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Menlo Park: Big sales tax drop likely due to error, finance director says

by Renee Batti

The city's on-paper decline of sales tax revenue of nearly $2 million in fiscal year 2009-10 is quite possibly the result of errors, not reality, according to Carol Augustine, Menlo Park's finance director.

Ms. Augustine told The Almanac that the city has asked the California State Board of Equalization to review the records of "two of our top 25 businesses" because their sales tax contributions to the city over a six-month period "fell far short of our expectation."

One business contributed no sales tax revenue in the quarter that ended March 31, and the other produced unusually small amounts during that quarter and the quarter ending Dec. 31, 2009, she said.

Ms. Augustine told the City Council at its July 27 meeting that she suspects the low figures represent "an error or misstatement" on the part of the businesses.

Sales tax revenue in fiscal year 2008-09 was nearly $6.9 million, according to a chart presented to the council as part of a quarterly financial review. The review shows that sales tax revenue in 2009-10 has so far come in at just under $5 million, although the books have not yet been closed.

Ms. Augustine said she is hopeful that the Board of Equalization review will result in the 2009-10 figure increasing by about $700,000.

Even if that happens, the city's sales tax revenue will be $1.2 million less in 2009-10 than it was in the prior fiscal year.

The businesses have 30 days to respond to Board of Equalization inquiries, and Ms. Augustine said she hopes the questions are resolved before the annual audit of the city's budget begins in October.

While she considers it likely that the figures are in error, Ms. Augustine said she doesn't want to insinuate "that there are incompetent people running our businesses — it's just not so." Instead, she said, such errors could be the results of staff turnover, or bookkeeping done in headquarters that are removed from the local business branches.

"But that's the stuff the (Board of Equalization) is made to deal with, so we let them take care of it," she said.