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. Future amounts below do not represent any assumed contractual labor adjustment (i.e. CPI or negotiated benefit increases). For purposes of this forecast, staff used assumption range between 3% and 4% in the forecast.
Salaries & Benefits
FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31
Administration $930,920 $963,503 $1,002,043 $1,032,104 $1,063,067 Finance $674,783 $698,400 $726,366 $748,126 $770,570
Building $232,044 $240,165 $249,772 $257,265 $264,983
Police $8,206,191 $8,493,408 $8,833,144 $9,098,138 $9,371,083 DPW $815,173 $843,704 $877,452 $903,776 $930,889
Total $10,859,111 $11,239,180 $11,688,777 $12,039,409 $12,400,592 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.
The Town has a contract planning services for its Planning Department. These services currently include one-time cost work on the Town’s 6th Cycle update of the Housing element. The Inclusionary Ordinance is one of the final phases of the Housing element update. In the current forecast, the Planning Department expense eliminates the one-time cost for the Housing Element.
The current building services are provided via contract with Interwest/Safebuilt community development services. The Building & Life Safety contract is structured as a revenue-based agreement, with contractual costs increasing as building revenues increase. Until recently, the current contract included the service provider receiving 58% of the first million in revenue and 55% for additional building revenues over $1 million. The Town performed a comprehensive fee study and updated its Master Fees in 2024. The last fee study was conducted in 2012. Staff evaluated the cost-of-service model resultant from the Town’s recent fee adjustments from the comprehensive study. At its January 2026 meeting, the City Council approved a contract amendment extending the Interwest/Safebuilt agreement and increasing the compensation rate to 65% percent of building fees collected by the Town.
Basic budget assumptions for the General Operations expenditure budgets are 3% to 4.5% year to year in the forecast. FY 2026/27 and FY 2027/28 forecast 4.5% increases; FY 2028/29 projects
3.5%; and FY 2029/30 and FY 2030/31 projects 3%.
Operational Expenditures
FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31
Council 79,629 83,212 86,125 88,708 91,370
Administration 513,722 536,839 555,629 572,298 589,467
Attorney 323,950 338,528 350,376 360,888 371,714
Finance 239,754 250,815 259,160 266,935 274,943
Planning 992,645 817,352 850,046 884,048 919,410
Building 1,754,127 1,824,293 1,897,264 1,973,155 2,052,081 Inter-department 1,269,844 1,326,987 1,373,432 1,410,729 1,446,419 Police 2,233,939 2,334,467 2,416,173 2,488,658 2,563,318 DPW 3,148,428 3,290,108 3,405,261 3,507,419 3,606,010
Total Amount $10,556,038 $10,802,601 $11,193,466 $11,552,838 $11,914,732 Pension Liabilities
In 2025, CalPERS performed its Asset Liability Management (ALM) review. The ALM process takes place every 4 years and includes comprehensive strategic asset allocation and experience study review of the pension fund (PERF), includes discussion of discount rate, and adoption of actuarial and economic assumptions. The 2025 ALM includes the proposal of a new approach to the portfolio for the PERF called the Total Portfolio Approach (TPA). It was discussed that this new investment framework provides a strategic allocation with increased focus on risk and follows an equity-bonds reference portfolio mix of 75/25 in equity bonds. This new approach recommends an established 400 basis point (bp) risk limit. A major take away is that the CalPERS Board voted to keep the discount rate at 6.8%. As the Council may recall, the discount rate was reduced from 7% to 6.8% in 2021. In FY 2025/26 the Normal Cost increased 0.07% for Miscellaneous Employees (non-sworn) and 0.05% for Public Safety Employees (sworn). These represent minimal increases. There was an increase in the total UAL for FY 2025/26 of $320,297. • The employer contribution rate set by CalPERS for Miscellaneous Employees (non-sworn) is 12.74% in FY 2025/26 and in FY 2026/27 the rate changes to 12.72%. • The employer contribution rate set by CalPERS for Public Safety Employees (sworn) is
29.35% in FY 2025/26 and in FY 2026/27 the rate changes to 29.38%.
