City of Palo Alto
Sales Tax Digest Summary
Collections through November 2023
Sales July through September 2023 (2023Q3)
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California Overview
For the year ending in the third quarter of 2023, cash receipts decreased 0.3% statewide, and decreased
0.4% in S.F. Bay Area. However, when adjusted for non-period related payments, the overall economic sales tax activity for the year ending in third quarter of 2023 decreased by 1.3% statewide and decreased by 3.2% in S.F. Bay Area.
City of Palo Alto
For the year ending in the third quarter of 2023, sales tax cash receipts for the city increased by 9.7% from the prior year. However, when adjusted for non-period related payments, the overall economic sales tax activity in Palo Alto for the year ending in third quarter of 2023 increased by 6.0%.
Same quarter sales tax cash receipts decreased by 3 .2% in California from Q 3 2022 to Q3 2023. Overall, the decline in sales tax cash receipts in California in Q3 2023 when compared to the same quarter in the prior year was due to a combination of factors, including consumer responses to higher prices and higher interest rates. While inflation rates have been declining, the cumulative impact of higher prices and economic uncertainty have started to impact consumer confidence and ultimately impacted consumer demand in Q3 2023 . Interest rate increases made financing larger purchases, such as new autos, more expensive.
The Palo Alto citywide sales tax cash receipts increas ed by 10.3% over the Q3 202 2 to Q3 2023 period .
Palo Alto’s growth bucked the overall statewide decreasing trend during the same period. Key reasons for the Palo Alto increase during this period (while the rest of the state was down) were a 11.6% increase in restaurants economic activity, a 14.5% increase in the auto leasing segment, along with an increase in non-period cash payments.
The Transportation Category in Palo Alto saw the largest decline in taxable sales on an economic basis over the past year, falling by 5.7%. This was largely driven by a 6.9% year-over-year decline in taxable sales of new autos. The average price of a new car in California was $47,899 in 2023Q3, down from $48,259 in 2022Q3, a 0.7% decrease. The average price of a Tesla in California declined by $14,317 in the year ended 2023Q3, from $ 65,000 in 2022Q 3 to $ 50,683 in 2023Q 3, a 22 .0% decline. The dec rease in the Transportation category for the Palo Alto can also be attributed to CDTFA’s determination that Tesla had not been reporting the local tax correctly based on Point-of-Sale criteria for auto dealerships.
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 2 % of Total / % Change Palo Alto California
Statewide S.F. Bay Area Sacramento
Valley Central Valley South Coast Inland Empire North Coast General Retail 26.2 / -1.1 28.3 / 0.6 23.6 / -4.0 28.5 / 0.5 37.0 / 0.8 26.9 / 2.2 33.6 / -0.8 27.1 / 2.6 Food Products 17.2 / 10.4 21.0 / 2.7 23.0 / 4.0 16.6 / 2.2 14.7 / 2.8 22.9 / 3.1 17.6 / -2.0 18.2 / 1.4 Transportation 17.9 / -5.7 23.9 / -3.8 19.9 / -5.2 26.6 / -5.9 22.8 / -3.2 24.9 / -2.5 24.7 / -7.7 28.9 / -7.2 Business to Business 35.5 / 19.7 16.0 / -4.2 21.7 / -5.8 14.7 / 0.3 14.8 / -3.4 15.6 / -4.5 11.1 / -1.2 10.2 / -9.6 Misc/Other 3.2 / -12.0 10.8 / -4.0 11.7 / -6.2 1.1 / 1.8 0.7 / -6.9 1.1 / -0.4 13.0 / -6.0 1.0 / 11.0 Total 100.0 / 6.0 100.0 / -1.3 100.0 / -3.2 100.0 / -2.3 100.0 / -1.2 100.0 / -0.3 100.0 / -3.6 100.0 / -2.9 Palo Alto California
Statewide S.F. Bay Area Sacramento
Valley Central Valley South Coast Inland Empire North Coast Largest Segment Leasing Restaurants Restaurants Miscellaneous Retail
Miscellaneous
Retail Restaurants Miscellaneous
Retail Restaurants
% of Total / % Change 21.9 / 14.5 15.1 / 5.1 17.0 / 6.2 11.7 / 10.5 14.8 / 11.0 16.9 / 5.3 16.5 / 1.6 11.5 / 1.4 2nd Largest Segment Restaurants Auto Sales -
New
Auto Sales -
New Restaurants Department
Stores
Auto Sales -
New Restaurants Auto Sales -
New
% of Total / % Change 15.4 / 11.6 11.5 / -0.3 9.6 / -2.7 11.3 / 3.1 10.9 / -1.9 12.8 / 0.4 11.3 / 2.4 11.4 / 0.9 3rd Largest Segment Auto Sales -
New
Miscellaneous
Retail
Department
Stores
Auto Sales -
New Restaurants Miscellaneous
Retail
Auto Sales -
New
Department
Stores
% of Total / % Change 14.0 / -6.9 9.9 / 9.4 7.7 / -2.9 11.3 / -1.1 9.8 / 4.8 8.6 / 14.9 11.1 / -1.7 10.8 / 20.0 ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 3rd Quarter 2023 ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 3rd Quarter 2023
Regional Overview
The first chart on page two shows adjusted economic benchmark year amounts, which means that it shows the year ended third quarter of 2023 compared to the year ended third quarter of 2022 (benchmark years are rolling annual comparisons through the current quarter). The growth rates are different between the state and Palo Alto because the sales tax from businesses in Palo Alto performed better overall than the statewide average.
