Menlo's sales tax revenues keep dropping Menlo's sales tax revenues keep dropping (April 03, 2002)

**Fourth-quarter 2001 down 43 percent from 2000.

Menlo Park's sales tax revenues dropped 43 percent in the fourth quarter of 2001, compared with the same three-month period the year before, according to the city's finance department. The third quarter had experienced a slightly smaller drop of 36.1 percent from 2000 to 2001.

The city will receive $1,784,713 in sales tax revenue from October, November and December of 2001 _ $1,346,078 less than the same months in 2000.

The city closed 2001 with $9 million in sales tax revenue for the year. That was about $2 million less than in 2000, and about $700,000 more than in 1999, said Finance Director Uma Chokkalingam.

The year 2000 was an anomaly, netting the city its highest revenues (from all sources) in at least 14 years, according to city staff.

Menlo Park receives 1 percent of sales tax collected in the city, according to Ms. Chokkalingam. Sales tax revenue contributes about one-third, the single largest share, to the city's general fund revenues, according to the 2001-2002 budget.

City staff had already anticipated a slowdown after 2000, and after instituting a 5 percent spending cut for all city departments, no further cuts in service are needed this fiscal year, said Ms. Chokkalingam.

As for next fiscal year, which begins July 1, city staff will present the city council with various options to keep spending down, she said.

Fourth-quarter revenues were down in all sales categories city-wide in 2001 compared with 2000, with "business-to-business" sales experiencing the biggest drop at 62.8 percent. "General retail" and "construction" posted losses of 34.7 and 30.1 percent, respectively.

Though the area east of Middlefield Road showed the most marked impact, with fourth-quarter sales tax revenues down 64.8 percent, none of the city's four defined commercial areas was spared some negative impact.

Ms. Chokkalingam cited two companies that particularly contributed to the drop east of Middlefield Road.

Sun Microsystems moved many sales functions to its Santa Clara office in the third and fourth quarters of 2001, she said. That hurt Menlo Park's take from Sun-generated sales tax, though the company has still guaranteed the city a certain amount of sales tax revenue each year until 2009, she said.

Egghead.com, based in Menlo Park since a 1999 merger with Onsale Inc., filed for Chapter 11 bankruptcy last year, further impacting sales tax in the eastern part of the city, according to Ms. Chokkalingam and various news reports.