Business tax in Palo Alto

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