
Posted by Melissa Lockwood, a resident of Embarcadero Oaks/Leland,
on Jun 10, 2022 at 11:40 am

Melissa Lockwood is a registered user.

The PACC is little more than an oky-doky committee catering to the directives, demands, and whims of the senior administrators they have hired.

Police Chief: "We need to mandate full radio encryption so that the media and Palo Alto residents will not be privy to our activities.

PACC: Oky-doky.

City Manager: We need to establish another tax to cover various undefined fiscal expenditures whether they are needed or not.

PACC: Oky-doky

City Attorney: We need to settle wrongful police lawsuits immediately so that the city can move on...until the next blatant police indescretion.

PACC: Oky-doky.

Developers: We need to maximize population density in Palo Alto because this endeavor will generate additional tax revenue and commerce in Palo Alto.

PACC: Oky-doky

"Being a council member requires more than just pounding a gavel and replenishing an ink pad to rubber stamp city manager directives."

The Oky-Doky Committee (aka PACC) is being led around by the nose not only by the City Manager's office but by every city administrator making $350K or more.

Oky-doky.


 +   1 person likes this
Posted by Palo Alto Resident, a resident of Downtown North,
on Jun 10, 2022 at 12:09 pm

Palo Alto Resident is a registered user.

Let's do the math. 10-11 cents per month is $1.00 to $1.20 per year per square foot (psf). On Loopnet, Palo Alto retail and office space goes for $50 to $100 psf per year. So this would push it up by 1-2%. Most businesses have annual lease escalators of 2-5%, so this is just at the noise level.

Nobody is going to make business decisions over a 1-2% one-time increase in rent. That's just silly. And even it is were passed through, the impact on Palo Alto consumers would be tiny - most impacted businesses mostly sell to people outside Palo Alto.


 +   21 people like this
Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Jun 10, 2022 at 12:39 pm

Online Name is a registered user.

Re Mr. Filseth's comments:

"(2) Affordable Housing and homelessness" Where was the oversight when they allowed the former city manager to sell The President Hotel out from under 85-long-time PA residents enjoying affordable housing and contributing to the community yet they NOW want us to pay for "affordable" housing that's really 85% markt-rate housing??

Sustainability / Climate Plan: How much are we spending to duplicate the mandates from the state under the delusion that PA should be even more "green" when they can't even be bothered to oversee the pathetic and long-time problematic Solar Permitting process?? See also the ridiculous expenditures on road "furniture" and traffic "calming" devices and unsafe roundabouts that create MORE backups and congestion?

Why did they allow the multi-million traffic light timing contract to be awarded to the former Transportation Czar who was running his own business on city time and who couldn't fix the MAIN problematic light near Town & Country for 8+ year?

Why did they consent to giving the City Manager a contract that grants him an extra years salary, vesting and benefits IF he performs so poorly he's forced out of his job here like he was from his previous one?

Why do they let the Planning Director call the shots on when to shut off public comment and why do they allow blatant bias in who's forced to recuse themselves (for belonging to PAN) but not those with obvious ties to applicants??


 +   5 people like this
Posted by Annette, a resident of College Terrace,
on Jun 10, 2022 at 12:55 pm

Annette is a registered user.

I don't think this is a math issue. Rather, it is an accountability and trust issue. Should we be asking businesses to grow the General Fund or should we be asking PA businesses to contribute specifically to the expenses related to the infrastructure and services that they impact and that benefit them most? The current CC has identified those as housing, transportation, grade separation, and public safety. Those areas of need will exist forever. But future City Councils are not bound by the promises and assurances that this City Council makes. Ms. Diamond correctly labels the talk about revenue use a "sales pitch". If the revenue from this tax are NOT spent on the identfied areas, and there's NOTHING requiring that they are, the City Manager and a future CC could well return with yet another tax proposal. To be perfectly frank, our current City Manager and the one before him and the long-standing twisted dynamic of City Council being run by the City Manager/Senior Staff (instead of the other way around) is why I think it unwise to enact a general tax.

Here's a daunting thought to keep in mind: if the revenue is not spent as promised, the very serious problems that exist in those areas will only worsen. Promises are nothing; this needs to be a specific tax.


 +   5 people like this
Posted by Aimee W., a resident of Palo Alto Hills,
on Jun 10, 2022 at 4:22 pm

Aimee W. is a registered user.

"These are {ALL} straight forward queries that cannot be answered with nebulous abstractions and unsubstantiated wish lists."

^ Further clarity on the part of the PACC is warranted in regards to comprehensively disclosing all of the key targeted goals along with the projected outbound expenditures relative to the incoming revenue the city will be receiving from this proposed business tax.

For Excel saavy PACC members, it's yet another opportunity to create and present some highly illuminating PowerPoint generated charts and graphs!

