With the clock ticking toward the deadline, the Palo Alto City Council again postponed its decision to create a business tax in hopes of striking a last-second compromise with a coalition of opponents.
The council has until Aug. 12 to submit a resolution to Santa Clara County that would put a business tax on the November ballot. To meet that deadline, council members voted to schedule a special meeting for Wednesday night to take final action on the business tax measure. They will also take a separate measure that would reaffirm the city’s historic practice of transferring funds from the gas company to the general fund, a policy that was stopped by a lawsuit from resident Miriam Green.
Council members have discussed the business tax for more than four years and had three opportunities before Monday’s meeting to put the item on the ballot, choosing to pass each time. At each meeting, council members voiced concerns about opposition from the business community and followed suit by revising the business tax proposal in hopes of reaching a consensus.
That pattern continued Monday night, with the council adding another provision to the proposed tax: a $1 million cap on how much each business would pay. However, despite repeated attempts to negotiate a truce with the business coalition, there were few signs on Monday that any compromise will be reached. Leaders of the business coalition, which consists of the Silicon Valley Leadership Group and the Palo Alto Chamber of Commerce, were noncommittal about changing their positions. Meanwhile, some members of the council indicated that their patience has reached the limit.
“We’ve bent over backwards to be accommodating, with very little acceptance,” said Council member Tom DuBois, who is serving on an ad hoc committee that has been trying to negotiate with the business community.
He noted the challenges of negotiating with opponents, who he said do not appear to be internally connected. Some of the partners in the business group, he argued, would likely not support any level of taxation.
DuBois supported moving forward with a vote to put a business tax on the November ballot along the lines the council supported in its previous Aug. 1 discussion. The tax would have a rate of $0.11 per square foot and would exclude all businesses with 10,000 square feet of space or less.
Vice Mayor Lydia Kou and Council Member Greer Stone agreed and suggested a decision be made sooner rather than later. Mayor Pat Burt and Councilman Eric Filseth, who both served on the ad hoc committee, chose to give the businesses one last chance to come to the table even as they acknowledged the long odds of reaching a deal. At Burt’s urging, the council voted 5-2, with council members Alison Cormack and Greg Tanaka dissenting, to schedule a special meeting for Wednesday night so the council could have one last chance to reach a compromise and to avoid an expensive campaign against the tax. .
Burt pointed to recent poll results showing a potentially close vote on the business tax. He also said business leaders had indicated that unless the city lowered the proposed tax rate to $0.60 per square foot, their coalition would campaign to defeat both the business tax and the gas transfer measure.
The real choice for the council, Burt said, “isn’t what we want, but what we can get.”
“I’ve been one of the strongest advocates of this business tax and I’m willing to consider a compromise because we’re in danger of having nothing and not being able to go to the voters for years if we fail,” Burt said. . “It’s not a bird in the hand versus two in the bush. It’s a bird in the hand versus a rattlesnake in the bush.”
But Burt’s exchange with the leaders of the opposing coalition left some of his colleagues discouraged about a compromise. Dan Kostenbauder, vice president for tax policy at the Silicon Valley Leadership Group, and Charlie Weidanz, president of the Palo Alto Chamber of Commerce, both spoke against the proposed measure and urged the council not to advance it. Kostenbauder repeatedly disputed accusations by Burt and his colleagues that the business community has not negotiated in good faith.
“It’s unfortunate that the council only engaged in serious conversations with members of the business community after the last round of voting showed deteriorating support for the business tax level the council had been considering,” Kostenbauder said.
When Burt repeatedly asked him and Weidanz if they would be willing to continue negotiations, neither would commit to any significant changes to the business group’s proposal, which would bring in about $7.1 million in annual revenue.
“We would be willing to try to have those conversations, but without setting any expectations that the numbers will change from where they are,” Kostenbauder said.
Weidanz was also reluctant to commit to further revisions and suggested that the position of members of his organization appeared to be fixed as of Monday afternoon. He argued that Palo Alto’s proposed business tax rate far exceeds what other communities charge.
“We want to see Palo Alto remain competitive and a desirable place for businesses to locate compared to neighboring jurisdictions, and we hope the council will take these pleas from businesses seriously and allow businesses to focus on the challenges of surviving this difficult period,” said Weidanz. .
Some residents and council members were disappointed by what they characterized as an uncompromising position by the coalition. Deputy Mayor Lydia Kou called their position “very disappointing” and asked her colleagues not to allow representatives of large corporations to dictate decisions that affect the quality of local life.
“What I’ve heard is that the Silicon Valley Leadership Group as well as the Chamber of Commerce have decided and declared that they are the watchdogs of the quality of life of the residents of Palo Alto,” Kou said.
Stone said he was surprised by the exchange between Burt and business leaders and the latter’s reluctance to negotiate. The council’s original proposal for a business tax would have raised about $45 million a year; this current one would raise about $16.5 million and have more exemptions and a lower rate than originally projected. Stone argued the council had compromised enough and should move forward with the tax.
“I can’t think of anyone I’ve talked to who has been really opposed to the business tax beyond the business community,” Stone said. “I understand that. Nobody wants to pay taxes, but taxes will pay for these critical services.”
Although the majority of the council agreed to postpone the final decision on Wednesday, DuBois, Kou and Stone all voted against making further revisions to the business tax at that time. The council will also consider Wednesday whether to put the gas transfer measure on the November ballot.
Cormack, who backs the utilities measure, has consistently advocated for a lower business tax rate. She was more optimistic about reaching a deal with business leaders and said the delay in the council vote creates an “opportunity for a comprehensive deal”.
“Nobody wants this to turn into an ugly fight,” Cormack said.
Others, however, saw the business community’s position as an overreach. Businesses benefit greatly from locating in Palo Alto, said Julie Lythcott-Haims, who is running for a council seat. Thus, they must contribute to helping the city make the necessary investments in services and infrastructure. Under the council’s plan, money raised from the business tax would be dedicated to three areas: affordable housing, improvements to railroad crossings and public safety.
“These are VCs and tech companies and big retail and they can afford it,” Lythcott-Haims said. “We need a proper business tax and not a sale to raise the funds our city desperately needs and our citizens deserve.”
Nadia Naik, a proponent of rail improvements, said many in the community feel angry about big companies not paying their fair share for city services. Resident Winter Dellenbach asked the council not to make any more concessions to the business community.
“This is not a negotiation. This is a standoff,” Dellenbach said.