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Voter Guide 2006: Measure K: Should Menlo Park levy a utility tax?
• No user would be taxed more than $12,000 per year.

by Rory Brown

Menlo Park's oft-divided political scene has been uncharacteristically quiet regarding Measure K, the utility tax proposed for residences and businesses.

Although Councilman Andy Cohen nearly withdrew his support for the tax, the council voted unanimously to put it on the ballot.

There is no ballot argument or organized opposition to Measure K, as it has support from a wide range of interests in the community, from real estate to labor unions.

Developer David Bohannon II and Councilwoman Kelly Fergusson are the co-chairs of the Yes on K committee.

The two-tiered measure, if approved by a simple majority of voters, would authorize the city to tax water, gas and electric bills up to 3.5 percent; and telephone, cell phone and cable bills up to 2.5 percent.

The tax is expected to garner about $2.5 million a year that would go to the city's general fund to provide general city services.

Police, emergency preparedness, street and storm drain maintenance, libraries, and youth and senior services are examples of city services that would benefit from the tax, according to the city attorney's analysis of the tax measure.

"We continue to struggle as our revenues are not keeping pace with the cost of providing city services," said City Manager David Boesch. "At the moment, we rely on a narrow and shallow tax base. We have a heavy reliance on the top 10 to 20 businesses and the tax dollars they generate."

The city's sales tax revenue ballooned to about $12.5 million during the height of the dot-com boom, and has dropped to $6 million in the past five years.

In the current fiscal year, the city expects to draw $1.85 million from its $21 million of reserves to balance the budget. In a 10-year projection, city staff estimates that revenues would fall short of spending by an average of $2.2 million a year.

If the tax does not pass, Mr. Boesch said, he expects the council will make additional budget cuts and fee increases that were deferred in June.

Among the options are eliminating the city's adult sports programs, raising the Belle Haven child care fees for non-residents, and reducing staff in the city manager's office.

Mr. Boesch said that, to his knowledge, Menlo Park has never levied a utility tax.

If approved, the tax would be reviewed no later than June 2008, and every two years thereafter. Two-thirds of the council — four council members — would have to vote in favor of the tax to keep it active. If the tax does not get a two-thirds council vote, it would expire Dec. 31 of that year.

The council would set the tax rate annually by a simple majority vote. It could decide not to levy the tax or to adopt a tax at any rate up to the limits.

Cap

The tax would have an annual cap of $12,000, meaning any single user — business or residential — would not pay more than $12,000 in taxes on electricity, gas and water.

The cap was one of several reasons Councilman Andy Cohen said he nearly withdrew his support for the tax when the council was on the brink of putting it on the ballot at its August 1 meeting.

He said the cap makes the tax "regressive" as businesses would be spared from paying a proportionally equal share of the tax.

He also said that tax revenues would help cover employee retirement costs — rising costs the city needs to address without taxing residents and businesses.

Council members Lee Duboc and Mickie Winkler said the cap is necessary to prevent a business-backed campaign against the measure.

Mr. Cohen was eventually persuaded to back the utility tax, and voted in favor of putting it on the ballot.

Support

The measure's largest financial supporter is Mr. Bohannon, who has donated $10,000 to the Yes on K committee.

"I'm very aware of the city's budget problems and how that affects the city's ability to conduct business," said Mr. Bohannon. "Having the city be financially healthy is in everyone's best interests — especially the interests of the business community."

The Redwood City-based Matteson Reality Services Inc. has donated $2,000 to the committee.

Measure K has been endorsed by the San Mateo County Central Labor Council, the Service Employees International Union Local 715, and the League of Women Voters of South San Mateo County.

INFORMATION

For more information, including the ballot argument in favor of Measure K, go to SmartVoter.org/ca/sm, click on "Local Measures" and select "Measure K."