HomeMy WebLinkAboutAugust 10, 2022 MemorandumCITY COUNCIL MEETING
_______8/10/2022_______
[X] Placed Before Meeting
[ ] Received at Meeting #AA1
City of Palo Alto
MEMORANDUM
To: City Council
Date: August 10, 2022
SUBJECT: Agenda Item #10 November 2022 Ballot Measures: (1) Repeal of a Resolution Adopted
on August 8, 2022, and Adoption of a Revised Resolution Placing a Business Tax on the
November 2022 Ballot; (2) Adoption of a Resolution Placing a Measure Affirming the
Natural Gas Utility Transfer on the November 2022 Ballot
The Council established an ad hoc committee to be appointed by the Mayor to continue discussions with
the business community on the tax structure. The ad hoc committee, consisting of Mayor Burt and
Councilmembers Filseth and Dubois, have continued to meet with representatives of the business
community multiple times prior to and subsequent to the June 20 Council meeting through today, August
10, 2022.
The Council ad hoc and the Business Coalition met on August 9, 2022 to continue discussions and staff
continued discussions with stakeholders on August 10. As an alternative to the tax adopted by the Council
on Monday August 8, 2022, staff is bringing forward their best professional recommendation seeking a
middle path based on where the two parties ended discussions. Staff have included documents reflecting
this alternative in the revised Attachment A. The Attachment A alternative differs from the August 8
adopted resolution as follows:
1) Adjusting the monthly tax rate from $0.11 to a monthly rate of $0.075 per square foot for all non-
exempt businesses above 10,000 square feet.
2) Adjust the annual cap on any business from $1.0 million annually to $500,000 annually, to be
adjusted as noted below.
3) Adjusting the annual Consumer Price Index (CPI) escalator to a flat 2.5% increase annually to be
applied to both the monthly rate and the tax cap, beginning fiscal year 2026-2027.
4) In Recital C, additional commitments are made to annual reporting of proceeds and
expenditures, which will also be reflected in revised Advisory Spending Guidelines to be brought
back to Council on Consent in the next few weeks.
5) Ballot Measure Question – Revised to reflect these changes and state that proceeds are
estimated at $9.6 million annually.
6) In section 2.37.080, a provision for offsets for vacant space that was inadvertently left out of the
August 8 measure is restored.
7) In section 2.37.120, language is added to confirm the Tax Administrator’s authority to adopt
rules governing timing of payments and tax returns.
In conjunction with this revised business tax, staff recommends adopting the resolution to place the gas
utility transfer on the ballot. That resolution is Attachment B.
In the alternative, if Council does not adopt the staff recommended business tax and gas utility transfer,
staff recommends that Council repeal and readopt the August 8 business tax to address the erroneously-
omitted offset for vacant space and correct minor typographical errors. This corrected measure is
Attachment C.
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Resolution No. ______
Resolution of the Council of the City of Palo Alto Calling an Election for
November 8, 2022 for Submittal to the Qualified Electors of the City a Measure
Amending Title 2 of the Municipal Code to Add Chapter 2.37 to Establish a Tax
on Businesses Operating in the City of Palo Alto
R E C I T A L S
A.Unlike most communities in California, the City of Palo Alto does not require local
businesses to contribute to city services through a local business tax. As Palo Alto looks to the
future, City leaders have determined that the time has come to seek voter approval to tax mid‐
sized and large businesses operating in the City, so that the business sector does its part to help
the City to meet evolving challenges, including the need for long term stable funding for public
safety services and the need for significant investments in affordable housing and grade
separated train crossings that maintain mobility for vehicles, bicyclists, and pedestrians.
B.A proposed ordinance attached hereto and incorporated herein by reference as
Attachment “A” (the “Ordinance”) would amend the Palo Alto Municipal Code to add Chapter
2.37 to Title 2, to establish a general tax on businesses operating in the City of Palo Alto that
would be imposed at a monthly rate for each square foot occupied by a business in the city, with
no tax imposed on the first 10,000 square feet occupied by a business in the city, and a tax of
seven and one‐half (7.5) cents for each square foot occupied by a business in the city above
10,000 square feet. The tax would be imposed at half the rate for the first two years. Grocery
stores would be exempt, offsets would be made for businesses that remit transient occupancy
tax and for payers of discretionary sales and use tax, and the total tax owed by any single taxpayer
would be capped at $500,000 per year. The tax rate and the cap would be increased by 2.5%
annually, to account for general inflation. The business tax would terminate in thirty‐five years.
C.Proceeds from the tax would be placed in the general fund for general
governmental purposes. The City Council has approved advisory spending guidelines after
considering input from residents and stakeholders on City spending priorities. During its regular
annual fiscal reporting, the City will separately report receipts from the business tax and the
spending of proceeds.
D.By its Resolution No. 10045 the City Council called a general municipal election for
November 8, 2022 (“Election”).
E.Pursuant to Government Code Section 53724 and Election Code Section 9222, the
City Council desires to submit the Ordinance to the voters of the City.
The City Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Findings. The City Council finds and determines that each of the findings
set forth above are true and correct.
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SECTION 2. General Tax Election. The City Council proposes to impose the general tax
set forth in the Ordinance and to present this proposal to the voters on November 8,
2022.
SECTION 3. Measure. Pursuant to Elections Code Section 9222, the City Council hereby
submits the Ordinance to the voters at the Election and orders the following question to be
submitted to the voters at the Election:
Shall the measure to raise funds for public safety,
affordable housing, rail crossing safety, homeless services,
and general city services, by levying a tax on businesses in
the City of Palo Alto at a monthly rate of 7.5 cents per
square foot occupied by a business, up to $500,000 per
business, with annual 2.5% adjustments for inflation and
exemptions for grocery stores and businesses under 10,000
square feet, raising approximately $9.6 million annually for
35 years, be adopted?
YES
NO
This question requires the approval of a majority of those casting votes.
SECTION 4. Adoption of Measure. The measure to be submitted to the voters is
attached to this Resolution as Exhibit A and incorporated herein by this reference.
SECTION 5. Notice of Election. Notice of the time and place of holding the election is
hereby given, and the City Clerk is authorized, instructed and directed to give further or additional
notice of the election, in time, form and manner as required by law.
SECTION 6. Impartial Analysis. Pursuant to California Elections Code Section 9280, the
City Council hereby directs the City Clerk to transmit a copy of the measure to the City Attorney.
The City Attorney shall prepare an impartial analysis of the measure, not to exceed 500 words in
length, showing the effect of the measure on the existing law and the operation of the measure,
and transmit such impartial analysis to the City Clerk on or before August 23, 2022.
SECTION 7. Ballot Arguments. Pursuant to Elections Code Section 9286 et. seq.,
August 16, 2022 at 5:00 p.m. shall be the deadline for submission of arguments in favor of, and
arguments against, any local measures on the ballot. If more than one argument for and/or
against is received, the priorities established by Elections Code Section 9287 shall control.
SECTION 8. Rebuttal Arguments. The provisions of Elections Code Section 9285 shall
control the submission of any rebuttal arguments. The deadline for filing rebuttal arguments
shall be August 23, 2022 at 5:00 p.m.
SECTION 9. Consolidation Request. The Council of the City of Palo Alto requests the
governing body of any other political subdivision, or any officers otherwise authorized by law, to
partially or completely consolidate such elections and the City Council consents to such
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consolidation. The Council requests the Board of Supervisors of Santa Clara County to include on
the ballots and sample ballots, all qualified measures submitted by the City Council to be ratified
by the qualified electors of the City of Palo Alto. The Council acknowledges that the election will
be held and conducted according to procedures in the Elections Code, including Section 10418.
SECTION 10. Request for County Services. Pursuant to Section 10002 of the California
Elections Code, the Council of the City of Palo Alto hereby requests the Board of Supervisors of
Santa Clara County to permit the Registrar of Voters to render services to the City of Palo Alto
relating to the conduct of Palo Alto’s General Municipal and Special Elections which are called to
be held on Tuesday, November 8, 2022. The services shall be of the type normally performed by
the Registrar of Voters in assisting the clerks of municipalities in the conduct of elections
including, but not limited to, checking registrations, mailing ballots, hiring election officers and
arranging for polling places, receiving absentee voter ballot applications, mailing and receiving
absent voter ballots and opening and counting same, providing and distributing election supplies,
and furnishing voting machines.
SECTION 11. Transmittal of Resolution. The City Clerk is hereby directed to submit
forthwith a certified copy of this resolution to the Santa Clara County Board of Supervisors and
to the Registrar of Voters.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSENTIONS:
ATTEST: APPROVED:
_____________________________ ______________________________
City Clerk Mayor
______________________________
APPROVED AS TO FORM: City Manager
_____________________________ ______________________________
City Attorney Director of Administrative Services
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Exhibit A
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Title 2 of the
Municipal Code to Add Chapter 2.37 to Establish a Tax on Businesses Operating
in the City of Palo Alto
The People of the City of Palo Alto do ordain as follows:
SECTION 1. Title 2 (Administrative Code) of the Palo Alto Municipal Code is hereby
amended by adding Chapter 2.37 (Business Tax) as follows:
Chapter 2.37
BUSINESS TAX
2.37.010 Title
This chapter is the “City of Palo Alto Business Tax Ordinance.”
2.37.020 Definitions
The definitions in this section apply to the words and phrases used in this chapter unless
the context clearly indicates otherwise.
(a) “Business” means any commercial enterprise, trade, calling, art, vocation, profession,
occupation, or means of livelihood, whether or not carried on for gain or profit.
(b) “Business operator” means a person who transacts, maintains, manages, operates,
controls, engages in, conducts, carries on, or owns a business in the city. It does not
include the employee of a business who is not an owner or proprietor of the business.
(c) “Calendar year” means the year beginning January 1 and ending December 31.
(d) “City” means the City of Palo Alto.
(e) “Fiscal year” means the year beginning July 1 and ending June 30.
(f) “Fixed place of business” means a place of business located in the city boundaries and
occupied for the particular purpose of operating a business.
(g) “Grocery store” means a business that exists for the primary purpose of selling a range
of food items to consumers for consumption off site, such as canned foods; dry goods;
fresh produce; fresh meats, fish, and poultry; and any area that is not separately owned
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within the store where food is prepared and served, including a bakery, deli, and meat
and seafood departments, or as otherwise defined in 14 CCR section 18982(a)(3),
provided that any store that combines grocery items with other retail products or
services is a grocery store for the purpose of this chapter only if two‐thirds or more of
the occupied space is designated to the sale of grocery items as listed in this section.
