Jan 2 2011

City Council to Create the 2011 Municipal Tax Review Committee

On January 3, 2011, the Piedmont City Council will consider a resolution forming the 2011 Municipal Tax Review Committee and authorizing Interim City Clerk John Tulloch to open recruitment for the committee.

In the past, the City has formed a Municipal Tax Review Committee  of independent citizens to provide an assessment of the city’s financial outlook prior to placing a municipal services parcel tax on the ballot.  The current parcel tax, Measure D, will expire June 30, 2013.

The previous 2007 Municipal Tax Review Committee met during 2007 and published its report in 2009.  It reviewed the need for a renewal of the Municipal Parcel Tax, and also evaluated the City Sewer Tax rate, the City Business Tax, General Fund Reserve requirements, as well as various other issues.  However, staff currently proposes to limit the charge of the 2011 Committee to a review of the Parcel Tax and the Sewer Tax.

The 2007 Committee was comprised of five members:  Martha Jones (Chair), Kate Breen, Brian Cain, Cynthia Kroll, and Conna McCarthy.   These Piedmont residents completed a well-researched and thorough report which analyzed the City’s expected revenues and liabilities, providing the City Council with “high-medium-low” projections and valuable data on budgetary trends.  See the 2007 Committee’s Report here.

The 2007 Committee’s Report recommended reauthorization of the Parcel Tax, with “some words of caution” which continue to be relevant today:

“Unless the Council is prepared to explicitly state that it will not underwrite the costs of operating the swimming pool, any long-term financial decisions based on this report should have these operational costs added back in. Otherwise, Piedmont is highly likely to commit to levels of expenses that it will be unable to sustain, and which will rapidly exhaust reserves. Future operating expenditure increases for both the pool and the library combined could amount to about $0.5 million per year. Moreover, the estimated salary increases used in our projections may or may not be adequate to maintain safety forces at desired levels.”  (At p. v.)

The 2007 Committee’s Report also recommended setting up a minimum General Fund Reserve percentage and a desired target percentage, pointing out that most cities have a minimum percentage which is often at least 25%.  In contrast, the City of Piedmont specifies only a maximum percentage for its general reserve fund  – and this maximum is equal to 25%.   (Most cities do not place any cap on their reserves and, of those having a cap, the cap is normally “about 50%”, according to the Report.)  A recommendation to change to a multi-year budget (e.g. 3 year) was also made, a procedure used by many other cities.   (See p. vi.)

A full list of the 2007 Committee’s Recommendations may be viewed at page vii of the report.

Over the next several years, the anticipated expenses for maintaining and replacing the City of Piedmont’s sewer system are anticipated to increase substantially due to recently increased EPA mandates, as well as the use of slightly less than $300,000 of sewer funds to pay for damages to Crest Road which occurred during the Piedmont Hills undergrounding project due to contractor trenching combined with heavy rains.  In addition, the City’s General Fund Reserve has recently been reduced substantially due to over $2.5 million in cost overruns and legal fees associated with private undergrounding districts.

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