The additional fiscal resources should not be allocated towards hiring more private consultants, outside lawyers, additional upper level management and support staff, or a clandestine slush fund to reconcile police-related lawsuits.


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Posted by Ronald Blevins, a resident of Another Palo Alto neighborhood,
on Jun 11, 2022 at 12:51 pm

Ronald Blevins is a registered user.

Blogger Steve Levy's most recent column hit the nail on the head.

I'd vote both Steve Levy and Diana Diamond for PACC and mayoral duties.

It's time to retire the current tribal council.


 +   4 people like this
Posted by Annette, a resident of College Terrace,
on Jun 12, 2022 at 11:37 am

Annette is a registered user.

Excerpt from the City Council Agenda for June 13:


11. Revenue-Generating Ballot Measures (Affirmation of the Natural Gas Utility Transfer and New Business Tax): Direction to Staff on Key Policy Questions and Measure Characteristics, and Direction to Return with Final Documents for Placement of Ballot Measure(s) on the November 2022 Election and a Non-Binding Resolution for Intended Use of Business Tax Proceeds (9:00 -10:30 PM) Late Packet Report Added

Key word: Non-Binding

Also on the agenda for closed session: discussion of the lawsuit brought by Miriam Green. The City lost that suit; the Court ruled that the practice of transferring revenue from CPAU to the General Fund is an illegal tax. In response, the City is considering a ballot measure asking residents to confirm the gas utility general fund transfer. This is being under-played.

Someone has some 'splainin to do here. Does the City need both revenue from a new business tax and revenue from the natural gas utility transfer? And is the City really planning to ask residents to, via their vote, make legal what has been determined in Court to be illegal?


 +   5 people like this
Posted by Jarod Parks, a resident of Leland Manor/Garland Drive,
on Jun 12, 2022 at 11:52 am

Jarod Parks is a registered user.

"...is the City really planning to ask residents to, via their vote, make legal what has been determined in Court to be illegal?"

It looks that way as the PACC and upper- tier city staff apparently travel to the beat of their own drum.

By referring this issue to a citywide vote, the PACC can conveniently disavow itself from any responsibility stemming from fiscal wastes and municipal mismanagements.

The PACC 'song and dance act' is getting kind of old.


 +   2 people like this
Posted by PH, a resident of Woodside: Emerald Hills,
on Jun 12, 2022 at 12:01 pm

PH is a registered user.

Are Palo Alto taxpayers going to subsidize business impacts or not?

Again, using the logic of AB1600, it's completely justifiable for Palo Alto to ask its non-resident daytime population to pay its fair share of infrastructure and service costs. As a practical matter this means asking businesses to pay for their employees.

It's also easy to believe that Prop 13 has created a gap in tax revenues collected from long-time commercial properties whose employment may have intensified and whose city service costs have increased in excess of taxes paid.

Clearly, there's a nexus and a need. And there are off-the-shelf methods for computing daytime service costs net of revenues.

It's also very easy to believe that impact fees levied on development years ago was under-priced. The best example is the “affordable housing impact fee." Most cities lack the courage to charge full mitigation price, they charge about 10-15%.

Which Palo Alto city council member has ever had the courage or the policy to charge full market price mitigation costs on its development? So, of course what went around has come around.

As part of this little exercise, Palo Alto might consider revisiting its current AB1600 fees and bumping them up, over time, to full market price.

As to the unfunded business portion of affordable housing and transportation infrastructure, those might require taxes essentially to claw back impact fees that were never charged. Having separate, specific taxes earmarked to affordable housing and transportation might be a good idea. It would stop some of the whining about padding the General Fund with monies that might be spent on salaries instead of hard community assets.

And the game of exempting your favorite pet business, is a really bad policy game. It's fundamentally a corruption in Democracy. There are no favorite citizens. Each who receives service should pay a fair share. Removing subsidies is always hard.


 +   14 people like this
Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Jun 12, 2022 at 3:48 pm

Online Name is a registered user.

Every year for decades Palo Alto Utilities has been siphoning off $20,000,000 from its customers to the General Fund while forcing us to pay for their appeal of paying us the court-ordered settlement in the Miriam Green lawsuit.

Now they want us to legalize their "over-charging" practice with their Gas Utility "Transfer" from our pocket to theirs.

Just say NO to both the business tax AND the "Gas Utility Transfer" until they can at least pretend to show some fiscal responsibility instead of their never-ending money grab while failing they continue to fail to impose and/or collect fines from their favored buddies like the Edgewood Plaza developer and Casti (which they ONLY fined the equivalent of 4 students' tuition while continuing to profit from their over-enrollment for many more years).

You don't have to be a spreadsheet jockey to figure that out.


