Portola Valley City Council
July 8, 2026

TOWN OF PORTOLA VALLEY
Regular Meeting of the Town Council
Wednesday, July 8, 2026
7:00 PM
MAYOR: Craig Taylor
VICE MAYOR: Mary Hufty
COUNCILMEMBERS: Rebecca Flynn, Judith Hasko, Helen Wolter

A G E N D A
HISTORIC SCHOOLHOUSE - 765 Portola Road, Portola Valley, CA 94028 Remote Public Comments: Meeting participants are encouraged to submit public comments in writing in advance of the meeting. Please submit your public comments by using the online form, by 1:00 PM on the day of the meeting. Time permitting, your correspondence will be uploaded to the website. All received questions will be forwarded to the Portola Valley Town Council for consideration during the meeting and included in the public record. Members of the public may also provide comments in person at the meeting. The agenda and staff report will be posted on the Town’s website by approximately 5:00 PM the Friday prior to the meeting. Additionally, technology permitting, the public body will take questions using the Raise Hand button for those who attend the meeting online or by phone. The Mayor will call on people to speak by the phone number calling in. Remote participation is provided as a supplemental way to provide public comment, but this method does not always work. The public is encouraged to attend in person to ensure full participation.

In-Person Public Comments: Please fill out and submit a Public Comment card to the Town Clerk or Mayor prior to speaking. The Mayor will call your name at the appropriate time. Each speaker's time is limited to three (3) minutes. The Mayor reserves the right to limit speaker's time, depending upon the number of speakers or other circumstances.

Assistance for People with Disabilities: In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the Town Clerk at (650) 851-1700 or by email at [email protected]. Notification 48 hours prior to the meeting will enable the Town to make reasonable arrangements to ensure accessibility to this meeting.

VIRTUAL PARTICIPATION VIA ZOOM
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1 1. CALL TO ORDER

2. ANNOUNCEMENT OF REMOTE ATTENDANCE / ROLL CALL

3. PRESENTATIONS / PROCLAMATIONS

4. TOWN MANAGER REPORT

5. ORAL COMMUNICATIONS

6. CONSENT AGENDA
a. Approve Special Meeting Minutes of June 24, 2026
b. Approve Regular Meeting Minutes of June 24, 2026
c. Approve Warrant List for July 8, 2026
d. Adopt a Resolution Approving and Authorizing The Town Manager To Execute an Amendment to the Cooperation Agreement with the County of San Mateo County which Permits the Town’s Continuing Participation in the County’s Housing and Community Development Program

7. REGULAR AGENDA
a. Consider Acceptance of the FY 2022-23 Annual Comprehensive Financial Report b. Receive Information and Provide Direction on the Draft Ordinance Amending Chapter 3.12 of Title 3 (Revenue and Finance) of the Portola Valley Municipal Code Regarding the Real Property Transfer Tax

8. COUNCIL SUBCOMMITTEE, LIAISON COMMITTEE, AND REGIONAL AGENCIES REPORTS a. 06/22/2026 ASCC Liaison Memo

9. ADJOURNMENT
There are no written materials, and the Town Council does not take action under this agenda item.

Persons wishing to address the Town Council on any not on the agenda or related to Presentations/Proclamations or the Town Manager Report subject may do so now. Please submit a speaker’s slip located at the front of the room to the Town Clerk or Mayor, prior to speaking. Please note the Council is not able to undertake extended discussion or action on items not on the agenda. Each speaker’s time is limited to three (3) minutes.

Oral and written reports arising out of Council subcommittee and liaison appointments to both in-town and regional committees and initiatives. The Town Council does not take action under this agenda item.

The next Regular Town Council meeting will be held on July 22, 2026 at 7:00 p.m.

Land Acknowledgement:

The Town of Portola Valley acknowledges the colonial history of this land we dwell upon the unceded territory of the Ramaytush (rah-my-toosh) Ohlone, Tamien Nation, and Muwekma (mah-WEK- mah) Ohlone, who endured a human and cultural genocide that included removal from their lands and their sacred relationship to the land. Portola Valley recognizes that we profit from the commodification of land seized from indigenous peoples and now bear the ecological consequences. We seek to understand the impact of these legacies on all beings and to find ways to make repair. 2 6a - Revised minutes and reposted 7/7/26

TOWN OF PORTOLA VALLEY

STAFF REPORT
TO: Mayor and Members of the Town Council
FROM: Veronica Dao, Town Clerk
DATE: July 8, 2026
RE: Approve Special Meeting Minutes of June 24, 2026

RECOMMENDATION
Staff recommends Town Council review and approve the June 24, 2026 special meeting minutes.

ATTACHMENTS

1. 06-24-2026 Council Special Meeting Minutes
3 Revised and reposted 7/7/26
Volume 47
June 24, 2026

PORTOLA VALLEY TOWN COUNCIL SPECIAL MEETING MINUTES – JUNE 24, 2026

1. CALL TO ORDER
Mayor Taylor called the meeting to order at 5:30 p.m. Roll call was taken.

Present: Councilmembers Helen Wolter (arrived 5:45 p.m.), Judith Hasko, Rebecca Flynn, Vice Mayor Mary Hufty, Mayor Craig Taylor

Absent: None
Others: Town Manager Darcy Smith, Town Attorney Catherine Engberg, Town Clerk Veronica Dao

2. ANNOUNCEMENT OF REMOTE ATTENDANCE / ROLL CALL

3. ORAL COMMUNICATIONS
Mayor Taylor invited public comment. None were received.

4. CLOSED SESSION
Councilmember Wolter was recused from this item.

The Council went into Closed Session at 5:31 p.m. to discuss the following:
a. CONFERENCE WITH LEGAL COUNSEL – LITIGATION (Gov. Code section 54956.9(d)(1))
County of San Mateo, et al. v. State of California, et al., San Francisco Superior Court Case No. CPF-25-519270
The Council returned at approximately 5:45 p.m. with Councilmember Wolter joining.

Town Attorney Engberg reported out that there was no reportable action.

5. REGULAR AGENDA – Items from the May 27, 2026 Regular Meeting a. Receive Update from the Town Council Ad Hoc Subcommittee to Identify Alternative Legal Counsel to Advise the Town regarding MidPeninsula Regional Open Space District’s Proposed Lower Barn Project and Hawthorns Historic Complex Property
Councilmember Hasko gave an update from the subcommittee.

Volume 47
June 24, 2026

Mayor Taylor invited public comment.

Public Comment
• Lynda Brothers
No formal action was taken.
b. Consider Appointment of a Town Council Ad Hoc Subcommittee to Research Options to Work Directly with the MidPeninsula Regional Open Space District Regarding the Hawthorns Property
Town Manager Smith presented the item.

Mayor Taylor invited public comment.

Public Comment
• Betsy Morgenthaler
• Lynda Brothers
• Lauren
• Nancy Powell
• Leslie Kriese
• Charles M.
• Ed Holland
• David Cardinal
Council asked questions and discussed the item.

Motion and second (Hufty, Hasko) to not appoint a subcommittee. The motion carried 4-1 by voice vote, with Mayor Taylor voting no.

6. ADJOURNMENT
The Council adjourned the meeting at approximately 7:05 p.m. _________________________ _________________________
Craig Taylor, Mayor Veronica Dao, Town Clerk
Submitted for approval to the Town Council at its July 8, 2026 regular meeting.

TOWN OF PORTOLA VALLEY

STAFF REPORT
TO: Mayor and Members of the Town Council
FROM: Veronica Dao, Town Clerk
DATE: July 8, 2026
RE: Approve Regular Meeting Minutes of June 24, 2026

RECOMMENDATION
Staff recommends Town Council review and approve the June 24, 2026 regular meeting minutes.

ATTACHMENTS

1. 06-24-2026 Council Regular Meeting Minutes
6 Volume 47
June 24, 2026

PORTOLA VALLEY TOWN COUNCIL REGULAR MEETING MINUTES – JUNE 24, 2026

1. CALL TO ORDER
Mayor Taylor called the meeting to order at 7:12 p.m. Roll call was taken by the Clerk.

Present: Councilmembers Helen Wolter, Judith Hasko, Rebecca Flynn, Vice Mayor Mary Hufty, Mayor Craig Taylor

Absent: None
Others: Town Manager Darcy Smith, Town Attorney Catherine Engberg, Assistant Town Manager Tony McFarlane, Planning and Building Director Sarah Cawrse, Senior Planner Ocoee Wilson, Town Clerk Veronica Dao

2. ANNOUNCEMENT OF REMOTE ATTENDANCE / ROLL CALL

3. PRESENTATIONS / PROCLAMATIONS
a. Proclamation for Ethan Radford for his Appointment to the United States Naval Academy
Mayor Taylor presented the proclamation and gave remarks. Ethan’s family accepted the proclamation on his behalf.
b. Presentation from the San Mateo County Mosquito and Vector Control District Regarding Services to the Town and the Presentation of a Proclamation for Mosquito Awareness Week
Brian Weber, District Manager made a presentation.

Mayor Taylor presented the proclamation to Board of Trustees representative, Robert Luo.
c. Presentation by PG&E
Marjory Ruiz, Senior Government Affairs Representative, made a presentation.

4. TOWN MANAGER REPORT
Town Manager Smith updated the Council on the following:
 Summer concert series
 PV Palooza
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June 24, 2026

 Town Picnic and Zotts to Tots
 Town Emergency Preparedness & Safety Day

5. ORAL COMMUNICATIONS
Mayor Taylor invited public comment.

Public Comment
 Danna Breen
 Caroline Vertongen
 Patty Dewes

6. CONSENT AGENDA
Mayor Taylor invited public comment.

Public Comment
 Caroline Vertongen
Consent Agenda items 6a, 6d, and 6j were pulled for separate discussion and action.

Motion and second (Hasko, Wolter) to approve Consent Agenda item 6a with the following changes:
 (spelling) Aaron Pfannenstiel of Atlas Planning
The motion carried 4-1-0 by voice vote, with Councilmember Flynn abstaining.

Motion and second (Hufty, Flynn) to approve Consent Agenda item 6d. The motion carried unanimously by voice vote.

Motion and second (Wolter, Flynn) to approve Consent Agenda item 6j. The motion carried 4-1-0 by voice vote, with Mayor Taylor recused.

Motion and second (Flynn, Hufty) to approve Consent Agenda items 6b, 6c, 6e-i, and 6ko. The motion carried unanimously by voice vote. a. Approve Special Meeting Minutes of June 10, 2026
b. Approve Regular Meeting Minutes of June 10, 2026
c. Approve Warrant List for June 24, 2026
d. Approve and Authorize the Mayor to Execute the Law Enforcement Services Agreement Between the County of San Mateo and the Town of Portola Valley 8 Volume 47
June 24, 2026

e. Approve and Authorize the Mayor to Execute a Professional Services Agreement for On-Call Engineering and Construction Project Management Services with Interwest Consulting Group, Inc.
f. Approve and Authorize the Mayor to Execute a Professional Services Agreement for On-Call Planning, Building, Code Enforcement, and Engineering Services with CSG Consultants, Inc.
g. Approve and Authorize the Mayor to Execute a Professional Consultant Services Agreement for On-Call Building Permit Technician Consulting Services with Shums Coda Associates
h. Approve and Authorize the Mayor to Execute a Professional Consultant Services Agreement for On-Call Planning Services with Good City Company i. Approve and Authorize the Mayor to Execute a Professional Consultant Services Agreement for On-Call Geotechnical and Engineering Services with Cotton Shires and Associates, Inc.
j. Adopt Resolution for Fiscal Year 2026-2027 Woodside Highlands Road Maintenance District Tax Assessment
k. Adopt a Resolution for Fiscal Year 2026-2027 Wayside II Road Maintenance District Tax Assessment
l. Adopt a Resolution Calling for a General Municipal Election to be Held on November 3, 2026; Requesting the County of San Mateo Board of Supervisors to Consolidate Said Election with the Statewide General Election; and Approving and Authorizing the Town Manager to Execute a Services Agreement with the County of San Mateo for Specified Services Relating to Conducting a General Municipal Election
m. Adopt a Resolution Authorizing Town Participation in the Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) Employment Risk Management Authority (ERMA)
n. Approve and Authorize the Mayor to Sign a Letter of Support for the Midpeninsula Regional Open Space District Application for a CAL FIRE Wildfire Prevention Grant for a Wildland Fire Fuels Reduction Project in the Coal Creek Open Space Preserve
o. Adopt a Resolution Adopting a List of Projects for Fiscal Year 2026-27 Funded by SB 1: The Road Repair and Accountability Act of 2017

7. PUBLIC HEARING
a. Hold a Public Hearing and Consider Adoption of Resolution Adopting the Recreation Fees in the Master Fee Schedule Update
9 Volume 47
June 24, 2026

Assistant Town Manager McFarlane presented the item.

Mayor Taylor invited public comment.

Public Comment
 Kristi C.
 Patty Dewes
Council asked questions and discussed the item.

Motion and second (Taylor, Hufty) to adopt the resolution with the following changes:
 Increase cleaning fees to $50
 Reduce court fees to $75
 Community Hall rental fee $2,277 for residents
The motion carried unanimously by voice vote.

Council recessed for a break at approximately 9:18 p.m. and returned at approximately 9:25 p.m.

The Council decided to move up Item 8d to be heard first on the Regular Agenda. b. Hold Second Public Hearing Regarding Proposed Adoption of a Town Charter Town Manager Smith presented the item.

Mayor Taylor Invited public comment.

Public Comment
 Kristi C.

Council asked questions and discussed the item.

No formal action was taken.

8. REGULAR AGENDA
The Council heard 8d first and then continued with the rest of the agenda in order. a. Consider a Resolution Adopting the Fiscal Year 2026-27 Operating and Capital Project Budget
Assistant Town Manager McFarlane presented the item.
10 Volume 47
June 24, 2026

Mayor Taylor invited public comment.

Public Comment
 Mark Waissar
Council asked questions and discussed the item.

Motion and second (Wolter, Flynn) to adopt the resolution approving FY26-27 budget. The motion carried unanimously by voice vote.
b. Consider a Resolution Establishing the Gann Appropriations Limit for Fiscal Year 2026-27
Assistant Town Manager McFarlane presented the item.

Mayor Taylor invited public comment.

Public Comment
 Kristi C.

Motion and second (Flynn, Hufty) to adopt the resolution. The motion carried unanimously by voice vote.
c. Consider Authorizing and Providing Direction to the Mayor to Complete the Ballot for the Westridge Architectural Supervising Committee 2026 Reinstatement of the Protective Restrictions, Conditions, Covenants, and Agreements for the Westridge Area
Town Manager Smith presented the item.

Vice Mayor Hufty recused herself and left the room at 11:21 p.m.

Mayor Taylor invited public comment. None were received Motion and second (Flynn, Wolter) to abstain from completing the ballot. The motion caried 4-1-0 by voice vote, with Vice Mayor Hufty recused.

Vice Mayor Hufty returned at 11:33 p.m. and Council continued on to Item 9. d. Receive Update and Provide Direction to Staff on the Draft Housing Element Amendment and Consider Authorizing Staff to Submit the Draft Housing Element Amendment to the State Department of Housing and Community Development This item was heard first before 8a.

Senior Planner Wilson presented the item.
11 Volume 47
June 24, 2026

Mayor Taylor invited public comment.

Public Comment
 Unidentified speaker
 Kristi C.

Council asked questions and discussed the item.

Motion and second (Flynn, Wolter) t to remove 100% from NOFA language and forward to HCD. The motion caried 4-1-0 by voice vote, with Vice Mayor Hufty abstaining.

The Council continued with the rest of the agenda starting at 8a.

9. COUNCIL SUBCOMMITTEE, LIAISON COMMITTEE, AND REGIONAL AGENCIES

REPORTS
Councilmembers reported on several local and regional meetings they attended recently.

Mayor Taylor invited public comment. None were received.

10. ADJOURNMENT
The meeting adjourned at 11:41 p.m.
_________________________ _________________________
Craig Taylor, Mayor Veronica Dao, Town Clerk
Submitted for approval to the Town Council at its July 8, 2026 regular meeting. 12 ______________________________________________________________________________________ TO: Mayor and Members of the Town Council
FROM: Anthony McFarlane, Assistant Town Manager
DATE: July 8, 2026
RE: Warrant List for July 8, 2026.

RECOMMENDATION:

Review and accept the Warrant List for July 8, 2026:

REPORT SUMMARY
The following table lists warrant activity by date, tracks starting and ending warrant numbers, and total amount of warrants issued.

The following table lists payments by fund.

Date
Ending
Warrant No
Warrant 7/8/2026 6138 6161 23 $ 105,237.32 7/9/2026 6/24/2026 6137 Prior Warrant List
Attached are Warrant Lists for:

Type of Warrant Date
Starting
Warrant No
Ending
Warrant No
Total
Warrants Amount
Warrants
Released
Date Fund Amount
7/8/2026 101-General $ 71,248.23
7/8/2026 206-Gas Tax 11,859.66
7/8/2026 221-Park In-lieu 5,313.14
7/8/2026 222-Inclusion In-lieu 7,387.50
7/8/2026 701-Customer Deposits 9,428.79
$ 105,237.32
Payments by Fund
Total

TOWN OF PORTOLA VALLEY

STAFF REPORT

TOWN OF PORTOLA VALLEY
13

Warrant List July 8, 2026
The following table lists the warrants issued as EFT/ACH payments. EFT/ACH payments are recurring payments for contributions related to retirement and deferred compensation, workers’ compensation premiums, and utilities, etc.

The following table lists the warrants that were voided and the reason for the voided transaction.

The following table lists the warrants issued outside of the scheduled warrant list cycle for various reasons, such as processing error, reissuing a voided check, or employee separation.

DISCLOSURE

ENVIRONMENTAL IMPACT
The recommended Town Council action to review and approve the Warrant List for July 8, 2026, is not considered a "project" under the California Environmental Quality Act (CEQA) Guidelines and is therefore exempt from CEQA requirements. As provided by CEQA Guidelines Section 15378(b)(5), a "project" does not include "organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment." Review and acceptance of the Warrant List is therefore exempt from CEQA and no further environmental analysis is required.

FISCAL IMPACT
Total fiscal impact is $105,237.32.

Date Warrant No Issued To Fund Dept Purpose Amount
7/8/2026 6138 California Water Service 101 610 May-Jun Water $ 9,484.74 7/8/2026 6143 Missionsquare Retirement 101 Jun Deferred Comp 2,458.87 7/8/2026 6145 Jeannie Goldman 101 410 Spring Classes 12,355.00 7/8/2026 6146 Navia Benefit Solutions 101 Jun Employee Deductions 562.50 7/8/2026 6149 PG&E 101 610 May-Jun Utilities 578.36
7/8/2026 6154 Amazon Capital Services 101 610 Jun Office Supplies 58.77 7/8/2026 6155 Leaf Capital Funding 101 610 Copier Lease 426.02 7/8/2026 6158 Precisionworks, LLC 101 420/510 Sidewalk repair 8,241.00 7/8/2026 6159 William R. Seligman 101 125 Legal Services 4,769.20 $ 38,934.46
Warrants Issued as ACH/EFT
Total
Date Warrant No Issued To Fund Dept Purpose Amount
-$
Warrants Voided and Reissued
Total
Date Warrant No Issued To Fund Dept Purpose Amount
-$
Warrants Issued Outside of a Scheduled Warrant List
Total
Date Warrant No Issued To Fund Dept Purpose Amount
-$
Disclosure
Total
14

Warrant List July 8, 2026
For additional information on any item disclosed in this report, please contact the Finance department directly at [email protected].

ATTACHMENTS

1. 07/08/2026 Warrant List Certification
15 TOWN OF PORTOLA VALLEY Warrant Disbursement Journal July 08, 2026 Claims totaling $105,237.32 having been duly examined by me and found to be correct are hereby approved and verified by me as due bills against the Town of Portola Valley. Date _____________________________ ________________________________ Anthony McFarlane, Assistant Town Manager Motion having been duly made and seconded, the above claims are hereby approved and allowed for payment. Signed and sealed this (Date) _____________________ _______________________________ _________________________________ Darcy Smith, Town Manager Craig Taylor, Mayor 1 6 17
18 19
20 21
22 23

TOWN OF PORTOLA VALLEY

STAFF REPORT
TO: Mayor and Members of the Town Council
FROM: Sarah Cawrse, Planning & Building Director
DATE: July 8, 2026
RE: Adopt a Resolution Approving and Authorizing The Town Manager To Execute an Amendment to the Cooperation Agreement with the County of San Mateo County which Permits the Town’s Continuing Participation in the County’s Housing and Community Development Program

RECOMMENDATION
Staff recommends that the Town Council adopt the attached Resolution (Attachment 1) approving and authorizing the Town Manager to execute an Amendment to the Cooperation Agreement (Attachment 2) with the County of San Mateo County which permits the Town’s Continuing Participation in the County’s Housing and Community Development Program.

