|
Getting your Trinity Audio player ready...
|
A construction and development tax — or similar types of taxes that town staff says could provide “substantial revenues” — is on hold in Atherton after being considered last week by the City Council.
The council put the idea on hold until officials have a better understanding of what the town’s “fiscal reality will be” after the civic center project is complete, said City Manager George Rodericks.
The town is currently determining whether it will take on debt service or other financing for its long-awaited $31.6 million new civic center.
During a Dec. 4 study session, council members discussed the pros and cons of implementing a tax that could be applied to all construction permits based on the valuation of the permit, according to a staff report. Discussions about a possible tax are in their “early stages,” Rodericks noted during the meeting.
Had a development and construction tax been in place for the last few years, it could have generated anywhere from about $800,000 to $2.5 million annually, according to a staff analysis. Such a tax would generally be imposed only on new construction, and would be based on the number of units, number of bedrooms or square footage.
Staff notes that because the amount of revenue derived from these taxes would fluctuate from year to year, it should not be used as a source of funding for ongoing operations.
Some, such as council member Mike Lempres, are skeptical about whether the town needs “a lot more” revenue sources.
“I don’t think this (the development tax) is the right thing,” he said on Dec. 4. “I commend staff for looking into this.”
Resident Sandy Crittenden told the council during the public comment period that he staunchly opposes any new town taxes.
“It’s (a development tax) not a very nice welcoming to Atherton,” he said. “Figure out something a little softer to keep the budget within what you get now.”
Council member Elizabeth Lewis said tax details would need to be more “fleshed out,” and that funding from this kind of tax would not be ongoing.
“I’m not convinced this is the type of tax we want to try to impose on a small group of people that would just flow into the general fund,” she said. “The numbers are just not compelling enough.”
Other council members, such as Mayor Bill Widmer, said that the town will need to bring in extra revenue to help cover increasing pension liabilities and countywide projects the town has to pay into. Council member Cary Wiest agreed that the town will need to generate more revenue to “tackle problems we just keep pushing off.”
Major home development does monopolize code enforcement staff’s time and pulls them away from other matters, so finding a way to acquire funds from this growing development would make sense, Widmer said.
Vice Mayor Rick DeGolia said that this might not be the right type of tax, but that the town needs some sort of funding to help with maintaining its streets and water drainage systems. He said he likes the idea of a tax on any development larger than 5,000 square feet to encourage people to build smaller houses. There are no commercial businesses in town, but development is one area that the town can tax, he said.
The council is still considering several financing options for the civic center project, scheduled for completion in 2021. Funding options include a written commitment from Bob and Connie Lurie to donate $500,000 in exchange for naming rights to the Cafe Terrace area, which will be located on the outdoor deck in front of the town’s new library.
At a Nov. 20 meeting, the council asked town staff to move forward with preliminary work on a “certificates of participation” financing mechanism (COPs) at about $7 million over a 10-year term to finance part of the project’s construction costs. Without an influx of cash, the town’s general fund is projected to be in the red by $1.9 million by next October, according to staff.
The council began discussing options to bolster revenue for the town’s general fund in 2014, the staff report noted. In 2017, it examined implementing a business license tax, but opted not to go forward with it.
–
The Town administrators should have looked at issues related to taking on debt service or other financing for its $31.6 million new civic center BEFORE the project was approved for constuction. The town has a budget surplus and they want MORE ?
Again, we voted no on a parcel tax. I’m voting no on a construction tax.
MemberOne…the Town of Atherton has plenty of money…to live within its means. Your comment is right on. Cost issues get decided before large projects are undertaken. This was the opposite. Grand scale and plans, we will figure out how to pay for it later. The opposition group led by Sandy Crittenden pointed all this out but were basically marginalized as aggrieved individuals by the town council. Very bad judgment on all of their parts, especially Bill Widmer. They are making fools out of themselves by trying to shake down the fire district, name streets, getting funds from residents who turned away the parcel tax by shadow fees. Let’s bring in a new council without emotional investments in prior bad decisions.
There are already over a hundred requests for changes submitted by the Town Center contractors.
