Item No. 12
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL
FROM: GEORGE RODERICKS, CITY MANAGER
DATE: JUNE 18, 2025
SUBJECT: DIRECTION REGARDING FORMATION OF A CITY CHARTER
RECOMMENDATION
It is recommended that the Council discuss and consider recommendations from the Charter City Standing Subcommittee and provide direction regarding the possible formation of a city charter.
BACKGROUND
Early in 2025, the City Council formed a Charter City Standing Subcommittee to explore the advantages of becoming a Charter City. The following is the Report from the Standing Subcommittee.
Transitioning to a Charter City would provide Atherton with greater autonomy in taxation, procurement, and governance. However, for some of these areas, the practical benefit to the Town is limited. The Town must carefully consider legal constraints, stakeholder concerns, and potential litigation risks before moving forward. Furthermore, once a charter is adopted, the Town must ensure that future decisions conform with the charter. Otherwise, the Town will be required to amend the charter each time there is a potential conflict between what the charter says and what the Town wants to do.
Given the requirements of state law, pursuit of a charter is not an overnight endeavor. If the Town foresees the possibility of state legislation that would negatively affect the Town as a general law city but retain the Town’s independence as a charter city, pursuit of charter cityship at that time may not be practical. While a charter may provide a layer of local responsibility it also has the potential to provide a layer of advance protection and opportunity.
ANALYSIS
The Town currently operates as a General Law City under California law, meaning its governance, policies, and regulations are based in the Constitution or by statutes. Shifting to a Charter City model would grant Atherton greater autonomy over “municipal affairs”, particularly in areas such as elections, personnel matters, contracting, prevailing wages, and taxation. However, the benefit of that greater autonomy is limited in many areas, with changes to those powers sometimes Discussion and direction regarding a city charter
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reflected in new judicial interpretations, when those powers are disputed. The more significant of these issues are discussed in brief below.
California law allows cities to operate under two governance structures: General Law Cities and Charter Cities. A general law city, like Atherton, derives its powers from the California Constitution and state laws that apply uniformly to all such cities. A charter city also derives its powers from the Constitution and some state laws but differs from general law cities in that it adopts its own charter that serves as a basis for all further powers, like a personalized local constitution. Only charter cities can claim an issue is a “municipal affair”, and thus, exercise or excuse itself, from certain mandates applicable to general law cities. If an issue is deemed a “municipal affair”, a charter city can ignore conflicting state statutes. However, if the statute concerns “a matter of statewide concern”, then that statute prevails, even for a charter city.
The charter city provision of the State Constitution, also commonly referred to as the “home rule”, allows charter cities to conduct their own business and control their own affairs. Put differently, “home rule” is a principle in the Constitution that allows a charter city to govern itself on any matter considered a “municipal affair”, subject to constitutional limitations and subject to matters that are made, by the Legislature, “a matter of statewide concern.” Charter cities are specifically authorized by state constitution to govern themselves, free of state legislative intrusion, as to the matters deemed municipal affairs. Thus, the potential for local control under the home rule principle is broad and significant; subject to what is or what is not a “municipal affair” but limited by what the legislature declares to be a matter of statewide concern. Courts have held that “home rule” is a means of adjusting the political relationship between state and local governments in discrete areas of conflict.
For these reasons, defining what is and what is not a “municipal affair” is an ever-evolving matter.
Article IX, section 5 of the Constitution sets out categorical areas that are considered municipal affairs – governance, regulation of police forces, and elections, but it does not define “municipal affair”. Instead, specific areas of municipal affairs have been more defined over time by court decisions. These include general municipal election matters, land use and zoning matters, the expenditure of local tax dollars, and public contracts.
When a court analyzes whether something is a municipal affair or a matter of statewide concern, it uses a four-step test:
1. Does the local law regulate something that could be characterized as a municipal affair? This is most easily established if it falls neatly within one of the categories enumerated in Article IX, section 5 (As noted above, these include general municipal election matters, land use and zoning matters, the expenditure of local tax dollars, and public contracts.).
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2. Is there a conflict between local and state law?
3. Does the state law address a matter of statewide concern?
4. Is the state statute reasonably related and narrowly tailored to the resolution of the statewide concern?
The Court's analysis is based on the facts and circumstances of the case, as well as existing case law, meaning the local control of charter cities is something that will continue to evolve, and can sometimes leave charter cities in limbo.1
Benefits of Becoming a Charter City
For the Town, the benefits of becoming a charter city vary from limited to significant. However, in the land use and zoning area, particularly in relation to housing, the benefit is undetermined at best and possibly limited at this time given the present legislature’s enactment of a multitude of land use and housing laws, mostly premised on the shortage of housing supply within the state.
