Atherton won't put business license tax changes on November ballot

Council wants to keep working on measure for a future election

Atherton's City Council has asked town staff to continue working on a proposal to update Atherton's business license tax, which was adopted in 1985, even though it means the tax won't make it on to this November's ballot.

Because the rules require that a general tax, one not earmarked for a specific use, be considered in an election during which council members are scheduled to be elected, that means a business tax can't be on the ballot until November 2018, the city attorney said. The tax would need approval by a simple majority of those casting votes, or just over 50 percent.

The current business license tax, which applies to anyone who does business in Atherton, from pool cleaning companies to real estate companies, ranges from $25 to $250 a year. The proposed tax would have been based on a flat fee plus a percentage of gross receipts for work done in Atherton, with a cap of $25,000.

The current tax raises about $228,000 a year. The proposed tax would bring in about $828,000.

Brad Smith of Pacific Peninsula Group, which has built and sold a number of homes in Atherton, said that the proposal could increase their business license tax in Atherton from the current $250 a year to $25,000 a year, a 100-fold increase.

"When someone imposes a tax or a fee, it should be fair," he said. "I would expect the fees to be somewhat lower." He asked for a lower maximum tax, such as Menlo Park's $8,000 business tax cap.

Council member Rick DeGolia said that even though the town now has a budget surplus, that situation may soon end, especially if donations are not raised to pay for the town's new civic center. "We are going to build it. We don't know how," he said. It could be "we're going to have to use that surplus to build this civic center," he said. "We have to look ahead."

(Currently, the town can not use the surplus to pay for the civic center because a measure passed by voters in 2012 says the town must primarily use private donations for the civic center. The measure also allows the use of building fees or grants, but not general fund or parcel tax money.)

The tax is designed to charge those who do business in the town because they use its services, Mr. DeGolia said. The current tax is a "miniscule amount for the value they're getting," he said.

"Right now (the tax proposal) is probably half-baked," Mr. DeGolia said. "We haven't spent enough time on this and we need to spend more time to get it right. I hate to have to put it off for two years, but I think it would be a better way to go."

Jessica Epstein, the Silicon Valley Association of Realtors' government affairs director, also asked the town to delay. "The revision is not ready and the town is not ready," she said.

One problem, Ms. Epstein said, is enforcing the law. "The town will have to dramatically increase its enforcement," she said. Without enforcement, she added, the tax "punishes the honest."

Mayor Elizabeth Lewis said the tax proposal "needs more thought, more outreach, more public input, more understanding of what we're doing ... so that it will pass."

"I feel like our back is against the wall to make the deadline," for putting the measure on the November ballot, she said. "We did not have a chance to do the public outreach."

"If we're going to do something, we need to do it right," Mayor Lewis said.

Ms. Lewis said, however, that the town does need to find new sources of revenue. The town currently gets almost its entire operating budget from property taxes, from a parcel tax that must be re-approved every four years, and from fees charged to developers and builders.

"We've seen a trend of development slowing down," she said. "There is a finite amount of property in Atherton that can be scraped and rebuilt."

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