March 5, 2025
Joint Study Session City Council & Audit and Finance Committee
AGENDA
Town of Atherton
Joint Study Session City Council & Audit and
Finance Committee
MARCH 05, 2025
SPECIAL MEETING – STUDY SESSION
4:00 PM
Council Chambers
80 Fair Oaks Lane
Atherton, CA 94027
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This Agenda may not reflect the actual order of items. The order of items is subject to change based on Council action. The public may participate and provide public comments in person or via Zoom Meeting. Please be advised that when all Council Members are attending the meeting in person, the teleconferencing option is provided as a courtesy to the public. If, for any reason, there are technical difficulties, the City Council meeting will continue in person, provided there is a quorum at the meeting.
SPECIAL MEETING - STUDY SESSION
ROLL CALL –
City Council: Hawkins-Manuelian, DeGolia, Widmer, Vice Mayor Holland, Mayor Lewis Audit & Finance: Hill, Sleeth, Patil, Scolnick, Walker
PUBLIC COMMENT – Public Comments can be emailed directly to [email protected] This portion of the meeting is reserved for persons wishing to address the Council on any matter that is on the Agenda. Speakers’ time is limited to three minutes. Speakers may also speak when the item comes up on the Agenda during the meeting. State law prohibits the Council from acting on items not listed on the Agenda except by special action of the City Council under specified circumstances. The Mayor may, at the Mayor’s discretion, restrict or grant additional speaker time based on such considerations as agenda length, number of speakers, complexity of the item, or looming threat of loss of quorum. Please refer to the footnote at the end of the posted agenda for additional notice regarding public comments.
ACTION ITEMS
STUDY SESSION
1. FY 2025/26 BUDGET KICK-OFF AND OVERVIEW
Report: ROBERT BARRON III, FINANCE DIRECTOR
Recommendation: It is recommended that the Council review and discuss the Fiscal Year 2025/2026 Budget.
Description: This item is part of the annual budget process for Council to review and discuss the fiscal year 2025/2026 budget.
2. PROVIDE FEEDBACK AND DIRECTION REGARDING CONSTRUCTION REGULATIONS – UTILITY SERVICES REQUIRED FOR DEVELOPMENT
PROJECTS
Report: ROBERT OVADIA, PUBLIC WORKS DIRECTOR
Recommendation: It is recommended that the Council review and provide feedback and direction to staff regarding the underground utility service connections required by the Town’s construction regulations associated with development and redevelopment construction projects.
Description: This item will involve a Council discussion to consider underground utility service connections that are required by the Town’s construction regulations associated with development and redevelopment construction projects.
COUNCIL REPORTS/COMMENTS
ADJOURN
PLEASE NOTE THE FOLLOWING INFORMATION:
If you challenge a Town zoning, planning, or any other decision in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this agenda, or in written correspondence delivered to the Town at, or prior to, the public hearing. Judicial review of any Town administrative decision may be had only if a petition is filed with the court not later than the 90th day following the date upon which the decision becomes final. Judicial review of environmental determinations may be subject to a shorter time period.
Copies of all staff reports and documents subject to disclosure that relate to each item of business referred to on the agenda are available for public inspection by 5:00 p.m. the Friday before each regularly scheduled City Council meeting.
Pursuant to the Americans with Disabilities Act, if you need special assistance in this meeting, please contact the City Clerk’s Office at (650) 752-0500. Notification of 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this March 5, 2025
Joint Study Session City Council & Audit and Finance Committee
March 5, 2025
Joint Study Session City Council & Audit and Finance Committee
meeting. (29 CRF 35.104 ADA Title II)
Public Comments:
The Town of Atherton Council and Committee or Commission meetings are a limited public forum, and all public comment must relate to something that is within the subject matter jurisdiction of the Council or Committees. If comments do not relate to the subject matter jurisdiction of the Council or Committee, we will stop the comment and a warning may be provided. If the comment continues to be outside of the subject matter jurisdiction the speaker will be stopped, and we will move on to the next speaker. Speakers found in violation of this rule of procedure may be removed from the meeting.
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Item No. 1
Town of Atherton
CITY COUNCIL STAFF REPORT – STUDY SESSION
TO: HONORABLE MAYOR AND CITY COUNCIL
FROM: GEORGE RODERICKS, CITY MANAGER
ROBERT BARRON III, FINANCE DIRECTOR
DATE: MARCH 5, 2025
SUBJECT: FY 2025/26 BUDGET KICK-OFF AND OVERVIEW
RECOMMENDATION
Review and Discuss.
BACKGROUND
The FY 2025/26 Budget Kick-Off Meeting is the first meeting in the FY 2025/26 Budget cycle.
The Kick-Off Meeting is a high-level overview of the Budget and not intended as a detailed discussion; instead, it focuses on a recap of the current Fiscal Year, current priorities, identifies Preliminary Budget Assumptions for FY 2025/26 and introduces the 5-year Forecast. The Report is a snapshot of future revenue and expenditure assumptions based on information available through the County, State, and local information.
The Annual Budget serves as one of the most important policy documents of the City Council. It aligns the Town’s annual revenues with Goals and Objectives for the coming year. One of the Town’s core strategies is financial stability. The focus during budget preparations is maintaining operational and service needs. During each budget cycle Town operational services and maintenance needs are reviewed to ensure adequate resources are available amongst Town departments. This includes creating a balanced budget that meets the Council’s Goals and Objectives while maintaining long-term financial stability.