(h) “Hotel” has the meaning provided in section 2.33.010.
(i) “Operate” means to conduct a business and includes all stages of conducting a business
from initial planning to the wind‐down of a business, whether or not a profit is being
made.
(j) “Person” means any individual, firm, partnership, joint venture, association,
corporation, limited liability company, estate, trust, receiver, syndicate or other group
or combination acting as a unit and includes the plural as well as the singular number.
(k) “Quarter” means the three‐month quarter of the fiscal year. The “first quarter” is the
months of July, August, and September; the “second quarter” is the months of October,
November, and December; the “third quarter” is the months of January, February, and
March; and the “fourth quarter” is the months of April, May, and June. The term “same
quarter of the previous fiscal year” means the quarter of the same number in the
previous fiscal year.
(l) “Square footage” means the rentable square footage used by a business as specified in a
business’s lease or, if the business floor space is owned by the business, as calculated in
the same manner as if the area was rented using commonly accepted standards of
measurement for leasing purposes such as the Standard Methods of Measurement
published by the Building Owners and Managers Association (BOMA). Any method of
measurement used must meet the following minimum standards:
(1) It shall be computed by measuring to the inside finish of permanent outer
building walls and shall include space used by columns and projections necessary
to the building.
(2) It shall include both the area used by the business and a proportionate share of
the building service areas such as lobbies, corridors and other common areas in a
building unless assigned to another business for tax calculation purposes.
(3) It shall not include vertical penetrations through the building such as stairs,
elevators, or heating, ventilation, air conditioning, utility, or telephone systems,
except on the lowest floor of stairs and elevators.
(4) For the business of renting or leasing property, it shall include area used
primarily for the business operator’s offices and operational facilities.
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(5) It shall not include residential uses, including multiple‐family use as defined in
section 18.04.030(102), two‐family use as defined in section 18.04.030(141),
single‐family residential use as defined in section 18.04.030(86)(A)), mobile
home park as defined in section18.04.030(97), residential care homes as defined
in section 18.04.030(124), supportive housing as defined in section
18.04.030(135.5), transitional housing as defined in section 18.04.030(138),
emergency shelter as defined in section 18.04.030(50), and any equivalent
residential use defined by the city.
(6) It shall include hotel as defined in section 18.04.030(73).
(7) Square footage for businesses with multiple locations will be measured and tax
assessed will be calculated based on the aggregate square footage for the
business for all locations in the city.
(m) “Tax Administrator” means the Director of Administrative Services, or successor
position, or their designee.
(n) “Transient Occupancy Tax” means the tax imposed under section 2.33.020.
(o) “Transitory business” means a business that operates in the city for less than 90 days in
the course of one calendar year (such as seasonal sale lots, special events,
concerts/performances/circuses, filming, and party rentals).
(p) “Vacant” means a severable portion of the physical location that a business is
occupying, such as an entire floor, a building, or a portion of a floor with independent
entrance and exit, that is free from any use, fixtures, furniture, and equipment, and is
immediately available for use by a new tenant or owner.
2.37.030 Obligation to Pay Business Tax
(a) It is unlawful for any business operator, either for themselves or for any other person, to
operate in the city any business taxed under this chapter without paying all business tax
required by this chapter.
(b) If a business has more than one business operator, then the payment of the business tax
by one business operator excuses any other business operators from the obligation to
pay the business tax for that period for which the tax has been paid.
(c) The requirement to pay business tax is in addition to and separate from the
requirement to obtain a business registration certificate under section 4.60.030.
(d) The payment of business tax does not authorize the doing of any act which the person
or business paying the business tax is not otherwise entitled to do and does not excuse
the business from complying with other applicable Code requirements.
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2.37.040 Imposition of Business Tax
Any business operator operating a business at a fixed place of business in the city must
pay a business tax at the following rates:
(a) Beginning January 1, 2023, the tax shall be imposed at the following rates:
(1) For the first 10,000 square feet occupied by a business in the city, no tax shall be
imposed.
(2) For each square foot occupied by a business in the city over 10,000 square feet,
a monthly tax of three and three‐quarter (3.75) cents per square foot shall be
imposed.
(b) Beginning January 1, 2025, the tax shall be imposed at the following rates:
(1) For the first 10,000 square feet occupied by a business in the city, no tax shall be
imposed.
(2) For each square foot occupied by a business in the city over 10,000 square feet,
a monthly tax of seven and one‐half (7.5) cents per square foot shall be imposed.
(c) The maximum amount of tax a business must pay is capped at $500,000 (five hundred
thousand dollars) per fiscal year.
2.37.045 Order of Calculations
Tax owed shall be determined by applying the terms of this ordinance in the following
order: first, application of the tax rate in subdivisions (a) or (b) of section 2.37.040 to the square
footage of the business; second, application of business tax offsets as set forth in section
2.37.080, if any; and third, application of the tax cap in subdivision (c) of section 2.37.040, if
applicable.
2.37.050 Annual Adjustment of Tax Rate and Cap
Beginning with the 2026‐27 fiscal year, and each fiscal year thereafter, the tax rate in
subdivision (b)(2) of section 2.37.040 and the cap in subdivision (c) of section 2.37.040 shall be
automatically increased by two and one‐half percent (2.5%).
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2.37.060 Disposition of Tax Revenue
The tax imposed by this chapter is for the purpose of raising revenue for the general
governmental purposes of the city. All of the proceeds from the tax imposed by this chapter
shall be placed in the city’s general fund.
2.37.070 Exemptions from Tax
(a)The following businesses are exempt from the tax imposed by this chapter:
(1)Any business exempt from the tax by the laws of the United States or the State
of California;
(2)Grocery stores;
(3)Businesses that occupy or use 10,000 square feet or less in the city; and
(4)Transitory businesses.
(b)If a business operator operates a single integrated business that has two or more parts,
one or more of which could be exempt from the tax imposed by this chapter if operated
as a separate business, the city may, at its discretion, exempt from the tax any part of
the business that would be exempt if operated as a separate business, provided the
business’s square footage can be reasonably allocated between the parts. If the city
determines that the square footage cannot be reasonably allocated between the
different parts of the business, then the entire business shall be taxed, unless to do so
would violate a law of the United States or the State of California.
2.37.080 Business Tax Offsets
(a)A business operator that operates a hotel in the city may deduct from the business tax it
owes for a quarter for the business of operating the hotel an amount equal to the total
transient occupancy tax collected and remitted to the city in the same quarter of the
previous fiscal year from transients staying at the hotel.
(b)The business operator of a business that has discretion to determine the location of the
place of sale, place of use, or principal place of negotiation for sales or use tax purposes
and which exercises that discretion and designates the city as the place of sale, place of
use, or principal place of negotiation for sales or use tax purposes which results in the
city receiving sales or use tax revenues that it would not otherwise have received, but
for the business’s exercise of its discretion to designate the city as the place of sale,
place of use, or principal place of negotiation for sales or use tax purposes
(“Discretionary Sales or Use Tax”) may deduct from the business tax it owes for a
quarter an amount equal to one half of the total sales tax or use tax received by the city
from the Discretionary Sales or Use Tax of that business in the same quarter of the
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previous fiscal year. This offset can offset up to, but no more than, 75% of the business’s
quarterly business tax. The city and a business operator may enter into an agreement
implementing this section.
(c) A business operator of a business that has rights to property due to property ownership,
a ground lease, or a lease that permits subleasing, and that is offering that property for
sale or rent, may deduct from the business tax owed for the business an amount equal
to the business tax associated with the square footage being offered for sale or rent,
provided that the area to be sold or rented is completely vacant and available for
immediate occupancy.
(d) A business claiming an offset under this section must claim the offset with its tax filing
for the quarter for which the offset is claimed.
(1) If the information necessary for a business to claim an offset is not available, the
business may defer claiming an offset for up to one year or for another period of
time set by written agreement with the city.
(2) The Tax Administrator may require a business claiming an offset to submit
additional information to support the claim of the offset. The request for
additional information must be made in writing and the information must be
provided within thirty (30) days.
(3) If the Tax Administrator determines that an offset claimed by a business is
incorrect, the Tax Administrator may make an Initial Determination of the
amount, if any, of the offset and the amount of tax due under subdivision (a) of
section 2.37.150.
2.37.090 Quarterly Tax Payments
(a) The tax imposed by this chapter shall be paid quarterly. The tax for each quarter is due
the first day of the following quarter and is delinquent thirty (30) days later.
(b) For the first quarter in which a business begins operating in the city, the business’s tax
shall be prorated for the number of days that the business was operating in the quarter.
(c) For the last quarter in which a business operates in the city before closing, the
business’s tax shall be prorated for the number of days that the business was operating
in the quarter.
2.37.100 Business Tax Filing for a New Business
When a business begins operating in the city for the first time, the business operator
must provide the Tax Administrator with the following information, verified by the business
operator as true and correct under penalty of perjury of the laws of the State of California,
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before beginning the operation of the business in the city:
(a)The name of the business and the address or addresses at which it will be operating in
the city;
(b)The date on which the business will begin operating;
(c)The nature of the business’s activities;
(d)The square footage in which the business will be operating in the city; and
(e)Any other information required by the Tax Administrator that is reasonably required to
administer this Chapter 2.37.
2.37.110 Quarterly Tax Returns
With each quarterly tax payment, a business operator must submit a quarterly tax
return which contains the following information, verified by the business operator as true and
correct under penalty of perjury of the laws of the State of California:
(a)The name of the business and the address or addresses at which it is operating in the
city;
(b)The nature of the business’s activities;
(c)The square footage in which the business is operating in the city;
(d)If the business operator claims an offset under section 2.37.080, sufficient information
and documentation to establish the business’s right to the offset and the amount of the
offset;
(e)Any other information required by the Tax Administrator; and
(f)The amount of tax due based on the square footage of the business.
2.37.120 Agreements for Installment Payments
The Tax Administrator may enter into an agreement with a business operator, or may
adopt regulations that apply to all or a group of business operators, to allow payment of the tax
on a more or less frequent basis.
2.37.130 Businesses Operating in the Same Location
(a)Each business operator operating a business in a location where one or more other
businesses are also operating is obligated to pay business tax measured by the square
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footage occupied by that business.
(b) The payment of business tax by a business operator absolves any other business
operator from having to pay business tax measured by the same square footage.
