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By Diana Diamond

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About this blog: So much is right — and wrong — about what is happening in Palo Alto. In this blog I want to discuss all that with you. I know many residents care about this town, and I want to explore our collective interests to help ...  (More)

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Money grabbing -- A Palo Alto tax to reject in November

Uploaded: Jun 14, 2022
While the Palo Alto City Council is having some hesitation, because of a weak economy, as to whether it should place on the November ballot a measure calling for a big business tax, it seems like the members want to go ahead with another ballot measure asking voters to affirm the city’s practice of transferring funds from the gas utility charges on our monthly utility bills to the general fund.

At first blush, it may sound like a good idea, but in reality, it’s another money-grabbing attempt by the city manager and council to continue filling up city coffers -- with our money. At the same time the city wants businesses to shell out some $20 to $26 million in taxes each year for years to come.

The proposed measure that is being drawn up asks residents to approve of the business tax as a “non-binding” resolution for intended use. That means that even though the gas tax funds automatically go into the general fund, even if the council says they will be used for X and Y, their X and Y designations can, in the future, be eliminated and the money used for anything at all, like salary increases for everyone in the city manager’s office.

The Utilities Department had been transferring about $20 million in funds yearly to the city’s general fund. In other words, we’ve been overcharged on our gas, electric and water rates so the city can get more of our money to spend. Naively, for several years I thought I was just paying the utilities department for how much gas, electric and water I used. I certainly was wrong.

What really troubles me – actually, irks me, is that Palo Alto resident Miriam Green filed a suit against the city several years ago, claiming the gas transfer was illegal because it was, in fact, a tax that the residents never approved. The judge agreed, and ordered the city to stop the gas transfer and return the money back to the residents.

Well, guess what. We never received any refund from the city! Instead, the council has had numerous closed-door sessions discussing the judge’s order and how the city could get around it.

As one of the TV ads proclaim, I want my money back!

City officials decided they would now ask the residents permission for what they were doing illegally for years, and voila! That’s the measure going on the November ballot. They are asking us voters to make legal what the court determined was illegal.

And so, do vote against authorizing this gas transfer when it is on the November ballot.

* * * * * *

I want to jump on a new bandwagon to get rid of those horrible compostable produce bags that the council, in their environmental enthusiasm, decided to impose on grocery shoppers a couple of years ago. The opaque bags are abysmal because food quickly rots inside of them.

I bought a pound of fresh green string beans the other day, and two days later they were soggy and had black spots. A handful of fresh mushrooms turned into mush three days later. Sometimes whatever was inside soon contained a little lake in the bag – water I never put in.

And once nestled in the vegie drawer of my refrigerator, I can’t even see what vegetable is hiding inside.

The council is always so eager to be politically correct that when a new PC produce bag is available, they quickly not only endorse the product but insist we all use them. Did any of them try the bags out? Or read about how functional (dysfunctional, really) they are? Please, council, tell grocers they no longer have to offer these bags to the public; get something else instead, so I can carry my beans, mushrooms, peas etc. home properly, and store them safely in my refrigerator without rotting

* * * * * *

I’ve never really liked the idea of closing Cal Ave off to automobiles all year long because while the outdoor restaurant seating is pleasant, the small retail stores suffer because, now that cars are banned, there’s no parking on streets and these little stores are blocked from view because of the umbrellas et al on the streets. The city surveyed some residents and the majority, of course, said they liked the outdoor dining, but the apotential loss of retail businesses was not part of the city’s query.

I wonder how filled the outdoor tables will be when later this summer the temperatures soar to the 90-degree-plus levels? I wonder how many stores will be forced to close.

* * * * * *

I was watching the council meeting on Monday night, waiting for the discussion on putting both the gas transfer issue and the business tax on the November ballot. Council members finally got to discuss it around 10 p.m. By that time, there were only six residents around to present their three-minute views to the council.

