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Business tax in Palo Alto

Uploaded: Jan 17, 2022
To the City Council and Finance Committee and staff

I support a tax at the rates suggested by the survey results in the Finance Committee agenda packet on large private businesses in Palo Alto with the following conditions:

--major exemptions for other businesses as listed below and

--an analysis of competitive factors

--incorporation of feedback from business and other stakeholders

I have the following technical and policy comments and questions

Technical

I thank the staff for including a vacancy factor in the revenue analysis. I am concerned that the 6% vacancy factor for non office uses is low by perhaps a factor of 3 and the 15.7% vacancy for office uses is also low. I ask the staff to do a survey of vacant properties in the city currently. My every day walk through downtown suggest much higher and enduring vacancies.

Relative to competitiveness analyses, I want the staff to provide vacancy data in neighboring cities.

I am concerned that with normal turnover of properties and the many shared facilities that the administrative costs for smaller properties will outweigh the revenue collection and support a flat fee.

Policy

I support exemptions for all small businesses at least under 10,000 square feet and possibly at the 20,000 exemption level in EPA.

I support no tax on hotels of any size for a minimum of five years as they have been and are very hard hit by the pandemic.

The pandemic has made it very difficult for many if not most small businesses and it will take time to recover and many may not recover.

My read of the data provided from staff is that a large share of revenue comes from a relatively small number of large private businesses so a very empathetic exemption policy will have a relatively small effect on revenues while substantially reducing administrative costs.

I support an annual escalation factor if easy to administer.

Re administration, I remember the difficulties with the existing fee and want to make sure any new tax is easy to administer and get compliance.

The original metrics for a business tax included equity and competitiveness analyses. I am interested in seeing these metrics addressed in the current round of analysis and engagement.

I look forward to the engagement results
Community.
What is it worth to you?

Comments

Posted by Annette, a resident of College Terrace,
on Jan 22, 2022 at 9:26 am

Annette is a registered user.

I like your suggestion of exempting hotels for 5 years and would insert "at least" into that sentence. They got hit with the TOT increase and then the COVID slow-down; a break is in order.

Where do you stand on requiring that the revenue be restricted for specific purposes?


Posted by stephen levy, a resident of University South,
on Jan 22, 2022 at 12:27 pm

stephen levy is a registered user.

Thanks Annette,

My preference is for specified uses but that to be effective would require a 2/3 vote and I do not expect council to go this route.


Posted by Annette, a resident of College Terrace,
on Jan 22, 2022 at 6:03 pm

Annette is a registered user.

Thanks. I hope CC does go the 2/3 route b/c I will most certainly vote against a tax that flows to the general fund.


Posted by Jason Leiter, a resident of Leland Manor/Garland Drive,
on Jan 23, 2022 at 9:52 am

Jason Leiter is a registered user.

*"I support no tax on hotels of any size for a minimum of five years as they have been and are very hard hit by the pandemic."

I disagree on this proposal. Those mediocre motels along ECR were raking it in prior to the pandemic. Midweek rates were often $275.00+ per night (plus tax) as there were countless out-of-town visitors attending business seminars and meetings in Silicon Valley pre-2020.

There are downturns to any business and a five-year tax increase exemption is too generous for these motel operators...unless they are willing to price their rooms at $100.00 per night maximum for the duration of your proposed tax moratorium.


Posted by Judy LaRussa, a resident of Cuesta Park,
on Jan 23, 2022 at 10:28 am

Judy LaRussa is a registered user.

I agree. Those motels along El Camino Real in Barron Park (and Mountain View) leave something to be desired and most provide sub-standard lodging at best.

They are also visual eyesores and could easily be converted into public assistance housing for the homeless and other displaced individuals.

Only then would they be deserving of a 5-year business tax break.


Posted by Priscilla Prescott, a resident of Jackson Park,
on Jan 24, 2022 at 12:40 pm

Priscilla Prescott is a registered user.

There are no nice roadside motels in either Mountain View or Palo Alto so why should their owners get a tax break?

Just let them go out of business and build affordable housing at the former sites.


Posted by John Worthington, a resident of Embarcadero Oaks/Leland,
on Jan 24, 2022 at 11:41 pm

John Worthington is a registered user.

I thank you for your insights, Steve. Here are some of my thoughts and proposals of other taxes.

The question is not whether it is justified, but rather is there a realistic pathway to revenue neutrality over the full term of the parcel tax and how can the tax be extended if it is not?

The parcel tax is estimated to generate $9 million in 2018, but the city of Palo Alto still needs at least $6.5 million in sources of new revenue over the two-year period to pay off the $10.7 million debt and make future capital improvements.

A simple and fair way to find these new sources of revenue would be to implement a progressive parcel tax over the full term of the parcel tax. In this model, a portion of the tax would be charged to all property owners in the city each year.

This model ensures revenue neutrality by shifting taxes to those who use more services and also ensures a rational funding structure by making it impossible for the city to increase the rates of the annual tax without making the new tax revenue available to pay down the old debt.

I spoke to a friend of mine who runs a local business Mountain View US and Foreign Coins https://mvcoins.org and he indicated to me that since the storefront is a fairly small storefront, he would not be paying as much in taxes. However, it would be unfair if, for example, the place had a warehouse to store inventory. Especially with the low margins in the coin appraisal and US coin business that he is in. The place is located on 200 E Dana St. and it's just an awesome location and pleasantly quaint store and he would love to stay in our community if the business climate would let him.

One of the things that the owner of the 200 E Dana St. location is interested in of the 6% vacancy factor for non office uses: It is possible that a percentage below 6% is accurate because there is relatively little office space in the City with a 10,000 square foot size and when property is vacated it is normally filled immediately with a



Posted by Julia Raines, a resident of another community,
on Jan 30, 2022 at 12:44 pm

Julia Raines is a registered user.

Democrats increase taxes and governmental spending.

Republicans are more fiscally disciplined.

No new taxes as austerity on frivolous spending will cover the bases


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