REVENUES
The FY 2025/26 Mid-Year Budget projected Total Property Tax Revenue at $16,965,000 – a decrease over projected revenues by $419,000.
• The decrease is attributable to lower
than anticipated In Lieu Vehicle
License Fee (VLF) revenues.
• VLF in Lieu revenue continues to be
closely monitored due to recurring
shortfalls in State payments. For FY
2025/26, staff anticipates a loss of
approximately $524,000 in VLF
revenues. The Adopted Budget
assumed receipt of State backfill
payments to address projected
shortfalls for both FY 2023/24 and
FY 2024/25. However, the State’s
FY 2025/26 budget provided funding for only two-thirds of the remaining FY 2023/24 shortfall.
Based on the FY 2025/26 update provided by San Mateo County, the Town will experience a cumulative VLF shortfall totaling $973,168 ($232,658 from FY 2023/24 and $740,511 from FY 2024/25). In addition, staff anticipates a shortfall in FY 2025/26 VLF revenues. To date, the Town has received $422,436 in December and anticipates receiving an additional $422,436 in April 2026, for a total of $844,872. This amount represents approximately one-half of the estimated FY 2025/26 VLF allocation.
The VLF shortfall is a major concern for the County and local agencies. San Mateo County and its member cities are working with the State to remedy these yearly shortfalls; however, a solution is not imminent or optimistic. The Town continues to use the San Mateo County legislative office and our legislative lobbyist firm, Joe A. Gonsalves & Son, 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 $322,500. Most items identified were one-time expenditures for computer equipment and system backup upgrades, operations facility upgrades for park rental use and tree maintenance/removal at the park; and one-time priority contract revenue adjustment due to amended agreement.
• FY 2025/26 General Fund revenues are projected at $27.7m (inclusive of ERAF $3.05m). • FY 2025/26 General Fund expenditures are projected at $22.7m. • Net mid-year adjustments included $322,500.
• Transfers Out of $6.416m for CIP ($5.55m) and Annual COP Debt Service $861k.
The projected year-end fund balance for FY 2025/26 is $10,512,552, well above the Town’s reserve requirements for FY 2025/26.
Projected FY 2025/26 Ending Fund Balance $10,512,552
Required 15% Emergency Reserve ($3,412,313)
Required 15% Contingency Reserve ($3,412,313)
TOTAL RESERVE REQUIREMENT ($6,824,626)
General Fund Unallocated Balance $3,687,926
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’s Assessed Property Value growth is ~7.46% per year. It dropped from 7.55%. The highest growth year was FY 2012/13 at 9.03% and the lowest growth year of FY 2021/22 at 5.68%. It is important to note that 2022 is the year interest rates began to increase significantly whereas over the previous 12 years they remained low. There are two consecutive years of approximately 6.5% growth in assessed property values. In 2025 there were 36 full-value sales in Atherton, whereas in 2024, the Town saw 48 full-value sales. The median price for homes is down 2.54% from the previous year to $7.67m. 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%
2025/26 $17,448,984,798 6.48%
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% increase in FY 2026/27 and FY 2027/28 and a 4.5% increase in FY 2028/29. With a 5.5% increase in FY2029/30 through FY 2030/31. These projections are not static and can be adjusted based as appropriate. 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
Building permit revenue is 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.
Projected building activity remains relatively consistent. The Town made adjustments to Building, Planning and Public Works fees two years ago. It had been approximately twelve years since there was an 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 2025/26 budget were based on the new Master Fee Schedule and projected work volume.
With the increase in fees and projected building activity, the forecast is set at 3% for FY 2026/27 through FY 2028/29; with 2% in FY 2029/30 and FY 2030/31. Planning revenue is projected slightly higher with increases in the next two years as development projected under the housing element begin to take shape. The Planning revenue forecast is set at 3% in FY 2028/29 and 2% in FY in FY 2030/31.
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. ERAF is also used to enhance 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
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 FY 2024/25 $2,500,000 $3,058,034 Additional allocation CIP ERAF revenue for FY 2025/26 was $3,058,034. This is an increase of $558,034 over the budget amount of $2,500,000. This is the highest ERAF amount that the Town has ever received. In FY 2024/25 budget the ERAF projection increased from $2.3m to $2.5m. Staff recommends Council review ERAF and potentially increase the forecast budget. Staff maintains that ERAF be set knowing that it could be the next target for State reduction of local revenues. An increase of $250,000 could be an optimal and yet conservative approach for ERAF 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 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31
Property Taxes $17,379,640 $18,074,826 $18,888,193 $19,832,602 $20,923,396 Building Fees $2,741,8221 $2,823,627 $2,902,885 $2,960,743 $3,019,758 Excess ERAF $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 Total Revenues $22,621,462 $23,398,453 $24,291,078 $25,293,345 $26,443,154 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 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31
Sales & Use Tax $539,580 $550,372 $561,379 $572,607 $584,059 Franchise Fees $962,120 $976,552 $986,3179 $996,180 $1,006,142 Other Significant Revenues
FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31
Business License $303,960 $308,519 $311,605 $314,721 $317,868 Planning Revenue $575,300 $620,300 $638,900 $651,672 $664,399 DPW Revenue $742,130 $763,173 $784,847 $799,730 $814,911 Park Revenue $89,454 $90,796 $91,704 $92,621 $93,547
Other Revenue $1,890,927 $1,911,294 $1,931,742 $1,952,656 $1,974,048 Total Revenues $5,103,471 $5,221,006 $5,306,494 $5,380,187 $5,454,974 Franchise Fees
In November 2025 the City Council again amended the Agreement between the Town and refuse hauler GreenWaste. The amendment set a lower Franchise Fee to the Town from GreenWaste for its exclusive franchise for refuse. 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. This amendment maintains the adjusted Franchise Fee at 5% (down from 10%) of the Franchisee’s monthly gross billings. It also uses a combination of the Town’s Rate Stabilization Fund (approximately $530,000), with delayed increases in contract-based compensation and incremental future restoration of the Town’s Franchise Fee to its full 10% level. For 2026 the contract increase of 11% was reduced to an effective rate increase of 8% due to the collective tools utilized. The prior annual Franchise Fee totaled $430,000. With the reduction of the fee to 5%, the new projected amount is approximately $242,000 in FY 2026/27 and is projected at $253,073 in FY 2030/31.
OTHER REVENUE FUNDS
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 an 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 Town applied for and received the grant in April 2025. The grant funds are being used 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 as well as the installation of EV stations at Holbrook Palmer Park entry lot. The Town is also using funds from this grant for the purchase of an electric scissor lift for use at all facilities.
San Mateo County Transportation Authority (SMCTA) - There were recent projects that received funding from the Transportation Authority for use of its Measure A and Measure W Highway Program funds. Seventeen projects were approved for funding, and the Town of Atherton had two projects. The allocation included $3M towards the El Camino Real/Selby Lane Traffic Signal Safety and Mobility Improvements (ranked 7), and $1M towards the Alameda de las Pulgas Traffic and Safety Improvements (ranked 14).
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.
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 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 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.
Park Picnic Table Donation of $3,200 from Atherton Arts Foundation - The Town received the donation for the cost of and installation of a picnic table at Holbrook Palmer Park.