When encryption was the big issue in town a couple of months back, that also didn’t get discussed until 10 p.m., as I recall. When council voted on the measure after 11 p.m., one member told me that he was so tired he couldn’t really concentrate.

Funny, isn’t it, how important issues to the public are usually discussed at the end of a long meeting. Maybe that’s the way our city manager, who schedules the agenda, can ensure he will have a better chance of getting what he wants (like the proposed taxes or allowing police encryption of police radio transmittals). In both cases, the council went along with Shikada’s proposals.

CORRECTION: In last week’s column on the business tax, I said grocery stores would be taxed. But my thanks to council members Tom DuBois and Eric Filseth who corrected me. Grocery stores will not be taxed. My apologies for the error.

What is it worth to you?


Posted by Resident 1-Adobe Meadows, a resident of Adobe-Meadow,
on Jun 15, 2022 at 12:54 am

Resident 1-Adobe Meadows is a registered user.

The topic of the utility bill charges being transferred to the general fund and used for other efforts is disturbing. Yes - that is illegal and it suggests that the city is incompetent in the running and pricing of the utility services.

We are living is an age when every opinion section in the paper is talking about adding housing. When you add more housing you are increasing the use of the existing system to what ever level of function - or disfunction it is currently at.

At this point it becomes unclear how much additional housing the services can support. We are talking about the sewer system, the electrical system of which a portion is in tree lines. We are talking about the water system.

If the tax payments we provide are not being used to keep the whole system up to date we are in trouble but have no way to status the level of trouble we are in. And the monthly bill we get with the information on pricing is not accurate? I think the measurement of useage is correct but the rate is not correct?

WOW - this requires a lot more discussion as to the status of the exisitng system and how the rate is developed.

It sounds like the utility income is in part being used as a business tax. That requires a lot of investigation as to what the business tax is suppose to cover and if we have been using the utility payments to cover those costs.

Posted by Annette, a resident of College Terrace,
on Jun 15, 2022 at 6:27 am

Annette is a registered user.

If CC puts both tax measures on the ballot, the revenue from each will flow to the General Fund, so representations about how the revenue will be spent are, unfortunately, meaningless. This reminds me a bit of the vote for high speed rail. Great idea conceptually, but there were few details at the time that was on the ballot and voters essentially approved a boondoggle.

Reading through the comments on the various articles about the proposed business tax and the measure asking us to affirm the gas transfer practice which, as Ms. Diamond points out, was ruled by a Court to be an illegal tax, there's an underlying message about the General Fund, how it it used and who really controls it. And that gets back to the accountability of the City Manager and some senior staff. If those we elect to run this city had that aspect of city management under control there probably wouldn't be such a high level of concern about the direction this city is going and the way tax revenue is spent. This is not a new issue that originated with this Council; this has been a problem for a long time. And it may be biting us now.

Posted by Bystander, a resident of Another Palo Alto neighborhood,
on Jun 15, 2022 at 7:16 am

Bystander is a registered user.

You make good points, but the compostable bags are up to you. Firstly the moisture gets into the bags because the stores spray/mist water on the veggies. I personally don't like them being wet as it encourages them to sweat once put into an airtight container. If you plan to keep them longer than 24 hours, I suggest transferring them into a tupperware with a paper towel in the bottom to soak up the moisture and help them last longer.

These bags are then ideal for putting into a kitchen composting container before putting in the green can for pick up. Provided I carry the kitchen can to the green can rather than just the bag, I have no spills.

Posted by Barron Park Denizen, a resident of another community,
on Jun 15, 2022 at 11:21 am

Barron Park Denizen is a registered user.

Ms. Diamond makes a good point about getting money from wherever and whenever, with little if any input from the citizenry. However, Palo Alto is in serious trouble due to massive pension liabilities (over $500 million, reportedly), plus the train crossings could approach $1 billion if outside funding isn't secured even if the designs can ever be agreed upon and completed.

Without wheelbarrows full of money, these issues can't be solved, particularly the pensions. So that's why I agree with Diana, but understand the Council's grabbiness.

