Revisions to Tax Proposal Fail to Sway Business Leaders | News

Palo Alto’s elected leaders have yet to finalize the details of the city’s proposed business tax, but campaigns for and against the measure are already in full swing.

On one side are City Council members who say the measure is necessary to restore services and advance major transportation projects and the construction of affordable housing. On the other side are business leaders who claim the new tax would hurt the local economy and drive some local businesses out of town or, worse, out of business.

Representatives from the two sides met last month in hopes of resolving differences, according to Mayor Pat Burt, who along with Councilman Tom DuBois represented the city in negotiations with a new group calling itself Palo Alto Community and Business. Alliance. . The group includes the Silicon Valley Leadership Group, the Palo Alto Chamber of Commerce, and NAIOP Silicon Valley, which represents commercial developers.

Neither side walked away completely satisfied. Recapping negotiations at the June 20 council meeting, Burt said the business group proposed a list of demands, including a much lower tax rate, and refused to consider any city alternatives.

“They refused to agree to changes other than what they had filed as demands the week before,” Burt said.

Burt said he was “surprised” that the group hadn’t moved an inch from their starting positions and had “essentially issued an edict and a demand that if we didn’t do what they demanded, they would exercise their power to use resources nearly unlimited efforts to defeat what we believe is in the best interest of our community, our residents and our businesses.”

Business leaders, for their part, have indicated they remain adamantly opposed to the city’s effort. Asked this week about recent negotiations, Silicon Valley Leadership Group and the Palo Alto Chamber of Commerce issued a joint statement calling the business tax “an unfortunate example of the wrong policy at the wrong time.”

“While we support the ultimate goal of ensuring a better future for Palo Alto, the current proposed tax would have a crippling effect on the local economy by making Palo Alto a much more expensive place to do business,” the statement read. June 6th.

But even despite the antagonistic positions, the gap between the two sides has narrowed. In a concession to the business community, the council agreed last month to revise its proposal and create a lower rate of 6 cents per square foot for businesses between 5,000 and 20,000 square feet, and fully exempt those with less 5,000 square feet. That’s a marked change from earlier this year, when the council was considering a rate of 15 cents per square foot for all businesses with more than 5,000 square feet of space.

Council members also agreed last month to apply only half this tax rate for the first 24 months, giving businesses time to adjust. And in another change, the council agreed to accept a 35-year expiration date and remove a previous provision that would have allowed the tax rate on the rise in the consumer price index to carry over from one year to the next.

The measures aim to stifle some of the business group’s opposition and counter some of its campaign claims. Even with the addition of the expiration date, the group’s website,, continues to characterize the Palo Alto proposal as a “tax forever.”

The business coalition has consistently argued that this is the wrong time for a business tax, a point critics of the proposed business tax have been making regularly for more than five years, but which has taken on particular relevance during the economic downturn that accompanied the COVID-19 Pandemic. Charlie Weidanz, executive director of the Palo Alto Chamber of Commerce, argued in a June 13 discussion that the local business community is “still feeling the effects of the pandemic and has not been restored to its pre-pandemic level.”

“Business owners are still finding it difficult to make ends meet and simply cannot afford a business tax at the moment,” Weidanz told the council.

However, in recent conversations with the city, business leaders have also made it clear that their opposition to the tax is not unqualified. The Silicon Valley Leadership Group and the Chamber of Commerce said in their joint statement this week that the business coalition “presented a credible alternative that would protect small and medium-sized businesses, provide stability so businesses can forecast future payouts, and make larger companies pay a higher share, comparable to rates in most neighboring Silicon Valley communities.”

“The credible alternative includes a lower monthly rate per square foot, a larger square foot exemption, a cap on payment by any business, and a reduced scale increase,” the group said.

Some of these proposals had previously been presented in public meetings by members of the group. Dan Kostenbauder, vice president for tax policy at the Silicon Valley Leadership Group, urged the council at the June 13 meeting to consider exempting the first 20,000 square feet of any business. Although he said his group opposes the tax, he believes the exemption would bring the local measure more in line with taxes in other cities in the region.

“We wish they had contacted us earlier in their process and wanted to share our thoughts on the parameters of a business tax that would create a prosperous and competitive Palo Alto whose tax burdens are aligned with other communities on the peninsula,” Kostenbauder said.

The group’s biggest suggestions are unlikely to end up on the measure, which the council plans to formally place on the ballot on Aug. 1, its first meeting after the summer break. Burt noted at the June 20 council meeting that based on the suggested tax rate, the measure “would have fallen far short of what we have identified as our needs and what we have discussed as what we believe would be a fair and appropriate tax.” “. .”

DuBois agreed, attributing the business group’s failure to consider alternative proposals from the city to the diversity of interests represented by the alliance. Some members, he said, did not want to accept any taxes. Other members had different views on what parameters they could support for a new tax.

“I think it was kind of a flawed process in a lot of ways and that really hampered our ability to get answers,” DuBois said during the June 20 council discussion. “And they didn’t budge from his initial offer.”

However, despite the impasse, the board made some modifications based on input from the business group. This includes DuBois’ proposal to create a lower rate for businesses with less than 20,000 square feet of space. This change, he said, would result in most of the tax being paid by the city’s largest businesses.

The council voted 5-2, with council members Alison Cormack and Greg Tanaka dissenting, to support the new parameters for the tax measure. Councilman Eric Filseth noted in the June 20 discussion that part of the tax proceeds would go to public safety and rejected the idea put forth by the business coalition that asking local businesses to help reduce crime is “bad for Palo Alto”. Most of the companies that belong to the Silicon Valley Leadership Group are not in Palo Alto, he noted, which helps explain why they don’t particularly care about tackling local crime.

“I suspect most Palo Altans don’t share that opinion and I think it’s our responsibility as a council to get a sensible and balanced measure out right away so they have a chance to fund all of this,” Filseth said.

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