About Us

State of the City, 2004 (Continued) Page 3

Where does this money come from?
The average Palo Alto family in 2000 had a household income of $107,000 and paid a total of
$31,500 in Federal, State and local taxes. The city of Palo Alto received just 3% of these taxes. That
is, we received $1,048 from the average family.

So where does the money come from?

Our top two revenue sources are sales tax and property tax.

Let me talk first about property taxes. Broadly speaking, we receive nearly half our property tax from
commercial properties.

For residential properties, let’s consider two families:
The first is a family that bought a million dollar home last year. Of the $10,000 they pay in property
taxes, the city receives just $950.

The second is a family with the good fortune to have lived in a similar home since 1975. With an
assessed value of $60,000 at that time, under Prop 13, the city receives $99 in property taxes. For
the year. For the family.

So where does the money really come from?
Our largest source of city revenue is sales tax.

We receive $3.7 million from the Stanford Shopping Center. And $2 million from our eight auto
dealerships. Fry’s Electronics, one of our largest retailers, likely provides around $1 million
annually in sales tax. But it’s not just the major retailers that are important to us. We have roughly
2000 retailers and service providers of all types in the city. At the peak, our sales tax revenues were
$25.8 million. This year they are projected as $17.4 million.

This decline reflects more than the Bay Area recession. A decade ago, the Stanford Shopping
Center was pre-eminent in the region, even in the nation. Today, while still successful, it is
challenged by an upgraded Valley Fair and by the new Santana Row with many similar retailers.
Our Fry’s Electronics store is now their oldest facility. Our auto dealerships are under intense
pressure from larger, more modern competitors. We’ve recently lost our Porsche and Nissan
dealerships: one moving to Redwood City; the other going out of business.