Posted by George Jaquette, a resident of Palo Verde,
on Jun 15, 2022 at 1:52 pm

George Jaquette is a registered user.

Thank you Diana for sharing your thoughts! I agree with your points (especially about overcharging for utilities and using that money as a slush fund), although @bystander is right ... once you get your fresh vegetables home, get them out of those bags and store them correctly (green bags, tupperware). As you note, the compostable bags are awful for storage and dissolve when wet so they are only good for a short time even in your compost bin. But we need to cut down on plastic, and the grocery stores are a great place to start doing that.

Posted by Eric Filseth, a resident of Downtown North,
on Jun 16, 2022 at 9:59 am

Eric Filseth is a registered user.

Whether we should have taxes, and how they should be structured, is a topic of legitimate and even necessary discussion.

Given that taxes by themselves are undesirable, it's an omission not to at least acknowledge the other side of the ledger, the expenses they would be used to fund.

Anybody following the Budget process understands the City is headed for a bit of a “fiscal cliff" starting in 2024. Multiple reasons for that, but a few are (1) the pandemic produced long term changes in Palo Alto's economic structure which will probably never change back; (2) long term trends in public safety expenses; and (3) the federal stimulus money runs out after his year. We used the stimulus money to restore services which we all remember were cut in the pandemic: libraries, public safety, youth services, the Art Center and Children's Theater, and so on. The gas equity transfer is a factor too. Obviously not everybody favors the transfer, but it does fund several million dollars per year (not $20M as some posters have said) of City services, which will either need other funding sources or else be lost. This is before any discussion of Affordable Housing and Grade Separation.

The City's “two-year service restoration" budgeting framework has been quite transparent that after next year everyone should expect a return to cuts, unless new revenue sources are found to fill the gap.

“How much tax vs how much service" is a tradeoff not everybody agrees on, which is why these things rightly go to a public vote. Hence in any such discussion it's “post-truth" not to at least acknowledge both sides of the ledger.

Posted by Robert , a resident of Midtown,
on Jun 16, 2022 at 11:08 am

Robert is a registered user.

Eric, here's an idea "Stop Spending " do whatever resident or small business owner has to do live within your means. As a former Palo Alto small building owner I couldn't figure out why my utility bill in PA for 1,500 sft was more then my Menlo business @ 3,300 sft now I know I was being fleeced by the city and it was illegal but it doesn't matter because they are above the law.

Posted by Eric Filseth, a resident of Downtown North,
on Jun 16, 2022 at 11:18 am

Eric Filseth is a registered user.

“Stop spending" is an entirely legitimate position. It's the City's responsibility to make sure it's clear which spending will stop, and the responsibility of us Citizens to understand that. (Sorry, still reeling from a very powerful Devin Booker “Citizens" graduation address last week).

Posted by Dee, a resident of Palo Verde,
on Jun 16, 2022 at 1:52 pm

Dee is a registered user.

I, too, dislike the disposable vegetable bags because the vegetables quickly go bad when stored in them. Now, when I get the vegetables home, they immediately go into plastic bags that I bought on Amazon. I tried cloth bags to be more environmentally conscious, but they worked as poorly as the disposable ones. ~Sigh~

Posted by Jerry Licht, a resident of Old Palo Alto,
on Jun 16, 2022 at 3:34 pm

Jerry Licht is a registered user.

Instead of all this talk about RAISING taxes based on dubious PACC & Palo Alto City Manager recomendations, how about a concerted effort to LOWER some of the residential property taxes via the Mills Act.

Any older house will do providing it is certified as 'historical' (aka old & of some redeeming value) by a city, county, state, or via national recognition.

Even a beloved Eichler would qualify within those parameters.

So let's start talking about further tax deductions for qualified Palo Alto residentialists FIRST and then we can address going after big corporations.

Besides, with the Mills Act firmly established in Palo Alto, the PACC & City Manager may find (upon comprehensive review of additional Excel sheets) that they will need to tax the larger businesses even more.

