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Menlo Park utility tax -- how much is enough?

Original post made by Neighbor, Hillview Middle School, on Dec 1, 2006

With about 11,000 people voting in Menlo Park, the Utility User's Tax passed by just 45 votes or less than one half of one percent.

Now the new city council has the OPTION of imposing up to a 2.5% tax on telephone bills, cable TV, cell phones, and internet service and a 3.5% tax on gas water and electric.

A press release from the city finance director on the day the votes were counted seemed to assume that the council would levy the full amount of the tax.

Does anyone know how much money the new tax will raise? I have heard projections from $2.5M all the way up to $4M.

Does anyone know how much money we need? We initially heard $1.85M in 2007 and then heard that we had a $1.3M surplus in 2006 and the potential to break even in 2007.

Is there a plan for how the additional money will be spent?

Should there be a public debate on this topic before the new tax is imposed?

Given the 50/50 voter split on this issue, perhaps the incoming council can set a new tone of public input and compromise on this issue.

Other opinions would be welcome.

Comments (11)

Posted by Rory Brown
Almanac staff writer
on Dec 1, 2006 at 10:56 am

Rory Brown is a registered user.

The utility users tax actually passed by 65 votes, according to the latest election results. The tax, at the full rate, is estimated to add $2.5 million a year to the city's coffers.

It isn't clear how much revenue the city needs to cover its costs, but the common assumption among council members and city staff is that a streak of service cuts and fee increases will end thanks to the tax.

This past fiscal year, the council fell $1.85 million short of covering city costs, and pulled the money from the city's reserves.

The new council is tentatively scheduled to discuss the tax at its Dec. 19 meeting.

Here's a link to the Almanac story after the tax was approved by the council:

Web Link

Posted by new guy
a resident of Menlo Park: Downtown
on Dec 2, 2006 at 8:21 am

Its always interesting to see how people actually vote to "tax themselves". One should really look at their income BEFORE taxes to see how much is simply going away to someplace to be spent. Yes, I understand the argument politicians use that they will have to cut police and fire staff, but that never happens, ever. Do you ever ask what you are getting for your dollar? The streets have potholes, homeless people, litter. I see a police officer go by somewhere in a car once a week at best.

Also, has there been any discussion on how much (read: who will get a cut) from the collection of this tax? All I see is that, if enacted, our city will ask the utility companies doing business here to "impose" the tax on us for them. Is it really that easy? (Don't we see the exact opposite argument everytime any alternative tax structure(s) is ever discussed.

Cell phone tax: how are you actually going to make sure people who live in Menlo Park pay for that one? There is no physical location for phone numbers of cell phones. TIP: change the address to somewhere other than Menlo Park (a place with no util. tax) and pay the bill online, or over the phone.

Cable tax: does this include satellite? If it does, you are imposing a tax on people who do not use ANY city services or resources, other than for the install person's one visit via city roads by a van, or the air above the tiny dish on their houses or apartments. If you need my money put a $2 dollar fee/tax on installation to cover the driving over a Menlo Park road.

What did I forget? Oh yes, energy taxes. Lets have PGE (known crooks) impose yet another tax on us. Who is going to make sure that THOSE numbers add up. Ah, only 2.5% on my bill, doesn't sound like much to little me, but OH, the guy who is trying to run a business in our town, an actual independent one, that we ALL LOVE AND ADORE AND CLAIM THAT IS ALL WE WANT IN OUR TOWN, etc. That guy/gal is going to get socked big time. Perfect. Lets start begging Starbucks now to simply open up on the entire street. Hey at least that would get us on the news.

Ok great, think about it, or don't, it doesn't matter to you, RIGHT?

Posted by Financier
a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle
on Dec 2, 2006 at 9:08 am

Neighbor writes: "Does anyone know how much money we need? We initially heard $1.85M in 2007 and then heard that we had a $1.3M surplus in 2006 and the potential to break even in 2007."

Rory Brown answered the first question noting that the current year budget (June '06 - June '07) "transfers" $1.85M from "savings" to operating to cover the yearly operating shortfall.

The $1.3M "surplus" was from ('05 - '06) and it comes with two notes.
1.) the '05-'06 budget was a one-time budget that consciously did not include the usual amounts for capital maintenance, and the "surplus" was from non-recurring savings that came mostly ($900k I think) from the fact that city failed to fill personnel vacancies they will eventually be filled. There were no recurring "structural" savings. The non-recurring savings was also politicized in the middle of an election. (BTW, in '05-06 once again, sales tax revenues dropped, so the only "structural" news was declining revenue)

Menlo Park has a "structural" deficit. Meaning when the city factors in a reasonable yearly amount of money it needs to spend on capital maintenance (police cars, computers, road repair, storm drain repair, facility repair) its operating revenue is short of expenditures, on the order of $2m/year.

