After seeing negotiations with the business community go awry, the Palo Alto city council pressed on Monday with plans to impose a business tax on the November ballot.
But in doing so, the council agreed to amend the tax code to exempt all businesses with less than 10,000 square feet of space. This is a change that effectively exempts all small retailers from the tax. Council members also moved away from previous proposals to set fees at either $0.06 or 0.12 cents depending on the size of the business. We changed it and moved to set a price of $0.11 per square foot.
The council also left the door slightly open for last-second changes based on a potential agreement with a coalition of business groups opposing the tax. , suggested that it was still possible for the legislature to fine-tune the proposal before the final resolution was adopted on August 8, the last meeting of the legislature before the county’s Aug. 12 deadline.
Without startling progress, the council’s actions could lead Palo Alto voters to raise about $15 million a year in tax measures that will be used to fund public safety, transportation and affordable housing. means to be complicit in The council voted her 5 to 2, with council members Alison Cormack and Greg Tanaka dissenting and supporting the amendment based on recommendations from the special committee.
Three members of the commission — Mayor Pat Bart, City Councilmen Tom DuBois and Eric Filces — argued Monday that the proposed tax would have little impact on large businesses, amounting to about 1% of rents. . The latest revision, which raised the standard for tax-free businesses from 5,000 square feet to 10,000 square feet, is aimed at shielding nearly all small and medium-sized retailers from the new tax.
DuBois noted that the higher exemption would exclude more than 50% of Palo Alto businesses (and all small businesses). Philses agreed.
“At 5,000 square feet, it exempts most restaurants and most small businesses in town, but there are also quite a few community service retailers in the 5,000 to 10,000 square foot range,” Filseth said. , Hassett Hardware, Palo Alto Bicycles, and Mike’s Bikes as examples. “We thought 10,000 square feet was a better target.”
However, there was no indication that the amendment would bring the council closer to a compromise with a coalition of business leaders in the group, including the Silicon Valley Leadership Group, the Palo Alto Chamber of Commerce and the NAIOP, who are opposing the new tax. Silicon Valley, a group representing commercial developers. Dan Costenbauder, vice president of tax policy at the Silicon Valley Leadership Group, wrote a letter ahead of Monday’s debate, arguing that Palo Alto’s taxes are “disproportionately higher than business taxes in neighboring communities.” submitted to the council.
In his letter, he said Sunnyvale limits the amount of taxes companies pay to less than $14,000, while San Jose limits them to less than $167,000. But Palo Alto’s proposed tax has no cap of any kind. This creates a “significantly higher tax burden”.
One of the companies opposing the tax is Maxar Technology, a manufacturer of satellites and other space technology and the parent company of Space Systems Loral, which has a manufacturing facility at Fabian Way.
Karen Cox, vice president of government relations and public policy at Maxar Technologies, said the tax is “particularly burdensome for manufacturing, industrial, and research and development facilities, often taking up substantial square footage disproportionately to their revenue streams.” ,” he argued. or economic impact. ”
“For example, we build large satellite, robotics, and spacecraft systems that require significant square footage. The same is true for many of our research facilities in Palo Alto. Calculations based on square footage under operation put us at a disadvantage: These important sectors of the city’s economy could be encouraged to move elsewhere,” Cox wrote.
The majority of speakers at Monday’s conference fully supported the tax effort, noting it was unusual for Palo Alto not to have a business tax. Alex Komsa of the City Council called the council’s tax proposal “very progressive and very generous to businesses.” He noted that local businesses have faced rent increases of more than 5% annually over the past few decades, a factor that far outweighs the impact of the new tax.
Mayor Pat Bart agreed, suggesting that the notion that a 1% increase in costs would dictate whether a business stays in Palo Alto “doesn’t add up from a practical standpoint.”
He also stressed the importance of raising funds for three tax-covered areas, particularly affordable housing. We don’t have anywhere near the resources needed to meet state mandates to build below-market housing.
Bart characterized the latest version of the business tax as a “compromise.”
“I think we’re taking a balanced approach, and I think we’ll continue to have reasonable steps to meet the really important needs of the community,” Bart said.
Other residents noted the need to generate income for flyovers, redesigning railroad crossings so that the tracks do not cross roads. Palo Alto is currently planning a flyover at the intersection of Churchill Avenue, East He Meadow Drive, and Charleston Road. The project will cost hundreds of millions of dollars. Some of the funding for class separation is expected to come from Bill B, the Santa Clara County tax measure voters approved in 2016, and other sources, but local funding will also be important. Chair of the Extended Community Advisory Board, a group that analyzed options for class separation.
“Pursuing federal funding to match Bill B’s budget requires local funding for flyovers, and this tax will create a safer environment for cities and keep trains free for cars, pedestrians, and traffic. It helps us achieve our long-term goal of clearly separating from transportation: bikes,” said Naik, who speaks as an individual rather than representing the group.
Keith Reckdahl notes that a generation ago, city taxes were split evenly between residents and businesses. Today, residents pay the majority of taxes. The new business tax won’t even come close to restoring parity, he said.
“If businesses are forced out of Palo Alto, it’s because of the landlord’s rent increase, not because of this tiny tax,” Reckdahl, who serves on the Planned Transportation Commission, said privately.
Tanaka and Cormack continued to oppose the tax, albeit for different reasons. Cormac was open to the idea of a business tax, but insisted on a low tax rate of about $0.05 per square foot. there will be less opposition to
Tanaka was adamantly opposed to any attempt to introduce a business tax, arguing it would harm the local economy. He claimed it wasn’t necessary.
“We have to spend within our means,” Tanaka said.