(c) Two or more business operators that are operating businesses in the same square
footage may contractually agree which business will pay the business tax measured by
that square footage.
2.37.140 Delinquent Taxes (Penalties and Interest)
(a) When a tax becomes delinquent, a penalty of 10% of the amount of the delinquent tax
will be added to the amount of tax due. If the tax remains unpaid sixty (60) days after
becoming delinquent, an additional penalty of 25% of the amount of the delinquent tax
(excluding accrued interest and the initial penalty) will be added to the amount of tax
due.
(b) On the first of each month that a tax is delinquent, interest in the amount of 1.5% of the
delinquent amount, excluding penalties and interest, will be added to the amount of tax
due.
(c) A business operator may apply to the Tax Administrator for a reduction or waiver of any
accrued penalties or interest, and the Tax Administrator may reduce or waive any
accrued penalties or interest upon a finding of good cause.
2.37.150 Administrative Procedure to Assess or Correct Tax
(a) If the Tax Administrator determines that a business operator has incorrectly reported
any information to the city or has not paid all or any of the tax, penalties, or interest
that are due, the Tax Administrator may, using any information available to the Tax
Administrator, issue an Initial Determination stating what the Tax Administrator believes
to be the correct information and, if new or additional tax, penalties, or interest are due,
how much tax, penalties, or interest are due. An Initial Determination must be issued
within five (5) years of the last day of the quarter to which the Initial Determination
applies, except in the case of an audit conducted under section 2.37.200, in which case
it must be issued within ninety (90) days of the completion of the audit and can apply to
any of the quarters that were subject to the audit. The Initial Determination shall be
served on the business operator either personally or by U.S. mail to the most recent
address for the business operator in the Tax Administrator’s records. Service is effective
upon deposit of the Initial Determination in the U.S. Mail.
(b) A business operator affected by an Initial Determination may within thirty (30) days of
service of an Initial Determination contest the Initial Determination and request a
hearing before the Tax Administrator by filing with the Tax Administrator a written
request for a hearing. The further accrual of penalties and interest shall be tolled upon
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the filing of a request for a hearing. If a business operator does not contest an Initial
Determination and request a hearing with the Tax Administrator within fifteen (15) days
of service of the Initial Determination, the Initial Determination shall become final and
cannot be appealed.
(c)If a business operator timely contests an Initial Determination and requests a hearing,
the Tax Administrator shall set a hearing within sixty (60) days of the filing of the
request for a hearing. Notice of the hearing shall be served on the business operator
either personally or by U.S. mail to the most recent address for the business operator in
the Tax Administrator’s records.
(d)At the hearing the business operator may present evidence and argument regarding the
Initial Determination to show why the Initial Determination is incorrect and to show
what the determination of the Tax Administrator should be. Within sixty (60) day after
the close of the hearing, the Tax Administrator shall serve a Final Determination, setting
forth the Tax Administrator’s determination of the facts and issues that were the subject
of the Initial Determination. The Final Determination shall be served on the business
operator either personally or by U.S. mail to the most recent address for the business
operator in the Tax Administrator’s records. Service is effective upon deposit of the Final
Determination in the U.S. Mail. Unless an appeal of a Final Determination is filed under
section 2.37.170, any penalties or interest tolled under subdivision (b) of this section will
resume accruing ten (10) days after the service of the Final Determination.
2.37.160 General Administrative Remedy
(a)Any person affected by a decision of the Tax Administrator (“the challenger”), except for
decisions under section 2.37.150, may challenge that decision by filing a written
objection to the decision with the Tax Administrator. The objection must be filed within
thirty (30) days of the issuance of the decision being challenged. If the Tax Administrator
was required to provide notice of the decision, then the time to file an objection to the
decision begins to run from the date of service of the notice of the decision. The Tax
Administrator shall serve a written response to the objection within thirty (30) days of
the filing of the objection, which period can be extended by the Tax Administrator for an
additional thirty (30) days. The Tax Administrator’s response to the objection shall be
served on the challenger either personally or by U.S. mail to the most recent address for
the challenger in the Tax Administrator’s records.
(b)The challenger may request a hearing on the Tax Administrator’s response to the
objection by filing a request for a hearing with the Tax Administrator within thirty (30)
days of service of the response to the objection. If a timely request for a hearing on a
response to the objection is filed with the Tax Administrator, the Tax Administrator shall
set a hearing within sixty (60) days of the filing of the request for a hearing. Notice of
the hearing shall be served on the challenger either personally or by U.S. mail to the
most recent address for the challenger in the Tax Administrator’s records.
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(c) At the hearing the challenger may present evidence and argument regarding the
decision being challenged to show why the decision is incorrect and to show what it
should be. Within sixty (60) days after the close of the hearing, which the Tax
Administrator may extend for an additional sixty (60) days, the Tax Administrator shall
serve a Final Determination on the decision, setting forth the Tax Administrator’s
determination of the decision that was challenged. The Final Determination shall be
served on the challenger either personally or by U.S. mail to the most recent address for
the challenger in the Tax Administrator’s records. Service is effective upon deposit of
the Final Determination in the U.S. mail.
2.37.170 Appeals
(a) A Final Determination of the Tax Administrator under section 2.37.150, subdivision (d),
or section 2.37.160, subdivision (c), can be appealed to the City Manager by filing a
written notice of appeal with the City Manager within thirty (30) days of service of the
notice of the Final Determination being appealed.
(b) Only a business operator who files a timely request for a hearing on an Initial
Determination under section 2.37.150 and participates in the hearing or a challenger
who files an objection to a decision and files a request for a hearing on the response to
the objection under section 2.37.160 and participates in the hearing can file an appeal
under this section.
(c) If a timely appeal is filed with the City Manager, the City Manager, or the City Manager’s
designee, shall set a hearing within sixty (60) days of the filing of the appeal, which may
be extended by the City Manager for an additional thirty (30) days. Notice of the hearing
shall be served on the appellant either personally or by U.S. mail to the most recent
address for the challenger in the Tax Administrator’s records. The tolling of the accrual
of penalties or interest under section 2.37.150, subdivision (b), shall continue upon the
timely filing of an appeal under this section.
(d) At the hearing the appellant and the Tax Administrator may present evidence and
argument regarding the decision being appealed to show why the decision is correct or
incorrect and to show what it should be. Within sixty (60) days after the close of the
hearing, which the City Manager or the City Manager’s designee may extend for an
additional sixty (60) days, the City Manager or the City Manager’s designee shall serve a
written decision, setting forth the resolution of the appeal. The decision shall be served
on the appellant either personally or by U.S. mail to the most recent address for the
appellant in the City Manager’s records. Service is effective upon deposit of the decision
in the U.S. Mail. Any penalties and interest that were tolled under section 2.37.150,
subdivision (b), shall resume accruing ten (10) days after the service of the decision.
(e) A decision of the City Manager, or the City Manager’s designee, served under
subdivision (d) of this section is subject to judicial review under sections 1094.5 and
1094.6 of the Code of Civil Procedure with a writ petition filed in the appropriate court
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within ninety (90) days of the service of the written decision. Any tax, penalties, or
interest determined by the decision to be owed to the city by the appellant must be
paid to the city as a precondition to filing a writ petition challenging the decision, but a
claim for a refund under section 2.37.190 does not have to be filed before filing a writ
petition.
2.37.180 Constitutional Apportionment
(a)No tax imposed by this chapter shall be applied to a business operator so as to
constitute an undue burden on interstate commerce or intercity commerce or be
violative of the equal protection or due process clauses of the United States or California
constitutions.
(b)A business operator who contends that the application of a tax imposed by this chapter
on the business operator constitutes an undue burden on interstate commerce or
intercity commerce or violates the equal protection or due process clauses of the United
States or California constitutions may apply to the Tax Administrator for an
apportionment of the tax imposed on the business operator that would remove the
constitutional violation by filing a written request with the Tax Administrator that
explains the factual and legal basis for the claimed constitutional violation and proposes
a method of apportionment that would resolve the alleged constitutional violations.
(c)The Tax Administrator, in consultation with City Attorney, shall review the application
and within sixty (60) days of the filing of the application, which deadline may be
extended for an additional sixty (60) days, issue a decision on the application. The
decision on the application shall be served on the business operator either personally or
by U.S. mail to the most recent address for the challenger in the Tax Administrator’s
records. The decision can be challenged under section 2.37.160.
2.37.190 Refunds
(a)A business operator who believes that any tax, penalty, or interest has been illegally,
erroneously, or mistakenly paid to, collected by, or otherwise received by the city may
file a claim for a refund of the amount of tax, penalty, or interest claimed to have been
improperly received by the city.
(b)The claim must be filed with the Tax Administrator and signed under penalty of perjury
by the business operator. The claim must state:
(1)The legal and factual basis for the refund claim;
(2)The amount of tax, penalty, or interest allegedly improperly received by the city;
(3)The date or dates that the improper payments were made to the city; and
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(4) The address of the claimant.
(c) The claim must be filed with the Tax Administrator within two (2) years of the date of
the allegedly improper payment to the city.
(d) The Tax Administrator shall provide a written decision on the claim within thirty (30)
days of the filing of the claim by serving the decision on the claimant either personally
or by U.S. mail to the address provided in the claim. Service is effective upon deposit of
the response in the U.S. Mail.
(e) A claimant may challenge the Tax Administrator’s decision on a refund claim under
section 2.37.160.
(f) This section does not apply to:
(1) A claim for a refund arising out of a decision of the Tax Administrator, City
Manager, or City Manager’s designee under sections 2.37.150, 2.37.160,
2.37.170, or 2.37.190; or
(2) A claim that could have been asserted by the claimant, but was not, under
sections 2.37.150, 2.37.160, 2.37.170, or 2.37.190.
2.37.200 Audits
(a) The Tax Administrator may conduct an audit of any business operator to ensure proper
compliance with the requirements of this chapter.
(b) To initiate an audit the Tax Administrator shall provide written notice to the business
operator that is the subject of the audit of the initiation of the audit by serving the
notice personally or by U.S. mail to the most recent address for the business operator in
the Tax Administrator’s records. The notice shall state the period of time subject to the
audit.
(c) Notice of the initiation of an audit for a quarter for which either a business tax filing for
a new business or quarterly tax return was submitted under section 2.37.100 or section
2.37.110 must be served within three (3) years of the last day of the quarter to which
the filing or return applied.
