Menlo Park: Parents seek city funds to cover future imbalance

When the Menlo Park City Council approved a proposal by Stanford last

October to add 215 apartments, 143,000 square feet of office space and about 10,000 square feet of retail space at 500 El Camino Real, one piece of the negotiations went unresolved. In February, Menlo Park Vice Mayor Ray Mueller proposed one option to correct a shortfall the Menlo Park City School District may experience as a result of the development, and the concept is gaining traction among district parents.

The problem

The core of the problem is that under California law, Stanford University is exempt from having to pay property taxes on any building it uses for “academic purposes.” That includes faculty and staff housing, which the apartments planned at 500 El Camino Real are intended to be used for.

Yet 60 percent of the school district’s funding comes from property taxes, according to district spokeswoman Parke Treadway. And, presumably, some of the faculty and staff who will be housed at Stanford’s new complex will have children. So the district would have to cover the costs to educate those kids without receiving property taxes from those households, an added cost the district claims would total about $663,000 per year.

Stanford officials have said that the university will pay property taxes on the office buildings that are slated to be developed as part of the project and leased to commercial tenants.

To address this, the city of Menlo Park had negotiated with Stanford University to get a contribution of $1.5 million to go toward an endowment for the Menlo Park-Atherton Education Foundation, an independent fundraising arm that provides funding for the Menlo Park City School District.

In previous negotiations between the city and Stanford, the university had offered $1.5 million to the Menlo Park City School District via the education foundation. The district says it needs a contribution of $2.5 million to its endowment (plus substantial property taxes from the office buildings) to enable it to annually generate enough revenue to cover that expected shortfall.

Stanford added a stipulation that up to $1 million of a $5 million Stanford contribution to a proposed bicycle and pedestrian crossing over or under the Caltrain tracks at Middle Avenue could potentially be paid to the education foundation instead. The idea was that the university would pay half of the cost for the crossing – up to $5 million – and if the city were to find a way to cut costs on that project, then up to $1 million of the project money left over would go to the education foundation.

The proposed solution

In February, the council received its mid-year budget report, which indicated that the city has a surplus of $3.85 million, $1.16 million of which was unbudgeted returns from what’s called “ERAF,” or the “Educational Revenue Augmentation Fund.”

That fund represents city money that’s set aside each year to cover any shortfalls school districts might have if property taxes don’t reach a basic funding level. That money is returned to cities annually if high property tax districts (like the Menlo Park City School District) cross that funding threshold.

At the Feb. 13 meeting, Mr. Mueller suggested that the city put $1.5 million of that surplus toward the project – he later indicated he wanted that number to be $1 million – enough to cover the funding gap between what Stanford has committed and the $2.5 million the district says it would need.

“We have an opportunity here now to kill that bird with this stone,” Mr. Mueller told the council at the time.

According to Ms. Treadway, district Superintendent Erik Burmeister alerted a small group of parents about the idea, and since then an email campaign to the council has been launched. As of the morning of Monday, March 5, the council had received about 21 emails urging it to put the surplus toward covering the expected shortfall from Stanford.

“The development is expected to generate approximately 39 new students beginning in the 2019-20 school year. As a community funded district, MPCSD does not receive any more funding when more students enroll,” Menlo Park parent Max Bonnette wrote in an email. “We all appreciate the value that an excellent school district adds to our vibrant community, and with your foresight and help, we can maintain the quality that we all expect.”

To do so straightforwardly, however, would probably be considered an illegal gift of public funds from one government agency to another, Mr. Mueller cautioned.

What the city may be able to do, he noted, is put $1 million from its surplus toward the proposed bike and pedestrian Caltrain crossing at Middle Avenue, and then urge Stanford to transfer $1 million that it planned to put toward that project to the school district through the Menlo Park-Atherton Education Foundation.

Mayor Peter Ohtaki agreed to add the matter to a future council agenda.