Item No. 1
Town of Atherton
CITY COUNCIL AND AUDIT & FINANCE COMMITTEE – STUDY
SESSION
TO: HONORABLE MAYOR AND CITY COUNCIL
CHAIR AND AUDIT & FINANCE COMMITTEE
GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT BARRON III, ASSISTANT CITY/FINANCE DIRECTOR DATE: APRIL 1, 2026
SUBJECT: FY 2026/27 GENERAL FUND/OPERATIONS BUDGET
RECOMMENDATION
Review and Discuss.
BACKGROUND
This is a review of the Town’s General Fund Operational Budget only. Expenditures include the Administration, Finance, Planning, Building, Inter-Departmental, Public Works, and Public Safety Departments. The Operations Budget focuses on the Town’s revenues and expenditures over time to the Town’s General Fund. The March 4 Study Session provided a high-level view of revenue and expenditure assumptions and a five-year forecast using those assumptions. Discussions involved the assumptions used for property tax projections and the ERAF revenue budget update.
Those assumptions are incorporated herein.
FY 2026/27 Total General Fund revenues are projected at $26,226,563 balanced against $23,364,831 in expenditures. Overall, the FY 2026/27 Budget is approximately $616K more than the FY 2025/26 adjusted Budget. The increase is spread across the various departmental budgets with the largest increase within the Building, Police, and Public Works Department budgets.
ANALYSIS
R E V E N U E S
FY 2026/27 Total General Fund revenues are projected at $26,226,563. Expenditures are projected at $23,351,631. This results in a single-year revenue surplus of $2.87 million; before the addition of one-time revenues or transfers in/out (such as ERAF or CIP). There is a projected year-end positive fund balance in the General Fund of $13.86 million.
FY 2026/27 General Fund Operations Budget
April 1, 2026
The Town’s ERAF revenue for FY 2025/26 was $3,058,034. This is an increase of $558,034 over the budget of $2,500,000. ERAF funding continues to be budgeted below the line for one time use.
The Town uses ERAF revenue to help reduce long-term liabilities and fund one-time capital project needs (Town Center) and recently as an allocation to the Town’s Capital Improvement programs. It is not included as operational revenue. The use of ERAF revenue is a year-to-year decision by the City Council as part of the budget process. For the last couple of years, ERAF has trended higher. Staff recommends that the ERAF revenue projection remain at $2.750m in the FY2026/27 budget.
For FY 2026/27, Property Taxes still represent 70% of the Town General Fund Revenues. The total projected revenue from property taxes is $17,826,500, approximately 5.1% or $866,500 over the FY 2025/26 adjusted budget. Changes in property values are based mainly on a combination of the projected CPI growth plus a review of sales, and construction activity that will come online in the next assessment period. The Town’s Property Tax Consultant HdL Companies suggests that the Town use a projected increase of 4% to 5.5% in Property Tax revenues. Since FY 2011/12, the Town has seen an Assessed Property Value growth of about 173%. The current assessed value is $17.48b. During our first budget study session, discussion included the projected increase percentage to use for budgeting purposes. Staff updated the projection from 4% to 5.5% for FY 2026/27 property taxes. The total net increase is approximately 5.1% and this is due to the VLF revenue budgeted with no increase.
As the projected tax revenues were based on the 5% assumptions for Secured, and Unsecured Taxes, the Property Tax in lieu of VLF did not use the same assumption. This VLF revenue is the most vulnerable from a revenue
perspective as there have been
consistent shortfalls in the past
several years.
• VLF in Lieu revenue continues to
be closely monitored due to
recurring shortfalls in State
payments. 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 $661,725 in April 2026,
for a total of $1,084,161. This amount represents approximately one-half of the estimated FY 2025/26 VLF allocation. The Town and other agencies continue to encourage the State to allocate funds within the yearly State Budgets. The adjacent table illustrates the shortfall of $124,944,312 FY 2026/27 General Fund Operations Budget
April 1, 2026
for FY 2025/26 VLF revenue. This is a major source of revenue for all agencies in the County and is vital for operations. Adding the VLF shortfalls outstanding for previous years of $973,168 and the current FY 2025/26 of $788,602 leaves a total outstanding of $1,761,770 for the Town.