BACKGROUND
Each year, the federal government allocates Community Development Block Grant funds to public entities throughout the County. These funds, which are strictly regulated by the Department of Housing and Urban Development (HUD), can be used only for qualifying projects and programs in income qualifying areas. The funds are not allocated directly to public agencies with a population of less than 50,000, which are considered “non- entitlement” jurisdictions. Therefore, the Town of Portola Valley is not eligible to receive CDBG funds directly.

Historically, the Town has entered into a Cooperation Agreement with San Mateo County cities to participate in this program. The most recent Cooperation Agreement was entered into in 2017 (Attachment 3). The Cooperation Agreement provided for automatic renewals every three years unless an amendment is required, which is the case with this program cycle.

The County of San Mateo, with the participation of small, non-entitlement cities and towns, qualifies as an Urban County under the CDBG Program guidelines and therefore is an “entitlement jurisdiction.” As such, the County is entitled to receive annual allocations of funding under the federal CDBG Program.

The San Mateo County Urban County also receives funding under the HOME Investment Partnership Program (HOME) and Emergency Solutions Grant (ESG) Programs.

The Town’s participation in the Cooperation Agreement is of benefit to the entire County, and therefore, to Portola Valley, by providing a slightly larger allocation base of CDBG funds for eligible projects throughout the County. Town residents who qualify based on income criteria can apply for rehabilitation funds to improve or fix their homes.

DISCUSSION
As noted above, the County is requesting that the Town approve by resolution an Amendment to the existing Agreement that has been in place since 2017. The Amendment is proposed for several reasons. 24 First, in July 2025, San Mateo County joined ongoing litigation against multiple federal agencies, including HUD, challenging certain new terms and conditions imposed on federal grant awards which the County alleged were unlawful. King County et al. v. Turner et al., 2:25-cv-00814-BJR (W.D. Wash.). On August 12, 2025, a Preliminary Injunction was issued in King County v. Turner, et al. prohibiting HUD from enforcing certain terms and conditions against San Mateo County in connection with any HUD grants awarded to the County. Accordingly, San Mateo County has included this provision in the amendment merely to reflect that the King County Preliminary Injunction extends to the Cooperative Agreement. This term will not affect any party’s obligations under this agreement.

Second, HUD has requested that San Mateo County make the following changes to the existing Cooperation Agreement between the County and the non-entitlement cities and towns to requalify as an Urban County:

The Cooperation Agreement will not be automatically renewed every three years but will be renewed through the Federal Fiscal Years 2027, 2028, 2029, and one subsequent three-year period thereafter.

The amendments update references to and obligations enumerated in Federal law as they relate to the program.

FISCAL IMPACT
There is no fiscal impact related to this agenda item.

ATTACHMENTS

1. Resolution.pdf

2. Cooperation Agreement Amendment

3. 2017 Approved Resolution and Cooperation Agreement
25 RESOLUTION NO. -2026

RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF

PORTOLA VALLEY APPROVING AND AUTHORIZINGTHE TOWN

MANAGER TO EXECUTE AN AMENDMENT TO THE COOPERATION

AGREEMENT WITH THE COUNTY OF SAN MATEO WHICH PERMITS
THE TOWN’S CONTINUING PARTICIPATION IN THE COUNTY’S

HOUSING AND COMMUNITY DEVELOPMENT PROGRAM
WHEREAS, the Housing and Community Development Act of 1974, as amended (“Act”), provides for the distribution of federal funds through the process of Community Development Block Grants to eligible public entities; and WHEREAS, those public entities which are eligible to receive said funds are cities with population in excess of 50,000, “hold harmless” public entities, and urban counties; and WHEREAS, public entities that do not otherwise come within the definition of an eligible public agency may cooperate and participate with an eligible public entity such as an Urban County; and
WHEREAS, the Town of Portola Valley has previously entered into a Cooperation Agreement with San Mateo County for participation in the Housing and Community Development Block Program; and
WHEREAS, the Cooperation Agreement renews automatically every three years since its initial execution, unless an amendment is required; and WHEREAS, per the County, an amendment is required to the Cooperation Agreement; and WHEREAS, the County of San Mateo has heretofore qualified as an Urban County under the Act, the County again solicits the cooperation and co-participation of public entities such as the Town in its application for federal assistance under the Act for the Federal Fiscal Years 2027, 2028, 2029, and one subsequent three-year period thereafter; and WHEREAS, the Town of Portola Valley desires to continue its participation in the Housing and Community Development Program;
NOW, THEREFORE, the Town Council of the Town of Portola Valley does RESOLVE as follows:

That the Amendment to the Cooperation Agreement with San Mateo County is hereby approved, and the Town Manager or their designee is hereby authorized and directed to execute said amendment to the agreement for and on behalf of the Town of Portola Valley.

PASSED AND ADOPTED this 8th day of July 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:
26 By: _____________________________
Craig Taylor, Mayor
ATTEST: _____________________________
Veronica Dao, Town Clerk
27 County of San Mateo Cooperative Agreement Amendment
Cooperation Agreement dated September 20, 2017 Amendment Number: 2 (Second) Cooperation Agreement Amendment #1 dated July 2023
Agreement between the COUNTY OF SAN MATEO and the TOWN OF PORTOLA VALLEY

THE AGREEMENT IS CHANGED AS FOLLOWS
I. Witnesseth Section is hereby ☐ added ☒ amended as follows:

Adds the following emboldened, italicized phrase:

WHEREAS, the County of San Mateo has heretofore qualified as an urban county under the Act, the County again solicits the cooperation and co-participation of public entities such as the City in its application for federal assistance under the Act for Federal Fiscal Years 2027, 2028 and 2029 and one subsequent three-year period thereafter; and
II. Witnesseth Section is hereby ☐ added ☒ amended as follows:

Adds the following as a new Whereas provision:

WHEREAS, the City Executive of the City is authorized to execute this Amendment on the City’s behalf, and the County Executive is authorized to execute this Amendment on the County’s behalf.

III. Section 1 (Purpose) is hereby ☐ added ☒ amended as follows:

Replaces the first sentence with the following emboldened, italicized phrase:
“The County and City agree to cooperate to undertake, or assist in undertaking, essential community development and housing assistance activities in and for the benefit of the City, as approved or authorized between the parties in the CDBG Agreements, including the Consolidated Plan. This Agreement includes...” IV. Section 2 (Term), 1 is hereby ☐ added ☒ amended as follows:

Amends and restates the first paragraph in its entirety as follows:
“This Agreement shall remain in effect for the three-year program period of Federal Fiscal Years 2027, 2028 and 2029, and until funds granted and program income received during the three-year program period are expended and the funded activities completed. Neither the County nor the Municipality may terminate, withdraw, or be removed from the program during the three-year program period. The Agreement will renew automatically for participation in one successive three-year Urban County qualification period (Federal Fiscal Years 2030, 2031, and 2032), unless the Municipality or the County provide written notice to the other party that it elects not to participate in a new qualification period. The terminating party shall send a copy of the notice of termination to the HUD field office by the date specified on the HUD Exchange Urban Counties website. The County will notify the Municipality in writing of the Municipality’s right to make this election. A copy of the County’s notification must be sent to the HUD field office by the date specified on the HUD Exchange Urban Counties website.”
28 V. Section 3 (County’s Responsibilities as Applicant) is hereby ☐ added ☒ amended as follows:

Amends and restates Paragraphs 4 and 5 of Subsection a. in their entirety as follows:
“Therefore, the County and City agree to cooperate to undertake, or assist in undertaking, essential community development and housing assistance activities in and for the benefit of the City, as approved or authorized between the parties in the CDBG Agreements, including the Consolidated Plan. The County and City will also strictly adhere to the Consolidated Plan as approved and to all assurances and certifications provided to HUD, including taking all actions necessary to comply with the Urban County’s certifications under Section 104(b) of Title I of the Housing and Community Development Act of 1974, as amended, that the grant will be conducted and administered in conformity with:
• Title VI of the Civil Rights Act of 1964, implementing regulations at 24 CFR Part 1; and • the Fair Housing Act, and implementing regulations at 24 CFR Part 100 and will comply with the obligation to affirmatively further fair housing; and
• Section 109 of Title I of the Housing and Community Development Act of 1974, and the implementing regulations at 24 CFR Part 6, which incorporates: Section 504 of the Rehabilitation Act of 1973, and the • implementing regulations at 24 CFR Part 8; and
• Title II of the Americans with Disabilities Act of 1974, and the implementing regulations at 28 CFR Part 35; and
• the Age Discrimination Act of 1975, and the implementing regulations at 24 CFR Part 146; and • Section 3 of the Housing and Urban Development Act of 1968; and • Uniform Relocation and Real Property Policies Act of 1970 and the implementing regulations at 49 CFR Part 24; and
• Section 104(d) of the Housing and Community Development Act of 1974 and the implementing regulations at 24 CFR Part 42; and
• all other applicable laws and regulations.

The Parties acknowledge that the Urban County is a plaintiff in King County et al. v. Turner et al., 2:25-cv-00814- BJR (W.D. Wash.) and through this litigation has obtained a Preliminary Injunction against HUD. To the extent that this Agreement purports to impose terms or conditions that are enjoined pursuant to that Preliminary Injunction, the Urban County is not bound to those enjoined terms or conditions.

The Parties agree that Urban County funding in no event will be used for activities in, or in support of, any cooperating unit of general local government that impedes the County’s actions to comply with the County’s fair housing certification and duty to affirmatively further fair housing. This provision is required because noncompliance by a unit of general local government included in an urban county may constitute noncompliance by the grantee (i.e. the Urban County) that can, in turn, provide cause for funding sanctions or other remedial actions by the Department.”
VI. Section 3 (County’s Responsibilities as Applicant), is hereby ☐ added ☒ amended as follows:

Amends and restates Subsection c. in its entirety as follows:
“Parties to this Agreement understand and agree that they may not sell, trade, or otherwise transfer all or any portion of CDBG funds to a Municipality, Urban County, unit of general local government, or insular area that directly or indirectly receives CDBG funds in exchange for any funds, credits, or nonFederal considerations, but must use such funds for activities eligible under Title I of the Housing and Community Development Act of 1974, as amended.”
29 VII. Section 5 is hereby ☐ added ☒ amended as follows:

Adds the following italicized and underlined language:

The City and County has each adopted and is enforcing:
a. A policy prohibiting the use of excessive force by law enforcement agencies within its jurisdiction against any individuals engaged in non-violent civilrightsdemonstrations; b. A policy ofenforcing applicable State and local laws against physically barring entrance to or exitfrom a facility or location which isthe subject ofsuchnon-violent civil rights demonstrations within jurisdictions.

VIII. Section 8 (County’s Responsibility to City), is hereby ☒ added ☐ amended as follows:

Adds the following new Subsection d.:
“d. The Urban County agrees that the CDBG funds that the Municipality is entitled to will be utilized to benefit the Municipality.”
IX. Section 10 (Program Income) is hereby ☐ added ☒ amended as follows:

Amends and restates Subsection e. in its entirety as follows:
“e. The County and Municipality shall not terminate or withdraw from the Agreement while it remains in effect. The County may transfer the program income to the Municipality, upon its termination of Urban County participation, provided that the Municipality begins participating as an independent CDBG Entitlement grantee and agrees to use the program income in its own CDBG Entitlement program.” X. Section 13 (Minor Amendments to the Agreement) is hereby ☐ added ☒ amended as follows Amends and restates Section 13 in its entirety as follows:

13. Amendments to the Agreement.
“The Parties agree to adopt amendment(s) to this Agreement as may be required by HUD to meet any new Urban County Qualification requirement(s), when applicable. Failure by either Party to adopt any such amendment, and to submit such amendment to HUD, will void the Agreement for such qualification period.” Other changes: None
I hereby certify that the requested changes are required per the United States Department of Housing and Urban Development.
________ June 4, 2026_____ Karen Coppock___________
Requestor Signature Date Requestor Name (please print)
County of San Mateo County of San Mateo
HCD Supervisor_____________
Requestor Title (please print)
30 This change is effective as of: July 1, 2027
ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT REMAIN UNCHANGED.

In witness of and in agreement with this Amendment’s terms, the Parties, by their duly authorized representatives, affix their respective signatures:

For City:
___________________________ ___________________ __________________________________ Signature Date Name (please print)
(City Manager)
For County:
____________________________ ____________________ _________ ______________________ Signature Date Name (please print)
(County Executive)
31 RESOLUTION NO. 771q - 2017
I

RESOLUTION OF THE TOWN COUNCIL OF THE

TOWN OF PORTOLA VALLEY AUTHORIZING EXECUTION OF A

COOPERATIVE AGREEMENT WITH THE COUNTY OF' SAN MATEO WHICH PERMITS

THE TOWN' S PARTICIPATION IN THE COUNTY' S

HOUSING AND COMMUNITY DEVELOPMENT PROGRAM
WHEREAS, the Housing and Community Development Act of 1974, as amended Act"), provides for the distribution of federal funds through the process. of Community Development Block Grants to eligible public entities; and WHEREAS, those public entities which are eligible to receive said funds are cities with population in excess of 50, 000, " hold harmless" public entities, and urban counties; and WHEREAS, public entities that do not otherwise come within the definition of an eligible public agency may cooperate and participate with an eligible public entity such as an Urban County; and
WHEREAS, the Town of Portola Valley has previously entered into a Cooperative Agreement with San Mateo County for participation in the Housing and Community Development Program; and
WHEREAS, the Cooperation Agreement has renewed automatically every three years since its initial execution; and
WHEREAS, the U. S. Department of Housing and Urban Development(" HUD") notified the County in August 2017 that certain changes were needed to the existing Cooperation Agreements between the County and non- entitlement cities' in order to requalify as an Urban County; and
WHEREAS, the Town of Portola Valley desire to continue its participation in the Housing and Community Development Program;
i
NOW, THEREFORE, the Town Council of the Town doe' s RESOLVE as follows:

That the Cooperative Agreement with San Mateo County is hereby approved, and the mayor is hereby authorized and directed to execute said agreement for and on behalf of the Town of Portola Valley.

PASSED AND ADOPTED this 6th day of September, 2017.
ti` By:
o
II '
ATTEST: ''
j
Town Clerk
32 COOPERATION AGREEMENT
This AGREEMENT, entered into this 6 day of September2017, between the COUNTY OF SAN MATEO, a political subdivision of the State of California(" COUNTY"), and the Town of Portola Valley, a duly incorporated City within the County of San Mateo (" CITY"),

WITNESSETH
WHEREAS, the Housing and Community Development Act of 1974, as amended (" Act"), provides for the distribution of federal funds through the process of Community Development Block Grants to eligible public entities; and
WHEREAS, those public entities which are eligible to receive said funds are cities with a population in excess of 50, 000, " hold harmless" public entities, and urban counties; and WHEREAS, public entities that do not otherwise come within the definition of an eligible public agency may cooperate and participate with an eligible public entity such as an urban county; and
WHEREAS, the County of San Mateo has heretofore qualified as an urban county under the Act, the County again solicits the cooperation and co- participation of public entities such as City in its application for federal assistance under the Act for the Federal Fiscal Years 2018, 2019 and 2020 and subsequent three- year periods thereafter; and WHEREAS, City, having a population ofless than 50, 000, desires to cooperate and coparticipate with County in this venture; and WHEREAS, a Cooperation Agreement by and between City and County establishes the formal relationship to cooperate and co- participate and is specifically authorized under the provisions of Government Code Section 6502 and 26227; and
WHEREAS, County is in receipt of a communication from the United States Department of Housing and Urban Development, (" HUD"), with regard to requisites which must be included in said Cooperation Agreement and which further stated that the same must be completed and submitted by September 21, 2017; and
WHEREAS, City has previously, by an official act of pronouncement expressed its intent and desire to cooperate and participate with County in its plan application and to engage in housing and community development activities within its incorporated limits thereunder; and WHEREAS, City understands that in becoming part ofthe Urban County, City automatically participates in the HOME and ESG Programs, which provide eligible local jurisdictions with federal funds for affordable housing activities; and
WHEREAS, City now desires to enter into this Cooperation Agreement(" Agreement") with the 33 County of San Mateo so that it may qualify, under applicable provisions of the Act and HUD regulations, as co- participant with County ineligible activities; under the Act:

NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, the parties hereto agree as follows:

1. Purpose:

County and City agree to cooperate to undertake, or assist in undertaking, community renewal and lower income housing assistance activities, specifically urban renewal and publicly assisted housing; economic development, neighborhood facilities, housing rehabilitation, and other appropriate housing assistance to primarily benefit lower and moderate income people. ' This Agreement includes participation in the Community Development Block Grant( CDBG), the HOME Investment Partnerships Program and the Emergency Solutions Grant( ESG) Program.

2. Term:

The term of this Agreement shall be for Federal Fiscal Year 2018, 2019 and 2020 after which the term shall be automatically renewed unless action is taken by the City to terminate this Agreement. As provided by HUD rules and regulations, this Agreement shall automatically be renewed for participation in successive three- year qualification periods, unless County or City provides written notice it elects not to participate in a new qualification period, provided however, that this Agreement shall remain in effect until CDBG, HOME and ESG funds and income received with respect to the three- year qualification period are expended and the funded activities completed. County and City cannot terminate or withdraw from this Agreement while the Agreement remains in effect. The County and City may not withdraw from this Agreement prior to expiration of Federal Fiscal Year 2020.

By the date specified in HUD' s Urban County Qualification Notice for a subsequent qualification period, County will notify City in writing ofits right not to participate.

Should there be changes necessary to meet the requirements for cooperation agreements set forth in the Urban County Qualification Notice applicable for a subsequent three- year urban county qualification period, amendment( s) to this Agreement shall be executed between County and City. Such amendment( s) shall be submitted to HUD; failure to do so will void the automatic renewal of such qualification period.

3. Applicant Responsibility
a. County, as applicant, has ultimate responsibility for execution of the community development program, for following its Consolidated Plan, which provides for an analysis of housing and non- housing community development needs of the geographic area, and for meeting the requirements of other applicable laws, including but not limited to the National Environmental Policy Act, Uniform Relocation Act, Fair Housing Act, Title VI ofthe Civil Rights Act of 1964, Section 504 ofthe Rehabilitation Act of 1973, Section 109 ofthe Housing and Community Development Act of 1974, and the Americans with' Disabilities Act of 1990. 1 34
County is the lead agent for carrying out the Urbanl County CDBG Program and for the ESG Program. The Urban County, as a CDBG entitlement jurisdiction, qualifies to receive its own allocation of federal HOME funds. However, to increase HOME funding access to the County overall, County has formed the San Mateo County HOME Consortium, of which the Urban County is member.

County is also the lead agent for the HOME Consortium. The HOME Consortium is technically responsible for preparing and submitting to HUD the Consolidated Plan which covers the geographic area ofthe Consortium. The Urban County is responsible for submitting its own non- housing community development plan, an Action Plan, and required certifications as part of the Consortium' s Consolidated Plan. As lead agent for the Urban County and the HOME Consortium, County is responsible for coordinating Consolidated Planning activities, including providing assurances or certifications to HUD.

Therefore, County requires City, and City agrees to cooperate to undertake, or assist in undertaking community renewal and lower- income housing assistance activities and to strict adherence to the Consolidated Plan as approved, and to all assurances and certifications provided, including agreeing to take all actions necessary to assure compliance with the Urban County's certifications under Sections 104( b) of Title I of the Housing and Community Development Act of 1974, as amended, including Title VI ofthe Civil Rights Act of 1964, the Fair Housing Act, and affirmatively furthering fair housing. See 24 CFR 91. 221( a) and to comply with section 109 of Title I of the Housing and Community Development Act of 1974, which incorporates Section 504 of the Rehabilitation Act of 1973 and the Age Discrimination Act of 1975. The County requires the City and the City agrees to comply with all other applicable laws.

