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By Diana Diamond

We need an audit of city spending

Uploaded: Aug 12, 2022

The fact that the Palo Alto City Council has decided not only to put a business tax on the November ballot, but also a tax that would allow the city to keep on transferring utility gas revenues to the city’s general fund, is upsetting, to say the least.

If both measures pass, the city will get approximately $7 million annually from the gas tax and $9.6 million from the business tax. That’s $16.6 million each year, every yea, that will be plunked into the city’s general fund, where the money can be spent on anything, including pensions and higher salaries for city staff. This council’s promise is to spend it on affordable housing, grade separations and public safety. But the next or future councils could change those priorities.

The city council has dutifully debated for months whether to put one or two measures on the November ballot. Some consultants recommended only one, in part due to the inflation we are now experiencing, and also because two tax asks in November may be one too many.

To the council’s credit, in trying to get business community’s buy-in for the business tax, the council compromised this week and the negotiating group of businesses agreed not to oppose either tax. Some council members were disappointed, because the tax, originally designed to bring in $45 million annually, had been considerably whittled down to the lower $9.6 million amount. The big businesses are happy about that.

But this whole process of the city trying to eke out more and more money from businesses and residents in town prompts me to strongly suggest we need a full audit of expenditures in Palo Alto, to determine how the city’s revenues are spent and whether some expenditures are no longer needed or valid.

Just recently an auditor found that the city was charging $1 a year rental on property owned by several non-profits in town – land that would, if taxed, bring in about $50 million a year.

When I talk about an audit, I am not implying there is or was any “fraud, abuse, or mismanagement of local government spending or that have major challenges associated with their economy, efficiency, or effectiveness,” which the California State Auditor write are some of the reasons for audits. But that office also points out the last couple of years, there have been more than a dozen cities whose expenditures have been audited for simply overspending, overcharges, or lack of oversight,

Palo Alto has hired a Chicago auditing firm, Baker Tilly, to Conduct several audits in this city. Their results, as released to the public, seem to be relatively thorough. Such a private auditor might be an effective way to conduct an overall audit of expenses – instead of getting the state involved. That audit could be expensive, but it also may be a way to find duplication and unnecessary expenditures, which could save us a lot of money.

While I can’t determine exactly what should be examined, such things as high permit costs, lengthy times for the city to issue permits, and other charges to residents and businesses come to mind.

Other items could include:
• Reasons for cost overruns by aa contractor;
• Whether the city is being charged too much by its vendors;
• Whether bids for contracts are coming in too high simply because “this is Palo Alto”;
• Are permitting fee charges by the city too high – especially for residents who want to make repairs and changes;
• Whether rebates are handled promptly (I’ve heard not); and finally,
• Is the city monitoring its revenues, and especially its esxpenses, carefully. I fear that some departments may have their own budgets with little administrative oversight year after year.

Back to the two measures on the November ballot. I predict that voters will probably approve the business tax, because residents will say, “Well, this is not a tax that I have to pay, so it’s okay if businesses pay for it.” And if there is no challenge to the measure from busineses, residents will also conclude they say it’s all right to tax them. If the gas tax and business tax are both in one measure, it will be a toss-up, tilting in vote totals toward what residents will have to pay themselves

As for continuing the gas utility transfer tax, which a judge last year declared was illegal because it had never been approved by voters, I am guessing since residents will have to pay it themselves, they will vote against it. Plus, the city was duplicitous in the way it withheld judge-ordered refunds to residents, which we have yet to receive. Instead of a rebate, the council instead put a measure on the ballot that, if passed, would allow those gas and electric extra charges to continue.

The ballot measures in the November election will occur, independent of any audit. But I contend city officials will still be asking for money, over and over, during the next several years, along with increasing utility charges each year.

Therefore, if we have an audit looking at howe well the city spends its money, it would be comforting to all of us to know whether the money the city takes in and spends is controlled efficiently – or not.