The property tax projection ranges from 5.1% to 5.5% for FY 2025/26 property tax revenues and will be revisited when we receive our second installment. The actual revenues may be higher.
Source FY 2019/20
Actual
FY 2020/21
Actual
FY 2021/22
Actual
FY2022/23
Actual
FY 2023/24
Actual
FY 2025/26
Estimate
FY 2026/27
Projection
Property
Taxes
$11,611,597 $12,050,352 $13,232,475 $14,242,837 $14,481,756 $16,960,000 $17,826.500 Excess
ERAF
$1,784,091 1,863,658 $2,488,713 $2,339,065 $2,633,605 $3,058,034 $2,750,000 Total
Property
Taxes
$13,395,688 $13,914,010 $15,721,188 $16,581,902 $17,115,361 $20,018,034 $20.576.500 Sales & Use Tax
The Town is not heavily reliant upon Sales & Use Tax revenue. There is a projected increase in Sales & Use Tax of $5,000 for a total of $450,000. The State advances Sales Tax funds based on prior year transactions and then trues up the following year. The Town continues to experience steady Sales Tax revenues.
Source FY 2025/26
Estimate Budget
FY 2026/27 Projected
Budget
Projected Change to
FY 25/26 Est. Budget
Sales & Use Tax $330,000 $330,000 $5,0000
Prop 172 Sales Tax Police $120,000 $120,000 $0
TOTAL $445,000 $450,000 $5,000
Building and Planning Revenues
Staff projects building permit revenues at approximately 2% to 4% for FY 2026/27. 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. The valuation driven fees Building Permit and Plan Check fees are based on building construction activity. Projected building activity remains relatively consistent. 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 Building Department services are provided by contract and any projected increase in revenues are also reflected by a corresponding increase in expenditures. The contract was recently adjusted, and it calls for a 65% share of total building permit revenues.
Planning services are not provided by a revenue-based contract. Most planning fees were set at full cost recovery; however, there are many fees that have been subsidized. When fees are subsidized, planning service contract costs are borne by the Town’s General Fund without a revenue offset.
Public Works Revenues
FY 2026/27 General Fund Operations Budget
April 1, 2026
Public Works issues Encroachment Permits for construction activity. Permit revenue is projected at 3% based on construction activity. In addition to monitoring construction activity in the Public Right of Way, the Department is also responsible for the maintenance and operation of all public infrastructure.
Revenue from activities in the Building, Planning and Public Works Departments (Community Development Departments) comprise most of the charges for services revenue for the Town. The revenue from Building, Planning and Public Works fees are projected to increase $106,000 for a total of $4,093,700 for FY 2026/27. These revenues will be revisited prior to final budget adoption.
Sources FY 2025/26
Est. Budget
FY 2026/27
Projected Budget
Projected Change to
FY 25/26 Est. Budget
Building Revenue $2,747,000 $2,792,000 $45,000
Planning $520,100 $560,100 $40,000
Public Works $720,700 $741,700 $21,000
TOTAL $3,987,800 $4,093,800 $106,000
Franchise Revenue
The Franchise revenues are projected at 4% based on current trends of individual revenues, to $984,000. Of important note are the Garbage 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 $275,000 in FY 2026/27.
Summary of Projected General Fund FY 2026/27 Revenues
Source Revenue
Property Taxes $17,826,500
ERAF $2,750,000
Sales Tax $450,000
Franchise Fees $984,000
Charges for Services (Building, Planning, DPW, Police) $4,617,640 Licenses and Intergovernmental $352,160
Use of Money/Property (Total Misc.) $1,891,563
Park Program Revenue $104,700
FY 2026/27 General Fund Operations Budget
April 1, 2026
Source Revenue
Total General Fund Revenues $28,976,563
• Note – the preceding table includes ERAF.