This Agreement shall also prohibit the Urban County from funding activities in or in support of, any cooperating unit of general local government that does not affirmatively further fair housing within its own jurisdiction or that impedes the County' s actions to comply with their own fair housing certification. This provision is required because noncompliance by, a unit of general local government included in an urban county may constitute noncompliance by the grantee (i.e. the Urban County) that can, in turn, provide cause for funding sanctions or other remedial actions by the Department.

County shall not provide CDBG, HOME or ESG funds for activities in, or in support of, any cooperating city that does not affirmatively further fair housing within its own jurisdiction or for activities that impede the County's actions to comply with its fair housing certification. In addition, County and City';are responsible for taking all required actions to comply with the provisions ofthe National Environmental Policy Act of 1969.
b. Further, pursuant to 24 CFR 570. 501( b), County, as applicant, has the responsibility for ensuring that CDBG, HOME and ESG funds are used in accordance with all 35 program requirements, for determining the adequacy of performance under agreements and procurement contracts, and for taking appropriate action when performance problems arise. Therefore, before disbursing any CDBG, HOME or ESG funds to City or projects in the City, County will require City, and City agrees to enter into a written agreement for each individual project. c. The City may not sell, trade, or otherwise transfer all or any portion of such funds to another such metropolitan city, urban county, unit of general local government, or Indian tribe, or insular area that directly or indirectly receives CDBG funds on exchange for any other funds, credits or non-Federal considerations, but, must use such funds for activities eligible under title I of the Act. This new requirement is contained in the Transportation, Housing and Urban Development, and Related Agencies Appropriation Act, 2014, pub. L113-

76. 4. City Subject to Same Requirements as Subrecipients:

Pursuant to 24 CFR 570. 501( b), the City is subject to the same requirements applicable to subrecipients, including the requirements of a written agreement set forth in 24 CFR 570.503. County as applicant, has the responsibility for ensuring that CDBG, HOME and ESG funds are used in accordance with all program requirements, for determining the adequacy of performance under agreements and procurement contracts, and for taking appropriate action when performance problems arise. Therefore, before disbursing any CDBG, HOME or ESG funds to City or projects in the City, County will require City, and City agrees to enter into a written agreement for each individual project.

5. The City has adopted and is enforcing:
a. A policy prohibiting the use of excessive force by law enforcement agencies within its jurisdiction against any individuals engaged in non-violent civil rights demonstrations;
b. A policy of enforcing applicable State and local laws against physically barring entrance to or exit from a facility or location which is the subject of such non-violent civil rights demonstrations within jurisdictions.

6. By executing this Agreement, the City understands that it:
a. May not apply for grants from appropriations under the Small Cities or State CDBG Programs for fiscal years during the period in which it participates in the Urban County' s CDBG program;
b. May participate in a HOME Program only through the Urban County. Thus, even if the Urban Countydoes not receive a HOME formula allocation, Citycannot form a III
HOME consortium with other local governments.
c. May receive a formula allocation under the ESG Program only through the 36 urban county, although this does not preclude the urban county or a unit of government participating with the urban county from applying to the Sate for ESG funds, if the state allows.

7. Affirmative Action.

Under County' s ultimate supervision and responsibility, City covenants and agrees that it will abide by and enforce all applicable affirmative action requirements including, but not limited to Executive Order 11246, the Equal Employment Opportunities Act, the San Mateo County Affirmative Action Plan and local affirmative action plans.

8. County' s Responsibility to City.

In addition to the foregoing obligations, County agrees:
a. County shall, in preparing future plans under the Act, solicit to the extent allowed by the Act and all lawful HUD regulations, City' s participation in the development of such future plans which refer to City's activities under the Act. b. In accordance with instructions from HUD, County agrees to permit City to carry out the essential community development and housing assistance activities provided for in the application and in future plans.
c. County agrees to distribute funding it receives from its current plan application and in future plans, ln. accordance with the terms and provisions therein contained, or in accordance with such terms and conditions as required by the Act of HUD.

9. City' s Responsibilities to County.

In addition to the foregoing obligations:
a. City agrees to expend any funds received by virtue of any ofUrban County's plans only in accordance with the terms and conditions stated therein, or amended by HUD. b. City agrees to cooperate with Urban County, as it has heretofore, with the development of future plan applications for funds under the Act, with regard to housing and community development activities to be continued or undertaken by City within its boundaries.

10. Program Income.
a. City must inform County of any income generated by the expenditure of CDBG, HOME or ESG funds received by City.
b. Any such program income must be paid to the County or City may retain the program income subject to requirements set forth in this Agreement. c. Any program income City is authorized to retain may only be used for eligible activities in accordance with all CDBG, HOME or ESG requirements as may then 37 apply.
d. County has the responsibility for monitoring and reporting to HUD on the use of any such program income and County shall require appropriate recordkeeping and reporting by City as may be needed for this purpose and e. In the event of close- out or change in status of City, any program income that is on hand or received subsequent to the close- out or change in status shall be paid to County.

11. Acquisition, Change in Use, and Disposition of Real Property Acquired or Improved with CDBG Funds.
a. City shall notify County of any change in use including disposition ofreal property, within the control of City, which was acquired or improved in whole or in part with CDBG funds, from that approved at the time CDBG funds were authorized for acquisition or improvement.
b. City shall reimburse County in an amount equal to the current fair market value( less any portion thereof attributable to expenditures of non- CDBG funds) of property acquired or improved with CDBG funds that is sold or transferred for a use which does not qualify under the CDBG regulations at any time prior to or subsequent to the close- out, change of status or termination ofthis Agreement between the County and City.,

12. Headings.

The headings in this document are merely for the convenience ofthe parties, and do not form a material part of this document. Headings shall not be considered in the construction of this document.

13. Minor Amendments to the Agreement.

Notwithstanding, Paragraph 2 above, should it become necessary to change the language ofthis Agreement to meet HUD approval, without making major changes and without altering the intent ofthe Agreement, such changes may be made administratively by the City Manager of City.

All remaining provisions of said Agreement shall remain in full force and effect for the term provided herein.
38 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

COUNTY OF SAN MATEO
By i 1, .., r::J
r
P •/ ent, : o, rd o Su. • ' sors
ATTEST:

Clerk of S d :_' and
Town of Portola Valley
By
411111. 0
Mayor
i
ATT T:

Town Clerk
Certificate of Delivery
Government Code Section 25103)
I certify that a copy of the original document filed in the Office of the Clerk of the Board of Supervisors of San Mateo County has been delivered to the President of the Board of pervisors.
idrAla
mow
Clerk of the Board of Supervisors
39 TOWN OF PORTOLA VALLEY

STAFF REPORT
TO: Mayor and Members of the Town Council
FROM: Anthony McFarlane, Assistant Town Manager
DATE: July 8, 2026
RE: Consider Acceptance of the FY 2022-23 Annual Comprehensive Financial Report

RECOMMENDATION
By motion, receive, accept, and file the Annual Comprehensive Financial Report (ACFR) for Fiscal Year 2022-23 and related reports and direct staff to prepare and post the Town’s ACFR using the financial statements contained in the ACFR and in accordance with State law.

BACKGROUND
The Town’s independent auditor Maze & Associates has confirmed that the ACFR for the fiscal year ended June 30, 2023, attachment 1, is free from material misstatements and fairly represents the Town’s financial position. The auditor further provided clarification on several points.

Change in Net Position: Town’s Net Position decreased by $1.6M.

Change in Revenue: Total revenues increased by $.66M to $9.31M.

Change in Expenditure: Total expenses increased by $6.1M to $10.9M.

Change in Fund Balance: Fund Balance for the General Fund decreased by ($1.26M) to $3.45M.

Internal Controls: Maze & Associates found no material deficiencies, however, did identify a finding of untimely removal of separated bank signers and three significant deficiencies related to segregation of duties, journal entry review and approval, and timely bank reconciliations in their memorandum on internal controls.

Reportable Errors: Maze & Associates found no reportable errors.

Single Audit Exemption: The Town is exempt from the federal government’s “Single Audit” requirement of federal award expenditures because less than $750K in federal awards was expended in 2022-23.

Timeliness of Audit Completion: The Town is still late in completing its audit for Fiscal Years 2023-24 and 2024-25. There are ongoing discussions related to the schedule for these audits.

FY 2023-24 GANN Limit: The auditor concurred with the manner in which the FY 2023-24 Appropriations Limit was calculated.

Measure A: The auditor concurred that the Town’s assertion is compliant with the requirements of Measure A.

Measure W: The auditor concurred that the Town’s assertion is compliant with the requirements of Measure W.

Finance Committee
The Finance Committee reviewed the financial statements and other reports provided by Maze and Associates at its June 30, 2026, meeting and recommended that the Town Council accept the Fiscal Year 2022-23 audited financial statements and other required reports. 40 Next Steps
If the Council accepts the Annual Comprehensive Financial Report (ACFR) for Fiscal Year 2022-23 and related reports, staff will prepare and post the Town’s ACFR using the financial statements contained in the ACFR and in accordance with State law.

FISCAL IMPACT
There is no fiscal impact.

ATTACHMENTS

1. 2022-23 Annual Comprehensive Financial Report

2. 2022-23 Memorandum on Internal Control

3. 2022-23 Required Communication

4. 2023-24 GANN Limit

5. 2022-23 Measure A

6. 2022-23 Measure W
41 TOWN OF PORTOLA VALLEY

BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED
JUNE 30, 2023
.
42 This Page Left Intentionally Blank
43 TOWN OF PORTOLA VALLEY
Basic Financial Statements
For the Year Ended June 30, 2023
Table of Contents
Page
Independent Auditor’s Report ........................................................................................................................... 1 Management’s Discussion and Analysis .......................................................................................................... 5 Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position ................................................................................................................ 18 Statement of Activities .................................................................................................................... 19 Fund Financial Statements:

Governmental Funds:

Balance Sheet ............................................................................................................................... 22 Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position ..................................................................................... 24 Statement of Revenues, Expenditures, and Changes in Fund Balance ....................................... 26 Reconciliation of the Statement of Revenues, Expenditures, and Changes in the Fund Balance of Governmental Funds to the Statement of Activities .......................... 28 Fiduciary Funds:

Statement of Net Position ............................................................................................................ 30 Statement of Changes in Net Position ........................................................................................ 31 Notes to Basic Financial Statements ...................................................................................................... 33 Required Supplementary Information:

Pension Plan:

Schedule of the Proportionate Share of Net Pension Liability (Assets) ......................................... 60 Schedule of Contributions ............................................................................................................... 61 OPEB Plan:

Schedule of Changes in the Net OPEB Liabilities (Assets) and Related Ratios ............................ 62 44 TOWN OF PORTOLA VALLEY
Basic Financial Statements
For the Year Ended June 30, 2023
Table of Contents
Page
Budgetary Comparison Schedules:

Schedule of Revenues Expenditures and Changes in Fund Balance – Budget and Actual:

General Fund ......................................................................................................................... 63 Open Space Restricted Special Revenue Fund ...................................................................... 64 Measure A Special Revenue Fund ........................................................................................ 65 Note to Budgetary Schedules ......................................................................................................... 66 Supplementary Information:

Non-major Governmental Funds:

Combining Balance Sheet ................................................................................................. 72 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................................................................................ 74 Schedule of Revenues, Expenditures and Changes
in Fund Balances-Budget and Actual ......................................................... 76 Custodial Funds:

Combining Statement of Net Positions ............................................................................. 82 Combining Statement of Changes in Net Positions .......................................................... 84 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .............................................................................................................. 87 45 INDEPENDENT AUDITOR’S REPORT
To the Honorable Members of the Town Council
Town of Portola Valley, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Portola Valley, California (Town) as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the Table of Contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining funds information of the Town as of June 30, 2023, and the respective changes in financial position and the respective budgetary comparisons listed in the Table of Contents as part of the basic financial statements for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Town and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibility of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1 46
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
2 47
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis and other Required Supplementary Information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information is the responsibility of management and although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The accompanying Supplementary Information, as listed in the Table of Contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 15, 2026 on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance.

Pleasant Hill, California
May 15, 2026
3 48
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49 MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2023
This section of the Town of Portola Valley’s annual Financial Report provides a narrative overview of the Town’s financial activities for the fiscal year ended June 30, 2023. We encourage readers to consider the information presented here in conjunction with the accompanying financial statements.

FINANCIAL HIGHLIGHTS:
• The Town’s Net Position, an indicator of its overall financial state, decreased by $1.6 million to $49.06 million.
• Total revenues increased by $662 thousand to $9.31 million and total expenses increased by $6.1 million to $10.9 million.
• General Fund revenues decreased by $216 thousand to $6.47 million, and expenditures increased by $768 thousand to $7.32 million. • The General Fund balance decreased by $1.26 million to $3.45 million. • The beginning fund balance for the General Fund was restated by $368 thousand to $4.71 million.

Government-Wide Financial Statement Highlights:

Net Position - The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of resources at fiscal year end June 30, 2023, by $49.01 million, down -3.14% from the prior year. Of this amount, $3.64 million was reported as “unrestricted net position” and may be used to meet ongoing obligations.

Changes in Net Position – The Town’s total net position decreased by approximately $1.6 million at fiscal year end June 30, 2023. Net position of governmental activities decreased -3.14% from the prior year, which is due in large part to a decrease in assets of $521 thousand and an increase in liabilities of $1.35 million.

The total liabilities and deferred inflows or resources increased 81.2% to $2.72 million, primarily due to the net GASB adjustments related to pension and OPEB liabilities of $1.6 million.

OVERVIEW OF THE FINANCIAL STATEMENTS:

This discussion and analysis serve as an introduction to the Town’s basic financial statements that are comprised of three components:

1. Government-Wide Financial Statements - Provides both short-term and long-term information about the Town’s overall financial status.

2. Fund Financial Statements - Focuses on individual parts of the Town’s financial information – reporting these operations in more detail than the government-wide financial statements. • The governmental funds statements and the agency funds statements tell how basic services such as operations, administration, and restricted funds were financed in the short-term as well as what remains for future spending. 5 50
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3. Notes to Basic Financial Statements – Provides explanation of the information contained in the basic financial statements.

The basic financial statements also include notes that explain some of the information in the statements and provide more detailed data analysis. Figure A-1 shows how the various parts of this annual report are arranged and relate to one another.

Figure A-1
Organization of the Town of Portola Valley’s Financial Report Government-Wide Financial Statements:

The government-wide financial statements present the financial picture of the Town and provide readers with a broad view of the Town’s finances. The current year’s revenues and expenses are considered, regardless of when cash is received or paid.

The first of the government-wide statements is the Statement of Net Position. The Statement of Net Position reports the difference between the Town’s total assets and total liabilities and includes all the Town’s capital assets and all its long-term debt.

Although the Statement of Net Position reports a total net position of $49.33 million, the Town has restrictions over the use of these funds. The investment in land, buildings, and equipment (capital assets, net of related debt) is necessary for the successful operation of the Town. Governmental laws segregate funds and place restrictions on spending. This should be considered when reviewing the report.

Management Discussion and Analysis
Basic Financial Statements
Notes to the
Financial
Statements
Required
Supplementary
Information
Fund Financial
Statements
Government-wide
Statements
6 51
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The second of the government-wide financial statements is the Statement of Activities.

This statement shows the result of operations that caused net position to change from the prior year to the amount reported on the Statement of Net Position as of June 30, 2023.

This change in net position is important because it tells the financial statement user whether the financial position has improved or diminished for the Town. The causes of this change may be the result of many factors. To assess the Town’s overall health, consideration should be given to additional non-financial factors such as building and land improvements, governmental mandates, and staffing levels.

The Statement of Activities classifies expenses by functional area. The report also shows corresponding charges for services and restricted grants for each function that help support the expenses. The resulting Net Revenue/(Expenses) and Changes in Net Position for OPEB, Pension, Fund Balance, Capital, and other assets shows the remaining expenses not supported by charges for services and restricted grants. General revenues are then applied to the remaining expenses resulting in a total change in net position.

Fund Financial Statements:

The fund financial statements provide detailed information about the Town’s major funds, defined as funds having significant activities and balances in the current year. Non-major funds are combined in a single column, referenced in the Supplemental section of this report.

Funds are accounting devices used to keep track of specific sources of funding and spending on specific programs. These are not reflective of the Town as a whole. It is important to note that:
• Some funds are required to be established by State law. • The Town establishes other funds to help it control and manage money for specific purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other monies.

The fund financial statements include statements for governmental funds only. These are considered major funds and include:
• The General Fund – This fund accounts for the sources and uses for most of the Town’s basic services.
• Open Space Restricted Fund – This fund accounts for revenue received from a special voter-approved 2% utility tax. The use of these funds is for the acquisition and preservation of open spaces within the Town.
• Inclusionary-in-Lieu Fund – This fund accounts for fees collected from developers.

The use of these funds is for affordable housing.
• Measure A Fund – This fund accounts for revenue received from a special voterapproved sales tax measure. The use of these funds is for the improvement of local transportation and road maintenance services.
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The governmental funds statements provide a detailed short-term view that helps determine whether there are more or fewer financial resources that can be spent in the future to finance the Town’s programs. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. Reconciliations are provided for both the governmental funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in fund balances to facilitate this comparison.

Fund Financial Statement Highlights:

Governmental Funds – As of the close of fiscal year 2022–23, the Town’s governmental funds reported a combined ending fund balance of $19.5 million. This is a $516 thousand increase from the prior year.

With the implementation of GASB-54 in 2011, the usefulness of fund balance information has been enhanced by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. In the case of the Town’s statements, fund balances within the General Fund that were formerly classified as “designated” by the Council are now reclassified as “assigned” fund balances. In the case of the Town’s loan receivable, these have now been reclassified as “non-spendable” fund balance.

The total combined balance for governmental funds as of June 30, 2023, $19.35 million, is classified into four categories of fund balance (nonspendable, restricted, assigned, and unassigned) to provide the reader of these financial statements with a better understanding of the City’s available resources as well as its plans to ensure fiscal stability in the near term. A detailed explanation of these categories can be found in Note 5 of the financial statements. Of the total, $124 thousand is categorized as “non-spendable”, $16.08 million is “restricted”, $3.06 million is “assigned” and the remaining $244 thousand is “unrestricted”.

The Town’s largest and most active government fund is the General Fund which decreased in fiscal year 2022–23 by $1.26 million compared to the prior year. General Fund revenues, transfers-in, and extraordinary gains totaled $6.7 million, and expenditures/transfers out totaled $7.96 million. The increase in expenditures is primarily related to increases in salaries and benefits of $245 thousand, increased use of consultants and legal services for the Housing Element update of $280 thousand and increases in public safety pf $124 thousand.

The beginning fund balance for the General Fund was restated by $368 thousand due to accounting entry errors from the prior year that resulted in overstating current liabilities and General Government expenses.

Notes to Basic Financial Statements:

The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. 8 53
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Required Supplementary Information:

In addition to the basic financial statements, this report also presents certain Required Supplementary Information including the Town’s budgetary comparison schedules for the General, Open Space Restricted, Inclusionary-in-Lieu and Road Impact Fee funds.

Other Supplementary Information:

Supplementary schedules concerning balance sheets and changes in fund balances for all other funds are presented immediately following the Required Supplementary Information. Financial activity related to the Town’s agency funds (maintenance districts) is also presented separately in this section.

GOVERNMENT-WIDE FINANCIAL ANALYSIS:

Statement of Net Position:

The Town’s net position as of June 30, 2023, decreased -3.29% from $51.0 million to $49.3 million and has decreased minimally in comparison to the prior year. The following are major components of the Town’s net position:

The Town’s net position of $49.3 million consists of $29.4 million in net investment in capital assets, $16.2 million in restricted net assets, and $3.8 million in unrestricted assets.

Restricted net assets are established by State law, the municipal code, and contractual obligations to be utilized for public works, public safety, and open space. Unrestricted assets are not restricted by law; however, $3.48 million of these funds remain assigned by the Town for special programs.
2022-23 2021-22 Variance Percent
Other Assets $ 20,791,434 20,632,841 $ (158,593) $ -0.76% Capital Assets, net 29,363,520 29,726,034 (362,514) -1.22% Total Assets 49,996,361 50,517,468 (521,107) -1.03%
Deferred Outflows of Resources 2,266,089 1,998,493 267,596 13.39% Current Liabilities 1,129,707 1,579,967 (450,260) -28.50% Noncurrent Liabilities 1,872,161 154,582 1,717,579 1111.11% Total Liabilities 3,001,868 1,734,549 1,267,319 73.06%
Deferred Inflow of Resources 205,231 136,269 68,962 50.61% Net Investments in Capital Assets 29,363,520 29,726,034 (362,514) -1.22% Nonspendable 124,083 144,134 (20,051) -13.91%
Restricted 15,929,844 14,280,879 1,648,965 11.55%
Unrestricted 3,637,904 6,494,096 (2,856,192) -43.98%
Total Net Position $ 50,645,143 49,055,351 $ (1,589,792) -3.14% Portola Valley Town's Net Position
Governmental Activities
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The increase in Long-Term Liabilities is primarily due to adjustments totaling $1.66 million for Net Pension (Note 6), OPEB liabilities (Note 7), and Compensated Absences (Note 1G).