The discussion focuses on the Town’s General Fund. The General Fund is the primary operating fund of the Town and most of the revenue to the fund comes from Property Taxes. The General Fund is also the single largest contributor to the Town’s Capital Improvement Fund for capital projects.
This staff report provides, in brief:
• An overview of the FY 2024/25 Year-End Projected Fiscal Condition • An overview of the Town’s Major Revenue Sources and 5-Year Forecasts • An overview of the Town’s Major Expenditure Categories and 5-Year Forecasts
Budget Study Session FY 2025/26
March 5, 2025
• An overview of the Budget Process and Policy Discussions Forecasted revenues and expenditures do not represent actual budget expectations year over year. These forecasts may change due to local and state economic conditions. Forecasts serve only to evaluate budget assumptions. Below is the FY 2025/26 Budget Review Calendar for the coming months.
FY 2025/26 Budget Calendar
City Council Meeting
March 5, 2025 – Meeting #1
An overview of the FY 2024/25 Year-End Projected Fiscal Condition An overview of the Town’s Major Revenue Sources and 5-Year Forecasts An overview of the Town’s Major Expenditure Categories and 5-Year Forecasts An overview of the Budget Process and Policy Discussions City Council Study Session Meeting
April 2, 2025 – Meeting #2
Review and Discussion of the Operations Budget
City Council Study Session Meeting
May 7, 2025 – Meeting #3
Review and Discussion of the Special Funds & Capital Projects Budget City Council Study Session Meeting
June 4, 2025 – Meeting #4
Review and Discussion of the Final Draft Budget
& Special Revenues/Other Funds
City Council Regular Meeting
June 18, 2025 – Meeting #5
Adoption of the Final FY 2025/26 Budget
Meetings #1 through #4 will be noticed as Joint Meetings with the Audit & Finance Committee to allow the Committee to engage with the Council during budget discussions.
ANALYSIS
Attachment 1 is a Summary of Revenues and Attachment 2 is a Summary of Expenditures.
Staff will review each attachment.
Fund and Reserve Balances
The General Fund is the Town’s primary operating fund and maintains reserve balances for emergencies, operating reserves, capital reserves and unallocated reserves. A portion of the Town’s General is set aside an Emergency Reserve. Emergency Reserves represent 15% of the actual annual General Fund operating expenditures each year.
Budget Study Session FY 2025/26
March 5, 2025
The Town also has an Operating Reserve set aside at 15% of the actual annual General Fund operating expenditures each year. There is no defined use for the Operating Reserve other than set aside funding. These Reserves provided financial assurance to the Town’s lender for the COP.
The City Manager does not have the discretion to utilize the Emergency Reserve or the Operational Reserve without specific City Council direction. Any remaining fund balance not reserved or committed is designated as Unallocated Fund Balance. This Unallocated Fund Balance represents funds that have not yet been assigned.
The City Council maintains a Budget Reserve Policy for Available Unallocated Reserve Fund Balance that is used to address long-term liabilities, capital projects, and a minimum mandatory reserve. As part of the budget process, every year the City Council considers an allocation of the unallocated General Fund Reserve to the Town’s Capital Improvement Fund to assist in accumulating funds for future capital projects or for other operational uses. As part of the Town’s ongoing financial stability core value and operations process, staff will continue to work with the Council on the use of unallocated reserve fund balance options.
Budget Process and Policy Discussions
The budget process is done in stages to allow the City Council and public time to review the General Fund Operations Budget, the Capital Improvement Budget, Special Revenues, and Internal Service Funds. The budget process provides staff the opportunity to examine programs, propose changes in current Town services, outline operational needs and recommend capital outlay items to the City Council.
Budget Goals
As staff prepares the budget, staff will set goals for each department that continue to maintain or enhance the level of service throughout the community, while ensuring that the Town maintains its core strategy of fiscal stability. These goals are based on the overall Council Policy Goals.
POLICY FOCUS
The policy focus for this item is discussion and overview of the budget process, philosophy, and assumptions. There are policy areas for Council discussion and direction. Discussion includes budget revenue and expenditure assumptions, the use of excess ERAF, reserve policies, and a policy focus on the reduction of long-term liabilities.
GOAL ALIGNMENT
This report and its contents are aligned with the following Council Policy Goals:
• Goal A – Maintain Fiscal Transparency
• Goal F – Be Forward-Thinking, Well-Managed, and Well-Planned
FISCAL IMPACT
Budget Study Session FY 2025/26
March 5, 2025
None.
PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders – to include, but be not limited to, media outlets, school districts, Menlo Park Fire District, service provides (water, power, and sewer), and regional elected officials.
The Town maintains a Fiscal Transparency web portal and includes all budget information on its website. Links to these various areas are below:
Fiscal Transparency Web Page: http://www.ci.atherton.ca.us/index.aspx?NID=269 Archive of Town Budgets: http://www.ci.atherton.ca.us/index.aspx?nid=273 Financial Data Portal (OpenGov): http://www.ci.atherton.ca.us/index.aspx?nid=361 Financial Audit Archive: http://www.ci.atherton.ca.us/Archive.aspx?AMID=39&Type=&ADID= Actuarial Valuations Archive:
http://www.ci.atherton.ca.us/Archive.aspx?AMID=61&Type=&ADID= Labor Contracts, Agreements, and Salary/Benefit Information:
http://www.ci.atherton.ca.us/index.aspx?nid=192
ATTACHMENTS
Attachment 1 – Revenues
Attachment 2 – Expenditures
Attachment 3 – FY 2025/26 General Fund Five Year Forecast
Attachment 1
REVENUES
The FY 2024/25 Mid-Year Budget projected Total Property Tax Revenue at $16,084,471 – an increase over projected revenues by $279,886.
