News

Menlo Park sales tax receipts take dive

 

A key source of revenue for Menlo Park fell by 21 percent in the first quarter of the current fiscal year, making an already dour revenue picture even bleaker.

Sales tax revenues declined by 20.6 percent, or $335,000, in the quarter ending Sept. 30 from the same quarter in the previous year, according to tax receipts recorded with the State Board of Equalization.

That drop was higher than the 12.9 percent decline seen in the Bay Area over the same period, the 14 percent decrease in Northern California, and the 14.8 percent drop statewide, according to Carol Augustine, Menlo Park's finance director.

The decline doesn't bode well for the current fiscal year (which began July 1), as the city had expected to receive more money from sales tax in 2009-10 than it did in 2008-09.

"Business-to-business" tax revenues in the area east of Middlefield Road accounted for most of the drop, falling by 37 percent, or $263,000.

In the four-quarter period from October 2008 to September 2009, total sales tax receipts dropped by 19.4 percent from the year-earlier period. That was the largest drop in any four-quarter period since 2002, according to Ms. Augustine.

City management plans to present the City Council with a mid-year budget report at the council's Feb. 23 meeting, with recommendations on possible budget cuts to follow.

Comments

Like this comment
Posted by re-vision this
a resident of Menlo Park: The Willows
on Feb 9, 2010 at 12:24 pm

Great. Let's get the City Council to pay a consultant a few more tens of thousands of dollars to study this! How much of this is due to the economy? How much of this has to do with years of studies to envision El Camino - and years of delays to develop it? I drive from Palo Alto to Redwood City on El Camino and there is no where I want to stop and more than a few boarded up windows.


Like this comment
Posted by Furthermore
a resident of another community
on Feb 9, 2010 at 12:32 pm

If any of you reading this has ever ordered anything on line to avoid paying sales tax, or shopped at a big box or chain store in another community, because you thought you were saving money, this is your fault. Look in the mirror, and promise to never do it again! Then, tell your friends and family the same thing. All you have to do is spend you money locally, and the community in which you live will not have to cut the services you need.


Like this comment
Posted by Martin Engel
a resident of Menlo Park: Park Forest
on Feb 9, 2010 at 1:44 pm

Let's take that concept further, Furthermore. Let's insist that all the retailers -- food, clothing, beverages, fuel, hardware, furniture, etc. -- shop for their merchandise only here in Menlo Park. Indeed, we should be growing all our produce locally, within the city limits.

On the other hand, we might consider that first of all, we all have become part of the global marketplace. Then, contemplate the possibility that the concept of sales tax becomes ever more meaningless as the entire Peninsula becomes one contiguous city.

Where are we now? Well, let's hypothetically reverse engineer San Francisco into neighborhoods, each collecting their own sales tax. Furthermore would ask all the residents to shop only within their community, but not, for instance, go downtown.

Well, my point is that we have evolved into a continuous Peninsula city and town sectarianism is simply obsolete. Unfortunately, we are not equipped to think that way. Our respective local municipal governments don't want us to think this way since it threatens their autonomy. However, economy of scale suggests that this is the consequence of urbanization, and as we all know, our Visioning process is propelling us in that direction with higher density development. Fall of local revenues is, paradoxically, one of the downsides of that trend.

Perhaps it no longer makes sense to have our own police force or other local services. Economy of scale suggests that these should be integrated at a higher governmental level, such as at the county level. Ditto sales taxes and equalization of revenues.

I'm not saying I like this trend. I don't. But, that's the reality of urban change as I see it.


Like this comment
Posted by shopaholic
a resident of Menlo Park: Felton Gables
on Feb 9, 2010 at 1:56 pm

I would love to spend my money in MP (and do whenever I can) but grocery stores don't generate much in sales tax and the boutiques with their limited selections just aren't very useful for day-to-day shopping.


Like this comment
Posted by halle
a resident of Menlo Park: other
on Feb 9, 2010 at 2:05 pm

Why are we talking about spending any money to redo Menlo Park, especially downtown, with the current economic problems we have???? Would love the Council and/or any of its members to comment on this. Who else can give a rationale for this?