(d) Notice of the initiation of an audit for a quarter for which neither a business tax filing for
a new business nor a quarterly tax return was submitted under section 2.37.100 or
section 2.37.110, but for which the business was registered as a business under section
4.60.030, must be served within five (5) years of the last day of the quarter for which
the filing or return should have been filed.
(e) Notice of the initiation of an audit for a quarter for which neither a business tax filing for
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a new business nor a quarterly tax return was submitted under section 2.37.100 or
section 2.37.110, and for which the business was not registered as a business under
section 4.60.030, must be served within seven (7) years of the last day of the quarter for
which the filing or return should have been filed.
(f)Upon completion of an audit, the Tax Administrator may make an Initial Determination
under subdivision (a) of section 2.37.150 of any taxes, penalties, and interest
determined to be owed and not paid for the audit period. The Initial Determination
must be issued within ninety (90) days of the completion of the audit. If a business
operator subject to audit is unable or unwilling to provide sufficient records to enable
the Tax Administrator to verify compliance with this chapter, the Tax Administrator is
authorized to make a reasonable estimate of the amount of tax due and the reasonable
estimate shall be entitled to a rebuttable presumption of correctness.
2.37.210 Maintenance and Review of Records
(a)Business operators must maintain for six (6) years records of square footage and
information necessary to calculate the tax. If the Tax Administrator serves notice of the
initiation of an audit, the information pertinent for the quarters subject to the audit
must be maintained until the conclusion of the audit.
(b)The Tax Administrator may with reasonable notice inspect the premises and records of
the business operator.
(c)The Tax Administrator may request the city council to issue an administrative subpoena
for records of a business operator or other persons with relevant information.
2.37.220 Confidentiality of Records
All documents submitted to the city by a business operator under this chapter and all
documents of a business operator inspected by the Tax Administrator in the conduct of an audit
are presumed to be confidential and will not be subject to public inspection to the fullest extent
allowed by law and must be maintained so that the contents of the documents will not become
known except to persons charged with the administration of this chapter. Confidential
documents may be shared with consultants retained by the city to aid in the administration of
this chapter, provided the consultants agree to maintain the confidentiality of the documents.
However, nothing in this section precludes the city from aggregating information and releasing
it in a manner that does not identify any particular business or connect any information with a
particular business.
2.37.230 Action to Collect Delinquent Taxes
(a)Any tax, penalty, and interest imposed on a business operator under this chapter is a
debt owed by the business operator to the city, which may be recovered in an action
filed by the city in a court of competent jurisdiction.
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(b) An action under this section shall be filed within three (3) years of an Initial
Determination becoming final under subdivision (b) of section 2.37.150, the issuance of
a Final Determination under subdivision (d) of section 2.37.150 that is not appealed, the
issuance of a Final Determination under subdivision (c) of section 2.37.160 that is not
appealed, or the issuance of a decision under subdivision (d) of section 2.37.170.
(c) During the pendency of an action filed under this section, interest will continue to
accrue under subdivision (b) of section 2.37.140 until the entry of judgment.
(d) Before filing an action, the city may serve the business operator either personally or by
U.S. mail at the most recent address for the business operator in the Tax Administrator’s
records with notice of the pending action and give the business operator fifteen (15)
days to pay all of the delinquent taxes, penalties, and fees. If all of the of the delinquent
taxes, penalties, and fees are not paid within the fifteen‐day period, then an additional
penalty of 25% of the amount of the delinquent tax (including accrued penalties and
interest) shall be added to the total delinquency and may be recovered in the action.
2.37.240 Errors Not Binding on the City
No error by the Tax Administrator or any other officer, employee, or agent of the city in
the application of this chapter shall prevent, prejudice, or estop the collection by or for the city
of the full amount of tax owed by any person under this chapter.
2.37.250 Dates
If the last day for the performance of any act under this chapter is a Saturday, Sunday,
or holiday recognized by the city, then the date for the performance of that act is extended to
the next day that is not a Saturday, Sunday, or holiday recognized by the city.
2.37.260 Rules and Regulations
(a) The Tax Administrator may adopt rules and regulations that are not inconsistent with
the provisions of this chapter as may be necessary to aid in the application and
enforcement of this chapter.
(b) The Tax Administrator may adopt rules providing for the service or filing of any notices,
filings, returns, or submittals required by this chapter. These rules may provide
alternative means for serving or filing any notice, filing, return, or submittal, and may
clarify the method of serving or filing any notice, filing, return, or submittal provided for
in this chapter.
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2.37.270 City Council Amendments
(a)The city council may amend this chapter in any way it deems necessary without the
approval of the electorate, provided the amendment does not increase the amount of
tax that any person would pay.
(b)Any amendment to this chapter that would reduce the amount of tax any taxpayer
would pay, either temporarily or permanently, must be approved by two‐thirds (2/3) of
the members of the city council.
(c)Notwithstanding subdivision (a) of this section, the city council may with the approval of
two‐thirds (2/3) of its members and without approval of the electorate reduce, revise,
or eliminate any of the business tax offsets in section 2.37.080.
2.37.280 Severability
If any word, phrase, sentence, part, section, subsection, or other portion of this chapter,
or any application thereof to any person or circumstance is declared void, unconstitutional, or
invalid for any reason, then such word, phrase, sentence, part, section, subsection, or other
portion, or the prescribed application thereof, shall be severable, and the remaining provisions
of this chapter, and all applications thereof, not having been declared void, unconstitutional or
invalid, shall remain in full force and effect. The People of the City of Palo Alto hereby declare
that they would have passed this ordinance, and each section, subsection, sentence, clause and
phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences,
clauses or phrases had been declared invalid or unconstitutional.
2.37.290 Savings Clause
No section, clause, part, or provision of this chapter shall be construed as requiring the
payment of any tax that would be in violation of the Constitution or laws of the United States of
America or of the Constitution or laws of the State of California.
2.37.300 Sunset
The tax imposed by this Chapter shall cease to be imposed on January 1, 2058.
SECTION 2. Implementation Procedures
1.The new tax imposed by this ordinance will go into effect on January 1, 2023.
2.Notwithstanding sections 2.37.090, 2.37.100, and 2.37.110 of the codified part of this
ordinance, the tax imposed by this ordinance will initially be due on the following schedule:
(a)The initial tax payment for the tax that has accrued since January 1, 2023 will be
due on January 1, 2024, or on a subsequent date established by the Tax Administrator and will
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be delinquent 30 days later if not paid.
(b) With its initial tax payment, each business shall provide the following
information:
(1) The name of the business and the address or addresses at which it will be
operating in the city;
(2) The nature of the business’s activities;
(3) The square footage in which the business will be operating in the city;
(4) If the business operator claims an offset under section 2.37.080,
sufficient information and documentation to establish the business’s
right to the offset and the amount of the offset;
(5) Any other information required by the Tax Administrator; and
(6) The amount of tax due based on the square footage of the business.
(c) A business that begins operating for the first time after January 1, 2023, must
submit its initial tax payment and initial information by the date provided in this uncodified
section or by the date provided in codified section 2.37.090, whichever is later.
SECTION 3. General Tax. Proceeds of the tax imposed by this Ordinance shall be
deposited in the general fund of the City and shall be available for any legal purpose.
SECTION 4. Effective Date. This ordinance shall be effective only if approved by a majority
of the voters and shall go into effect immediately after the vote is declared by the City Council.
/ /
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/ /
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SECTION 5. Execution. The Mayor is hereby authorized to attest to the adoption of this
Ordinance by the voters of the City by signing where indicated below.
I hereby certify that the foregoing Ordinance was PASSED, APPROVED and ADOPTED by
the People of the City of Palo Alto voting on the 8th day of November, 2022.
ATTEST:
_____________________________________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
City Attorney City Manager
___________________________
Director of Administrative Services
ATTACHMENT A
Not Yet Approved
Resolution No. ______
Resolution of the Council of the City of Palo Alto Calling an Election for
November 8, 2022 for Submittal to the Qualified Electors of the City a Measure
Affirming the City’s Natural Gas Utility General Fund Transfer
R E C I T A L S
A.Pursuant to the City of Palo Alto Charter, Article VII, Section 2 (Public Utilities
Revenue) the City of Palo Alto has had a decades‐long practice of annually transferring funds
from the natural gas utility to the general fund to fund general city services.
B.In 2021, in the case of Green v. City of Palo Alto, Santa Clara County Superior Court
No. 16CV300760, the Superior Court determined that voter approval is required with respect to
a portion of the transferred funds that are generated from retail natural gas rates.
C.The natural gas utility transfer is an important part of funding for basic City
services such as roads, parks, libraries, climate change reduction, and police, fire, emergency
medical, and 9‐1‐1 response. Affirming the continuation of the City’s long‐standing transfer
practice does not raise natural gas rates above current levels.
D.A proposed ordinance attached hereto and incorporated herein by reference as
Attachment “A” (the “Ordinance”) would amend the Palo Alto Municipal Code to affirm Palo
Alto’s existing and decades‐old practice of annually transferring up to 18% of the gross revenues
of the gas utility (generated by retail natural gas rates) to the general fund to support general
city services.
E.By its Resolution No. 10045 the City Council called a general municipal election for
November 8, 2022 (“Election”).
F.Pursuant to Government Code Section 53724 and Elections Code Section 9222,
the City Council desires to submit the Ordinance to the voters of the City.
The City Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Findings. The City Council finds and determines that each of the findings
set forth above are true and correct.
SECTION 2. General Tax Election. The City Council proposes to impose the general tax
set forth in the Ordinance and to present this proposal to the voters on November 8,
2022.
SECTION 3. Measure. Pursuant to Elections Code Section 9222, the City Council hereby
submits the Ordinance to the voters at the Election and orders the following question to be
submitted to the voters at the Election:
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Shall the measure affirming the City of Palo Alto’s existing
and decades‐old practice of annually transferring no more
than 18% of the gross revenues from the City’s natural gas
utility (generated by the City’s retail natural gas rates) to its
general fund to support general city services such as roads;
parks; libraries; climate change reduction; police, fire,
emergency medical, and 9‐1‐1 response; providing
approximately $7 million annually in existing revenues until
ended by voters, be adopted?
YES
NO
This question requires the approval of a majority of those casting votes.
SECTION 4. Adoption of Measure. The measure to be submitted to the voters is
attached to this Resolution as Attachment A and incorporated herein by this reference.
