The council had hoped to cover some of the red ink in future budgets with income from the tax, which is assessed on visitors who stay overnight in a hotel or motel room. If passed by city voters, the heftier tax was expected to produce an additional $500,000, which would have been a big help in closing the deficit. Now, with that choice off the table, the council's option to raise revenue — increasing the utility users tax, which would impact all residents, not just visitors — is an idea that is not popular with most council members in an election year.
Mr. Boyle was no doubt swayed by testimony from managers of the Stanford Park and Rosewood hotels, who registered strong opposition to increasing the tax from 10 to 12 percent. They said it would hit particularly hard during the economic downturn. Stanford Park manager Glen Alden said business is down more than 20 percent, leading to workforce cuts of 19 percent since 2007. Speaking for the Rosewood, which just opened last year, Michael Casey also cautioned the council about approving the tax, saying, "Raising it is a risk," not only to the hotels but to other Menlo Park businesses that benefit from the trade the hotels bring to town.
So now that the hotel tax is off the table for at least three years, it is time for the council to tell city manager Glen Rojas to bring them a balanced budget, even if it means reducing staff positions or, heaven forbid, doing without two or three police officers.
If Mayor Rich Cline and Councilman Heyward Robinson, who both are running for re-election, want to score points with Menlo Park voters, they need to give up any thoughts of raising taxes and focus on bringing expenses into line. Local residents, like many others on the Peninsula, are suffering from the slow economy and are not in the mood to vote yes on a tax increase, even if it is imposed on visitors to the city. And although the council can raise the utility tax on its own without approval of the voters, such a choice would not be wise at this time.
And if the structural deficit of about $500,000 wasn't bad enough, the city finance director said late last week that sales tax collections for the first six months of the year could be as much as $2 million below the estimate, although she hopes the calculation is a mistake. If the council is forced to cover such a huge shortfall without borrowing from reserves or adding new taxes, some staff members will have to be let go.
The upshot for Menlo Park: Despite the possible bad economic news, the city should be able to trim its sails and balance its budget. With more than $25 million in reserves, it is not time to push the panic button. Nevertheless, the council must cope with some hard choices in the days ahead.