Contractors on public projects make their real profits on change orders.
Stay tuned.
And after costing taxpayers over $100k here is where the attempted shake down of the Fire District has ended up ( from Town’s own Staff Report):
“Based on the results of the Study and subsequent conversations with the District and LAFCO, it
is unlikely that a tax agreement could be negotiated; unlikely that Special Legislation would be
supported; and a detachment application through LAFCO, although it could be pursued and
would be processed, would not be supported by LAFCO staff. ”
All of these outcomes were known to the Council BEFORE they wasted a single penny of the taxpayers’ dollars.
Peter Carpenter’s comment that there are hundreds of change orders to the Town Center Project is inaccurate.
There are three change orders to the city portion, totally $41,000, which came out of the contingency and leaves $2.83m available for change orders, contingencies, etc. see: http://www.ci.atherton.ca.us/CivicAlerts.aspx?AID=741
Certainly change orders is what is the danger in any of these public construction projects, but this one is being carefully managed. It is 20% complete with $41K of additional cost to Atherton (well below 20% of the original $2.87m contingency). That is certainly on time and on budget.
I stated “There are already over a hundred requests for changes submitted by the Town Center contractors.”
So Rick, how many requests for changes have been submitted by the Town Center contractors?
“What Is a Request for Information (RFI) in Construction?
The American Council of Engineering Companies of Kansas explains that “In most Construction Documents, it is inevitable that the agreement, drawings and specifications will not adequately address every single matter.” Therefore, “There may be gaps, conflicts or subtle ambiguities. The goal of the Request For Information (RFI) is to act as a partnering tool to resolve these gaps, conflicts or subtle ambiguities during the bidding process or early in the construction process to eliminate the need for costly corrective measures.”
The phrase “request for information” might make this seem like a simple process in which a question is asked and then subsequently answered. Unfortunately, it’s not always this easy. As the above definition indicates, an RFI is a formal and sometimes complicated process and needs an immense amount of detail.
Construction RFIs are used by many parties and for many purposes, as Quality in Construction explains. It may be “a question from the Contractor to the Designer asking for information and clarifications on some drawing” or “a question from the Contractor to the Client or other stakeholders of the project… In some other cases, it’s the Subcontractor who is asking information from the Main Contractor regarding the subcontracted works.”
Rick DeGolia, thanks for coming on here to engage with residents.
Do you agree with Peter that there have been over 100 change order requests? I do agree with you that if the town has had the discipline to only accept three of them so far, it’s trying to hold the line.
But what about the $100K on investigating the fire district? That seems like a bad waste of money to me.
Interested in your thoughts.
Thank you.
The number of Requests for Information are irrelevant and there have likely been very many of those, but these are common in construction and include almost anything because contractors need information. It is the actual requests for change orders and approved change orders that are important. I don’t know how many requests there have been, but certainly with only three approved (two surveys from Cal Water) any request is carefully managed and all approved changes are reported on the Town Center blog, as I cited previously http://www.ci.atherton.ca.us/CivicAlerts.aspx?AID=741.
It is important is to be transparent about this project and to insure that the project is well managed, including very careful management of any change requests, because this is where unexpected costs occur. So far, with $41K of changes at a 20% completion milestone, this project is being extremely well and carefully managed. As the largest project Atherton has ever undertaken, by an order of magnitude, that is really important.
Curious, the Carpenter pet peeve re: Atherton and the Fire District is very political and has consistently been distorted by Carpenter. The costs of the studies, which were not a course of action that I promoted, were about $55K. That isn’t stated to justify anything, only to assert truth and not distortion. The discrepancy between what Atherton residents pay and the cost to provide services is about an $8m/yr deficit. That’s a very big number. Council members received many resident complaints about that discrepancy and none none that challenged the quality of service received. That is just the reality. We all know that tax issues are a deep hole. I believe that was a proper issue for the Council to discuss with the Fire District. Discussion is cheap. Time to move on.
Rick ignores the tax payer costs borne by the Fire District to respond to the Matrix study which take the total cost over $100k. And that does not include Atherton staff and legal time.
