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Economic anxieties complicate Palo Alto's march toward business tax

Original post made on Jun 14, 2022

As Palo Alto prepares to place a business tax to the November ballot, city leaders are bracing for an onslaught of opposition from local corporations, developers and regional organizations.

Read the full story here Web Link posted Tuesday, June 14, 2022, 1:12 AM

Comments (15)

Posted by Annette
a resident of College Terrace
on Jun 14, 2022 at 11:19 am

Annette is a registered user.

I know CC has worked hard on this and I'd like to support it b/c businesses, especially the largest ones, should contribute to City services and infrastructure. But it really doesn't matter what this CC would "like" to spend the revenue on b/c a general tax is non-binding. And in this city, that's a problem. I urge CC to put forward a ballot measure for a specifc tax. More votes will be needed to pass it, but the revenue from the tax will be for specific uses and not subject to "prevailing winds".


Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jun 14, 2022 at 1:01 pm

Online Name is a registered user.

I think the city did all it could do to ensure that the business tax would be so confusing that it would fail -- just as the lobbyists wanted it to do. Their conflating the "Business" tax with the Gas Utility Transfer tax is a money-grab designed to muddy the waters and to enshrine their continued practice of ripping off Palo Alto to the tune of $20,000,000 each and every year. -- AND to avoid paying us the court-ordered settlement in the Miriam Green lawsuit.

Given the city's budget and huge gravy train of consultants, it's inability to construct and maintain a business registry is inexcusable -- and a bad joke.

That being said, we need a CLEAN business tax on the commuters who over-run us, NOT on resident-serving retail. But they knew that -- and didn't provide it. Shameful.


Posted by Gale Johnson
a resident of Adobe-Meadow
on Jun 14, 2022 at 1:13 pm

Gale Johnson is a registered user.

Nice try Mayor, but what do you think business leaders will say during those interviews with CC members this week? I think a few adjustments to the measure that will be proposed for the November ballot, could push it over the top for the 'pro' taxers. I think the comments about the businesses not being supportive of 'affordable housing' is basically correct. Individuals who work for those businesses/companies might be devout supporters of affordable housing but it's the corporate leaders looking out after their bottom lines that tacitly oppose it by pushing hard against a business tax.

My suggested adjustments to the measure to give it a better chance of passing with only a majority vote: Increase the business/company physical size to 20K-30K square feet, include a labor force size (number of employees) requirement, and an annual gross income, for the companies that would be affected. I know, I know, that would probably take time to study and poll, so that part would have to be left up to consultants and pollsters...and they don't come cheap. Let me know if you know of any pro bono work being done by any of them. I'm not worried about missing any of your calls, emails, or text messages about pro bono responders that you know.


Posted by PaloAltoVoter
a resident of Crescent Park
on Jun 14, 2022 at 1:57 pm

PaloAltoVoter is a registered user.

Don’t back off council! The residents will support a tax on business. It’s far beyond their time for businesses to pay their fair share. A lot of Palo Alto’s success has created impacts - a huge daytime population, a regional mall that is a crime magnet, and some of the highest commercial rents on the peninsula. Many of the tech companies had record profits throughout the pandemic. Paying about 1% of their office rent as a tax to help improve our community is something they should not fight. And if they do I am confident in our residents seeing through their arguments and passing it anyways. Don’t cave council! Let’s get this on the ballot and pass it!


Posted by tmp
a resident of Downtown North
on Jun 14, 2022 at 2:50 pm

tmp is a registered user.

This is a great tax idea that will help fund needed services in the city. These large businesses have benefitted to an extraordinary level the past few years while they pay little towards the running of the city. They rely on city provided police, fire, roads, water, electricity and other services. It is time for them to help fund them.

Stores and small business are exempt. This is not a difficult tax to figure out. It is easily based on the square footage of the business. Given the exorbitant rents charged per square footage around here this very small addition will not be a problem. They just don't want to be good citizens of the city and pay for what they use.

Further, this tax should go to the general fund. The needs of the city change over time and what the city council and manager do is try to manage the funds and allocate them to programs as needs change. As city members we may not all agree that a new parking structure, rail separation, low income housing or a sports center is what needs funding this year, but we all have the right to run for city council or voice our opinion. So once city councils are elected they do the best they can to allocate these funds, and they can never please all of the people, all of the time.

What we, as city residents, can do is look to who in the city is paying their fair share towards upkeep and who is not and fix that issue. Every other city in this area has a business tax - we need one also. This tax needs to be passed.


Posted by Richard
a resident of Old Palo Alto
on Jun 14, 2022 at 5:48 pm

Richard is a registered user.

As proposed as a tax for the general fund I won't support this tax. My opposition is not because of the business lobby's claim that "now is not the time." In their view no time is the time. I think certain services really need bolstering, like police, fire and having streets that don't look like they have been run over by tanks (have you ridden on Churchill Avenue lately; riding a bike is akin to working a jack hammer). I would support the tax if it were so targeted. These are all services that businesses use so it is reasonable for them to help pay for them. Yes, I realize that it would take more votes but a tax for the general fund, but in view of the seemingly large "city staff" and consultants, and the bureaucracy they have created, with the support of the city council, I don't trust the council to use general funds for the most needed projects.


