Atherton zeroes in on new real estate, construction taxes Atherton zeroes in on new real estate, construction taxes (October 27, 2004)

By Andrea Gemmet
Almanac Staff Writer

The town of Atherton is in need of a steady source of income, and the City Council is zeroing in on a new business license fee that would tax real estate transactions and home construction.

After spending several months and countless hours exploring various options, including new budget cuts and introducing a tax on utilities, council members on October 20 directed town staff to pursue a plan to tax Atherton's biggest businesses -- home building and sales -- at a rate still to be determined.

It was the council's strongest indication yet that the town would pursue a business license fee linked to the gross receipts of real estate agents and construction firms operating in town, removing the existing $250 annual cap. It would amount to a new tax, which would have to be approved by voters. Details on how high the tax would be, and how the town would collect it, remain to be seen.
Cost-cutting

The council also approved cutting two open positions in the Police Department and the equivalent of one full-time administrative position; capping the number of vacation hours employees can accumulate; imposing a new fee to compensate for wear and tear on roads caused by dirt-hauling trucks; and paying off $40,000 of debt to its pension fund.

The formerly full-time jobs of city clerk and assistant finance director will go to half-time. Both positions are open following the retirement of City Clerk Sharon Barker and the departure of the assistant finance director this summer.

One cost-cutting measure can't go into effect right away; in order to cap vacation hours, the town will have to renegotiate some employee contracts, said Finance Director John Johns.

All told, Atherton is expected to save at least $392,000 and to gain at least $200,000 in additional revenue from charging builders the higher road-impact fees, which target basement excavations, grading work and major landscaping projects, said Mr. Johns.

"The cost savings are twice as much as the revenue enhancements," said Mayor Kathy McKeithen. "I think that's what the people of Atherton want to see, that we're continuing to tighten our belts."

After some extended quibbling over whether to wait to see if voters approve Measure O, the four-year parcel tax renewal on the November 2 ballot, the council voted 4-1, with Ms. McKeithen opposed, to put the cost-cutting measures into effect and to commission a consultant to work out the details of the road impact fee.

Ms. McKeithen dissented because she said she wanted staff to work out the numbers for the revenue enhancements, as well.

"Can't we just cool it for 13 days?" asked Councilman Bill Conwell. "After the election, we'll know where we stand."

Councilman Jim Janz and Charles Marsala volunteered to work out a simple table with the amounts of money the various new revenue sources the council has been investigating would bring in.

Other options the town had been pursuing over the course of several special council meetings include creating a special benefit assessment district for public safety and getting rid of the four-year term of the parcel tax, giving it no end date, while providing for regular increases to it.

The council has yet to decide if the new business license tax on real estate and construction the town is pursuing should supplement the parcel tax, which currently costs most homeowners $750 a year, or eventually replace it.

Mr. Johns has estimated that a 5-percent tax on real estate sales commissions would bring in around $750,000 a year. The $100 million in annual home construction done in Atherton could also prove quite a cash-cow.

Atherton is facing a $2.3 million total shortfall in funding over the next five years unless town officials dramatically cut costs or find new ways to raise money. Mr. Johns said the town must come up with an average of almost $590,000 in cost cuts or "revenue enhancements" in each of the next four fiscal years in order to make ends meet.

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