New taxes, less staff ahead for Atherton? New taxes, less staff ahead for Atherton? (September 01, 2004)

By Andrea Gemmet
Almanac Staff Writer

From fewer cops to new taxes, the Atherton City Council appears to be open to just about any reasonable idea for raising revenues and cutting expenses in its quest to keep the town's finances in good shape over the next four years and beyond.

At a special meeting on August 24, the ideas ranged from charging rent for the Atherton library to taxing everything from utility use to real estate commissions.

The City Council took no action on any of the ideas, but fired a volley of instructions at town staff, asking for more information on many of the proposals.

Even with the passage of the special parcel tax, which is up for renewal in November, Atherton faces a bleak financial outlook. According to Finance Director John Johns' four-year outlook, the town will have to spend down its reserve funds in order to stay afloat, with the balance dipping below its council-mandated minimum by 2009.

The only revenue-boosting measure that appeared to be headed for certain rejection is a proposal to double the franchise fee paid by BFI, Atherton's garbage service. The increased franchise fee -- which would raise $80,000 annually -- would likely be passed on to residents through higher garbage fees.

"I don't like to use the term 'nickel and dime...'" said Mayor Kathy McKeithen, as Councilman Alan Carlson muttered "chump change" under his breath.

New taxes under consideration include a public-safety assessment district and a so-called utility-users tax to collect a percentage of gross receipts from telecommunications, energy, water and sewage service. A 6 percent utility-users tax rate could generate close to $1.3 million annually, said Mr. Johns.

The biggest ticket item under consideration is to drop the $250 cap on the business license tax and instead collect a percentage of gross receipts, a move which could boost Atherton's annual revenues by $500,000 to $2 million, said Mr. Johns. Taxing real estate agents 5 percent of their commissions on the sale of Atherton properties would bring in around $750,000 a year, he said.

Imposing the same 5 percent tax on the gross receipts of Atherton's $100 million real estate construction industry would bring in $5 million, Mr. Johns said.

"Obviously, hitting up contractors for $5 million is a little on the extreme side," said Councilman Carlson, adding that the town's $250 tax on people engaged in $4-5 million construction projects would strike reasonable people as being a bit too low.

Cutting staff

A cost-cutting item is a workforce reduction plan that would save Atherton $280,000 a year by eliminating two police officer positions and converting the full-time city clerk and finance assistant positions to half-time, said Mr. Johns.

Currently, two police officer positions are being left vacant, and council members questioned whether a third could be eliminated without seriously hampering the department's service.

The Atherton Police Department is down by six positions since a restructuring in 2000, said City Manager Jim Robinson. Atherton spends nearly twice as much per capita on police service as other cities do, said Mr. Johns.

"I think you need to try to understand why there's a difference -- maybe it's the quality of the benefits," said Jerry Carlson, a former member of the town's audit committee.

Pension debt

Another cost-cutting measure under consideration is dipping into Atherton's reserve funds to the tune of $1 million to pay down what the town owes to the state Public Employee Retirement System fund. The debt -- an unfunded liability in insurance-speak -- is amortized over a number of years, explained Mr. Johns.

"It's like having a mortgage. Do you keep your money in a passbook savings account or do you pay down the mortgage?" he said.

Ms. McKeithen asked staff for more information about whether the town could expand upon its road-impact fees, a charge for construction projects to cover wear and tear on local streets. The fees might be expanded to include major landscaping and demolition projects.

Ms. McKeithen also asked for more information about why Atherton's building fees appear to be much lower than those of neighboring communities.

Any new tax measures would have to be approved by voters.

The Atherton City Council is set to continue its discussion at another special meeting, tentatively set for September 9.

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