New study on revenue potential from 2020 tax ballot measures

August 17, 2019 – Palo Alto Matters

On August 20, the Council Finance Committee will take a deeper dive into potential Tax Measures to place on the 2020 Ballot. The latest analysis describes the process and revenue potential for a General Bond or a Parcel Tax and a commissioned study on Business Tax measures in the Bay Area over the past 10 years, including comparative research across municipalities and analysis and modeling of the range of potential revenue the city might generate via a business tax vehicle (based on employee head count, square footage, or payroll expenses).

There are a lot of variables that can impact how much revenue a given tax might generate, including potential exemptions and different pricing levels and structures. In selecting an appropriate vehicle, the city must also consider “potential areas of tax leakage” and impacts on the economic environment and tax ecosystem. With further Finance Committee and council direction to narrow the focus, more complex scenarios will be modeled. Meanwhile, In a nutshell, the initial analysis modeled the following including initial, general assessments of impacts on equity, administrability, stability, and economic benefits:

  • General Obligation Bonds ranging from $100 to $500 million in debt issuance. These would require 2/3 voter approval.
  • Parcel Taxes of either a flat $350 per parcel or a $1 per square foot per eligible parcel, yielding between $7 million and $25 million per year. City parcel taxes typically require 2/3 voter approval.
  • Business license taxes, whether based on employee headcount, square footage, or payroll size, could potentially generate $1 million to $15.5 million annually, depending on the tax rate. If the tax is considered a “general tax”, it requires only majority voter approval. If a “special tax” it would require 2/3 voter approval. Whether “general” or “special” depends on the level of specificity regarding what the revenues will be spent on.

Following the Finance Committee meeting, staff will return to City Council with an update and confirm timing for next steps, including polling and stakeholder outreach, with an eye toward a decision about the type of measure to pursue by October/November. Click here for the staff report. 

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