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on Mar 8, 2009
In the March 2, 2008 meeting, I believe staff did a very good job proposing detailing Atherton’s financial situation and giving City Council three policy choices for meeting the town’s financial needs moving forward.
At that meeting mid-year budget meeting, I favored option “B” for meeting our current situation which is to reallocate some of the Parcel Tax funds scheduled for Capital Improvements in 2009 to Operating Expenditures.
My understanding of the situation is as follows:
1. Annual Parcel Tax revenue of approximately $1.85 Million will not be down. Property Tax revenue will be down $120,000, sales tax revenue will be down $68,000, and investment income will be down $100,000. The meaningful impacts from today’s economy for Atherton those are our three concerns. Building Permits will be down $500,000, but that department should operate as a separate business unit.
2. On June 6, 2008 staff proposed a budget with $650,000 of the Parcel Tax going to operations and $1,200,000 going to capital improvements. This is in line with allocations of Parcel Tax revenue for the past twenty-five years and how it was presented to the public in the last two Parcel Tax Campaigns.
3. In June 2008 the City Council directed staff to create a budget with 100% of the Parcel Tax going to Capital Improvements. It was a worthy goal, and the attempt to achieve it has made us leaner and more efficient; but we simply can not meet it.
To meet this goal some budget items were reduced way below what was reasonable. For instance in 2008 we spent $527,000 on legal expenditures and but we only budgeted $206,000 for 2009. That includes the City Attorney’s salary, plus outside specialists-not realistic.
At the March 2, 2009 meeting, we were advised that this budget item needs at least $100,000 more. We were also advised that $72,000 per year in annual retire health care costs have not been listed as a budget expense for several years. A net increase of at least $172,000.
During this meeting the Police Department produced nearly $200,000 in budget cuts, most coming from delaying filling a retirement vacancy and assigning those responsibilities, which include Emergency Preparedness, to other officers.
Public Works produced budget cuts of $240,000 from deferring projects. That does not mean they will not get done, just not as fast as we planned. Additional optional projects were presented.
The Building Department cut its budget by $72,000 reducing various line items.
The Big Elephants in the Room:
There are at least three big elephants in the room that are council policy decisions and beyond staff’s ability to budget cut. A fourth is lurking outside.
1. First is dealing with the extra $300,000 per year in illegal Business License Tax revenue that Atherton has been operating with since 2003. The 2003 reengineered collection method raised Business License Tax revenue from $150,000 per year to $450,000 per year. In the Fall of 2007, Interim City Manager Wende Protzman brought this concern to council’s attention and in the Spring of 2008 Interim Finance Director Bill Yoemans again brought it to council’s attention as a potential financial problem.
In 2003 the Business License Tax was re-engineered and began overcharging and double charging residents on construction permits. In December 2008, we went back to the previous method. Had we gone back to the previous method for the 2009 budget, we would have had collected the $150,000 for FY2009; but because we did not deal with this until midway though the fiscal year, we will only collect $25,000 for FY2009.
The current policy decision by the Council is to refund for 2007 & 2008; that could be as much as $680,000 and is reflected in the 2009 Mid-year budget adjustment as a worst case scenario.
Atherton’s unrestricted reserves have grown over the past few years due to Building Department surpluses and Business License Tax (BLT) Revenue. It makes sense to me to pay the BLT refunds from those reserves and not reduce staff and services.
2. A second elephant in the room is the lost investment income, which went into the Operating Budget. Last Spring Interim Finance Director Bill Yoemans advised the council that surpluses from the Building Department dating back to 2001 had been left in the General Reserves. At present the number seems to be approximately $3 Million dollars; I think it could go higher.
State law prohibits cities from using Building Department surpluses for other uses. Those funds had been earmarked for the Building Department’s share of a new building and a reserve for future building inspections in lean years. I would favor a plan to tap into some of the $767,000 in reserves for future building during this time.
The transfer of $3Milion in Building Department Funds out of the General Account reduces the town’s investment income going into the operating budget by $100,000 a year.
3. A third elephant that may enter the room is a possible refund for overcharging in Road-Impact fees. Road Impact Fees were increased by 40% in 2007 by a 3-2 council vote, without a study being done to justify that increase. A study is now underway, which may or may not support the increase. Possible refunds are not factored into budget adjustments. Menlo School recently paid over $100,000 in Road Impact Fees for a new Gym it is building. I believe there is a possibility that refunds may be due from the Road Impact Fee.
4. A fourth elephant in the room is that revenue projections for Building Permits for 2009 will be down by $500,000 from 2008 to 2009. In 2006 following the Phase 1, 2, & 3 Audits, council changed policy and added a permit technician to the Building Department staff, a contract code enforcement officer to handle construction parking was also added to that budget. I have advocated since 2006 that an independent consultant’s review of the former finance director’s audits should have been commissioned. This would allow council to politically review some of the policy decision made following the audits.
Since May 2000 when resolution 00-17 was passed, the town has been putting aside $200,000 from building department revenue towards a new building and $150,000 a year towards a building inspection reserve. Those items can be stopped, cutting $350,000 from the building department’s 2009 expenditures.
I do want to praise the City Manager, Department Heads, and Staff for again paring down their budgets and providing a detailed report on council policy issues to address the budget shortfall.
Marsala is a bag of wind just like all the other counsel members aka coffee clatch. Let the Sheriff's Office take over services and they will have more money than they could dream of! 4.3 million dollars to be specific. Freezing positions is a joke. Ice the small little police department and be fiscally responsible...that is, after all, what you are supposed to be doing in the first place.
Go get 'em Charlie
I hope you run over Kathy McKeithen like a bulldozer.
She has no right to humiliate Town employees with edicts like "you guys just don't get it".
Its time that there were more on the council like you and elizibeth.
I can do the math. During the next election cycle I'll be voting for you, and whomever is on your team.
Keep up the good work.
What's been going on in Town hall is criminal. Plain and simple. Charles has stood up to improper financial practices all the while Carlson and McKeithen sat back and nodded their heads in approval.
Now its McKeithen and Carlson who are mum. Remember who was on the audit committee and the finance committee when that bully who got shown the door was in charge of the money.
I say its time to throw the hoodlums out and I don't mean Charles and Elizabeth.
Kathy might be able to play on her attorney turned housewife credentials and plead ignorance. But Jerry Carlson. That guy was a controller for HP so by goodness he should have been able to figure things out.
I say dump Jerry, he's got no reason being Mayor.
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