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Opinion: A Palo Alto business tax and the space-time continuum

Palo Alto official have set their sights on presenting voters with a proposed business tax measure on the November 2022 ballot. Embarcadero Media file photo.

How are two lobbying powerhouses able to foretell the impact of a yet-to-be-defined tax measure in Palo Alto? Through a wrinkle in time, the Silicon Valley Leadership Group (SVLG) and the Commercial Real Estate Development Association (NAIOP) opposed the business license tax before it was even defined. NAIOP and SVLG — whose tax-aversion somehow never extends to personal taxes like bridge tolls and parcel assessments — have already flooded our mailboxes and Facebook feeds over it.

A tax on large corporations makes good sense. Why? The region, especially tech and real estate, has prospered spectacularly. According to Joint Venture Silicon Valley, the corporate wealth of Silicon Valley and San Francisco is $14 trillion. By comparison, personal wealth in the area is one-twentieth of that, around $750 billion.

From left, Palo Alto City Council members Tom DuBois and Eric Filseth. Embarcadero Media file photos by Veronica Weber.

Meanwhile, the Bay Area's unmet needs for public safety, 30,000 unhoused residents and transportation improvements run into the hundreds of billions of dollars. Between taxing corporations or personal wealth, only one source, corporate wealth, has that kind of money.

Where does SVLG stand on taxing large businesses? Well, according to its mailer: "Now's not the right time" (When is?); "It's too big" (The size isn't determined yet); "It'll hurt small businesses" (Small business will certainly be exempted); and "It should benefit businesses" (It should benefit everybody).

Business license taxes are the norm in the Bay Area; Palo Alto is one of the few cities currently without one. Public outreach has been underway since 2015 in the form of public meetings, polls and focus groups. Through these efforts, we have listened and prioritized the values of fairness and ease of enforcement. Polls have shown broad support for a modest contribution by corporations to Palo Alto coffers.

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Three critical areas have been identified as underfunded to meet our current and projected needs:

First, restoring and improving city services, notably public safety. For the last two decades the police and fire departments have accounted for about 35% of the city's budget. However, during that time, staffing for both areas fell steadily, down 30% since 2004. Those who live and work in Palo Alto have experienced the erosion, such as reduced traffic enforcement and recent fire station "brownouts."

Yet we also face expanded needs, notably around mental health response, and the growth of organized property-crime tourism. We can't deliver on these things if we continue balancing our books via cuts. All of us, residents, businesses and visitors, rely on public safety services.

Palo Alto's police and fire staffing level has gradually decreased as funding for their respective budgets has fluctuated since 2004. Source: City of Palo Alto budget.

Second, we have major transportation work ahead. Separating car, bike and pedestrian traffic from our railway crossings, both to increase safety at some of the state's deadliest crossings and to protect us from looming major transportation-capacity problems, is finally feasible with county and federal funds. But it will require local contributions that a business tax can provide.

Third, we need more services for the unhoused and families without large tech salaries to keep them afloat. Rapid high-wage job growth in Peninsula cities has increased inequality and shrunk the housing stock available for lower-paid workers. Silicon Valley corporations lead the planet in wealth creation, but community investment has fallen short. The need for housing for service workers, those on fixed incomes, and the humanitarian needs of the rising number of people living on sidewalks, in campers, in parks and creeks has grown beyond the ability of tax-paying residents to fund.

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The nature of business has changed, and Palo Alto must pivot. Historically, companies made products that generated sales tax for city services. Now, many of our largest corporations generate very little sales tax because their business is information, finance or professional services. Our hotel and sales taxes plummeted during the pandemic. Diversifying our revenue base will make us more resilient for the long term.

No solution is perfect, but we are striving to define an equitable and appropriate business tax to best serve the Palo Alto community.

Our region will be a very different place if it can't sustain communities where workers prefer to live and be, even though the Bay Area is more expensive than elsewhere. Here in Palo Alto we can do our part by adopting a fair, appropriate tax on those companies that can most afford it. Silicon Valley is the corporate envy of the world, but as the saying goes, "The piper must be paid."

We don't need crystal balls, time travel or misinformation. We must take responsibility now and solve these threats to public safety, infrastructure and our most vulnerable neighbors with a financially sound solution for our long-term community health.

