Item No. 2
Town of Atherton
CITY COUNCIL STAFF REPORT – STUDY SESSION
TO: HONORABLE MAYOR AND CITY COUNCIL
GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT BARRON III, FINANCE DIRECTOR
DATE: JUNE 4, 2025
SUBJECT: REVIEW OF THE FY 2025/26 TOWN BUDGET – ALL FUNDS CHANGES ONLY; AND DIRECTION REGARDING AN ADDITIONAL
DISCRETIONARY PAYMENT TO CALPERS
RECOMMENDATION
1. Review and Discuss Operating Budget for FY 2025/26.
2. Provide specific direction regarding the allocation of funds toward an Additional Discretionary Payment to CalPERS.
BACKGROUND & EXECUTIVE SUMMARY
The June 4 Study Session is the 4th meeting of the Council to discuss the FY 2025/26 Town Budget.
Prior meetings focused on each fund area individually.
This Study Session returns the entirety of the budget back to the City Council and incorporates any adjustments since the last review. Staff incorporated feedback from the prior meetings, together with additional adjustments, if any, to the Operational and CIP budgets based on identified priorities or projects that need to be adjusted within the CIP program for the fiscal year. This Staff Report only discusses changes made to the Budget since the last Study Session of the City Council.
For FY 25/26, General Fund revenues are projected at $24,712,266 and General Fund expenditures are projected at $22,134,254. This reflects a single year surplus of $2,578,012 before the addition below the line of ERAF and transfers in/out for CIP. There is a projected year-end positive fund balance in the General Fund of $9.522 million. This is a decrease of approximately $6,000 from previous General Operations budget review. There is an allocation placeholder of $7.805 million to the CIP and other priorities below the line. This will be discussed further in more detail in the CIP section of this report. The new fund balance amount includes an Unallocated Fund Balance of $2.88 million.
FY 2025/26 Town Operations Budget
June 4, 2025
Summary of Changes Since Last Council Meeting
Town Financial Outlook Planning Model
During the May 7 Budget Study Session, the Council discussed the 5-Year Planning Model and identified capital project priorities and a tentative Additional Discretionary Payment to CalPERS.
The Council directed staff to incorporate all of the changes and return on June 4 with an updated spreadsheet.
Based on Council feedback, the updated FY 2025/26 allocation to CIP is $5,605,000 in the Financial Planning Model. This allocation is a transfer out from the General Fund in the FY 2025/26 budget towards the Capital Improvement Fund for Town project priorities in the Drainage, Bike & Ped, Streets, and Park Master plans. The Transfer out of $5.605 million is now incorporated below the line within the General Fund Revenues & Expenditure Summary.
With the changes made, there is a net available ending fund balance (after set-asides) of $2,882,527 (line 46) in FY 2025/26 in the Financial Planning Model.
Departmental Budget Changes
There were slight adjustments to Revenues in the amount of $42,700 in the General Fund for FY 2025/26.There was an overall increase in General Fund Department expenditures in the amount of $124,188. This was due to a total increase in salary and benefits expense of $17,896 in the Administration and Finance Departments salary adjustments and job reclassifications. The remainder of the $106,292 expenditures increase was due to other department operations. o Police Department had an increase of $49,892 due to an identified need to update the dispatch phone recording system. There was also funding added for the CAD RIMS system’s annual maintenance, as well as slight increases in Other Contract Services and Other Supplies and Materials.
o Planning Department had an increase of $35,000 for membership fees to the ADU Resource Center of San Mateo County.
o Inter-Department had an increase of $15,200 that includes server storage replacement ($8K), an increase in Microsoft licenses for Office 365 ($4K), and cloud backup ($3K). o Public Works Department- increase of $6,000 in Facility Repairs and Maintenance for plants and greenery in Town Center office spaces.
