City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: May 27, 2025
Report #:2503-4251
TITLE
Adoption of Resolution Suspending the Levy of Assessments on the Downtown Palo Alto Business Improvement District (BID) Assessment for Fiscal Year 2026; CEQA status – not a project.
RECOMMENDATION
Staff recommends that Council adopt the attached resolution suspending the levy of the Palo Alto Downtown Business Improvement District assessment for Fiscal Year (FY) 2026. (Attachment A).
BACKGROUND
The Palo Alto City Council established the Palo Alto Downtown Business Improvement District (BID) in 2004 pursuant to the California Parking and Business Improvement Area Law to maintain economic vitality and physical maintenance of the Palo Alto Downtown business district. The Council appointed the Palo Alto Downtown Business and Professional Association (PADBPA), a non-profit corporation, as the advisory board and administrator of the BID. PADBPA, acting through its independent Board of Directors, has historically advised the Council on the method and basis for levy of assessments in the BID and has managed the expenditure of revenues derived from the assessments.
In light of organizational changes at PADBPA and changes resulting from the COVID-19 pandemic, and with the concurrence of the City Council, the City allowed the contract with PADBPA to expire on June 30, 2020. Council directed staff to work with the Palo Alto Chamber of Commerce and PADBPA to develop options for the transition of the management of the BID. The Chamber and PADBPA identified a need to build support for a resumption of the BID assessment within the business community before collecting a new assessment and establishing a new management agreement.
On March 1, 2022 the Finance Committee discussed options for the FY 2023 Business Registry
Certificate (BRC) and BID processes (CMR 13902 1). The Committee reviewed three options for the BRC and BID and forwarded their recommendation to the City Council on April 4, 2022, CMR 139012, to restore the BRC in the 2022-2023 collection timeframe, using the established structure used in pre-pandemic years, while continuing the pause of BID assessments again in FY 2023. The Palo Alto City Council supported the Finance Committee recommendation and approved a resolution to not levy an assessment for FY 2023. The BID was subsequently paused again in FY 20243 and FY 20254. Staff continues this recommendation for FY 2026.
ANALYSIS
Staff recommends that the Council approve the recommendation for FY 2026 with the intention to not collect BID assessments for an additional year. In 2022 Council directed staff to work with the PADBPA and the Chamber to provide options on the future management of the BID. City staff are currently working on developing alternatives for a new streetscape design on University Avenue, in consultation with stakeholders and the community more broadly. This work is expected to generate a plan that will require businesses in the vicinity to invest in capital improvements and potentially operating costs for ongoing maintenance.
Based on Council direction in December 2023, in addition to the long-term streetscape plan, options for near-term and mid-term improvements in the downtown district are being reviewed.
These may include enhanced cleaning and maintenance as well as minor infrastructure improvements. A pilot program to improve downtown cleanliness has been in place for a year and there have been notable improvements. Additional resources were added to wash trash can liners weekly, increase frequencies of daily litter pickup, reducing overflowing trash cans/emptying trash cans more frequently, wiping down tops of newspaper racks, and wiping down tops of trash cans. Staff anticipates finalizing the plan for these improvements in the first half of next fiscal year and subsequently engaging the BID stakeholders to discuss re-initiating BID assessments in FY 2027 to fund these enhanced services. Thus, staff recommends suspending the BID assessments for one additional year.
Additionally, after the plan for long-term streetscape improvements has been approved and a 1 03/01/2022 Finance Committee, Review the Business Registry Certificate and Business Improvement District FY 2023 Processes and recommendation to City Council on the Renewal Processes https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/finance- committee/2022/20220301/20220301pfcs-linked.pdf
2 04/04/2022 City Council, Approve Finance Committee Recommendation for FY 2023 to (a) Return to the Customary Pre-Pandemic Business Registry Certificate Requirement and Fee, and (b) Pause for One Year the Downtown Business Improvement District Assessment Program https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council-agendas- minutes/2022/20220404/20220404pccsmamendedlinked1.pdf
3 04/14/2023 City Council, PUBLIC HEARING: Adoption of a Resolution Providing that the City will Not Levy Assessments for the Downtown Business Improvement District for FY 2024.
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=1974&meetingTemplateType=2 4 05/20/2024 Adoption of Resolution Suspending the Levy of Assessments on the Downtown Palo Alto Business Improvement District (BID) Assessment for Fiscal Year 2025; CEQA status – not a project. https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=4957&meetingTemplateType=2&compiledMeetingDocumentId=10 006
funding plan for capital improvements has been finalized, staff will evaluate the appropriate ongoing funding framework to support the long-term vision for downtown including, but not limited to, enhanced cleaning and maintenance, landscaping, branding, and events. Staff anticipates bringing forward any recommended changes to the BID for Council consideration in 2026. Finally, given the uncertainty surrounding PADBPA, a new advisory board for the BID may be necessary. The decision to not levy assessments in FY 2026 is consistent with Council’s prior decisions5. In addition, based on further review of the Parking and Business Improvement Area Law of 1989, staff has determined that no public hearing on the proposed resolution is required if no assessment will be levied. If and when the Council determines to resume levy of the BID assessment for future years, the Council will need to conduct a noticed public hearing prior to doing so.
FISCAL/RESOURCE IMPACT
The BID is set up as a separate fund within the City’s budget. In prior years, when active, the BID has required a General Fund subsidy as collected assessments fell short of the costs of operating the BID. The subsidy amounted to $70,000 in FY 2020. Historically, the City acts as the collection agent for BID revenues and reimburses PADBPA’s expenses after receipt and verification of invoices. With the BID being paused, an estimated $80,000 will not be collected and no BID business activities will be provided. In the past, business activities have included the streetlight banner program, Lytton Plaza enhancements, and summer concerts among others.
In prior years, staffing resources have included staff time from the City Manager’s Office and Administrative Services Department to provide oversight to the BID, administer the contract with HdL (the third-party administrator for both BID and BRC), liaise with stakeholders, and preparing the annual reauthorization.
STAKEHOLDER ENGAGEMENT
Staff continues to discuss the potential options for the future of the BID with downtown business stakeholders, including former leaders of PADBPA and the Chamber of Commerce. In FY 2026, staff anticipates working with stakeholders to explore options for new management agreements for the BID.
ENVIRONMENTAL REVIEW
The proposed action is not a project for the purposes of the California Environmental Quality Act. 5 Prior Council Decisions: FY 2021 (CMR 11219) and in FY 2022 (CMR 12255) in response to the pandemic, along with the Finance Committee’s recommendation to not levy assessments for FY 2023 (CMR 13901) and FY 2024 (CMR 2303-1184) and Council in FY 2025 (CMR 2403-2822).
ATTACHMENTS
Attachment A: Resolution Declaring Intention to Not Levy Assessments APPROVED BY:
Lauren Lai, Administrative Services Director