SECTION 5. Notice of Election. Notice of the time and place of holding the Election is
hereby given, and the City Clerk is authorized, instructed and directed to give further or additional
notice of the Election, in time, form and manner as required by law.
SECTION 6. Impartial Analysis. Pursuant to Elections Code Section 9280, the City
Council hereby directs the City Clerk to transmit a copy of the measure to the City Attorney. The
City Attorney shall prepare an impartial analysis of the measure, not to exceed 500 words in
length, showing the effect of the measure on the existing law and the operation of the measure,
and transmit such impartial analysis to the City Clerk on or before August 23, 2022.
SECTION 7. Ballot Arguments. Pursuant to Elections Code Section 9286 et. seq.,
August 16, 2022 at 5:00 p.m. shall be the deadline for submission of arguments in favor of, and
arguments against, any local measures on the ballot. If more than one argument for and/or
against is received, the priorities established by Elections Code Section 9287 shall control.
SECTION 8. Rebuttal Arguments. The provisions of Elections Code Section 9285 shall
control the submission of any rebuttal arguments. The deadline for filing rebuttal arguments shall
be August 23, 2022 at 5:00 p.m.
SECTION 9. Consolidation Request. The Council of the City of Palo Alto requests the
governing body of any other political subdivision, or any officers otherwise authorized by law, to
partially or completely consolidate such elections and the City Council consents to such
consolidation. The Council requests the Board of Supervisors of Santa Clara County to include on
the ballots and sample ballots, all qualified measures submitted by the City Council to be ratified
by the qualified electors of the City of Palo Alto. The Council acknowledges that the Election will
be held and conducted according to procedures in the Elections Code, including Section 10418.
SECTION 10. Request for County Services. Pursuant to Section 10002 of the Elections
Code, the Council of the City of Palo Alto hereby requests the Board of Supervisors of Santa Clara
County to permit the Registrar of Voters to render services to the City of Palo Alto relating to the
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conduct of Palo Alto’s General Municipal and Special Elections which are called to be held on
Tuesday, November 8, 2022. The services shall be of the type normally performed by the
Registrar of Voters in assisting the clerks of municipalities in the conduct of elections including,
but not limited to, checking registrations, mailing ballots, hiring election officers and arranging
for polling places, receiving absentee voter ballot applications, mailing and receiving absent voter
ballots and opening and counting same, providing and distributing election supplies, and
furnishing voting machines.
SECTION 11. Transmittal of Resolution. The City Clerk is hereby directed to submit
forthwith a certified copy of this resolution to the Santa Clara County Board of Supervisors and
to the Registrar of Voters.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSENTIONS:
ATTEST: APPROVED:
_____________________________ ______________________________
City Clerk Mayor
______________________________
APPROVED AS TO FORM: City Manager
_____________________________ ______________________________
City Attorney Director of Administrative Services
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Attachment A
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Chapter 2.28 (Fiscal
Procedures) of Title 2 of the Palo Alto Municipal Code to Authorize the City
Council to Continue to Annually Transfer from the Natural Gas Utility to the
General Fund an Amount Equal to 18% of the Gross Revenues of the Natural Gas
Utility, Generated by the City’s Retail Natural Gas Rates
The People of the City of Palo Alto do ordain as follows:
SECTION 1. Chapter 2.28 of the Palo Alto Municipal Code is hereby amended by adding
Section 2.28.185 as follows:
Chapter 2.28
FISCAL PROCEDURES
2.28.185 Natural Gas Utility Transfer
Each fiscal year the City Council may transfer from the natural gas utility to the general fund an
amount equal to 18% of the gross revenues of the gas utility received during the fiscal year two
fiscal years before the fiscal year of the transfer. At its discretion, the City Council may decide to
transfer a lesser amount. The projected cost of the transfer shall be included in the City’s retail
natural gas rates as part of the cost of providing gas service.
SECTION 2. General Tax. Proceeds of the tax imposed by this Ordinance shall be
deposited in the general fund of the City and shall be available for any legal purpose.
SECTION 3. Amendment or Repeal. The City Council may repeal Section 2.28.185 of the
Palo Alto Municipal Code or amend that Section without a vote of the people except that any
amendment to Section 2.28.185 that increases the amount or rate of tax due from any person
beyond the amounts and rates authorized by this Ordinance may not take effect unless approved
by a vote of the people.
SECTION 4. Severability. If any section, subsection, sentence, clause, phrase, or portion
of this Ordinance is for any reason held to be invalid or unenforceable by a court of competent
jurisdiction, the remaining portions of this Ordinance shall nonetheless remain in full force and
effect. The people hereby declare that they would have adopted each section, subsection,
sentence, clause, phrase, or portion of this Ordinance, irrespective of the fact that any one or
more sections, subsections, sentences, clauses, phrases, or portions of this Ordinance be
declared invalid or unenforceable.
SECTION 5. Effective Date. This ordinance shall be effective only if approved by a majority
of the voters and shall go into effect immediately after the vote is declared by the City Council.
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Attachment A
SECTION 6. Execution. The Mayor is hereby authorized to attest to the adoption of this
Ordinance by the voters of the City by signing where indicated below.
I hereby certify that the foregoing Ordinance was PASSED, APPROVED and ADOPTED by
the People of the City of Palo Alto voting on the 8th day of November, 2022.
ATTEST:
__________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
City Attorney City Manager
___________________________
Director of Administrative Services
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Resolution No. ____
Resolution of the Council of the City of Palo Alto Calling an Election for
November 8, 2022 for Submittal to the Qualified Electors of the City a Measure
Amending Title 2 of the Municipal Code to Add Chapter 2.37 to Establish a Tax
on Businesses Operating in the City of Palo Alto
R E C I T A L S
A.Unlike most communities in California, the City of Palo Alto does not require local
businesses to contribute to city services through a local business tax. As Palo Alto looks to the
future, City leaders have determined that the time has come to seek voter approval to tax mid‐
sized and large businesses operating in the City, so that the business sector does its part to help
the City to meet evolving challenges, including the need for long term stable funding for public
safety services and the need for significant investments in affordable housing and grade
separated train crossings that maintain mobility for vehicles, bicyclists, and pedestrians.
B.A proposed ordinance attached hereto and incorporated herein by reference as
Attachment “A” (the “Ordinance”) would amend the Palo Alto Municipal Code to add Chapter
2.37 to Title 2, to establish a general tax on businesses operating in the City of Palo Alto that
would be imposed at a monthly rate for each square foot occupied by a business in the city, with
no tax imposed on the first 10,000 square feet occupied by a business in the city, and a tax of
eleven cents for each square foot occupied by a business in the city above 10,000 square feet.
The tax would be imposed at half the rate for the first two years. Annual adjustments would be
made for inflation, limited to 5%. Grocery stores would be exempt, offsets would be made for
businesses that remit transient occupancy tax and for payers of discretionary sales and use tax,
and total tax would be capped at $1 million per year. The business tax would terminate in thirty‐
five years.
C.Proceeds from the tax would be placed in the general fund for general
governmental purposes. The City Council has approved advisory spending guidelines after
considering input from residents and stakeholders on City spending priorities.
D.By its Resolution No. 10045 the City Council called a general municipal election for
November 8, 2022 (“Election”).
E.Pursuant to Government Code Section 53724 and Election Code Section 9222, the
City Council desires to submit the Ordinance to the voters of the City.
The City Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Findings. The City Council finds and determines that each of the findings
set forth above are true and correct.
SECTION 2. General Tax Election. The City Council proposes to impose the general tax
set forth in the Ordinance and to present this proposal to the voters on November 8,
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2022.
SECTION 3. Measure. Pursuant to Elections Code Section 9222, the City Council hereby
submits the Ordinance to the voters at the Election and orders the following question to be
submitted to the voters at the Election:
Shall the measure to raise funds for public safety,
affordable housing, rail crossing safety, homeless services,
and general city services, by levying a tax on businesses in
the City of Palo Alto at a monthly rate of 11 cents per
square foot occupied by a business, with annual inflation
adjustments (limited to 5%) and exemptions for grocery
stores and businesses under 10,000 square feet, raising
approximately $16.5 million annually for 35 years, be
adopted?
YES
NO
This question requires the approval of a majority of those casting votes.
SECTION 4. Adoption of Measure. The measure to be submitted to the voters is
attached to this Resolution as Exhibit A and incorporated herein by this reference.
SECTION 5. Notice of Election. Notice of the time and place of holding the election is
hereby given, and the City Clerk is authorized, instructed and directed to give further or additional
notice of the election, in time, form and manner as required by law.
SECTION 6. Impartial Analysis. Pursuant to California Elections Code Section 9280, the
City Council hereby directs the City Clerk to transmit a copy of the measure to the City Attorney.
The City Attorney shall prepare an impartial analysis of the measure, not to exceed 500 words in
length, showing the effect of the measure on the existing law and the operation of the measure,
and transmit such impartial analysis to the City Clerk on or before August 23, 2022.
SECTION 7. Ballot Arguments. Pursuant to Elections Code Section 9286 et. seq.,
August 16, 2022 at 5:00 p.m. shall be the deadline for submission of arguments in favor of, and
arguments against, any local measures on the ballot. If more than one argument for and/or
against is received, the priorities established by Elections Code Section 9287 shall control.
SECTION 8. Rebuttal Arguments. The provisions of Elections Code Section 9285 shall
control the submission of any rebuttal arguments. The deadline for filing rebuttal arguments
shall be August 23, 2022 at 5:00 p.m.
SECTION 9. Consolidation Request. The Council of the City of Palo Alto requests the
governing body of any other political subdivision, or any officers otherwise authorized by law, to
partially or completely consolidate such elections and the City Council consents to such
consolidation. The Council requests the Board of Supervisors of Santa Clara County to include on
the ballots and sample ballots, all qualified measures submitted by the City Council to be ratified
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by the qualified electors of the City of Palo Alto. The Council acknowledges that the election will
be held and conducted according to procedures in the Elections Code, including Section 10418.
SECTION 10. Request for County Services. Pursuant to Section 10002 of the California
Elections Code, the Council of the City of Palo Alto hereby requests the Board of Supervisors of
Santa Clara County to permit the Registrar of Voters to render services to the City of Palo Alto
relating to the conduct of Palo Alto’s General Municipal and Special Elections which are called to
be held on Tuesday, November 8, 2022. The services shall be of the type normally performed by
the Registrar of Voters in assisting the clerks of municipalities in the conduct of elections
including, but not limited to, checking registrations, mailing ballots, hiring election officers and
arranging for polling places, receiving absentee voter ballot applications, mailing and receiving
absent voter ballots and opening and counting same, providing and distributing election supplies,
and furnishing voting machines.
