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Hotel tax hike heading to Menlo Park ballot

by Sandy Brundage

"If you hear nothing else tonight — your city budget is balanced," new City Manager Alex McIntyre told the council on May 22. The $65 million spending plan for fiscal year 2012-13 maintains quality of life and services, he said, and even has a small $296,000 surplus for Menlo Park's general fund despite the loss of redevelopment agency funding.

That balance depends on increasing the hotel guest tax rate from 10 percent to 12 percent, however, which means voters get the final say. All five Menlo Park council members agreed to put the "transient occupancy tax" (TOT) on the November ballot. According to staff calculations, passing the higher tax would raise more than $560,000 annually for the city, and bring local rates in line with neighboring cities, including Palo Alto and Redwood City.

But the proposed budget avoids increasing another tax that already has the voter stamp of approval. The utility users tax (UUT) remains at 1 percent, a reduced rate passed by the 2007 city council after voters approved a higher rate in 2006. Staff argued that since the budget doesn't draw on general fund reserves, and raising the tax would require substantial administrative time, there's no reason to change it right now. Given that the higher 3.5 percent rate would add about $2.3 million in annual revenue, at least one council member — Kelly Fergusson — found staff's reasoning unconvincing. The UUT will return to the council for reconsideration in October.

No discussion of Menlo Park's budget would be complete without mention of Facebook, the company that "saved us," according to Mr. McIntyre. Thanks to the city's developer agreement with the social networking giant, Menlo Park will see a bump of at least $800,000 in annual revenue.

Between Facebook and the anticipated hike to the hotel guest tax, the budget avoids service reductions for the next fiscal year. It does propose some cost-cutting measures such as eliminating paper council agenda packets to save $10,000 a year, sharing vehicle and median maintenance services with other city entities, and delaying the replacement of $100,000 worth of police cars for one year.

The budget returns to the council for approval on June 12.