Internal Service Fund/Special Revenue Fund Changes
There were some changes to the Equipment Replacement and Employee Benefits Fund. During the previous Study Session there was discussion regarding donation for the purchase of three (3) BMW motorcycles. The donation amount of $180,000 was updated in the Equipment Replacement Fund FY 2025/26 budget to coincide with the expense of the purchase of the 3 motorcycles for the police department traffic fleet. The Employment Benefit Fund FY025/26 budget also includes an expense of $800,000 to the General Fund for a potential allocation towards CalPERS Additional Discretionary Payment (ADP). This was a recommendation by staff as an allocation in support of FY 2025/26 Town Operations Budget
June 4, 2025
a General Fund allocation toward an ADP amount of $3million. This ADP amount is further discussed below in this report.
There were minor changes to the Library Funds for capital improvement expense increase in the amount of $175,000. During the CIP portion of the previous Study Session, there was discussion regarding the improvements along Station Lane connection along Maple to Watkins Avenue as partial Library-related improvements for pedestrian pathway accommodation. The Town will be pursuing the design of these pathway improvements and $100,000 is allocated as the Library portion. Additional improvements for the design of parking lot modifications to add parking stalls along the mulch section along the track ($15,000) and design to add solar carports/EV charging ($60,000) along the track side of the Town Center.
Capital Improvement Program (CIP)
Staff provided the 5-Year Fiscal Outlook Spreadsheet and project list for Council review. Based on Council feedback, the allocation amount from the General Fund for FY2025/26 is $5,605,000.
Specific Projects the Council reviewed and provided feedback on included:
• Bicycle Pedestrian Master Plan Implementation Program o Support for El Camino Complete Streets – Project Initiation Document and Project Approval and Environmental Documents phases by others
o El Camino Real/Selby Lane intersection Improvements
• Traffic Safety Improvement Program
o Streetlight painting
o Middlefield Road/Fair Oaks Lane/Palmer Avenue traffic signal o Middlefield Road/Watkins Avenue traffic signal
• Drainage Improvements Program
o El Camino Real Drainage Solutions (North Segment)
o El Camino Real Drainage Solutions (South Segment)
o Drainage Master Plan Update
• Park Master Plan Implementation Program
o Clay Court Conversion Project
o HPP Master Plan Update
Policy discussion by the Council resulted in minor changes and/or updates to the baseline projects and continuing projects in Bike Pedestrian, Traffic Safety Improvement, Drainage, Park, and Park projects. The projects are included for the specific fiscal year for inclusion and extend within the Capital Improvement Program (FYs 2025/26 through FY 2029/30). Below are the resultant updated changes to the CIP program:
Changes to Baseline Projects
— Reduce Town Center Improvements to $100k per year
— For 2025/26, allocate $150k in Green Infrastructure to ADLP Project FY 2025/26 Town Operations Budget
June 4, 2025
Continuing Projects
— Reduce the ADLP allocation by $150k to account for Green Infrastructure CIP Added and Future Projects
— ECR Complete Streets - $100 Support in 2025/26 (BP2)
— ECR/Selby Intersection - $250k Conceptual in 2025/26 (BP4) — ECR/Selby Intersection - $250k Design Remainder in 2026/27 (BP4), $2.5m in 2027/28 (BP4) — Station Lane Connection - $120k Study and Design in 2025/26 (BP7) has been updated to $200k, $600k in 2026/27 (BP7)
— Streetlight Painting - $100k in 2025/26 (TS1)
— Middlefield/Fair Oaks & Middlefield/Watkins - $100K Corridor Study in 2025/26 (TS1/3), $1m solution in 2027/28 (TS1/3)
— ECR Drainage/North & ECR Drainage South - $475k in 2025/26 for design (add $350 remaining from 2024/25) (DR2/3); $1.5m in 2027/28 (DR2), $4m in 2028/29 (DR3) — Solar/Battery @ Jennings Pavilion - $30k/$150k in 2025/26 (HPP5) — Parking Lot Modifications - $15k/$60k in 2025/26 (TC2) — Drainage Master Plan Update - $350k in 2027/28 (DR1)
— Park Master Plan Update - $350k in 2026/27 (HPP2)
These are numerous significant projects that were incorporated. They are listed in detail further below in the report. Staff also discussed that some of the projects or priorities have potential grant or non-general funds offsets. The Outlook spreadsheet incorporates these offsets on line 44. These amounts reduced the General Fund contribution reflected in the final Unallocated balance of $5.605million for CIP projects.