The OPEB liability should continue to decline as the Town continues to fund the CalPERS OPEB trust.

The Town uses capital assets to provide services to the Town’s populace; consequently, these assets are not available for future spending.

Statement of Activities:

Total revenues increased by $662 thousand, or 7.65%, from the prior year. Total expenses increased by $5.8 million, or 121.8%, which included adjustments for capital depreciation of -$363 thousand and adjustments to OPEB and pension liabilities totaling $6.0 million. Taken together these adjustments resulted in a decrease in the Town’s Net Position of -$1.68 million, or -3.29%.
2022-23 2021-22 Variance Percent
Revenues:

Program Revenues:

Charges for Services $ 1,209,452$ 1,685,536 $ 476,084 39.36% Operating Grants and Contributions 673,828 908,438 (234,610) -25.83% Capital Grants and Contributions 5,000 5,300 (300) -5.66% General Revenues:

Property Taxes 3,706,993 3,803,444 (96,451) -2.54%
Agency Revenues 997,021 1,244,162 (247,141) -19.86%
Franchise Fees 360,362 414,689 (54,327) -13.10%
Utility Users Tax 1,166,150 1,128,474 37,676 3.34%
Investment Earnings 433,435 (91,393) 524,828 574.25%
Miscellaneous 282,836 26,715 256,121 958.72%
Total Revenues 9,311,161 8,649,281 661,880 7.65%
Expenses:

General Government 6,475,460 660,297 5,815,163 880.69%
Public Safety 1,869,411 1,708,389 161,022 9.43%
Public Works 1,743,373 1,684,981 58,392 3.47%
Parks and Recreation 179,132 151,355 27,777 18.35%
Town Center Facilities 633,577 584,223 49,354 8.45%
Total Expenses 10,900,953 4,789,245 6,111,708 127.61%
Changes in Net Position (1,589,792) 3,860,036 (5,449,828) -141.19% Net Position - Beginning of the Year 51,013,125 47,153,089 3,860,036 8.19% Prior Period Adjustment (367,982)
Net Position - Beginning of the Year, restated 50,645,143 Net Position - End of the Year 49,055,351 50,645,143 (1,589,792) -3.14% Portola Valley Changes in Net Position
Governmental Activities
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2022-23 2021-22 Variance Percent
Change in OPEB Liability 220,999 (471,373) 692,372 146.88% Change in Pension Liability 1,262,425 (1,075,468) 2,337,893 217.38% Change in Fund Balance (1,311,564) 1,459,817 (2,771,381) -189.84% Change in Capital Assets (362,514) (352,614) (9,900) 2.81% Change in Other Assets (158,593) 888,778 (1,047,371) -117.84% Net Position – Beginning, restated 50,645,143 46,828,900 3,816,243 8.15% Net Position - Ending 49,055,351 50,645,143 (1,589,792) -3.29% 11 56
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Observations for 2023:

The most significant variances in revenue occurred in Grants and Contributions, Agency Revenues, Charges for Services, Franchise Fees, and Investment Earnings. • Charges for Services increased by 39.36% due to assessments of Park in-lieu fees of $8 thousand and Inclusionary fees of $870 thousand to offset decreases in General Fund revenue of -$177 thousand.
• Agency Revenues decreased by 19.9% due to reduced activity in allocation of Measure W Half-Cent Sales Tax proceeds of $0.
• Franchise Fees decreased by 13.1% due to timing differences in recognizing revenue from California Water Service Company and Comcast from prior years. • Investment earnings increased by 574.25% in Schwab securities and the Local Agency Investment Fund (LAIF) due to higher interest rates as the economy continued to recover post-COVID.

The most significant variances in expenditures occurred in General Government, Parks & Recreation, Public Safety, and Public Works.
• General Government increased by 838.55% due to net GASB adjustments for Pension and OPEB liabilities totaling approximately $6.0 million. • Public Safety increased by 9.4% due to an increase in the Sherrif’s contract of $123 thousand.
• Parks and Recreation costs increased 18.4% due to increased maintenance costs related to increased use of recreation facilities post-COVID. • Town Center Facilities costs increased 15.57% due to increased maintenance costs related to increased use of Town Center facilities.

FUND FINANCIAL STATEMENT ANALYSIS
As of June 30, 2023, the Town’s governmental funds (General Fund, Open Space Restricted Fund, Inclusionary-in-Lieu Fund, Measure A Fund, and Other Governmental Funds) reported a combined fund balance of $19.5 million, which is an increase of $149 thousand over the prior year. Revenues for the year totaled $8.6 million, while expenditures including transfers out were $7.5 million.

Governmental Fund Balances 2022-23 2021-22 Variance Percent General Fund 3,449,207 5,073,440 (1,624,233) -32.01%
Open Space 8,054,520 7,571,622 482,898 6.38%
Inclusionary In-lieu 4,495,580 3,735,375 760,205 20.35% Measure A 789,675 742,480 47,195 6.36%
Other Governmental Funds 2,714,152 2,231,402 482,750 21.63% Total 19,503,134 19,354,319 148,815 0.77%
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The following assigned fund balances, totaling $3.45 million, can be used for their specific purposes within the General Fund; however, these funds can be reassigned at the Council’s discretion. • Assigned for unfunded pension reserve $1,415,296
• Assigned for OPEB 41,632
• Assigned for emergency capital reserve 1,400,000
• Assigned for equipment replacement 100,000
• Assigned for legal contingency 100,000
The General Fund had an unassigned fund balance of $268 thousand at fiscal year-end.

The remaining $16.05 million in restricted funds can only be used for projects within the intended purpose of the funds.

Additional detail on specific fund balances can be found in Footnote 5 of the financial statements.

Fund Budgetary Highlights:

General Fund revenues missed budget by -$545 thousand, and the prior year by -$217 thousand, or <.01%. Increases in revenue include utility users’ tax of $26 thousand, sales tax of $20 thousand, charges for services of $170 thousand and a decrease in franchise fees of ($13 thousand) in comparison to the prior fiscal year.

General Fund expenditures exceeded budget by $36 thousand. The increase is due to the increased use of consultants in planning and legal activities related to the Housing element update.

Open Space revenues exceeded budget by $46 thousand with investments coming higher than anticipated due to higher interest yields. Measure A Fund revenues were $322 thousand compared to $275 thousand in expenses with the ending fund balance increasing to $743 thousand.

CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets:

As of June 30, 2023, the Town had invested $29.4 million (net of depreciation) in a broad range of capital assets including buildings, land, and technology upgrades. The Town’s gross capital assets decreased by ($363 thousand), which was entirely due to depreciation expense for the year. Depreciation expense is allocated to the fund and category in which the capital asset has been recorded. Most of the decrease can be credited to construction in progress, buildings, and improvements.

Additional information on the Town’s capital assets can be found in Note 3. 13 58
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Long-Term Assets
The Town’s long-term assets consist of Loans receivable of $124 thousand.

Long-Term Debt:

The Town’s long-term liability includes net pension liabilities of $1.4 million, net OPEB liabilities of $41 thousand, and accrued compensated absences (unpaid vacation leave) balance of $137 thousand. No new debt was incurred during the fiscal year.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET:

The Town’s financial outlook is unclear. Property values remain high and, at 57 percent of total General Fund revenue, remain a reliable resource to support City operations.

However, post-COVID has seen unprecedented increases in medical premium costs, and the Town should anticipate additional cost increases in other segments of the budget, specifically in public safety and planning. The General Fund reserve ended the fiscal year at 47% of operating expenditures and is no longer in compliance with the minimum general fund reserve policy level of 60%.

Staff will continue to monitor the long-term budget situation, both locally and at the State level, to keep the Town Council informed of critical economic events that may have an impact on the sustainability of the Town’s spending plan. Further, staff will continue to be proactive in developing plans to promote economic development in the Town, aggressively pursue grant funding for significant infrastructure improvements, and continually assess the Town’s operations and service delivery models to achieve efficiencies where possible.

The Town must continue to focus its efforts on prioritizing fiscal initiatives such as adequate funding of infrastructure, careful comprehensive planning, and optimization of business and residential development opportunities. Further, as new long-term needs are identified, the appropriate resources to meet those needs must also be identified. And finally, the Town must maintain financial flexibility to ensure it is able to continue to quickly respond to changes in the economy and major revenue sources as evidenced by the recent uncertain and unprecedented environment.
2022-23 2021-22 Variance Percent
Land 6,690,959 $ 6,690,959 $ - $ 0.00%
Land Improvements 1,640,210 1,690,386 (50,176) -2.97%
Construction in Progress 19,957 9,851 10,106 102.59%
Buildings and Improvements 14,159,221 14,570,427 (411,206) -2.82% Equipment 107,859 131,135 (23,276) -17.75%
Infrastructure 6,745,314 6,633,276 112,038 1.69%
$ 29,726,034 29,363,520 $ (362,514) -1.22%
Governmental Activities
Town of Portola Valley
(Net of Accumulated Depreciation)
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The Town has evaluated the impact of GASB 96, issued during May 2020. The pronouncement seeks to increase the usefulness of governments’ financial statements by requiring the recognition of certain Subscription-Based Information Technology Arrangements (SBITAs) and the underlying right-to-use the intangible asset and corresponding subscription liability. A SBITA is defined as a contract that conveys the right to use another party’s information technology software, either alone or in combination with tangible capital assets for a specified period in an exchange or exchange-like transaction. The initial term of the subscription gives the user rights to use the IT asset with reasonable consideration to either extend or terminate the agreement.

Under this pronouncement, the Town should recognize the right-to-use the asset and the corresponding liability. The asset is initially measured at the initial amount of the subscription liability and amortized on a straight-line basis over the shorter of the subscription term or the useful life of the asset. The Town recognizes SBITA liabilities with an initial individual valuation of $300,000. This pronouncement is effective for fiscal years beginning after June 15, 2022. The Town’s SBITA agreements are immaterial to the requirements of GASB 96.

CONTACTING THE TOWN’S FINANCIAL MANAGEMENT:

This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the Town’s finances and to show the Town’s accountability for the money it receives. If you have questions about this report or would like additional financial information, please contact the Finance Director at the Town of Portola Valley, 765 Portola Road, Portola Valley, California 94028. 15 60
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61 TOWN OF PORTOLA VALLEY

STATEMENT OF NET POSITION

AND STATEMENT OF ACTIVITIES
The purpose of the Statement of Net Position and the Statement of Activities is to summarize the Town’s entire financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the Town’s assets, liabilities and deferred inflows/outflows, as well as all its revenues and expenses. This is known as the full accrual basis—the effect of all the Town’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between Town funds have been eliminated.

The Statement of Net Position reports the difference between the Town’s total assets and deferred outflows of resources, if any; and the Town’s total liabilities and deferred inflows of resources, if any, including all the Town’s capital assets and all its long-term debt.

The Statement of Net Position summarizes the financial position of all of the Town’s Governmental Activities in a single column.

The Town’s Governmental Activities include the activities of its General Fund along with all its Special Revenue Funds and Capital Projects Funds.

The Statement of Activities reports increases and decreases in the Town’s net position. It is also prepared on the full accrual basis, which means it includes all the Town’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures.

The Statement of Activities presents the Town’s expenses first, listed by program. Program revenues— that is, revenues which are generated directly by these programs—are then deducted from program expenses to arrive at the net expense of each governmental program. The Town’s general revenues are then listed in the Governmental Activities column and the Change in Net Position is computed and reconciled with the Statement of Net Position.
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TOWN OF PORTOLA VALLEY

STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental
Activities
ASSETS
Cash and investments (Note 2) $19,114,702
Restricted cash (Note 2) 865,065
Accounts and interest receivable 528,991
Loans receivable 124,083
Capital assets, net (Note 3)
Nondepreciable 6,710,916
Depreciable, net of accumulated depreciation 22,652,604 Total Assets 49,996,361

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 6) 2,266,089

LIABILITIES
Current liabilities:

Accounts payable 269,490
Refundable customer deposits 860,217
Non-current liabilities:

Accrued compensated absences (Note 1G) 137,005
Net Pension liability (Note 6) 1,415,296
Net OPEB liability (Note 7) 319,860
Total Liabilities 3,001,868

DEFERRED INFLOWS OF RESOURCES
Related to pensions (Note 6) 205,231
NET POSITION (Note 5)
Net investment in capital assets 29,363,520
Restricted for:

Special Revenue Projects 15,065,502
Capital Projects 988,425
Unrestricted 3,637,904
Total Net Position $49,055,351
See accompanying notes to financial statements
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TOWN OF PORTOLA VALLEY

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2023
Program Revenues
Charges Operating Capital Net
Operating for Grants and Grants and (Expense)
Functions/Programs Expenses Services Contributions Contributions Revenue Governmental Activities:

General government $6,475,460 $1,641,672 $40,000 ($4,793,788) Parks and recreation 179,132 43,864 (135,268)
Town center facilities 633,577 (633,577)
Public safety 1,869,411 180,777 (1,688,634)
Public works 1,743,373 453,051 $5,000 (1,285,322)
Total governmental activities $10,900,953 $1,685,536 $673,828 $5,000 (8,536,589) General Revenues:

Property tax revenues………………………………………………………………………………………………… 3,706,993 Other governmental agencies revenues……………………………………………………………………………… 997,021 Franchise fees………………………………………………………………………………………………………… 360,362 Utility user tax………………………………………………………………………………………………………… 1,166,150 Investment earnings…………………………………………………………………………………………………… 433,435 Miscellaneous revenue………………………………………………………………………………………………… 282,836 Total general revenues 6,946,797
Change in net position (1,589,792)
Net Position, beginning of year, as restated (Note 5D) 50,645,143 Net Position, end of year $49,055,351
See accompanying notes to financial statements
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65 TOWN OF PORTOLA VALLEY

FUND FINANCIAL STATEMENTS
The Fund Financial Statements present only individual major funds, while non-major funds are combined in a single column. Major funds are defined generally as having significant activities or balances in the current year.

The funds described below were determined to be Major Funds by the Town in fiscal year 2023.

Individual non-major funds may be found in the Supplemental section.

GENERAL FUND
Accounts for all financial resources except those required to be accounted for in another fund.

OPEN SPACE RESTRICTED
Accounts for monies accrued from a special 2% utility tax approved by the voters in 1997, 2001, 2005, 2009, 2013 (Measure Q), 2018 (Measure T) and from private donations. Restricted for acquisition and support of open space within the Town. Private donations are generally in the form of tax-deductible checks or appreciated securities.

INCLUSIONARY-IN-LIEU
Accounts for the subdivision developer’s fee, payable by fee or land that can only be used for affordable housing.

MEASURE A
Accounts for the half-cent County sales tax revenue restricted for the improvement of local transportation, including streets and roads for the recovery of road repair costs from building permit applicants due to road wear and tear from construction vehicles.
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Open Space Inclusionary
General Restricted In-Lieu
ASSETS
Cash and investments (Note 2) $3,062,138 $8,010,295 $4,476,541 Restricted cash - customer deposits (Note 2) 865,065
Accounts and interest receivable 422,305 44,225 19,039
Loans receivable 124,083
Total Assets $4,497,700 $8,054,520 $4,495,580

LIABILITIES
Accounts payable $188,276
Due to other funds
Refundable deposits 860,217
Total Liabilities 1,048,493
FUND BALANCES (Note 5)
Nonspendable 124,083
Restricted $8,054,520 $4,495,580
Assigned 3,056,928
Unassigned 268,196
Total Fund Balances 3,449,207 8,054,520 4,495,580
Total Liabilities and Fund Balances $4,497,700 $8,054,520 $4,495,580

BALANCE SHEET
JUNE 30, 2023

TOWN OF PORTOLA VALLEY

GOVERNMENTAL FUNDS
See accompanying notes to financial statements
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Other Total
Governmental Governmental
Measure A Funds Funds
$785,505 $2,780,223 $19,114,702
865,065
4,170 39,252 528,991
124,083
$789,675 $2,819,475 $20,656,950
$81,214 $269,490
24,109 24,109
860,217
105,323 1,153,816
124,083
$789,675 2,738,086 16,077,861
3,056,928
(23,934) 244,262
789,675 2,714,152 19,503,134
$789,675 $2,819,475 $20,656,950
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TOWN OF PORTOLA VALLEY

RECONCILIATION OF THE

GOVERNMENTAL FUNDS BALANCE SHEET
TO THE

STATEMENT OF NET POSITION
JUNE 30, 2023
Fund Balances - Total Governmental Funds $19,503,134
Amounts reported for governmental activities in the
statement of net position are different because:

Capital assets used in governmental activities
are not financial resources and therefore are
not reported in the funds:

Governmental capital assets 29,363,520
Retirement contributions and changes in net pension
liability subsequent to the measurement date are not
recognized on the Fund Balance Sheets and taken
into the Statement of Net Position:

Deferred outflows of resources - pension 2,266,089
Deferred inflows of resources - pension (205,231)
Long-term liabilities are not due
and payable in the current period
and therefore are not reported in the funds
Collective net pension assets (liabilities) (1,415,296) Net OPEB assets (liabilities) (319,860)
Compensated absences (137,005)
Net Position of Governmental Activities $49,055,351
See accompanying notes to financial statements
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70 General Open Space Inclusionary
Fund Restricted In-Lieu

REVENUES
Taxes
Property taxes $3,706,993
Sales tax 326,974
Utility users tax 807,059 $359,091
Gas tax
Business license tax and other taxes 118,501
Total taxes 4,959,527 359,091
Agency revenues 4,550
Grants
Franchise fees 360,362
Licenses and permits 263,062
Service charges and fees 626,592 $872,693
Parks and recreation 47,213
Investment and other revenues 212,520 123,807 72,852
Total Revenues 6,473,826 482,898 945,545

EXPENDITURES
General government 4,641,628
Parks and recreation 116,731
Town center facilities 121,750
Public safety 1,701,662
Public works 739,406
Capital improvement program 185,340
Total Expenditures 7,321,177 185,340
Excess (Deficiency) of Revenues
Over Expenditures (847,351) 482,898 760,205

OTHER FINANCING SOURCES (USES)
Transfers in (Note 4) 232,557
Transfers (out) (Note 4) (641,457)
Total other financing sources (uses) (408,900)
NET CHANGE IN FUND BALANCES (1,256,251) 482,898 760,205 FUND BALANCES, BEGINNING OF YEAR, AS RESTATED 4,705,458 7,571,622 3,735,375 FUND BALANCES, END OF YEAR $3,449,207 $8,054,520 $4,495,580 See accompanying notes to financial statements

TOWN OF PORTOLA VALLEY

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2023
26 71
Other Total
Governmental Governmental
Measure A Funds Funds
$3,706,993
$306,500 $189,542 823,016
1,166,150
151,085 151,085
118,501
306,500 340,627 5,965,745
557,192 561,742
172,217 172,217
360,362
263,062
8,100 1,507,385
47,213
15,392 8,864 433,435
321,892 1,087,000 9,311,161
77,686 4,719,314
116,731
70,474 192,224
160,000 1,861,662
237,764 977,170
274,697 467,226 927,263
274,697 1,013,150 8,794,364
47,195 73,850 516,797
702,457 935,014
(293,557) (935,014)
408,900
47,195 482,750 516,797
742,480 2,231,402 18,986,337
$789,675 $2,714,152 $19,503,134
27 72
Net Change in Fund Balances - Total Governmental Funds $516,797 Amounts reported for governmental activities in the
statement of net position are different because:

Capital outlay is an expenditure in the government
funds financial statement, but the cost of those
assets is allocated over their estimated useful
lives as depreciation expense in the statement
of activities.

