ATTACHMENT 1
REVENUES
The FY 2023/24 Budget projected Total Property Tax Revenue at $15,126,271 – a slight decrease over projected revenues ($2,593).
• Secured and Unsecured Property
Tax increased $181,900 for the
fiscal year.
• Property Tax in lieu of VLF
decreased ($184,493). (VLF
Shortfall)
The VLF shortfall has become
serious concern as the County and
local agencies look to the State
Legislature to include these funds
in the State Budget. The Town has
solicited our legislative lobbyist Joe
A. Gonsalves and team to assist with
legislative efforts.
Mid-Year Budget adjustments were made in the amount of $440,00. These were identified as onetime expenditures related to operations and maintenance needs that included IT Support services, Police overtime, Building contract services, park event management services, and survey consultant services.
• FY 2023/24 General Fund revenues are projected at $25.2m (inclusive of ERAF $2.63m). • FY 2023/24 General Fund expenditures are projected at $20.24m. • Net mid-year adjustments included $440,000.
• Transfers Out of $6.751m for CIP and Annual COP Debt Service.
The projected year-end fund balance for FY 2023/24 is $11,997,543, well above the Town’s reserve requirements for FY 2023/24.
Projected FY 2023/24 Ending Fund Balance $11,997,543
Required 15% Emergency Reserve ($3,037,291)
Required 20% Contingency Reserve ($3,037,291)
TOTAL RESERVE REQUIREMENT ($6,074,582)
General Fund Unallocated Balance $5,922,960
ATTACHMENT 1
Major Revenue Sources and 5-Year Forecasts
Property Tax Revenue
Property Taxes comprise about 70% of the total General Fund Revenues. Since FY 2011/12, the Town has seen an Assessed Property Value growth of ~7.63% per year. The highest growth year was FY 2015/16 at 9.0% and the lowest growth year of FY 2021/22 at 5.68%. In 2022 there were 92 full-value sales in Atherton, whereas in 2023, the Town saw 57 full-value sales. The median price for homes is down 4.75% from the previous year.
Tax Year Assessed Property Value Growth Year over Year
2011/12 $6,373,832,577
2012/13 $6,949,217,818 9.03%
2013/14 $7,575,935,532 9.02%
2014/15 $8,068,565,397 6.50%
2015/16 $8,791,201,962 9.00%
2016/17 $9,512,555,665 8.21%
2017/18 $10,220,091,841 7.44%
2018/19 $10,941,160,453 7.06%
2019/20 $11,664,530,505 6.61%
2020/21 $12,376,059,220 6.10%
2021/22 $13,078,821,692 5.68%
2022/23 $14,227,857,062 8.79%
2023/24 $15,386,937,386 8.15%
Atherton’s changes in property values are based mainly on CPI growth, prior year transfer of ownership, residential remodels, and new construction on razed properties. The Town’s Property Tax Consultant HdL Companies suggests that the Town use a conservative projection of 4.5%-
5.5% increase in Property Tax revenues. This is a combination of the projected CPI growth plus a review of sales, and construction activity that will come online in the next assessment period. For the 5-year forecast, staff projected a 4.5% increase in FY 2024/25 and FY 2025/26; a 5% increase in FY 2026/27; and 5.5% increase in FY 2027/28 and FY 2028/29. These are conservation projections that can be adjusted year over year based assessed value growth.
Building Permit & Planning Revenues
Building permit revenue is another major revenue source for the Town. Total revenue includes the basic building permit fee (calculated based a valuation per square foot); various flat fees for plumbing, mechanical and electrical permits; grading and drainage permits; and plan check fees.
Building Permit and Plan Check Fees are valuation-driven fees. Valuation-driven fees, such as Building Permit fees and Plan Check fees are based on building construction activity.
The Town completed its comprehensive fee study and adopted updates to the Town’s Master Fee Schedule. The new fees have an effective date of March 23, 2024. It is anticipated that there will be revenue increases across the community development departments. Most of the fees were set at full cost recovery. The FY 2024/25 Budget will include revenue projections based on the proposed Master Fee Schedule updates and on projected work volume, where feasible.