There is more structural bad news on the horizon. There will be an increase in the future in the amount the city has to pay to fund employee pension costs. So the yearly operating expenses are expected to climb again. That increase is recurring.

"Neighbor" also writes: Should there be a public debate on this topic before the new tax is imposed? ... Given the 50/50 voter split on this issue, perhaps the incoming council can set a new tone of public input and compromise on this issue.

In a democracy, neighbor, voting *IS* "the debate." The tax won. End of story. Surely no-one is suggesting we "compromise" the results of the city council elections, by letting Vince Bressler sit half the time and John Boyle sit half the time because they came so close its hard to tell who really won the third seat.

I appreciate that you are against the tax. I do hope you honor votes, because there has been an integrity problem in Menlo Park with honoring majorities, starting with Measure T and the child care center. This is absolutely destructive to democracy, when voting out comes are not universally acknowledged, even by those who wanted different outcomes.

On the other hand, you do make a good point when you point out that the community is really ambivalent about the tax, but many of us feel that the ambivalence reflects a lot things, including voter uncertainty, like yours, about the need for the tax, giving the conflicting information being produced by council trying to get re-elected.

Me personally, I don't particularly favor "general" taxes, and prefer instead directed "fee for service" or specific bond measure (road and storm drains), (actually I think in retrospective that Prop 13 is not such a great idea) but I do feel that Menlo Park has cut as deep as it can, it cannot balance the structurual deficit by cutting expenses anymore. Revenues must increase, and dramatically, in one way or another.

Posted by Anna
a resident of Menlo Park: University Heights
on Dec 2, 2006 at 11:57 am

Almanac reporter Rory Brown writes: "It isn't clear how much revenue the city needs to cover its costs, but the common assumption among council members and city staff is ..."

Does anyone else find that information unsettling? WHY isn't it clear? Doesn't the city have a finance director who can produce figures and reasonable projections about the budget so that elected officials don't have to base their decisions on faith?

Posted by Financier
a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle
on Dec 2, 2006 at 7:16 pm

Yes. The city has both. There are several reasons for the seeming uncertainty.

1.) The prior council did, in my opinion, frequently distort, withhold, and mis-state financial facts to justify its agenda or enhance its image. That is too bad. It undermines the entire trust in democracy and city government.

The known facts are not in dispute, though they may not be well known outside of the city and the usual insiders. Audited city financial facts and budgets appear here Web Link

What these facts mean is a subject of intense political debate.

2.) It's not unusual for cities to "defer" known recurring costs, such as some capital maintenance, and items like future pension costs. "Deferring" is a euphemism for "ignoring them for now." Given this, there is debate among reasonable persons about when and whether *any* budget is structurally balanced, because an argument can probably be made that some form of recurring cost is always being deferred, and will eventually have to be paid.

3.)There are actual policy choices about how much capital maintenance to set aside each year for road repairs, and storm drains, and future workers pension costs, and whether or not full monies are set aside aside or some of the monies are set aside determines the quality or "level of service" of roads, storm drains, police cars, etc.

As a matter of policy, Menlo Park might choose to have a crummy planning deparment but an outstanding gymnastics program, and that will impact how much it spends. So costs reflect political policy, and there is some variability in policy.

But the facts of what Menlo Park is spending, what the revenue is, what the cost recovery structure is, and how much it would need were it to maintain X service or facility at Y level is completely known to the city.

Posted by Katie
a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle
on Dec 3, 2006 at 10:48 pm

To add to the information for original poster "Neighbor," there was a lot of public debate and outreach from mid-2005 through the election in the form of "your city/your decision" budget outreach process. This community driven budget process invited all residents to give input on how they wanted to see the budget balanced and if they felt a tax such as a utility user tax was one of the answers. This input was given in both written/mail-in/web surveys in fall of 2005. Then in early 2006, workshops were held in three locations in Menlo Park (Belle Haven, Burgess Rec, and Sharon Heights) and all residents were invited to give further input on cuts, fees, and taxes. Overwhelmingly when presented with the budget as a whole, residents supported a utility users tax. That process is what promted the council to agree to place it on the ballot this fall.

It isn't great fun to have new taxes imposed, but on this one, it was supported by nearly everyone who chose to participate in the very public process and took the time to educate themselves on the financial picture of the city.