Given the totally predicted outcome why did the Council waste all that time and money and create so much ill will?
“The discrepancy between what Atherton residents pay and the cost to provide services”
Given our well accepted progressive tax system there is not a single public service where wealthy Atherton residents do not pay far more than the cost of those services.
Nevertheless this tone deaf Council wants to steal from the poor to give to the wealthiest Town in the Nation.
And the Council’s dirty little secret is that IF they got money from the Fire District that would not reduce the property taxes of Atherton residents by a single penny but it would reduce the level of fire services for everybody in the Fire District.
Stupid and selfish are too mild of words for this behavior.
“It is important is to be transparent about this project and to insure that the project is well managed, including very careful management of any change requests”
So Rick – how many RFI’s have been submitted and how many of those have been resolved.
My sources say that the answer to both questions is more than a hundred.
The silence of De Golia on the points made by Peter Carpenter has become deafening.
De Golia is now the mayor!
What’s going on here?
Silence, your comment is just not tuned in. Unlike some people, I don’t live on these blogs. I respond whenever I happen to review the comments, but I’m not silent, I just don’t spend my time in this arena.
There are many RFIs from any contractor. It may be more than a hundred. The number is irrelevant because RFIs mostly include questions about the plans that are relevant to those constructing vs those designing. What is relevant is the change orders requested and approved. In this case, that number is totally public and very, very small because the project is on time and on budget. $40K of approved change orders is extremely small for being 20% of the way through a $31m project (I am focusing only on the non-library portion here).
I am proud of what is happening with the Atherton Town Center. A whole group of people opposed the little league improvements in Holbrook-Palmer Park. That facility is now heavily used and loved. I believe that the same will happen with the new Town Center, which Atherton desperately needed. We’ve found a way to finance this HUGE project without new taxes and without residents bearing the cost of a bond. It is a remarkable accomplishment after attempts to design a new Town Center failed three times do to the inability to find a way to finance it.
The issue of the dispute between the Atherton Council and the Fire District is an entirely different matter. The subject of this article which addresses exploring ways to offset some of the tax loss from the end of the Atherton Parcel Tax. This Fire District dispute involves no taxation change to anyone in Atherton. I have publicly stated many times that I am opposed to changing fire services because the services that Atherton receives are excellent.
“There are many RFIs from any contractor. It may be more than a hundred. The number is irrelevant because RFIs mostly include questions about the plans that are relevant to those constructing vs those designing.”
Actually processing an RFI is not cheap:
“Average Total Cost per RFI Review and Response = $1,080”
https://www.cmaanet.org/sites/default/files/resource/Impact%20%26%20Control%20of%20RFIs%20on%20Construction%20Projects.pdf
Thus the more than 100 RFIs on this project could cost more than $100,000 simply to process and the more RFIs the more likely that there will be more Change Orders.
“In the last several years, contractors
have developed a number of practices in
an effort to increase their bottom line.
It is now common to see contractors
submitting an exceptional number of
RFI’s and then presenting unapproved
change orders which they claim are
the result of the design professional’s
response to RFIs.”
Time will tell but in the meantime it would be unwise to ignore RFI’s as a useful management metric.
I’m concerned with the number of RFIs and Rick De Golia’s indifference.
When this project originally went out to bid, the bids came back very, very high. Second round, the bids were much lower.
Common sense is the contractors have a plan to make it up through RFIs and change orders.
Wouldn’t even surprise me that certain members of the council are complicit in this, having told the contractors to come in with low bids so they could get the town center started, and they’ll figure out how to true up with RFIs later on.
Of course, since De Golia’s original promise of NO BORROWING to build the town center has proved to be false – the town is about to take on “certificates of participation” without voter consent – I don’t feel confident relying on his statements now.
Having done public works construction projects in the past, I can tell you from experience that the change orders have just begun. You can bet that the contractor is already working on determining how the town is delaying them. For which they will submit claims for delay. This is even if the job is currently “on time”. A good scheduler can show how the project could have gone more quickly than it has. This creates “float”. Float in the schedule belongs to the contractor NOT the town. So, if they can show that they had to use “their” float and that prevented them from using it themselves, it’s chargeable to the town as delay.