Like this comment
Posted by Maria of West Menlo
a resident of Menlo Park: other
on Feb 9, 2010 at 2:09 pm

Educating about smoking just may save your life or someone you care about!!!! This is not wasteful, but the reality is the Council needs to put laws into effect, not just talk about smoking. Secondhand smoke kills MANY!!!!!!!!


Like this comment
Posted by watcher
a resident of Menlo Park: Downtown
on Feb 9, 2010 at 2:41 pm

I think this ordinance will be used to cite the homeless, who smoke in public. Good work, council. Otherwise it is unenforceable. This has been a waste of staff's time, and will be a further waste to enforce.

We have laws against smoking, I applaud them But this goes too far. MP has more important tasks to handle. The risks of smoking, and second hand smoking, are well known.


Like this comment
Posted by T Smith
a resident of Menlo Park: Downtown
on Feb 9, 2010 at 2:42 pm

Oh. Isn't it time for the city's business development manager to move on? If not him, then the city manager should move on.


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Feb 9, 2010 at 2:51 pm

Peter Carpenter is a registered user.

Why the surprise?

Here is what I wrote in the Palo Alto Weekly in December 2008:

"With falling property values yielding less property-tax revenues, falling consumer and business spending yielding less sales taxes, increased retirement costs (because CalPERS has suffered significant loss of capital in the current financial downturn), continued demands for well-above-average salary increases by public employees, and the governor declaring a financial emergency, local governments in California are facing a Perfect Storm. "

"First, local governments need to recognize that there is a crisis and act now.

Second, they need to involve their citizens in a careful look at each of their programs to determine which programs are no longer affordable — however nice or special they might have been in better times, or even how worthy any single program might be.

Third, they need to plan now for hiring freezes, elimination of overtime, reduction in services, layoffs, renegotiated labor agreements and, in the extreme, bankruptcy.

Fourth, they should consider accelerating essential capital-improvement projects (the operative word is essential), as construction costs during this downturn will be substantially less than if the projects are delayed until the recovery begins.

Finally, they need to move the review and approval of new labor agreements out from behind the current wall of secrecy from which the public is excluded.

Once new labor agreements have been agreed upon by the negotiators then those agreements should be simultaneously submitted to both the union members and to the public that will bear the costs well before the city councils and special district boards meet in public session to vote on those agreements.

The Perfect Storm can be weathered but not by sunbathing on the deck. "


Like this comment
Posted by Concerned
a resident of Menlo Park: Central Menlo Park
on Feb 9, 2010 at 7:42 pm

Mr. Carpenter makes a great point as always !!


Like this comment
Posted by Joseph E. Davis
a resident of Woodside: Emerald Hills
on Feb 10, 2010 at 11:50 am

No problem! Just reduce the salaries and benefits of our public servants to match the decline in revenue.


Like this comment
Posted by Interested
a resident of another community
on Feb 10, 2010 at 12:05 pm

No problem! Just reduce the salaries and benefits of our public servants to match the decline in revenue.

And of course increase them when revenue improves...

Its frightening the idiots that come out of the woodwork


Like this comment
Posted by AME
a resident of Menlo Park: other
on Feb 10, 2010 at 12:31 pm

If there was more parking and fewer parking tickets maybe I would shop more in MP. Besides, there is little of interest in the downtown stores. Don't blame local consumers for the problem. Blame the stores and the administration for making it an relatively unpleasant experience.


Like this comment
Posted by Willy
a resident of Woodside: other
on Feb 10, 2010 at 1:14 pm

Shopping locally is a step, but take it further:

MAKE THINGS locally, regionally and nationally - and bring back manufacturing and jobs to America. If our working class is reduced to service and technology jobs (also subject to offshoring - just look at Carly's record "creating" jobs at HP) then folks just won't have the income to support a broad tax base.

NAFTA CAFTA etc... Look at the destruction of the middle class in our country since 1980.

No more race to the bottom, let's create again. Big picture.