Tom DuBois and Eric Filseth are Palo Alto City Council members. They can be reached at [email protected] and [email protected]

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Opinion: A Palo Alto business tax and the space-time continuum

by Tom DuBois and Eric Filseth / Contributors /

Uploaded: Fri, May 13, 2022, 6:50 am

How are two lobbying powerhouses able to foretell the impact of a yet-to-be-defined tax measure in Palo Alto? Through a wrinkle in time, the Silicon Valley Leadership Group (SVLG) and the Commercial Real Estate Development Association (NAIOP) opposed the business license tax before it was even defined. NAIOP and SVLG — whose tax-aversion somehow never extends to personal taxes like bridge tolls and parcel assessments — have already flooded our mailboxes and Facebook feeds over it.

A tax on large corporations makes good sense. Why? The region, especially tech and real estate, has prospered spectacularly. According to Joint Venture Silicon Valley, the corporate wealth of Silicon Valley and San Francisco is $14 trillion. By comparison, personal wealth in the area is one-twentieth of that, around $750 billion.

Meanwhile, the Bay Area's unmet needs for public safety, 30,000 unhoused residents and transportation improvements run into the hundreds of billions of dollars. Between taxing corporations or personal wealth, only one source, corporate wealth, has that kind of money.

Where does SVLG stand on taxing large businesses? Well, according to its mailer: "Now's not the right time" (When is?); "It's too big" (The size isn't determined yet); "It'll hurt small businesses" (Small business will certainly be exempted); and "It should benefit businesses" (It should benefit everybody).

Business license taxes are the norm in the Bay Area; Palo Alto is one of the few cities currently without one. Public outreach has been underway since 2015 in the form of public meetings, polls and focus groups. Through these efforts, we have listened and prioritized the values of fairness and ease of enforcement. Polls have shown broad support for a modest contribution by corporations to Palo Alto coffers.

Three critical areas have been identified as underfunded to meet our current and projected needs:

First, restoring and improving city services, notably public safety. For the last two decades the police and fire departments have accounted for about 35% of the city's budget. However, during that time, staffing for both areas fell steadily, down 30% since 2004. Those who live and work in Palo Alto have experienced the erosion, such as reduced traffic enforcement and recent fire station "brownouts."

Yet we also face expanded needs, notably around mental health response, and the growth of organized property-crime tourism. We can't deliver on these things if we continue balancing our books via cuts. All of us, residents, businesses and visitors, rely on public safety services.

Second, we have major transportation work ahead. Separating car, bike and pedestrian traffic from our railway crossings, both to increase safety at some of the state's deadliest crossings and to protect us from looming major transportation-capacity problems, is finally feasible with county and federal funds. But it will require local contributions that a business tax can provide.

Third, we need more services for the unhoused and families without large tech salaries to keep them afloat. Rapid high-wage job growth in Peninsula cities has increased inequality and shrunk the housing stock available for lower-paid workers. Silicon Valley corporations lead the planet in wealth creation, but community investment has fallen short. The need for housing for service workers, those on fixed incomes, and the humanitarian needs of the rising number of people living on sidewalks, in campers, in parks and creeks has grown beyond the ability of tax-paying residents to fund.

The nature of business has changed, and Palo Alto must pivot. Historically, companies made products that generated sales tax for city services. Now, many of our largest corporations generate very little sales tax because their business is information, finance or professional services. Our hotel and sales taxes plummeted during the pandemic. Diversifying our revenue base will make us more resilient for the long term.

No solution is perfect, but we are striving to define an equitable and appropriate business tax to best serve the Palo Alto community.

Our region will be a very different place if it can't sustain communities where workers prefer to live and be, even though the Bay Area is more expensive than elsewhere. Here in Palo Alto we can do our part by adopting a fair, appropriate tax on those companies that can most afford it. Silicon Valley is the corporate envy of the world, but as the saying goes, "The piper must be paid."

We don't need crystal balls, time travel or misinformation. We must take responsibility now and solve these threats to public safety, infrastructure and our most vulnerable neighbors with a financially sound solution for our long-term community health.