Posted by Barry Steinman, a resident of Leland Manor/Garland Drive,
on Jun 17, 2022 at 11:44 am

Barry Steinman is a registered user.

In addition to further initiating the Mills Act for older Palo Alto residential properties, an exclusive Palo Alto lottery (for PA residents only) might gain further public acceptance of this proposed business tax.

Let tax advocates Filseth, Burt, Shikada etc. promote this so-called business tax but how about setting aside maybe 25% of the projected $20-$26M tax revenue ($5M) for a citywide lottery?

If the city wants to pass a controversial business tax referendum, consider using some creative imagination to ensure further public acceptance.

No entrance fee required, just proof of Palo Alto residency.

As Paul Newman said in The Color of Money, "Money won is always sweeter than money earned."

Posted by Jesse Phillips, a resident of Midtown,
on Jun 17, 2022 at 11:56 am

Jesse Phillips is a registered user.

"Let tax advocates Filseth, Burt, Shikada etc. promote this so-called business tax..."

It is always easier to exploit others for frivolous municipal spending.

How about some 'giving back' to Palo Alto residents rather than exploring other tax bases to ensure even more reckless & irresponsible city spending as advocated by the aforementioned city visionaries?

Enough is enough.

Posted by Bob Wehrle, a resident of Duveneck/St. Francis,
on Jun 17, 2022 at 12:56 pm

Bob Wehrle is a registered user.

> Let tax advocates Filseth, Burt, Shikada etc. promote this so-called business tax...

I'm voting against the proposed business tax in November. The aforementioned proponents and their nebulous justifications are akin to having a monkey riding on one's back.

And no Palo Alto resident wants that.

Until the PACC can come up with specific and clearcut directives for the additional tax revenue, there is absolutely no reason to create a war chest for wasteful city spending.

Thank goodness for term limits. Now can we apply those limitations to the City Manager?

Silly question because the PACC approved a generous severance package in the event Mr. Shikada is dismissed.

What were they thinking?

Posted by Marty Lange, a resident of Los Altos Hills,
on Jun 17, 2022 at 4:35 pm

Marty Lange is a registered user.

Unlike Los Altos and Mountain View, it seems there's always some kind of municipal or land usage controversy going on in Palo Alto.

Palo Alto being the oldest of the tri-cities, it should be setting a leading-edge example for the others to follow. Instead it is the opposite.

And being a city council member in PA town must be akin to frying bacon in the buff for there is always some hot splatter coming from the bacon (the populace) itself.

Posted by Jarod Wong, a resident of Old Mountain View,
on Jun 17, 2022 at 4:55 pm

Jarod Wong is a registered user.

Hopefully the PACC is not trying to perfect their stir-fry politics in a hot wok.

Posted by Bill Bucy, a resident of Barron Park,
on Jun 18, 2022 at 7:50 am

Bill Bucy is a registered user.

Studies show that tax increases are more likely to achieve voter approval when the money is earmarked for a specific use. Asking voters to approve higher taxes (or endorse current ones) and blindly trusting city leaders to spend the money wisely or even legally just doesn't cut it in today's political environment. The city council's refusal to obey a judge's order to refund tax money is proof.

Posted by Annette, a resident of College Terrace,
on Jun 18, 2022 at 8:55 am

Annette is a registered user.

Not only is the City not obeying the order to refund the ill-gotten revenue, it is doing an end-run around the Court decision and asking residents to say "that's ok, keep the money and continue the practice." If that's not arrogance, nothing is.

But wait, there's more! Additionally, the city wants a business tax that funnels revenue into the General Fund perhaps with escalations and with no expiration date. This forever tax can be spent on anything. It makes sense that PA businesses contribute to the infrastructure and services they impact most and it is highly unlikely that those areas are ever going to not need funding so the argument that City needs change over time doesn't really validate a general tax over a specific tax.