Regional Overview Chart (Economic)
BENCHMARK YEAR 2023Q3 COMPARED TO BENCHMARK YEAR 2022Q3
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 3 $-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
Quarterly Benchmark Year
Leasing
22.0%
Restaurants
15.5%
Auto Sales - New
14.0%
Office Equipment
8.2%Apparel Stores
6.6%
All Other
33.8%
Net Pools & Adjustments
23.9%
Gross Historical Sales Tax Cash Receipts by Benchmark Year and Quarter (Before Adjustments)
Net Cash Receipts for Benchmark Year third Quarter 2023: $36,691,136
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2023Q3 BMY is sum of 2023 Q3, 2023 Q2, 2023 Q1, 2022 Q4)
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 2 Anderson Honda Macy's Department Store Shreve & Co.
Apple Stores Magnussen's Toyota of Palo Alto Stanford Health Care Arco AM/PM Mini Marts Neiman Marcus Tesla
Audi Palo Alto Nordstrom Department Store Tesla Lease Trust Bloomingdale's Richemont Tiffany & Company
Hengehold Trucks Rivian Automotive Union 76 Service Stations Hermes Sephora Varian Medical Systems
HP Enterprise Services Shell Service Stations Volvo Cars Palo Alto Louis Vuitton
TOP 25 SALES/USE TAX CONTRIBUTORS
The following list identifies Palo Alto’s Top 25 Sales/Use Tax contributors. The list is in alphabetical order and represents th e year ended third quarter of 2023. The Top 25 Sales/Use Tax contributors generate
61.9% of Palo Alto’s total sales and use tax revenue.
City of Palo Alto
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$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
Benchmark Year 2023Q3 Benchmark Year 2022Q3
Sales Tax from Largest Non-Confidential Sales Tax Segments (Economic)
City of Palo Alto
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Economic Category % 2023Q3 2023Q2 2023Q1 2022Q4 2022Q3 2022Q2 2022Q1 2021Q4 2021Q3 2021Q2 2021Q1 Business To Business 27.3% 2,619,833 2,439,519 2,350,567 2,571,178 2,194,817 2,095,020 2,031,199 2,136,501 1,689,561 1,559,814 1,700,725 M isc ellaneous/Other 19.5% 1,870,170 1,546,096 1,302,322 1,517,005 1,597,816 1,724,861 1,701,538 1,687,189 1,812,731 1,743,358 1,558,859 Gener al Retail 19.1% 1,834,297 2,017,885 1,640,927 2,305,038 1,802,777 1,920,316 1,639,417 2,282,253 1,687,461 1,740,666 1,153,240 Food Products 13.3% 1,277,173 1,349,926 1,195,458 1,260,287 1,230,824 1,227,240 1,018,577 1,083,309 999,729 912,939 635,705 Subtotal Ec onomic (Loc al Business) 79.3% 7,601,473 7,353,426 6,489,274 7,653,508 6,826,234 6,967,438 6,390,731 7,189,252 6,189,482 5,956,778 5,048,529 Net Pools & Adjus tments 20.7% 1,986,175 2,084,763 1,586,938 1,935,580 1,862,181 686,044 1,721,924 1,806,328 584,508 1,513,663 1,741,273 Total C ash Rec eipts 100.0% 9,587,647 9,438,189 8,076,212 9,589,088 8,688,414 7,653,481 8,112,655 8,995,580 6,773,990 7,470,441 6,789,802 Economi c Segment % 2023Q3 2023Q2 2023Q1 2022Q4 2022Q3 2022Q2 2022Q1 2021Q4 2021Q3 2021Q2 2021Q1 M isc ellaneous/Other 48.4% 4,635,983 4,197,978 3,818,384 4,490,992 4,087,158 4,008,008 3,949,786 3,969,954 3,752,178 3,570,610 3,406,995 Res taurants 12.0% 1,154,189 1,214,502 1,073,621 1,114,637 1,102,248 1,093,944 902,707 947,771 884,911 799,544 540,244 M isc ellaneous Retail 5.0% 480,649 512,077 448,322 545,797 381,616 479,710 432,956 679,381 412,016 514,516 338,032 Appa rel Stores 5.0% 478,973 509,894 423,470 538,573 435,730 495,508 392,724 540,782 406,274 398,447 264,318 Department Stores 4.5% 435,388 492,374 356,626 533,032 423,601 454,349 367,144 525,295 388,703 384,763 237,522 Ser v ic e Stations 2.4% 229,911 222,029 192,723 215,640 233,387 250,715 191,755 190,610 181,460 157,268 116,258 Food Markets 1.1% 103,251 111,465 101,978 116,810 99,811 104,253 91,634 108,203 90,773 89,773 74,397 Business Serv ices 0.9% 83,130 93,106 74,150 98,027 62,683 80,950 62,025 227,256 73,169 41,858 70,763 Subtotal Ec onomic (Loc al Business) 79.3% 7,601,473 7,353,426 6,489,274 7,653,508 6,826,234 6,967,438 6,390,731 7,189,252 6,189,482 5,956,778 5,048,529 Net Pools & Adjus tments 20.7% 1,986,175 2,084,763 1,586,938 1,935,580 1,862,181 686,044 1,721,924 1,806,328 584,508 1,513,663 1,741,273 Total C ash Rec eipts 100.0% 9,587,647 9,438,189 8,076,212 9,589,088 8,688,414 7,653,481 8,112,655 8,995,580 6,773,990 7,470,441 6,789,802
Historical Analysis by Calendar Quarter
The chart above shows the categories and segments in quarterly economic basis amounts. The total amount is the net cash recei pts, and it was obtained by adding up the categories/segments with the “Net Pools & Adjustments” amount.
