Palo Alto prepares to vote on new business tax

Council to decide on Monday whether to ask voters to pass tax to pay for transportation improvements

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.


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22 people like this
Posted by resident
a resident of Mayfield
on Jun 25, 2016 at 9:54 am

A tax based on headcount makes sense to me. Taxes based on revenue or space don't make much sense if the money is earmarked for transportation projects. I assume that each part-time workers counts separately, so this tax should encourage employers to convert part-timers to full-time, which is good for both employees and transportation.

Is the $50 mentioned in the article an annual tax? That seems like a minimal amount to me compared to the headache that all these extra cars are causing.

The city should also look into giving tax breaks to companies with a substantial number of employees using non-car transportation (eg Caltrain, bicycle, etc).

4 people like this
Posted by well ok
a resident of Midtown
on Jun 25, 2016 at 10:41 am

More specificity on what it will be used for, and
a real citizen oversight board that reports to the council and the public would convince me to vote for it.
Real citizens, not people appointed by the city manager.

13 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jun 25, 2016 at 12:22 pm

A $50 or $100 per employee charge does very little to stop or alleviate congestion. Those fees are a mere drop in the bucket when you figure that that the city wants to pay to full fare cost of public transit costs for commuters coming into Palo ALto. For those coming from San Francisco, that's $8 a day or $2,704 a year so that's a huge shortfall. Those there's a $500 gap between what we'd be paying carpoolers.

Please stop pretending business charge would do anything t "fix" the problem the city has allowed to fester. Don't give the city more money to waste.

5 people like this
Posted by Soecifics, please
a resident of Another Palo Alto neighborhood
on Jun 26, 2016 at 8:04 am

From this day forward, I am only voting for taxes in which the goals or even projects are spelled out specifically. People vote for ideas and the reality is that there is little to no accountability. The school district's Measure A, which we had to pass or 80 teachers would be laid off went largely to greater increases in teacher salaries than the handsome increases they would have gotten otherwise.

5 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Jun 26, 2016 at 9:27 am

I honestly feel this tax is confusing in design due to all the complexities of how a business is run. If a business has a constant number of full time employees that all travel from out of town it would be OK, but how many businesses really function like that.

Is the tax for the number of total employees during the year, or the number at a given date in the year? Many businesses have season fluctuations of employees e.g. take on more employees for the summer or the holidays.

Is the tax for employees who are full time or part time and what about those that jobshare?

Is the tax the same for those whose employees live so close that they walk to work as those who have to commute 5 miles or more?

I am also concerned about somewhere like the Winter Lodge. Their employees are often high school students who bike or walk to get there and only work a couple of shifts a week so the numbers of employees is quite high compared to the number of staff working at any given time. Putting a minimum wage of $15 on part time 16 year old workers and then making this tax would mean that the cost of a couple of kids in skating lessons or a family evening of fun or a fun hangout for teens could run much higher and ultimately lose business for one of the few fun recreational activities we have in town for families and teens. It is a non profit, but it does have many employees and does have to balance its books.

Like this comment
Posted by SJW
a resident of College Terrace
on Jun 27, 2016 at 2:06 pm

SJW is a registered user.

Of course, it gets back to the question of how many people are actually employed in any given business. When Facebook was on California Ave. we could never get that information. They simply didn't know. Good luck, this sounds like a real messy on the implementation side of things.

Like this comment
Posted by Johnny
a resident of Midtown
on Jun 27, 2016 at 5:24 pm

How can we trust them to use the tax money properly? Is there an accountability system that ensures every dollar of this new tax goes towards improving transit?

I doubt it, but no one ever bothers to ask this question. Many well-intentioned Palo Alarms will vote for this tax measure with total, blind trust in their government.

I contend that raising taxes fundamentally lacks any kind of correlation with improved transit.

They just want your $$$ OBVIOUSLY

10 people like this
Posted by Resident
a resident of College Terrace
on Jun 27, 2016 at 11:57 pm

Palo Alto's $50 tax is petty compared to the 1.5% payroll tax that San Francisco is considering. That's more than $2000 for your average techie. Web Link

Sorry, but further commenting on this topic has been closed.

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