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About this blog: So much is right — and wrong — about what is happening in Palo Alto. In this blog I want to discuss all that with you. I know many residents care about this town, and I want to explore our collective interests to help ...  (More)

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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.

Local Journalism.
What is it worth to you?


Posted by Annette, a resident of College Terrace,
on Aug 14, 2022 at 8:33 am

Annette is a registered user.

Good idea. Maybe such an audit will force us to look at changing the City Charter so that we can change our model of government. The current city-manager model is working much better for the Business Alliance (and developers) than residents. Recent example: how is it that our un-elected City Manager was allowed to insert himself into the recent negotiation only to deliver a deal that (unsurprisingly) protects the Business Heavies from a higher, relevant-to-impact tax? The exemptions in the proposed tax protect small and medium-size businesses and that's good. They are not the ones attracting thousands of commuters and workers who need housing. But that's another subject. The idea of an audit is a good one.

Related: I think there should be a freeze on administrative hires until after both the PAPD and PAFD are fully staffed. Both have a more compelling need for staff than the City Manager does. The recent attack on the man in his car in the Piazza's parking lot makes clear that this city needs a higher police presence. The new chief is going to need money to achieve that. Maybe an audit will find areas that can be defunded or funded less so that more can be spent on public safety.

Posted by resident3, a resident of Another Palo Alto neighborhood,
on Aug 14, 2022 at 10:28 am

resident3 is a registered user.

I agree that the core question is our model of government.

An audit can result in a snapshot about where the money is spent but the day to day and year over year choices on where to allocate time and resources are consumed at the hands of a volunteer team of nice people but who are basically unaccountable. They don't even have to answer questions and neither does staff for their choices which are visions way beyond what we can afford or not even rooted in what the taxpayers care about. Competing with AT&T? How much time and money is being spent on this and why.

The business tax debacle shows that the current model of government has endless ideas about where to spend and reinvent but cannot close on getting any money to do anything.

As for the 2 measures, I will support the 7 million transfer of money from the gas proceeds to the general fund which should be going to basic community needs

I would have supported the business tax no questions asked but the 9 million "compromise" and how the City negotiated with them is so disgusting. If the City and Council want big spending ideas, they should go and keep negotiating with businesses and get real money for all the stuff we cannot afford. They can pay the tax and show up for more money or we can just try to live within our means and keep from having dilapidated sidewalks or unsafe parks.

Posted by Bill Bucy, a resident of Barron Park,
on Aug 14, 2022 at 4:48 pm

Bill Bucy is a registered user.

I suggest the city's annual budget include money for an audit of a specific municipal department or function. The council could create a basic framework of considerations in all cases and add an additional focus if needed.

(I'm willing to bet the public would like to chime in on this during the budgeting process.)

These wouldn't be forensic studies probing for wrongdoing - unless credible allegations are made or something untoward is found during the audit. In those cases, and if necessary, the city could certainly justify additional money to ensure a deeper dive.

One example: Auditors could determine if Palo Alto's notoriously involved and lengthy planning and permitting processes really produce superior results to those of comparable communities with more streamlined rules and procedures.

Any audit's methodology and results will draw criticism, particularly here in nit-picky Palo Alto. But I believe such audits will produce information and informed recommendations that will be well worth the money spent.

Posted by rita vrhel, a resident of Crescent Park,
on Aug 15, 2022 at 8:44 pm

rita vrhel is a registered user.

Excellent idea for an audit. Thank you Ms. Diamond.

The recent audit regarding PA owned properties rented to non-profits was excellent.

Even if the audit uncovered "no issues", I, as a long term resident, would like to know that tax revenues are being spent wisely.

Personally, I do not believe such a finding will occur. Our budget is so large and so complicated, there is ample room for many different kinds of "errors".

And why was our City Manager, who is on the Joint Venture Silicon Valley Board of Directors even involved in negotiations for the business tax?

It was a complete fiasco!

But then if you ask the people you are going to tax to weigh in and approve the tax, what did you expect?

It was almost like the business community and C of C, with their glossy mailer, was threatening a lawsuit. To which the city always caves.

I guess they were; we will outspend you and get our way.

The voters deserve better and the business community needs to pay more of their fair share.

Thank you.

Posted by Consider Your Options. , a resident of Another Palo Alto neighborhood,
on Aug 16, 2022 at 2:08 pm

Consider Your Options. is a registered user.

Oh, Diana. Your numbers and assumptions are wrong. The UUT measure is a vote to continue an existing tax, so your numbers are wrong. You need to subtract the UUT revenues that residents already pay from your total future UUT revenues.

The business tax should, in my opinion, be higher than proposed in order to restore more parity in the share businesses pay for the services and infrastructure they require from our city. They have been freeloading for too long.

Posted by Jarrod Taylor, a resident of Old Palo Alto,
on Aug 17, 2022 at 10:42 am

Jarrod Taylor is a registered user.

The question is...how many 'average' Palo Alto resident/citizens would actually read
read/scrutinize/comprehend such an audit and how many would actually be interested?

Posted by Heath Carlton, a resident of another community,
on Aug 17, 2022 at 11:44 am

Heath Carlton is a registered user.

An audit of this nature is pointless unless fraud and theft can be detected.

Mismanagement is not a crime.

Posted by Gary Locke, a resident of another community,
on Aug 18, 2022 at 7:28 pm

Gary Locke is a registered user.

"...how many 'average' Palo Alto resident/citizens would actually
read/scrutinize/comprehend such an audit and how many would actually be interested?"

^ Only beancounter types who can fully comprehend and interpret such information including any underlying reasons and justifications for certain municipal expenditures.

The 'average' citizen is incapable of such an undertaking.

Posted by Bystander, a resident of Another Palo Alto neighborhood,
on Aug 18, 2022 at 8:28 pm

Bystander is a registered user.

The average resident probably could not understand such an audit. But that doesn't mean an audit shouldn't take place and then it is up to analysts and journalists to dig deep into the figures and explain to us lesser mortals what is going on.

It is the reason we used to buy newspapers.

Posted by Noelle Carter, a resident of Downtown North,
on Aug 19, 2022 at 7:28 am

Noelle Carter is a registered user.

A comprehensive audit of how/where the U.S. government spends taxpayer dollars (including clandestine activities) is also warranted.

Posted by Dolores Campo, a resident of Duveneck/St. Francis,
on Aug 19, 2022 at 9:56 am

Dolores Campo is a registered user.

Accounting is not rocket science. In its most basic form, accounting is balancing the books between Accounts Receivable (incoming resources) and Accounts Payable (outbound expenditures).

It's no different than reviewing one's checkbook ledger along with the memo citing where/what the money was spent towards.

Anyone can comprehend a basic audit providing they know how to count.

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