SECTION 11. Transmittal of Resolution. The City Clerk is hereby directed to submit
forthwith a certified copy of this resolution to the Santa Clara County Board of Supervisors and
to the Registrar of Voters.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSENTIONS:
ATTEST: APPROVED:
_____________________________ ______________________________
City Clerk Mayor
______________________________
APPROVED AS TO FORM: City Manager
_____________________________ ______________________________
City Attorney Director of Administrative Services
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Exhibit A
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Title 2 of the
Municipal Code to Add Chapter 2.37 to Establish a Tax on Businesses Operating
in the City of Palo Alto
The People of the City of Palo Alto do ordain as follows:
SECTION 1. Title 2 (Administrative Code) of the Palo Alto Municipal Code is hereby
amended by adding Chapter 2.37 (Business Tax) as follows:
Chapter 2.37
BUSINESS TAX
2.37.010 Title
This chapter is the “City of Palo Alto Business Tax Ordinance.”
2.37.020 Definitions
The definitions in this section apply to the words and phrases used in this chapter unless
the context clearly indicates otherwise.
(a) “Business” means any commercial enterprise, trade, calling, art, vocation, profession,
occupation, or means of livelihood, whether or not carried on for gain or profit.
(b) “Business operator” means a person who transacts, maintains, manages, operates,
controls, engages in, conducts, carries on, or owns a business in the city. It does not
include the employee of a business who is not an owner or proprietor of the business.
(c) “Calendar year” means the year beginning January 1 and ending December 31.
(d) “City” means the City of Palo Alto.
(e) “CPI Index” means the Consumer Price Index—All Urban Consumers for All Items for the
San Francisco‐Oakland‐Hayward Area or any successor to that index designated by the
Federal Bureau of Labor Statistics or the city council.
(f) “Fiscal year” means the year beginning July 1 and ending June 30.
(g) “Fixed place of business” means a place of business located in the city boundaries and
occupied for the particular purpose of operating a business.
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(h) “Grocery store” means a business that exists for the primary purpose of selling a range
of food items to consumers for consumption off site, such as canned foods; dry goods;
fresh produce; fresh meats, fish, and poultry; and any area that is not separately owned
within the store where food is prepared and served, including a bakery, deli, and meat
and seafood departments, or as otherwise defined in 14 CCR section 18982(a)(3),
provided that any store that combines grocery items with other retail products or
services is a grocery store for the purpose of this chapter only if two‐thirds or more of
the occupied space is designated to the sale of grocery items as listed in this section.
(i)“Hotel” has the meaning provided in section 2.33.010.
(j)“Operate” means to conduct a business and includes all stages of conducting a business
from initial planning to the wind‐down of a business, whether or not a profit is being
made.
(k)“Person” means any individual, firm, partnership, joint venture, association,
corporation, limited liability company, estate, trust, receiver, syndicate or other group
or combination acting as a unit and includes the plural as well as the singular number.
(l)“Quarter” means the three‐month quarter of the fiscal year. The “first quarter” is the
months of July, August, and September; the “second quarter” is the months of October,
November, and December; the “third quarter” is the months of January, February, and
March; and the “fourth quarter” is the months of April, May, and June. The term “same
quarter of the previous fiscal year” means the quarter of the same number in the
previous fiscal year.
(m)“Square footage” means the rentable square footage used by a business as specified in a
business’s lease or, if the business floor space is owned by the business, as calculated in
the same manner as if the area was rented using commonly accepted standards of
measurement for leasing purposes such as the Standard Methods of Measurement
published by the Building Owners and Managers Association (BOMA). Any method of
measurement used must meet the following minimum standards:
(1)It shall be computed by measuring to the inside finish of permanent outer
building walls and shall include space used by columns and projections necessary
to the building.
(2)It shall include both the area used by the business and a proportionate share of
the building service areas such as lobbies, corridors and other common areas in a
building unless assigned to another business for tax calculation purposes.
(3)It shall not include vertical penetrations through the building such as stairs,
elevators, or heating, ventilation, air conditioning, utility, or telephone systems,
except on the lowest floor of stairs and elevators.
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(4) For the business of renting or leasing property, it shall include area used
primarily for the business operator’s offices and operational facilities.
(5) It shall not include residential uses, including multiple‐family use as defined in
section 18.04.030(102), two‐family use as defined in section 18.04.030(141),
single‐family residential use as defined in section 18.04.030(86)(A)), mobile
home park as defined in section18.04.030(97), residential care homes as defined
in section 18.04.030(124), supportive housing as defined in section
18.04.030(135.5), transitional housing as defined in section 18.04.030(138),
emergency shelter as defined in section 18.04.030(50), and any equivalent
residential use defined by the city.
(6) It shall include hotel as defined in section 18.04.030(73).
(7) Square footage for businesses with multiple locations will be measured and tax
assessed will be calculated based on the aggregate square footage for the
business for all locations in the city.
(n) “Tax Administrator” means the Director of Administrative Services, or successor
position, or their designee.
(o) “Transient Occupancy Tax” means the tax imposed under section 2.33.020.
(p) “Transitory business” means a business that operates in the city for less than 90 days in
the course of one calendar year (such as seasonal sale lots, special events,
concerts/performances/circuses, filming, and party rentals).
(q) “Vacant” means a severable portion of the physical location that a business is
occupying, such as an entire floor, a building, or a portion of a floor with independent
entrance and exit, that is free from any use, fixtures, furniture, and equipment, and is
immediately available for use by a new tenant or owner.
2.37.030 Obligation to Pay Business Tax
(a) It is unlawful for any business operator, either for themselves or for any other person, to
operate in the city any business taxed under this chapter without paying all business tax
required by this chapter.
(b) If a business has more than one business operator, then the payment of the business tax
by one business operator excuses any other business operators from the obligation to
pay the business tax for that period for which the tax has been paid.
(c) The requirement to pay business tax is in addition to and separate from the
requirement to obtain a business registration certificate under section 4.60.030.
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(d)The payment of business tax does not authorize the doing of any act which the person
or business paying the business tax is not otherwise entitled to do and does not excuse
the business from complying with other applicable Code requirements.
2.37.040 Imposition of Business Tax
Any business operator operating a business at a fixed place of business in the city must
pay a business tax at the following rates:
(a)Beginning January 1, 2023, the tax shall be imposed at the following rates:
(1)For the first 10,000 square feet occupied by a business in the city, no tax shall be
imposed.
(2)For each square foot occupied by a business in the city over 10,000 square feet,
a monthly tax of five and one‐half (5.5) cents per square foot shall be imposed.
(b)Beginning January 1, 2025, the tax shall be imposed at the following rates:
(1)For the first 10,000 square feet occupied by a business in the city, no tax shall be
imposed.
(2)For each square foot occupied by a business in the city over 10,000 square feet,
a monthly tax of eleven (11) cents per square foot shall be imposed.
(c)The maximum amount of tax a business must pay is capped at $1,000,000 (one million
dollars) per fiscal year.
2.37.045 Order of Calculations
Tax owed shall be determined by applying the terms of this ordinance in the following
order: first, application of the tax rate in subdivisions (a) or (b) of section 2.37.040 to the square
footage of the business; second, application of business tax offsets as set forth in section
2.37.080, if any; and third, application of the tax cap in subdivision (c) of section 2.37.040, if
applicable.
2.37.050 Annual CPI Adjustments
(a)Beginning with the 2026‐27 fiscal year, and each fiscal year thereafter, the tax rate in
subdivision (b)(2) of section 2.37.040 and the cap in subdivision (c) of section 2.37.040
shall be automatically increased by a percentage equal to the percentage increase in the
CPI Index in the previous calendar year (“the CPI Increase”).
(b)Notwithstanding subdivision (a) of this section, in any year in which the CPI Increase is
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more than 5%, the increase in the tax rate in subdivision (b)(2) of section 2.37.040 will
be limited to 5%.
2.37.060 Disposition of Tax Revenue
The tax imposed by this chapter is for the purpose of raising revenue for the general
governmental purposes of the city. All of the proceeds from the tax imposed by this chapter
shall be placed in the city’s general fund.
2.37.070 Exemptions from Tax
(a) The following businesses are exempt from the tax imposed by this chapter:
(1) Any business exempt from the tax by the laws of the United States or the State
of California;
(2) Grocery stores;
(3) Businesses that occupy or use 10,000 square feet or less in the city; and
(4) Transitory businesses.
(b) If a business operator operates a single integrated business that has two or more parts,
one or more of which could be exempt from the tax imposed by this chapter if operated
as a separate business, the city may, at its discretion, exempt from the tax any part of
the business that would be exempt if operated as a separate business, provided the
business’s square footage can be reasonably allocated between the parts. If the city
determines that the square footage cannot be reasonably allocated between the
different parts of the business, then the entire business shall be taxed, unless to do so
would violate a law of the United States or the State of California.
2.37.080 Business Tax Offsets
(a) A business operator that operates a hotel in the city may deduct from the business tax it
owes for a quarter for the business of operating the hotel an amount equal to the total
transient occupancy tax collected and remitted to the city in the same quarter of the
previous fiscal year from transients staying at the hotel.
(b) The business operator of a business that has discretion to determine the location of the
place of sale, place of use, or principal place of negotiation for sales or use tax purposes
and which exercises that discretion and designates the city as the place of sale, place of
use, or principal place of negotiation for sales or use tax purposes which results in the
city receiving sales or use tax revenues that it would not otherwise have received, but
for the business’s exercise of its discretion to designate the city as the place of sale,
place of use, or principal place of negotiation for sales or use tax purposes
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(“Discretionary Sales or Use Tax”) may deduct from the business tax it owes for a
quarter an amount equal to one half of the total sales tax or use tax received by the city
from the Discretionary Sales or Use Tax of that business in the same quarter of the
previous fiscal year. This offset can offset up to, but no more than, 75% of the business’s
quarterly business tax. The city and a business operator may enter into an agreement
implementing this section.
(c)A business operator of a business that has rights to property due to property ownership,
a ground lease, or a lease that permits subleasing, and that is offering that property for
sale or rent, may deduct from the business tax owed for the business an amount equal
to the business tax associated with the square footage being offered for sale or rent,
provided that the area to be sold or rented is completely vacant and available for
immediate occupancy.