E X P E N D I T U R E S
Overall, General Fund expenditures are estimated at $23.36 million. Expenditures are evaluated and adjusted based on operational needs to provide a consistent level of services for the community. Staff reviewed operational expenditures and known expenditure adjustments were incorporated based on upcoming contract costs, projected dues/fees for member agencies, as well as corresponding changes in rate adjustments for CalPERS, health costs, and Workers’ Compensation rate adjustments.
Overall Personnel Costs and Benefits
The basic employee-paid CalPERS pension costs are 7% of salary for Miscellaneous employees (non-sworn personnel) and 9% of salary for Public Safety employees (sworn personnel). Through cost-sharing agreements with employees implemented in FY 2019/20, in addition to the preceding rates, employees pay an additional 1% (local miscellaneous) and 3% (public safety) of the employer cost. This has also resulted in operational savings of $1,049,455 since FY 2019/20.
The employer cost for CalPERS pension costs for Miscellaneous employees is 12.72%. This represents a decrease of .02% from the prior year. With the above cost sharing agreement, the actual cost is reduced to 11.72%. The Public Safety employee cost is 29.38% (an increase of .03%).
Through the cost-sharing agreement, the Town’s actual cost is 26.38%.
Listed below are the Unfunded Accrued Liabilities (UAL) dollar amounts the Town has paid for FY 2020/21 through FY 2025/26. The FY 2026/27 total UAL payment within the Actuarial Report is $2,048,890. With the $3m ADP the estimated UAL total is now $1,737,092. This is a decrease of $311,798 as a result of the ADP amortized savings for FY 2026/27. These expenses are incorporated into respective department budgets.
CalPERS Employer
Payment of
Unfunded Liability
UAL
FY
2020/21
UAL
FY
2021/22
UAL
FY
2022/23
UAL
FY
2023/24
UAL
FY
2024/25
UAL FY
2025/26
Miscellaneous
Employees
$333,762 $393,774 $452,652 $431,925 $518,728 $598,108
Public Safety
Employees
$860,123 $6,007,045 $813,210 $791,076 $1,000,841 $955,268 Total Contribution $1,193,885 $6,400,819 $1,265,862 $1,223,001 $1,519,569 $1,553,376 The initial FY 2025/26 budget amount for UAL was $1,839,866. During FY 2025/26 budget discussions, the Town Finance Committee provided a recommendation for making a one-time Additional Discretionary Payment (ADP) of $1m, $2m or $3m to the Classic Public Safety Plan FY 2026/27 General Fund Operations Budget
April 1, 2026
with CalPERS. The City Council approved the recommendation and in June 2025, the Town made a $3m ADP to CalPERS. This ADP decreased the FY 2025/26 UAL contribution of the Town.
The total UAL payment was $1,553,376, a decrease of $286,490 in expense.
The table below reflects the Town’s total Unfunded Actuarial Liability for all employee classes (PEPRA, Classic, Public Safety). In the June 2024 actuarial reports, CalPERS combined the four classes into just two classes of Miscellaneous and Public Safety.
Unfunded Actuarial Liability
As of June 30, 2024
Retiree Class Liability Funded Unfunded Funded
Ratio
Classic & PEPRA
Miscellaneous
$24,248,833 $16,964,130 $7,284,703 70%
Classic & PEPRA Safety $59,429,388 $46,021,118 $13,408,270 77.4% Totals $83,678,221 $65,985,248 $20,692,973 78.8%
OPEB
Town retiree health expenses are being paid through the PARS Trust. The operational cost savings expense to all General Fund operation departments for FY 2026/27 is ($530,317). The current OPEB Liability is $7.98 million and there is currently $9.05 million in the Trust. This results in an estimated Net OPEB Liability asset of $1,070,389.