Grants are contingent funds and will need Council feedback to evaluate the feasibility of these projects in the event of unavailability of grant funds. The grant and offsets by Fiscal Year are as follows:
FY 2025/26
$175,000 from Library Funds
$800,000 from Employee Benefits Fund (Pension Allocation) $350,000 from CIP the remaining for DR2/3
$200,000 from GRANT – potential grant SMCTA/C/CAG or Caltrans FY 2026/27
$300,000 from Library Funds
$100,000 from GRANT – potential grant SMCTA/C/CAG or Caltrans FY 2027/28
$3,000,000 from GRANT - SMCTA/C/CAG or Caltrans/Agency Contribution The dark green shaded projects in the Bike/Ped and Drainage lines are the projects for which there may be outside grants or other agency funds. Direction was also sought regarding the inclusion of an Additional Discretionary Payment (ADP) toward the Town’s Unfunded Actuarial Pension obligation with respect to the amount and timing of payment. For illustrative purposes the entire FY 2025/26 Town Operations Budget
June 4, 2025
$3 million was allocated to the Pension UAL, with the $800,000 offset from the Employee Benefit Fund, resulting in a draw of $2.2 million from the General Fund. For an ADP amount to be considered, CalPERS will need to be notified by June 13, 2025, in order to generate the documentation needed for the Town. It was communicated that the Town would need to contribute before June 23, 2025. This will also create an updated UAL payment for FY 2025/26. A $3m ADP would reduce the public Safety UAL expense amount for FY2025/26 by approximately $237k.
Staff needs specific direction tonight regarding the amount of an ADP to be submitted.
If all selected projects proceed as the Council selected, this assumes we will receive the $3.3 million in grants or other agency funds. Without these funds, the General Fund would be the major funding needed to make up the difference for the projects or the projects would not move forward.
This would result in the depletion of the Unallocated Fund balance. There is continued review of other Special Revenue Streets and Drainage funds as funding sources for projects. This is all predicated that projects meet the expenditure criteria for this use of funds. There will be a continual review of the 5-year Outlook that includes the above recommended updates and changes based on the Council's feedback on projects and priorities for General Fund allocation at tonight’s study session.
Ongoing and new major Capital Projects in the CIP Program Book include:
Traffic Safety Improvement Program – Page 14, #56064
Previously Funded Projects (Ongoing)
• Alameda de las Pulgas Traffic and Safety Improvements – This project includes a roundabout at the ADLP/Atherton Avenue intersection. The project is currently in the final design phase pending environmental clearance and grant funding approvals. Construction is anticipated to begin in FY 2025/26. Funding for this project includes a $2m Federal Grant.
- $600,000 (FY 2022/23)
- $1,850,000 (FY 2023/24)
- $600,000 (FY 2024/25)
Proposed FY 2025/26
• $1,600,000 - Alameda de las Pulgas Traffic and Safety Improvements (construction) - • $100,000 - Streetlight Painting Program
• $100,000 - Evaluation of traffic control devices and other improvements at both Middlefield Road/Fair Oaks Lane and Middlefield/Watkins Avenue • $15,000 (Annual) - Purchase/Replace fixed solar powered radar speed indicators (Measure M)
• $25,000 (Annual) - Traffic Counts and Speed Surveys (Measure A) Future Projects
• $1,000,000 - Traffic Signal at Middlefield Road/Watkins Avenue (construction) Bicycle Pedestrian Master Plan Implementation Program – Page 15, #56059 Previously Funded (Ongoing)
FY 2025/26 Town Operations Budget
June 4, 2025