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 7 Economic Category % 2023Q3 2022Q3 2021Q3 2020Q3 2019Q3 2018Q3 2017Q3 2016Q3 2015Q3 2014Q3 Business To Business 28.7% 10,537,037 8,801,184 7,087,412 8,271,109 8,206,755 6,135,995 5,533,774 5,274,809 4,252,383 4,537,394 M isc ellaneous/Other 17.0% 6,254,742 6,703,263 6,886,475 5,536,429 8,213,787 7,119,601 6,064,700 6,214,339 5,685,238 5,340,922 Gener al Retail 21.0% 7,715,221 7,711,008 6,188,795 5,169,077 7,806,118 8,438,880 8,410,442 8,066,588 8,097,731 8,085,021 Food Products 13.9% 5,101,072 4,618,590 3,229,004 3,381,024 4,912,510 4,799,026 4,641,731 4,623,265 4,411,228 4,126,302 Subtotal Ec onomic (Loc al Business) 80.7% 29,608,071 27,834,045 23,391,686 22,357,638 29,139,170 26,493,501 24,650,648 24,179,001 22,446,580 22,089,640 Net Pools & Adjus tments 19.3% 7,083,065 5,616,086 4,983,730 5,500,512 5,787,830 5,476,835 4,896,415 4,110,008 4,201,030 3,612,493 Total 100.0% 36,691,136 33,450,131 28,375,417 27,858,150 34,927,000 31,970,336 29,547,063 28,289,009 26,647,610 25,702,133
Economi c Segment % 2023Q3 2022Q3 2021Q3 2020Q3 2019Q3 2018Q3 2017Q3 2016Q3 2015Q3 2014Q3 M isc ellaneous/Other 48.2% 17,688,682 16,315,061 14,908,971 14,585,390 17,361,346 14,617,927 12,927,875 12,448,262 11,022,846 11,018,397 Res taurants 12.5% 4,580,374 4,105,455 2,788,501 2,900,521 4,337,084 4,196,932 4,040,236 4,021,805 3,835,898 3,602,981 M isc ellaneous Retail 5.2% 1,893,775 2,024,139 1,754,067 1,220,669 1,658,961 1,688,462 2,034,384 1,992,497 1,519,840 1,518,777 Appa rel Stores 5.3% 1,947,222 1,873,085 1,433,338 1,193,933 1,951,720 1,931,597 1,721,857 1,631,712 1,656,560 1,663,440 Department Stores 5.0% 1,817,415 1,774,002 1,326,441 1,014,928 1,842,137 2,085,700 2,032,059 2,188,368 2,402,334 2,376,717 Ser v ic e Stations 2.4% 866,745 866,857 566,228 505,818 693,546 671,528 601,794 554,825 668,928 784,615 Business Serv ices 1.0% 380,071 471,450 269,485 550,605 845,213 819,254 790,083 832,423 839,442 670,259 Food Markets 1.2% 433,789 403,997 344,656 385,774 449,163 482,100 502,359 509,109 500,731 454,455 Subtotal Ec onomic (Loc al Business) 80.7% 29,608,071 27,834,045 23,391,686 22,357,638 29,139,170 26,493,501 24,650,648 24,179,001 22,446,580 22,089,640 Net Pools & Adjus tments 19.3% 7,083,065 5,616,086 4,983,730 5,500,512 5,787,830 5,476,835 4,896,415 4,110,008 4,201,030 3,612,493 Total 100.0% 36,691,136 33,450,131 28,375,417 27,858,150 34,927,000 31,970,336 29,547,063 28,289,009 26,647,610 25,702,133
Historical Analysis by Calendar BMY from 2014Q3 to 2023Q3
The chart above shows the categories and segments in benchmark year economic basis amounts. The total amount is the net cash receipts, and it was obtained by adding up the categories/segments with the “Net Pools & Adjustments” amount. Benchmark year (BMY) is the sum of the current and 3 previous quarters (2023Q3 BMY is sum of 2023 Q3, 2023 Q2, 2023 Q1, 2022 Q4).
City of Palo Alto
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General Retail
Food Products
Transportation
Business to Business
Misc/Other
2023/3 Total
2022/3 Total
% Chg
Largest Gain
Second Largest
Gain
Largest Decline
Second Largest
Decline
Campbell -2.3% 1.6% -5.4% -14.2% -5.5% 2,621,244 2,734,865 -4.2% I.T. Infrastructure Office Equipment Light Industry Electronic Equipment Cupertino 3.0% 7.6% 11.8% -2.5% 11.0% 8,679,509 8,777,018 -1.1% Restaurants Service Stations I.T. Infrastructure Office Equipment Gilroy -2.6% 3.0% 8.3% 16.9% -11.9% 4,574,449 4,463,250 2.5% Auto Sales - New Heavy Industry Bldg.Matls-Whsle Service Stations Los Altos -4.8% -3.1% -13.6% -49.6% -4.4% 596,170 666,060 -10.5% Food Markets Auto Parts/Repair Electronic Equipment Service Stations Los Gatos -8.3% 9.2% -1.0% -8.1% -49.9% 1,406,816 1,485,590 -5.3% Food Processing Eqp Liquor Stores Miscellaneous Other Furniture/Appliance Milpitas -0.9% 3.7% 1.2% -20.4% -6.5% 5,852,181 6,231,427 -6.1% Restaurants Auto Sales - New Office Equipment Furniture/Appliance Morgan Hill 4.2% -0.1% 11.4% 5.0% 1.7% 2,790,740 2,631,056 6.1% Auto Sales - New Misc. Vehicle Sales Auto Parts/Repair Energy Sales Mountain View 5.8% -5.0% -12.4% 7.0% 10.3% 4,920,160 4,992,780 -1.5% Business Services Auto Parts/Repair Auto Sales - New Office Equipment Palo Alto -1.3% 3.1% 21.7% 29.7% 0.4% 7,840,790 6,881,458 13.9% Office Equipment Auto Sales - New Furniture/Appliance Bldg.Matls-Whsle San Jose -2.5% 3.4% -7.9% 13.4% 3.0% 50,232,059 49,442,213 1.6% Office Equipment Miscellaneous Other Auto Sales - New Electronic Equipment Santa Clara -6.4% 14.4% -6.1% 0.8% -10.6% 12,959,968 13,097,600 -1.1% Light Industry Restaurants Office Equipment Heavy Industry County of Santa Clara 3.2% -11.2% 55.2% -31.8% 8.6% 1,294,694 1,345,716 -3.8% Misc. Vehicle Sales Health & Government Food Processing Eqp Heavy Industry Saratoga -0.6% 1.6% -5.3% -47.8% 24.0% 277,630 289,988 -4.3% Light Industry Auto Parts/Repair Business Services Service Stations Sunnyvale 19.7% 2.9% 19.7% -4.6% 11.4% 7,488,182 7,145,562 4.8% Auto Sales - New Miscellaneous Retail Bldg.Matls-Whsle Office Equipment Quarterly Analysis by Sales Tax Category: Change from 2022Q3 to 2023Q3 (Economic)
Unlike the chart on page one which showed a ‘benchmark year’ through third quarter of 2023, the chart above shows a comparison of one quarter only – third quarter of 2023 to third quarter of 2022. This chart is for local ‘brick and mortar’ businesses and it excludes county pools and adjustments.
