Poor little rich town: What does Atherton need a $1.8 million parcel tax for? Poor little rich town: What does Atherton need a $1.8 million parcel tax for? (June 01, 2005)

By Andrea Gemmet

Almanac Staff Writer

Forbes recently named Atherton the wealthiest city in America, based on the enormous amount of money residents shell out to buy a home. So it can be hard to fathom why town officials are having trouble convincing Athertonians to fork over an average of $750 a year to keep police on the streets, pave potholes and unclog storm drains.

Parcel taxes -- annual levees that are tacked onto an owner's property tax bill -- are most often used to raise money for special districts like schools or fire departments. Since 1980, the town of Atherton has relied on a parcel tax to fund basic services and capital improvements. With few exceptions, a two-thirds majority of voters have agreed to be taxed, approving new four-year parcel tax measures.

This year, the pressure is on. After Atherton voters shocked town officials by failing to pass a parcel tax renewal measure on the November 2004 ballot, the Atherton City Council spent countless hours analyzing alternative plans.

Ultimately, council members decided that the tax-deductible parcel tax was the most equitable, least offensive and easiest to administer option available to them.

The current parcel tax measure is set to expire June 30, and a five-year renewal, Measure W, is going before voters at a special June 7 election.

Measure W is identical to the existing parcel tax in all ways but one -- the council opted for a five-year term. The longer term is largely due to Atherton's financial planning process. Like many local cities and towns, Atherton uses a five-year financial forecast for long-range budget planning.

For the majority of Atherton residents, who own homes on lots of a half-acre to just under two acres, the parcel tax costs $750 a year.

"It costs less than a cup of Starbucks coffee a day. And it's tax deductible," says Marion Oster, a town volunteer and co-chair of the Yes on Measure W campaign.

Of course not every homeowner is charged $750. Homes on smaller lots pay from $450 to $570 a year, and homes on lots that are two acres or larger are charged $960. The Menlo Circus Club, as a private club, pays $10,000 annually in parcel taxes.

Atherton officials say they rely on the parcel tax because, with no commercial zoning, the town receives virtually no sales tax revenues, and because the state has been diverting increasing amounts of property tax revenues to shore up its own budget.

Although expenses in Atherton are going up -- particularly employee-related costs such as contributions to state pension plans and health insurance -- the council opted to freeze parcel tax rates. Instead, town officials expect to make ends meet through a combination of belt-tightening measures and an increase in some construction fees to pay for wear and tear on Atherton roads.

Since 2002, the number of town employees has gone from nearly 55 full-time positions down to the current 49, all through attrition, says City Manager Jim Robinson. The city clerk and assistant finance director jobs have been reduced from full time to half time, he says.

"We're able to cope with essentials, but obviously it requires a greater effort," Mr. Robinson says. "It's keeping us busy, that's for sure. We're doing as much, but with fewer people."

A key concern is the ability to continue funding capital improvement projects. Over the past four years, between 40 and 50 percent of parcel tax revenues have gone into Atherton's capital improvement program, Mr. Robinson says.

Overall, the $1.8 million generated annually by the parcel tax makes up about 14 percent of Atherton's total budget of $12.9 million. The total includes both the operating expense budget and the capital improvement program budget.

"The parcel tax is a very, very significant source of (the capital improvement budget)," he says. "You can defer some things, but with capital improvements the longer you defer, the costs increase exponentially, particularly with roads and storm drains."

Town staff members are preparing a budget proposal for the fiscal year beginning July 1 based on the assumption that the parcel tax will pass, says Mr. Robinson.

"If the parcel tax is unsuccessful, we can go back and look at capital improvements and operating expenses. It didn't seem to make much sense to prepare two budgets at this point," he says.

Mr. Robinson declined to specify exactly where operating expenses might be cut, but it's clear that the lion's share would likely come out of the Atherton Police Department, which is supported by 51 percent of the annual operating budget.

While proponents point to the need to keep the police department running effectively and efficiently, a number of critics of the parcel tax have said that having its own police department is a luxury Atherton could afford to do without. Nearby Woodside and Portola Valley contract with the San Mateo County Sheriff's Office for police services, rather than operate their own police departments.

Supporters of the police department claim that the high level of service enjoyed by the Atherton residents is one of the reasons property values are so high.

There's no organized opposition to the parcel tax, which is one of the reasons Atherton officials were so flummoxed when just under 57 percent of voters were in favor of renewing the parcel tax in November, well under the two-thirds majority needed to pass. Prior to that vote, the parcel tax had failed in 1999 and 2000, when disgruntled -- and organized -- residents sent a clear message that they didn't like the way the town was being managed.

The town has cleaned up its act since then, and successfully passed a parcel tax measure in 2001. Since then, Atherton has received clean bills of financial health from outside auditors, and minor scandals involving town staff haven't been decorating the front pages of local newspapers as they had in the late 1990s.

City Council members were so confident that all was well in their tiny hamlet last fall that they figured no one would have to do any campaigning -- a renewal of the parcel tax measure would simply pass on its own merits when it appeared on the November ballot.

That's not a mistake that parcel tax supporters plan to make twice, as anyone who has passed through Atherton recently can attest to. Bright orange Yes on W signs have popped up like mushrooms all over town.

The campaign has raised over $17,000 and spent it on mailers, newspaper ads, yard signs and those distinctive orange "W in for Atherton" T-shirts. Volunteer precinct captains have been ringing doorbells and sending out postcards.

Philip Lively, the campaign co-chair, is optimistic that volunteers are getting the word out. When it comes to explaining why the renewal measure didn't pass last November, a number of factors have been pointed to -- the lack of campaigning and voter confusion chief among them. Mr. Lively says his group didn't bother to focus on the concerns of opponents.

"That's the part we skipped over," he says.

He suspects that the parcel tax's placement on the ballot -- it was the very last item on a huge general election ballot -- had more to do with its failure than anything else.

The Atherton Civic Interest League conducted a survey to find out why people voted against the parcel tax, and the reasons were all over the map.

Of the 30 replies the ACIL received, the largest number had to do with the police department, saying the police force was too large and the department was over-funded, according to ACIL director Sam Goodman.

Others had to do with the rates for small-lot owners, the lack of a senior citizen exemption, and the assumption that if the tax was so important, someone would have campaigned for it, he says. One new resident cited disappointment with Selby Lane School as a reason.

Meanwhile, volunteers who have been campaigning for the parcel tax said at a recent meeting that they have received mostly positive responses from people they've talked to. They rely on sending out mailers and walking neighborhoods, rather than running the typical campaign phone banks in order to avoid irritating people who don't want to be disturbed by phone calls in the evening.

Volunteer Jack Ringham says rather than opposition, "I've run into more people who don't know beans about it."

Door-to-door precinct walking can be a bit tricky in neighborhoods full of gated estates, but volunteer Elizabeth Lewis says the bicycles she and her husband rode on a recent Sunday afternoon made short work of the long driveways. The biggest setback has been the number of people who aren't home or won't answer their doors, campaign workers say.

Mr. Lively says he's developed a technique of ringing doorbells and backing up 10 feet, so people peering through the peephole get an eyeful of his bright orange shirt.

"I get the biggest smiles when people see this shirt," he says.

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