Tom DuBois and Eric Filseth are Palo Alto City Council members. They can be reached at [email protected] and [email protected]

Comments

Annette
Registered user
College Terrace
on May 13, 2022 at 8:28 am
Annette, College Terrace
Registered user
on May 13, 2022 at 8:28 am

So much of this makes sense and I would vote for it if it was a special tax rather than a general tax. Per the minutes of the April 25 CC meeting “council voted to direct staff to draft a non-binding resolution to inform the public of council’s intentions regarding the use of Business Tax proceeds,” with the intentions being grade separation and rail safety, affordable housing and homeless programs, public safety, and improvements to University and California Ave business districts.

Key words: non-binding and intentions. This means that the tax could pass and the General Fund could swell but the issues that need funding will continue to be issues that need funding.


Online Name
Registered user
Embarcadero Oaks/Leland
on May 13, 2022 at 8:55 am
Online Name, Embarcadero Oaks/Leland
Registered user
on May 13, 2022 at 8:55 am

Thank you both for calling out the lobbying powerhouses for refusing to pay their fair share while making us, the residents, bear the costs of their members' never ending expansions.

How about also calling out the City Manager and Budget Director for contributing to the confusion of the tax with their confusing "set-in-stone" presentations to CC about revenue projections and Shikada's recent announcement of his "plans" to add 23 more high-level staffers?

Also it's ludicrous that our highly paid city staffers and their gravy train of consultants are incapable of setting up a business registry and tracking the number of employees instead of taking the easy way out and going with a square footage tax.

The same people can't even manage permitting services and simple things like responding to street light outrage reports yet they have NO problem awarding themselves raises and utility rate hikes to fund those raises.

Where's the accountability? Where's the clarity? Where's the oversight?


Citizen
Registered user
College Terrace
on May 13, 2022 at 10:29 am
Citizen , College Terrace
Registered user
on May 13, 2022 at 10:29 am

No thanks guys. No new taxes that will get passed on to consumers dealing with 8% inflation. Tighten your belts and live within your means, City.

Propose a special tax if you really believe it's needed for certain items.

The population is dropping in CA and the Bay Area; not such a great need for frequent Caltrain runs, or costly grade separations.


Annette
Registered user
College Terrace
on May 13, 2022 at 10:31 am
Annette, College Terrace
Registered user
on May 13, 2022 at 10:31 am

As noted by the authors, NAIOP is the Commercial Real Estate Development Association. NAIOP stands for National Association for Industrial and Office Parks. I would love to hear Teddy Roosevelt's comments on those parks.


David Ross
Registered user
Portola Valley
on May 13, 2022 at 10:42 am
David Ross, Portola Valley
Registered user
on May 13, 2022 at 10:42 am

Until 2001 I operated a commercial construction business based in Palo Alto. I always thought it odd that we paid business license taxes in 15 local jurisdictions, but not in our home town.


Anne
Registered user
Midtown
on May 13, 2022 at 12:50 pm
Anne, Midtown
Registered user
on May 13, 2022 at 12:50 pm

Thank you Council Members DuBois and Filseth for this column. Also thanks to the Weekly for printing it.

I have also been watching, for many years, as the Silicon Valley Leadership Group promotes regressive taxes on those who can afford them the least. I've also been watching as the San Jose Mercury has been taken over by corporate interests (Digital First Media) and always parrots and promotes the Silicon Valley Leadership Group agenda.

The special sauce provided by Silicon Valley and Stanford has enriched corporations tremendously and it is time for them to pay their fair share for the impacts they cause.

I'm in favor of the biggest possible business tax we can extract, to deal with all the seemingly intractable problems we face.


Local Resident
Registered user
Community Center
on May 13, 2022 at 1:05 pm
Local Resident, Community Center
Registered user
on May 13, 2022 at 1:05 pm

While prop 13 requires increasing the taxable value of homes when sold but businesses have managed to skirt these revaluations. The result is businesses have been paying a smaller and smaller portion of taxes and the burden has been shifting rather dramatically onto the shoulders of residents who have far less wealth than the corporations. This tax does not fix this issue but does add a business tax which almost every other city on the peninsula already has. I will be voting for this tax.


