Possible Local Tax Measure for 2020 Election

 Exploring a revenue generating local tax to support key City initiatives

One of the Calendar Year 2019 priorities the City Council approved was Fiscal Sustainability and they adopted a workplan 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 with a long-term balance of resources and the cost of doing business. The goal of the adopted workplan continues to make proactive progress towards fiscal sustainability for the City of Palo Alto in order to maintain the quality of life that the City of Palo Alto supports through its services.

 

In February 2020, the City Council approved the City’s FY 2021 - FY 2030 Long Range Financial Forecast which shows projected General Fund financial forecasts over the next ten years based on current City Council approved service levels as well as three alternative financial models. The current Base Case projects a surplus in the General Fund of $1.1 million in FY 2021, followed by annual gaps where expenses outpace forecasted revenue growth ranging from a deficit of $2.4 million in FY 2023, to $1.1 million in FY 2025, before reaching surpluses in the final years of the forecast. This base case scenario does not include investments to support train crossing infrastructure needed in the longer term based on Caltrain’s move to make their trains electric by 2022. Without action, the City will face increased traffic and safety issues, with traffic wait times at the City’s four train crossings could increase by 137%. In addition, there is no additional funding in this scenario for future capital needs like the Cubberley concept plan or the Park Master Plan, or affordable housing. This scenario assumes a status quo as it relates to the local and national economy.

 

To address these potential gaps in funding, one major effort underway is continued work to explore a revenue generating local tax ballot measure. In December 2019, the City Council approved the content of the first round of polling questions to be conducted by the City’s polling consultant, FM3 Associates. FM3 began polling in January, employing a multi-modal methodology that prompted participation either over the internet or through a facilitated telephone conversation. It should be noted that there were more than 514 successful engagements. For the results of the first round of polling, go here.

 

Recent Update

In January 2020, the City Council approved direction to poll residents and businesses again related to a potential business tax. This direction was based on the initial polling results and focused on the type of business tax, desired revenue to be raised by a business tax, and tiering and/or exemptions in the business tax. Council direction included development of a potential local tax ballot measure including, but not limited to, a General Business Tax based on employee headcount, raising approximately $10 million per year, to be used for transportation projects and services, or transportation and affordable housing. Other elements included tiers with no additional exemptions that charges small businesses a flat minimal amount; annual reporting requirement and an escalator clause. In addition, Council directed staff to study fiscal and business impacts through the stakeholder engagement process and recommend an economic development program.

 

Staff work is underway to refine the analysis based on the selection of a specific tax structure and methodology, with additional refined polling and stakeholder outreach to further understand community and business stakeholder feedback around these elements. The January 27, 2020 Staff report on this topic can be found here. The next round of polling is being developed by FM3 Associates. In addition, the City engaged TBWB as the consultant to conduct outreach through this process. This specific business outreach is currently underway.

 

To sign up for City updates on this topic and other items, go here.

 

Other helpful Links

For the City’s budget documents, go here.

For the City’s Services Guide, go here.


Past Discussions on this Effort 

The City of Palo Alto has been discussing its options for a revenue generating ballot measure in 2020 throughout 2019. A brief timeline of the staff reports and discussions with the Finance Committee and the City Council since April of 2019, when staff was formally directed to begin working on this project by the City Council, is included below. 

  • 1/27/2020 City Council, "Update, Consideration, and Potential Direction on Possible Local Tax Measure for 2020 Election," CMR 11019

  • 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

  • 12/2/2019 City Council, “Structure and Scenarios of Initial Round of Polling for a Potential Local Tax Measure”, CMR 10891

  • 11/4/2019 City Council, “Potential Ballot Measure Polling/Outreach, Contract, Solicitation Exemption and Budget Amendment”, CMR 10792

  • 10/15/2019 Finance Committee, “Stakeholder Outreach, Initial Polling, and Discussion of a Potential Ballot Measure”,CMR 10743

  • 10/1/2019 Finance Committee, “Revised Workplan for Consideration of a Ballot Measure”, CMR 10712

  • 9/16/2019 City Council, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures and Budget Amendment”, CMR 10615

  • 8/20/2019 Finance Committee, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures”, CMR 10445

  • 6/18/2019 Finance Committee, “Review, Comment, and Accept Preliminary Revenue Estimates for Consideration of a Ballot Measure”, CMR 10392

  • 4/22/2019 City Council, “Approve Workplan for a Potential Revenue Generated Ballot Measure”, CMR 10261

  • 4/22/2019 City Council, “2019 Fiscal Sustainability Workplan”CMR 10267