BY ELAINE GOODMAN
Daily Post Correspondent
Palo Alto voters might be asked in November to increase taxes in the city as a way to fund a package of infrastructure projects, including parking garages, a new police station, and improvements to Charleston and Arastradero roads.
The type of tax hike to be requested hasn’t yet been determined, but it could be an increase to the sales tax, parcel tax, hotel tax or a tax on real estate transactions. The decision will depend in part on results of a voter survey to be conducted this month and in early April.
The City Council Finance Committee will discuss the potential tax measures tonight (March 20). The meeting is a continuation of the committee’s discussion of infrastructure project funding in February.
Palo Alto is trying to figure out how to come up with money to complete a nine-item infrastructure plan adopted in 2014. Since then, costs for some of the projects have been skyrocketing. In particular, the new police station planned for 250 Sherman Ave., in the California Avenue District will now cost an estimated $92.2 million, according to a report to the Finance Committee from City Manager Jim Keene. That amount is up from a 2012 cost estimate of $57 million and a $75.3 million estimate in March 2017.
The city had budgeted $57 million for the police station, leaving a shortfall of about $35 million.
Escalating construction costs are the main reason for the increased price tag. In addition, a review of the project by the city’s Architectural Review Board resulted in design changes that were expected to add to the cost, according to a report to the City Council in January.
A $76 million hole
Similarly, Keene said in January that a review by the ARB was expected to add to the cost of the California Avenue parking garage at 350 Sherman Ave. The new report to the Finance Committee prices the garage at $41.3 million.
Other items in the infrastructure plan are a downtown parking garage, estimated at $29.1 million; an $18.5 million Highway 101 bike bridge; and $15.9 million in improvements to Charleston and Arastradero roads.
The city is now looking for about $76 million to plug a funding gap for its infrastructure plan. That amount includes $20 million in contingency funds to cover “unanticipated future cost escalation,” according to the report to the finance committee.
In addition, the committee wants to see how much public support there is for other projects, such as the second phase of construction for the Junior Museum and Zoo, at a cost of $5 million; a new animal shelter, estimated to cost $10 million to $15 million; and spending $40 million to $45 million to tackle some of the projects in the Parks Master Plan.
Sales tax rates
The report contains a comparison of tax rates in Palo Alto to other California cities. Palo Alto’s current sales tax rate of 9.0% is on par with most cities in Santa Clara County. San Jose, Campbell and Alviso are higher at 9.25%.
But Palo Alto is ahead of its neighbors when it comes to the hotel tax, also known as transient occupancy tax or TOT. The city boosted the hotel tax from 12% to 14% in 2014, “consistent with other destination cities such as San Francisco, Oakland, Santa Monica and Beverly Hills,” the report said.
Mountain View’s hotel tax is 10%, while the tax is 12% in Menlo Park and Redwood City.
Under a tentative timeline for a ballot measure, a consultant would conduct a voter survey from March 26 to April 6. Depending on the results, and with council approval, a second survey might be conducted in May. The council would take action in June to place a measure on the November ballot.