Palo Alto businesses would have to pay a tax based on how many workers they employ and that money would pay for transportation improvements under a proposal that the City Council will consider Monday night.
If the City Council agrees to move ahead with this plan, local voters will have a chance in November to shed Palo Alto's status as one of few Bay Area cities that does not have a business tax. The city does, however, have a business registry that comes with an annual $50 fee.
So far, there hasn't been a clear consensus on whether to move ahead with the November measure. A specially appointed council committee has been crafting polls over the past few months to gauge public sentiment, with the most recent results suggesting that about two-thirds of the voters would support the measure.
While Mayor Pat Burt has emphasized the importance of trying to solve the city's traffic problems before they get much worse, Vice Mayor Greg Scharff has been advocating for delaying the measure until 2017 or 2018, so that the city could perform more outreach and get a better sense of what specific transportation projects would be funded with the revenues from the new tax.
Though it would be up to the City Council to craft the new tax, the measure proposed by the council's Local Transportation Funding Committee calls for a tax of $50 per employee for businesses with between 10 and 50 employees. Those with fewer than 10 would be exempt. For those with more than 50, the tax would be $100 per employee.
At recent meetings, members of the committee called for the tax to have a sunset date. Councilwoman Karen Holman also supported the creation of a citizen oversight committee to keep track of how the funds are spent and report back to the council.
If the full council agrees on June 27 to move ahead with the new measure, it would mark the second time in the last seven years that Palo Alto has tried to impose a tax on local businesses. In 2009, the council went ahead with a measure calling for a business tax based on gross receipts, with the idea of using the revenues to pay for needed infrastructure improvements. Voters soundly rejected the proposed tax, with 57 percent voting against Measure A. Among the measure's opponents at the time was Scharff, who was elected to the City Council on the same night that the measure was defeated.
Today, like in 2009, the proposed measure is facing opposition from the business community. Last week, members of the Palo Alto Chamber of Commerce attended the meeting of the Local Transportation Funding Committee to urge caution on the local measure. Chamber CEO Judy Kleinberg and board Chairman Peter Stone each pointed to the transportation measure being spearheaded by the Santa Clara Valley Transportation Authority (a measure that would pay for the extension of BART to San Jose; improvements to Caltrain; and other regional improvements) and warned the committee that placing a local measure on the ballot could erode support for the regional one, which the Chamber plans to support.
The committee didn't take any votes on the measure, though some members noted the benefits of local funding for transportation.
Councilwoman Liz Kniss, a former Santa Clara County Supervisor and member of the VTA board of directors, was among them. The county, she said, has a history of sending the lion's share of tax proceeds to BART. A local tax would give the city control over how the funding is spent.
"The part I like about this tax is that it's ours -- we collect it; we spend it; it's predictable." Kniss said at the June 16 meeting.
Bur Scharff argued that waiting until 2017 or 2018 will give the council a chance to get the business community -- as well as the broader community -- on board, thus blunting potential opposition.
"If we plan this out and tell people exactly what we're going to do, it's not rushed and it goes to the 2018 ballot, hopefully there's no opposition to it because everyone knows exactly what it's used for," Scharff said. "It passes because the community is together."
The council is looking to craft the measure as a general tax, which means the funding could be used for any General Fund expenditure and requires 50 percent of the vote to pass, rather than the two-thirds needed for specific-project taxes. However, to give voters confidence that the money would be spent on transportation, the council would pass an advisory ordinance that would restrict expenditures for traffic-congestion relief measures. That is a similar tactic that the council used in 2014, when voters increased the city's hotel-tax rate from 12 percent to 14 percent.
At the June 27 meeting, the council is scheduled to review the polling results, consider the structure the measure and vote on whether to move ahead with it.