Workers Compensation Increase
As the Council is aware, the Cities Group JPA entered a dissolution plan under which the Cities Group would cease providing claims administration and all other benefit services on behalf of the Member Agencies on or before December 31, 2025. The Town joined the PLAN JPA Workers Compensation program beginning January 1, 2026. We currently are with PLAN JPA for general liability and property insurance programs. The consolidation of these programs with the workers’ compensation program creates a more coordinated risk management program. With the new workers compensation program, we have a low Self-Insured Retention amount - $10,000 per claim. Since we joined as of January 1, 2026, with the minimum $10,000 SIR amount, this included a half year assessment cost of $208,294. The PLAN JPA offers reliable premium with a low SIR range, and an 85% confidence level on costs. A higher confidence level provides a greater likelihood that actual costs will fall within the projected estimate. Estimated costs for a full fiscal year in PLAN JPA are estimated at $416,588. With the estimated costs at $416K, it is prudent that the allocation charge for workers’ compensation for departments is increased. The current year’s assessment is 1% of salary for all departments and the total amount is $74,053. For FY 2026/27 staff recommends that the charge be increased for sworn public safety from 1% to 4%. This increases the workers compensation costs by $113,482 to $187,535 for FY2026/27. There are adequate reserves in the Workers Compensation Fund to absorb the difference for the year. We can ramp up allocation charges in future years as we build history with our new JPA.
Departmental Budgets
FY 2026/27 General Fund Operations Budget
April 1, 2026
During the review of department operations, each department evaluated service and maintenance needs required for the next fiscal year. Overall, the Town’s total combined operational expenditures increased by $616,077 compared to the FY 2025/26 adjusted budget – an increase of
2.6%. The majority of departmental increases are due to salary and benefits adjustments, CalPERS UAL savings from ADP, job reclassifications, and workers compensation allocation charge updates. The Planning Department expenses include continued costs related to the Housing Element update that are winding down. These include the current, inclusionary housing, and zoning ordinance updates, continued savings due to OPEB retiree health paid from PARS Trust, building contract expense, tree maintenance, increase in landscape maintenance, police operation expense slight increases other equipment, fuel increase costs, training-professional development, one-time expenses, council priorities, purchases for continued level of service within the community, and public works contract services increases. Lastly, there is a contractual cost of living adjustment placeholder of 2.5% within the budget.
Operational expenditures within departments include items such as professional services (MCE, Interwest, Planning, Legal, Contract Custodial services, Park Event services etc.), advertising, utilities, equipment repair, copier leases, phone service, training, technology, computers, postage, etc. – everything net of salaries and benefits.
Each department summary provides general context for most of the major adjustments; however not every specific adjustment is noted in the narrative as minor adjustments are not noted.
CITY COUNCIL OPERATIONS
OVERALL NET DECREASE OF $3,800
The City Council budget includes expenditures related to City Council meetings, conference attendance, Council/Town memberships (LAFCO, C|CAG, HEART, HIP Housing, League of Cities, etc.), elections, utilities for the Council Chambers and incidentals.
Operations
FY 2026/27 includes a slight increase in advertising/publishing for Council meeting notifications and minor increases in membership dues and meals. There was a reduction in Office Equipment and Furniture due to audio visual upgrades and needs were performed in the current year. There is an increase in the municipal election budget line item of $10,000 as there are general election costs in the fiscal year.
ADMINISTRATION DEPARTMENT
OVERALL NET INCREASE OF $82,665
The Administration Department budget includes the City Manager’s Office and City Clerk’s Office. This represents four full-time salaries and benefits (City Manager, City Clerk/Deputy City Manager, Management Analyst II, and Receptionist/Postal Clerk), contract support for human resources (legal), legal noticing and posting, conference attendance and support, memberships, FY 2026/27 General Fund Operations Budget
April 1, 2026
municipal code publishing, office supplies, and the administrative share of general utilities and costs.
