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About this blog: So much is right — and wrong — about what is happening in Palo Alto. In this blog I want to discuss all that with you. I know many residents care about this town, and I want to explore our collective interests to help ...  (More)

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Lucky Palo Alto voters – maybe two tax increases to approve in November

Uploaded: Aug 2, 2022

There’s a duplicitous November ballot measure the Palo Alto City Council is considering -- asking voters to approve a natural gas usage rate tax charged by the Utilities Department that a judge declared illegal. In a suit filed in 2016 by resident Miriam Green (Miriam Green v. City of Palo Alto) claiming the charge was an illegal tax because voters had never approved of it, the judge not only agreed but ordered the city last year to refund the $12.6 million in overpayments back to the residents. One year later, no refund.

The city has appealed the judge’s decision, and right now that appeal is on hold in hopes that Green and the city can settle their differences. The council has considered this case in closed sessions several times so far.

The slippery way the city has conjured up is to continue getting the money is to put it a measure on the ballot this November and continue with the gas rate overcharge is. The thinking is that if voters approve the transfer, then that will satisfy the court. And the city hasn’t said anything about when and how residents will get their overcharges back, although the judge said it could not use future utility gas revenues for the rebate.

Mayor Pat Burt described the overcharges as just “a profit” that was returned to the general fund. What an interesting choice of words.

The city simply wants to keep the money it already got from utilities customers – even though Palo Alto’s annual budget is now almost $1 billion – used to run a city of 62,000 residents. It seems the city never has enough money – it always wants more.

I want my money back –as the TV ad proclaims -- for all those overpayments I made each month for gas usage.

• • • • •

Well, by next Monday night, the city council will, in all likelihood, agree to let Palo Alto voters decide e on a November ballot measure to impose a heavy tax on all businesses with 10,000+ square feet of space – permanently. If adopted, the tax will bring in $15 million annually into city coffers.

The proposed tax has been whittled down substantially from the original version which would have collected $45 million annually from businesses, so it’s a good step in the right direction.

We knew all along that at least five of the seven council members would support the business tax (Allison Cormack and Greg Tanaka are the exceptions). But Mayor Burt pushed it strongly as did City Manager Ed Shikada. They want the money.

The city said it plans to use the new tax revenues for grade separations at track crossings, affordable housing and public safety. Promises are fine, but the revenues would go into the city’s general fund, where the city ca use the money to pay for anything, e.g., community services, new bike paths and (ahem) emp0loyee salaries.

The business community continues to object to a tax, saying the cost of retail rental space (about $7/sq ft.) is high in this city, compared to other municipalities, as are the monthly utility costs retail and offices pay.

I oppose the business tax, fearing that it could force businesses here to close or relocate, which is very important because so many businesses downtown and around California Avenue have disappeared during the pandemic. If we want new businesses to locate here, an added forever tax sure doesn’t seem like an inducement to move here. And while sales tax revenues are coming back to the city, that is certainly not any indication yet of a thriving,bustling downtown. Just a few years ago this city used to be full of shoppers and restaurant customers morning, noon and night. Ever since Cal Ave has been closed to traffic, sales tax revenues are dropping in that area. And the street barricades at both entrances that block the traffic say to me keep out, rather than come in.

While the city council did not discuss the gas tax transfer in depth this past Monday night, some members indicated that maybe having two tax proposals on the November ballot was one too many. That’s for sure. Of course, if the gas tax measure is delayed until the 2024 election, there was no indication of when residents may get their court-ordered refunds.

In any case, despite the inflation, I predict the city council will go ahead and place one of the measures – most likely the business tax -- on the ballot this November. It will be an interesting election.

What is it worth to you?


Posted by Victor+Bishop, a resident of Another Mountain View Neighborhood,
on Aug 2, 2022 at 4:22 pm

Victor+Bishop is a registered user.

Anyone really surprised by the somewhat shady dealings of mayor Patrick Burt??? We have already seen how he refuses to take any responsibility for the Castilleja School issue.

Posted by Eric Filseth, a resident of Downtown North,
on Aug 3, 2022 at 12:49 am

Eric Filseth is a registered user.

Just to be clear, the proposed business tax exempts the first 10,000 square feet; so any business with less than 10,000 sf would pay nothing, and any business slightly over that would be assessed very little.

There are very few businesses over 10,000 sf in the downtown and Cal Ave areas. The City's larger businesses are mostly in the Research Park and elsewhere.