• FY 2023/24 - Stockbridge Avenue at Alameda de las Pulgas Pedestrian Crossing Improvements (Rectangular Rapid Flashing Beacons – Funded FY 2023/24). Design is complete, with construction anticipated to complete in FY 2025/26. • FY 2022/23 - Watkins Avenue Pedestrian Improvements, Middlefield Road to McCormick Lane (Funded in FY 2022/23). Conceptual design completed and final design is pending. • FY 2024/25 - Bicycle and Pedestrian Master Plan Update In Progress – $250,000 Proposed FY 2025/26
• $50,000 - Bicycle and Pedestrian Master Plan Update for additional public outreach • $100,000 - ECR Complete Streets Gap Closure Project – SamTrans lead (consultant support)
• $250,000 - ECR/Selby Lane Intersection Improvements to be funded over multiple fiscal years
• $200,000 - Station Lane Connection Design/Study to be funded over multiple fiscal years • $25,000 - Grant applications for funding and partnerships to design or implement improvement
Future Projects
• $250,000 - ECR/Selby Lane Intersection Improvements (Design – FY 2026/27) • $2,500,000 – ECR/Selby Lane Intersection Improvements (Construction – FY 2027/28) • $600,000 - Station Lane Connection Construction (FY 2026/27) Drainage Improvements Program – Page 21, #56034
Previously Funded (Ongoing)
• Atherton Channel Assessment and Relining Upstream of Alameda de las Pulgas. Project design is underway and initial regulatory consultations are initiated. Completion of project design and start of construction is anticipated in FY 2025/26. - $400,000 (FY 2022/23)
- $2,400,000 (FY 2023/24)
• El Camino Real Long-Term Drainage Solutions. Conceptual design is complete. Final design is anticipated to be completed in FY 2025/26.
- $250,000 (FY 2023/24)
- $400,000 (FY 2024/25)
• The Atherton Channel culvert and detention system improvements at Alameda de las Pulgas and Las Lomitas Elementary School. This project has a $1.38m Federal grant (pending FEMA approval). Initiation of the project has been deferred pending grant approval.
- $225,000 (FY 2023/24)
- $2,750,000 (FY 2024/25) (includes anticipated grant)
• Replacement and installation of storm drain inlet markers. Installation of markers has been ongoing and is anticipated to be completed in FY 2025/26 in compliance with the Regional Storm Water Permit.
- $10,000 (FY 2024/25)
Proposed FY 2025/26
• $2,000,000 - Atherton Channel Assessment and Relining Upstream of Alameda de las Pulgas (construction)
FY 2025/26 Town Operations Budget
June 4, 2025
• $475,000 – ECR Long-Term Drainage Solutions – toward pump stations and assorted improvements at both ECR/Selby w/extension to Stockbridge (N) and ECR/Isabella w/extension to Almendral (S). Timing contingent on permitting by Caltrans once design completes.
• $150,000 - Green Infrastructure Plan Implementation. Funds to be added to ADLP Project for green infrastructure requirements.
• $10,000 - Replacement and installation of storm drain inlet markers (continuing project) • $50,000 – Miscellaneous storm drain related improvements throughout Town Projects Future Projects
• $350,000 - Drainage Master Plan Refresh (FY 2027/28)
• Green Infrastructure Improvements – various locations (TBD) • $1,500,000 – Construction of ECR Drainage Solutions (N) (FY 2027/28) • $4,000,000 – Construction of ECR Drainage Solutions (S) (FY 2029/30) Civic Center Master Plan Implementation Program - Page 25, #54015 Proposed FY 2025/26
• $60,000 - Solar Carports/EV Charging design to add solar carports and EV Charging to Town Center (track side)
• $15,000 - Parking Lot Modifications towards design to add parking stalls in mulch along tracks, near Corporation Yard
• $100,000 – Miscellaneous Town Center Infrastructure Improvements (FY 2025/26) Park Master Plan Implementation Program – Page 26, #56063 Previously Funded (Ongoing)
• Park Playground Improvements – construction anticipated to start in FY 2025/26 - $200,000 (FY 2023/24) Design
- $1,000,000 (FY 2024/25) Construction
• Fencing Improvements along Watkins Avenue, Middlefield Road to McCormick Lane – Funded in FY 2022/23. To be implemented with the Watkins Avenue Pedestrian Improvements Project.