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 9 California Avenue % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL FOOD PRODUCTS 12.2% 96,166 85,732 58.8% 53.8%
GENERAL RETAIL -14.9% 26,767 31,459 16.4% 19.7%
ALL OTHER -3.9% 40,657 42,294 24.9% 26.5%
TOTAL 2.6% 163,590 159,485 100.0% 100.0%
El Camino Real and Midtown % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL FOOD PRODUCTS -0.3% 156,519 156,984 25.8% 27.3%
GENERAL RETAIL -5.5% 34,492 36,481 5.7% 6.4%
ALL OTHER 9.4% 416,432 380,604 68.6% 66.3%
TOTAL 5.8% 607,443 574,069 100.0% 100.0%
Greater Downtown % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL FOOD PRODUCTS 5.5% 514,021 487,139 63.6% 57.5%
GENERAL RETAIL -18.2% 246,806 301,594 30.6% 35.6%
BUSINESS TO BUSINESS -21.4% 32,847 41,770 4.1% 4.9%
CONSTRUCTION -23.9% 9,586 12,591 1.2% 1.5%
TRANSPORTATION -2.1% 3,331 3,402 0.4% 0.4%
MISCELLANEOUS 53.4% 1,058 690 0.1% 0.1%
TOTAL -4.7% 807,651 847,186 100.0% 100.0%
Stanford Shopping Center % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL GENERAL RETAIL 3.1% 1,332,525 1,291,996 76.4% 76.4%
FOOD PRODUCTS 0.0% 156,813 156,883 9.0% 9.3%
ALL OTHER 5.1% 255,596 243,153 14.6% 14.4%
TOTAL 3.1% 1,744,934 1,692,032 100.0% 100.0%
City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q3 to 2023Q3 (Economic)
City of Palo Alto
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Town And Country Shopping Center % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL FOOD PRODUCTS -1.5% 110,125 111,844 61.4% 62.2%
GENERAL RETAIL 2.3% 66,420 64,948 37.0% 36.1%
ALL OTHER -8.5% 2,892 3,161 1.6% 1.8%
TOTAL -0.3% 179,437 179,953 100.0% 100.0%
All Other Geos combined with Balance of Jurisdiction % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL BUSINESS TO BUSINESS 29.2% 2,660,006 2,058,913 36.6% 32.3% GENERAL RETAIL -1.0% 1,781,083 1,799,951 24.5% 28.3%
TRANSPORTATION 21.8% 1,629,334 1,338,217 22.4% 21.0%
FOOD PRODUCTS 4.2% 1,114,697 1,069,613 15.4% 16.8%
MISCELLANEOUS -4.8% 45,461 47,759 0.6% 0.7%
CONSTRUCTION -49.7% 27,610 54,920 0.4% 0.9%
TOTAL 14.0% 7,258,191 6,369,373 100.0% 100.0%
All Geo Area Totals Comparison 23Q3 & 22Q3 % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL Balance of Jurisdiction 28.7% 3,755,136 2,916,649 51.7% 45.8% Stanford Shopping Center 3.1% 1,744,934 1,692,032 24.0% 26.6% Greater Downtown -4.7% 807,651 847,186 11.1% 13.3%
El Camino Real and Midtown 5.8% 607,443 574,069 8.4% 9.0% Town And Country Shopping Center -0.3% 179,437 179,953 2.5% 2.8% California Avenue 2.6% 163,590 159,485 2.3% 2.5%
TOTAL 14.0% 7,258,191 6,369,373 100.0% 100.0%
Palo Alto citywide QE 23Q3 & 22Q3 % CHANGE QoQ 2023Q3 QE 2022Q3 QE 23Q3 % OF TOTAL 22Q3 % OF TOTAL BUSINESS TO BUSINESS 29.7% 2,854,009 2,200,581 36.4% 32.0% GENERAL RETAIL -1.3% 1,834,297 1,857,838 23.4% 27.0%
TRANSPORTATION 21.7% 1,632,961 1,342,342 20.8% 19.5%
FOOD PRODUCTS 3.1% 1,277,173 1,239,211 16.3% 18.0%
MISCELLANEOUS 18.0% 205,832 174,396 2.6% 2.5%
CONSTRUCTION -45.6% 36,519 67,091 0.5% 1.0%
TOTAL 13.9% 7,840,790 6,881,458 100.0% 100.0%
City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q3 to 2023Q3 (Economic) Cont.
