News

Palo Alto hopes for last-ditch deal on business tax

City Council sets special meeting for Wednesday, leaves opening for compromise with opponents

SAP is one of about 150 companies at Stanford Research Park. Photo by Lloyd Lee.

With the clock ticking toward the final deadline, the Palo Alto City Council deferred yet again its decision on creating a business tax in hopes of reaching a last-second compromise with a coalition of opponents.

The council has until this Friday, Aug. 12, to submit to Santa Clara County a resolution that would place a business tax on the November ballot. To meet this deadline, council members voted to schedule a special meeting for Wednesday night when they will take final action on the business tax measure. They also will take action on a separate measure that would reaffirm the city's historic practice of transferring funds from the gas utility to the general fund, a policy that was halted by a lawsuit from resident Miriam Green.

Council members have been discussing the business tax for more than four years and have had three opportunities prior to Monday's meeting to place the item on the ballot, opting to punt each time. At each meeting, council members expressed concerns about opposition from the business community and followed suit by revising the business tax proposal in hopes of getting closer to a consensus.

That pattern continued on Monday night, with the council adding another provision to the proposed tax: a cap of $1 million on how much any business would pay. Yet despite repeated attempts to negotiate a truce with the business coalition, there was little sign on Monday that any compromise will be reached. Leaders of the business coalition, which consists of the Silicon Valley Leadership Group and the Palo Alto Chamber of Commerce, were decidedly noncommittal about changing their positions. Meanwhile, several council members indicated that their patience has reached its limit.

"We have bended over backward to be accommodating, with very little receptivity," said council member Tom DuBois said, who is serving on an ad hoc committee that has been trying to negotiate with the business community.

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He pointed to the challenges of negotiating with opponents, who he said do not appear to be aligned internally. Some of the partners in the business group, he argued, likely would not support any level of tax.

DuBois supported moving ahead with a vote to place a business tax on the November ballot along the lines that the council supported at its previous discussion on Aug. 1. The tax would have a rate of 11 cents per square foot and exempt all businesses with 10,000 square feet of space or less.

Vice Mayor Lydia Kou and council member Greer Stone both agreed and suggested getting to a decision sooner rather than later. Mayor Pat Burt and council member Eric Filseth, who both served on the ad hoc committee, opted to give businesses a last chance to come to the table even as they acknowledged the long odds of reaching a deal. At Burt's urging, the council voted 5-2, with council members Alison Cormack and Greg Tanaka dissenting, to schedule a special meeting for Wednesday night so that the council has one last chance to get to a compromise and avoid an expensive campaign against the tax.

Burt pointed to recent polling results showing a potentially close vote on the business tax. He also said that business leaders had indicated that if the city doesn't reduce the proposed tax rate to 6 cents per square foot, their coalition would campaign to defeat both the business tax and the gas-transfer measure.

The real choice for the council, Burt said, is "not what we want but we can achieve."

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"I have been one of the strongest advocates of this business tax, and I'm willing to consider a compromise because we are in jeopardy of having nothing and not being able to go to the voters for years if we fail," Burt said. "It's not a bird in the hand versus two in the bush. It's a bird in the hand versus a rattlesnake in the bush."

But Burt's exchange with leaders of the opposing coalition left some of his colleagues feeling discouraged about a compromise. Dan Kostenbauder, vice president for tax policy at the Silicon Valley Leadership Group and Charlie Weidanz, president of the Palo Alto Chamber of Commerce, both spoke out against the proposal and urged the council not to advance the measure. Kostenbauder repeatedly rebuffed accusations by Burt and his colleagues that the business community has not been negotiating in good faith.

"It is unfortunate that the council only engaged in serious conversations with members of the business community after the last round of polling showed deteriorating support for the level of business tax that the council had been considering," Kostenbauder said.

When Burt repeatedly asked him and Weidanz whether they would be willing to continue negotiating, neither would commit to any meaningful changes to the business group's proposal, which would net about $7.1 million in annual revenues.

"We would be willing to try to have those conversations but without setting any expectations that the numbers will change from where they are," Kostenbauder said.

Weidanz was also reluctant to commit to further revisions and suggested that the position of his organization's members appeared to be fixed as of Monday afternoon. He argued that Palo Alto's proposed business tax rate far exceeds what other communities charge.

"We want to see Palo Alto remain competitive and a desired place for businesses to locate when compared to neighboring jurisdictions and we hope the council takes these pleas from businesses seriously and allows businesses to concentrate on the challenges of surviving this difficult period," Weidanz said.

