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Palo Alto pols back ballot measure for per-square-foot office tax
Measure would call for up to 20 cents psf levy on larger offices, flat fee under 5,000 sf
Palo Alto, the only major Bay Area city without a business tax, has proposed placing a square-footage tax on commercial offices on the November ballot, with the levy billed as a way to add as much as $43 million a year to public coffers, the Mercury News reported.
The tax would apply to business tenants with offices larger than 5,000 square feet, which would pay between 5, 10 and 20 cents a square foot, depending on which options the city chooses. Smaller offices and “community-serving” businesses would pay a flat $50 annual fee.
If the measure passes, Palo Alto would join East Palo Alto, Mountain View and San Francisco, which have targeted businesses to help pay for city services through various taxes and fees.
Palo Alto Mayor Pat Burt said a majority of the city’s leadership indicated it supports the tax.
The measure would help the city pay for future affordable housing projects, rail-grade separations required by Caltrain’s electrification plan, and restoration of services cut during the pandemic. A 20-cent tax per square foot could bring in up to $43.4 million a year.
While Palo Alto doesn’t have a company as big as Google or Facebook, it is a longtime keystone of Silicon Valley, with a vibrant base of tech businesses, many spurred by research at Stanford University. City leaders said they want top employers to pay for what makes the city attractive – its services, culture and legacy of tech entrepreneurship.
“The reason we don’t have the giant tech companies is that they outgrew us,” Burt told the Mercury-News. “Frankly Palo Alto really wants to be the center for new companies to continue to be born and grow to a certain point. Some stay for a long time and others move away. But we currently have a lot of large companies that can afford to pay more.”
Leasing an office in Palo Alto costs close to $8 a square foot, while similar space in San Jose runs about $4 a square foot, Burt said. But despite all its “incredible business wealth,” Silicon Valley has some of the lowest corporate taxes in the country.
Nonetheless, critics warn that placing a tax on offices could exacerbate an exodus of tech companies out of Palo Alto. The Silicon Valley Leadership Group, headed by Silicon Valley business leaders, favors sales tax increases over a business tax.
“Our members are concerned that the proposed new tax could make Palo Alto much less attractive as a place to do business,” said Laura Wilkinson, a spokeswoman for the Leadership Group, in a statement. “Make no mistake, this proposed new business tax would hurt small businesses as well as the large ones.”
She said the city has spent time and money on polling, but has not performed an economic analysis on the full impact of a new office tax that is higher than in neighboring cities.
City Councilman Eric Filseth, however, said the Silicon Valley business model has created “unimaginable amounts of wealth.” But if the city doesn’t invest some of that wealth in housing, transportation and social-services, it could “choke off the region’s future – we already see the signs.”
[San Jose Mercury-News] – Dana Bartholomew