Personnel and Benefits
Overall, the salaries and benefits categories increased $61,965. The majority of the increase is in cost-of-living adjustment placeholder, updated Management Analyst I to Management Analyst II salary range, and reclassification of Reception/Postal Clerk to Deputy City Clerk. The Town Post Office is due to close at the end of the current fiscal year. The front desk role will evolve. The CalPERS UAL increased to $10,974.
Operations
There was an increase in operations expenses in the amount of $20,700. The majority of the increase is due to Other Equipment Repairs & Maintenance - copier lease, increased printing of materials, advertising noticing, and Laserfiche records management project, and support for refuse recycling reporting. There are continued sustainability programs and outreach efforts and the maintaining of budget expenditures for the Town’s Earth Day event.
CITY ATTORNEY’S OFFICE
OVERALL NET INCREASE OF $0
The City Attorney’s Office budget consists of the legal retainer for the City Attorney and other associated legal services. The budget includes expense for the Town City Attorney adjusted retainer amount. The budget also includes a line item for Additional Services as needed.
FINANCE DEPARTMENT
OVERALL NET INCREASE OF $15,674
The Finance Department budget includes the salaries and benefits of three full-time employees (Finance Director, Senior Accountant and Jr. Accountant). The budget includes contract services for the Town’s Audit and Investment Services, financial software licensing and support, conference attendance and support, memberships, office supplies, and business license processing costs.
Personnel and Benefits
Overall, the salaries and benefits category increased by $14,689. This includes the cost-of-living placeholder, health insurance for active employees’ expense, and UAL payment (~$6,874) increases.
Operations
FY 2026/27 General Fund Operations Budget
April 1, 2026
Operation expenses for the Department increased by $985, mainly audit and financial expenses.
PLANNING DEPARTMENT
OVERALL NET DECREASE OF $31,480
The Planning Department budget consists of contract planning services and associated services and costs. The Department also includes an allocation of arborist service costs related to planning activities. The budget includes necessary staff hours and counter review for day-to-day processing of basic applications. Most costs are offset by fees. The Planning team has responsibility for onetime programmatic expenditures related to the Town various General Plan Updates that include the Safety Element, Housing Element, and the Zoning ordinance code updates, etc. During the last year, the Town has been working on finalizing the expanded objective design standards, Safety Element updates, with major focus on In-lieu Exclusionary Fee Nexus Study and Financial Feasibility Analysis report. As the above updates have been in process during the current fiscal year, there is a budgetary decrease in FY 2026/27 of (-$42,000). The Town just recently approved an In-lieu Exclusionary Fee. With the Housing Element update in its final stages the operation expense will decrease and include moderate budget expense for mid cycle Housing Element checkins and review of housing sites within the multifamily zones, RHNA numbers count and any legislative changes.
Operations
The Planning Department operations budget includes a decrease in operations budget due to Housing Element winding down. The department basic planning services contract expense has remained static for FY 2026/27 budget for core staffing of planning services for the Town Community Development. There have been increases in the number of application reviews for SB 9, ADU, other similar permits and new legislative housing bills.
BUILDING DEPARTMENT
OVERALL NET INCREASE OF $214,605
The Building Department budget consists mostly of the contract services for the building department (Interwest), portions of three full-time salaries and benefits are also allocated to the department (Arborist, Associate Engineer, and Office Specialist), general office supplies and materials, software costs, and a share of the building department share of utilities.
Personnel and Benefits
Overall, the salaries and benefits category increased to $17,255. There were adjustments in salaries, cost of living placeholder, and CalPERS UAL payment (~$10,191) increases.
Operations
Most of the increase is due to a corresponding Building and Life Safety Contract Services increase - $187,050. This is based on the revenue assumption for the department for the upcoming fiscal FY 2026/27 General Fund Operations Budget
April 1, 2026
year. In the current fiscal year this revenue sharing contract was updated to a flat percentage increase in building revenues. If revenues decrease, the Building and Life Safety Contract services will also see a decrease. There were slight increases in Electricity and Office Supplies expense.