The Staff Report categorizes the benefits from minor to moderate to significant and undetermined.
Areas where there may be minor benefits include:
• Elections: The Town could determine some of its own election rules, including timing, campaign finance regulations, vacancy determinations, and districting requirements, rather than being bound by state law. However, the Town does not have district elections and benefits financially from consolidating local elections with County and Statewide elections. Absent unique situations for campaign finance or vacancies, the Town would not see any significant benefit in this area by establishing requirements that differ from state law.
• Governance: The Town could determine specific Councilmember compensation, modify legislative authority for the adoption of ordinances (timing), as well as quorum and voting requirements. However, the Town does not have any unique circumstances that make the 1 For example, in 2024, a trial court in Southern California held that Senate Bill 9, regulating land use and housing, did not apply to charter cities, even though the bill stated it addressed a matter of statewide concern. The court found that the bill was not reasonably related nor narrowly tailored to address the stated statewide concern, thus violating the "home rule" doctrine. However, the state is appealing, and the court suggested that if the bill was written differently, it would have applied to charter cities. By contrast, the Court of Appeal in Ruegg & Ellsworth v.
City of Berkeley upheld Senate Bill 35’s application to charter cities. SB 35 requires ministerial approval of certain development projects. There, the court held that although local historical preservation and land use regulation are traditional municipal affairs, SB 35 was enacted to address an issue of statewide concern—the housing crisis and specifically the lack of affordable housing.
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establishment of local regulations more advantageous. State law already allows for the establishment of councilmember compensation and there are processes in place for the adoption of urgency ordinances. The Town would still be required to follow state law with respect to conflicts of interest, the Brown Act, and the Public Records Act. • Public Employment: Atherton could establish its own civil service system and set policies for hiring, promotions, and discipline outside of state mandates. However, the Town does not face significant issues with current state provisions related to hiring or the imposition of discipline. Nor does the Town have multiple employee unions with which to contend.
Police operations remain subject to state and federal laws. Furthermore, the Town must still abide by the Meyers-Milias-Brown Act (law that governs labor-management negotiations and bargaining).
• Building Services (Code Adoptions, Building Code, Permitting): Atherton could opt to follow specific provisions of state law or develop local regulations for unique conditions like wildfire or seismic risks. However, the Town must still comply with California Building Standards Codes and the Town has very few, if any, unique conditions. • Policy Innovation and Tailored Governance: The Town could develop policies suited to its unique demographic and economic conditions rather than adhering to uniform state requirements. Governance structures, such as appointing officials or streamlining advisory boards, could be customized for efficiency. However, the Town is a small agency with limited need for strong commission or advisory board formats.
Areas where there may be moderate benefits include:
• Contracting and Procurement: Charter status would allow the Town to bypass some statemandated competitive bidding laws, potentially reducing project costs and increasing efficiency. Charter cities can exempt themselves from state prevailing wage requirements, though sometimes this is legally complex. Exemptions would not apply to projects that receive state or federal grants. Further, if a Charter City exempts itself from state prevailing wage laws, there are consequences for doing so, such as becoming ineligible for state funds for construction projects. (Cal. Lab. Code § 1782). Charter Cities can bypass Public Contract Code requirements, allowing best-value contracts instead of lowest-bid selection (Cal. Pub. Contract Code § 20160-20175).
The Town could create tailored bidding requirements that save funds on large projects.
However, the size of the Town’s public contracting is limited and the small nature of the project and locale often contributes more to the cost. Lastly, larger Town projects often take advantage of state or federal grant funding which would trigger the prevailing wage Discussion and direction regarding a city charter
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compliance requirements regardless of the Town’s governance status. The biggest benefit would be that the Town could reject the imposition of prevailing wages on Town-funded public works projects that are not receiving grant or trickle-down funding or forego the competitive bidding process when local funds are being used for a public works project.
Areas where there may be significant benefits include:
• Local Taxes and Revenue Measures: Charter status provides broader authority to impose certain local taxes, such as real estate transfer taxes, without requiring state authorization or voter approval at high thresholds. The Town may also have greater flexibility for bond issuance options.
The most significant financial benefit to the Town would be the ability to impose a real estate transfer tax. As with any tax, it would require a vote of the electorate to impose. A tax of 1% ($0.01 for every $1.00) per transaction could generate nearly $4 million annually - on an estimated 80 property sales per year @ $5 million average sale price. Most other provisions of state law related to financing and taxing power would apply, such as Proposition 218. Because charters can be limited or broad, a charter could specify local control only for local taxes and revenue measures, but subject itself to the general laws of the state for all other matters.
