Menlo Park budget shows hotel tax will produce more revenue than sales tax


"A Year of Action: Getting Things Done!" is perhaps as can-do a title as can be found for a municipal budget. It's the title the city of Menlo Park has given its combined operational and capital improvement budget for the fiscal year starting July 1, which anticipates $107 million in spending, $110 million in revenues, and a surplus of $3.4 million.

The City Council held a public hearing June 7 on the 2016-17 budget, and the budget will return to the council June 21 for approval.

While property taxes are the largest source of city revenues, Menlo Park's 12 percent hotel tax is expected to produce 6.25 percent of general fund revenue, for the first time exceeding sales taxes, which are expected to produce 5.5 percent.

A booming economy, high occupancy rates and the new Marriott Residence Inn at 555 Glenwood Ave., which opened in September 2015, explain the healthy hotel tax revenues.

Ten-year budget projections anticipate continued hotel tax revenue growth as more hotels are built in Menlo Park, including the 11-story Menlo Gateway hotel, which broke ground in March 2016, and the Pollock Financial Group's boutique hotel at 1400 El Camino Real, approved in April.

During the council budget discussion, Councilman Peter Ohtaki pointed out, though, that even with more hotel rooms, the hospitality industry is vulnerable to economic swings and these revenues would likely decline in an economic downtown, a contingency factored into the budget.

A number of long-term trends are contributing to relatively weaker sales tax revenues for the city, including the loss of car dealerships and the growth of online sales, Nick Pegueros, the city's administrative services director, noted.

General fund spending is expected to grow by 6.75 percent over last year, much of this related to work on development projects by the Community Development and Public Works departments.

Capital improvement spending includes planning a Middle Avenue bike and pedestrian rail crossing, installing downtown streetscape improvements, and developing a master plan for Bedwell Bayfront Park.

Flood control is another issue that will likely gain urgency in Menlo Park, City Manager Alex McIntyre said. "We have no money coming in to pay for flood control," he said, and demands are growing in areas where flooding is a hazard.

Belle Haven, Facebook

During the June 7 public hearing, Belle Haven resident Jonnie Walton expressed skepticism that the city found a way to appropriate $4.8 million to install sidewalks on Santa Cruz Avenue (in the area from downtown to Hillview Middle School) while many of the capital improvements in Belle Haven are occurring conditional to development agreements with large companies in exchange for added building allowances.

Specifically, Mr. Walton said he wants the city to address traffic-related problems in Belle Haven.

If Belle Haven and Menlo Park east of U.S. 101 is where a lot of the revenue is being generated and where a large part of the city's workforce is, he said, "That should be the top priority."

City Manager McIntyre acknowledged that "Belle Haven is taking a lot of the brunt of the impacts of Facebook."

Facebook is the city's largest employer by far, with 6,068 Menlo Park employees, according to the budget. In second place is SRI International with 1,373 employees.

Future developments that could significantly change Belle Haven have not yet been factored into the 10-year budget forecast, according to Mr. McIntyre, because it is too early to know what the costs and revenues of such projects for the city would be. Those include amenities that may be built in Menlo Park's industrial area east of U.S. 101 as the result of imminent changes to the city's General Plan, and whatever Facebook has planned for the 56-acre Menlo Science and Technology Park it purchased in February 2015.

He said he would try to work with community members in Belle Haven, though didn't recommend the council ask to track specifically which neighborhoods generate more revenue and which receive more city funds.

"You don't want to balkanize your city that way," he said.


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