Capital outlay and other capitalized expenditures $720,020 Depreciation expense (1,082,534) (362,514)
The amount below included in the Statement of
Activities does not provide or (require) the use
of current financial resources and therefore is
not reported as revenue or expenditures in
governmental funds (net change):

Pension expense (1,262,425)
OPEB expense (499,227)
Net change in compensated absences 17,577
Change in Net Position of Governmental Activities ($1,589,792) See accompanying notes to financial statements

TOWN OF PORTOLA VALLEY

RECONCILIATION OF THE

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN THE FUND BALANCE OF GOVERNMENTAL FUNDS TO THE

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2023
28 73

TOWN OF PORTOLA VALLEY

FIDUCIARY FUNDS
Fiduciary Funds are used to account for assets held by the Town as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the Entity – wide financial statements, but are presented in separate Fiduciary Fund financial statements. 29 74

TOWN OF PORTOLA VALLEY

FIDUCIARY FUNDS

STATEMENT OF NET POSITION
JUNE 30, 2023
Custodial
Funds
ASSETS
Cash and investments (Note 2) $949,554
Accounts and interest receivable 3,159
Total Assets $952,713

LIABILITIES
Deposits and accrued liabilities $952,713
Total Liabilities $952,713
NET POSITION (Note 5)
Restricted for:

Maintenance Districts
Total Net Position
See accompanying notes to financial statements
30 75

TOWN OF PORTOLA VALLEY

FIDUCIARY FUNDS

STATEMENT OF CHANGES IN NET POSITION
JUNE 30, 2023
Custodial
Funds

ADDITIONS
Fee Collection $384,437
Total Additions 384,437

DEDUCTIONS
Distributions to districts 426,243
Total Deductions 426,243
Net increase (decrease) in fiduciary net position (41,806) Net Position, beginning of the year 41,806
Net Position, end of the year
See accompanying notes to financial statements
31 76
This Page Left Intentionally Blank
77 TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of accounting policies of the Town:

A. Reporting Entity
The Town of Portola Valley (the Town) was incorporated on July 14, 1964 under the laws of the State of California. Portola Valley operates under a Council-Manager form of government. The Town provides a full range of municipal services to its citizens including public safety, culture, recreation, public improvements, planning and zoning, and general administrative support. These financial statements present the financial status of the Town.

B. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applied to governmental agencies. The Government Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing governmental accounting and financial reporting principles.

These Statements require that the financial statements described below be presented.

Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the Town). These statements include the financial activities of the overall Town government. Governmental activities are generally financed through taxes, intergovernmental revenues, and other nonexchange transactions.

The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.

Fund Financial Statements: The fund financial statements provide information about the Town's funds. The emphasis of fund financial statements is on major individual governmental funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.

C. Major Funds
The Town’s major governmental funds are presented separately in the fund financial statements.

All other funds, called non-major funds, are combined and reported in a single column, regardless of their fund-type.

Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The Town may also select other funds it believes should be presented as major funds.
33 78

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Town reported the following major governmental funds in the accompanying financial statements:

General Fund is the general operating fund of the Town. It is used to account for all financial resources except those required to be accounted for in another fund.

Open Space Restricted Fund is a major fund of the Town. Through the years, residents and others have raised funds to preserve some 100 acres of open space within the Town’s boundaries, Several fund-raising committees have worked at various times to achieve this goal, culminating in today’s Open Space Acquisition Fund (PVOSAF). This fund, overseen by the Town Council, is composed of monies accrued from a special 2% utility tax approved by the voters in 1997 and from private donations. Subsequent elections were re-authorizing the increase of the appropriations limits for 4 additional years. It can be used for the acquisition and support of open space within the Town.

Private donations are generally in the form of tax-deductible checks or appreciated securities.

Inclusionary-In-Lieu is used to account for the subdivision developer’s fee, payable by fee or land that can only be used for affordable housing.

Measure A accounts for the half-cent County sales tax revenue restricted for the improvement of local transportation, including streets and roads for the recovery of road repair costs from building permit applicants due to road wear and tear from construction vehicles.

The Town also reports the following fund types:

Custodial Funds account for assets held by the Town in a purely custodial capacity. Since custodial funds are custodial in nature, they do not involve measuring the results of operations and are not presented in the government-wide financial statements. There are five custodial funds, account for fees collected for the following maintenance districts: Cresent Road, Portola Valley Ranch, Wayside Road I, Wayside Road II and Woodside Highlands Road.

D. Basis of Accounting
The government-wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Governmental funds financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Town considers all revenues reported in the governmental funds to be available if the revenues are collected within 45 to 60 days after year-end.

Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of governmental longterm debt and acquisitions under capital leases are reported as other financing sources.

Those revenues susceptible to accrual are property tax, sales tax, utility user tax, interest revenue and franchise fees. Fines, licenses and permits are not susceptible to accrual because they are not measurable until received in cash.
34 79

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Non-exchange transactions, in which the Town gives or receives value without directly receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

The Town may fund programs with a combination of cost-reimbursement grants and general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The Town’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary.

Certain indirect costs are included in program expenses reported for individual functions and activities.

E. Property Taxes
County tax assessments include secured and unsecured property taxes. Unsecured taxes are taxes on personal property. Tax assessments are secured by liens on the property being taxed. The County makes annual adjustments as needed to current year revenues based on true-ups and prior year tax roll corrections to special districts related to Tax Equity Allocations.

Revenue is recognized in the period for which the tax and assessment is levied. The County of San Mateo levies, bills and collects property taxes for the Town. The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties.

Secured and unsecured property taxes are levied on January 1. Secured property tax is due in two installments, on November 1 and February 1, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on August 31 and becomes delinquent on September 30.

F. Implementation of Governmental Accounting Standards Board Statements The Town has implemented the requirements of the following GASB Pronouncement:

In May 2020, GASB issued GASB Statement No. 96, Subscription-Based Information Technology Arrangements.

GASB Statement No. 96 establishes uniform accounting and financial reporting for SubscriptionBased Information Technology Arrangements (SBITAs) by state and local governments. It requires governments to recognize a right-to-use intangible subscription asset and a corresponding subscription liability on their balance sheets, significantly improving the transparency of cloudbased IT spending. The provisions of this Statement were implemented during fiscal year 2023. 35 80

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Compensated Absences
Compensated absences represent the vested portion of accumulated vacation and compensation time. Upon termination, 100% of vacation leave will be paid. The Town records a liability for unpaid compensated absences.

The changes of the compensated absences are as follows:

Beginning balance $154,582
Additions 670,846
Payments (688,423)
Ending balance $137,005
Accumulated sick leave benefits are not recognized as liabilities of the Town. The Town’s policy is to record sick leave as an operation expense in the period taken since such benefits do not vest nor is payment probable.

For all governmental funds, amounts that have matured are recorded as fund liabilities; the longterm portion is recorded in the Statement of Net Position.

Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated primarily by the General Fund.

H. Deferred Compensation Plan
Town employees may defer a portion of their compensation under Town sponsored Deferred Compensation Plans created in accordance with Internal Revenue Code Section 457. Under these plans, participants are not taxed on the deferred portion of their compensation until distributed to them; distributions may be made only at separation, retirement, death or in an emergency as defined by the Plans.

The laws governing deferred compensation plan assets required them to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the Town’s property and are not subject to the Town control, they have been excluded from these financial statements.

I. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 36 81

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the statement of net position or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

K. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for an asset or liability.

If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.

L. Leases
As clarified by the Government Accounting Standards Board (GASB) Statement No. 87, a lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. The Town recognizes lease receivables or liabilities with an initial, individual value of $300,000 or more, based on the future lease payments remaining at the start of the lease.

The Town has no leases subject to GASB #87 for the fiscal year 2023. 37 82

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Subscription-Based Information Technology Arrangements (SBITAs) Accounting A Subscription-Based Information Technology Arrangement (SBITA) is a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.

At the commencement of a SBITA, the Town initially measures the subscription liability at the present value of payments expected to be made during the contract term. Subsequently, the subscription liability is reduced by the principal portion of payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for payments made at or before the SBITA commencement date, plus certain initial direct costs. Subsequently, the subscription asset is amortized on a straight‐line basis over shorter of the subscription term or the useful life of the underlying IT assets. The Town recognizes SBITA liabilities with an initial, individual value of $300,000 or more for all funds, based on the future SBITA payments remaining at the contract's start.

Key estimates and judgments related to SBITAs include how the Town determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments as follows:
•The Town uses the interest rate charged by the IT vendor as the discount rate. When the interest rate charged by the IT vendor is not provided, the Town uses its estimated incremental borrowing rate as the discount rate for subscription liabilities. •The subscription term includes the noncancellable period of the subscription. •Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that the Town is reasonably certain to exercise.

The Town monitors changes in circumstances that would require a remeasurement of its subscription and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

Subscription assets are reported with other capital assets and subscription liabilities are reported with liabilities on the statement of net position.

The Town has no SBITA subject to GASB#96 for the fiscal year 2023. 38 83

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 2 – CASH AND INVESTMENTS
The Town maintains a cash and investment pool for all funds consistent with the Town’s investment policy and relevant governmental code.

A. Policies
The California Government Code requires California banks and savings and loan associations to secure the Town’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the Town’s name.

California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the Town’s cash on deposit or first trust deed mortgage notes with a market value of 150% of the Town’s total cash deposits, as collateral for these deposits. The Town may waive collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The Town, however, has not waived the collateralization requirements. Under California Law this collateral is held in a separate investment pool by another institution in the Town’s name and places the Town ahead of general creditors of the institution.

The Town follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agent is credited directly to the related fund.

The Town’s investments are carried at fair value, as required by the generally accepted accounting principles. The Town adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year.

B. Classification
Cash and investments are classified in the financial statements as follows:

Statement of Net Position:

Cash and investments $19,114,702
Restricted cash and investments 865,065
Cash and investments of the Town 19,979,767
Cash and investments in Fiduciary Funds 858,595
Total cash and investments $20,838,362
39 84

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 2 – CASH AND INVESTMENTS (Continued)
C. Investments Authorized by the California Government Code and the Town’s Investment Policy The Town’s Investment Policy and the California Government Code allow the Town to invest in the following, provided the credit ratings of the issuers are acceptable to the Town; and approved percentages and maturities are not exceeded.

Authorized Investment Type
Maximum
Maturity
Maximum
Percentage
of Portfolio
Maximum
Investment In
One Issuer
California Local Agency Investment Fund N/A None $75 million U.S. Treasury Obligations 5 years None None
US Government Agency Bonds N/A None None
Joint Powers Authority Pool N/A None None
County Pooled Investment Funds N/A None None
Negotiable Certificates of Deposits 5 years 30% None
Money Market and Mutual funds * Upon Demand None None
* For Funds investing over 80% of assets in either:
of rating of “A” or better
2) short to medium term Federal Agency or U.S. Government sponsored enterprise obligations. 1) short to medium term corporate bonds holding an average credit not to exceed 30% of surplus funds, The Town does not enter into any repurchase or reverse repurchase agreements.

D. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates will be.

Information on the fair values of the Town’s cash and investments at June 30, 2023, is provided by the following table:

Investment Type 12 Months or less Total
California Local Agency Investment Fund $12,041,161 $12,041,161 Money Market Mutual Funds 4,620,996 4,620,996
Total Investments $16,662,157 16,662,157
Cash in Bank 4,174,705
Cash on Hand 1,500
Total Cash 4,176,205
Total cash and investments $20,838,362
40 85

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 2 – CASH AND INVESTMENTS (Continued)
The Town is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The Town reports its investment in LAIF at the fair value amount provided by LAIF.

The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage obligation, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, Untied States Treasury Notes and Bills, and corporations. At June 30, 2023, these investments matured in an average of 260 days.

Money market mutual funds are available for withdrawal on demand and at June 30, 2023, had an average maturity date of 30 days.

E. Credit Risk
Credit Risk is the risk that an issuer will not fulfill its obligation to the holder of the investment.

This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required (where applicable) the California Government Code, the City’s investment policy, and actual ratings as of June 30, 2023 for each investment type as provided by Moody’s investment type rating system (as date of the purchase):

Investment Type AAm/AAA Not Rated Total
California Local Agency Investment Fund $12,041,161 $12,041,161 Money Market Mutual Funds $4,620,996 4,620,996
Total Investments $4,620,996 $12,041,161 $16,662,157
F. Fair Value Hierarchy
The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets.

The California Local Agency Investment Fund is reported at amortized cost, and is not subject to the fair value reporting requirements. Fair value is defined as the quoted market value on the last trading day of the period. These prices are obtained from various pricing sources by our custodian bank.

G. Custodial Credit Risk
Custodial credit risk is the risk that in the event of a bank failure, the Town’s deposits may not be able to recover the value of its investments or collateral securities that are in possession of an outside party.

Significant investments in the securities of any individual issuers, other than U.S. Treasury securities or mutual funds would be subjected to this risk. As of June 30, 2023, no investments were subjected to custodial credit risk on the entity-wide level.
41 86

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 3 – CAPITAL ASSETS
The Town defines capital assets as assets with an initial cost generally of $5,000 or more and an estimated useful life in excess of two years except for land which is always capitalized and buildings, land improvements and infrastructure which have a $25,000 capitalization threshold.

All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair market value on the date contributed.

The Town is required to record all its public domain (infrastructure) capital assets. The Town has elected to prospectively record its infrastructure placed into service beginning in fiscal year 2004, including roads, curbs and gutters, streets, trails, paths and drainage systems.

All capital assets with limited useful lives are depreciated over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets.

The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets.

Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The Town has assigned the useful lives listed below to capital assets:

Asset Class Useful Lives
Infrastructure 50 years
Buildings 50 years
Buildings Improvements 20 years
Equipment & Machinery 5 - 20 years
Improvements other than Buildings 35 years
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. 42 87

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 3 – CAPITAL ASSETS (Continued)
A. Capital Assets
Capital assets activities during the fiscal year ended June 30, 2023 was as follows:

Balance Transfers & Balance
June 30, 2022 Additions Adjustment June 30, 2023
Governmental Activities
Capital assets not being depreciated:

Land $6,690,959 $6,690,959
Construction in Progress 9,851 $10,106 19,957
Total capital assets not being depreciated 6,700,810 10,106 6,710,916 Capital assets being depreciated:

Infrastructure 11,905,071 668,947 12,574,018
Land improvements 3,086,836 35,957 3,122,793
Buildings and improvements 19,910,589 19,910,589
Equipment 528,176 5,010 533,186
Total capital assets being depreciated 35,430,672 709,914 36,140,586 Less accumulated depreciation for:

Infrastructure (5,271,795) (556,909) (5,828,704)
Land improvements (1,396,450) (86,133) (1,482,583)
Buildings and improvements (5,340,162) (411,206) (5,751,368) Equipment (397,041) (28,286) (425,327)
Total accumulated depreciation (12,405,448) (1,082,534) (13,487,982) Total depreciable assets, net 23,025,224 (372,620) 22,652,604 Capital assets, net $29,726,034 ($362,514) $29,363,520
B. Depreciation Allocation
Depreciation expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or program is as follows:

Governmental Activities
General Government $12,071
Parks and Recreation 62,401
Town Center Facilities 441,353
Public Safety 7,749
Public Works 558,960
Total Governmental Activities $1,082,534
43 88

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 4 – INTERFUND TRANSACTIONS
A. Interfund Transfers
With Council approval, resources may be transferred from one Town fund to another, Interfund transfers for the year of June 30, 2023, were as follows:

Transfers in Transfers Out Total
General Fund Non-Major Governmental Funds $232,557
Non-Major Governmental Funds General Fund 641,457
Non-Major Governmental Funds Non-Major Governmental Funds 61,000 $935,014
B. Current Interfund Balances
Current interfund balances arise in the normal course of business and are expected to be repaid shortly after the end of the fiscal year. As of June 30, 2023 there were no interfund balances.

NOTE 5 – NET POSITION AND FUND BALANCES
A. Net Position
Net Position is measured on the full accrual basis and is the excess of all the Town’s assets and deferred outflows of resources over all its liabilities, and deferred inflows of resources. Net Position is divided into three captions which are determined only at the Government-wide level, and are described below:

Net Investment in Capital Assets describes the portion of Net Position which is represented by the current net book value of the Town’s capital assets, less the outstanding balance of any retention payables.

Restricted describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the Town cannot unilaterally alter.

Unrestricted describes the portion of Net Position which is not restricted to use. 44 89

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 5 – NET POSITION AND FUND BALANCES (Continued)
B. Fund Balances
Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash and receivables, less its liabilities.

The Town’s fund balances are classified in accordance with Governmental Accounting Standards Board Statement Number 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, which requires the Town to classify its fund balances based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the Town prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned.

Each category in the following hierarchy is ranked according to the degree of spending constraint:

Nonspendable represents balances set aside to indicate items do not represent available, spendable resources even though they are a component of assets. Assets not expected to be converted to cash, such as prepaids and notes receivable are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then nonspendable amounts are required to be presented as a component of the applicable category.

Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources.

Committed fund balances have constraints imposed by formal action of the Town Council which may be altered only by formal action of the Town Council. Nonspendable amounts subject to council commitments are included along with spendable resources.

Assigned fund balances are amounts constrained by the Town’s intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the Town Council and may be changed at the discretion of the Town Council. This category includes nonspendables, when it is the Town’s intent to use proceeds or collections for a specific purpose; and residual fund balances, if any, of Special Revenue Funds which have not been restricted or committed.

Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual General Fund balance and residual fund deficits, if any, of other governmental funds.
45 90

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 5 – NET POSITION AND FUND BALANCES (Continued)
Detailed classifications of the Town’s fund balances, as of June 30, 2023, are below:

Open Space Inclusionary
Restricted In-lieu Measure A Other
General Special Revenue Special Revenue Special Revenue Governmental Fund Fund Fund Fund Funds Total
Fund balances:

Nonspendables:

Loans receivable $124,083 $124,083
Total nonspendable 124,083 124,083
Restricted for:

Open space acquisition $8,054,520 8,054,520
Public safety $32,233 32,233
Gas tax 364,801 364,801
Public safety COPS 161,609 161,609
Library fund -
Park in-lieu 43,869 43,869
Grants 228,912 228,912
Capital projects 715,644 715,644
Inclusionary in-lieu $4,495,580 4,495,580
Measure M 40,370 40,370
Frod Pond OS Rd Remnant 27,571 27,571
ARPA-Coronavirus Recovery 638,224 638,224
Measure A $789,675 789,675
Measure W 484,853 484,853
Total restricted 8,054,520 4,495,580 789,675 2,738,086 16,077,861 Assigned to:

Unfunded pension reserve 1,415,296 1,415,296
Equipment replacement 100,000 100,000
1,400,000 1,400,000
OPEB 41,632 41,632
Legal contingency 100,000 100,000
Total assigned 3,056,928 3,056,928
Unassigned 268,196 ($23,934) 244,262
Total fund balances $3,449,207 $8,054,520 $4,495,580 $789,675 $2,714,152 $19,503,134 Capital replacement/repairs
C. General Fund Minimum Fund Balance Policy
Town is required to maintain a minimum of 60% of its annual budgeted operating expenditures (excluding capital improvement expenditures) within the General Fund’s unrestricted fund balance.

This amount is to be calculated annually via the adopted budget for the next fiscal year. The General Fund unrestricted fund at June 30, 2023 is as follows:

Fiscal 2022-23 Adopted Budget General Fund Operating Expenditures $8,146,487 Multiplied by 60%:

Required minimum unrestricted General Fund fund balance $4,887,892 General Fund unrestricted fund balance as of June 30, 2023 $3,325,124 46 91

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 5 – NET POSITION AND FUND BALANCES (Continued)
D. Beginning Fund Balance and Net Position Restatement
Adjustments resulting from errors or changes are treated as adjustments to prior periods to comply with provisions of the accounting standards. The Town adjusted the beginning fund balances for the General Fund and the beginning net position for the Statement of Activities as of July 1, 2021, for $367,982 that was overstated in the fiscal year 2022.

Deficit Fund Balance – As of June 30, 2023, the Library Special Revenue Fund had a deficit fund balance of $23,934.

NOTE 6 – PENSION PLAN
For purposes of measuring the net pension liabilities (assets)and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Town’s California Public Employees’ Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For the purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

A. General Information about the Pension Plans
Plan Description – All qualified permanent and probationary employees are eligible to participate in the Town’s separate Miscellaneous Employee Pension Rate Plans. The Town’s Miscellaneous Rate Plan is part of the public agency cost-sharing multiple-employer defined benefit pension plan (PERF C), which is administered by the California Public Employees’ Retirement System (CalPERS). PERF C consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Individual employers may sponsor more than one miscellaneous rate plan. The employer participates in one cost-sharing multiple-employer defined benefit pension plan regardless of the number of rate plans the employer sponsors. The Town sponsors two miscellaneous rate plans. Benefit provisions under the Plan are established by State statute and Town resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided – CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.