(d)A business claiming an offset under this section must claim the offset with its tax filing
for the quarter for which the offset is claimed.
(1)If the information necessary for a business to claim an offset is not available, the
business may defer claiming an offset for up to one year or for another period of
time set by written agreement with the city.
(2)The Tax Administrator may require a business claiming an offset to submit
additional information to support the claim of the offset. The request for
additional information must be made in writing and the information must be
provided within thirty (30) days.
(3)If the Tax Administrator determines that an offset claimed by a business is
incorrect, the Tax Administrator may make an Initial Determination of the
amount, if any, of the offset and the amount of tax due under subdivision (a) of
section 2.37.150.
2.37.090 Quarterly Tax Payments
(a)The tax imposed by this chapter shall be paid quarterly. The tax for each quarter is due
the first day of the following quarter and is delinquent thirty (30) days later.
(b)For the first quarter in which a business begins operating in the city, the business’s tax
shall be prorated for the number of days that the business was operating in the quarter.
(c)For the last quarter in which a business operates in the city before closing, the
business’s tax shall be prorated for the number of days that the business was operating
in the quarter.
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2.37.100 Business Tax Filing for a New Business
When a business begins operating in the city for the first time, the business operator
must provide the Tax Administrator with the following information, verified by the business
operator as true and correct under penalty of perjury of the laws of the State of California,
before beginning the operation of the business in the city:
(a) The name of the business and the address or addresses at which it will be operating in
the city;
(b) The date on which the business will begin operating;
(c) The nature of the business’s activities;
(d) The square footage in which the business will be operating in the city; and
(e) Any other information required by the Tax Administrator that is reasonably required to
administer this Chapter 2.37.
2.37.110 Quarterly Tax Returns
With each quarterly tax payment, a business operator must submit a quarterly tax
return which contains the following information, verified by the business operator as true and
correct under penalty of perjury of the laws of the State of California:
(a) The name of the business and the address or addresses at which it is operating in the
city;
(b) The nature of the business’s activities;
(c) The square footage in which the business is operating in the city;
(d) If the business operator claims an offset under section 2.37.080, sufficient information
and documentation to establish the business’s right to the offset and the amount of the
offset;
(e) Any other information required by the Tax Administrator; and
(f) The amount of tax due based on the square footage of the business.
2.37.120 Agreements for Installment Payments
The Tax Administrator may enter into an agreement with a business operator to allow a
business operator to pay the tax on a more or less frequent basis.
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2.37.130 Businesses Operating in the Same Location
(a)Each business operator operating a business in a location where one or more other
businesses are also operating is obligated to pay business tax measured by the square
footage occupied by that business.
(b)The payment of business tax by a business operator absolves any other business
operator from having to pay business tax measured by the same square footage.
(c)Two or more business operators that are operating businesses in the same square
footage may contractually agree which business will pay the business tax measured by
that square footage.
2.37.140 Delinquent Taxes (Penalties and Interest)
(a)When a tax becomes delinquent, a penalty of 10% of the amount of the delinquent tax
will be added to the amount of tax due. If the tax remains unpaid sixty (60) days after
becoming delinquent, an additional penalty of 25% of the amount of the delinquent tax
(excluding accrued interest and the initial penalty) will be added to the amount of tax
due.
(b)On the first of each month that a tax is delinquent, interest in the amount of 1.5% of the
delinquent amount, excluding penalties and interest, will be added to the amount of tax
due.
(c)A business operator may apply to the Tax Administrator for a reduction or waiver of any
accrued penalties or interest, and the Tax Administrator may reduce or waive any
accrued penalties or interest upon a finding of good cause.
2.37.150 Administrative Procedure to Assess or Correct Tax
(a)If the Tax Administrator determines that a business operator has incorrectly reported
any information to the city or has not paid all or any of the tax, penalties, or interest
that are due, the Tax Administrator may, using any information available to the Tax
Administrator, issue an Initial Determination stating what the Tax Administrator believes
to be the correct information and, if new or additional tax, penalties, or interest are due,
how much tax, penalties, or interest are due. An Initial Determination must be issued
within five (5) years of the last day of the quarter to which the Initial Determination
applies, except in the case of an audit conducted under section 2.37.200, in which case
it must be issued within ninety (90) days of the completion of the audit and can apply to
any of the quarters that were subject to the audit. The Initial Determination shall be
served on the business operator either personally or by U.S. mail to the most recent
address for the business operator in the Tax Administrator’s records. Service is effective
upon deposit of the Initial Determination in the U.S. Mail.
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(b) A business operator affected by an Initial Determination may within thirty (30) days of
service of an Initial Determination contest the Initial Determination and request a
hearing before the Tax Administrator by filing with the Tax Administrator a written
request for a hearing. The further accrual of penalties and interest shall be tolled upon
the filing of a request for a hearing. If a business operator does not contest an Initial
Determination and request a hearing with the Tax Administrator within fifteen (15) days
of service of the Initial Determination, the Initial Determination shall become final and
cannot be appealed.
(c) If a business operator timely contests an Initial Determination and requests a hearing,
the Tax Administrator shall set a hearing within sixty (60) days of the filing of the
request for a hearing. Notice of the hearing shall be served on the business operator
either personally or by U.S. mail to the most recent address for the business operator in
the Tax Administrator’s records.
(d) At the hearing the business operator may present evidence and argument regarding the
Initial Determination to show why the Initial Determination is incorrect and to show
what the determination of the Tax Administrator should be. Within sixty (60) day after
the close of the hearing, the Tax Administrator shall serve a Final Determination, setting
forth the Tax Administrator’s determination of the facts and issues that were the subject
of the Initial Determination. The Final Determination shall be served on the business
operator either personally or by U.S. mail to the most recent address for the business
operator in the Tax Administrator’s records. Service is effective upon deposit of the Final
Determination in the U.S. Mail. Unless an appeal of a Final Determination is filed under
section 2.37.170, any penalties or interest tolled under subdivision (b) of this section will
resume accruing ten (10) days after the service of the Final Determination.
2.37.160 General Administrative Remedy
(a) Any person affected by a decision of the Tax Administrator (“the challenger”), except for
decisions under section 2.37.150, may challenge that decision by filing a written
objection to the decision with the Tax Administrator. The objection must be filed within
thirty (30) days of the issuance of the decision being challenged. If the Tax Administrator
was required to provide notice of the decision, then the time to file an objection to the
decision begins to run from the date of service of the notice of the decision. The Tax
Administrator shall serve a written response to the objection within thirty (30) days of
the filing of the objection, which period can be extended by the Tax Administrator for an
additional thirty (30) days. The Tax Administrator’s response to the objection shall be
served on the challenger either personally or by U.S. mail to the most recent address for
the challenger in the Tax Administrator’s records.
(b) The challenger may request a hearing on the Tax Administrator’s response to the
objection by filing a request for a hearing with the Tax Administrator within thirty (30)
days of service of the response to the objection. If a timely request for a hearing on a
response to the objection is filed with the Tax Administrator, the Tax Administrator shall
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set a hearing within sixty (60) days of the filing of the request for a hearing. Notice of
the hearing shall be served on the challenger either personally or by U.S. mail to the
most recent address for the challenger in the Tax Administrator’s records.
(c)At the hearing the challenger may present evidence and argument regarding the
decision being challenged to show why the decision is incorrect and to show what it
should be. Within sixty (60) days after the close of the hearing, which the Tax
Administrator may extend for an additional sixty (60) days, the Tax Administrator shall
serve a Final Determination on the decision, setting forth the Tax Administrator’s
determination of the decision that was challenged. The Final Determination shall be
served on the challenger either personally or by U.S. mail to the most recent address for
the challenger in the Tax Administrator’s records. Service is effective upon deposit of
the Final Determination in the U.S. mail.
2.37.170 Appeals
(a)A Final Determination of the Tax Administrator under section 2.37.150, subdivision (d),
or section 2.37.160, subdivision (c), can be appealed to the City Manager by filing a
written notice of appeal with the City Manager within thirty (30) days of service of the
notice of the Final Determination being appealed.
(b)Only a business operator who files a timely request for a hearing on an Initial
Determination under section 2.37.150 and participates in the hearing or a challenger
who files an objection to a decision and files a request for a hearing on the response to
the objection under section 2.37.160 and participates in the hearing can file an appeal
under this section.
(c)If a timely appeal is filed with the City Manager, the City Manager, or the City Manager’s
designee, shall set a hearing within sixty (60) days of the filing of the appeal, which may
be extended by the City Manager for an additional thirty (30) days. Notice of the hearing
shall be served on the appellant either personally or by U.S. mail to the most recent
address for the challenger in the Tax Administrator’s records. The tolling of the accrual
of penalties or interest under section 2.37.150, subdivision (b), shall continue upon the
timely filing of an appeal under this section.
(d)At the hearing the appellant and the Tax Administrator may present evidence and
argument regarding the decision being appealed to show why the decision is correct or
incorrect and to show what it should be. Within sixty (60) days after the close of the
hearing, which the City Manager or the City Manager’s designee may extend for an
additional sixty (60) days, the City Manager or the City Manager’s designee shall serve a
written decision, setting forth the resolution of the appeal. The decision shall be served
on the appellant either personally or by U.S. mail to the most recent address for the
appellant in the City Manager’s records. Service is effective upon deposit of the decision
in the U.S. Mail. Any penalties and interest that were tolled under section 2.37.150,
subdivision (b), shall resume accruing ten (10) days after the service of the decision.
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(e) A decision of the City Manager, or the City Manager’s designee, served under
subdivision (d) of this section is subject to judicial review under sections 1094.5 and
1094.6 of the Code of Civil Procedure with a writ petition filed in the appropriate court
within ninety (90) days of the service of the written decision. Any tax, penalties, or
interest determined by the decision to be owed to the city by the appellant must be
paid to the city as a precondition to filing a writ petition challenging the decision, but a
claim for a refund under section 2.37.190 does not have to be filed before filing a writ
petition.
2.37.180 Constitutional Apportionment
(a) No tax imposed by this chapter shall be applied to a business operator so as to
constitute an undue burden on interstate commerce or intercity commerce or be
violative of the equal protection or due process clauses of the United States or California
constitutions.