Palo Alto Chamber of Commerce CEO Charlie Weidanz is part of a coalition of business leaders that is opposing the city's push to adopt a business tax. Photo by Gennady Sheyner.

Some residents and council members were put off by what they characterized as an uncompromising position from the coalition. Kou called their position "very frustrating" and urged her colleagues not to let representatives of major corporations dictate decisions that affect the local quality of life.

"What I heard is that the Silicon Valley Leadership Group, as well as the Chamber of Commerce, has decided and declared that they are overseers of Palo Alto residents' quality of life," Kou said.

Stone said he was surprised by the exchange between Burt and the business leaders and the reluctance of the latter to negotiate. The council's initial proposal for a business tax would have raised about $45 million annually; the current one would raise about $16.5 million and have more exemptions and a lower rate than was originally contemplated. Stone argued that the council had compromised enough and should move ahead with the tax.

"I can't think of anyone I talked to who has been really in opposition to the business tax beyond the business community," Stone said. "I understand that. Nobody wants to pay taxes but taxes are going to pay for these critical services."

Though the council majority agreed to punt the final decision to Wednesday, DuBois, Kou and Stone all voted against making further revisions to the business tax at that time. The council will also consider on Wednesday whether to place the gas-transfer measure on the November ballot.

Cormack, who supports the utility measure, has consistently advocated for a lower rate on the business tax. She was more optimistic about getting to an agreement with business leaders and said the delay in the council's vote creates a "possibility for a comprehensive agreement."

"Nobody wants this to turn into an ugly fight," Cormack said.

Others, however, saw the position of the business community as an overreach. Businesses benefit greatly from being located in Palo Alto, said Julie Lythcott-Haims, who is running for a council seat. Thus, they should contribute to helping the city make the needed investments in services and infrastructure. Under the council's plan, the money raised from the business tax would be dedicated to three areas: affordable housing, improvements to rail crossings and public safety.

"These are VCs (venture capitalists) and tech companies and big retail and they can afford it," Lythcott-Haims said. "We need a proper business tax and not a bake sale to raise the funds that our city desperately needs and that our citizens deserve."

Nadia Naik, a proponent of rail improvements, said many in the community feel angry about large companies not paying their fair share for city services. Resident Winter Dellenbach urged the council not to make any more concessions to the business community.

"This isn't a negotiation. This is a holdup," Dellenbach said.

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Gennady Sheyner
 
Gennady Sheyner covers the City Hall beat in Palo Alto as well as regional politics, with a special focus on housing and transportation. Before joining the Palo Alto Weekly/PaloAltoOnline.com in 2008, he covered breaking news and local politics for the Waterbury Republican-American, a daily newspaper in Connecticut. Read more >>

Follow Palo Alto Online and the Palo Alto Weekly on Twitter @paloaltoweekly, Facebook and on Instagram @paloaltoonline for breaking news, local events, photos, videos and more.

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Palo Alto hopes for last-ditch deal on business tax

City Council sets special meeting for Wednesday, leaves opening for compromise with opponents

by / Palo Alto Weekly

Uploaded: Mon, Aug 8, 2022, 11:29 pm

With the clock ticking toward the final deadline, the Palo Alto City Council deferred yet again its decision on creating a business tax in hopes of reaching a last-second compromise with a coalition of opponents.

The council has until this Friday, Aug. 12, to submit to Santa Clara County a resolution that would place a business tax on the November ballot. To meet this deadline, council members voted to schedule a special meeting for Wednesday night when they will take final action on the business tax measure. They also will take action on a separate measure that would reaffirm the city's historic practice of transferring funds from the gas utility to the general fund, a policy that was halted by a lawsuit from resident Miriam Green.

Council members have been discussing the business tax for more than four years and have had three opportunities prior to Monday's meeting to place the item on the ballot, opting to punt each time. At each meeting, council members expressed concerns about opposition from the business community and followed suit by revising the business tax proposal in hopes of getting closer to a consensus.

That pattern continued on Monday night, with the council adding another provision to the proposed tax: a cap of $1 million on how much any business would pay. Yet despite repeated attempts to negotiate a truce with the business coalition, there was little sign on Monday that any compromise will be reached. Leaders of the business coalition, which consists of the Silicon Valley Leadership Group and the Palo Alto Chamber of Commerce, were decidedly noncommittal about changing their positions. Meanwhile, several council members indicated that their patience has reached its limit.

