Send this story Print this story

Adjust text size

Menlo Park faces falling revenues

by Sean Howell

City of Menlo Park revenues have sloughed off during the economic recession even more than initially anticipated, a recent budget report revealed.

According to an un-audited report provided by the city for the fiscal year that ended June 30, the city's revenue dropped by $2.5 million, or 6.6 percent, from the 2007-08 fiscal year. Falling utility users' tax revenues accounted for $489,000 of that loss, after the City Council lowered the tax rate.

Taxes associated with retail business and hotel occupancy fell by 11 percent each from the prior fiscal year.

Revenue from building permit fees also dropped precipitously, reflecting a slide in the cumulative value of construction projects in the city. So did business license fees revenue. Combined, revenue from those fees dropped 29 percent (they are lumped together in the budget).

The numbers would seem to indicate that local residents and people who patronize local businesses cut back as the economy floundered, and were still tightening their belts in the first half of the 2009 calendar year.

Combined, revenues from all three categories — sales tax, transient occupancy tax, and fees for licenses and permits — totaled $2.04 million below what the city had initially projected at the end of the fiscal year, and $1.21 million below the city's mid-year projection, adjusted to take into account the effects of the economic recession.

While the city had at mid-year anticipated about a $340,000 jump in hotel tax revenues over the prior year with the opening of Rosewood Sand Hill, revenues from that tax actually fell by about $120,000, despite the new hotel.

In making its revenue estimates, the city continues to rely on a 2006 report that estimated it would receive $1 million per year in hotel tax revenues from Rosewood Sand Hill.

Sales tax revenues and fees for business license and building permits have continued to slide in the first quarter of the 2009-10 fiscal year, compared with the first quarter of the 2008-09 fiscal year, according to a separate report.

Expenses rising

Meanwhile, expenditures rose by about $950,000 over the prior year — and would have risen more, had the city not reduced its transfer to the capital improvement fund by $800,000. Police spending jumped 7 percent over the prior year; spending in administrative services increased by 13 percent.

According to the report, the city's general fund finished the 2008-09 fiscal year about $570,000 in the red. The city considers more than half of that — $360,000 — to be a one-time, "below-the-line" expense on a long-term planning project in the city center.

Before a recently discovered $400,000 accounting error, the city had balanced its budget for the current (2009-10) fiscal year.

With city expenses projected to rise at a faster rate than revenues in the long-term, city management is working to make structural changes to the organization as employees resign and retire in order to cut costs.