How to fix our $5 million budget deficit
Original post made by Bern Beecham on Jun 10, 2006
Last November, based on recommendations from task forces on retail retention and enhancement, we proposed a three-year multi-element plan to enhance city revenues. We need this plan now more than ever to avoid further, deeper budget cuts.
Here's what we need to do:
1. Work with Stanford Shopping Center, now managed by Simon Property Group, to increase their total taxable sales by 30% or more.
2. Ensure that our auto dealers stay in town and successfully compete with larger franchises. The right solution could double our $2 million in auto sales taxes. With no solution, we will lose our dealerships over time, for a negative budget swing of $4 million a year.
3. Provide incentives to attract one or more hotels, partially offsetting the loss of revenue and services from the closure of Rickey's Hyatt.
4. Open discussions with Fry's to ensure they stay. Our Palo Alto store is their oldest and smallest. A reasonable reinvestment in this keystone operation could increase sales tax revenues by up to 50%.
5. Create new revenue opportunities in collaboration with major corporations in Stanford Research Park. Few of them maintain sales offices here so they provide negligible revenue to us. Our business-to-business sales tax revenues significantly lag those in other cities.
6. Focus new energy on our two downtowns, especially California Avenue. Upgraded streetscapes can enhance these shopping and dining centers. We need to ensure the prosperity of both.
We've already initiated work on most of these items. On budget night this Monday, it will be time to take strong, positive control of our revenue future. We must develop a comprehensive revenue strategy that addresses the magnitude of our growing revenue shortfall and establishes a series of specific objectives for potential increases. Finally, we must prepare a clear, actionable and measurable implementation plan, dedicating sufficient resources for this purpose to meet our long-term revenue needs.
(Editor's Note: Bern Beecham is a member of the Palo Alto City Council)
on Jun 10, 2006 at 11:28 pm
I could not agree more with Mr. Beecham's comments on fixing the city budget! We need to attract more retail to Palo Alto. Look at the cities around us. Take a drive to Morgan Hill or Gilroy. They still have that "bedroom community feel", but have built up their freeway areas with big retail, hotels, auto dealers. Palo Alto is a great city, but it needs to change it's way of doing business before it is to late.
on Jun 12, 2006 at 8:08 am
I don't want to belittle Mr. Beecham's suggestions for increasing city revenues (though I don't agree with all of them), but I am concerned at the short shrift he gives to reducing expenditures. Here's what he has to say:
I'm not entirely certain why the $1.7 million surplus is enclosed in quotation marks -- perhaps it is an imaginary pile of money. Setting that aside, Mr. Beecham suggests that cutting staff and services is akin to getting blood from a stone, and anything along those lines would be "severe." Out of curiosity, I downloaded some of the recent budgets to find out exactly how draconian we had been in our previous cuts. Here's what I found:
In the 2006-07 budget (General Fund Expenditures): "Total General Fun expense is projected to be $127.4 million [...] a $2.1 million increase from 2005-2006 adjusted budget figures. The main elements of these changes include: [...] $2.0 million increase for salary and benefit-related expenses..."
Which is to say that we cut so severely in the past that we only increased the budget by $2 million! Thank heavens for thrift.
I was also struck by the "adjusted budget" reference. Looking at the initial (I suppose, unadjusted) budget, the plan called for $120.8 million in General Fund expenditures. Which means that the 2006-07 budget is actually $6.6 million more than the original 2005 budget (not the $2.1 mentioned). And this is just in the General Fund -- I won't pretend to understand all the odd shuffling that goes on between the General and Operating funds.
Before we let the City Council get into the business of choosing business models (i.e., hotels and car dealerships) to support (read: benefit from tax money), I suggest we ask them to set some spending limits like population growth + inflation. Perhaps we already have such limits?
on Jun 12, 2006 at 10:16 am
I wish more members of our community would take a multi-year view of our budget challenges and realize that Council Member Beecham's clarion call looks at both our current finances and where they are headed in the future. Here are two cost realities that we will face for years to come:
1. Our aged infrastructure of streets, sidewalks, irrigation, medians, parks, trails, etc. is reaching the end of its useful life, and it will require increasing funds to keep it intact and in some cases upgraded when replaced. This is a 9 figure (that is, over $100 million, some estimates are as high as $200 million) issue that will require many years and many dollars to address. These things don't get done by magic, and a great deal of staff time and staff labor goes into this type of work. I am yet to hear anyone in the community advocating that we save money by delaying or curtailing upkeep and upgrade of our basic infrastructure, but that is what is happening as a result of the budget contraints we already face.
2. Like it or not, Palo Alto, like cities, counties, and state agencies all over California, are facing an increasing retirement fund obligation for those employees who put their years of service to Palo Alto, with an understanding that they would receive in retirement a certain amount of money--it was part of the compensation package they signed up for when they worked for the community. These are people who served at all job levels, most did not earn large salaries as employees. We could lay off every employee in Palo Alto tomorrow, and this retirement obligation would continue to grow for a number of years to come, until restructured compensation and retirement plans start to apply to employees whose retirement is many years away.
These two matters alone amount to tens of millions of dollars of costs Palo Alto cannot wish away. While reasonable people can have different opinions about what a million or 2 million dollars of a budget is all about, I fear it misses a much larger point, one I believe Council Member Beecham is trying to bring to the community's attention.