However, while the Town explored the transition to charter city in the past to investigate diversification of revenues, revenue generation is not the purpose of exploration of charter city status at this time.
Areas where there may be benefits but at this time, they are undetermined include:
• Planning Services – Land Use, Zoning, Affordable Housing: Local land use is considered a municipal affair. Unless the state legislature deemed a land use (planning and zoning) statute a matter of statewide concern, the Town could have greater authority over local zoning and land use. The Town’s most significant regulatory concerns from a land use perspective relate to the state’s housing mandates. The state has adopted more and more housing regulations as matters of statewide concern thus making them applicable to charter cities. As a result, even if the Town became a charter city, the Town must still comply with the majority of new state housing laws (e.g., SB 35, RHNA), provided the legislature made narrowly tailored findings in support of statewide significance.
However, there may still be a benefit to the Town in other areas, such as requirements for consistency with the General Plan or provisions of state law that are not determined to be matters of statewide concern. Given the large volume of land use laws being passed by the legislature and imposed on all cities—general and charter—it is difficult to predict with Discussion and direction regarding a city charter
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any meaningful certainty whether these statutes will be determined by future courts not to apply to charter cities. To date, a court of appeal has found that SB 35 applies to charter cities and one trial court decision (on appeal and not binding on the Town at this time) has determined that SB 9 does not apply to charter cities.
However, there is always the potential that future housing legislation proposed by the state to which the Town objects is not deemed a matter of statewide concern and therefore not applicable to charter cities. The Town would be subject to such legislation as a general law city. Further, the legislative makeup may change at some point in the future and legislation deemed of statewide concern today may be modified to remove that concern. In addition, litigation, such as what occurred under SB9, may prompt the courts to make a similar determination, if upon review a court determines that the legislature failed to narrowly tailor the legislation, as required under its 4-steop test. If so, such legislation would no longer be applicable to charter cities but would remain applicable to general law cities.
Potential Challenges and Pitfalls of Becoming a Charter City • Legal and Administrative Complexity: Drafting and adopting a municipal charter requires legal expertise and public engagement. Charter provisions must be carefully crafted to withstand legal challenges, particularly concerning matters of statewide concern. • Increased Exposure to Litigation: Charter provisions that conflict with state law could lead to costly litigation. Alternatively, the Town’s charter could be used as a sword by opponents, arguing that the Town’s actions violate the charter. Employment policies, especially regarding wages and benefits, could face legal scrutiny if they diverge from state requirements.
• Potential Resistance from Stakeholders: Local employees and/or unions may oppose changes to employment rules. Some residents may prefer the predictability of operating under General Law rather than adopting a new governance model. Residents may also be opposed to a Charter because it allows more flexibility and ability to impose local taxes.
None of these issues are seen as insurmountable or challenging.
Process for Becoming a Charter City/Timing for the November 2026 General Election To place a Charter City measure on the November 2026 ballot, Atherton must follow these procedural steps.
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Initial Exploration and Public Engagement (Early 2025)
• Conduct a feasibility study, if desired.
• Engage legal consultants to draft a proposed charter, if necessary. • Hold public meetings and workshops to educate residents and solicit input. • Understand the Town’s policy goals with the charter and use that to inform the public. • A charter can be limited or broad. The charter could specify that for all other aspects of the law, Atherton remains subject to the general laws of the state.2 • The broader a charter is, it will likely come with more costs related to drafting and voter outreach explaining the benefits of the charter. Assuming the charter passes, there will be costs with implementation of new procedures, training staff, creating new forms, etc. Finally, the broader a charter is, particularly if it governs areas like labor and prevailing wage, the more room there is for litigation risk. The Town should consider both short-term and long-term costs versus the short-term and long-term benefits.
Drafting the Charter – Two Options Considered (Mid-2025 – Early 2026) • Option (1): Forming a Charter Commission
• Procedurally more difficult than delegating this task to the City Council. • It requires an election to be called either by a majority vote of the Council, or by at least 15% of registered Atherton voters. (Gov. Code § 34451). This election is held for the purpose of forming a charter commission.
• The election to form the charter commission and appoint the commission members is then held pursuant to Election Code sections 1000 and 10403. (Gov. Code § 34452). If a charter commission is formed, it only exists for two years and is then abolished. (Gov. Code § 34462). A Charter Commission is subject to the Brown Act. • Assuming a commission is formed following the election, the commission then drafts and proposes a charter, files it with the City clerk, and it is put up for election at the next established statewide election. (Gov. Code §§ 34455-57). • The proposal for a charter must be submitted to the voters at least 95 days before the election.