INTERDEPARTMENTAL
OVERALL NET INCREASE OF $83,840
The Interdepartmental budget provides for the accounting of costs that are incurred and supports all Town departments. Costs include liability insurance, IT support, County Tax administration costs, IT infrastructure costs and other charges that are Town-wide in nature.
Operations
The annual cost for IT support is set at an amount that supports the Town’s IT service needs. The contract was updated during the current fiscal and includes an increase of $12,240. The Town IT support services now includes a Systems Engineer and Senior Systems Analyst on site. The majority of the departmental increase is in the general liability, employment practice, and property insurance cost increases of $38,000 - to maintain the Town’s cost for insurance and self-insured retention.
IT Infrastructure expense includes needs and upgrades identified with Town Center. The FY 2026/27 Budget maintains the updates to the Town’s phone system, continued cybersecurity, storage, various licenses, and software application needs. General technology services are within this department (maintenance as well as infrastructure) and include current Shoretel Phone Services, Data Storage Plans, Servers, virus protection systems, software licensing and transparency tools. There were increases in the IT infrastructure expense for the update of the access points for Townwide Wi-Fi and interconnectivity of $35,000. In addition, the department maintains a budget for upgrade to the phone system. There is a slight increase in county tax administration support charges for processing tax revenue. This is offset by the reduction of Post Office Expense due to the Town’s contract post office closing at the end of June.
PUBLIC WORKS DEPARTMENT
OVERALL NET INCREASE OF $147,430
The Public Works Department budget consists of 5 distinct areas of focus: Engineering, Streets, Park Maintenance, Park Programs, and Building Maintenance. The salaries and benefits of all or portions of six full-time employees (Public Works Director, Associate Engineer, Maintenance Manager, Town Arborist, Management Analyst and Office Specialist) are included in the budget.
The budget includes contract services for the Town Maintenance Services (MCE), Custodial Services, new Landscape Maintenance Services, Facility Maintenance services, Tree Trimming, Street Sweeping, Signal Maintenance, Street Light Maintenance, Contract Engineering, and Park Event Services. The equipment and facility servicing needs for the Town are incorporated to include systems maintenance and monitoring, landscaping, custodial, and utilities for these new Town facilities. Within the budget includes maintenance costs for building systems (heating systems, chilled water systems, BMS systems, radiant ceiling and flooring, elevator, green FY 2026/27 General Fund Operations Budget
April 1, 2026
infrastructure, permeable paving, etc.), The budget also includes computers and equipment, training and workshops, software licensing and support, general office support, memberships, office supplies, and shares of general utilities and costs.
Personnel and Benefits
Overall, the salaries and benefits category increased $69,074. The majority of the increase in salaries and benefits category is due to the cost-of-living placeholder. There was also an increase in active employee health insurance. The CalPERS UAL payment increased by $22,416.
Operations
There is an increase in operational expenses of $78,356. Most of the increase is due to the current contract Maintenance Service Budget (MCE) and placeholder estimate of 6%, an estimated contractual adjustment expense of $60,000. The Public Works Maintenance Services Contract with MCE Corporation expires at the end of the current fiscal year. The Town has been advised that there have been significant cost increases, particularly related to prevailing wage activities, which now constitute the majority of work conducted by the MCE crew. Staff is working with MCE to better quantify the cost increases over the last three years and projections to better outline budgetary needs for FY 2026-27 and FY 2027-28. These estimates will be used to update the proposed operating budget as we return to the Council in the upcoming budget workshops. There is an increase in Contract Park Event Services of $30,400 for the new event management contract.
This includes the base year amount and the revenue percentage split for park event rentals.
