HomeMy WebLinkAbout2004-07-19 City Council (2)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY. MANAGER DEPARTMENT:CITY MANAGER’S
OFFICE
DATE:JULY 19, 2004 CMR: 365:04
SUBJECT:REQUEST FOR COUNCIL OPPOSITION TO A PROPOSED SALES TAX
INCREASE BY THE COUNTY OF SANTA CLARA
RECOMMENDATION
Staff recommends that the City Council authorize the Mayor to sign a letter declaring the
City’s opposition to Santa Clara County’s proposed sales tax increase.
BACKGROUND
Staff has received preliminary information that the County of Santa Clara will consider a
proposal to increase sales tax in Santa Clara County by ¼ to ½ cent at its August 3, 2004
Board of Supervisors meeting. The County Executive will propose that the Board place a
general sales tax increase on the November 2004 ballot.
The Board will have the option to approve either a ¼ cent or a ½ cent increase. If the
Board approves a ¼ cent increase, all tax revenues would be directed to the County.
If the Board approves a ½ cent sales tax increase, the tax revenue would be shared
between the County and the 15 cities within the County. The distribution of the extra ¼
cent sales tax revenues would be split with 2/3 going to the County and 1/3 going to the
cities. The cities’ portion of these funds would be based on a per capita formula. The City
ofPalo Alto’s share would be approximately 3.8%. As a comparison,the City of San Jose
would receive approximately 56.7%.
DISCUSSION
Staff is concerned with this proposal. The first concern is that the ¼ cent sales tax increase
would have no known direct benefit to the City or its residents. All of the money would go
directly to the County. The second scenario, or ½ cent sales tax increase, would provide
an estimated $1.7 million to Palo Alto. However, any tax increase could make it more
difficult for other fee or tax proposals, such as the Storm Drain fee or the Transient
Occupancy Tax for General Fund needs if circumstances warrant.
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The second concern is that while most local government agencies within Santa Clara
County are experiencing budget shortfalls, the proposed sales tax increase would
disproportionately benefit the County without adequately taking into account the needs of
other local agencies such as local school districts and the Valley Transportation Authority.
This proposal would most likely have a direct impact on school parcel taxes, specifically
the planned PAUSD parcel tax. Therefore, staff believes that a more collaborative
approach should be taken prior to submitting a countywide proposal to the voters.
The third concern relates to the decrease the City has experienced in sales tax revenues.
During the past three years, the City’s sales tax revenues have dropped 30%. As a result,
staff is taking steps to make the public aware of the benefits of buying goods and services
in Palo Alto through the "Shop Palo Alto" campaign. In addition, the City is proactively
working to retain its auto dealerships as they provide a substantial base of sales tax to the
City. Staff is concerned that increasing the sales tax within the county would detract from
its efforts to keep auto dealers and other businesses in Palo Alto. It would also make it
more attractive for prospective Palo Alto shoppers to make purchases outside of the city
limits in a county with lower sales taxes.
POLICY IMPLICATIONS
This request is consistent with existing City policies, including the Council Top 5 priority
for City Finances.
ENVIRONMENTAL REVIEW
This staff report does not represent a project under the California Environmental Quality
Act (CEQA).
PREPARED BY:
Chris Mo
Assistant to the City Manager
CITY MANAGER
HARRISON
Assistant City Manager
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