"We have bended over backward to be accommodating, with very little receptivity," said council member Tom DuBois said, who is serving on an ad hoc committee that has been trying to negotiate with the business community.

He pointed to the challenges of negotiating with opponents, who he said do not appear to be aligned internally. Some of the partners in the business group, he argued, likely would not support any level of tax.

DuBois supported moving ahead with a vote to place a business tax on the November ballot along the lines that the council supported at its previous discussion on Aug. 1. The tax would have a rate of 11 cents per square foot and exempt all businesses with 10,000 square feet of space or less.

Vice Mayor Lydia Kou and council member Greer Stone both agreed and suggested getting to a decision sooner rather than later. Mayor Pat Burt and council member Eric Filseth, who both served on the ad hoc committee, opted to give businesses a last chance to come to the table even as they acknowledged the long odds of reaching a deal. At Burt's urging, the council voted 5-2, with council members Alison Cormack and Greg Tanaka dissenting, to schedule a special meeting for Wednesday night so that the council has one last chance to get to a compromise and avoid an expensive campaign against the tax.

Burt pointed to recent polling results showing a potentially close vote on the business tax. He also said that business leaders had indicated that if the city doesn't reduce the proposed tax rate to 6 cents per square foot, their coalition would campaign to defeat both the business tax and the gas-transfer measure.

The real choice for the council, Burt said, is "not what we want but we can achieve."

"I have been one of the strongest advocates of this business tax, and I'm willing to consider a compromise because we are in jeopardy of having nothing and not being able to go to the voters for years if we fail," Burt said. "It's not a bird in the hand versus two in the bush. It's a bird in the hand versus a rattlesnake in the bush."

But Burt's exchange with leaders of the opposing coalition left some of his colleagues feeling discouraged about a compromise. Dan Kostenbauder, vice president for tax policy at the Silicon Valley Leadership Group and Charlie Weidanz, president of the Palo Alto Chamber of Commerce, both spoke out against the proposal and urged the council not to advance the measure. Kostenbauder repeatedly rebuffed accusations by Burt and his colleagues that the business community has not been negotiating in good faith.

"It is unfortunate that the council only engaged in serious conversations with members of the business community after the last round of polling showed deteriorating support for the level of business tax that the council had been considering," Kostenbauder said.

When Burt repeatedly asked him and Weidanz whether they would be willing to continue negotiating, neither would commit to any meaningful changes to the business group's proposal, which would net about $7.1 million in annual revenues.

"We would be willing to try to have those conversations but without setting any expectations that the numbers will change from where they are," Kostenbauder said.

Weidanz was also reluctant to commit to further revisions and suggested that the position of his organization's members appeared to be fixed as of Monday afternoon. He argued that Palo Alto's proposed business tax rate far exceeds what other communities charge.

"We want to see Palo Alto remain competitive and a desired place for businesses to locate when compared to neighboring jurisdictions and we hope the council takes these pleas from businesses seriously and allows businesses to concentrate on the challenges of surviving this difficult period," Weidanz said.

Some residents and council members were put off by what they characterized as an uncompromising position from the coalition. Kou called their position "very frustrating" and urged her colleagues not to let representatives of major corporations dictate decisions that affect the local quality of life.

"What I heard is that the Silicon Valley Leadership Group, as well as the Chamber of Commerce, has decided and declared that they are overseers of Palo Alto residents' quality of life," Kou said.

Stone said he was surprised by the exchange between Burt and the business leaders and the reluctance of the latter to negotiate. The council's initial proposal for a business tax would have raised about $45 million annually; the current one would raise about $16.5 million and have more exemptions and a lower rate than was originally contemplated. Stone argued that the council had compromised enough and should move ahead with the tax.

"I can't think of anyone I talked to who has been really in opposition to the business tax beyond the business community," Stone said. "I understand that. Nobody wants to pay taxes but taxes are going to pay for these critical services."

Though the council majority agreed to punt the final decision to Wednesday, DuBois, Kou and Stone all voted against making further revisions to the business tax at that time. The council will also consider on Wednesday whether to place the gas-transfer measure on the November ballot.

Cormack, who supports the utility measure, has consistently advocated for a lower rate on the business tax. She was more optimistic about getting to an agreement with business leaders and said the delay in the council's vote creates a "possibility for a comprehensive agreement."

"Nobody wants this to turn into an ugly fight," Cormack said.