Posted by taxed
a resident of Menlo Park: Stanford Hills
on Dec 4, 2006 at 9:41 am

It seemed that the tax tolerance consensus at the workshops was 1%, not 2.5%

Posted by ElectionWatcher
a resident of Menlo Park: Sharon Heights
on Dec 6, 2006 at 12:10 am

A couple of comments on the utility tax measure:
The measure just gives the council the AUTHORITY to impose a tax up to the stated limits - it does NOT, by itself, impose the tax. So the new council can conceivably impose NO tax if it wishes to. And it certainly seems that the council would be wise to back off from imposing the maximum tax, given that:

1) The vote WAS a razor-thin passage at about 50.5%, despite no public opposition to the measure (to put that into perspective: if just 30 odd people who voted “yes” had voted “no” voted differently, it would have failed).
2) As Financier noted, the previous council majority did certainly appear to "frequently distort, withhold, and mis-state financial facts to justify its agenda or enhance its image" so any of the numbers that have been touted thus far – either on the revenue or the spending side - should be looked at with a healthy dose of skepticism.
3) The Almanac revealed back in the spring that $2 million of the projected $2.9 million budget deficit was due to a sudden (and hidden) increase in spending on "infrastructure maintenance." So essentially you are being asked to pay for road repairs via a tax on your utility bills - that doesn't make much sense in my opinion.
And, oh, and by the way, the Almanac also revealed that that increase in infrastructure maintenance wasn't pointed out in the Your City/Your Decision documents, so you never had a say if that increase was OK with you or not.

A final comment regarding the entire Your City/Your Decision process - that whole process was in my humble opinion a farce that was used solely for political cover for the council majority to cut what and where they wanted to - if you look at the public responses versus the implemented actions, there's little, if any, correlation between the two. For instance, the biggest savings (at least on paper) was with privatizing the pool and that was certainly something NOT included in the Your City/Your Decision process.

Posted by Anna
a resident of Menlo Park: University Heights
on Dec 6, 2006 at 10:39 am

I've long been convinced that the "YourCity/Your Decision" process was exactly what ElectionWatcher called it: a farce. And one of the negative results of it was that the now blessedly "former" city council majority distorted one of its conclusions to justify giving away operation of the taxpayer-funded, multi-million-dollar aquatics center. "YourCity" participants had said that, if budget cuts had to be made, the swimming program was the place to start (I think I'm remembering this correctly; if the swimming program wasn't at the very top of the cost-cutting list, it was near). Within four weeks of when Tim Sheeper stepped up and proposed taking over the pools, the council majority allowed him to do so, ignoring requests by now Mayor Fergusson and now Vice Mayor Cohen to slow down and study the issue seriously before making such an important decision. To justify the privatization, the majority distorted the "YourCity" conclusion, which had nothing to do with privatization, but everything to do with cutting costs of the program, if necessary. That could have been done through fee increases (which the public is now paying anyway under Sheeper's program) or through other methods that the majority refused to explore.

We can speculate all we want about why the utility tax passed by such a slim margin. My guess is that the council majority's foot-loose-and-fancy-free interpretation of the city' budget problems, the unclear reporting of the city's financial situation by the finance department, and the amazing "discovery" of $1 million in the city's coffers a short time ago contributed to the voters' suspicions that they may not need to pay more taxes to keep the city financially sound.

Posted by Political Animal
a resident of another community
on Dec 7, 2006 at 4:41 pm

I don't think the utility tax rate should be set based on political considerations. The council should have an open debate about the level of services Menlo Park residents want to receive and then budget accordingly. Those who want a low tax rate should also identify the services that should be cut to balance the budget. Do you want to cut an officer from the police force? Do you want to close a library? Do you want to let trash accumulate in the park for a few days longer? What are you willing to live without in order to avoid paying a few dollars more on your utility bills?

If the council wants to play politics, frankly they'd be wise to set the rate to maximum and decide later they don't need the money rather than set a rate that's too low and be forced to raise it later. A budget surplus is always a good political problem to have.x

Posted by new guy
a resident of Menlo Park: Downtown
on Dec 9, 2006 at 9:00 am

OK, I get it. We want to pay more for better service. I am probably not far off saying that most people like better service than worse service. So "what is better service!", and why do we need better service?

I read that the town will be installing automated red light traffic ticket machines (50% of the money goes to MP). So what will the officers do now that they won't have to write traffic tickets? Oh wait, they were not doing that anyways.

My point earlier, was "what does MP get for our money?"

Sure, I will only be taxed maybe about and extra $100-$200 a year with this tax, and how I handle that is simply not spending the 100-200 on something else. Oh wait, here is a concept, if you dont have it, you cannot spend it.

If I really thought that that extra money would buy me a better/cleaner/safer town. I would pay more, lots more, no question about it.

The real impact we dont want to discuss here is who pays the most on this tax. Yes, I read that there are caps, but once again, it is the small business who sees the increase hit the hardest. As we watch PA expand and update its retail spaces, we can all watch the empty spaces grow in our town. In the end, we will have to fight (read: pay) to get these businesses back, and it will cost alot more than what we will get out of them in extra taxes in the short term. Hey thats OK, i guess, lets turn into an Atherton. Most of us will be driving into PA to shop anyways. (but then what will we need all the SERVICES we a are getting, we can move to an Atherton model with a small number of services and city employees, and all be happy)

Think about it, or don't, it doesn't matter right now.

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