East Palo Alto puts business tax on ballot

Measure would tax commercial developments and earmark millions for new affordable housing

A proposed parcel tax on commercial development that could generate millions of dollars for affordable housing and job training will come before voters this November, the East Palo Alto City Council unanimously decided on Tuesday.

If passed by two-thirds of voters, the "Commercial Office Space Parcel Tax for Affordable Housing and Job Opportunities" would impose a $2.50 per-square-foot tax on commercial office space of more than 25,000 square feet. It could generate $1.6 million annually from existing commercial office stock, according to a staff report. The city could also earn three times as much revenue, however, from the 1.6 million square feet of office space that already has received entitlements if all of that space is built, staff noted. The council also would have the option to reduce the tax or to instate a moratorium in an economic downturn.

The measure is a "special purpose" tax restricted to generating revenue for affordable and supportive housing programs for residents, with an emphasis on building additional units and programs to improve training of residents in technology, engineering, mathematics and retail positions. It would strengthen the city's first-source hiring program and allow up to 15 percent for city administrative costs, according to the staff report.

With Facebook on its border in east Menlo Park and an estimated 1,300 jobs at the newly opened Amazon facility within town, demands for housing for tech workers and commercial development are on the rise. The average home price has jumped to $900,000, according to real estate websites, and some homes now top $1.4 million. The city's working-class and immigrant residents have told the council that property values have left many of them out of the housing picture and more have been displaced by high rents. Add to that picture the recent Hetch Hetchy water-share transfers the city has negotiated from Palo Alto and Mountain View, which allowed the city to lift its new water hookup moratorium last month.

The potential economic impact of the tax hasn't been evaluated, so staff does not know if the $2.50-per-square-foot tax rate would deter development. The report noted that tech and professional services firms in the city are currently paying rental rates comparable to averages in Menlo Park and San Mateo: approximately $4.71 to $7.30 per square foot of space, so East Palo Alto isn't starting out as a bargain.

Staff asked the council to consider the impact of a "stack" of costs related to future office development from fees that are already in place, including the $10-per-square-foot affordable housing commercial linkage fee and still unknown development impact fees; a potential infrastructure assessment district; and city facilities taxes.

Vice Mayor Lisa Gauthier voiced concern about putting the tax on the ballot. She said already developed cities are able to impose the taxes without the potential consequences East Palo Alto might face.

"Mountain View taxed after they have a Google and a LinkedIn that's already there. We're saying that we want to go ahead of the game and create this tax for companies that may or may not come to the city. ... At the end of the day, it's going to be on my shoulders if I make a decision that kills this city. ... So I'm very nervous right now to do what's right for our community," she said.

Councilman Carlos Romero refuted the notion that the city has 40 percent affordable housing stock and the tax isn't needed. The city has a rent-control portfolio, but when someone leaves, that housing converts to market rate. The tax would also not affect medium-sized businesses, he said. He was not concerned about developers failing to build in East Palo Alto if voters pass the tax.

"If we have miscalculated, we can lower the tax -- to zero if we want to. This is one of the hottest commercial markets we have seen and we need to capture some of that. Because if we wait, in a couple of years -- and indeed there may be a downturn in the market -- it will be far more difficult for us to pass this tax," he said.

"It's pretty clear to me that the ultimate arbiters are going to be the voters, and they have every right to determine for themselves whether or not this is what the community needs."


Follow the Palo Alto Weekly/Palo Alto Online on Twitter @PaloAltoWeekly and Facebook for breaking news, local events, photos, videos and more.

What is community worth to you?
Support local journalism.


2 people like this
Posted by Hmmm
a resident of East Palo Alto
on Aug 3, 2018 at 5:57 pm

Thank you for reporting on this. Thank you also for the quote from council members which reflect their concerns and sense of responsibility to the community. I look forward to more coverage from PA Online as the election nears.

Like this comment
Posted by Home Boy 1990
a resident of East Palo Alto
on Aug 4, 2018 at 2:53 pm

I would like to see EPA eventually surpass Palo Alto in status and prestige. We need a top-notch private university and high-end shopping mall in addition to big corporations housed in EPA office complexes.

The gentrification of EPA is its stepping stone to national and world recognition.
If it means some people relocating due to redevelopment so be it.

I was born here and would like to see the city move forward instead of being a perpetual crap-town. IKEA and Home Depot are OK but we need stores like a Tiffany's and luxury car dealerships to put EPA on the map.

1 person likes this
Posted by R. Davis
a resident of Crescent Park
on Aug 4, 2018 at 6:36 pm

QUOTE: I would like to see EPA eventually surpass Palo Alto in status and prestige. We need a top-notch private university and high-end shopping mall in addition to big corporations housed in EPA office complexes.

The gentrification of EPA is its stepping stone to national and world recognition.

Sounds reasonable enough...let's start off with a name change. Any suggestions?

Next, maybe some contemporary robber baron/high-tech billionaire will offer to build a university in his name.

Creating a fancy shopping center should be the easiest task of all...Santana Row wasn't much of a place before it became Santana Row.

Lastly & as you mentioned...a major residential redevelopment which would involve either buying out (or running out) 90%+ of the current residents. The soon to be renamed EPA could then become like Foster City but with a major university.

The parasitic/hyperbolic RE agents would have a field day.

3 people like this
Posted by Mark Dinan
a resident of East Palo Alto
on Aug 4, 2018 at 8:31 pm

Mark Dinan is a registered user.

The fact that council passed this without having any idea about the economic impact is extremely disappointing, and speaks to the need to get new voices on the council. I would be extremely surprised if this tax has no impact on businesses decision to locate in EPA, nor impacts developers intention to build in the city. If this tax raises $1.6 Million per year, but stops hundreds of millions of dollars in development in EPA it in no way benefits East Palo Alto.

Sorry, but further commenting on this topic has been closed.

All your news. All in one place. Every day.

Round Table Pizza bites the dust in downtown Palo Alto
By Elena Kadvany | 5 comments | 3,729 views

Local Transit to the Rescue?
By Sherry Listgarten | 28 comments | 3,375 views

Eating Green on the Green – August 25
By Laura Stec | 6 comments | 1,349 views

Moral Panic, again on guns
By Douglas Moran | 18 comments | 1,073 views

"The 5 Love Languages" by Gary Chapman
By Chandrama Anderson | 0 comments | 758 views


Register now!

‚ÄčOn Friday, October 11, join us at the Palo Alto Baylands for a 5K walk, 5K run, 10K run or half marathon! All proceeds benefit local nonprofits serving children and families.

More Info