Traffic Congestion Relief Measure Questions and Answers

Q. Why is the Palo Alto City Council considering a traffic congestion relief tax on businesses?
A. Palo Alto’s thriving economy brings thousands of commuters onto Palo Alto’s roads each day. Traffic engineering reports show steadily increasing congestion and surveys of commuters measure growing frustration with longer commutes and lost productivity due to traffic. Traffic congestion is negatively impacting quality of life in Palo Alto as well as the ability for local businesses to attract and retain top talent. To provide locally controlled funding to help address parking and traffic congestion, the Palo Alto City Council is considering placing a measure on the November 2016 ballot to establish a traffic congestion relief tax on businesses based on the number of employees working for the business in Palo Alto.

Q. Do other cities collect a similar tax?
A. Yes, neighboring cities including Menlo Park, Redwood City and others collect a business license tax that provides local funding for infrastructure and services, including transportation and congestion relief.  The structure of the business taxes in other cities vary. Some cities structure the tax rate based on a percentage of gross receipts, while others base taxes on the number of employees, the type of business or some combination thereof.  Currently, Palo Alto registers businesses of all sizes for just a flat fee of $50. Palo Alto is currently considering a business tax based on the number of employees, with exemptions for small businesses and non-profits.

Q. How could funds from a Traffic Congestion Relief Measure be utilized to address Palo Alto’s parking and traffic problems?
A.  Funds from a measure could be used to upgrade signals and intersections to improve traffic flow and improve safety for students and other cyclists and pedestrians to keep cars off the road.  Funds could also be used to expand shuttle services to help employees get to and from work and connect to regional public transportation options.  This measure would support the city’s efforts to implement innovative transportation demand management strategies to limit congestion at peak times as well as supporting Palo Alto’s Transportation Management Associations that provide resources to businesses and employees to efficiently plan commutes, identify carpool opportunities and link commuters to shuttles and public transportation options.

Q. How would this proposal impact small businesses?
A. The proposal currently under discussion by the City Council would exempt businesses and non-profits with ten employees or fewer. In addition, a reduced rate per employees is being considered for businesses with 11 to 50 employees.

Q. Approximately how much might this measure cost local businesses?
A. No decisions have been made regarding a rate structure.  As a starting point for the conversation, the City Council has discussed potentially levying $50 per employee for businesses with 11 to 50 employees working in Palo Alto and $100 per employee for businesses with 51 or more employees working in Palo Alto. Businesses with ten or fewer employees would be exempt.  Accordingly, a business with 25 employees working in Palo Alto would pay $1,250 per year and a business with 2,000 employees would pay $200,000 per year.  This structure aims to link the cost to the number of employees from a business utilizing roads, transit and parking in Palo Alto, while avoiding this proposal becoming a significant burden on small and medium businesses in Palo Alto.

Q. How would this measure impact residents?
A. While only businesses would pay the cost of the measure, residents of Palo Alto’s neighborhoods feel the impact of increased traffic congestion. As the main thoroughfares have grown more congested, commuters are using small residential streets to avoid traffic, creating congestion on neighborhood streets and growing safety risks for children walking and biking to school as well as other cyclists and pedestrians. Residents in the neighborhoods adjacent to Palo Alto’s business districts report increasing numbers shoppers and employees of businesses parking in their neighborhoods.

Q. Why is this proposal being considered now?
A. A traffic relief tax on businesses must be approved by local voters and, per state law, general tax measures of this nature must be placed on the ballot at the same time as City Council elections.  Thus, this measure may be placed on the in November 2016 or November 2018.  The City Council has expressed concerns that the severity of Palo Alto’s current traffic and parking problems cannot wait two years for a solution. This is why the City is evaluating the potential for a placing a measure on the ballot this November for local voters to consider.

Q. When will decisions about this measure be made?
A. The Palo Alto City Council will make a decision about potentially placing a Traffic Congestion Relief Measure on the November 2016 ballot at their June 27th meeting.  In the meantime the City is seeking input from local residents and businesses to refine the options under consideration.

Q. Where can I get additional information or provide feedback?
A.  For more information or to provide feedback, please call the City Manager’s Office at 650-329-2563.
Last Updated: May 25, 2016