Like this comment
Posted by Just wondering...
a resident of Portola Valley: Ladera
on Feb 10, 2010 at 1:38 pm

I wonder how much sales tax revenue has been coming in from the new Rosewood Hotel, which always looks deserted, aside from the cocktail lounge.


Like this comment
Posted by WHoRUpeople
a resident of another community
on Feb 10, 2010 at 3:17 pm

To state what should be obvious, the economy is still in crisis. Many people are unemployed, and those that are still employed, if they're smart, are being very cautious with their spending. No wonder sales tax revenues are down--sales are down. To suggest people should ignore the fact that their dollar will go farther at a big box store or by shopping on line is really a non-starter right now. In my view, what all cities, Menlo Park included, really should be doing is combing their budgets hard, reducing expenses (and, yes, services where necessary)and making tough decisions on what we can do without for the short term. Instead, everyone seems to be focused on big picture things to increase revenue that will take years to bear fruit.


Like this comment
Posted by truth
a resident of Menlo Park: Belle Haven
on Feb 10, 2010 at 7:32 pm

One vote for no planning by Who. Let's pack up and hide away for the winter like bears.

That is strategic.


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Feb 10, 2010 at 7:39 pm

Peter Carpenter is a registered user.

Let me attempt to give Menlo Park a score on each of the recommendations that I made in 2008:

"First, local governments need to recognize that there is a crisis and act now.

Grade C

Second, they need to involve their citizens in a careful look at each of their programs to determine which programs are no longer affordable — however nice or special they might have been in better times, or even how worthy any single program might be.

Grade C

Third, they need to plan now for hiring freezes, elimination of overtime, reduction in services, layoffs, renegotiated labor agreements and, in the extreme, bankruptcy.

Grade D

Fourth, they should consider accelerating essential capital-improvement projects (the operative word is essential), as construction costs during this downturn will be substantially less than if the projects are delayed until the recovery begins.

Grade F

Finally, they need to move the review and approval of new labor agreements out from behind the current wall of secrecy from which the public is excluded.

Once new labor agreements have been agreed upon by the negotiators then those agreements should be simultaneously submitted to both the union members and to the public that will bear the costs well before the city councils and special district boards meet in public session to vote on those agreements.

Grade F


Like this comment
Posted by truth
a resident of Menlo Park: Belle Haven
on Feb 10, 2010 at 10:11 pm

i fundamentally disagree with many of the items you recommend Peter. I also disagree with your love affair with yourself.

I think a grading system is just another example of how high you think of yourself.

Peter, you should marry Peter and run off together.


Like this comment
Posted by Enough Already Peter Perfect!
a resident of Menlo Park: other
on Feb 10, 2010 at 10:33 pm

I second that motion, truth!


Like this comment
Posted by Richard Hine
editor of The Almanac
on Feb 10, 2010 at 11:58 pm

Richard Hine is a registered user.

Please debate the topic and the points made, but avoid attacking other posters.


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Feb 11, 2010 at 7:04 am

Peter Carpenter is a registered user.

Truth and Enough Already:

- what specific metrics would each of you propose for measuring the City's response to the economic downturn and how would you grade the City on those metrics?


Like this comment
Posted by WhoRUpeople
a resident of another community
on Feb 11, 2010 at 11:55 am

Truth - I didn't intend by my previous post to suggest that strategic planning/thinking was not important. Of course it is, and its what I believe the City leadership (council) should be doing. My comment was really aimed at my fellow posters who seemed to be focusing on longer term strategic issues, in response to a real time issue-specifically the fact that sales tax revenues are falling short of plan. The several points that Peter reiterated from his 2008 posting, setting aside whether or not one agrees with each of them, is an excellent example of strategic thinking, and I would hope that the City management and council have similar plans in place. My point is that given the tax revenue shortfall now is the time to implement any of the TACTICAL steps from the STRATEGY. At home, if my income suddenly isn't sufficient to cover my expenses, I reduce my expenses first and then try to figure out ways to increase my income.