(b) A business operator who contends that the application of a tax imposed by this chapter
on the business operator constitutes an undue burden on interstate commerce or
intercity commerce or violates the equal protection or due process clauses of the United
States or California constitutions may apply to the Tax Administrator for an
apportionment of the tax imposed on the business operator that would remove the
constitutional violation by filing a written request with the Tax Administrator that
explains the factual and legal basis for the claimed constitutional violation and proposes
a method of apportionment that would resolve the alleged constitutional violations.
(c) The Tax Administrator, in consultation with City Attorney, shall review the application
and within sixty (60) days of the filing of the application, which deadline may be
extended for an additional sixty (60) days, issue a decision on the application. The
decision on the application shall be served on the business operator either personally or
by U.S. mail to the most recent address for the challenger in the Tax Administrator’s
records. The decision can be challenged under section 2.37.160.
2.37.190 Refunds
(a) A business operator who believes that any tax, penalty, or interest has been illegally,
erroneously, or mistakenly paid to, collected by, or otherwise received by the city may
file a claim for a refund of the amount of tax, penalty, or interest claimed to have been
improperly received by the city.
(b) The claim must be filed with the Tax Administrator and signed under penalty of perjury
by the business operator. The claim must state:
(1) The legal and factual basis for the refund claim;
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(2) The amount of tax, penalty, or interest allegedly improperly received by the city;
(3) The date or dates that the improper payments were made to the city; and
(4) The address of the claimant.
(c) The claim must be filed with the Tax Administrator within two (2) years of the date of
the allegedly improper payment to the city.
(d) The Tax Administrator shall provide a written decision on the claim within thirty (30)
days of the filing of the claim by serving the decision on the claimant either personally
or by U.S. mail to the address provided in the claim. Service is effective upon deposit of
the response in the U.S. Mail.
(e) A claimant may challenge the Tax Administrator’s decision on a refund claim under
section 2.37.160.
(f) This section does not apply to:
(1) A claim for a refund arising out of a decision of the Tax Administrator, City
Manager, or City Manager’s designee under sections 2.37.150, 2.37.160,
2.37.170, or 2.37.190; or
(2) A claim that could have been asserted by the claimant, but was not, under
sections 2.37.150, 2.37.160, 2.37.170, or 2.37.190.
2.37.200 Audits
(a) The Tax Administrator may conduct an audit of any business operator to ensure proper
compliance with the requirements of this chapter.
(b) To initiate an audit the Tax Administrator shall provide written notice to the business
operator that is the subject of the audit of the initiation of the audit by serving the
notice personally or by U.S. mail to the most recent address for the business operator in
the Tax Administrator’s records. The notice shall state the period of time subject to the
audit.
(c) Notice of the initiation of an audit for a quarter for which either a business tax filing for
a new business or quarterly tax return was submitted under section 2.37.100 or section
2.37.110 must be served within three (3) years of the last day of the quarter to which
the filing or return applied.
(d) Notice of the initiation of an audit for a quarter for which neither a business tax filing for
a new business nor a quarterly tax return was submitted under section 2.37.100 or
section 2.37.110, but for which the business was registered as a business under section
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4.60.030, must be served within five (5) years of the last day of the quarter for which
the filing or return should have been filed.
(e) Notice of the initiation of an audit for a quarter for which neither a business tax filing for
a new business nor a quarterly tax return was submitted under section 2.37.100 or
section 2.37.110, and for which the business was not registered as a business under
section 4.60.030, must be served within seven (7) years of the last day of the quarter for
which the filing or return should have been filed.
(f) Upon completion of an audit, the Tax Administrator may make an Initial Determination
under subdivision (a) of section 2.37.150 of any taxes, penalties, and interest
determined to be owed and not paid for the audit period. The Initial Determination
must be issued within ninety (90) days of the completion of the audit. If a business
operator subject to audit is unable or unwilling to provide sufficient records to enable
the Tax Administrator to verify compliance with this chapter, the Tax Administrator is
authorized to make a reasonable estimate of the amount of tax due and the reasonable
estimate shall be entitled to a rebuttable presumption of correctness.
2.37.210 Maintenance and Review of Records
(a) Business operators must maintain for six (6) years records of square footage and
information necessary to calculate the tax. If the Tax Administrator serves notice of the
initiation of an audit, the information pertinent for the quarters subject to the audit
must be maintained until the conclusion of the audit.
(b) The Tax Administrator may with reasonable notice inspect the premises and records of
the business operator.
(c) The Tax Administrator may request the city council to issue an administrative subpoena
for records of a business operator or other persons with relevant information.
2.37.220 Confidentiality of Records
All documents submitted to the city by a business operator under this chapter and all
documents of a business operator inspected by the Tax Administrator in the conduct of an audit
are presumed to be confidential and will not be subject to public inspection to the fullest extent
allowed by law and must be maintained so that the contents of the documents will not become
known except to persons charged with the administration of this chapter. Confidential
documents may be shared with consultants retained by the city to aid in the administration of
this chapter, provided the consultants agree to maintain the confidentiality of the documents.
However, nothing in this section precludes the city from aggregating information and releasing
it in a manner that does not identify any particular business or connect any information with a
particular business.
2.37.230 Action to Collect Delinquent Taxes
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(a) Any tax, penalty, and interest imposed on a business operator under this chapter is a
debt owed by the business operator to the city, which may be recovered in an action
filed by the city in a court of competent jurisdiction.
(b) An action under this section shall be filed within three (3) years of an Initial
Determination becoming final under subdivision (b) of section 2.37.150, the issuance of
a Final Determination under subdivision (d) of section 2.37.150 that is not appealed, the
issuance of a Final Determination under subdivision (c) of section 2.37.160 that is not
appealed, or the issuance of a decision under subdivision (d) of section 2.37.170.
(c) During the pendency of an action filed under this section, interest will continue to
accrue under subdivision (b) of section 2.37.140 until the entry of judgment.
(d) Before filing an action, the city may serve the business operator either personally or by
U.S. mail at the most recent address for the business operator in the Tax Administrator’s
records with notice of the pending action and give the business operator fifteen (15)
days to pay all of the delinquent taxes, penalties, and fees. If all of the of the delinquent
taxes, penalties, and fees are not paid within the fifteen‐day period, then an additional
penalty of 25% of the amount of the delinquent tax (including accrued penalties and
interest) shall be added to the total delinquency and may be recovered in the action.
2.37.240 Errors Not Binding on the City
No error by the Tax Administrator or any other officer, employee, or agent of the city in
the application of this chapter shall prevent, prejudice, or estop the collection by or for the city
of the full amount of tax owed by any person under this chapter.
2.37.250 Dates
If the last day for the performance of any act under this chapter is a Saturday, Sunday,
or holiday recognized by the city, then the date for the performance of that act is extended to
the next day that is not a Saturday, Sunday, or holiday recognized by the city.
2.37.260 Rules and Regulations
(a) The Tax Administrator may adopt rules and regulations that are not inconsistent with
the provisions of this chapter as may be necessary to aid in the application and
enforcement of this chapter.
(b) The Tax Administrator may adopt rules providing for the service or filing of any notices,
filings, returns, or submittals required by this chapter. These rules may provide
alternative means for serving or filing any notice, filing, return, or submittal, and may
clarify the method of serving or filing any notice, filing, return, or submittal provided for
in this chapter.
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2.37.270 City Council Amendments
(a) The city council may amend this chapter in any way it deems necessary without the
approval of the electorate, provided the amendment does not increase the amount of
tax that any person would pay.
(b) Any amendment to this chapter that would reduce the amount of tax any taxpayer
would pay, either temporarily or permanently, must be approved by two‐thirds (2/3) of
the members of the city council.
(c) Notwithstanding subdivision (a) of this section, the city council may with the approval of
two‐thirds (2/3) of its members and without approval of the electorate reduce, revise,
or eliminate any of the business tax offsets in section 2.37.080.
2.37.280 Severability
If any word, phrase, sentence, part, section, subsection, or other portion of this chapter,
or any application thereof to any person or circumstance is declared void, unconstitutional, or
invalid for any reason, then such word, phrase, sentence, part, section, subsection, or other
portion, or the prescribed application thereof, shall be severable, and the remaining provisions
of this chapter, and all applications thereof, not having been declared void, unconstitutional or
invalid, shall remain in full force and effect. The People of the City of Palo Alto hereby declare
that they would have passed this ordinance, and each section, subsection, sentence, clause and
phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences,
clauses or phrases had been declared invalid or unconstitutional.
2.37.290 Savings Clause
No section, clause, part, or provision of this chapter shall be construed as requiring the
payment of any tax that would be in violation of the Constitution or laws of the United States of
America or of the Constitution or laws of the State of California.
2.37.300 Sunset
The tax imposed by this Chapter shall cease to be imposed on January 1, 2058.
SECTION 2. Implementation Procedures
1. The new tax imposed by this ordinance will go into effect on January 1, 2023.
2. Notwithstanding sections 2.37.090, 2.37.100, and 2.37.110 of the codified part of this
ordinance, the tax imposed by this ordinance will initially be due on the following schedule:
(a) The initial tax payment for the tax that has accrued since January 1, 2023 will be
due on January 1, 2024, or on a subsequent date established by the Tax Administrator and will
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be delinquent 30 days later if not paid.
(b)With its initial tax payment, each business shall provide the following
information:
(1)The name of the business and the address or addresses at which it will be
operating in the city;
(2)The nature of the business’s activities;
(3)The square footage in which the business will be operating in the city;
(4)If the business operator claims an offset under section 2.37.080,
sufficient information and documentation to establish the business’s
right to the offset and the amount of the offset;
(5)Any other information required by the Tax Administrator; and
(6)The amount of tax due based on the square footage of the business.
(c)A business that begins operating for the first time after January 1, 2023, must
submit its initial tax payment and initial information by the date provided in this uncodified
section or by the date provided in codified section 2.37.090, whichever is later.
SECTION 3. General Tax. Proceeds of the tax imposed by this Ordinance shall be
deposited in the general fund of the City and shall be available for any legal purpose.
SECTION 4. Effective Date. This ordinance shall be effective only if approved by a majority
of the voters and shall go into effect immediately after the vote is declared by the City Council.
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SECTION 5. Execution. The Mayor is hereby authorized to attest to the adoption of this
Ordinance by the voters of the City by signing where indicated below.
I hereby certify that the foregoing Ordinance was PASSED, APPROVED and ADOPTED by
the People of the City of Palo Alto voting on the 8th day of November, 2022.
ATTEST:
_____________________________________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
City Attorney City Manager
___________________________
Director of Administrative Services
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