The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
47 92

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – PENSION PLAN (Continued)
The Plans’ provisions and benefits in effect at June 30, 2023, are summarized as follows:

Classic PEPRA
Hire date Prior to January 1, 2013 On or after January 1, 2013 Benefit Formula 2% at 55 2% at 62
Benefit vesting schedule 5 years service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 - 67+ 52 - 67+
Monthly benefits, as a % of eligible compensation 1.426 - 2.418% 1.000 - 2.500% Required employee contribution rates 6.920% 6.750%
Required employer contribution rates 10.320% 7.470%
Miscellaneous
Beginning in fiscal year 2016, CalPERS collects employer contributions for the Plan as a percentage of payroll for the normal cost portion as noted in the rates above and as a dollar amount for contributions toward the unfunded liability (UAL). The dollar amounts are billed on a monthly basis or can be paid in a lump sum at a reduced amount. The City’s required contributions for the unfunded liability in the Miscellaneous Plan was $107,323.

Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plan are determined annually on an actuarial basis as of June 30 by CalPERS.

The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The Town is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change in plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions.

For the year ended June 30, 2023, the Town’s contributions to the Plan were as follows:

Miscellaneous
Contributions - employer $283,449
B. Net Pension Liabilities (Assets)
As of June 30, 2023, the Town reported a net pension asset for its proportionate share of the net pension Liabilities (Assets) of the Plan as follows:

Proportionate Share
of Net Pension Liabilities (Assets)
Miscellaneous $1,415,296
48 93

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – PENSION PLAN (Continued)
The Town’s net pension liabilities (assets) for the Plan is measured as the proportionate share of the net pension liabilities (assets). The net pension liabilities (assets) of the Plan is measured as of June 30, 2022, and the total pension liability for the Plan used to calculate the net pension liabilities (assets) was determined by an actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The Town’s proportion of the net pension liabilities (assets) was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined.

The Town’s proportionate share of the net pension liabilities (assets) for the Plan as of June 30, 2021 and 2022 was as follows:

Miscellaneous
Proportion - June 30, 2021 -0.00241%
Proportion - June 30, 2022 0.03025%
Change - Increase (Decrease) 0.03266%
C. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2023, the Town recognized pension expense of $1,545,874. On June 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $283,449 Differences between actual and expected experience 28,422 ($19,036) Changes of assumptions 145,027
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions (186,195)
Change in proportion 1,549,946
Net differences between projected and actual earnings
on plan investments 259,245
Total $2,266,089 ($205,231)
49 94

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – PENSION PLAN (Continued)
$283,449 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liabilities (assets) in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended Annual
June 30 Amortization
2024 $828,369
2025 639,749
2026 150,727
2027 158,564
Total $1,777,409
Actuarial Assumptions – The total pension liability was determined by rolling forward the total pension liability determined in the June 30, 2021, actuarial accounting valuation to June 30, 2022.

The total pension liability was based on the following actuarial methods and assumptions:

Miscellaneous
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increases (1)
Investment Rate of Return 6.90% (2)
Mortality Derived using CalPERS' membership data for all funds (3)
Post Retirement Benefit Increase Contract COLA up to 2.3% until Purchasing Power Protection Allowance Floor on Purchasing Power
applies 2.3% thereafter
(3) The mortality table used was developed based on CalPERS-specific data. The table includes generational mortality improvements using the Society of Actuaries Scale 80% of scale MP 2020.

For more details on this table, please refer to the November 2021 experience study report (based on CalPERS demographic data from 2001 to 2019) that can be found on the CalPERS website. (1) Depending on age, service and type of employment.
(2) Net of pension plan investment expenses, including inflation.

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation were based on the results of a November 2021actuarial experience study for the period 2001 to 2019. Further details of the Experience Study can be found on the CalPERS website. 50 95

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – PENSION PLAN (Continued)
Discount Rate – The discount rate used to measure the total pension liability for the Plan was

6.90%. The projection of cash flows used to determine the discount rate for the Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefits payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payment to determine the total pension liability.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a buildingblock approach. The expected rate of return was then adjusted to account for assumed administration expenses of 10 basis points.

The expected real rates of return by asset class are as follows:

Asset Class (a)
Assumed
Asset
Allocation
Real Return
(a), (b)
Global Equity - Cap-weighted 30.0% 4.54%
Global Equity - Non-Cap-weighted 12.0% 3.84%
Private Equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed Securities 5.0% 0.50%
Investment Grade Corporates 10.0% 1.56%
High Yield 5.0% 2.27%
Emerging Market Debt 5.0% 2.48%
Private Debt 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% -0.59%
Total 100%
(a) An expected inflation of 2.30% used for this period. (b) Figures are based on the 2021 Asset Liability Management Study 51 96

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 6 – PENSION PLAN (Continued)
Sensitivity of the Net Pension Liabilities (assets) to Changes in the Discount Rate – The following presents the Town’s proportionate share of the net pension liabilities (assets) for the Plan, calculated using the discount rate for the Plan, as well as what the Town’s proportionate share of the net pension liabilities (assets) would be if it were calculated using a discount rate that is 1- percentage point lower or 1-percentage point higher than the current rate:

Miscellaneous
1% Decrease 5.90%
Net Pension Liabilities (Assets) $2,696,889
Current Discount Rate 6.90%
Net Pension Liabilities (Assets) $1,415,296
1% Increase 7.90%
Net Pension Liabilities (Assets) $360,864
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

NOTE 7 - OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATIONS A. General Information about the Town’s OPEB Plan
Plan Description
The Town’s Post Employment Benefit Plan is a single-employer defined benefit OPEB plan.

Permanent employees who retire under the Town’s CalPERS retirement plan are, pursuant to their respective collective bargaining agreements, eligible to have certain portion of their medical insurance premiums paid by the Town. No assets are accumulated in a trust that meets the criteria in paragraph 4 of Governmental Accounting Standards Board Statement No. 75.

The Town contracts with CalPERS for this insured-benefit plan established under the state Public Employees’ Medical and Hospital Care Act (PEMHCA). The plan offers employees and retirees three CalPERS’ self-funded options, setup as insurance risk pools, or offers various third-party insured health plans. The plan’s medical benefits and premium rates are established by CalPERS and the insurance providers. The Town contribution is established by Town resolution. Retirees and active employees pay the difference between the premium rate and the Town’s contribution.

Premiums and Town contributions are based on the plan and coverage selected by actives and retirees. A comprehensive annual financial report of CalPERS, inclusive of their benefit plans, is available at www.calpers.ca.gov. Eligibility and the Town contributions toward month premiums are as follows:
52 97

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 - OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATIONS (Continued) Benefits Provided
The following is a summary of Plan benefits by employee group as of June 30, 2023:

Eligibility
Minimum age before retirement 50
Minimum required years of service: 5
Health Benefit - Employer Contribution
Monthly Premiums
BlueShield HMO medical, pharmacy coverage $143
Health Net HMO medical, pharmacy coverage $143
Kaiser medical, pharmacy coverage $143
PERS Select medical, pharmacy coverage $143
PERSChoice medical, pharmacy coverage $143
United Healthcare HMO medical, pharmacy coverage $143
Employees Covered by Benefit Terms
Membership in the plan consisted of the following at the measurement date of June 30, 2023:

Active employees 7
Inactive employees or beneficiaries currently
receiving benefit payments 5
Total 12
B. Net OPEB Liabilities (Assets)
Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the type of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan members to that point. The actuarial calculations of the OPEB plan reflect a long-term perspective. Consistent with this perspective, actuarial valuations, after this initial year, will use actuarial methods and assumptions that include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The ARC for the plan was determined as part of the actuarial valuation using the following methods and assumptions:
53 98

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 - OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATIONS (Continued) Actuarial Assumptions
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Actuarial Cost Method Entry Age Normal
Amortization Method Level Percentage of Payroll
Actuarial Assumptions:

Discount Rate 7.59%
Payroll Growth 3.20%
Mortality Rate Pub-2010 Public Retirement Plans Mortality Tables, with mortality improvement projected for 10 years
Amortization Period 20 years
Pre-Retirement Turnover Derived from data maintained by the U.S. Office of Personnel Management regarding the most recent experience of the employee group covered by the Federal Employees Retirement System Healthcare Trend Rates 5.8% descending to 4.1% over 10 years The discount rate was based on the long-term expected rate of return on OPEB plan investments.

C. Changes in Net OPEB Liabilities (Assets)
The end of the year net OPEB liabilities (assets) are determined as follows:

Total OPEB Plan Fiduciary Net OPEB
Liabilities (Assets) Net Position Liabilities (Assets)
(a) (b) (a) - (b)
Balance at June 30, 2022 $380,565 $559,932 ($179,367)
Changes Recognized for the Measurement Period:

Service cost 17,142 17,142
Interest on the total OPEB liabilities 18,103 18,103
Changes of benefit terms
Differences between expected and actual experience
Economic gains or losses (153,120) (153,120)
Changes of assumptions (69,302) (69,302)
Contributions from the employer (77,493) 77,493
Contributions from the employee
Net investment income 30,949 (30,949)
Administrative expenses (140) 140
Benefit payments (3,214) (3,214)
Net changes (190,391) (49,898) (140,493)
Balance at June 30, 2023 (Measurement Date) $190,174 $510,034 ($319,860) 54 99

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 7 - OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATIONS (Continued) D. Sensitivity of the Net OPEB Liabilities (Assets) to Changes in the Discount Rate and Healthcare Cost Trend Rates
The following presents the Net OPEB Liabilities (Assets) of the Town, as well as what the Town's Net OPEB Liabilities (Assets) would be if it were calculated using a discount rate that is 1- percentage-point lower (6.590%) or 1-percentage-point higher (8.590%) than the current discount rate:

Net OPEB Liabilities/(Assets)
Discount Rate -1% Discount Rate Discount Rate +1%
(6.590%) (7.590%) (8.590%)
($300,399) ($319,860) ($336,677)
The following presents the Net OPEB Liabilities (Assets) of the Town, as well as what the Town's Net OPEB Liabilities (Assets) would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates of

5.8%, descending to 4.1% over 10 years:

Net OPEB Liabilities/(Assets)
Trend rate -1% Current Healthcare Cost Trend rate +1%
Trend Rates
($326,448) ($319,860) ($312,610)
NOTE 8 – RISK MANAGEMENT
The Town participates in the following public entity risk pools; other risks are covered by commercial insurance.

A. Liability Coverage
The Town, along with 28 other Bay Area governments, is a member of the of the Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA), a joint powers insurance authority consisting of 28 member cities in the San Francisco Bay Area, a public-entity risk pool. PLAN JPA provides liability insurance coverage, claims management, risk management services and legal defense to its participating members. PLAN JPA is governed by a Board of Directors, which is comprised of officials appointed by each participating member. Premiums paid to PLAN JPA are subject to a possible refund based on the results of actuarial studies and approval by PLAN JPA’s Board of Directors. In the opinion of the Town management, premiums made represent the best available estimate of the ultimate cost of the Town’s participation in PLAN JPA and, accordingly, the accompanying basic financial statements of the Town include no provisions for possible refunds or additional assessments. Actual refunds and assessments arising from retrospective premium adjustments relating to prior loss years will be recorded in the Town’s basic financial statements in the year they become known. During the fiscal year ended June 30, 2023, the Town contributed $159,223 for current year coverage.
55 100

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 8 – RISK MANAGEMENT (Continued)
Prior to January 2018 the Town participated in ABAG Plan Corporation, a non-profit public benefit corporation established to provide liability insurance coverage, claims and risk management, and legal defense to its participating members. On January 16, 2018, ABAG Plan Corporation transitioned to PLAN JPA.

Audited financial information for the JPA may be obtained from PLAN JPA at 1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833.

B. Workers Compensation Coverage
The State Compensation Insurance Fund covers workers compensation claims up to $200,000 for each claim and has coverage above that limit to a maximum of $1,000,000. The Town has no deductible for these claims. During the fiscal year ended June 30, 2023, the Town contributed $55,697 for current year coverage.

C. Liability for Uninsured Claims
The Town has retained the risk for the deductible or uninsured portion of general liability claims.

The Town’s liability for uninsured claims at June 30, 2023 is believed by management to be de minimis based on the absence of any asserted claims.

NOTE 9 – JOINT POWERS AGREEMENT
A. C/CAG
The Town participates in the City/County Association of Governments of San Mateo County (C/CAG), which is governed by a board consisting of a representative from each member. The board controls the operations of C/CAG, including selection of management and approval of operating budgets, independent of any influence by each member beyond member representation on the Board.

C/CAG was established under a 1990 Joint Exercise of Powers Agreement between the Town, San Mateo County and a majority of cities within San Mateo County for the purpose of developing State mandated plans such as an integrated waste management plan. The Town makes annual nonrefundable contributions to C/CAG which are used along with other member contributions to finance C/CAG operations. Audited financial statements may be obtained from the Town of San Carlos, 666 Elm Street, San Carlos, California, 94070. The Town's payments to C/CAG during the year totaled $15,212. The Town's share of year-end assets, liabilities, or fund equity has not been calculated by C/CAG.
56 101

TOWN OF PORTOLA VALLEY

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
NOTE 9 – JOINT POWERS AGREEMENT (Continued)
B. San Mateo County Free Library Systems
The Town is a participant with the County of San Mateo in the San Mateo County Free Library System (the Library System), a joint powers agency created to provide extended library services to the residents of the Town and the County. The Agency is governed by a 12-member board made up of a representative from each participating City or Town. The Agency shall continue, uninterrupted, until two thirds of the members vote to terminate the Agency. However, an individual member can terminate its membership, at which the agreement shall terminate on June 30 of the following fiscal year. Upon individual member termination, the member would not be entitled to the return of any funds contributed to the Joint Powers Agency nor to the return in cash or in kind of any materials or supplies contributed. Upon full termination of the Joint Powers Agency the member would receive any surplus money on hand proportionate to its contribution to the Joint Powers Agency. However, all property acquired by the Joint Powers Agency during the term of the agreement shall become the property of the County Free Library System. The Library System’s financial statements can be obtained by contacting the San Mateo Library System, 25 Tower Road, San Mateo, CA 94402.

NOTE 10 – COMMITMENT AND CONTINGENT LIABILITIES
A. Outstanding Litigation
The Town is subject to litigation arising in the normal course of business. In the opinion of the Town Attorney there is no pending litigation which is likely to have a material adverse effect on the financial position of the Town. Litigation outstanding in prior years has been settled without material cost to the Town.
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REQUIRED SUPPLEMENTARY INFORMATION
104
Pension Plan
Schedule of the Proportionate Share of the Net Pension Liabilities (Assets) Last 10 Fiscal Years*
Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 Plan's proportion of the Net Pension Liability
(Asset) 0.03873% 0.00301% 0.01508% 0.01807% 0.01778% 0.00310% 0.00353% -0.02682% 0.03025% Plan's proportion share of the Net Pension
Liability (Asset) $957,322 $82,489 $523,840 $712,486 $670,105 $836,271 $1,029,705 ($45,763) $1,415,296 Plan's Covered Payroll $993,466 $1,071,540 $1,442,039 $1,522,511 $1,524,652 $1,550,930 $1,628,561 $1,938,663 $2,011,428 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its Covered
Payroll 96.36% 7.70% 36.33% 46.80% 43.95% 53.92% 63.23% -2.36% 70.36% Plan's Fiduciary Net Position as a Percentage of
the Total Pension Liability 79.82% 78.40% 74.06% 73.31% 75.26% 75.26% 75.10% 88.29% 76.68% Benefit changes. The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a Golden Handshakes).

Changes in assumptions. GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense, but without reduction for pension plan administrative expense. From 2018 to 2021, there were no changes. In 2022, the accounting discount rate decrease from 7.15% to 6.9% the accounting discount rate In 2017, reduced from 7.65% to 7.15%. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported are based on the 7.5% discount rate.

All other assumptions for the June 30, 2014 measurement date were the same as those used for the June 30, 2015 and 2016 measurement dates.
* Fiscal year 2015 was the 1st year of implementation. Additional years will be displayed as they become available.

TOWN OF PORTOLA VALLEY
60 105

TOWN OF PORTOLA VALLEY
Pension Plan

SCHEDULE OF CONTRIBUTIONS
Last 10 Fiscal Years*
Fiscal Year Ended June 30 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 Actuarially determined contribution $111,313 $84,007 $116,123 $141,356 $153,312 $205,746 $232,527 $267,420 $283,449 Contributions in relation to the actuarially
determined contributions (84,007) (111,313) (116,123) (141,356) (153,312) (205,746) (232,527) (267,420) (283,449) Additional Contributions (907,699)
Contribution deficiency (excess) ($907,699) $0 $0 $0 $0 $0 $0 $0 $0 Covered payroll $993,466 $1,071,540 $1,442,039 $1,522,511 $1,524,652 $1,550,930 $1,628,561 $1,938,623 $2,011,428 Contributions as a percentage of covered payroll 11.20% 7.84% 8.05% 9.28% 10.06% 13.27% 14.28% 13.79% 14.09% Notes to Schedule
Valuation date 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age
Amortization method Level percentage of payroll
Remaining amortization period 15 Years as of the Valuation Date Asset valuation method Market Value of Assets
Inflation 2.30%
Varies by Entry Age and Service
Investment rate of return

7.50% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020, 7.00% for 2021,

7.15% for 2022, and 6.9% for 2023
net of pension plan investment expense, including inflation Retirement age The probabilities of Retirement are
are based on the CalPERS Experience Study
Mortality
The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experiece Study for the period from 2001 to 2019.

Pre-retirement and Post-retirement mortality rates include generationl mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more detail on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.
* Fiscal year 2015 was the 1st year of implementation. Additional years will be displayed as they become available.

Salary increase
61 106

TOWN OF PORTOLA VALLEY
OPEB Plan

SCHEDULE OF CHANGES IN THE

NET OPEB LIABILITIES (ASSETS) AND RELATED RATIOS
Last 10 fiscal years*
Measurement Date 6/30/18 6/30/19 6/30/2020 6/30/21 6/30/22 6/30/23 NET OPEB Liability (1)
Service Cost $92,662 $92,662 $120,877 $108,443 $60,118 $17,142 Interest 35,711 29,825 29,294 41,523 18,103
Changes of benefit terms
Differences between expected and actual experience
Economic gains or losses (84,838) (62,829) (85,347) (380,979) (153,120) Changes of assumptions 258,913 56,159 (451,120) (185,030) (69,302) Contribution from employer (566,703) (78,745) 77,493
Contribution from employee (8,760)
Net investment income 80,367 (30,949)
Administrative expense 133 140
Benefit payments (51,432) (6,456) (6,456)
Net change in net OPEB liability 41,230 295,992 137,576 (965,433) (471,373) (140,493) Net OPEB liabilities - beginning 782,641 823,871 1,119,863 1,257,439 292,006 (179,367) Net OPEB liabilities (Assets) - ending (a) $823,871 $1,119,863 $1,257,439 $292,006 ($179,367) ($319,860) Covered-employee payroll $1,522,511 $1,524,652 $1,550,930 $1,628,561 $1,938,663 $2,011,428 NET OPEB liability as a percentage of covered-employee payroll 54.11% 73.45% 81.08% 17.93% -9.25% -15.90% Notes to Schedule:
(1) No assets are accumulated in a trust that meets the criteria in paragraph 4 of Governmental Accounting Standards Board Statement No. 75. * Fiscal year 2018 was the first year of implementation. 62 107

TOWN OF PORTOLA VALLEY

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Variance
Positive
Original Budget Final Budget Actual (Negative)

REVENUES
Taxes:

Property taxes $3,843,175 $3,843,175 $3,706,993 ($136,182) Sales tax 265,000 265,000 326,974 61,974
Utility users tax 807,761 807,761 807,059 (702)
Business license tax and other taxes 125,000 125,000 118,501 (6,499) Total Taxes 5,040,936 5,040,936 4,959,527 (81,409)
Franchise fees 400,828 400,828 360,362 (40,466)
Agency revenues 5,256 5,256 4,550 (706)
Licenses and permits 328,779 328,779 263,062 (65,717)
Service charges and fees 1,054,479 1,054,479 626,592 (427,887) Investment and other revenues 75,925 75,925 212,520 136,595 Total Revenues 6,793,203 7,019,203 6,473,826 (545,377)

EXPENDITURES
General government 4,105,786 4,105,786 4,641,628 (535,842) Parks and recreation 159,752 159,752 116,731 43,021
Town center facilities 161,885 161,885 121,750 40,135
Public safety 1,764,849 1,764,849 1,701,662 63,187
Public works 1,093,070 1,093,070 739,406 353,664
Total Expenditures 7,285,342 7,285,342 7,321,177 (35,835) Excess (Deficiency) of Revenues
Over Expenditures (492,139) (266,139) (847,351) (581,212)

OTHER FINANCING SOURCES (USES)
Transfers in 232,557 232,557 232,557
Transfers (out) (641,457) (641,457) (641,457)
Total Other Financing Sources (Uses) (408,900) (408,900) (408,900) NET CHANGE IN FUND BALANCE ($901,039) ($675,039) (1,256,251) ($581,212) Fund balance at beginning of year, as restated 4,705,458 Fund balance at end of year $3,449,207
63 108

TOWN OF PORTOLA VALLEY

OPEN SPACE RESTRICTED SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Variance
Original and Positive
Final Budget Actual (Negative)

REVENUES
Utility users tax $355,047 $359,091 $4,044
Investment and other revenues 81,578 123,807 42,229
Total Revenues 436,625 482,898 46,273

EXPENDITURES
Capital improvement program
Total Expenditures
Excess (Deficiency) of Revenues
Over Expenditures 436,625 482,898 (46,273)
Net change in fund balance $436,625 482,898 $46,273
Fund balance at beginning of year 7,571,622
Fund balance at end of year $8,054,520
64 109

TOWN OF PORTOLA VALLEY

MEASURE A SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Variance
Original and Positive
Final Budget Actual (Negative)

REVENUES
Sales tax $306,500 $306,500
Investment and other revenues $569 15,392 14,823
Total Revenues 569 321,892 321,323

EXPENDITURES
Capital improvement program 274,697 (274,697)
Total Expenditures 274,697 (274,697)
Net change in fund balance $569 47,195 $46,626
Fund balance at beginning of year 742,480
Fund balance at end of year $789,675
65 110

NOTE TO BUDGETARY SCHEDULES
The Town follows these procedures annually in establishing the budgetary data reflected in the financial statements:

1. The Town Manager submits a proposed budget to the Finance Committee for review and approval.

2. The Town Manager then submits to the Town Council a recommended draft budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them.