City of Palo Alto
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FOOD PRODUCTS,
12.2% CHANGE, $96,166 ,
58.8% TOTAL
GENERAL RETAIL, -14.9%
CHANGE, $26,767 ,
16.4% TOTAL
ALL OTHER,
-3.9% CHANGE, $40,657 ,
24.9% TOTAL
California Avenue 2023Q3 SALES TAX AMOUNTS
FOOD PRODUCTS, $85,732 ,
53.8% TOTAL
GENERAL RETAIL,
$31,459 , 19.7%TOTAL
ALL OTHER, $42,294 ,
26.5% TOTAL
California Avenue 2022Q3 SALES TAX AMOUNTS
FOOD PRODUCTS,
-0.3% CHANGE, $156,519 ,
25.8% TOTAL
GENERAL RETAIL,
-5.5% CHANGE,
$34,492 , 5.7% TOTAL
ALL OTHER,
9.4% CHANGE,
$416,432 ,
68.6% TOTAL
El Camino Real and Midtown 2023Q3 SALES TAX AMOUNTS
FOOD PRODUCTS, $156,984 ,
27.3% TOTAL
GENERAL RETAIL,
$36,481, 6.4% TOTAL
ALL OTHER, $380,604
66.3% TOTAL
El Camino Real and Midtown 2022Q3 SALES TAX AMOUNTS
City of Palo Alto Geo Area Pie Charts
City of Palo Alto
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FOOD PRODUCTS,
5.5% CHANGE, $514,021 ,
63.6% TOTAL
GENERAL RETAIL,
-18.2% CHANGE,
$246,806 ,
30.6% TOTAL
BUSINESS TO BUSINESS,
-21.4% CHANGE, $32,847 ,
4.1% TOTAL
CONSTRUCTION,
-23.9% CHANGE, $9,586 ,
1.2% TOTAL
TRANSPORTATION,
-2.1% CHANGE, $3,331 ,
0.4% TOTAL
MISCELLANEOUS,
53.4% CHANGE, $1,058 ,
0.1% TOTAL
Greater Downtown 2023Q3 SALES TAX AMOUNTS
FOOD PRODUCTS,
$487,139 , 57.5% TOTAL
GENERAL RETAIL,
$301,594 , 35.6% TOTAL
BUSINESS TO BUSINESS,
$41,770 , 4.9% TOTAL
CONSTRUCTION, $12,591 ,
1.5% TOTAL
TRANSPORTATION, $3,402 ,
0.4% TOTAL MISCELLANEOUS, $690 ,
0.1% TOTAL
Greater Downtown 2022Q3 SALES TAX AMOUNTS
GENERAL RETAIL
$1,291,996 ,
76.4% TOTAL
FOOD PRODUCTS, $156,883 ,
9.3% TOTAL
ALL OTHER, $243,153 ,
14.4% TOTAL
Stanford Shopping Center 2022Q3 SALES TAX AMOUNTS
GENERAL RETAIL,
3.2% CHANGE, $1,332,525 ,
76.4% TOTAL
FOOD PRODUCTS,
0.0% CHANGE,
$156,813 ,
9.0% TOTAL
ALL OTHER, 5.1% CHANGE,
$255,596 , 14.6% TOTAL
Stanford Shopping Center 2023Q3 SALES TAX AMOUNTS
City of Palo Alto Geo Areas Pie Charts
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 13
FOOD PRODUCTS,
-1.5% CHANGE, $110,125 ,
61.4% TOTAL
GENERAL RETAIL,
3.1% CHANGE, $66,420 ,
37.0% TOTAL
ALL OTHER, 5.1% CHANGE, $2,892 , 1.6% TOTAL
T own And Country Shopping Center 2023Q3 SALES TAX AMOUNTS
FOOD PRODUCTS,
$111,844 ,
62.2% TOTAL
GENERAL RETAIL, $64,948 ,
36.1% TOTAL
ALL OTHER, $3,161 , 1.8% TOTAL
T own And Country Shopping Center2022Q3 SALES TAX AMOUNTS
BUSINESS TO BUSINESS,
29.2% CHANGE,
$2,660,006 ,
36.6% TOTAL
GENERAL RETAIL,
-1.0% CHANGE, $1,781,083,
24.5% TOTAL
TRANSPORTATION,
21.8% CHANGE,
$1,629,334,
22.4% TOTAL
FOOD PRODUCTS,
4.2% CHANGE, $1,114,697 ,
15.4% TOTAL
MISCELLANEOUS, -4.8% CHANGE,
$45,461 , 0.6% TOTAL
CONSTRUCTION,
-49.7% CHANGE, $27,610 ,
0.4% TOTAL
All Other Geos combined with Balance of Jurisdiction 2023Q3
SALES TAX AMOUNTS
BUSINESS TO BUSINESS,
$2,058,913 ,
32.3% TOTAL
GENERAL RETAIL, $1,799,951,
28.3% TOTAL
TRANSPORTATION,
$1,338,217
21.0% TOTAL
FOOD PRODUCTS,
$1,069,613 ,
16.8% TOTAL
MISCELLANEOUS,
$47,759 , 0.7% TOTAL
CONSTRUCTION,
$54,920 , 0.9% TOTAL
All Other Geos combined with Balance of Jurisdiction 2022Q3
SALES TAX AMOUNTS
City of Palo Alto Geo Area Pie Charts
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 14
Balance of Jurisdiction,
28.7% CHANGE,
$3,755,136 ,
51.7% TOTAL
Stanford Shopping Center,
3.1% CHANGE, $1,744,934 ,
24.0% TOTAL
Greater Downtown,
-4.7% CHANGE, $807,651 ,
11.1% TOTAL
El Camino Real and Midtown,
5.8% CHANGE, $607,443 ,
8.4% TOTAL
Town And Country Shopping Center,
-0.3% CHANGE, $179,437 , 2.5% TOTAL
California Avenue, 2.6% CHANGE,
$163,590 , 2.3% TOTAL
All Geo Area Totals 2023Q3 SALES TAX AMOUNTS
Balance of Jurisdiction,
$2,916,649 , 45.8% TOTAL
Stanford Shopping
Center, $1,692,032 ,
26.6% TOTAL
Greater Downtown,
$847,186 , 13.3% TOTAL
El Camino Real and Midtown,
$574,069 , 9.0% TOTAL
Town And Country Shopping Center,
$179,953 , 2.8% TOTAL
California Avenue,
$159,485 , 2.5% TOTAL
All Geo Area Totals 2022Q3 SALES TAX AMOUNTS
BUSINESS TO BUSINESS,
29.7% CHANGE, $2,854,009 ,
36.4% TOTAL
GENERAL RETAIL,
-1.3% CHANGE, $1,834,297 ,
23.4% TOTAL
TRANSPORTATION,
21.7% CHANGE,
$1,632,961 ,
20.8% TOTAL
FOOD PRODUCTS,
3.1% CHANGE, $1,277,173 ,
16.3% TOTAL
MISCELLANEOUS, 18.0% CHANGE,
$205,832 , 2.6% TOTAL
CONSTRUCTION,
-45.6% CHANGE, $36,519 ,
0.5% TOTAL
Palo Alto citywide 2023Q3 SALES TAX AMOUNTS
BUSINESS TO BUSINESS,
$2,200,581 , 32.0% TOTAL
GENERAL RETAIL,
$1,857,838 ,
27.0% TOTAL
TRANSPORTATION,
$1,342,342 ,
19.5% TOTAL
FOOD PRODUCTS, $1,239,211
18.0% TOTAL
MISCELLANEOUS,
$174,396 , 2.5% TOTAL CONSTRUCTION, $67,091 ,
1.0% TOTAL
Palo Alto citywide 2022Q3 SALES TAX AMOUNTS
City of Palo Alto Geo Area & Citywide Pie Charts
California Legislative
Update December 18,
2023
This edition of our policy update provides information on the Legislative Analyst’s Office fiscal outlook and
upcoming ballot initiatives with a focus on Proposition 1 and the Taxpayer Protection Act.