Contract Tree maintenance expense had an additional increase for pruning program throughout Town streets/park and needed tree removals at the park. There was a slight increase in Contract Custodial Services expenses. There was a reduction in Machinery and Equipment and Computer Equipment software for total amount of $73,000 due to whiteboard and audio visual and lighting upgrades taking place at the pavilion in the current fiscal year. There were slight increases in Landscape Supplies and Safety Supplies & Materials. The Public Works Department operations budget includes professional engineering, town service needs, existing contracts for facilities maintenance services, repair and maintenance. The budget includes the maintenance of the Town service contracts with various vendors for the needs and services for the Town Center facility maintenance.
POLICE DEPARTMENT
OVERALL NET INCREASE OF $107,143
The Police Department budget consists of four distinct divisions: Admin/Training, Patrol/Traffic, Investigations, and Communications/Records. Within these areas are specific areas of focus including detectives, community service officers (and code enforcement), school resource officer, K-9s, dispatch, and administration. Deployment consists of 4 Patrol Teams of 12 hours shifts (2 day shift 7am – 7pm and 2-night shift 7pm – 7am). Minimum staffing consists of 1 supervisor, 2 officers, and 1 dispatcher. The Department currently has one officer vacancy and one dispatcher vacancy. Vacancies often result in increased overtime, which is offset, in part, by overall salary savings at the end of the year.
FY 2026/27 General Fund Operations Budget
April 1, 2026
Personnel and Benefits
Overall, the salary and benefits category increased $147,093. This is largely due to the increase in estimated salary adjustments, cost of living adjustment, increase in workers compensation allocation to 4 percent of salaries for sworn officers, and a CalPERS UAL payment reduction of (~167k) due to the $3m ADP to public safety reduced the UAL expense due. This results in a salary adjustment of $290,694 for FY 2026/27 for a department budgeted as fully staffed. The line item for overtime expense (OT) has increased to $775,000 to address enforcement needs and cpi adjustment. Department overtime includes augmented categories for OT pay for dispatchers; OT for backfill staffing-court, training, investigations, special operations/directed enforcement OT, and holiday OT.
Operations
Overall, the Operations expenditure budget for the Police Department decreased by ($39,950). The majority of this was due to a decrease in transfer to equipment replacement fund for supplemental equipment expenses. This year there is a total expense request of $45,000 for the replacement of townwide AEDs ($35k) and purchase of an additional radar trailer ($10k) There are donation driven programs (such as the health and wellness program (~$200,000), and perishable skills training (~40,000). The health and wellness and perishable skills programs are annual review programs and are currently receiving donations for funding. These are anticipated to be continued during FY 2026/27. There is an identical donation revenue in the amount of $240k within the budget.
There is an increase in Equipment Maintenance for vehicles due to increased costs and needs, Citation Processing for the required RIPA reporting guidelines, and an increase for Other Contract Services expenses for national night out, and for accreditation of crime intelligence services software. An increase in fuel expense due to SUV fleet and recent increase in prices. There are slight increases in Recruitment costs, Other Supplies and Materials, and Machinery and equipment.
The Department is purchasing supplemental equipment from the separate Equipment Replacement Fund. These are purchases which are funded via annual departmental allocations into the Fund until purchases are necessary. As discussed above there was a decrease in supplemental equipment in the budget. The previous year’s supplemental items included $150k budget for the purchase of necessary firearm replacements for the department. The Department is also not anticipating the purchase of vehicles in FY 2026/27. However, the standard Equipment Replacement Fund allocation for the department of $210,000 is still in the operations budget.
OVERALL SUMMARY
Overall, the Operational Budget increased $616,077 over current year’s Adjusted Budget. For FY 2026/27 the Town’s General Fund Revenues are projected at $26,226,563. Expenditures are projected at $23,364,831. This will result in a single year-end positive balance of $2,874,932 and a total positive ending Fund Balance of $13,848,234.