Posted by Deborah
a resident of Evergreen Park
on Jun 14, 2022 at 7:05 pm

Deborah is a registered user.

How about a 2% tax on all real estate transactions? San Francisco now has that. So does the entire state of Washington. If you've got $15 million for a house, seems to me 2% for the city on top of that is chump change.


Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jun 14, 2022 at 9:27 pm

Online Name is a registered user.

Residents are already paying a County Transfer Tax and a City Transfer tax plus CA cap gains and Federal Capital Gains tax plus whatever clever hidden fees like transfor recording tax etc.

How dies a 2% tax on ALL reak estate transactions equate to a BUSINESS tax? Actually silly me; I'm sure our city spinners will work hard to convince us that it is a business tax.


Posted by anon1234
a resident of College Terrace
on Jun 15, 2022 at 2:25 am

anon1234 is a registered user.

Please don’t delay this long delayed tax for any reason ! We are internet of the only cities that currently does NOT tax big corporations.
Big corporations may do a lot of good but they also bring a lot of issues that government needs funds to address.
Yes please get the details right but by no means delay a tax on big corporations to help pay for infrastructure, housing, parks, libraries etc …etc….there an amazing amount corporate wealth in and passing through this town; high time to enact a business tax now!


Posted by anon1234
a resident of College Terrace
on Jun 15, 2022 at 2:28 am

anon1234 is a registered user.

Sorry second line should be
We are one of the only cities…


Posted by mjh
a resident of College Terrace
on Jun 15, 2022 at 9:45 pm

mjh is a registered user.

Not to mention how the commercial sector has benefited from Prop 13 loopholes for commercial real estate transactions so that during the interim years city revenue generated by that sector’s property taxes has plunged from approximately 50% to 25%, on a continuing downward trajectory.


Posted by James
a resident of Midtown
on Jun 15, 2022 at 10:18 pm

James is a registered user.

City general fund spending, resident population, and average per person:

Palo Alto $247M, 68572, $3602
Mountain View $165M, 82376, $2003
Cupertino $93M, 60381, $1540
Menlo Park $80M, 33780, $2368
Los Altos $51M, 31625, $1612

General fund expenditures exclude utilities. So they are comparable.

Seems Palo Alto government is already spending far more, both in total and in average per resident, than surrounding cities. Where did the money go? Personally I don't feel that Palo Alto residents enjoy more than double the amenities of Los Altos, or twice better qualities of service.


Posted by Eric Filseth
a resident of Downtown North
on Jun 16, 2022 at 11:04 am

Eric Filseth is a registered user.

I certainly agree with @James’ intent, but getting apples-to-apples comparison data on these things is notoriously hard. For example, the City of Menlo Park has no Fire Department, which is $41M/yr in Palo Alto. Instead, Menlo Park’s fire and emergency medical services come from a separate Fire Prevention District, which is funded directly from property taxes and doesn’t appear in the City’s General Fund at all. If we did the same thing, our General Fund Expense accounting would be $41M lower. That’s a big swing.

Another example: most cities charge fees for at least some of their services. For example, Palo Alto’s Development Services Department posts $22M/yr in General Fund Expenses, but it also recovers $18M/yr of that in fees. We count that as $22M in expense, but should we really count $4M instead? If we cut Development Services in half, then per-capita, do we save $11M/68572, or $2M/68572? Different cities have different cost-recovery ratios too.

This is by no means to argue we shouldn’t try to get these numbers; just, it’s tricky to get really proper comparisons because there’s a ton of devil-in-the-details stuff, and how it’s all reported varies between cities and departments. The best approach might be to really drill down on individual departments and try to apples-to-apples it one function at a time.

I myself believe we generally spend more per capita than other cities, but in terms of what really matters I don’t know how much. We certainly do some things differently. For example, we run our own ambulance services, nearby cities outsource to private corporations. We have five libraries, Menlo Park has two. And so on. But is it all worth it? That remains hard to answer definitively.


Posted by James
a resident of Midtown
on Jun 17, 2022 at 9:53 am

James is a registered user.

I'm not an expert in municipal accounting practices. But if I were an leader of Chamber of Commerce or the other organizations against the tax I'd get an expert to compare the books of Palo Alto and other cities, to convince Palo Alto residents on why the tax is not a good idea.


Posted by ArtL
a resident of Barron Park
on Jun 18, 2022 at 8:54 am

ArtL is a registered user.

The Council is trying to 'have their cake and eat it too' with their proposal. If the Council were clearly focused on using the funds for the purposes they proposed and promised, the Council would have proposed three special taxes: one for affordable housing, one for public safety, and a third on grade separation. That way, they would know for sure the community's priorities. As it stands, after the next Council election there will be a new Council WITHOUT ANY constraint on their allocations of the tax funds. I would expect the new Council going forward would feel it would be within their purview - actually they would feel liberated -to do a switcheroo and move the money into other categories.


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