City prepares trio of new taxes

Lacking the money for an ambitious list of transportation upgrades, Mountain View officials are hoping the city’s new generation of businesses can pay for it.

City officials plan to study three separate tax measure options that could go before voters as soon as next November. The measures could include a surcharge on future marijuana sellers, a new per-employee fee aimed at the city’s largest companies, and an increase on local hotel fees intended to capture Airbnb and other short-term rentals.

At a meeting earlier this month, City Council members signaled support for studying and possibly conducting polling for all three tax measure options. Extra tax revenues will be needed, they said, for an upcoming series of costly capital improvements, such as a new automated transit system and a series of grade separation projects along the Caltrain line.

The tax on large employers like Google would be the most complicated of the three options, involving a comprehensive update of the city’s business license fees to put higher fees on large employers that draw heavy commuter traffic, according to city staff. This measure would likely borrow from similar policies in other South Bay cities with per-employee fees, such as San Jose and Sunnyvale.

Earlier this year, San Jose updated its business license fees to charge companies with more than three workers up to $60 per employee as part of their license fee. If Mountain View adopted similar rules, it would generate about $3.2 million annually, according to staff estimates.

Large tech employers are generating much of the local traffic, so using this pool of money to pay for transportation improvements seems logical, said Councilman Lenny Siegel. He pushed for bringing forward a tax measure on the November ballot.

“2020 will be too late,” he said. “Mountain View is really growing, and I want to see us building a lot of housing — we need it — but if we don’t do something about the traffic, then we’re going to lose support for the housing.”

Siegel hinted that officials of one of Mountain View’s “major employers” had actually expressed support for the proposed fee in private talks with him.

It remains unclear exactly what this proposed fee increase would mean for smaller businesses like retailers and restaurants. The standard business license fee in Mountain View currently costs about $30 per year, but the fee hasn’t been updated in more than 30 years.

Council members emphasized they would perform an outreach campaign and gather input from local business owners before moving forward with the plan.

Another proposed idea for a future tax would be to raise the so-called transient-occupancy tax, which is basically a surcharge on hotel stays in the city. Mountain View now charges a 10 percent fee on hotel lodgings, but most other South Bay cities have pushed their rates higher. While they prepare a voter measure to raise the hotel fees, city staff said, they could also study expanding the tax to cover the surging local market for Airbnb and other short-term rentals

A past investigation by the Voice found that the city is forfeiting about $1 million in annual revenues by not imposing hotel fees on about 800 Airbnb rentals in the city. City legal staff say they lack sufficient authority to charge the fees, but they have also declined to follow the example of nearby cities by allowing Airbnb to set aside those taxes until formal regulations are drafted.

“Now is the time to get Airbnb taxed — we’re leaving a lot of money on the table,” said Councilwoman Pat Showalter.

A tax on future marijuana dispensaries in Mountain View also received council member support, although officially the pot industry is still prohibited in the city. Earlier in the same meeting, the council decided to place a temporary ban on dispensaries opening in the city, which could be extended through 2019. City staff say that time will be needed to fully prepare policies and regulations.

Despite that delay, discussions of a future marijuana tax indicated that Mountain View would eventually allow pot dispensaries in the city. Sean Kali-rai of the Silicon Valley Cannabis Alliance urged the city to consider using some of the taxes to help pay for treatment and “adverse impacts” of marijuana legalization.

For any of the tax options, city officials would need to decide whether to specify a use for the revenues. Under state law, tax measures with a specific purpose, such as paying for transportation improvements, are required to get support from two-thirds of voters. Unspecified tax measures that go directly into the general fund need only a simple majority to pass.

Councilman Chris Clark suggested that the city should play it safe. He said a tax measure could be written to suggest various possible uses without requiring that the revenues are spent on a specific project.

Mountain View’s three potential tax measures could have some company on the November ballot. The Mountain View-Los Altos High School District is also considering a bond measure for November. Meanwhile, the Silicon Valley Leadership Group and the Bay Area Council are pushing for a regional transportation tax, which could join the same ballot.

For Mountain View, “three measures on the ballot is something to be cautious about,” warned City Manager Dan Rich. “But we can explore it.”