It took years for Palo Alto to prepare a business tax that city leaders were planning to place on the November ballot. And just one surreal week to shut the effort down.
The City Council on Monday officially abandoned the proposed business tax, which officials were hoping to pay for various transportation improvements, including the city's ambitious effort to redesign its rail crossings. But with the coronavirus pandemic leveling the local economy and sending the business community into a tailspin, council members recognized that the proposal is no longer tenable.
The council unanimously agreed that rather than pursuing the tax, staff should move ahead with strengthening the city's famously error-filled business registry. Council members also left open the possibility of revisiting the business tax in 2022.
The council's vote followed a recommendation from City Manager Ed Shikada, who argued in a report last week that the effort should be suspended given the economic turmoil caused by the coronavirus pandemic and the shelter-in-place order that public health officials have implemented to slow down the spread of the virus.
The report from Shikada and Chief Financial Officer Kiely Nose point to the shifting economic landscape, as well as the difficulty of providing outreach, engagement and education relating to the tax during the shelter-at-home order.
"Small businesses such as restaurants and cafes have closed or are seeing precipitous declines in patronage while large companies face heightened uncertainty," the report states. "In addition, Santa Clara County's Shelter in Place Public Health Order makes it more difficult to solicit meaningful engagement and feedback with stakeholders, including both residents and businesses."
While the business tax has spurred extensive council debate in the past, the council reached a swift consensus on Monday: now is not the time. Councilwoman Liz Kniss pointed to the dramatic shift in the local business scene. While the drop in economic activity is most visible in commercial areas such as downtown and the California Avenue business district, companies in Stanford Research Park are also struggling, and have been for a while, she said.
"What this does is — it's that nail that's going to, I think, make it very difficult for the businesses there to continue, especially with our shelter-in-place rule," Kniss said.
Vice Mayor Tom DuBois, a staunch supporter of the business tax, also concurred Monday that now is not the time.
"Every year we've brought it up, we've heard a lot of arguments opposing the tax. A lot of them were short-sighted (and) red herrings. But the reason today was valid," DuBois said.
Councilwoman Alison Cormack also noted that the main reasons for the tax – curbing traffic congestion and preparing for an increase in Caltrain service – are no longer as pressing as they were just weeks ago, with train ridership plummeting and most employees working remotely.
"I don't know how great the need will be in the medium-term," Cormack said.
The council also agreed that the city's decision on grade separation will have to be postponed, given the city's shifting priorities and the recent cancellation of meetings by the Expanded Community Advisory Panel, a citizen group that is helping the city reach a decision. Shikada is set to return in the coming weeks with an updated timeline for picking a preferred alternative for rail crossings, a decision that the council was hoping to reach in May.
Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.