Facing deficit, Menlo Park counts on hotel tax increase — in advance of vote
by Xiaohuo Cui
October 27, 2012
The fate of a ballot measure that would increase a tax on hotel rooms will determine whether the city of Menlo Park can close its budget deficit without deep cuts to government services, city officials say.
But opponents of Measure K, such as the Silicon Valley Taxpayers Association, say that raising the Transient Occupancy Tax from 10 percent to 12 percent would further weaken Menlo Park economically.
Menlo Park is facing a $1.7 million deficit this fiscal year, according to city finance officials. They cite the loss of redevelopment funds as the primary culprit, in the aftermath of a state Supreme Court decision upholding a 2011 law that dissolved California’s redevelopment agencies. The proposed hotel tax increase would not recover all of the lost money, but it would “certainly take much of the pressure off,” said City Council member Richard Cline, a former mayor.
In adopting the current budget plan, the council factored in the $580,000 that a hotel tax hike is projected to generate annually. If the measure is defeated on Nov. 6, according to city officials, the council would have to look at funding cuts to the police department and to programs that help schoolchildren and senior citizens. Raising the utility user tax or diving into city reserves would also be considered as a last resort, officials said.
John W.S. Roeder, president of the Silicon Valley Taxpayers Association, argues that Menlo Park’s dozen or so hotels do not constitute enough business for a lodging tax increase to save the city budget. “Those pushing for tax hikes always threaten to cut the same vital services if they don’t get their way,” he said.
The City Council has tabled, until after the election, its discussion of possible cuts. One option under consideration is eliminating a four-officer police narcotics team to save $870,000 a year.
Cmdr. Dave Bertini of the Menlo Park Police Department said that patrol officers would need to cover the shifts of narcotics team members if those positions go away, which would result in city residents seeing fewer patrols and slower response times to burglary calls.
The School Age Child Care Program in the Belle Haven community, where 61 children go there after school, also has faced scrutiny as a way to save the city $192,000 a year.
“It’s sad that the city even considered cutting this program,” said Marie Bridges, who works as a physician therapist in Palo Alto during the day and picks up her 5-year-old granddaughter from the program.
“Sometimes it seems the city just wants us out.” The program offers services to children from kindergarten to sixth grade in one of Menlo Park’s lower-income communities. Some Belle Haven residents worry that the program could be cut even if the hotel tax increase is approved.
City Council member Kelly Fergusson, who is seeking re-election, said at a candidates forum on Oct. 11 that hotel owners in the city have no objections to the tax increase. Interviews with managers and other employees at two hotels indicate that not everyone agrees. Theresa Romo is hotel manager of the Mermaid Inn, where families of patients at nearby Stanford Hospital frequently stay. She worries that budget-conscious customers might skip Menlo Park if Measure K passes.
Menlo Park’s situation reflects the financial difficulties that many local governments in California are experiencing. There are 482 debt-prone cities in the state.
Menlo Park, home to Facebook and an affluent population, is viewed as being in better positioned than most to balance the budget. “I think the city has been well managed,” said Assemblyman Richard S. Gordon, who represents the 21st district in the State Assembly. “In terms of cuts, it is just not an easy decision to make.”
The city adopted a $65 million budget in June, with the goal of a small surplus for the 2012-2013 fiscal year. The nationally recognized Fitch Ratings recently gave Menlo Park the highest rating of AAA.
In July, however, the city’s housing renovation project — previously funded by redevelopment funds undefined closed. The project was designed to help low-income residents make renovations to their properties.