Therefore, any claim that this measure would harm downtown and Cal Ave businesses must make the more complicated argument that it would chase away basically Big Tech in other parts of town, and the lack of those employees would then harm small businesses who serve them, vs residents.

But would it drive Big Tech away? The measure amounts to a bit over 1% of rent for most of those corporations. Office rents in Palo Alto have increased on average 6% /yr over the last decade without much large-company turnover. To argue this tax would trigger such a turnover, you have to argue that a =one-time= 1% rent increase would drive out corporations that a 6% rent increase =each year= does not.

That's a hard case to make. I suspect many who argue it haven't actually made that kind of a Facilities decision themselves. For what it's worth, a number of us on council actually have made such decisions in our previous lives, and the notion that a 1% rent increase will do that isn't generally consistent with our experience. Furthermore, unlike regular “commercial landlord" rent increases, this 1% would be reinvested in city services, so corporations would get at least some of it back in the form of services.

Please note this is NOT an argument for a tax; only that it's hard to make an objective case that this particular tax will cause businesses downtown and around Cal Ave to relocate.

The larger question of “how much tax vs how much service" I am not weighing in on; these things rightly go to voters. Our job on council, as with the Press, is to make sure voters correctly understand the decisions they're making.

Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Aug 3, 2022 at 9:28 am

Online Name is a registered user.

I totally agree with you re the Utility Transfer Tax. I too want my money back from the "profit" -- aka ILLEGAL overcharges. Shame on Pat Burt for calling it just "profit" -- it's a ripoff.

How about Mayor Burt and the City Council start demanding accountability from the city manager and the city staff since they so blithely waste OUR money on ridiculous things like the 6-year Casti hearings that clearly showed staff didn't do its homework in its craved desire to cater to the uber-wealthy, Ms. Cormack's pandering support of converting Town & Country to "medical/retail" without even bothering to define what that is just before the pandemic ended even though it would have deprived the city needed sales tax revenue and a community resource, etc etc etc.

Of course Ms Cormack and Mr. Tanaka prefer the Utility Tax on US, the residents, to a business tax on their big-money backers. You can bet money on their positions.

But shame on Burt and the city re the Utility Transfer Tax which is a license to steal and to keep stealing as they've done for way too long. I might be more sympathetic if CPAU could manage to produce updated power outage info but no, they;re going to manage a fiber optic network that will cost us many millions of dollars.

Pathetically obvious that someone's buddy is getting the outsourcing contract for the fiber networks.

Posted by Bystander, a resident of Another Palo Alto neighborhood,
on Aug 3, 2022 at 11:17 am

Bystander is a registered user.

As an observer and user of our utilities, I have seen our service deteriorate considerably over the time we have been here. Taking garbage as an example, we were given crates to do our own sorting or recyclables and although they may have all been emptied into the same truck, we felt it was doing our bit. Those crates and the sorting system changed to a blue can and everything went in together. At the same time we were given green compost cans and black garbage cans. I do seem to remember seeing Pasco Sam workers running back and forth with the cans and emptying them into the trucks. Pasco Sam of course turned into Greenwaste and then the trucks came with an automatic arm that did the lifting. As a result many items of garbage were allowed to fly out from overstuffed cans and on windy days that could amount to a lot of garbage left on the street. As a result of this, the trucks had one driver/operator who never left the cab.

So presumably we have had less workers amounting to less jobs, and more trucks. Presumably the trucks do a one way system on the street and each truck picks up a similar color only. Logically speaking, this means that on pick up day, each street has 6 passes by trucks to empty all 3 cans on each side of the street.

We pay for this in our monthly charge. We can reduce the charge by using a smaller black can. We also get a twice yearly clean up day when each neighborhood can leave out larger items for pickup. Although these were touted as recycling, it seems from experience and anecdotes that these items just go into landfill and not recycled or sorted, and can't be done so as they are put into trucks which compact them, thereby destroying any use the items may have for anyone else.

Our monthly utilities charge for garbage is a tax. We do not get "vacation holds" or the option for a twice monthly pickup instead of weekly. Each month we pay for weekly pickup even if we do not need it or use it weekly.

Tax everything, including garbage.

Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Aug 3, 2022 at 11:32 am

Online Name is a registered user.

Agreeing with Bystander. When CPAU forced people to pay $25 for unwanted, ugly countertop compost receptacles and wouldn't allow us to refuse them, the number of people who switched to smaller black cans was dramatic. I still remember seeing the full trucks switching out the garbage cans -- and the little topless compost receptacles sitting on top of the garbage cans.