We hope that this update is helpful, and we will provide additional updates in January 2024 covering legislation and budget activity in Sacramento. Enjoy the holiday season and please reach out to us with any questions.
Government Relations Contact
[email protected] / 559.288.7296
Legislative Analyst’s Office Fiscal
Outlook
The Legislative Analyst’s Office (LAO) released its fiscal outlook on December 7, which was delayed this year
because of tax deadline extensions. Most 2022 income
taxes were due November 16, with final state revenue
numbers trickling in at the beginning of this month. The outlook, as anticipated, is not nearly as positive as numbers contained in the 2023-24 Budget Act.
Over the three-year outlook period – 2022-23, 2023-24,
and 2024-25, revenues are now estimated to be $58 billion below projections. The LAO which advises the legislature on budget issues, believes that the current revenue
weakness is likely to continue based on past similar
downturns such as the dotcom bust (2000-2001) and Great Recession (2007-2009).
The LAO is estimating that California will be facing a $68 billion deficit in the 2024-25 budget year. Compounding this news is their projection of a $155 billion structural deficit across the forecast period 2024-25 through 2027-28:
• ~$68 billion in 2024-25
• ~$31 billion in 2025-26
• ~$29 billion in 2026-27
• ~$27 billion in 2027-28
These projections are subject to substantial uncertainty, however, assuming the administration is working with
similar estimates, California policymakers will be subject to some serious number crunching in the next six months.
For the 2023-24 Budget Act, lawmakers were forced to
build a budget based on projections of revenues that
disappointingly did not materialize. For the governor’s January budget proposal, due on or before January 10,
2024, new investments are not expected. Based on
preliminary numbers, this was anticipated. What
lawmakers haven’t reckoned with in the last several years, which may now be on the table, is cutting core services to vulnerable populations.
Budget committee staff and the LAO are anticipating
proposals for spending reductions, revenue increases,
clawbacks of unspent funding, cost shifts, and tapping
reserves. Additionally, it would not be unusual for the administration to propose a realignment of programs from the state level to the local level without commensurate funding.
LAO Advice to the Legislature
It is likely that ongoing spending reductions, revenue
increases, or both will be necessary to balance the budget.
Early budget action in 2024 could increase the legislature’s flexibility by allowing the state to pull back funding that has not yet been allocated. Using reserves is merited but is unlikely to be sufficient to cover the state’s multiyear deficits. Moreover, preserving some reserves would
provide a helpful cushion in the future.
Reserves: The state’s Budget Stabilization Account
(reserve) has about $23 billion in it. Should the governor declare a fiscal emergency, which would be possible under the LAO’s projections in both 2023-24 and 2024-25,
lawmakers could suspend deposits and withdraw the lesser of the amount of the budget emergency or 50 percent of
the reserve balance (in each year). There is approximately $1 billion in the Safety Net Reserve which is available to
2 fund program costs in health and human services
programs which could also be utilized.
One-Time and Temporary Spending: The LAO
estimates the state has $8.6 billion in one-time and
temporary spending slated for 2024-25 that can be reduced entirely to address the budget problem, including $2.2
billion in transportation, $1.9 billion in natural resources and environment, and $1.8 billion in various education
programs. There are also potentially billions of dollars from prior years that have been committed but not yet
distributed.
Cost Shifts: The state used $10 billion in cost shifts in the 2023-24 budget and may have additional capacity to shift funds again this year.
New Revenue: In 2020-21, the state suspended net
operating loss deductions, preventing corporations with net income over $1 million from using them. The state
also limited businesses from claiming more than $5 million in tax credits. Lawmakers could adopt similar provisions in the upcoming budget year. The state has also increased
broad-based taxes on a temporary and permanent basis in similar revenue downturns.
Managed Care Organization (MCO) Tax: The state
may have to explore using more of the MCO tax to offset the General Fund costs of Medi-Cal, rather than for other costs, such as increasing provider rates.
School Funding: School funding could be a major target
for budget solutions; however, the legislature and
administration have traditionally avoided cuts to K-14 if possible. According to the LAO’s estimates, spending on schools and community colleges could be reduced by $21
billion over three budget years based on the minimum
General Fund spending requirement under Prop 98:
• $9.6 billion in 2022-23,
• $7 billion in 2023-24, and
• $4.4 billion in 2024-25.