• Secured and Unsecured Property
Tax increased $279,886 for the
fiscal year.
• Property Tax in lieu of VLF for
FY 2024/25 is consistent with
the adopted budget projections.
Staff budgeted VLF In Lieu
based on anticipated shortfalls
projected by the State for FY
2024/25. The revenue projection
for VLF In Lieu that was
included in the Adopted Budget
for FY 2024/25 is $1,433,225.
The VLF shortfall is still a major
concern for the County and local
agencies. Every year agencies lobby the State Legislature to include these funds in the State Budget. There is still a remaining shortfall for the Town of $1,455,425. This is made up of FY 2023/24 shortfall of $704,985 and FY 2024/25 shortfall of $750,440. The Town continues to use our legislative lobbyist Joe A. Gonsalves and team to assist with legislative efforts to lobby on the Town’s behalf for backfill funding.
Mid-Year Budget adjustments were made in the amount of $183,900. These were identified as one-time expenditures primarily due to one-time expenditures for operations and maintenance needs that included Laserfiche imaging project phase II, Police overtime and technology upgrades, Building contract services, and park event management services. • FY 2024/25 General Fund revenues are projected at $26.3m (inclusive of ERAF $2.71m). • FY 2024/25 General Fund expenditures are projected at $21.2m. • Net mid-year adjustments included $183,900.
• Transfers Out of $5.311m for CIP ($4.45m) and Annual COP Debt Service $861k.
The projected year-end fund balance for FY 2024/25 is $11,997,543, well above the Town’s reserve requirements for FY 2024/25.
Attachment 1
Projected FY 2024/25 Ending Fund Balance $12,400,555
Required 15% Emergency Reserve ($3,180,536)
Required 20% Contingency Reserve ($3,180,536)
TOTAL RESERVE REQUIREMENT ($6,361,072)
General Fund Unallocated Balance $6,039,483
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 ~7.55% per year. It dropped from 7.63%.
The highest growth year was FY 2021/13 at 9.3% and the lowest growth year of FY 2021/22 at
5.68%. In 2024 there were 48 full-value sales in Atherton, whereas in 2023, the Town saw 92 fullvalue sales. The median price for homes is down 21.72% from the previous year to $6.54m. This is an important statistic as an indicator of future property tax revenues.
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%
2024/25 $16,386,551,372 6.50%
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 uses a conservative projection of 4.0%-
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 2025/26 and FY 2026/27 and a 5.5% increase in FY 2027/28 through FY 2028/29. These are projections that can be adjusted year over year based assessed value growth. The Council may wish to discuss a reduction in those out year projections of 5.5% as they are on the top end of HdL’s projections.
Building Permit & Planning Revenues
Attachment 1
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 is approaching its full first year of updates to its Master Fee Schedule. The new fees were effective March 23, 2024. This was done via comprehensive fee study. Most of the fee adjustments impacted fees within Building, Planning and Public Works. It had been approximately twelve years since the prior increase in building valuation fees. Most of the fees were set at full cost recovery; however, some fees were set lower based on policy direction of the City Council.
Revenue projections in the FY 2024/25 budget were based on the new Master Fee Schedule and projected work volume.
With the increase in fees and projected building activity slowing, the forecast is set at 4% for FY 2025/26; 3% in FY 2026/27 and FY 2027/28; with 2% in FY 2028/29 and FY 2029/30. Planning revenue is also projected lower in 2025/26 and FY 2026/27 as there is a projected slow down in applications for future construction permits. The Planning revenue forecast is set at 3% in FY 2027/28 and 2% in FY 2028/29 and FY 2029/30.
Educational Revenue Augmentation Fund (ERAF)
The Town uses ERAF revenue to help reduce long-term liabilities and fund one-time capital project needs. It is not included as operational revenue. In previous years, ERAF has been used for the Town Center Project, debt service, the reduction of other long-term pension obligations.
Recently, there was also an allocation to the Town’s Capital Improvement programs. The use of ERAF revenue 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
Attachment 1
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 FY 2023/24 $2,300,000 $2,633,605 Additional allocation CIP ERAF revenue for FY 2024/25 was $2,771,578. This is an increase of $271,578 over the budget amount of $2,500,000. This is now the highest ERAF amount that the Town has ever received. In FY 2024/25 budget we increased the ERAF projection from $2.3m to $2.5m. Staff recommends maintaining ERAF at $2.5m in the upcoming budget.
ERAF is a product of State legislative tax shifts (related to property tax and school guaranteed revenue levels) and is directly affected by VLF Shortfalls. The State Legislature continues reviewing the methodology and changing the minimum guaranteed funding level for schools.
There is an expectation that the State will introduce legislation that requires jurisdictions to backfill the State’s VLF obligations using Excess ERAF. If the State is successful in this shift, schools will be made whole with VLF obligated funds, the State will reimburse the VLF shortfall with ERAF funds and the Excess ERAF funds will ultimately be reduced or eliminated. The Town is due its share of VLF and Excess ERAF. If the State uses Excess ERAF to shore up the VLF shortfall, the State would essentially be reimbursing the Town using the Town’s own expected revenue.
