Honorable Mayor and Councilmembers:
Without new and expanded revenue sources, the citys financial future is grim because of the "long-term structural imbalance" described in tonights staff report. Unfortunately, the identified ballot measures - alone - will not remedy the trendlines. Both short-term and long-term changes must be launched.
NEW REVENUE IS NEEDED
Over the past 30 years, car dealerships and businesses such as Raychem and SUN Microsystems departed; they made and sold "things" and paid substantial non-retail sales taxes. They were replaced by businesses that do not provide revenue to the city coffers: service businesses (e.g., venture capital, law, real estate), internet-based businesses (e.g., huge Meta), and non-for-profit organizations (e.g., SRI, Stanford, medical, dental). [
[Yes, some pay property taxes but such revenue is limited by Prop 13, causing such revenue to increase at a slower rate than city expenses -- or actually decline in downturns.] I
Now is the time to authorize a multi-prong economic strategy and plan that considers such things as:
* Menlo Parks unique strengths relative to the region, state, country
* Potential sources of new retail and non-retail tax revenue from businesses that build on these strengths
* Ways that service and internet-based businesses could contribute a fair share to the citys revenue
* Lessons Learned from a comparison of actual revenue to projected revenue in the respective Financial Impact Analysis reports for major development projects (e.g., Menlo Gateway, Facebook Expansion projects) and plans (e.g., ECR/Downtown Specific Plan and ConnectMenlo General Plan)
It will take time to right the financial ship, so this work to learn from the past and identify a path into the future must begin as soon as possible. A strong strategy consultant as well as volunteers from our talented community and businesses should be engaged.
BALLOT MEASURES HAVE A PART
It makes sense to reinstate some sort of Utility Users Tax (UUT) and discuss the relative tradeoffs of increasing other taxes.
Because it is extremely important to our community to retain small businesses as well as for the city to provide a broad range of services, the current business license tax is both a concern and an opportunity. As it stands now, it is regressive with a higher rate for the smallest businesses. Additionally, the cap does not make sense in certain sectors (e.g., non-retail service and internet-based businesses that do not provide sales tax revenue). Is it possible to create a selective cap by sector? Could sufficient additional revenue result from a less regressive tax, possibly beginning at a lower rate than todays, and/or that has a higher cap (or is uncapped) on larger gross receipts? Are all companies paying a fair share?
SUMMARY
Action is required on numerous fronts, not just reliance on some ballot measures that may not even pass. Please authorize an economic strategy and plan to guide our city forward to a stronger financial footing.
Respectfully submitted,
Patti Fry
PS attached for information are excerpted pages from the 2014 Menlo Park Economic Development Strategic Plan Phase 1: Economic Trends Report where you can see the dramatic shifts in revenue sources that preceded more recent charts that were part of the recent budgeting process