Others, however, saw the position of the business community as an overreach. Businesses benefit greatly from being located in Palo Alto, said Julie Lythcott-Haims, who is running for a council seat. Thus, they should contribute to helping the city make the needed investments in services and infrastructure. Under the council's plan, the money raised from the business tax would be dedicated to three areas: affordable housing, improvements to rail crossings and public safety.

"These are VCs (venture capitalists) and tech companies and big retail and they can afford it," Lythcott-Haims said. "We need a proper business tax and not a bake sale to raise the funds that our city desperately needs and that our citizens deserve."

Nadia Naik, a proponent of rail improvements, said many in the community feel angry about large companies not paying their fair share for city services. Resident Winter Dellenbach urged the council not to make any more concessions to the business community.

"This isn't a negotiation. This is a holdup," Dellenbach said.

Comments

Annette
Registered user
College Terrace
on Aug 9, 2022 at 12:01 pm
Annette, College Terrace
Registered user
on Aug 9, 2022 at 12:01 pm

We’ve been building towards this denouement for years. The community of big businesses has grown accustomed to getting its way here. Past Councils can be *thanked* for this. Now we want them to simply pay their fair share of the cost of the infrastructure they use and they object. And threaten an “anti” campaign. We’ve seen this before with threats of a lawsuit (Hotel President, Foothills Park, Castilleja). If the other side isn’t negotiating in good faith is the City bound to concessions made to date or can it go forward with a meaningful business tax that will yield the revenue projections stated at the beginning of this effort? I believe the number was $45 million. Sure, the business heavies will push back and launch a vigorous and no doubt vicious campaign. So what? That’s their prerogative. Let the voters decide if they should continue to have a free pass or pay their fair share.


Gale Johnson
Registered user
Adobe-Meadow
on Aug 9, 2022 at 3:42 pm
Gale Johnson, Adobe-Meadow
Registered user
on Aug 9, 2022 at 3:42 pm

I come down on the side of a business tax, in whatever the per square foot range is, that would yield the latest CC's goal to raise $16,500,000 to support our budget. I'm pretty sure this will end up on the ballot for voters to decide. I thank all the council members who have put time in on this issue. I also understand the reason for the opposition. The spokespersons for big businesses are just following marching orders from their CEO's, and the subservient organizations are toeing the line also, because they know where their funding comes from. They're smart people and doing their jobs, but Palo Alto is also blessed with thousands of smart people (residents) who see our infrastructure crumbling around us and they see the benefits companies get from having a Palo Alto address and being able to have all the benefits of infrastructure and utilities that we provide.

Okay, now to the point of how to spend the money! Maybe $2 million to affordable housing, just to show good faith, but the fact is that it will take hundreds of millions to make a dent in it. The bulk of it should go towards hard infrastructure projects that help all residents. The rail crossings are a regional problem and that needs to be addressed at a regional, state, and federal level. It's a region where thousands of commuters live and need those crossings to make their commutes easier and shorter. Now we're down to the homeless and climate change issues. My priority pick is for the homeless. Some money should go into making residents aware of things they can do to have an impact on climate change, but that shouldn't cover a fiber optics network which would only serve the people who could afford it. I'll be happy to suffer longer download times, and streaming capabilities if it could get one more homeless person off the streets.


community member
Registered user
University South
on Aug 9, 2022 at 7:58 pm
community member, University South
Registered user
on Aug 9, 2022 at 7:58 pm

Which are the influential businesses on the Chamber?
Stanford? Amazon? HP? Tesla?
I searched their website and they hide any real information
so I gave up in frustration.


Online Name
Registered user
Embarcadero Oaks/Leland
on Aug 9, 2022 at 11:55 pm
Online Name, Embarcadero Oaks/Leland
Registered user
on Aug 9, 2022 at 11:55 pm

"When Burt repeatedly asked him and Weidanz whether they would be willing to continue negotiating, neither would commit to any meaningful changes to the business group's proposal, which would net about $7.1 million in annual revenues."

I heard Burt repeatedly ask Weidanz about willingness to negotiate in "good faith" -- a phrase Weidanz objected to repeatedly and so aggressively I kept hoping that Burt would say he kept using the phrase "good faith" because Weidanz was obviously unclear on the concept. Instead he groveled, effectively begging for a meeting unlikely to be productive.

I'm from the East Coast. I like plain talk -- about the costs WE pay to support business that hurt our restaurants with their own cafeterias, by not supporting crime prevention that protect their stores -- how many times has the Apple Store, for example, been robbed and at what cost to the city??

Winter Dellerbach's remarks about how much the CC gave away were classic.


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