The total UAL for the Town in FY 2026/27 increased $209,024 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 2023/24 investment return was 9.5% and will first impact employer contribution rates for public agencies in fiscal Year 2026/27. The rate of return on the PERF for FY 2024/25 was 12%. This investment return will first impact the employer contribution rates for public agencies in fiscal Year 2027/28. For budget purposes the FY2026/27 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 24/25 12.0%
CalPERS Returns Net Rate of Return
2-year FY 23/24 9.5%
3-year FY 22/23 6.2%
4-Year FY 21/22 -6.1%
5-year 21.3%
10- year 6.2%
20-year 6.7%
30-year 7.7%
In April 2022, the City Council directed staff to allocate $5 million toward the Town’s Unfunded Accrued 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.
Making the $5m contribution reduced the Public Safety UAL for FY 2022/23 to $815,591 and 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. As noted above, since our initial $5m ADP there have been changes in the investment rate of return, actual yearly realized returns, and CalPERS methodologies. The investment return was a negative 6.1% for FY 2021/22 (the time of the $5m 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%. Staff updated the savings analysis with the most recent CalPERS’ updated Actuarial Report (6/30/2024) and it reflects an adjusted savings projection.
Recently the City Council submitted an additional ADP of $3M toward the Public Safety portion to reduce the UAL. This was a recommendation from the Audit & Finance Committee to make this additional contribution during the FY2025/26 budget cycle.
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 $930,814 $1,366,330
Difference – Savings $356,491 $422,487 $322,793 $449,628 $68,002 This recent CalPERS Actuary report as of June 30, 2024, reveals updated UAL payments showing above that the savings are now estimated at $1.619 million over time. Last year’s savings projection showed $1.424 million savings over time. This is a net change of $195,341. The reduction is due to CalPERS Actuarial changes to the rate of return to 6.8%, CalPERS’ actual returns and the additional $3M ADP. This additional contribution to the Town’s UAL was a fiscally prudent decision. This impact is anticipated to be with the recent actuarial changes by CalPERS and the reduction of UAL expenses over time.
It is important to note, the FY 2025/26 actual amount for Public Safety of $930,814 includes the recent $3M ADP sent to CalPERS in June 2025. Due to the timing of the $3M ADP it only affected our initial UAL expense for FY2025/26. The CalPERS Actuarial Reports for (6/30/25) will reflect an updated amortized cost and UAL payments from this additional ADP. The $3 million ADP is anticipated to produce a 5-year savings of $1,271,378 in UAL payment reductions and over full amortization with an estimated savings of $5,385,063.
Based on the above, the Town has experienced savings of $1.619 million in operations expenses over time. 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 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 Miscellaneous $682,560 $708,000 $775,000 $782,000 $787,000 Public Safety $1,366,330 $1,426,000 $1,583,000 $1,589,000 $1,588,000 Total $2,048,890 $2,134,000 $2,358,000 $2,371,000 $2,375,000 With CalPERS’ discount rate of 6.8% and this year’s return of 12%, the estimated overall funded status of the CalPERS Pension Fund stands at 77%. The Town’s FY 2024/25 net pension liability is $18.67m (local miscellaneous and public safety). This is a decrease of $345k 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.
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 2025/26 the Town has made $6.0m in payments on the COP Lease.
The Town did not exercise the 5-year call option. The estimated call option amount was $4.3m.
The Council direction was to retain the 2.1% interest rate on the lease payments and continue making the semi-annual payments through conclusion in FY 2029/2030. Based on the current state of interest rates, it was 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 6. 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. There is a shift of focus on other capital projects throughout the Town, priorities may change or redevelop as we move to accomplish projects from the master plans. Current projects are the park playground, park restrooms, Alameda De La Pulgas traffic improvement, El Camion Selby Lane intersection, Atherton Culvert and Detention.
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 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 reductions from our property taxes yearly in the amount of $313,815. The outstanding amount on the loans is $501,916.