ATTACHMENT 1
With the increase in fees and projected building activity slowing, the forecast is set at 4% for FY 2024/25; 3% in FY 2025/26 and FY 2026/27; and 2% in FY 2027/28 and FY 2028/29.
Educational Revenue Augmentation Fund (ERAF)
The Town does not include ERAF revenues as operational revenue. Instead, the Town uses ERAF to help reduce long-term liabilities and fund one-time capital project needs. Over the years, ERAF has been used for the Town Center Project, debt service, the reduction of other long-term pension obligations, and recently as an allocation to the Town’s Capital Improvement programs. The use of ERAF is a year-to-year decision by the City Council as part of the budget process.
From FYs 2013/14 to FY 2015/16, the Town allocated $3,211,958 of ERAF funds toward Council priorities related to retiree healthcare and pension liabilities. ERAF revenues received from FYs 2016/17 to FY 2021/22 were directed to the Town Center Project – a total of $10,002,346.
Fiscal Year Budget Amount Actual Amount Use of Funds
FY 2013/14 $700,000 $1,020,000 OPEB Liabilities
FY 2014/15 $700,000 $1,125,000 $680,684 – OPEB Liabilities $444,316 – Workers’ Comp
FY 2015/16 $1,200,000 $1,066,958 $112,998- WC Equity
$548,950- CalPERS UAL
$405,010- Additional CIP
FY 2016/17 $1,033,000 $1,103,185 Town Center
FY 2017/18 $1,066,958 $1,280,172 Town Center
FY 2018/19 $1,025,000 $1,691,772 Town Center
FY 2019/20 $1,300,000 $1,784,091 Town Center
FY 2020/21 $1,312,500 $1,863,658 Town Center
FY 2021/22 $1,100,000 $2,279,468 Town Center
FY 2022/23 $2,316,000 $2,339,064 Additional allocation CIP ERAF revenue for FY 2023/24 was $2,633,605. This is an increase of $333,605 over the budget amount of $2,300,000. This is the highest ERAF that the Town has ever received. ERAF is a product of State legislative tax shifts (related to property tax and school guaranteed revenue levels).
The State Legislature is making changes to its methodology and changing the minimum guaranteed funding level for schools. It is anticipated that the State will introduce legislation that requires jurisdictions to backfill the State’s VLF obligations using Excess ERAF. It is anticipated that if the State is successful in this shift that schools will be made whole with VLF obligated funds, the State will reimburse the VLF shortfall with ERAF funds and the ERAF funds will ultimately be reduced or eliminated. Staff recommends that for projection purposes, FY 2024/25 ERAF revenue be estimated at $2.5m. This is a slight increase from the previous $2.3 estimate for FY2023/24.
ATTACHMENT 1
These three major revenues represent the primary revenues for the Town. Below is a table that reflects 5-year projections for these three revenue sources.
Major Revenues
FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29
Property Taxes $15,804,583 $16,515,789 $17,341,579 $18,295,366 $19,301,611 Building Fees $2,203,280 $,2,269,018 $2,334,729 $2,381,224 $2,428,648 Excess ERAF $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 Total Revenues $20,507,863 $21,284,807 $22,176,308 $23,176,590 $24,230,259 During the budget process staff reviews and projects other significant revenues to ensure there is adequate funding to meet operational service levels. Except for Planning Revenue (4%), these revenues reflect projected increases of 1% to 2%; and/or projections based on historical amounts received in the 5-year forecast. The following table reflects the projections of other significant revenue sources.
Other Significant Revenues
FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29
Sales & Use Tax $417,282 $425,628 $434,140 $442,823 $451,679 Franchise Fees $1,077,120 $1,093,277 $1,104,210 $1,115,252 $1,126,404 Business License $289,272 $293,611 $296,547 $299,513 $302,508 Planning Revenue $871,312 $897,451 $924,375 $942,862 $961,720 DPW Revenue $664,700 $683,420 $702,702 $715,942 $729,446 Park
Program Revenue $114,870 $116,593 $117,759 $118,937 $120,126 Other Revenue $1,699,896 $1,715,923 $1,732,036 $1,748,527 $1,765,407 Total Revenues $5,134,452 $5,225,903 $5,311,769 $5,383,856 $5,457,290