For years they had contests and apps and games comparing energy usage among neighbors that were horribly inaccurate because they ignored house size, number of occupants, etc. in the hopes that people would shame their neighbors. Did they stop with that nonsense? No, they just spent more money redesigning and then killings them.

Ever tried to get a rebate for your new hot water heater that only your licensed and highly paid plumber could use to submit the requests? It NEVER worked and they were totally clueless that plumbers' hourly rates FAR exceeded the $25 rebate.

And now the CPAU manager is City Manager.

Posted by Annette, a resident of College Terrace,
on Aug 3, 2022 at 12:17 pm

Annette is a registered user.

The last sentence of Online Name's post is important to note. Not only is the former CPAU manager now the City Manager, that was achieved by circumventing the usual search process. This is not good for anyone, including the person hired into the open position.

Posted by Gale Johnson, a resident of Adobe-Meadow,
on Aug 3, 2022 at 2:19 pm

Gale Johnson is a registered user.

Those were some unfair comments made about Pat Burk. He's not in this to get elevated to higher office, or for the money and perks that CC members get. His comment was right, that it was 'profit' but that it was handed back to the General Fund for CC to determine how to spend it. The suit filed will be settled out of court. Green will get a nice check and business will go on as usual...just like it should.

Posted by Gale Johnson, a resident of Adobe-Meadow,
on Aug 3, 2022 at 2:37 pm

Gale Johnson is a registered user.

Thanks to Eric and Tom. They might not remember me and that I was a major contributor to their campaigns because I felt we needed some real experienced business leaders, thinkers, analysts, and problem solvers on council. That was to counter Liz Kniss' progressive team that (she groomed them) had brilliant ideas but didn't have a clue how to execute them and fund them.

Posted by Eric Filseth, a resident of Downtown North,
on Aug 3, 2022 at 4:19 pm

Eric Filseth is a registered user.

Yes I remember, and thank you Gale especially for your years of thoughtful comments on these forums and elsewhere.

I think most people in Palo Alto are pretty sensible. I think we mostly want the same things, though we often don't all agree on the best way to get there, which is ok.

The apparently growing tendency of people in our country to take this maximalist view that “if you don't agree with me on means, you must not agree with me on goals," and its too-often extension, “if you don't agree with me on goals, you must be a corrupt heretic!" and ultimately, “if we just burn the corrupt heretics, we'll reach Utopia" is one of our most disturbing trends today. To some extent this stuff is in our DNA; demagogues and maximalist advocates across the political spectrum didn't invent it, but they leverage it. Media, both social and traditional, in our “outrage gets eyeballs" world, amplifies it. It's an unsettling brew. Yet most things in the world are tradeoffs, even more so in public policy. We just have to remember that most people accept that; not all, but most.

Back to this example, a $1/yr business tax will drive nobody out of town, and a $10M/yr tax will drive everybody out of town. A $50M revenue increase would far exceed our needs, and $0 will undershoot for most people. In between these extremes is the place for most people, and the way to navigate it is with maturity and mutual thoughtfulness, informed by data, without which all we have is religion. Thanks Gale for contributing to such navigations.

Posted by Online Name, a resident of Embarcadero Oaks/Leland,
on Aug 3, 2022 at 4:33 pm

Online Name is a registered user.

Following up on Annette's reminder, maybe Eric can explain why -- with only one city manager candidate submitted to them -- the CC awarded him an extra year's salary, benefits and vesting if he were fired or forced to resign for cause. The reason we were given by Mayor Kniss was that he had to be grabbed quickly lest someone else rush to hire them.

For years CPAU has overcharged us $20,000,000 each and every year. For years we've paid out huge lawsuits to "bad" cops for their abuses while allowing them to retire with full benefits while the City Manager and City Attorney "refuse to comment on personnel matters." For years we've heard land use attorney's and other attorneys comment to CC that the city is in clear violation of public disclosure laws, a practice for which they've been censured.

And what specific responses are ever given? What oversight promises?

Posted by Eric Filseth, a resident of Downtown North,
on Aug 3, 2022 at 10:20 pm

Eric Filseth is a registered user.

Wow. Kind of getting off topic, but I'll try here:

$20M/yr for the gas transfer isn't right. I've never heard any number even remotely close to that. Less than half.