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 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Property Taxes $17,145,791 $17,917,352 $18,902,806 $19,942,460 $21,039,296 Building Fees $2,446,931 $2,519,979 $2,593,219 $2,644,883 $2,697,581 Excess ERAF $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 Total Revenues $22,092,722 $22,937,331 $23,996,025 $25,087,343 $26,236,877 During the budget process staff reviews and projects other significant revenues to ensure there is adequate funding to meet operational service levels. These revenues reflect 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 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Sales & Use Tax $527,748 $538,303 $549,069 $560,050 $571,251 Franchise Fees $904,176 $928,408 $950,259 $970,340 $988,432 Business License $295,800 $300,237 $303,239 $306,272 $309,334 Planning Revenue $520,312 $620,321 $638,931 $651,710 $664,744 DPW Revenue $689,660 $709,129 $729,182 $742,951 $756,996 Park Revenue $86,700 $88,001 $88,881 $89,769 $90,667
Other Revenue $1,704,956 $1,722,203 $1,739,549 $1,757,302 $1,775,470 Total Revenues $4,729,352 $4,906,602 $4,999,110 $5,078,394 $5,156,894 Franchise Fees
Attachment 1
In November 2024, the City Council amended the Franchise Agreement between the Town and refuse hauler GreenWaste. This amendment adjusted the Franchise Fee the Town receives from GreenWaste for its exclusive franchise for refuse. The amendment adjusted the Franchise Fee from 10% to 5% of the Franchisee’s monthly gross billings. This was done to support the ratepayer impact of the annual rate adjustments for the refuse contract and thus will remain in effect until otherwise amended. The prior annual Franchise Fee totaled $430,000. With the reduction of the fee to 5%, the new projected amount is approximately $237,000 in FY 2025/26 and is projected at $290,830 in FY 2029/30. This projects a $190,000 reduction in franchise fee per fiscal year.
OTHER REVENUE FUNDS
Library Funds
The Town is a member of the San Mateo County Library (SMCL) JPA system. The Atherton Library is funded through property taxes that are collected and allocated to library services. Under the JPA, jurisdictions are permitted to retain excess funds generated from the local property taxes if the basic library services are met. The Town most recent use of all excess funds have been for the Town Center Project – Library – as well as extended library hours of daily operation, utilities, and maintenance costs. The San Mateo County Libraries holds all future excess funds.
For the Construction of the Atheron Library, SMCL advanced the Town $5,391,725 for completion of the project. With the completion of the new Atherton Library, annual excess funds minus the amounts needed for yearly operation of the library are retained by the Library JPA until the total advancement amount is reimbursed. During the agreement on advancement of Library funds, it was estimated that the projected Library Fund Revenue would be in the range of approximately $1,600,000 per year.
For FY 2023/24 the Atherton Library property tax received and held by San Mateo County Library was $1,791,379 and included interest of $85,173 for a total amount of $1,876,552. Of this amount, the Town applied $1,350,468 toward the current SMCL JPA advancement of funds balance of $2,508,377. This leaves a projected remaining balance of $1,157,909 on the advancement of funds used for the library construction. The Town anticipates that with the estimated yearly Library Property Tax revenue of $1.7m, that the debt for advancement of funds will be eliminated by the end of FY 2025/26.
The Library Budget for FY 2024/25 and FY 2025/26 will include the Children’s Nature Garden Project at $528k and Library Operations at $857k.
Once the advancement of funds is reimbursed, any remaining funds after Library Operations and CIP are evenly split between the Library and the Town for library-related activities. This estimates that the Town would receive approximately $850,000 in tax revenue for Library operations use.
These funds must be maintained separate from the Town’s General Fund and can only be used for Library services, programs and capital projects.
Attachment 1
Grant Funds
The Town receives grants through application for certain operational or capital projects. In addition, the Town receives grant funds through regional applications and other JPA agencies for use on studies, augmentation of project expenditures, or to enhance state mandated programs.
Grants are only budgeted if they have been authorized and approved by the granting agency. The Town does not budget for grants not yet awarded. There are several grants that the Town has received or for which we have award.
The Peninsula Clean Energy (PCE) grant $182,000. PCE has a one-time program geared to community reinvestment. There is currently $11.5 million available for member agency grants.
This is a fixed allocation for each agency based on load share or customer accounts at the end of the year 2023. The Town has an allocated shared amount of the PCE Grant for $182K. The grant is flexible funding to be used to reduce local greenhouse gas emissions. The grant application is due by June 30,2025. The Town’s application is for the installation of EV charging stations within the Police Department secured parking lot for the current two electric vehicles (EV) and for future transition of the fleet. The grant also covers the installation of EV stations at Holbrook Palmer Park entry lot.
Atherton Culvert and Detention $1.3m (Eshoo Grant) – The Town received grant funding approval for Upper Channel Flood mitigation project through a Community Project Funding Grant (Federal). This project is flood mitigation at Alameda de las Pulgas associated with the Upper Atherton Channel. The project is in collaboration with Las Lomitas Elementary School. This grant is administered through FEMA. Federal funds have not yet been allocated, and staff is working with FEMA to address information requests. It is likely that additional funding will be necessary to complete the project.
ADLP Traffic & Safety Project $2m (Eshoo Grant) – The Town has received a $325,000 Federal Funds grant through the State of California Department of Transportation for design funding for Alameda De Las Pulgas traffic improvements. This portion is for traffic calming and pedestrian measures along Alameda De Las Pulgas from Mills Avenue to Stockbridge. The Town is currently working on updating the improvement funds to increase the design funding to $560,000 and $1.675m available for construction.
