For the city's biggest fund, its general fund, the draft budget shows spending of $67.4 million, with $420,000 left over from revenue generated, representing a spending plan 18.4 percent larger than in this fiscal year.
With that plan comes a complex and ambitious to-do list that lays out a framework for the city's operations, policies and projects in the coming fiscal year and beyond.
When it comes to city revenue reflected in the proposed budget, one of the biggest changes from this fiscal year is the cash boost expected to come from two new hotels: Hotel Nia at 200 Independence Drive, which opened for business in April; and the Park James Hotel at 1400 El Camino Real, set to open in July, according to developer Jeff Pollock.
Menlo Park receives 12 percent of the room rate collected from all hotels in the city as part of its hotel tax, said Nick Pegueros, finance and administrative services director.
Also set to boost revenue are recently approved updates to the city's fee schedule, which, among other shifts, set major increases on permitting fees for private developers. This, staff said, was intended to make developers cover the full cost of the work it takes the city to review and approve plans.
Sales tax revenue, meanwhile, is expected to decline slightly in the coming year, Pegueros said. That's partly because when people in town shop online, the sales tax revenue goes to the county, which then distributes it to cities based on each city's share of the total taxable sales, according to the draft budget.
Although voters in 2006 authorized the city to increase the utility users' tax to 3.5 percent, the city hasn't done so, and the draft budget reports that the city plans to continue the tax at the current 1 percent rate.
All in all, staff say the city appears to be in good fiscal health. Ten-year forecasts indicate that the city could have up to $5.5 million in surplus revenue by the 2028-29 fiscal year.
Pegueros said the city worked with its Finance and Audit Committee to use a new uncertainty modeling method to come up with what's believed to be a more accurate 10-year forecast. That method looked at more than a thousand possible scenarios, including economic downturn and recovery at various points in time over the coming years, before reaching its conclusion, Finance and Budget Manager Dan Jacobson explained in an interview.
Since January, McIntyre and other managers within city staff have spoken of difficulty in hiring people to work in public sector jobs in a region with so many employment opportunities, and have noted a substantial number of staff vacancies as staffers have left to take better offers elsewhere.
The new draft budget calls for the city to hire the equivalent of 9.25 new full-time employees in the city's public works, police, library, community services and administrative services departments, including two new full-time employees to maintain and improve the services of the Menlo Park Municipal Water District. (This cost would be borne only by people who receive their water from the water district.)
If all city positions are filled, the number of staff would rise to 287, an increase of 3 percent over this fiscal year and a 17 percent increase since the 2015-16 fiscal year.
At least recently, McIntyre explained, it has been even more expensive to contract outside of City Hall than to hire a new person, even accounting for the costs of an employee's retirement and other benefits. That said, he noted at a public presentation about the budget May 29, it is easier to end a contract than to terminate an employee.
The draft budget requests $507,000 to increase contract staffing, which, the document says, will allow the city to do organizational reviews of the community development and public works departments and complete the biennial review of the city's downtown specific plan.
The draft budget also calls for setting aside $615,000 as contingency funding for rising costs for services the city currently contracts out and may soon need to renew contracts for: janitorial services, street repairs, street sweeping, pool operations and operations for the city's flood and storm drainage systems.
Like other cities across California, a big question for Menlo Park in the coming years will be how to pay for its unfunded pension liabilities. The California Public Employees Retirement System, or CalPERS, in December 2016 cut its expected return rate from 7.5 percent to 7 percent, which increases the city's unfunded pension liabilities by more than 40 percent and will more than double the city's annual pension expenditures by the 2027-28 fiscal year, according to the draft budget.
Pegueros said that the system is decreasing the risks in its portfolio and may expect lower returns in years to come.
Another question in coming years will be whether the state will continue to refund Menlo Park for what's called an excess "education revenue augmentation fund," abbreviated to ERAF. That's a pool of tax revenue that's automatically deducted by the state from cities and special districts to help it pay for local schools.
But since Menlo Park generates what the state considers to be sufficient money to run local schools through property taxes alone, the state hasn't claimed that money. It has, in past years, sent all of that funding back to the city, which has resulted in what's effectively been an annual bonus for the city's general fund.
The city can't count on receiving it, Pegueros said, so it only assumes the city will be refunded about half of the full amount. In the future, the state could update its school funding formulas to keep the funds, according to the draft budget.
There is also an effort, spearheaded by Menlo Park Vice Mayor Ray Mueller, to consider using this funding as a source that local jurisdictions might use to help the Ravenswood City School District pay for critical capital improvements as part of a joint powers authority that would be established.
During a May 29 meeting, heads of the city's different departments briefly summarized some of their accomplishments over the past year, ongoing projects, and initiatives they'd like to see funded in the future.
Among the accomplishments was the completion of a number of complex land use project approvals — including Stanford's 500 El Camino Real project and Facebook's updated plans for its "Building 22" — and beginning to review Facebook's proposed 59-acre redevelopment to create a new mixed-use neighborhood called "Willow Village."
In addition to a wide range of projects, the city also launched an online "SeeClickFix" program, an app people can use to report non-emergency problems like code violations, potholes or graffiti to the city; and a new police unit to patrol the city's bayfront area. Internally, the city also began using Facebook Workplace, an internal application for employees that Facebook runs which costs $3 a month per user. It cost the city $459 last month, Pegueros said.
The budget also includes requests from city departments to fund new programs. For instance, the police department hopes to start a "Text to 911" program, which, according to interim Police Chief Dave Bertini, would enable people to text their requests for police service to the dispatch center, which might help in areas where people have weaker phone signals, he said.
The city also has major capital improvement plans, with a five-year list that includes 78 projects. It has set aside nearly $30 million for building those projects and plans to commit $17.3 million more to others.
The draft budget calls for beginning to save for some big-ticket items the city has long debated how to pay for: building a separated roadway from the Caltrain line at Ravenswood Avenue and a separated bike and pedestrian path at Middle Avenue; flood protection projects along the Bayfront Canal and Atherton Channel; moving forward with improvement plans for Bedwell Bayfront Park; improving information technology; and building a downtown parking garage.
New projects added to the list are street resurfacing; a study to design and build a Caltrain crossing for bicycles and pedestrians at Middle Avenue; a sidewalk power-washing program; a holiday lighting program in Belle Haven; removal of hazardous trees; expanded library services, including plans to clean the Belle Haven branch library more often; and a proposed expansion of Project Read, a nonprofit that works with the library to provide literacy services.
According to the draft budget, it's expected that the city would need to invest about $73.5 million over five years to meet the needs for all the projects on its list. Yet the city is expected to have only about $44.6 million of that.
However, the city can put general fund surpluses toward such projects, which McIntyre said would enable the city to chip away on other projects that could otherwise take years to get funded.
And there are yet more projects the city wants to move forward with that haven't yet been priced out, said McIntyre: a new emergency operations center, improvements to the main and Belle Haven branch libraries, rebuilding or expanding the Onetta Harris and Senior Center complex, improving or replacing the Belle Haven pool, and implementing the parks and recreation master plan.
The Menlo Park City Council was scheduled to host its first discussion of the budget on Tuesday, June 5, after The Almanac went to press. A subsequent discussion of the budget is scheduled for Tuesday, June 19.
Go to almanacnews.com for the latest updates.
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