Measure K

Palo Alto Local Business Tax

CITY OF PALO ALTO—Would levy 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, in order to raise funds for public safety, affordable housing, rail crossing safety, homeless services, and general city services. Measure K requires a simple majority (50% + 1) to pass.

Fiscal Impact: Would generate approximately $9.6 million annually for each of the 35 years it is in effect.

Next Santa Clara County Measure: Measure L

See Endorsements for Measure K

Pro:

Proponents of Measure K argue that during the pandemic, City revenues fell 20%, forcing service cuts— police, firefighters, libraries, youth programs, and others—even as crime, fire danger and homelessness worsened. They argue that many services were restored using Federal Stimulus money, but that funding is ending, and without new revenue, the City must cut services again.

A YES vote on this measure means: A tax would be levied on businesses in the City of Palo Alto at a monthly rate of 7.5 cents per square foot occupied by a business (with the exemptions included in the measure) in order to raise funds for public safety, affordable housing, rail crossing safety, homeless services, and general city services.

Con:

Opponents of Measure K argue that in a time of spiking inflation and recessionary pressures, it smacks of the worst possible timing--and Palo Alto spending is hardly moderate. They argue that Palo Alto is already among the top 5 municipalities in the entire state with the highest spending per capita, and a new tax at a time when Palo Alto coffers are already overflowing with money and is already spending so much will contribute little of usefulness to the kind of Palo Alto our residents would like to have.

A NO vote on this measure means: A tax would not be levied on businesses in the City of Palo Alto.

Background

Unlike most communities in California, Palo Alto does not currently require local businesses to contribute to city services through a local business tax. After lengthy discussions and outreach, the City Council decided to seek voter approval to tax mid-sized and large businesses operating in the City to raise funds for general city services, including public safety, affordable housing, transportation and train crossing safety, and homeless services.

The Measure

The measure would amend the City’s Municipal Code to establish a tax on businesses operating in the City of Palo Alto as follows:

Businesses would pay a tax of seven and one-half cents ($0.075) per month for each square foot of space occupied by the business in Palo Alto above 10,000 square feet.
No tax would be imposed on:
- Small businesses (10,000 square feet or less)
- Grocery stores
- Residential uses
- Vacant and unoccupied space
- Non-profit organizations, schools, and banks and financial institutions, as required by State law
Offsets, or tax credits, would be made for businesses that remit transient occupancy tax (hotels) and businesses that have discretion to direct sales and use activity to Palo Alto for purposes of paying sales and use taxes.
The total tax on a business would be capped at $500,000 per year.

The tax would begin in January 2023 but payments would not be due until January 2024. For the first two years, the tax would be imposed at half the rate. The tax rate and cap would be increased by 2.5% annually to account for general inflation, beginning July 2026. The tax would terminate January 1, 2058, unless extended by voters.

The proposed tax is estimated to raise approximately $9.6 million each year for 35 years. The measure is a general tax, which means the City may use the revenues for any governmental purpose. Tax revenues cannot be taken away by the State. The City Council has adopted advisory spending guidelines stating its intention to expend revenues on long-term stable funding for public safety, affordable housing and homeless services, and grade separated train crossings that maintain safety and mobility for vehicles, bicyclists, and pedestrians, and to annually report on tax revenues and expenditures.

Source: City Attorney's Impartial Analysis of Measure K

Palo Alto Office of the City Clerk

Pro:

Con:

2026 Propositions

2026 Local Ballot Measures

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