In general, I actually agree with the Mayor on the principle that if PG+E is allowed to earn a profit they spend on their shareholders, then residents with their own utility ought to be allowed to do something analogous to spend on their community, as long as a majority agree. So much of this is exactly how the statutes are written. The broader “less tax vs more services" debate isn't a Legal issue.

City Manager �" not sure what you're asking. If it's whether to source internally or externally, reams of management literature have been written about that. Whichever way, compensation has to be competitive like anywhere else.

FWIW, City Manager is a harder job than most realize. It's like a private-sector CEO job, plus the constraints and weirdness of Government layered on top, plus a level of personal abuse most of us really aren't accustomed to. Many Assistant City Managers don't actually ever want to be City Managers. And take a look at the turmoil at this position going on in some other cities.

On lawsuits and disclosure �" for better or worse we live in a litigious society. Anybody can sue anybody for anything, it seems, and the City is a common target because it �" you �" has money. We're all really careful because anything any official says in public becomes potential grist for out-of-context use in litigation. Most people don't understand just how much the City gets sued, sometimes with cause, often without; it was an eye-opener for me. Imprecise talk by City people can cost taxpayers a lot. The result is verbal caution relative to anything legal. I know that usually comes across as evasiveness, which is really unfortunate. None of us likes it this way, but it's how Society rolls.

Posted by resident3, a resident of Another Palo Alto neighborhood,
on Aug 4, 2022 at 5:35 am

resident3 is a registered user.

@Eric Filseth

“Imprecise talk by City people can cost taxpayers a lot. The result is verbal caution relative to anything legal. I know that usually comes across as evasiveness, which is really unfortunate. None of us likes it this way, but it's how Society rolls.""

As you say, everything is litigious. That's usually because no other means were found to communicate. It still doesn't justify unsatisfactory or non-specific responses to inquiries from taxpayers. Not a standard even for Palo Alto Inc. with a City Manager, City Attorney, 7 electeds and hard to tell who runs what. What's next, NDA's?

Not the best case for tax increases.

Instead of a team of smart analysts who can't be bothered with the folks who have more at stake than the bills to pay, wish we had an elected City Attorney and an elected Mayor who could be accountable.

Posted by Byron Tate, a resident of Stanford,
on Aug 4, 2022 at 9:04 am

Byron Tate is a registered user.

[Post removed.]

Posted by Bystander, a resident of Another Palo Alto neighborhood,
on Aug 4, 2022 at 9:08 am

Bystander is a registered user.

I'm reminded of an episode of the old Brit comedy, Yes PrimeMinister. A brand new hospital had been built at government's expense and had not yet opened to patients. Yet, it was running very efficiently, with doctors and other medical staff, administrators and other non-medical staff, all working hard doing their jobs and yet not one patient had been treated. When the PM innocently asked why they hadn't started treating patients and when they would start, he was told by his horrified official that patients would only spoil the efficiency of the well run hospital.

It is time that Palo Alto CC and city staff realised that they are working for the residents and the services are to serve us, not to use as a rung on their career ladder or to give jobs to their cronies.

Posted by Citizen , a resident of College Terrace,
on Aug 4, 2022 at 11:22 am

Citizen is a registered user.

[Portion removed.]

No new taxes. City - live within your means. Cut back if you need more funds. Send us back our money that the City robbed from us in the first place.

Posted by Consider Your Options. , a resident of Another Palo Alto neighborhood,
on Aug 4, 2022 at 11:59 am

Consider Your Options. is a registered user.

I agree with Eric Filseth's comments above. I read the complete budget annually. While there is always room for improvement on how any large organization spends its money, we need the UUT revenue and the business tax. Businesses create enormous impacts on the community that residents pay to mitigate. The share of total taxes that businesses contribute has reduced significantly over time while their demand for services has increased, and that is unfair. I view the business tax as correcting that accumulated imbalance. I like the adjustments Council recently made to the measure language. It seems fair. The UUT revenue is an important part of the city budget already. I'm planning to vote for both tax measures.

These revenues are needed, if we vote this down, the city will have to capture revenue somewhere else or significantly cut services. I don't understand where there is as much left to cut as some others here suggest. Please tell me specifically, what would you cut?

To Ms. Diamond, you often write about additional things you think the city should be doing--where do you think that money is going to come from? I see no evidence in what you write that you have carefully read the detailed budget. Where, exactly, would you cut spending in the existing budget to offset the UUT revenue losses?