Beverage Container Grant of $5,000 (CalRecycle Grant) – The CalRecycle grant is an annual grant received via the State. The Town recently installed water bottle filling station fountain at the Park by the Tennis Courts and Baseball field. In previous years staff has used this grant for recycling containers around the Park and Town Center facilities.
Housing Element $65,000 (LEAP grant) – The Town applied and received one-time grant funds for assistance to the update of the Town’s 6th Cycle of the Housing Element. These funds were used to augment planning and other consulting services to deliver the various portions of the Housing element update. This included the Housing Element review update, zoning update, and objective design standards.
Attachment 1
State COPS Grant of $165,000-This yearly State for Community Oriented Policing Programs is sent to local entities for use to advance community policing in jurisdictions of all sizes across the nation. Community policing focuses on crime and social disorder through the delivery of police services that includes aspects of traditional law enforcement, as well as prevention, problemsolving, community engagement, and partnerships.
Donation Funds
Police Department Wellness Program Donation of $200,000- This is for the continuation of a fulltime contract police wellness program coordinator to be shared by Atherton, Menlo Park and East Palo Alto. The regionally supportive wellness initiative gives the employees confidence that their department cares for their well-being. This donation investment helps with employee physical and mental wellness, assists in delivering benefits for officer health, morale, and operational efficiency.
The anonymous donor indicates they plan to continue to fund the wellness program on an annual basis.
Police Department K9 Vest Donation of $4,000- This donation was for a new K-9 vest to outfit our K9 “Maverick” for his service to the Town as one of our police dogs. Our police K-9 units are a vital part of our service and protection of residents and the police department.
Police Department Perishable Skills Training & Nutrition Support Program Donation of $40,000 – This program is in its second year of five and funds overtime for annual police training and funding for a nutritional support for the department. This works in tandem with our wellness program. Police training is critical for officers/staff to maintain important perishable skills, increasing team readiness and officer safety. This donation for overtime helps support a second annual training enhancing team building, morale, and maintaining perishable skills. The nutritional support program provides healthy meals, snacks, and drinks to APD staff daily.
Town Center Donation of $45,000- This was the final grant donation from the Lisa and Douglas Goldman Fund toward the Atherton Town Center project. This was part of $225,000 grant payable over five years for the construction of the Town Center. This grant is in addition to the grant awarded by the Goldman Fund in 2016 to Atherton Now for the project for a total contribution of $250,000 towards the project.
Park Beautification Donation of $1,000 from Atherton Garden Guild- The Town received the donation for the cost of labels to identify trees and provide horticulture education at the Atherton Town Center campus for trees that flourish in our Town.
Attachment 2
EXPENDITURES
The 5-Year Projections for Salaries and Benefits are shown below. The Town has one bargaining unit, the Atherton Police Officers Association. There are annual adjustments associated with the current Memorandum of Understanding based on an agreed upon CPI range. The amounts below do not represent any assumed contractual labor adjustment (i.e. CPI or negotiated benefit increases). For purposes of this forecast, staff used assumptions between 3% and 4%.
Salaries & Benefits
FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Administration $927,232 $964,321 $998,072 $1,028,014 $1,058,855 Finance $632,271 $657,562 $680,577 $700,994 $722,024
Building $228,604 $237,749 $246,070 $253,452 $261,056
Police $7,651,857 $7,957,931 $8,236,459 $8,483,553 $8,738,059 DPW $758,443 $788,791 $816,388 $840,880 $866,106
Total $10,198,407 $10,606,344 $10,977,566 $11,306,893 $11,646,100 The Town uses a wide variety of contract services, the most significant portion of expenditures within the department budgets are Professional Services and Other Technical Services. These expenditure categories represent a variety of contract services, software licensing, and basic operational costs. These are included in the projection table below and represent services such as building and safety services, planning services, maintenance services, landscaping services, park event services, tree maintenance, legal services, IT services, and animal control services. The services provided under contract are not Town staff, but they assist in providing day-to-day Town operations services.
It is important to note that contract planning services saw an increase in expenses in FY23/24 as the Town transitioned to a new service provider and the Town continued work on the 6th Cycle update of the Housing element. In the current forecast, the Planning Department expense eliminates the one-time cost for the Housing Element. However, Building Contract services are being evaluated, and the contract methodology may see an adjustment. There has not been a change in the terms of the service contract since 2012. The current building services are provided via contract with Interwest/Safebuilt community development services. The current contract includes the service provider receiving 58% of the first million in revenue and 55% for additional building revenues over $1 million. Staff is evaluating the cost of service model resultant from the Town’s recent fee adjustments.
Basic budget assumptions for the General Operations expenditure budgets are 3% to 4.5% year to year in the forecast. FY 2025/26 and FY 2026/27 forecast 4.5% increases; FY 2027/28 projects
3.5%; and FY 2028/29 and FY 2029/30 projects 3%.
