Palo Alto — After several days of negotiations between the city council and a coalition of business leaders, Palo Alto City Council members voted in November’s vote Wednesday night to retain a compromise measure on business taxes that would cost the city about $10 million annually. dollars are found.
Palo Alto council members voted 6-1 during a special session Wednesday to impose a tax of 7.5 percent per square foot of office space on all non-exempt businesses over 10,000 square feet. The tax measure includes an annual cap and a monthly rate of $500,000 and a flat 2.5% increase per year that will apply to both the tax cap beginning in 2026.
The tax is expected to bring in about $9.6 million a year, of which city leaders have said $5.2 million will go towards affordable housing and $3.2 million towards public safety. While city officials expected more and business leaders didn’t want the tax at all, the agreement ensured that the money from the companies’ interest was not used to launch an opposition campaign against the tax measure.
Mayor Pat Burtt said Wednesday night, “We have presented an agreement that will generate more revenue than the parties that want this measure and less than many of us expected.” we do not encounter resistance from the business community, has increased greatly.”
Burt, who was part of an ad hoc committee of council members tasked with negotiating major tax measures, had been campaigning for a corporate tax for years prior to his tenure on the council. Palo Alto remains the only major city in the Bay Area with no business tax.
Dan Kostenbauder, vice president of tax policy at the Silicon Valley Leadership Group, said his coalition of business leaders considered Wednesday’s proposed settlement “very carefully” and said members are “united to drop our opposition to this business tax measure.”
“We drove with the IHK and were able to reach an agreement not to object to the trade tax,” said Kostenbauder. “Our alliance will not stand in the way of the chance that Palo Alto finally has a business tax.”
The settlement rate is a far cry from the 11 percent tax measure originally proposed by council members, which would have raised $16.5 million a year. Local residents speaking during Wednesday’s meeting expressed disappointment with the end result and called on the council to opt for a higher rate and face the business community in Public Square over the next few months.
“We were at 11 cents that night and now it’s 7.5 cents?” Barron Park resident and attorney Winter Dellenbach said. “Hope falls with this tax. Let’s live off a trade tax of 11 cents and get on with it. Whichever direction you go in, the more people in this city will be more inclined to do that.” . We can get up and do that.”
Some councilors also criticized the move to commit to a lower interest rate, with councilor Tom Dubois arguing that $5 million in public housing wouldn’t build many units.
“It feels really wasteful,” Dubois said. “The question Council members need to ask is: is nothing better than nothing? Maybe. But as much effort as it takes, I have to say putting in all that effort and not raising a lot of money at the end of the day is a lot. This is a big disappointment.”
Vice Mayor Ku also criticized the negotiations, arguing that residents were not asked what they wanted to see in the measure and instead the city was mainly negotiating with a coalition of business leaders.
“We can streamline what we want, but at the end of the day it’s not enough,” Kou said, adding that it was “very clear” that the city needed to build affordable housing itself, and that’s why Wilton Court and 525 development from East Charleston. for example.
“The property we have on the East Fry site can claim to be 100% 120% AMI, which is close to market price, 100% affordable even if a developer comes into affordable housing. There will be no developers. who build them,” said Kau. “They’ll give us some change.”
In response to comments from Koo and Dubois, Burtt stated that the money the city would receive from this tax would be “highly leveraged,” which would allow the city to qualify for regional, state, and federal funding, which are often referred to as local contributions. or require corresponding investments.
“When the local dollar is highly leveraged, it’s the necessary backbone to qualify for those big dollars,” Burt said. “Because of new opportunities in both class segregation and affordable housing, we have an opportunity to really accelerate processes that we haven’t seen in years because a new measure brings new big dollars to the table that we don’t want. miss the opportunity to receive.”