The city’s current two-year budget is balanced with about an $8 million surplus of anticipated revenues over expenses. Property tax and sales tax are the two biggest revenue components. Property taxes are sound and a growing at 3-5 percent annually—not so for sales tax, which is flat at about $25 million. That’s about 25 percent of the tax revenue.
There are two key drivers, Fialho said:
1. Regional competition, particularly from the San Francisco Bay Outlets in Livermore that is taking revenue from Stoneridge Shopping Center. The abundance of new retail in Dublin also is a factor. Incidentally, Simon Property Group owns both the outlets and the mall.
2. Online shopping, where people pay no sales tax or pay into a pool that is then distributed county-wide on a per capita basis. For Alameda County, that means Fremont, Oakland and the bigger bayside cities get the lion’s share. When the tax is generated in Pleasanton, the full local share goes to the city.
The online challenge likely will increase as online shopping continues to grow and major players continue to push into speedy delivery, including same day.
On the expense side, with about 76 percent of the expenses personnel-related, the challenge will be employee pension contributions. The California Public Employees Retirement System board had been basing its actuarial assumptions on a 7.5 percent annual return—terribly optimistic. The board has lowered the assumption to 7 percent—some folks, yours truly included—believe a more conservative return in the 6-6.5 percent range would be more reasonable.
The half-point change means increased contributions for Pleasanton that will total $15 million over five years. With its healthy $200 million in reserves (twice the annual operating budget), Pleasanton will be able to cope—he predicted other cities without the strong economic base that Pleasanton boasts will not do well.
The same goes for school districts that are facing increased contributions as well and cannot charge more for services to offset the costs.
During a lively question-and-answer session, Fialho was asked about why Owens Drive was reduced to one-lane where new mixed-use retail/apartment building had been constructed in Hacienda Business Park. He pointed out that a two-year planning effort went into that decision because for retail to succeed, there needs to be parking and it needs to be pedestrian friendly. That’s now true on the southside.
What’s missing is the development on the BART parking lot on the northside with retail, 300 apartment units and a parking structure. He’s maintaining that longer viewpoint, arguing that currently we only have half of the picture. Incidentally, he shared the presentation with Pamela Ott, the city’s economic development director. More later.