Operational Expenditures
FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Council 69,613 72,745 75,291 77,550 79,877
Administration 436,909 456,570 472,550 486,727 501,328
Attorney 323,950 338,528 350,376 360,888 371,714
Attachment 2
Operational Expenditures
FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Finance 230,036 240,659 248,649 256,108 263,791
Planning 1,169,050 $1,000813 1,040,845 1,082,479 1,125,778 Building 1,367,484 1,422,183 1,479,070 1,538,233 1,599,762 Inter-department 1,225,221 1,280,356 1,325,168 1,361,017 1,395,216 Police 1,777,338 1,857,318 1,922,324 1,979,994 2,039,394 DPW 2,885,312 3,015,151 3,120,681 3,214,302 3,304,099
Total Amount $9,484,912 $9,684,323 $10,034,955 $10,357,297 $10,680,959 Pension Liabilities
In November 2021 the CalPERS Board adopted a new investment return assumption of 6.8%. The new discount rate took effect July 2022 and is set for the next several years at 6.8%. The effect of these changes is a gradual increase in the required contributions for UAL and Normal Cost increases. In FY 2024/25 the Normal Cost increased 0.04% for Miscellaneous Employees (nonsworn) and 0.21% for Public Safety Employees (sworn). These represent minimal increases. There was an increase in the total UAL for FY 2024/25 of $296,568 that reflected the negative 6.1% investment return in FY 2021/22.
• The employer contribution rate set by CalPERS for Miscellaneous Employees (non-sworn) is 12.67% in FY 2024/25 and in FY 2025/26 the rate changes to 12.74%. • The employer contribution rate set by CalPERS for Public Safety Employees (sworn) is
29.30% in FY 2024/25 and in FY 2025/26 the rate changes to 29.35%.
The total UAL for the Town in FY 2025/26 increased $124,266 from the previous year’s estimates.
Public Employees Retirement Fund (PERF) rates of return are reflective in CalPERS actuary reports two years after occurrence. The 2022/23 investment return was 6.2% and will first impact employer contribution rates for public agencies in fiscal Year 2025/26. The rate of return on the PERF for FY 2023/24 was 9.5%. This investment return will first impact the employer contribution rates for public agencies in fiscal Year 2026/27. For budget purposes the FY2025/26 Normal Cost and UAL amounts are actual amounts. The CalPERS actuarial reports produce the incoming fiscal year’s rates and UAL amounts, as well provides a projection for the second fiscal year as rates of return are factored in each year. Below is a snapshot of the CalPERS net rate of return over the long term:
CalPERS Returns Net Rate of Return
1-year FY 23/24 9.5%
2-year FY 22/23 6.2%
3-Year FY 21/22 -6.1%
10- year 6.2%
20-year 6.7%
30-year 7.7%
There is an Ad Hoc committee of the Audit & Finance Committee currently reviewing the possibility of recommending an additional ADP towards the Town’s Public Safety UAL. In April 2022, the City Council directed staff to allocate $5 million toward the Town’s Unfunded Accrued
Attachment 2
Liability (UAL) for the Public Safety Classic Plan. CalPERS allows employers to make Additional Discretionary Payments (ADP’s) at any time and any amount. Optional ADP payments serve to reduce the Town’s UAL and future required contributions. This can result in significant long-term savings.
In 2022, making the $5m contribution reduced the Public Safety UAL for FY 2022/23 to $815,591 and a net savings of $356,491. The updated UAL payments at the time showed that the savings through FY 2026/27 were estimated at $2.67m. Staff updated the savings analysis with the most recent CalPERS’ updated Actuarial Report (6/30/2023) and it reflects a different savings projection. As noted above, since our initial $5m ADP there have been changes in the investment rate of return, actual realized returns, and CalPERS methodologies.
CalPERS UAL Contribution UAL FY
2022/23
UAL FY
2023/24
UAL FY
2024/25
UAL FY
2025/26
UAL FY
2026/27
Public Safety UAL $1,172,082 $1,235,697 $1,323,634 $1,380,442 $1,434,332 Public Safety UAL w/$5m ADP Actual &
Projection Updated
$815,591 $813,210 $1,000,841 $1,196,485 $1,296,000
Difference – Savings $356,491 $422,487 $322,793 $183,957 $138,332 This recent CalPERS Actuary report as of June 30, 2023, reveals updated UAL payments showing above that the savings are now estimated at $1.424 million over time. In the previous year’s savings projection, it showed $1.573 million savings over time. This is a net change of $149,485. The reduction is due to CalPERS Actuarial changes to the rate of return to 6.8% and the CalPERS’ actual returns. The contribution to the Town’s UAL was a fiscally prudent decision, the impact was not as significant as anticipated due to actuarial changes by CalPERS. Nonetheless, the Town has experienced savings of $1.424 million in operations expenses over time. The investment return was a negative 6.1% for FY 2021/22 (the time of the ADP contribution) and in FY 2022/23 the return was 6.2% combined with a reduction of discount rate from 7.0% to 6.8%. There will be a recommendation from the Audit & Finance Committee on whether to contribute an additional ADP amount to CalPERS during this budget cycle. The Town’s estimated Unfunded Actuarial Liability (UAL) payments (minimum annual payments to CalPERS) for Classic and PEPRA members combined look as follows:
Unfunded Accrued Liability Payments
Plans FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Miscellaneous $618,109 $662,000 $698,000 $776,000 $793,000 Public Safety $1,221,757 $1,328,000 $1,417,000 $1,602,000 $1,635,000 Total $1,839,866 $1,990,000 $2,115,000 $2,378,000 $2,428,000 With CalPERS’ discount rate of 6.8% and this year’s return of 9.5%, the estimated overall funded status of the CalPERS Pension Fund stands at 75%. The Town’s FY 2023/24 net pension liability is $19.01m (local miscellaneous and public safety). This is an increase of $1.15m from the previous year. Staff will continue to present the CalPERS Actuarial Reports to the Audit & Finance Committee and work with CalPERS actuary to continue to review and discuss pension liabilities.
