Palo Alto voters would likely support another hotel-tax increase, though they would almost certainly shoot down any proposal to hike the real-estate transfer tax, according to a new survey commissioned by the city.
Things are far less certain, however, when it comes to a proposal to tax sugary beverages. On that measure, the citizens appear to be split pretty much down the middle, according to the survey from the firm Fairbank, Maslin, Maullin, Metz and Associates (FM3 Research). The City Council plans to discuss the survey results this Monday before considering whether to place on the November ballot a tax measure to help pay for infrastructure improvements.
The survey, which the city released Thursday afternoon, largely reaffirms the results of an earlier survey, which suggested that an increase to the transient-occupancy tax (better known as the "hotel tax") has a better chance of gaining voter support than other types of tax increases. The survey showed more than 60 percent of the voters supporting increasing the tax rate from 14 percent to 16 percent, with more than 30 percent saying "definitely yes" and more than 20 percent saying "probably yes."
Depending on how the question is framed, the rate of support for a hotel-tax ranges from 62 percent to 67 percent, well above the simple majority needed to approve the general tax increase (taxes raised for a specific purpose require a two-thirds approval).
The survey also indicated that for the voters, the most pressing infrastructure projects are those relating to public safety and road repairs. When asked about ensuring a "modern, stable 911 emergency communication network," 73 percent of the survey respondents rated the priority as "extremely important" or "very important." Fixing potholes and ensuring safe routes to schools also scored high, with 68 percent and 67 percent of the respondents, respectively, giving these priorities high scores.
The council also requested that the firm poll voters on whether they would support increasing the real-estate transfer tax by $1.10 per $1,000, which would provide about $2 million in annual revenues. While the prior poll suggested that such a proposal could have a chance at passage, the new one suggests that it would be a tough, if not impossible, sell.
Regardless of how a real-estate tax measure would be worded, the measure is unlikely to earn even a simple majority (support ranged from 38 to 41 percent). The result suggests that the proposal to raise the real-estate tax, which was already on thin ice, is likely to be dropped from consideration on Monday, when the council revisits the topic.
The biggest wild card is the sugar tax. The survey asked residents about the prospect of imposing a 2 cent-per-ounce tax on distributors of sugar-sweetened beverages, which includes sodas, sports drinks and sweetened teas. The tax would generate an estimated $2.5 million for the general fund.
The survey indicated that such a measure would be divisive, with 49 percent likely to support it and 47 percent likely to oppose it (with different wording, the support would be 52 percent and opposition 44 percent).
The survey results suggest that the sugar tax could be a viable measure, even if the outcome is unpredictable. Even so, a new report from the Administrative Services Department suggests that this may not be the right year for it. The report points to the "considerable staff and council work" that would be required to place the sugar-sweetened beverage tax on the November ballot and suggests that the city consider the idea for a subsequent ballot.
In the meantime, staff could consider the size of the tax, issues relating to collection and enforcement, potential exemptions and the purpose of tax proceeds, the report states.
"In addition to the analysis and direction needed to craft a local measure, Council may wish to direct staff to engage in outreach and education with beverage distributors who would be subject to the tax, and with other stakeholders (such as the Palo Alto Unified School District) regarding the issue and the potential adoption of the local tax to address it."
The council decided to explore a November tax measure in response to the recent escalation of construction costs and the resulting funding gap in the city's infrastructure plan. The plan, which the council adopted in 2014, includes a new public-safety building, two rebuilt fire stations, a bike bridge over U.S. Highway 101, new garages in downtown and near California Avenue, the completion of the Charleston-Arastradero streetscape project and various bike improvements.
Staff estimates that the projects are collectively facing a funding gap of $76 million, according to the new report.