Viewpoint - March 4, 2009

Editorial: Atherton on the budget ropes

Like many communities, Atherton is facing a major shortfall in this year's budget. But while the economic downturn is partially at fault, Atherton has only itself to blame for a large part of its expected $2 million deficit.

It all started in 2003 when the council, on the advice of its finance director, decided to charge contractors and subcontractors a business license fee based on .36 percent of 1 percent of the project's value, rather than the annual flat fee assessed in the prior years. While it was easy for the town to collect $250 from each general contractor, keeping track of numerous subcontractors was not.

The idea was to make up the revenue the town thought it was losing to hundreds of subcontractors who some officials said were side-stepping their $150 annual license fee.

The argument was convincing, and the City Council went along, voting unanimously on March 19, 2003, with the approval of its then city attorney, Marc Hynes, to impose the recommended new business license fee. The new charges were strongly opposed by contractors working in Atherton, who said the new fee overestimated the number of subcontractors on expensive jobs. They met with Atherton officials in an effort to change the new assessment plan, but the town held fast and revenues from the business license tax jumped from $150,000 to $450,000 annually.

The system remained in place although the town's resolve wavered last year, when more and more protests were lodged against the tax. Sacred Heart School, for example, said it was charged $55,000 in business license fees when it was building a new gym. Other residents echoed the private school's story, saying they had paid far too much for simple remodeling jobs.

Council member Charles Marsala took up the cause, and for the past year, has continued to press his fellow council members to consider changing the tax. Finally, under the threat of legal action, the city hired a consultant to review the business license tax system for contractors, and although the resulting advice was heard in a closed session, the council voted in December of last year to go back to its old method of flat fees and offer refunds for fees paid in the past two years.

This isn't the first time Atherton has had to refund money to irate and potentially litigious builders. In September 2006, the council rescinded the controversial construction off-haul fee a year after it was imposed, and announced it would refund the approximately $350,000, plus interest, that had been collected. Opponents of the off-haul fee, a charge on excavated dirt carted off building sites, said that it was an illegal tax, not a reasonable fee for road damage caused by heavy trucks.

In the next fiscal year, Atherton expects a negative swing of $1.1 million from the business license fiasco, based on $425,000 in lost income and an estimated $680,000 in refunds that will be paid to contractors who were overcharged during the last two years. No refunds will be given for the higher fees paid from 2003 to 2005.

Even in a good budget year, Atherton cannot afford to pay for a $1.1 million mistake that was approved on what appears to be terrible advice from its finance director and city attorney. Everyone is entitled to a bad decision now and then, but now it appears that a consultant's analysis of the new business license fee should have been commissioned before it was assessed, not five years later, after the damage had been done.


Posted by marc, a resident of another community
on Mar 11, 2009 at 7:06 pm

Go ahead Tom, blame the last guy to leave town hall.

I think I'll start reading the palo alto daily. Although they have an anti-government slant, at least they do their homework before writing an editorial.

Talk about lazy journalism........

Posted by robert, a resident of Atherton: Lloyden Park
on Mar 12, 2009 at 12:58 pm

Well at least Tom knows what side his bread is buttered on.

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I don't own a construction business. I don't sell houses in Atherton, I don't buy advertising space in your newspaper.

From now on I'm not even one of those who you need bother to try and influence. That's because your newspaper is going straight from my driveway to the bottom of my cat's litter box.

Posted by alfred, a resident of Portola Valley: Portola Valley Ranch
on Mar 12, 2009 at 3:04 pm

Give the guy a break

He's got a business to run. If he doesn't sell advertising space he's out of a job.

If the Almanac goes broke, his only option really is to start a blog and hope he generates some web traffic.

Posted by Thelma, a resident of Atherton: other
on Mar 12, 2009 at 5:28 pm

Alfred--Its not just another" business to run" for Mr. Gibboney--it's the "forth estate" and crucial to transparency in our community--I believe the issue here is-- How can Tom indorse Elizebeth Lewis for council and dismiss her enormous listed campaign contributions from develpement and realestate---and then run her paid add (with her name on it--see Amanac Febuary 11th top of page 38)-as owner and listing agent for University Properties???---all the while printing her denials of any ties to developement????? I Know he's busy and I know he dosen't want to see it cuz it inconveniant but but it is unfortunate.

Posted by randy, a resident of Atherton: other
on Mar 13, 2009 at 7:19 am

[Removed due to excessive posts by the same poster and disrespectful comments]

Posted by rebekkah, a resident of Atherton: Lloyden Park
on Mar 13, 2009 at 7:52 am

Atherton's is no different from any other upper crust enclave.

Smile all the while you're stabbing your neighbor, business associate, lover, spouse in the back.

We are far to genteel to want people to know what's really going on.

Sorry, but further commenting on this topic has been closed.