How is it that other cities have managed to achieve this while Palo Alto has not? Part of the answer is years of CC partiality to developers that resulted in unmitigated commercial development, making Palo Alto the equivalent of the goose that laid the golden egg. Maybe some of our past mayors should advise on what they had in mind for future funding of critical services and housing. Surely the plan wasn't continued reliance on the utility transfer which a Court of law rule an illegal tax.

Posted by Ron Hicks, a resident of Ventura,
on Jun 18, 2022 at 10:12 am

Ron Hicks is a registered user.

Another viable business tax option would be for Palo Alto to license marijuana dispensaries.

An ideal location in terms of ease of accessibility would be along El Camino Real in Barron Park.

In addition to a required business license and sales tax revenue, an additional city surcharge of .08% on all purchases would add to the city coffers.

The University and California Avenue shopping/dining districts should remain off limits for marijuana dispensaries in Palo Alto to curtail traffic and parking gridlock.

Leland Stanford did not prohibit marijuana sales within the city limits so this is another option that should be considered.

Posted by Sandra Marshall, a resident of Community Center,
on Jun 18, 2022 at 10:24 am

Sandra Marshall is a registered user.

With available commercial properties now becoming more scarce in Palo Alto, how about teaming-up with the Ohlone tribe and creating a gaming casino somewhere off east Embarcadero Road near the municipal golf course?

People like to gamble and 101 would provide an easy access.

Or perhaps somewhere in Barton Park along ECR?

Revenues from gaming, dining, entertainment, and lodging taxation would provide an endless flow of revenue for the city.

It is time to start thinking outside of the box.

Posted by Gary Price, a resident of Midtown,
on Jun 18, 2022 at 10:57 am

Gary Price is a registered user.

Speaking of a hypothetical Ohlone gambling casino, another option would be to bequeath Foothills Park to them for something along the lines of an Ohlone Village & Casino, a cultural and nature themed resort.

Since Old Page Mill Road is too narrow to accommodate a steady flow of casino visitors, perhaps a more direct route could be established directly off of 280.

Big money and more tax dollars for the PACC to either spend or squander accordingly.

Posted by Resident 1-Adobe Meadows, a resident of Adobe-Meadow,
on Jun 18, 2022 at 5:49 pm

Resident 1-Adobe Meadows is a registered user.

In the SJM 06/18 is an article concerning the East Palo Alto Sewer System being outdated and a requirement by the city that new construction includes the upgrade of the sewer system by the contractor as a condition for appproval to build. That now includes Sobrato in one of their projected builds, and Ms. Jobs on a build she has planned. That could be construed as a business tax vs a utility tax that is passed on to the residents.

Applying that concept to PA what is the status of our sewer systems - being at least 70 years old in South PA. And do we require any new builds be paid for by he contractor or is the city passing the cost of upgrade onto the residents?

A number of issues concerning the Business Tax, the Utility rates, and what is being passed on to the residents for new builds. If the cost for utilities is going up then what are the specific costs that are going up?

SU has a huge amount of land that if built on would require SU to lay in a sewer system which would require connection to the Palo Alto system. Who is paying for that? I like how EPA is handling this topic and we need to clarify how PA is handling it. Passing costs onto the residents for business costs needs to be addressed. That is the purpose of the Business Tax.

Posted by Roger Flanagan, a resident of Midtown,
on Jun 19, 2022 at 9:04 am

Roger Flanagan is a registered user.

@Resident 1-Adobe Meadows
Installing septic tanks on new construction sites could alleviate any sewage system issue.

Posted by Diana Diamond, a Almanac Online blogger,
on Jun 21, 2022 at 10:54 am

Diana Diamond is a registered user.

Posted by HHTurner, a resident of Ventura,
on Jul 13, 2022 at 2:41 am

HHTurner is a registered user.

Taxes taxes taxes.. In one of the articles on
I read that in some counties, on the contrary, they reduce taxes in order to attract large enterprises and provide citizens with work. For some reason, we have the opposite.

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