The question of how to grow our sales-tax revenues has become one of the main themes of the current Menlo-Park city council race. Campaigning is an opportunity to educate an interested public. Candidates have a duty to know at least basic financial facts, and so as not to confuse our citizens.
History: During the high-tech boom, companies like Sun Microsystems experienced soaring sales and as a result Menlo Park reaped millions in extra sales-tax revenues, peaking at $12 million in 2000.When the bubble burst, sales dropped and along with them sales-tax revenues. To make matters worse, Sun consolidated their billion-dollar sales operations to more business friendly Santa Clara, taking millions of sales tax dollars with them for good. By the end of 2002, when Lee and I were elected, sales taxes revenues had already fallen nearly 50% to about $6 million.
The question for Menlo Park is what, if anything, can be done to get back that $6 million in lost revenues?
Can we recover lost sales-tax revenues from Santa Cruz Ave, as some have suggested? While we like the idea of more vibrancy downtown, and are delighted with the new construction we have attracted, the city keeps only one cent on every retail dollar, so it would take a retail district bigger than Stanford Park Mall to generate $6 million.
Can we recover lost sales-tax revenues by propping up the failing car dealerships on El Camino Real, as some have suggested? At the peak of the free-spending high-tech bubble, our car dealerships brought in a total of $1.4 million, so we would need four times that number of car dealerships in order to generate $6 million.
Would service businesses or “green energy” start-ups be part of the answer as suggested by some? Unfortunately, in California service businesses -- even as big as Google -- do not pay sales taxes and start-ups rarely generate sufficient product revenues to be major sales tax producers.
So what is our strategy to get back lost revenues?
1. Hotels pay a Transient Occupancy Tax of 10% to the city. Thus a single new hotel like the Rosewood Hotel already under construction at Sand Hill and 280 will generate up to $1.9M/year -- more revenues than all of the car dealerships combined. There is a second hotel before the planning staff at Marsh road and 101 and an expansion of the Stanford Park Hotel has just been announced.
2. Recognizing that the small auto lots on El Camino will never be viable again, we have been working with GM to create a regional auto-mall near the Dumbarton Bridge. Even with GMs proposed tax sharing arrangement on a quarter of the site, the first phase of the auto-mall would generate ¾ million per year – a figure that could easily grow to $3 million per year when the site is fully leased to other dealers.
3. With the understanding that the majority of Menlo Park’s sales-tax revenues are generated east of 101 from business selling to other businesses (e.g. computers, office products, etc.) we have been working to change the business unfriendly practices that drove Sun to Santa Clara. Since coming into office we have grown annual business-to-business sales-tax revenues by 22% to $2.5 million.
The fruits of all these efforts, and several other major efforts under way, will take several more years to be fully realized, and we must all understand and commit to the realities of creating a long-term, sustainable economic base.
Mickie Winkler email@example.com