Potential Business Tax Ballot Measure for 2022 Election

In 2019, the City Council approved Fiscal Sustainability as a Citywide priority and they adopted a workplan(PDF, 249KB) to address this long-range goal on April 27, 2019. Fiscal Sustainability is the ability of the City to provide ongoing services while maintaining its finances at a credible and serviceable position, balancing resources and the cost of doing business over the near-, medium-, and long-term. The adopted workplan continues to provide a blueprint for proactive progress towards fiscal sustainability for the City of Palo Alto ensuring that the City can provide high-quality services that meet the expectations of the community.

The workplan details actions, including proactive funding contributions for the city’s long-term liabilities for both pension and Other Post-Employment Benefits (OPEB), and strategies to structurally balance the General Fund’s revenue and expenditures on an ongoing basis. This work is detailed more fully in City Manager Report (CMR) 10267(PDF, 249KB) which describes each of the 14 elements of the workplan to address the 2019 City Council priority of Fiscal Sustainability and in CMR 11722(PDF, 933KB) which adopted the City’s proactive  pension funding policy.

Despite these fiscal sustainability efforts, COVID-19 has significantly impacted the City’s revenues. Economic impacts from COVID-19 and efforts necessary to contain and mitigate the virus contributed to a $40 million gap between revenues and expenses in the General Fund in FY 2021. This gap was balanced through significant reductions in  departmental operating expenses throughout the organization, significant reduction in capital investment, including catch-up and keep-up costs, as well as new projects and concessions from  some of the City’s bargaining units.

Development of potential revenue generating local ballot measures for the November 2022 election was included as a discrete work item in the Community and Economic Recovery Workplan approved by the City Council on March 17, 2021 as part of CMR 12111(PDF, 558KB). Consistent with that workplan, the City resumed work on potential revenue-generating local ballot measures, including a potential business tax, through a conversation with the Finance Committee on June 15, 2021 and CMR 12299(PDF, 1MB). The next conversation on this topic will be held on August 16 at the regular City Council Meeting as discussed in CMR 12381(PDF, 2MB).

Key Dates and Meeting Discussion on Current 2022 Ballot Measure

August 16, 2021 City Council Meeting

On Monday, August 16, 2021, City Council reviewed CMR 12381(PDF, 2MB) and approved the workplan for November 2022 Local Ballot Measure(s) & Affordable Housing Funding Referral.

June 15, 2021 Finance Committee Meeting

On Tuesday, June 15, 2021, the Finance Committee reviewed CMR 12299(PDF, 1MB) to recommend the City Council approve the workplan for pursuit of a revenue-generating local ballot measure for the November 2022 General Election and review and provide potential guidance to staff on affordable housing funding mechanisms as referred by the City Council.

Through that review, the Finance Committee reached consensus with the recommendation below passing unanimously. The full minutes from the conversation can be found beginning on page three (3) of the summary minutes(PDF, 588KB) from the June 15, 2021 meeting.


Staff and the Finance Committee recommend that the City Council approve the workplan for the pursuit of a revenue-generating local ballot measure for the November 2022 General Election with the following focus:

  1. The pursuit of a business tax and the preference of square footage as the basis for such a tax;
  2. The pursuit of a utility use-based tax;
  3. Proceed with the refinement of estimates and evaluation of potential tax measures -including stakeholder outreach, polling and further feasibility analysis - and bring forward the budget actions necessary; and
  4. Review and accept additional information regarding affordable housing funding mechanisms.

Although square footage was identified as the preferred basis for a business tax, other potential options discussed include basing the tax on employee headcount, gross receipts, or payroll.

Background of Prior Local Tax Measure

Prior to COVID-19, the City undertook a significant work effort to discuss potential revenue generating ballot measures. Through those discussions, staff presented a discussion of the various taxes that contribute to the General Fund and proposed using Equity, Administrability, Stability and Economic Benefits (EASE) as the framework for analysis. This framework was approved for use by the City Council to focus conversations on potential revenue generating local ballot measures.

Previous work on local ballot measures included three parallel paths that were pursued by staff, augmented by consultant resources, and a fourth path that was not reached during the prior effort. These four paths were:

  • Research, Analysis, and Modeling
  • Stakeholder Outreach
  • Polling
  • Drafting Ordinance Language


Each of the first three paths had extensive work performed on it throughout 2019 and until March of 2020 when the COVID-19 pandemic paused the work. A brief timeline of the staff reports and discussions with the Finance Committee and the City Council since April of 2019 are summarized below for reference. The various reports detail the progress made on each path.

  • 1/27/2020 City Council, "Update, Consideration, and Potential Direction on Possible Local Tax Measure for 2020 Election," CMR 11019(PDF, 919KB)
  • 12/17/2019 Finance Committee, “Consideration, Evaluation, and Discussion of a Revenue Generating Local Tax Ballot Measure, Review of Refined Modeling, Analysis, Tax Structure and Recommendation to the City Council," CMR 10655(PDF, 2MB)
  • 12/2/2019 City Council, “Structure and Scenarios of Initial Round of Polling for a Potential Local Tax Measure," CMR 10891(PDF, 257KB)
  • 11/4/2019 City Council, “Potential Ballot Measure Polling/Outreach, Contract, Solicitation Exemption and Budget Amendment," CMR 10792(PDF, 778KB)
  • 10/15/2019 Finance Committee, “Stakeholder Outreach, Initial Polling, and Discussion of a Potential Ballot Measure," CMR 10743(PDF, 192KB)
  • 10/1/2019 Finance Committee, “Revised Workplan for Consideration of a Ballot Measure," CMR 10712(PDF, 489KB)
  • 9/16/2019 City Council, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures and Budget Amendment," CMR 10615(PDF, 281KB)
  • 8/20/2019 Finance Committee, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures," CMR 10445(PDF, 1MB)
  • 6/18/2019 Finance Committee, “Review, Comment, and Accept Preliminary Revenue Estimates for Consideration of a Ballot Measure," CMR 10392(PDF, 217KB)
  • 4/22/2019 City Council, “Approve Workplan for a Potential Revenue Generated Ballot Measure," CMR 10261(PDF, 360KB)
  • 4/22/2019 City Council, “2019 Fiscal Sustainability Workplan," CMR 10267(PDF, 249KB)