• Park Playground Restroom Replacement
- $800,000 (FY 2024/25)
Proposed FY 2025/26
• $350,000 - Park Playground Restroom Replacement to support additional scope for project split between playground ($300k) and restroom ($50k) • $180,000 - Jennings Solar and Energy Resiliency Improvements for design and construction
• $100,000 - Holbrook Palmer Park General Assessment and repairs Future Projects
• $350,000 - Holbrook Palmer Park Master-Plan Refresh (FY 2026/27) FY 2025/26 Town Operations Budget
June 4, 2025
The Town Capital Improvement Program was presented to the Planning Commission at its May 28, 2025 meeting. The Planning Commission determined that the Town CIP for Fiscal Years 2025/2026 – 2029/2030 is consistent and in conformance with the Town’s General Plan.
OVERALL SUMMARY
For FY 2025/26 the Town’s General Fund Revenues are projected at $24,712,266 against $22,134,254 in expenditures. This will result in a single year-end positive balance of $2,578,012 and a total ending Fund Balance of $9,522,799.
FY 2025/26 includes below the line items of $2,500,000 for ERAF, budgeted debt service payment of $861,871, Transfer Out to CIP Fund 401 for capital projects of $5,605,000 and potential Transfer out of $3million for ADP. There will be a single-year projected change in fund balance by a negative $3,588,859. The negative change reflects the drawdown of unallocated reserves Fund Balance of $5.605 million for capital projects and $3milion ADP from the Town Financial Planning model.
Reserve Calculations
With Council direction, the unallocated reserve balance can be appropriated towards operational use, capital projects or to pay down liabilities. During its review of the Town Financial Planning model during the fiscal year 2025/26 budget process, the Council considered uses for the unallocated funds towards various priorities. For FY 2025/26, there is an allocation of $5.605 million for various set aside buckets for capital projects in the Town CIP.
The beginning of FY 2024/25 General Fund Balance was $12,597,358. The table below reflects all the changes noted above.
FY 2025/26 Beginning Fund Balance $13,111,658
FY 2025/26 Projected Revenues (inclusive of ERAF) $27,212,266 Total Available Funds $40,323,924
COP Debt Service for FY 2025/26 ($861,871)
FY 2025/26 Expenditures (Projected Budget) ($22,135,254) FY 2025/26 Transfer Out CIP 401 Fund -Financial Planning ($5,605,000) FY 2025/26 Transfer In Employee Benefit Fund $800,000
FY 2025/26 Transfer Out CalPERS ADP ($3,000,000)
Projected FY 2024/25 Ending Fund Balance $9,522,799
As shown below, the Town will meet its new 30% reserve requirements total of $6,640,276 in FY 2025/26 and projects an unallocated reserve that is 13% of projected expenditures.
FY 2025/26 Town Operations Budget
June 4, 2025
We continue to be fiscally prudent with our resources but are mindful of operational and infrastructure needs. This budget presents a plan for accomplishing the goals and objectives of the City Council within existing resources and core strategy of financial stability. Town priorities will focus again on CIP Master Plan projects and paying down long-term liabilities.
POLICY FOCUS
The Town’s Operating and Capital Improvement Budget represents one of the most significant Policy Documents approved by the City Council. Staff has crafted the attached Budget based on specific policy objectives of the City Council. This item discusses revenue and expenditure projections for FY 2025/26. The Council adopts a fiscal year budget that addresses any policies and or priorities of the Council while addressing the needs of the community.
FISCAL IMPACT
None.
GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal C – Maintain Conservative Fiscal Policies and Financial Transparency • Goal D – Be Forward Thinking
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
FY 2025/26 Expenditures $22,134,254
Projected FY 2025/26 Ending Fund Balance $9,522,799
15% Emergency Reserve $3,320,138
15% Budget Stabilization Reserve $3,320,138
TOTAL RESERVE REQUIREMENT $6,640,276
Less Above Reserve Requirement = Unallocated Reserves $2,882,523 FY 2025/26 Town Operations Budget
June 4, 2025
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
1. FY 2025/26 General Fund Revenue and Expenditure details by department
2. FY 2025/26 Internal Service, Library, Tennis Funds
3. 5-Year Fiscal Outlook Planning Spreadsheet & Project Lists
4. FY 2025/26 Capital Improvement Program
5. FY 2025/26 5-Year CIP Look Ahead