Attachment 2
Debt Service Lease Payments
The Town issued COP Lease Financing of $7.68m for cash flow purposes for the Town Center Project. The COP is a ten (10) year financing tool with a five (5) year call option and includes an average annual debt service of approximately $861,871. The first semi-annual payment began in December 2020. Including FY 2024/25 the Town has made $5.14m in payments on the COP Lease.
We are approaching the call option that is available this year in June 2025. The call option estimated payment amount is $4.3m. If desired, the Town can exercise the call option and pay off the COP. However, the current Council direction is to retain the 2.1% interest rate on the lease payments and continue making the semi-annual payments through conclusion in FY 2029/2030.
With the current state of interest rates, it seems judicious to maintain paying the COP lease financing through the term of the lease. Throughout term, the total lease financing payments are $8.6m of which includes interest of $915k.
Capital Projects
Capital Projects will be addressed in detail at Meeting #3 – May 7. Capital projects focus on streets & transportation, drainage, and Town Buildings & Park Facilities. There are priority projects from the various Master plans for Council review and discussion for the Capital Improvement Program.
There is currently a refresh ongoing on the Bike & Pedestrian Master Plan. Some of the priority projects from the various master plans have been completed, one major project being the Town Center and Library. As we shift focus on other capital projects throughout the Town, priorities may change or redevelop as we move to accomplish projects from the master plans.
Funding sources for capital projects are the following:
General Fund Library Funds
Capital Improvement Fund Channel Funds
Measure A, Measure W, & Measure M Surface Transportation Funds Gas Tax Donations (Town Center)
MTC transportation Funds Federal Grants
San Mateo County Bayfront Canal Loan (Lease Financing) $1,515,000- in 2018 the Town of Atherton entered into a $165,000 loan agreement for the Bayfront Canal and Atherton Channel Collaborative Memorandum of Understanding between the City of Redwood City, City of Menlo Park, Town of Atherton, and the County of San Mateo. The County provided a $165,000 loan to the Town of Atherton for the planning design, and environmental permitting for the Bayfront Canal and Atherton Channel Flood Management and Restoration Project. The loan in the amount of $165,000 is being repaid over a ten (10) year period. In addition to the planning and design loan on the project, on December 9, 2022 the Town of Atherton entered into a sublease with the County of San Mateo for the construction of the Bayfront Canal Restoration Project related to the San Mateo County Intra-County Lease Agreement. The County loaned the Town of Atherton $1,350,000 for the Town’s portion of the construction costs of the Bayfront Canal Project. The loan is to be repaid over a five (5) year period through reduction of Atherton property taxes remittance from the County for a fix amount of $148,500 on April 15 and December 15 annually.
The Town repays these loans through reduction from our property taxes yearly in the amount of $313,815. The outstanding amount on the loans is $815,731.
Item No. 2
Town of Atherton
CITY COUNCIL STAFF REPORT – STUDY SESSION
TO: HONORABLE MAYOR AND CITY COUNCIL
GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT OVADIA, PUBLIC WORKS DIRECTOR
DATE: MARCH 5, 2025
SUBJECT: PROVIDE FEEDBACK AND DIRECTION REGARDING
CONSTRUCTION REGULATIONS – UTILITY SERVICES
REQUIRED FOR DEVELOPMENT PROJECTS
RECOMMENDATION
It is recommended that the Council review and provide feedback and direction to staff regarding the underground utility service connections required by the Town’s construction regulations associated with development and redevelopment construction projects.
BACKGROUND
Atherton Municipal Code (AMC) Section 15.40 regulates various construction activities including but not limited to screening, parking, noise, signage, and utility services. AMC Section 15.40.010, adopted in 1966 states:
“All telephone, telegraph, electric wires and other such service facilities to newly constructed dwellings shall be placed underground from the point of the utility company pole. This section shall apply to all dwellings where building permits have not been issued prior to the date of the ordinance codified in this section. (Ord. 272, 1966)” This ordinance was likely enacted for multiple reasons including an effort to reduce the proliferation of overhead wires as the Town continued to develop, public safety, resiliency and aesthetics.
The ordinance prohibits the installation of new overhead service lines or extension of service lines from existing infrastructure. The installation of new poles is limited to direct frontage along an existing pole line, unless agreement from other affected properties is obtained. Pole replacement is permitted to allow for required services.
PG&E regulations limit the number and size of overhead transformers on utility poles and do not allow for primary power lines to be undergrounded on poles with transformers. PG&E is also
Construction Regulations – Underground Utility Services MARCH 5, 2025
limiting the approval/installation of new underground transformers related to availability, safety, and other concerns.
PG&E has indicated that they are able to provide a 400 Amps service for primary residences and an additional 200 Amp service for detached accessory dwelling units (ADU’s) with limited additional infrastructure. Many new full site development/redevelopment projects require services of 600 Amps or greater for the primary residence and accessory structures with additional service needs for an ADU if included. These large services typically require dedicated transformers from primary (high-voltage) power lines, or the extension of the primary lines to the private property with transformer located on site to accommodate the project’s power needs. Due to right-of-way constraints, aesthetics and impacts to neighboring properties, staff does not permit new above ground pad-mounted transformers within the public right-of-way.
With the increased power needs for projects and the number of utility poles with existing transformers, it is often difficult to locate a nearby utility pole that can easily accommodate the power needs for a large-scale single-family development project. Developers, property owners and PG&E often seek the easiest/cheapest solution of installing a new pole and/or extending utility lines, most often affecting other’s property frontage as the most expedient way to provide power to their projects. In consideration of heritage trees within and along the right-of-way and on property, installation of underground utility services often include directional boring or hand digging to minimize tree impacts.