Like this comment
Posted by I Agree With Peter
a resident of Menlo Park: Felton Gables
on Feb 11, 2010 at 12:17 pm

I agree with Peter's assessment, he is looking at this in a common sense sort of way. I know the others on this blog do not like it, because it's a CONSERVATIVE approach, and God knows how bad CONSERVATIVE thinking is!? Sincerely, exactly how many city jobs have been eliminated or furloughed? Answer: probably 0. Exactly how many programs have been eliminated? Answer: probably 0.(many people tried like heck to revamp the children's center, I'm not sure where that ended up?) I think the bottomline here is that all of us have to do without and really, really, really try to determine what we are willing to live without, or live without for awhile. I find it absolutely amazing that Californians are finally starting to think this way, and heck, it may be too late for our state government. We may be "without" for several generations! We need to turn this public debt, into private debt!


Like this comment
Posted by WhoRUpeople
a resident of another community
on Feb 11, 2010 at 2:34 pm

Feeling that the issue of strategy vs tactic was getting my thinking off the subject, I just went back and re-read the article. I picked up on an issue I missed earlier. According to the article "....the City had expected to receive more from sales tax in 09-10 than 08-09". It goes on to cite that the 1st 1/4 revenue was down 20.6% over the 08-09 1st 1/4 compared to being down 19.4% in 08-09 versus the previous period, which I assume to mean 07-08. I gotta ask--how/why did the City think 09-10 was going to be better? How could they miss it by that much? And back to the strategic planning issue, if the City thought revenues were going to improve, is it safe to assume their strategic plan did not include a strategy for dealing with such a shortfall? There are still 3 1/4s to go--anyone want to bet on a sudden increase in tax revenues?(retorical)


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Feb 11, 2010 at 2:47 pm

Peter Carpenter is a registered user.

WhoRUpeople asks:"I gotta ask--how/why did the City think 09-10 was going to be better? "

The fact is that local governments were and remain in denial about the effects of the economic downturn on all of their revenue streams.

For example, no one is acknowledging that total property tax revenues will probably go DOWN in 2010/11 because the 2% increase cap is just that a ceiling and not a floor. The State Board of Equalization has stated that the property tax inflation adjustment for 2010/11 will be NEGATIVE - try to find that in any local revenue projections.

This was all very predictable in 2008 but nobody wanted to listen.

Elected and appointed officials are not doing their homework and citizens are giving them a pass.


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Feb 11, 2010 at 2:56 pm

Peter Carpenter is a registered user.

Here is the info on projected 2010/11 property tax rates:

Using Consumer Price Index numbers recently released by the federal government, the Board of Equalization estimated that deflation this year hit 0.237 percent in California.

A spokeswoman for the Board of Equalization defended the decision as "good news" for Californians, even as she acknowledged the dire impacts on local governments.

"Consumers will not see their taxes rise," said Anita Gore, "and that's what the voters voted for when they passed Proposition 13. "

The measure, which took effect in 1978, caps the annual increase for assessed property values at 2 percent, no matter a property's actual market value. The rate set by the Board of Equalization has fallen below that 2 percent maximum only five times in the past 31 years, but it has never before been negative.

Homes are reassessed only when they are sold or significantly remodeled — or if the assessor's office determines the market value of a property has dropped below its assessed value.

This year, facing the prospect of negative inflation for the first time, the board "took a look at the law," Gore said.

"The law mandates that in inflationary times, the rate is capped," she added, "and that if indeed there is deflation, the value should be reduced."

Again try to find this brutal fact reflected in any local city or school district budget !!


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Feb 11, 2010 at 4:11 pm

Peter Carpenter is a registered user.

NEWS UPDATE !!

San Mateo County Assessor site now states:

"Important Notice: Our Office has updated the 2010-11 roll being prepared for a deflation factor of 0.99763% which has been reported by the Board of Equalization on December 15."

So instead of the traditional 2% increase property taxes for 2010/11 will do DOWN by almost 1%. That is a negative 3% change in the usual revenue growth. Ask your local officials if they have factored that into their financial planning.


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