FY 2026/27 General Fund Operations Budget
April 1, 2026
FY 2026/27 includes below the line items of $2,750,000 for ERAF and budgeted debt service payment $861,871, the single year projected positive change in fund balance is $2,484,861. The Town is focusing on various priority buckets for the allocation of Unallocated General Funds to Town Master plans in the CIP, Town long-term liabilities, other Council priorities or one-time expenses. In the FY2025/26, the Town allocated $5,555,000 to the Capital Improvement fund for projects in the CIP and also allocated a $3m ADP towards public safety pension liabilities.
Reserve Calculations
Any remaining fund balance not reserved or committed is designated as Unallocated Fund Balance. The projected unallocated available fund balance for FY 2026/27 is $6,838,785. This Unallocated Fund Balance represents funds that have not yet been assigned. There is a current $2,265,000 allocation out to the CIP fund from previous year’s Out-Year Financial Tool. We will review the Out-Year Financial Planning Model, and with Council direction, the unallocated reserve balance can be adjusted or appropriated towards operational use, capital projects or to pay down liabilities. During review of the outlook forecasting model, staff will come back with adjusted or maintained allocation to CIP amount and other town priorities such long term liabilities at its next reiteration of the operating budget study session review.
The FY 2025/26 beginning General Fund Balance was $11,950,140. The FY 2025/26 updated estimate actual projected year-end fund balance is $11,363,374. This includes the ERAF revenues, as allocated. With the inclusion of debt service, there is a total General Fund projected FY 2026/27 year-end fund balance of $13,848,234.
FY 2026/27 Beginning Fund Balance $11,363,374
FY 202627 Projected Revenues (inclusive of ERAF) $28,976,563 Total Available Funds $40,339,937
COP Debt Service for FY 2026/27 ($861,871)
FY 2026/27 Expenditures (Projected Budget) ($23,364,831) Transfer Out to CIP 401 ($2,265,000)
Projected FY 2026/27 Ending Fund Balance $13,848,234
As shown below, the Town will meet its reserve requirements in FY 2026/27 and projects an unallocated reserve that is 29% of projected expenditures. This is a change over last year’s reserve that was 26% of projected expenditures. This is attributed to the General Fund use of unallocated reserves for the CIP allocation and priority projects.
FY 2026/27 General Fund Operations Budget
April 1, 2026
Other Budgetary Issues
Financial Planning Model, Master Plan Projects, and Council Priorities An Out-Year Financial Planning Model was created to assist the Council in the discussion of the allocation of Unallocated General Funds over the next five (5) years to various identified Town priorities. Set aside buckets were used to illustrate funding towards various priorities. The set aside buckets are planning tools and do not lock the Town into funding in specific areas or specific projects. This provides the Council with an outlook based on current priorities and funding opportunities.
The attached Financial Planning Model is updated with the FY 2025/26 projected budget and staff can walk through the Model during the April 2 Study Session. The Model is General Fund Only and the Operational Revenues and Expenditures match those in the Operational Budget. There currently is an allocation from the Unallocated General Fund to reflect the Financial Planning Model set aside bucket amount of $2.265 million. This is the allocation from last year’s June 1 Study Session.
COP 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 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 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. Staff has appropriated the $861,871 amount for FY 2026/27 for its debt service payments.
POLICY FOCUS
This item discusses revenue and expenditure projections, the use of excess ERAF, reserve policies, priority set aside bucket for out-year financial planning, and recommendations for General Fund Budget. These are policy areas for Council discussion and direction as we prepare the FY 2026/27 budget.
FISCAL IMPACT
FY 2026/27 Expenditures $23,364,831
Projected FY 2026/27 Ending Fund Balance $13,848,234
15% Emergency Reserve $3,504,725
15% Budget Stabilization Reserve $3,504.725
TOTAL RESERVE REQUIREMENT $7,009,450
Less Above Reserve Requirement = Unallocated Reserves $6,838,785 FY 2026/27 General Fund Operations Budget
April 1, 2026
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
FY 2026/27 General Fund Revenue and Expenditure details by department Financial Planning Model