As outlined above, undergrounding of utility services and minimizing additional overhead utility infrastructure is increasingly important for public safety and resiliency, and minimizing impacts to residents and property values.
ANALYSIS
As noted above, often the most expedient and cheapest way to accommodate power to new development/redevelopment sites is the installation of new power poles, often in front of other properties. Staff discourages the installation of new poles and extension of utility lines and works with PG&E and developers to find solutions that minimize impacts to the public and adjacent property owners. There are occasions where PG&E regulations and/or existing infrastructure limit options and may have an oversized impact to the public and the development. Staff is seeking guidance from the Council on paths to facilitate additional review/consideration in instances where complete undergrounding solutions are not possible or have an oversized impact to the public. It is important to be aware that should such alternate review/consideration be made available that it is done in such a manner that does not encourage developers/contractors to seek such alternate approval.
Staff has compiled a few real-world scenarios for discussion. Staff will go through a description of each scenario and lead the Council through possible solutions.
Sample scenarios:
Scenario 1:
Construction Regulations – Underground Utility Services MARCH 5, 2025
• Flag lot currently served underground from nearest pole, approximately 115 feet from property.
• Service (200 Amp) is insufficient for the project (600 Amp + 320Amp) • Existing pole has a transformer which does not allow for primary power line to be brought underground.
• PG&E/Contractor proposal – extend overhead primary power and other utilities and install new pole at front of property. Primary power would be brought down the new pole and new pad mount transformer installed to serve the property. • Nearest clean pole for primary power drop is 300 feet away from the existing service pole • Proposed solution – coordinate with adjacent property owner to remove the overhead transformer from existing service pole near their driveway, extend primary service underground to the applicant’s property and install two transformers within a utility easement on private property adjacent to neighbor. (resolved) Scenario 2:
• Lot located near end of cul-de-sac where all existing poles have transformers that do not allow for primary power lines to be undergrounded.
• PG&E/Contractor proposal – install new pole in front of the property across the street along the existing pole line to allow for undergrounding of primary power to serve the project.
• Proposed solution – connect to nearest clean pole, near entry to the cul-de-sac, for power drop, installation of splice box to allow for future connection and extend underground service to project, approximately 250 feet from service point in front of the property. (resolved)
Scenario 3:
• Flag lot where existing service pole at end of driveway has a transformer that does not allow for primary power lines to be brought underground. • Nearest clean pole for primary power drop 250 feet away from existing service pole. • PG&E/Contractor proposal – remove existing overhead transformer from the pole at the driveway and go underground to a new pad-mounted transformer in front of the property across the street (currently being redeveloped) to provide primary power to serve the project.
• Proposed solution – remove existing overhead transformer from the pole at the driveway, go underground to a new underground transformer across the street to serve both the subject property as well as the other redevelopment property. (resolution - PG&E in engineering for underground transformer solution)
Scenario 4:
• Lot located near end of cul-de-sac where there are no poles. Nearest pole line behind the property on neighbor’s property on the other side of a drainage channel. • PG&E/Contractor proposal –Bring primary power from the existing utility pole on neighbor’s property, overhead across the channel to a new pole that would be installed in rear of the property (near rear property line), where it would be undergrounded to a new transformer on property.
Construction Regulations – Underground Utility Services MARCH 5, 2025
• Alternate solutions reviewed that were not approved by PG&E:
o Bring primary power down the existing pole and bore under the channel o Bring primary power down the existing pole and bridge over the channel • PG&E advised that the nearest underground connection location is from a subsurface transformer located approximately 250 – 300 feet from the front of the property, may not pass PG&E voltage calculations based on length without extending other distribution lines.
In consideration of increasing climate risk, public safety concerns, aesthetics, and potential permanent impacts to current residents and their properties, undergrounding to the maximum extent possible is desired.
Currently staff do not charge for review, consultation and coordination of utility connections beyond the standard permit charges (building, encroachment, grading/drainage, etc.).
Should an appeal or exception process be desired, it is recommended that such a process not be a means to shortcut timelines, reviews and implementation of utility undergrounding, but be done in such a manner to encourage undergrounding and be limited to extreme cases where true undergrounding solutions are not available. Such a process may include review by the City Manager with referral to the Planning Commission and potentially the City Council for approval.
Fees associated with an appeal or exception process should be adopted to cover costs including staff time, legal noticing, advertisement, etc. should be developed and paid by the applicant.
Next steps, if any, would be determined based on the feedback received and may include modification of the Municipal Code, update to the Town’s Master Fee Schedule, consultation and education with development community and governing body tasked with appeals or exceptions.
FISCAL IMPACT
None at this time.
GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal Area B – Preserve Small Town Character and Quality of Life • Goal Area D – Manage Circulation and Improve Safety
• Goal Area F – Be Forward-Thinking, Well-Managed, and Well-Planned • Goal Area G – Emergency Preparedness – Be Prepared
POLICY FOCUS
The policy focus for this item is regarding construction regulations associated with development and redevelopment projects – particularly utility underground requirements.
Construction Regulations – Underground Utility Services MARCH 5, 2025
PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders –to include, but be not limited to, media outlets, school districts, Menlo Park Fire Protection District, service provides (water, power, and sewer), and regional elected officials.
COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item has not been before a Town Committee or Commission
ATTACHMENTS
None.