Palo Alto proposed business-license tax was soundly defeated by voters Tuesday, with 56.43 percent casting their ballots against Measure A.
The tax proposal fizzled after months of debate, with critics calling it too messy and complicated to enforce and too onerous on already struggling businesses.
Skip Justman, who led the campaign against the tax, said he was surprised by how many small-business owners and entrepreneurs told him they were worried about intrusion from the city. He attributed the defeat of Measure A to the many voters who have part-time jobs but are also "working quietly at home."
Justman, whose group called itself Small Business Against Taxes, said he was pleasantly surprised by the votes. As of 11 p.m., only 4,278 voters supported Measure A, while 5,538 voted against it.
"We had to fight an uphill battle," Justman said. "We had to go against the City Council, City Hall and the downtown establishment and we were able to succeed."
But City Manager James Keene said the voters' rejection of Measure A would only make future decisions about program cuts more difficult. The city is facing a "structural" budget gap of at least $10 million, meaning long-term cuts need to be made. Keene was hoping to use the roughly $3 million in projected revenues from the new tax to narrow the budget gap.
"There's no light at the end of the tunnel," Keene said Tuesday night. "We'll have to revisit ou possibilities and consider other ways of raising rrevenue."
Larry Klein, who was reelected to the council on Tuesday, called Measure A's projected defeat "unfortunate but not surprising." All three local newspapers have come out against the measure, as have nine of the 14 council candidates.
Opponents of the measure have consistently argued that the ongoing recession is a horrible time for a new tax. Greg Scharff, who opposed Measure A and won election to the City Council Tuesday, said he would prefer to see the Palo Alto "invigorate its business climate" and generate more revenue by promoting more growth.
"I think we really need to increase revenue," Scharff said. "I don't think we can tax our way out of this."
But Mayor Peter Drekmeier said he expects some of the voters who rejected Measure A to have second thoughts when programs and services start getting cut.
The council has already compiled a short list of possible cuts. The city's shuttle service, the Fire Department's disaster-preparedness program and the Police Department's four-officer traffic-enforcement team, school-resource officer and crime analyst positions could all be on the cutting block.
"This means there will have to be more cuts made," Drekmeier said Tuesday night. "I think it's really going to sink in when people's favorite programs are gone."