The automatic reduction in school spending is only $4.3 billion, mostly related to the automatic elimination of required deposits into the Prop 98 reserve in 2022-23 and 2023-24. To obtain additional savings, the state would
have to reduce spending previously approved in 2022-23
and 2023-24. In previous downturns the state relied upon across-the-board reductions to per-pupil allocations and payment deferrals, both of which tend to be disruptive for school operations. Less disruptive options would be
utilizing Proposition 98 reserve for 2022-23. Should the state withdraw funding for 2022-23, it would also have to withdraw the remaining funds - about $450 million in
2023-24.
Additional savings could come in the form of pulling back $1.1 billion for grants to community schools in 2022-23 that haven’t been awarded, as well as several hundreds of millions in State Preschool funding provided in 2022-23 and 2023-24 that is not currently obligated.
LAO’s $68 Billion Deficit Calculation
• The state anticipated a deficit of around $14 billion entering the 2024-25 budget year.
• Revenues are lower than budget act projections by $58 billion.
• School and community college spending is lower by
more than $4 billion.
• Other spending is lower by $4 billion - $3 billion of this is from health and human services programs.
• Entering fund balance is lower by $3 billion.
Budgetary changes to years before the budget window
are reflected in the 2022‑23 entering fund balance.
• Reserve deposits are higher by $400 million -
Proposition 2 requires the state to set aside minimum
amounts to deposit into its reserve, pay down debts,
and under certain conditions spend money on
infrastructure. Typically, the set asides increase when revenues increase and drop when revenues decrease.
This year, however, the state’s reserve requirements
would increase in response to the LAO’s revenue
forecast.
The LAO’s analysis is based on the data below as well as other factors, and it will continue to adjust its estimates as additional information emerges:
• The federal reserve has made borrowing more
expensive and reduced money available for
investments slowing economic activity.
• Home sales are down by about half. On average,
monthly mortgage payments have increased from
$3,500 to $5,400.
• Investment in California startups and technology,
which is especially sensitive to financial conditions, has dropped significantly.
• The number of companies that went public in 2022
and 2023 is down over 80% from 2021.
3 • The number of unemployed workers has risen almost
200,000 since last summer, with the unemployment
rate rising from 3.8% to 4.8%.
• Inflation adjusted incomes posted five straight
quarters of year-over-year declines from the first
quarter of 2022 to the first quarter of 2023.
• Income taxes collected directly from workers’
paychecks is down 2% as compared to last year, sales
tax collections are flat, and total income tax collections are down 25% in 2022-23.
• The LAO is projecting that revenues will be nearly flat in 2023-24 after falling 20% in 2022-23. Revenue
growth is expected to return in 2024-25 and beyond.
The governor’s January budget proposal will contain the administration’s projections. The administration’s forecast along with the LAO’s will give legislators a sense of how much spending they'll need to cut, delay, or shift to bonds over the coming budget cycle.
On December 12, the Department of Finance issued a
budget letter directing state entities under the governor’s control to take immediate actions to reduce current-year General Fund expenditures. Examples of savings cited
include limiting new goods and services contracts,
reducing information technology costs, limiting vehicle replacements, limiting office supply purchases, reducing non-essential travel, cancelling some leave buy-back
programs, and deferring funding requests. The letter
authorizes agency secretaries and cabinet-level directors to make exemptions only in limited instances: to address a declared emergency, to provide 24-hour medical care, to avoid significant revenue losses, or to achieve significant net cost savings.
We will update you on the state’s budget picture in
January, after the governor presents his 2024-25 budget proposal.
March 2024 Ballot
Appearing on the March 5, 2024 ballot for voters’
consideration will be Proposition 1. Proposition 1, which Governor Gavin Newsom has dubbed, Treatment not
Tents, is a combination of elements from SB 326, Chapter 790, Statutes of 2023 and AB 531, Chapter 789, Statutes of 2023.
Assuming passage, Proposition 1 will reform the Mental
Health Services Act (Proposition 63, 2004) and includes $6.38 billion in bonds to finance grants for the acquisition of capital assets for, and the construction and
rehabilitation of, unlocked, voluntary, and community-
based treatment settings and residential care settings and to house veterans and others who are experiencing
homelessness or are at risk of homelessness and are living with a behavioral health challenge.
Proposition 1 will shift the focus of the Mental Health Services Act (MHSA), which will be renamed the
Behavioral Health Services Act, by directing funding
toward housing and personalized support services, but
away from other mental health services currently utilizing the funding. Proposition 1 will also shift approximately $140 million in MHSA funding annually from counties to
the state.
$4.4 billion in bond funding will be allocated by the state to build more places for mental health care and drug or alcohol treatment. The other $2 billion will be granted by the state to local governments to turn hotels, motels, and other buildings into housing and construct new housing.
Housing will be for people who are experiencing
homelessness or are at risk of becoming homeless and
have mental health, drug, or alcohol challenges. Just over half of the $2 billion will be set aside for veterans.
The state is estimating that the bond will build places for 6,800 people to receive mental health care and drug or
alcohol treatment, and provide up to 4,350 housing units, with 2,350 set aside for veterans. Costs for the bond are estimated to be $310 million annually for 30 years.
Taxpayer Protection Act
The California Supreme Court has agreed to determine
whether The Taxpayer Protection and Government
Accountability Act (Taxpayer Protection Act) should
appear on the November 2024 ballot. The initiative would limit the ability for state and local governments to impose taxes, fees, and other charges, applying the changes
retroactively to January 1, 2022, and giving voters 12
months to approve or reject tax increases imposed during that time.
It would also limit the ability of a local government to place an advisory measure on the ballot if the measure is related to the potential use of revenues derived from a general tax that is appearing on the same ballot. It is sponsored by the California Business Roundtable (CBRT).