 +   2 people like this
Posted by Jim Fisher, a resident of Downtown North,
on Jun 13, 2022 at 11:44 am

Jim Fisher is a registered user.

Palo Alto should be doing everything it its power to rejuvenate the local economy even at the expense of those who contribute very little to this worthwhile objective (e.g. poor people and the homeless etc).

Since the poor and homeless contribute the least, they also have the least to say in the matter of fiscal objectives and any displacements that may occur.


 +   2 people like this
Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Jun 13, 2022 at 6:38 pm

Online Name is a registered user.

@Jim Fischer, how fortunate for you that you've escaped all the Silicon Valley economic downturns, that you've never got laid off, that you missed the dot.bomb crash where laid-pff techies hung sheets in their windows painted with pleas for roommates, never had your kid carjacked because DoorDash/ Uber Eats paid you so much less than minimum wage you couldn't afford a babysitter, never had to train your cheaper outsourced replacement before you got fired, never had your startup crash and burn and stiff you on your salary, never had a client repeatedly forget to put that check in the mail in time to pay your rent, got paid in worthless stock on which you still had to pay taxes .....

Maybe to revitalize the economy those companies should stop grossly underpaying their workers WHILE killing off established restaurants with their markups and fees. Maybe those companies should STOP spending literally hundreds of millions of dollars lobbying so they don't have to pay workers fairly or give them benefits or let them qualify for unemployment???

Putting money in people's pockets revitalizes the economy because they spend it at businesses; they don't suck those businesses dry.

Thoughts, Mr. Fisher?


 +   5 people like this
Posted by Jim Fisher, a resident of Downtown North,
on Jun 14, 2022 at 7:33 am

Jim Fisher is a registered user.

@Online Name

Perhaps you misread or misinterpreted my previous post.

I was just saying that the homeless population (many of whom are substance abusers and/or mentally ill) and those receiving public assistance (i.e. welfare) have no say in any budgetary or tax matters that involve Palo Alto.

Only tax-paying Palo Alto residents and Palo Alto business owners should have a voice pertaining to this issue.

[Portion removed.]


 +   2 people like this
Posted by Marion Tate, a resident of Midtown,
on Jun 14, 2022 at 7:53 am

Marion Tate is a registered user.

@Jim Fisher
I doubt if the homeless population, especially the ones with mental health issues or drug addictions even bother to vote. They have other priorities.

As far as those on public assistance, they have to spend that subsidized money somewhere so to a certain extent Online Name's comment "Putting money in people's pockets revitalizes the economy because they spend it at businesses;" makes sense providing they are using these resources on basic subsistence rather than substance abuse.


 +   4 people like this
Posted by Ron Jessup, a resident of Barron Park,
on Jun 14, 2022 at 8:47 am

Ron Jessup is a registered user.

@Online Name

You cannot compare the economic downturn of displaced professional workers with those who are homeless and destitute due to mental illness or drug abuse.


 +   5 people like this
Posted by Tony Baronne, a resident of Evergreen Park,
on Jun 14, 2022 at 9:42 am

Tony Baronne is a registered user.

@Online Name

Lest we forget, the homeless population in Palo Alto has an adverse effect on local retail businesses by dissuading potential customers from patronizing various stores and restaurants.

Your commentary about workers being underpaid does not apply to the homeless population because the majority of them do not work due to drug/alcohol addictions and mental illness.

They are not part of the equation.


 +  Like this comment
Posted by Annette, a resident of College Terrace,
on Jun 14, 2022 at 11:34 am

Annette is a registered user.

I do not have statistics on homelessness so cannot refute with the backing of data the statement that "the majority of them do not work due to drug/alcohol addictions and mental illness" but given the cost of housing and living in this area, I think it unlikely. No doubt some of our homeless population suffer from addictions and mental illness, but homelessness is caused by many factors, including gentrification and our failure to provide workforce housing, and our housing and development policies. Think back to the Hotel President debacle. A statement by the former City Manager and a "typo"in an ordinance, and *just like that* dozens of people lost their affordable housing. It happens, even to capable, responsible people.


 +   4 people like this
Posted by Frank Johnson, a resident of Community Center,
on Jun 14, 2022 at 12:09 pm

Frank Johnson is a registered user.

According to statistics, roughly 65% of the homeless population is comprised of individuals suffering from substance abuse and/or mental illness.

The other 35% are homeless due to economic reasons (loss of job, rent increases, etc.) and these folks can be helped in some way.

The mentally ill and substance abusers who are homeless are a lost cause.


 +  Like this comment
Posted by Annette, a resident of College Terrace,
on Jun 14, 2022 at 8:04 pm

Annette is a registered user.

@Frank Johnson, thank you for providing the stats. I obviously wasn't aware of that 65% data point.


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