Palo Alto bets on business tax for housing and transportation projects | News

If Palo Alto voters approve a new business tax in November, improving affordable housing and transportation will likely eat up much of the revenue the city collects, the city council agreed Monday.

The council is still fine-tuning the tax measure, which members have been discussing for years and which continues to face widespread opposition from business leaders. The effort progressed further on Monday, when the council reached broad consensus on some of the parameters of the new tax, including the uses of the funding.

During two public hearings[andalongprocessionofvotesthecouncilcoalescedaroundataxmeasurethatroughlymirrorstheonethatwas[andlongprocessionofvotesthecouncilcoalescedaroundataxmeasurethatroughlymirrorstheonethatwas[etd’unelongueprocessiondevotesleconseils’estregroupéautourd’unemesurefiscalequireflèteàpeuprèscellequiaété[andalongprocessionofvotesthecouncilcoalescedaroundataxmeasurethatroughlymirrorstheonethatwasrecommended last month by its finance committee. The tax would exempt all small businesses, defined as those with 5,000 square feet of space or less, as well as supermarkets, hotels and seasonal businesses that have been in operation for less than 90 days.

The council also agreed that the tax rate would likely be $0.10 per square foot or $0.12 per square foot, with the exact amount to be determined after the next ballot. The rate would be phased in over two years, with the first half taking effect immediately after the tax is passed and the second half a year later.

In most cases, the votes were 6 to 1, with Council member Greg Tanaka being the only dissenter. A key exception concerned the question of how the funds were to be used. On this issue, the board voted 4-3, with board members Alison Cormack, Eric Filseth and Tanaka dissenting, to order his polling agency, FM3, to specify in its next poll the four areas where tax revenue would be dedicated: grade separation and railway safety; affordable housing and homelessness; public safety; and improvements to University Avenue and California Avenue.

With the exception of Tanaka, a staunch opponent of the business tax, council largely agreed that housing and transport should feature prominently in the city’s funding plan. But Cormack and Filseth voted against the motion because they felt it was premature to create a fundraising plan without further refining the city’s priorities. Even Cormack, however, suggested the city needs to invest more in transportation projects such as reviving the city’s shuttle program.

Mayor Pat Burt and Councilman Tom DuBois had no such reservations. DuBois proposed the four focus areas, and he and Burt noted that some of these issues had already emerged as significant concerns for the community in past surveys. Burt also argued that allocating local funds for grade separations — redesigning grade crossings so lanes and roads no longer intersect — would allow the city to leverage federal funding and the state that would be needed to complete the complex and expensive projects.

“A lot of the criticism we’ve heard is that we haven’t been clearer to date on the uses,” Burt said. “With the exception of the latter (improvements on University and California avenues), these are what we have identified as our highest priorities.”

DuBois suggested that improving the two downtown thoroughfares is a particularly good use for tax revenue because of the project’s close ties to the business community. However, all four focus areas were previously identified as important, he said.

“They have a connection to the business community and the residents and we have significant, unfunded activity in those areas, said DuBois,

The council discussion came a week after several members of the business community brought their concerns to council about the proposed measure, which they said would hurt local businesses and could drive some out of town. Dan Kostenbauder, vice president of tax policy at Silicon Valley Leadership Group, said a business tax would “increase the cost of occupancy for a tenant and ultimately reduce the rent that businesses would be willing to pay.”

“It would reduce property values ​​and result in lower future property income,” said Kostenbauder, who also read a list of Palo Alto residents who he said agreed with his group’s position. of companies.

Charlie Weidanz, CEO of the Palo Alto Chamber of Commerce, told the board that his organization “regularly hears from our business members how hard it is to make ends meet here in Palo Alto” and said the community ” just can’t afford a new business tax right now.” Tiffany Griego, chief executive of Stanford Research Park, lamented that the city did not conduct an analysis of the economic impacts of a tax, which other jurisdictions have traditionally done before adopting new taxes.

“From our experience, we know that demand in the search park is elastic. Companies large and small assess the cost of doing business and how friendly a city is before making a decision to locate or bring their outlet to Palo Alto,” Griego said.

Burt and Filseth both argued, however, that investing in housing and transportation is essential to sustaining both the city and, more broadly, Silicon Valley. Filseth observed that Silicon Valley has seen an exodus of workers over the past decade, with many of those leaving citing the high cost of housing and diminished quality of life as the two main reasons. And Burt lamented that two powerful industries — tech giants and commercial developers — spoke out against the proposed tax before it was even formulated.

“The Silicon Valley Leadership Group, which represents one of the largest and most successful companies in the world, supported increases in sales taxes, tolls, gas taxes – anything that is regressive and disproportionately taxes people with low and modest incomes,” Burt says. “We really shouldn’t expect them to support this measure, however moderate it may be when it finally passes.

“I still hope that members of our community who had blindly allowed themselves to be used by these large business entities would reconsider.”

Tanaka took the opposite position and argued that innovation has been leaving Palo Alto for years, a trend further accelerated by Covid-19 and the rise of remote working. He cited companies like Tesla and Palantir, which in recent years had moved their headquarters out of Palo Alto. He hinted that by introducing a business tax, the city could destroy its financial base.

“My big concern is that these companies move, what will happen to the taxes they pay and the jobs they will create?” Tanaka said.

In a separate 6-1 vote, with Tanaka dissenting, the council also signaled support for a second measure that would reaffirm the city’s historic practice of transferring gas utility funds. The city suspended the transfers in the last budget due to a legal challenge by resident Miriam Green and a court finding the transfers were an illegal tax. By gaining voter approval, the city hopes to overcome this legal setback and restore the approximately $7 million shortfall in the general fund created by the court ruling.

“It’s a crucial part of funding our services and it’s been a double whammy during the pandemic not being able to access those funds,” Cormack said. “I think the community, based on the poll results, understands that and is ready to… restore that revenue stream to our general fund.”

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