The initiative has been challenged by Governor Gavin
Newsom, legislative leadership, and several local
governments, arguing that it violates the California
4 constitution by infringing on lawmakers’ constitutional powers to impose state taxes. Additionally, they argue it would illegally shift power from the governor to
lawmakers by requiring charges now considered fees to be approved as taxes by the legislature, and that it
impermissibly seeks to restructure California’s system of government in a way that impedes the state’s ability to respond to future crises and cannot lawfully be enacted through the initiative process.
On November 29, the court ordered California Secretary
of State Shirley Weber and the ballot measure’s counsel to make their case for why the challenge should not proceed.
The Supreme Court gave the respondents until December
27 to file their response, and the petitioners’ filing is due January 31.
In addition to the lawsuit, the legislature passed ACA 13 this year, which will appear on the same ballot as the
Taxpayer Protection Act. Upon voter approval, ACA 13
requires any state or local initiative measure to conform with any increased voter threshold that it seeks to impose on future ballot measures. If ACA 13 passes, it will require that the Taxpayer Protection Act pass by a 2/3 vote of the electorate. ACA 13 also preserves the right of local
governments to place advisory questions on the ballot to ask voters their opinion on the issue, and states that the provisions of this constitutional amendment apply to all statewide initiative measures submitted to voters on or after Jan. 1, 2024.
Proponents have raised $17.25 million in support of the Taxpayer Protection Act. It received a fiscal analysis from the Department of Finance and Legislative Analyst’s
Office last year, as well as an official title and summary from the Attorney General’s Office. The official title of the measure is: Limits Ability of Voters and State and
Local Governments to Raise Revenues for Government
Services.
As a review, below is an outline of the initiative’s
provisions.
State
• Define every levy, charge, or exaction of any kind
imposed by state law, a tax or an exempt charge.
• An exempt charge would include:
o A charge for a specific government service or
product provided directly to a payor receiving the
product or service which does not exceed actual
costs to the State of providing the service or
product.
o A charge for issuing licenses and permits,
performing investigations, inspections, and audits,
enforcing agricultural marketing orders, and the
administrative enforcement and adjudication
thereof.
o A levy, charge, or exaction collected from local
governments, health care providers, or health
plans primarily used to finance the non-federal
portion of the Medi-Cal program.
o A reasonable charge to enter, use, purchase, rent,
or lease state property.
o A fine or penalty imposed by the judicial branch.
o A levy, charge, assessment, or exaction collected
for the promotion of California tourism.
• Any change in state law resulting in a new or higher
tax must be passed by a ⅔ vote of the Legislature, be
submitted to the electorate, and approved by a
majority vote of the electorate. Details provided to
voters regarding the change in taxes must include the
duration a tax will be imposed, an estimate of annual
revenue, and how the revenue will be used.
• The title and summary for a measure providing for the imposition of a tax must include the type and amount
or rate of the tax, the duration of the tax, and the use of revenue derived from the tax.
• Any change in state law resulting in any taxpayer
paying a new or higher exempt charge must be passed
by both houses of the Legislature, specify the type of
exempt charge, and the amount or rate of the exempt
charge.
• Any tax or exempt charge adopted after January 1,
2022, that is not in compliance with the initiative
would be void 12 months after the effective date of
the initiative.
• The State must provide clear and convincing evidence
that a levy, charge, or other exaction is an exempt
charge and not a tax, and that the amount is
reasonable and does not exceed actual costs.
Local Governments
• Define every levy, charge, or exaction of any kind
imposed by local law, a tax or an exempt charge.
• An exempt charge would include:
o A charge for a specific government service or
product provided directly to a payor receiving the
product or service which does not exceed actual
costs to the local government of providing the
service or product.
o A charge for issuing licenses and permits,
performing investigations, inspections, and audits,
5 enforcing agricultural marketing orders, and the
administrative enforcement and adjudication
thereof.
o A reasonable charge to enter, use, purchase, rent,
or lease local government property.
o A fine or penalty imposed by the judicial branch
or local government administrative enforcement
agency to punish a violation of the law.
o A charge imposed as a condition of property
development that is not related to vehicle miles
traveled.
o An assessment, fee, or charge subject to Article
XIII D of the constitution, or an assessment
imposed upon a business in a tourism marketing
district, a parking and business improvement area,
or a property and business improvement district.
o A charge imposed for a specific health care service
not exceeding reasonable costs to the local
government of providing the service.
• No local law proposed by the governing body, or an
electorate may impose, extend, or increase any general
tax unless the tax is submitted to the electorate and
approved by a majority vote.
• No local law proposed by the governing body or an
elector, may impose, extend, or increase any special tax unless the tax is submitted to the electorate and
approved by a 2/3 vote.
• The title and summary for a measure providing for the imposition of a tax shall include the type and amount
or rate of the tax, the duration of the tax, and the use of revenue derived from the tax.
• For a general tax, the phrase, “for general government use” shall be required and no advisory measure may
appear on the same ballot that would indicate that the
tax will or could be used for a specific purpose.
• No amendment to a county charter which provides for
the imposition, extension, or increase of a tax or
exempt charge shall be submitted to or approved by
the electors.
• Any tax or exempt charge adopted after January 1,
2022, that is not in compliance with the initiative
would be void 12 months after the effective date of
the initiative.
• The local jurisdiction must provide clear and
convincing evidence that a levy, charge, or other
exaction is an exempt charge and not a tax, and that
the amount is reasonable and does not exceed actual
costs.
The LAO/Department of Finance analysis of the measure
points out the following:
• More than 90% of the state budget is funded with
revenues from taxes. Much of the rest is funded by
fees and other charges.
• Current law requires approval by ⅔ of each house of
the Legislature or a majority vote of the statewide
electorate. This measure would require both.
• The measure expands the definition of a tax to include some charges state and local governments currently
treat as fees and other charges.
• The initiative would make it harder for the Legislature and local governments to raise revenues, likely
resulting in lower annual state and local revenues
depending on future actions of the Legislature, local
governing bodies, voters, and the courts.