3. The Town Council reviews the proposed budget at one of its regularly scheduled meetings which is open to the public. The Council also conducts a public hearing on the proposed budget to obtain comments from interested persons.

4. Prior to July 1, the budget is adopted through the passage of a resolution. All appropriations lapse at year end.

5. From the effective date of the budget, which is adopted and controlled by the Town Manager at the fund level, the amounts stated therein as proposed expenditures become appropriations to the various Town activities. The Town Council may amend the budget by resolution during the fiscal year.

6. Capital Projects Funds are budgeted on an annual basis. If a capital project is not completed in a budget year, it is included in the subsequent budget year, if necessary. Inclusionary Inlieu Capital Project Fund was not budgeted. 66 111

SUPPLEMENTARY INFORMATION
112
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113

NON-MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS:

PUBLIC SAFETY
Accounts for half-cent State sales tax revenue designated exclusively for local agency public safety services, (Sec. 35 of Art. XIII of California Constitution).

GAS TAX
Accounts for gasoline tax allocated by the state for street maintenance, repair and improvement.

PUBLIC SAFETY COPS (Citizens’ Options for Public Safety) Accounts for the Supplemental State law Enforcement Fund Service Account (SLESA) revenue for special law and traffic enforcement established by SB89.

LIBRARY FUND
Accounts for library service revenue from San Mateo County Library JPA that can only be used for library-related activities.

MEASURE M
Accounts for County-generated motor vehicle registration fee revenue for traffic congestion and water pollution mitigation programs.

MEASURE W
Accounts for amounts restricted for the Town’s share of a one-half cent sales tax revenue for road repairs and construction.

FROG POND OS RD REMNANT
To account for contributions received to support maintenance of the road remnant adjacent to the Frog Pond.

ARPA CORONAVIRUS RECOVERY
To account for American Rescue Plan Act (ARPA) received in response to the COVID-19 shutdown.
69 114
NON-MAJOR GOVERNMENTAL FUNDS (Continued)
CAPITAL PROJECTS FUNDS:

PARK IN-LIEU
Accounts for the subdivision developer’s fee restricted for parks or recreational purposes.

GRANTS
Accounts for various grant activities.

CAPITAL PROJECTS
Accounts for federal or state-reimbursed storm-related road repairs as needed. 70 115
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116
Public
Public Safety Library
Safety Gas Tax COPS Fund
ASSETS
Cash and investments $32,015 $383,970 $160,414
Accounts and interest receivable 218 17,486 1,195 $175
Total Assets $32,233 $401,456 $161,609 $175

LIABILITIES
Accounts payable $36,655
Due to other funds $24,109
Total Liabilities 36,655 24,109

FUND BALANCES (DEFICIT)
Restricted $32,233 364,801 $161,609
Unassigned (23,934)
Total Fund Balance 32,233 364,801 161,609 (23,934)
Total Liabilities and Fund Balances $32,233 $401,456 $161,609 $175 Special Revenue Funds

TOWN OF PORTOLA VALLEY

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
JUNE 30, 2023
72 117
Special
Revenue Funds Capital Projects Funds
Frog Pond ARPAOS Rd Coronavirus Park Capital
Measure M Measure W Remnant Recovery In-Lieu Grants Projects Totals $44,591 $485,203 $27,571 $673,532 $43,691 $208,912 $720,324 $2,780,223 178 20,000 39,252
$44,591 $485,203 $27,571 $673,532 $43,869 $228,912 $720,324 $2,819,475 $4,221 $350 $35,308 $4,680 $81,214
24,109
4,221 350 35,308 4,680 105,323
40,370 484,853 $27,571 638,224 $43,869 $228,912 715,644 2,738,086 (23,934)
40,370 484,853 27,571 638,224 43,869 228,912 715,644 2,714,152 $44,591 $485,203 $27,571 $673,532 $43,869 $228,912 $720,324 $2,819,475 73 118
Public
Public Safety Library
Safety Gas Tax COPS Fund

REVENUES
Taxes:

Sales tax $42,990
Gas tax $151,085
Total taxes 42,990 151,085
Agency revenues
Grants $137,787
Service charges and fees
Investment and other revenues 528 2,488 4,378 $817
Total Revenues 43,518 153,573 142,165 817

EXPENDITURES
General government
Town center facilities 70,382
Public safety 15,000 145,000
Public works 219,433
Capital improvement program
Total Expenditures 15,000 219,433 145,000 70,382
Excess (Deficiency) of Revenues
Over Expenditures 28,518 (65,860) (2,835) (69,565)

OTHER FINANCING SOURCES
Transfers in 126,783
Transfers out
Total other financing sources 126,783
Net change in fund balances 28,518 60,923 (2,835) (69,565) Fund balances at beginning of year 3,715 303,878 164,444 45,631 Fund balances (deficit) at end of year $32,233 $364,801 $161,609 ($23,934) Special Revenue Funds

TOWN OF PORTOLA VALLEY

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2023
74 119
Special
Revenue Funds Capital Projects Funds
Frog Pond ARPAOS Rd Coronavirus Park Capital
Measure M Measure W Remnant Recovery In-Lieu Grants Projects Totals $146,552 $189,542
151,085
146,552 340,627
$557,192 557,192
$34,430 172,217
$8,100 8,100
(30) 683 8,864
146,522 557,192 8,783 34,430 1,087,000
77,686 77,686
92 70,474
160,000
$13,851 4,480 237,764
2,776 3,800 $460,650 467,226
13,851 2,776 86,058 460,650 1,013,150
(13,851) 143,746 471,134 8,783 34,430 (460,650) 73,850
61,000 514,674 702,457
(61,000) (232,557) (293,557)
(61,000) (232,557) 61,000 514,674 408,900
(13,851) 82,746 238,577 8,783 95,430 54,024 482,750
54,221 402,107 $27,571 399,647 35,086 133,482 661,620 2,231,402 $40,370 $484,853 $27,571 $638,224 $43,869 $228,912 $715,644 $2,714,152 75 120

TOWN OF PORTOLA VALLEY

NON-MAJOR GOVERNMENTAL FUNDS

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Public Safety Gas Tax
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Taxes
Sales tax $15,000 $42,990 $27,990
Gas tax $242,030 $151,085 ($90,945)
Total taxes 15,000 42,990 27,990 242,030 151,085 (90,945) Agency revenues
Grants
Contributions
Service charges and fees
Investment and other revenues 528 528 2,985 2,488 (497) Total Revenues 15,000 43,518 28,518 245,015 153,573 (91,442)

EXPENDITURES
General government
Town center facilities
Public safety 15,000 15,000
Public works 238,193 219,433 18,760
Capital improvement program
Total Expenditures 15,000 15,000 238,193 219,433 18,760 Excess (Deficiency) of Revenues
Over Expenditures 28,518 28,518 6,822 (65,860) (72,682)

OTHER FINANCING SOURCES
Transfers in 126,783 126,783
Transfers out
Total Other Financing Sources 126,783 126,783
Net change in fund balances 28,518 $28,518 $133,605 60,923 ($72,682) Fund balances, beginning of Year 3,715 303,878
Fund balances (deficit), end of Year $32,233 $364,801
76 121
Public Safety COPS Library Fund Measure M
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $145,000 $137,787 ($7,213)
1,482 4,378 2,896 $817 $817
146,482 142,165 (4,317) 817 817
$65,378 70,382 (5,004)
145,000 145,000
$17,117 $13,851 $3,266
145,000 145,000 65,378 70,382 (5,004) 17,117 13,851 3,266 1,482 (2,835) (4,317) (65,378) (69,565) (4,187) (17,117) (13,851) 3,266 $1,482 (2,835) ($4,317) ($65,378) (69,565) ($4,187) ($17,117) (13,851) $3,266 164,444 45,631 54,221
$161,609 ($23,934) $40,370
(Continued)
77 122

TOWN OF PORTOLA VALLEY

NON-MAJOR GOVERNMENTAL FUNDS

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Measure W Frog Pond OS Rd Ramnant
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Taxes
Sales tax $145,440 $146,552 $1,112
Gas tax
Total taxes 145,440 146,552 1,112
Agency revenues
Grants
Contributions
Investment and other revenues ($30) ($30)
Total Revenues 145,440 146,522 1,082

EXPENDITURES
Town center facilities
Town center facilities
Public safety
Public works
Capital improvement program 2,776 (2,776)
Total Expenditures 2,776 (2,776)
Excess (Deficiency) of Revenues
Over Expenditures 145,440 143,746 (1,694)

OTHER FINANCING SOURCES
Transfers in
Transfers out (61,000) (61,000)
Total Other Financing Sources (61,000) (61,000)
Net change in fund balances $84,440 82,746 ($1,694)
Fund balances, beginning of Year 402,107 $27,571
Fund balances (deficit), end of Year $484,853 $27,571
78 123
ARPA - Coronavirus Recovery Park in Lieu Grants
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $546,381 $557,192 $10,811
$243,400 $34,430 ($208,970)
$8,100 $8,100
$447 683 236
546,381 557,192 10,811 447 8,783 8,336 243,400 34,430 (208,970) 10,000 77,686 (67,686)
10,000 92 9,908
6,000 4,480 1,520
330,900 3,800 327,100
356,900 86,058 270,842
189,481 471,134 281,653 447 8,783 8,336 243,400 34,430 (208,970) 61,000 61,000
(232,557) (232,557)
(232,557) (232,557) 61,000 61,000
($43,076) 238,577 $281,653 $447 8,783 $8,336 $304,400 95,430 ($208,970) 399,647 35,086 133,482
$638,224 $43,869 $228,912
(Continued)
79 124

TOWN OF PORTOLA VALLEY

NON-MAJOR GOVERNMENTAL FUNDS

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2023
Capital Projects
Variance
Positive
Budget Actual (Negative)

REVENUES
Taxes
Sales tax
Gas tax
Total taxes
Agency revenues
Grants
Contributions
Investment and other revenues
Total Revenues

EXPENDITURES
Town center facilities
Town center facilities
Public safety
Public works
Capital improvement program $449,674 $460,650 ($10,976) Total Expenditures 449,674 460,650 (10,976)
Excess (Deficiency) of Revenues
Over Expenditures (449,674) (460,650) (10,976)

OTHER FINANCING SOURCES
Transfers in 514,674 514,674
Transfers out
Total Other Financing Sources 514,674 514,674
Net change in fund balances $65,000 54,024 ($10,976)
Fund balances, beginning of Year 661,620
Fund balances (deficit), end of Year $715,644
80 125

CUSTODIAL FUNDS
Custodial Funds are presented separately from the Government-wide and Fund financial statements.

Custodial Funds account for assets held by the Town as agent for individuals, governmental entities, and non-public organizations.

MAINTENANCE DISTRICTS
Accounts for all revenues and expenditures related to the following maintenance districts formed to maintain roads within the individual district boundaries with governance separate from the Town Council.

The Town acts as a fiduciary custodian for the maintenance district assessment revenue collected and disbursed from the County:

CRESCENT MAINTENANCE DISTRICT

PORTOLA VALLEY RANCH MAINTENANCE DISTRICT

WAYSIDE ROAD I MAINTENANCE DISTRICT

WAYSIDE ROAD II MAINTENANCE DISTRICT

WOODSIDE HIGHLANDS MAINTENANCE DISTRICT
81 126
Crescent Maintenance Portola Valley Ranch Wayside Road I District Maintenance District Maintenance District
ASSETS
Cash and investments $194,997 $37,288
Accounts and interest receivable 796 148
Total Assets 195,793 37,436

LIABILITIES
Deposits and other liabilities 195,793 37,436
Total Liabilities 195,793 37,436

NET POSITION
Restricted for:

Maintenance Districts
Total Net Position (Deficit)

TOWN OF PORTOLA VALLEY
Custodial Funds
JUNE 30, 2023

CUSTODIAL FUNDS

COMBINING STATEMENT OF NET POSITION
82 127
Wayside Road II Wayside Highlands
Maintenance District Maintenance District Total
$272,447 $444,822 $949,554
1,262 953 3,159
273,709 445,775 952,713
273,709 445,775 952,713
273,709 445,775 952,713
Custodial Funds
83 128
Crescent Maintenance Portola Valley Ranch Wayside Road I District Maintenance District Maintenance District

ADDITIONS
Fee Collection $16,959 $1,555 $231,703
Total Additions 16,959 1,555 231,703

DEDUCTIONS
Distributions to districts 42,806 3,307 154,085
Total Deductions 42,806 3,307 154,085
Net increase (decrease) in fiduciary net position (25,847) (1,752) 77,618 Net Position, beginning of the year 25,847 1,752 (77,618) Net Position, end of the year

COMBINING STATEMENT OF CHANGES IN NET POSITION

TOWN OF PORTOLA VALLEY
Custodial Funds
FOR THE FISCAL YEAR ENDED JUNE 30, 2023

CUSTODIAL FUNDS
84 129
Wayside Road II Wayside Highlands
Maintenance District Maintenance District Total
$59,114 $75,106 $384,437
59,114 75,106 384,437
160,579 65,466 426,243
160,579 65,466 426,243
(101,465) 9,640 (41,806)
101,465 (9,640) 41,806
Custodial Funds
85 130
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131
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Members of the Town Council
Town of Portola Valley, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the Town of Portola Valley, California (Town), as of and for the year ended June 30, 2023, and have issued our report thereon dated May 15, 2026.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control.

Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies as listed on the Status of Prior Year Material Weaknesses included as part of our separately issued Memorandum on Internal Control dated May 15, 2026 to be material weaknesses, which is an integral part of our audit and should be read in conjunction with this report.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies as listed on the Status of Prior Year Significant Deficiencies included as part of our separately issued Memorandum on Internal Control dated May 15, 2026 to be significant deficiencies, which is an integral part of our audit and should be read in conjunction with this report.
87 132
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.

We have also issued a separate Memorandum on Internal Control dated May 15, 2026, which is an integra part of our audit and should be read in conjunction with this report.

Town’s Response to Findings
Government Audit Standards require the auditor to perform limited procedures on the Town’s response to the findings identified in our audit and described in our separately issued Memorandum on Internal Control dated May 15, 2026, which is an integral part of our audit and should be ready in conjunction with the report. The Town’s response was not subject to the other auditing procedures applied in the audit of the financial statements, and, accordingly, we express no opinion on the response.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control and compliance.

Accordingly, this communication is not suitable for any other purpose.

Pleasant Hill, California
May 15, 2026
88 133

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL
FOR THE YEAR ENDED JUNE 30, 2023
134
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135

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL
For The Year Ended June 30, 2023
Table of Contents
Page
Memorandum on Internal Control ................................................................................................................... 1 Schedule of Other Matters ....................................................................................................................... 3 Status of Prior Year Material Weaknesses .............................................................................................. 9 Status of Prior Year Significant Deficiencies ........................................................................................ 11 Status of Prior Year Other Matters ........................................................................................................ 15 136
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137

MEMORANDUM ON INTERNAL CONTROL
To the Honorable Mayor and Members of the Town Council
Town of Portola Valley, California
In planning and performing our audit of the basic financial statements of the Town of Portola Valley (Town) as of and for the year ended June 30, 2023, in accordance with auditing standards generally accepted in the United States of America, we considered the Town’s internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. However, as discussed below, we identified certain deficiencies in internal control that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies in internal control included on the Status of Prior Year Material Weaknesses to be material weaknesses.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control included on the Status of Prior Year Significant Deficiencies to be significant deficiencies.

Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency.

Government Auditing Standards require the auditor to perform limited procedures on the Town’s response to the findings identified in our audit and described in the accompanying Schedule of Other Matters, Status of Prior Year Material Weaknesses and Status of Prior Year Significant Deficiencies. The Town’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. 1 138
This communication is intended solely for the information and use of management, Town Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards, and is not intended to be and should not be used by anyone other than these specified parties.

Pleasant Hill, California
May 15, 2026
2 139

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2023-01: Untimely Removal of Separated Signers
Criteria: Employees no longer employed by the Town should be removed as authorized signers promptly.

Condition: While testing signature cards, we noted that a few former members who left the Town were not yet removed from the authorized signers list.

Cause: The Finance team did not update the signature cards in a timely manner due to changes in positions and responsibilities.

Potential Effect: With untimely removal of separated signers, there is an increased risk of unauthorized transactions and operational disruptions.

Recommendation: The Town should establish formal procedures for removing unauthorized signers from the Town in a timely manner.

Management Response:

The Town recognizes and agrees with above recommendation and is actively working on developing a process that allows for timelier updates to authorized signers due to turnover. 3 140

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS

NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking affect in the next few years. We cite them here to keep you informed of developments:

EFFECTIVE FISCAL YEARS 2022, 2023 and 2024:

GASB 99 – Omnibus 2022
The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The practice issues addressed by this Statement are as follows:
• Classification and reporting of derivative instruments within the scope of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, that do not meet the definition of either an investment derivative instrument or a hedging derivative instrument • Clarification of provisions in Statement No. 87, Leases, as amended, related to the determination of the lease term, classification of a lease as a short term lease, recognition and measurement of a lease liability and a lease asset, and identification of lease incentives • Clarification of provisions in Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, related to (a) the determination of the public-private and public-public partnership (PPP) term and (b) recognition and measurement of installment payments and the transfer of the underlying PPP asset
• Clarification of provisions in Statement No. 96, Subscription-Based Information Technology Arrangements, related to the subscription-based information technology arrangement (SBITA) term, classification of a SBITA as a short term SBITA, and recognition and measurement of a subscription liability
• Extension of the period during which the London Interbank Offered Rate (LIBOR) is considered an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap that hedges the interest rate risk of taxable debt • Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance Program (SNAP)
• Disclosures related to nonmonetary transactions
• Pledges of future revenues when resources are not received by the pledging government 4 141

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 99 – Omnibus 2022, (Continued)
• Clarification of provisions in Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, related to the focus of the government-wide financial statements
• Terminology updates related to certain provisions of Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position • Terminology used in Statement 53 to refer to resource flows statements.

The Requirements of this Statement are Effective as Follows:

The requirements in paragraphs 26–32 related to extension of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement 34, as amended, and terminology updates related to Statement 53 and Statement 63 are effective upon issuance.