• If a charter commission drafts the charter, the charter commission has the final decision/approval of whether to submit the charter to Atherton. The City Council does not play a role.
• Option (2): Forming a City Council Subcommittee
• If drafting the charter is delegated to the City Council, the City Council may, on its own motion, draft a charter and submit it to the voters. If submitted to the voters, the vote will 2 The City of St. Helena used this approach in the 2024 election when it proposed both a charter and a real property transfer tax. However, both measures were defeated.
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take place at the next regularly scheduled statewide election. If the Council is drafting the charter, there are various procedural requirements:
• General Requirements:
• Proposal submitted to voters at least 88 days before election. • Before proposal is submitted, two public hearings must be held, with at least 30 days between each public hearing, and at least 21 days' notice for each public hearing is given by publication and public posting.
• General Timeline:
• At least 21 days before each public hearing, notice must be given. Notice must be given by publication pursuant to Government Code section 6066 and by posting the notice in three public places within Atherton. Notice for the first and second public hearing could be given 21 days before the first public hearing to meet the notice requirements for both public hearings.
• First public hearing is held.
• At least 21 days before the second public hearing, notice must be given, if not already done so.
• At least 30 days after the first public hearing, the second public hearing can be held. • 21 days after the second public hearing, City Council can vote whether to approve the submission to the voters of the proposal to adopt a charter. • At least 88 days before the election, the Council must approve and submit to the voters the proposal to adopt a charter.
• Define key provisions related to governance, finance, elections, and employment.
Of the two options, the Charter City Standing Subcommittee recommends that the Council pursue Option 2 by continuing the work of the Charter City Standing Subcommittee to create a draft charter and propose it to the City Council. As a Standing Subcommittee, meetings are public and interested members of the public may participate in the discussion and creation of the draft charter. Option 2 provides a more efficient process for moving a draft charter forward.
Public Review and Council Approval (Mid-2026)
• Hold public hearings to refine the draft charter.
• Obtain City Council approval to place the measure on the ballot. • City Council approval is not required if the process is taking place through a Charter Commission. However, a resolution of support would show support from the Town.
Election Campaign and Voter Approval (November 2026)
• Conduct voter outreach to explain the benefits and implications of charter status.
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• Majority vote (50%+1) required for adoption.
Contents of Charter
Whether drafted by the City Council or by a Charter Commission, the proposal to adopt a charter must include a ballot description of the new city powers if the charter is adopted. (Gov. Code § 34458.5). The Town can decide how broad or specific it wishes to be.
The Charter City Standing Subcommittee recommends that the charter be narrowly tailored to provide the Town with flexibility to take advantage of home rule potential as it may arise but avail itself of general laws of the State as appropriate.
If Charter is Adopted
If a charter is adopted, three copies must be certified and authenticated by the city clerk. Certified copies of all publications and notices, arguments for or against the proposal, and certified abstracts must be preserved by the city and county recorder's office. The three copies must be:
• One copy goes to the county recorder's office.
• One copy goes in the Town’s own records.
• One copy is filed with the Secretary of State. The charter cannot take effect until it is filed and accepted by the Secretary of State. (Gov. Code § 34459).
Depending on how detailed the charter is, the Town will then have to undergo the process of ensuring staff understand and follow the charter. This will likely involve training of staff, revising forms, and informing the public on new processes/procedures.
Charter Amendments
Elections Code section 9255 provides, in part, that “A charter or charter amendment proposed by a charter commission, whether elected or appointed by a governing body, for a city or city and county shall be submitted to the voters at an established statewide general election..” Therefore, if the Town wished to adopt and later amend its charter, it could only do so at a regular election, not a special election.
Subcommittee Recommendations
The Subcommittee recommends that the City Council review and discuss the possibility of becoming a charter city. If the Council opts to move forward, the Charter City Standing Subcommittee recommends that the Council pursue formation of a limited scope charter using a City Council Subcommittee (Option 2).
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FISCAL IMPACT
None at this time; however, if the Town opts to pursue a charter, there will be costs involved. After consultation with staff and legal counsel, the Subcommittee estimates the costs could be up to $25,000 for a limited scope charter. For a more expansive charter where the Town pursues the creation of a formal resident committee (Option 1), a feasibility analysis and/or additional legal consultation, the costs would increase.
GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal A - Preserve Small Town Character & Quality of Life • Goal D - Be Forward Thinking
POLICY FOCUS
Policy focus for the Council is discussion of the formation of a charter and the process to do so.
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
1. None.