PaloAltoVoter
Registered user
Crescent Park
on May 13, 2022 at 2:06 pm
PaloAltoVoter, Crescent Park
Registered user
on May 13, 2022 at 2:06 pm

It is not a surprise that big business is already campaigning against a tax. I am happy that small businesses will be exempted. It’s about time that we have such a tax. I will be supporting this wholeheartedly. All the cities around us have a business tax and many are raising theirs. It’s time that the large businesses paid their fair share of city costs.


felix
Registered user
Another Palo Alto neighborhood
on May 13, 2022 at 2:38 pm
felix, Another Palo Alto neighborhood
Registered user
on May 13, 2022 at 2:38 pm

A Palo Alto busniness tax is a no-brainer except to parasites who want to suck the hard earned money out of residents while keeping theirs. The Chamber (not mentioned but also behind egregiouos mailers), the SVLG and NIOP are a bunch of greed-heads.

If voters are swayed by the age-old phony arguements of the entitled, then woe is us. Everyone who is worried about affordable housing, every mom or dad with a kid who crosses railroad tracks to school, or all in town who needs traffic relief and protection from fires and hazardous spills need this tax. Our town needs this tax.

Don't listen to the phony, self-interested BS - Vote for the Business Tax.




Online Name
Registered user
Embarcadero Oaks/Leland
on May 13, 2022 at 2:48 pm
Online Name, Embarcadero Oaks/Leland
Registered user
on May 13, 2022 at 2:48 pm

"While prop 13 requires increasing the taxable value of homes when sold but businesses have managed to skirt these revaluations. The result is businesses have been paying a smaller and smaller portion of taxes and the burden has been shifting rather dramatically onto the shoulders of residents who have far less wealth than the corporations."

Absolutely. And the groups they support like the well-funded YIMBY's, Palo Alto Forward and all their latest incarnations just love to scream about Prob 13 and blame the horrible "NIMBY residents" while never, ever mentioning businesses.


ALB
Registered user
College Terrace
on May 13, 2022 at 3:00 pm
ALB, College Terrace
Registered user
on May 13, 2022 at 3:00 pm

I commend council members Tom DuBois and Eric Filseth for their important piece concerning the proposed business tax. It has been disgraceful IMO that a culture of obstructing the business tax by earlier councils and city managers (Keane) has endured until now. Note that the Chamber of Commerce is against this tax. Palo Alto is the only city without a business tax. I trust this council to be responsible and work to get this passed.
Again, thank you council members Dubois and Filseth for stepping up to elucidate on this critical and long overdue tax.


peter p.
Registered user
Another Palo Alto neighborhood
on May 13, 2022 at 4:27 pm
peter p., Another Palo Alto neighborhood
Registered user
on May 13, 2022 at 4:27 pm

Large businesses contribute to the cost of a city's services and infrastructure. Palo Alto is one of the few cities without a business tax. It would appear to be reasonable to expect large businesses to pay their fair share and therefore it was sad to see the business community attack this proposal before it was actually written.


Annette
Registered user
College Terrace
on May 13, 2022 at 5:35 pm
Annette, College Terrace
Registered user
on May 13, 2022 at 5:35 pm

@ALB, good point about earlier City Councils and City Managers. This issue should have been addressed long ago. The pro-development bent that allowed unmitigated commercial development and low development fees hurt Palo Alto. We've waited a LONG time to break that hold and I also applaud this Council for taking up this issue. That said, I wish this was proposed as a special tax so that we didn't have to trust that the City Manager and the finance team will consistently propose budgets that use the revenue for its intended purposes. Promises are too easily broken and the intended purposes too important to be ignored in favor of special projects, capital improvement projects that are nice but not critical, adding staff positions that are not directly related to the 4 areas this tax is supposed to fund, or paying down our unfunded pension liability.


chris
Registered user
University South
on May 13, 2022 at 5:54 pm
chris, University South
Registered user
on May 13, 2022 at 5:54 pm

It would be lovely if the square footage tax were high enough to incent landlords to convert their property to housing. The remaining commercial property would generate significantly more revenue and the city would get more housing out of the bargain.


community member
Registered user
University South
on May 14, 2022 at 4:42 pm
community member, University South
Registered user
on May 14, 2022 at 4:42 pm

Thanks to Council Members DuBois and Filseth for clear,
well-written message.
Yes. All should pay their fair share.


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