Finally, I know, even with the UUT, I pay much less for utilities than my friends who have to use PG&E. As long as the city manages to keep our power green and maintain competitive pricing, I think the UUT is okay. Mayor Burt's remarks are spot on.

Posted by DianaDiamond, a resident of Midtown,
on Aug 4, 2022 at 12:20 pm

DianaDiamond is a registered user.

Eric --

You wrote: "$20M/yr for the gas transfer isn't right. I've never heard any number even remotely close to that. Less than half."

I had written that the Utilities Department has been transferring $20 million a year to the city's general fund. I did not say it only came from gas collections from the Utilities Department. However, Miriam Green's suit was only about the gas revenues.

The Weekly has reported several times that the transfer is for gas and electric and amounts to $21 million a yea:

'In recent years, the city has been transferring about $21 million from its gas and electric utilities to its general fund, which pays for most city services not related to utilities. The logic behind the transfers is simple: just as investor-owned utilities like PG&E profit from their operations, the city should be able to make money from the investment it made in municipal utilities over a century ago." --Pal Alto Weekly news story by Gennady Sheyner.


Posted by Eric Filseth, a resident of Downtown North,
on Aug 4, 2022 at 5:09 pm

Eric Filseth is a registered user.

Ah. You said it, but it seems some of your readers may not have understood it.

I believe Ms Green's suit was in fact about both; and the electric transfer was upheld as you know. One can't really argue that the gas transfer is illegal because the courts struck it down, and the electric transfer is also illegal even though the courts upheld it.

Having observed this for some years now, my overwhelming impression is that the legal differences are sensitive to specific circumstances, the exact details of how the statutes are written, and any changes over time in the background of state laws.

The broader issue of “how much tax vs how much service" to me seems like a Values issue that not everybody agrees on, which is why it rightly goes to voters. But even voter intent has to work legally. The proposed GST ballot measure updates the legal side from the City Charter approved many decades ago. Does a majority of voters still have that intent? Polls suggest so, but only a ballot box will tell for sure.

Posted by MyFeelz, a resident of JLS Middle School,
on Aug 7, 2022 at 2:37 pm

MyFeelz is a registered user.

Every time I drive past a section of "free"way where construction signs say "Your Tax Dollars At Work" I look for the part that must have fallen off that should say "So We Can Tax You More".

Taxpayer dollars paid for a thoroughfare called California Avenue, where customers could drive to their destination, purchase whatever, and drive away. Now there are barricades as Diana pointed out, that are not inviting. The fact that they are quite near other barricades of a building under construction must make a Cal Ave newbie wonder what the heck they're building on both sides of the street?

As to the business tax "only" being assessed if it's over 10,000 square feet, why aren't all of the food establishments that have barricaded a thoroughfare into oblivion NOT assessed the space that constitutes the entire street? All of the food establishments are using the whole street, without paying a dime of tax for their added square footage. I don't think it could be said they should just pay for the part of the street where the food service begins and ends, because they all benefit from the barricades that block the entire street.

The establishments know they are getting a massieve amount of free square footage, including barricades, to keep people from getting run over while eating 0 star food, by people who may not have heard that Cal Ave is now JUST an eatery, and no other business can be easily accessed from a convenient parking spot. The entire square footage of the street that's being blocked off to benefit all of the food establishments should be added to every one of their current INDOOR square footage, and be taxed accordingly.

Posted by Local Resident, a resident of Community Center,
on Aug 8, 2022 at 10:43 am

Local Resident is a registered user.

We need large businesses to pay their fair share. Businesses used to pay 50% of the property tax but due to Prop 13 loopholes, they now pay 28% of the total tax collected by the city. This is despite the employees growing much faster than residents. This tax is 1% of the rent businesses pay and they their rents have been increasing on average 6% per year in Palo Alto so the idea they will be priced out does not carry weight. Almost every other city in the Bay Area already has a business tax lending even less credence to the fear of losing businesses. Businesses use police, fire and road services. All businesses under 10,000 square feet are exempt. This tax effects companies like Palantir, VM Ware and Lockheed Martin.

Covid cuts to fire & police were restored by using Fed Covid relief funds but will run out and be cut again if we don't pass this tax. Besides public safety, this tax will also go to rail safety helping to help protect our children and enable better traffic flows. In addition, it will go towards affordable housing since the city's funds are currently depleted. Please vote to support the business tax.

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