A massive number of RFI’s can be used to prove “delay”. Because the need for answers to numerous questions creates delay. Especially, if the contractor can document that responses to RFI’s isn’t timely. Mr. DeGolia would be wise to pay attention. It’s very early in the project to ignore what’s going on. In fact, if they haven’t hired a Construction Manager (Owner’s Rep.), they are being foolish. This is the point at which the contractor starts the set up for future claims.
I will be shocked if this project does not go over budget. These types of projects almost always do. Especially, when the contractor is dealing with amateurs. Which they are.
@Concerned
The promise was only general funds would be used. That’s what Measure A spelled out. I don’t recall a promise for no borrowing, just no bonds. Bonds do require voter approval since they increase our taxes. Certificates of participation allow surpluses from existing revenue sources, which means no higher property taxes.
@Menlo Voter
The last multi-million dollar Atherton infrastructure project was the Marsh Road channel repair. It won a construction management award for being on time and on budget.
https://www.mercurynews.com/2017/05/23/athertons-marsh-channel-project-wins-management-award/
The civic center project does have a project manager working for Atherton. In fact, I believe it has two, one from Mack 5 and one from Interwest. However, I believe the Interwest one is the primary manager during the construction phase.
The project budget has a built in 10% contingency in case Atherton goes over budget.
Very naive to assume surpluses will always be there for certificates of participation. We have had many years of economic growth now. History shows we are due for a recession. Maybe the only good news that will come out of this is the police department will finally have to get outsourced when and if that shoe drops…the long term correct decision. The opposition group will make sure no bailout occurs by the residents. Of course, the common sense solution to all of this, scaling down the center to what this tiny town needs and can afford with funds on hand, was never considered seriously. That’s too bad,
Very interesting that this unelected council feels surpluses are abundant to borrow against for a Taj Mahal, but just a short while ago wanted a parcel tax, arguing the surpluses were needed to fix roads etc. Lots of double talk and standards.
@Concerned
Even if we hit a recession, property taxes do not experience negative growth until a couple years afterwards. Downward property assessment adjustments lag recessions. During the last recession (2007-08), fiscal year 2010-11 was when Atherton experienced lower year over year property tax revenue. That’s a good two years after the recession ended.
Without the parcel tax, there will be fewer capital projects funded by the town with the exception of the civic center. That’s the trade off.
Resident, thanks for setting a few of these issues straight.
Menlo Voter, there is no illusion about my or other council members being amateurs when it comes to construction projects. That’s why we’ve worked hard to hire highly regarded professionals. We have carefully reviewed this project, and we know that we are dependent on what we are told by staff and the hired consultants, but the bottom line is quality of product and cost. So far the cost is being managed well. That doesn’t alleviate worries that hidden or unexpected problems could arise. We do remain at the beginning and we are paying careful attention.
Concerned, the myth that the Atherton Council is unelected has been promoted by Carpenter because of his issues he has had with the Council and obviously it was picked up by others. In fact, every member of this Council was originally elected. We have all been appointed when no one ran against us, but the history is that (I believe) this is the only Council where all 5 members were originally elected (other than the very first Council that was elected in the 1920’s). For many many years, council members resigned before their term was up and the existing council appointed a new member, then those appointed members were re-elected by the voters when their terms were up. When vacancies occurred in 2013 and 2014, the then existing councils did not appoint replacements. Those vacancies were filled by election. In our case, every member of the council was originally elected and re-elected whenever there was an re-election.
“every member of this Council was originally elected. We have all been appointed when no one ran against us, ”
Correct – as I stated:
“Of all the communities in which I have lived Atherton is unique – for the vast majority of Atherton residents the Town government is so irrelevant that no one has even bothered to challenge the incumbent council members over the last eight years. As a consequence none of the five members of the Town Council have been elected by the citizens to their current term of service.
Without elections there is no accountability.
We get the government that we deserve.”