The requirements in paragraphs 11–25 related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.

The requirements in paragraphs 4–10 related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter.

Earlier application is encouraged and is permitted by individual topic.

How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will enhance comparability in the application of accounting and financial reporting requirements and will improve the consistency of authoritative literature. Consistent authoritative literature enables governments and other stakeholders to more easily locate and apply the correct accounting and financial reporting provisions, which improves the consistency with which such provisions are applied. The comparability of financial statements also will improve as a result of this Statement. Better consistency and comparability improve the usefulness of information for users of state and local government financial statements.

Potential Impact on the Town:

We did not expect any changes in the accounting and disclosure for the Town’s financial reporting in FY2024.
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TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
EFFECTIVE FISCAL YEAR 2023/24:

GASB 100 – Accounting for Changes and Error Corrections The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability.

This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting—understandability, reliability, relevance, timeliness, consistency, and comparability. This Statement also addresses corrections of errors in previously issued financial statements.

This Statement prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections. This Statement requires that (a) changes in accounting principles and error corrections be reported retroactively by restating prior periods, (b) changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in accounting estimates be reported prospectively by recognizing the change in the current period. The requirements of this Statement for changes in accounting principles apply to the implementation of a new pronouncement in absence of specific transition provisions in the new pronouncement. This Statement also requires that the aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, be displayed by reporting unit in the financial statements.

This Statement requires disclosure in notes to financial statements of descriptive information about accounting changes and error corrections, such as their nature. In addition, information about the quantitative effects on beginning balances of each accounting change and error correction should be disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to beginning balances as restated.

Furthermore, this Statement addresses how information that is affected by a change in accounting principle or error correction should be presented in required supplementary information (RSI) and supplementary information (SI). For periods that are earlier than those included in the basic financial statements, information presented in RSI or SI should be restated for error corrections, if practicable, but not for changes in accounting principles.

Potential Impact on the Town:

If the Town’s accounting changes or has error corrections in FY2024 or subsequent, the provisions of the Statement should be reviewed to determine the proper accounting and disclosure. 6 143

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
EFFECTIVE FISCAL YEAR 2024/25:

GASB 101 – Compensated Absences
The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures.

Recognition And Measurement
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.

This Statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used.

This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities.

With respect to financial statements prepared using the current financial resources measurement focus, this Statement requires that expenditures be recognized for the amount that normally would be liquidated with expendable available financial resources.

Notes To Financial Statements
This Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. 7 144

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 101 – Compensated Absences (Continued)
How the Changes in this Statement Will Improve Financial Reporting The unified recognition and measurement model in this Statement will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. In addition, the model can be applied consistently to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave.

The model also will result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences.

Potential Impact on the Town:

We did not expect any changes in the accounting and disclosure for the Town’s financial reporting in FY2024.
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TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR MATERIAL WEAKNESSES
2022-01: Prior Year Significant Deficiency Not Implemented During the current year audit, we followed up on the status of Significant Deficiencies identified on the Status of Prior Year Significant Deficiencies:

1. 2021-02 Journal Entry Reviews, Approvals, and Timeliness

2. 2021-03 Timely Bank Reconciliations

3. 2020-01 Timeliness for the Completion of Audit
and found that the deficiencies had not been mitigated as of June 30, 2023. Therefore, they are deemed to be the current year's Material Weakness.

Details of these deficiencies and associated management responses are listed in the Status of Prior Year Significant Deficiencies.

Current Status as of June 30, 2023:

See Management’s Response to the Current Year Status for the above deficiencies as listed in the Status of Prior Year Significant Deficiencies.
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TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR SIGNIFICANT DEFICIENCIES
2022-02: Prior Year Significant Deficiency Not Implemented During the current year audit, we followed up on the status of Significant Deficiencies identified on the Status of Prior Year Significant Deficiencies:

1. 2021-01 Segregation of Duties, and found that the deficiencies had not been mitigated as of June 30, 2023. Therefore, they are deemed to be the current year's Significant Deficiencies.

Details of these deficiencies and associated management responses are listed in the Status of Prior Year Significant Deficiencies.

Current Status as of June 30, 2023:

See Management’s Response to the Current Year Status for the above deficiencies as listed in the Status of Prior Year Significant Deficiencies.
2021-01: Segregation of Duties
Criteria: Effective internal control must be maintained at any organization, regardless of size and intricacy. Good internal controls require that employees with access to the assets not have access to the accounting records for the same assets. Reconciliations of any accounts should be performed by separate individuals to ensure segregation of duties.

Condition: During our review of internal controls, we noted areas in which controls need to be improved, and employee access and/or duties should be revised:
a) The payroll run was reviewed by the same employee who processes payroll. There was no evidence of a separate employee reviewing the payroll register. The same employee also prepared and input the payroll journal entries into the general ledger without a separate employee review. In addition, there is no evidence of documentation of the preparer and reviewer for the payroll register. b) The vendor database is managed by the same staff who was also involved in processing accounts payable.

Cause: Due to the Town's staff turnover, financial system upgrade, and impacts from the pandemic, the Town did not have enough finance staff to ensure sufficient segregation of duties in various transaction cycles. The tight labor market during the pandemic year further delayed recruitment. The staff shortage delayed the finance department from preparing and reconciling financial activities for the audit in a timely manner.

Potential Effect: Assets or accounts recorded and reviewed by the same staff do not permit good checks, transparency, accuracy, or segregation of duties and increase the likelihood that material misstatement in the financial statement will not be prevented or detected and corrected on a timely basis.

Recommendation: Good internal control dictates that the same employee with access to physical assets should not also have access to updating account records for the same assets. A different employee should be involved in the records or assets to provide a good check and balance. The Town should analyze staff resources to ensure proper review and segregation of duties. 11 148

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR SIGNIFICANT DEFICIENCIES
2021-01: Segregation of Duties (Continued)
Current Status as of June 30, 2023:

We noted the conditions described above remained unchanged for the fiscal year 2023.

Management Response to Current Status and Recommendations:

The Town recognizes and agrees with the above findings for the fiscal year 2023 and in fiscal year 2024 implemented a process that increased the number of staff in the Finance department that allows for the following,
a) Payroll journal entries are reconciled to the payroll register and reviewed and approved by the Finance Director prior to posting.
b) The vendor database is updated by the Senior Accountant and not the Finance Technician processing Accounts Payable.
2021-02: Journal Entry Reviews, Approvals, and Timeliness Criteria: Journal entries (JE) are an important transaction cycle affecting all accounting and financial reporting aspects. Prudent internal control concepts dictate that:

1. No single employee should process a transaction without the involvement of another employee.

2. A second employee should review and approve the entry prepared by the first employee, with evidence of signing and dating for the approval.

3. The JE should be prepared, reviewed, and posted within 30-45 days of the event's occurrence.

Condition: We sample-tested the Town’s JE and noted the following:
a) The JEs tested showed no separate reviewer other than the preparer. b) Five JEs had reviewed and posted dates six months later than the original preparation dates:

Cause: Due to the Town's staff turnover, financial system upgrade, and impacts from the pandemic, the Town did not have enough finance staff to ensure sufficient segregation of duties in various transaction cycles. The tight labor market during the pandemic year further delayed recruitment. The staff shortage delayed the finance department from preparing and reconciling financial activities for the audit in a timely manner.

Potential Effect: Journal entry preparation and reviewing by the same staff does not permit good checks, transparency, accuracy, or segregation of duties and increase the likelihood that material misstatement in the financial statement will not be prevented or detected and corrected on a timely basis.

When journal entries are not posted in a timely manner, there is an increased risk that transactions are not posted in the correct period, and accounting errors, misstatements, or unauthorized transactions may not be identified or corrected in a timely manner.

Recommendation: We recommend that the Town implement a park and place function that allows someone to create entries and then alerts and allows the authorized employees to review and approve the entry before posting. We also recommended that the town work on submitting journal entries in a timely manner.
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TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR SIGNIFICANT DEFICIENCIES
2021-02: Journal Entry Reviews, Approvals, and Timeliness (Continued) Current Status as of June 30, 2023:

We noted the conditions described above remained for the fiscal year 2023.

Management Response to Current Status and Recommendations:

The Town recognizes and agrees with the above findings for the fiscal year 2023 and in fiscal year 2025 implemented a process that allows for the review and approval of journal entries in timelier manner. The Town acknowledges that this will be a repeat finding for fiscal year 2024. 2021-03: Timely Bank Reconciliations
Criteria: Bank account reconciliations are one of the most important internal controls. To be effective, bank reconciliations and the associated review should be completed in their entirety as soon as reasonably possible after each month's end, usually within 30-45 days of the bank statement date. Additionally, reconciliations should be dated and signed off by the preparer and reviewer to leave an audit trail.

Condition: We noted that the bank reconciliation for fiscal year 2021, was not completed and reviewed until the fiscal year of 2024, more than three years later.

Cause: Due to the Town's staff turnover, financial system upgrade, and impacts from the pandemic, the Town did not have enough finance staff to ensure timely preparation and review of the financials in various transaction cycles. The tight labor market during the pandemic year further delayed recruitment.

The staff shortage delayed the finance department from preparing and reconciling financial activities for the audit in a timely manner.

Potential Effect: Without timely preparation and review for the bank reconciliation, there is an increased risk that misstatements or unauthorized transactions will not be prevented, detected, and corrected on a timely basis.

Recommendation: We recommend that the Town maintain adequate qualified staff to ensure that bank reconciliations are prepared and reviewed promptly, ideally within 30-45 days of the close of a given month. Also, the preparer and reviewer should date and sign off reconciliations to maintain proper audit trail.

Current Status as of June 30, 2023:

We noted the conditions described above remained for the fiscal year 2023.

Management Response to Current Status and Recommendations:

The Town recognizes and agrees with the above findings for the fiscal year 2023 and is actively working on implementing a process that allows for timelier preparation and review of reconciliations of the bank statements. The Town acknowledges that this will be repeat finding for fiscal Year 2024. 13 150
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TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2020-01: Timeliness for the Completion of Audit
Criteria: Well-managed organizations should develop a plan to ensure that adequate resources will remain available in the event of employee departures and the potential impact of unexpected events. Part of that is ensuring there are resources available to be utilized on short notice to fill gaps in key positions, especially in the Finance Department. These resources need to be in place throughout the fiscal year to ensure accounting processes and procedures continue and allow time for the analysis of account balances and activities.

Condition: The Town’s basic financial statements for the year ended June 30, 2020, were not completed until October 2022.

Cause: Due to the Town's staff turnover, financial system upgrade, and impacts from the pandemic, the Town's staff were not able to prepare and complete recording financial activities for the audit timely.

Effect: As a result, there were significant delays in the completion of the audit, which increases the risk that errors or misstatements may go undetected by staff and corrections may not be made in a timely manner. Audit effort was substantially increased due to the delay and coordination.

Recommendation: The Town should analyze staff resources for backup plans to ensure that the financial data is processed properly and timely during staffing transitions and unexpected events.

Current Status as of June 30, 2023:

The Town was not able to assemble the essential audit items for the fiscal year 2023 until mid-May 2026.

Management Response to Current Status and Recommendations:

The Town recognizes and agrees with the above findings for fiscal year 2023 and has built up staff resources to ensure that financial data is processed properly and timely during fiscal years 2025 and 2026.

Unfortunately, the backlog of audits will be completed during fiscal year 2027. The Town recognizes that this will be a repeat finding for fiscal year 2024.
2022-03: Out of Compliance with Government Code 53646
Criteria: California Government Code 53646 states that the treasurer or chief fiscal officer may render a quarterly report to the chief executive officer, the internal auditor, and the legislative body of the local agency. The quarterly report shall be so submitted within 30 days following the end of the quarter covered by the report.

Condition: The Town did not prepare the quarterly treasurer’s reports in the fiscal year 2022.

Cause: The Town did not prepare the treasury reports due to staff shortage.

Potential Effect: The Town appears to be out of compliance with California Government Code Section 53646 and its own Investment Policy.

Recommendation: The Town should ensure timely preparation and submission of the investment reports to comply with California Government Code Section 53646. 15 152

TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2022-03: Out of Compliance with Government Code 53646 (Continued) Current Status as of June 30, 2023:

We noted the conditions described above remained for the fiscal year 2023.

Management Response:

The Town recognizes and agrees with the above findings for the fiscal year 2023 and is actively developing a process that will bring the Town into compliance with Government Code 53646. The Town acknowledges that this will be a repeat finding for fiscal year 2024. 2021-04: Reconciliation of Payroll Journal Entries with the Payroll Register Criteria: The payroll journal entries prepared by one employee should be reconciled with the payroll register and reviewed by a separate employee before posting to the general ledger.

Condition: During the payroll testing, we noted that the payroll journal entries for the pay period ending on March 31, 2021, were not reconciled with the payroll register and were not reviewed before posting them to the general ledger.

Potential Effect: The above condition does not promote good checks and balances for payroll processing.

Without proper reconciliation of the payroll journal entries with the payroll register and separate review, there is an increased risk that misstatements or unauthorized transactions will not be prevented, detected, and corrected on a timely basis.

Cause: Due to the Town's staff turnover, financial system upgrade, and impacts from the pandemic, the Town did not have enough finance staff to ensure sufficient segregation of duties and timely preparation and review of the financials in various transaction cycles. The tight labor market during the pandemic year further delayed recruitment. The staff shortage delayed the finance department from preparing and reconciling financial activities for the audit in a timely manner.

Recommendation: We recommend that the Town establish procedures for an employee who does not have edit rights in the Town’s payroll system to review the payroll register after every payroll run. If this is deemed impossible under the current staffing situation, cross-review should be performed by the two employees who have access to the payroll module.

In addition, the payroll JE prepared should be reconciled with the payroll register and reviewed properly before posting to the general ledger.

Current Status as of June 30, 2023:

We noted the conditions described above remained for the fiscal year 2023.

Management Response to Current Status and Recommendations:

The Town recognizes and agrees with the above findings for the fiscal year 2024 and implemented a process where the payroll journal entry is reviewed and approved by the Finance Director prior to posting to the ledger.
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TOWN OF PORTOLA VALLEY

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2021-05: Outstanding Checks
Criteria: The town’s policy is to follow up every six months on checks that have been outstanding for over a year.

Condition: We noted that of all the outstanding checklists accompanying the June 2021 Bank Reconciliation, twenty-five outstanding checks were over a year old.

Cause: Due to the town's staff turnover, financial system upgrades, and impacts from the pandemic, the town did not have enough finance staff to follow up on the outstanding checks in a timely manner.

Potential Effect: This practice does not promote proper internal control over disbursements.

Recommendation: We recommend that the Town follow up and clear the stale check timely.

Current Status as of June 30, 2023:

We noted the conditions described above remained for the fiscal year 2023.

Management Response to Current Status and Recommendations:

The Town recognizes and agrees with the above findings for fiscal year 2023 and is actively working on developing a process that allows for a timelier review and clearance of stale dated checks. The Town acknowledges that this will be a repeat finding for fiscal year 2024. 17 154
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TOWN OF PORTOLA VALLEY

REQUIRED COMMUNICATIONS
FOR THE YEAR ENDED JUNE 30, 2023
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TOWN OF PORTOLA VALLEY

REQUIRED COMMUNICATIONS
For The Year Ended June 30, 2023
Table of Contents
Page
Required Communications ................................................................................................................................ 1 Significant Audit Matters:

Qualitative Aspects of Accounting Practices ................................................................................... 1 Difficulties Encountered in Performing the Audit ........................................................................... 2 Corrected and Uncorrected Misstatements ...................................................................................... 3 Disagreements with Management .................................................................................................... 3 Management Representations ............................................................................................................ 3 Management Consultations with Other Independent Accountants ................................................. 3 Other Audit Matters or Issues ............................................................................................................ 3 Other Matters ............................................................................................................................................ 3 158
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REQUIRED COMMUNICATIONS
To the Honorable Mayor and Members of the Town Council
The Town of Portola Valley, California
We have audited the basic financial statements of the Town of Portola Valley for the year ended June 30, 2023. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 23, 2026. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Matters
Qualitative Aspects of Accounting Practices
Accounting Policies – Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Town are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year except as follows:

GASB 91 – Conduit Debt Obligations
GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements
GASB 96 – Subscription-Based Information Technology Arrangements GASB 99 – Omnibus 2022, paragraphs 11-25
The pronouncements became effective, but did not have a material effect on the financial statements.

Unusual Transactions, Controversial or Emerging Areas – We noted no transactions entered into by the Town during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting Estimates – Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the Town’s financial statements were:

Estimated Fair Value of Investments: As of June 30, 2023, the Town held approximately $20.8 million of cash and investments as measured by fair value as disclosed in Note 2 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2023. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2023.
1 160
Estimate of Depreciation: Management’s estimate of the depreciation is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note 1 to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimate of Compensated Absences: Accrued compensated absences which are comprised of accrued vacation, holiday, and certain other compensating time is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year as disclosed in Note 1 to the financial statements. We evaluated the key factors and assumptions used to develop the accrued compensated absences in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Claims Liabilities: Management’s estimate of the claims liabilities payable is disclosed in Note 8 to the financial statements and is based on actuarial studies determined by a consultant, which are based on the claims experience of the Town. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Net Pension Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net pension liabilities and deferred outflows/inflows of resources are disclosed in Note 6 to the financial statements and are based on actuarial studies determined by a consultant, which are based on the experience of the Town. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Net OPEB Liabilities (Assets) and OPEB-Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net OPEB liability (assets) and Deferred Outflows and Inflows of Resources is disclosed in Note 7 to the financial statements and is based on actuarial study determined by a consultant, which is based on the experience of the Town. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Disclosures – The financial statement disclosures are neutral, consistent, and clear.

Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit except as noted below.

The Town experienced unusual difficulty during the fiscal year 2022 year-end close. The Town was in the process of an upgrade for its financial system during the year while dealing with finance staff turnover, plus the COVID-19 pandemic impact on the Town’s overall operation which lasted for over two years. Although Town staff worked diligently throughout the process and provided full cooperation to our audit, the current year’s audit was adversely affected. The Town’s finance staff had difficulty assembling the various required audit items timely. As a result, the audit completion was significantly delayed. 2 161
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.

Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the Town Council.

Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations
We have requested certain representations from management that are included in a management representation letter dated May 15, 2026.

Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Town’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Matters or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Town’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Matters
We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary information. 3 162
We were engaged to report on the supplementary information which accompany the financial statements, but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
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This information is intended solely for the use of Town Council and management and is not intended to be, and should not be, used by anyone other than these specified parties.

Pleasant Hill, California
May 15, 2026
4 163
INDEPENDENT ACCOUNTANT’S REPORT ON

APPLYING AGREED UPON PROCEDURES FOR
COMPLIANCE WITH THE PROPOSITION 111
2023-2024 APPROPRIATIONS LIMIT INCREMENT
Honorable Mayor and Members of the Town Council
Town of Portola Valley, California
We have performed the procedures enumerated below on the Appropriations Limit Worksheet (Worksheet) of the Town of Portola Valley, California, for the year ended June 30, 2024. The Town’s management is responsible for the Worksheet.

The Town has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of these procedures, which were suggested by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, performed solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings are as follows:

A. We obtained the Worksheet and determined that the 2023-2024 Appropriations Limit of $5,116,145 and annual adjustment factors were adopted by Resolution of the Town Council. We also determined that the population and inflation options were selected by a recorded vote of the Town Council.

B. We recomputed the 2023-2024 Appropriations Limit by multiplying the adjusted 2022-2023 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option.

C. For the Worksheet, we agreed the Per Capita Income Factor, Town Population Factor and County Population Factor to California State Department of Finance Worksheets.

We were engaged by the Town to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet.

Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. 164
We are required to be independent of the Town and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of management and the Town Council and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record.

Pleasant Hill, California
May 15, 2026
165

TOWN OF PORTOLA VALLEY

MEASURE A PROGRAM
Report on Compliance with the
Agreement for Distribution of San Mateo County
Measure A Funds for Local Transportation Purposes
For the Year Ended June 30, 2023
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INDEPENDENT AUDITORS’ REPORT
ON MANAGEMENT’S ASSERTION
Honorable Mayor and Members of the Town Council of the
Town of Portola Valley, California
We have examined management of the Town of Portola Valley’s (Town) assertion, included in the accompanying Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds For Local Transportation Purposes (the Agreement) between the Town and the San Mateo County Transportation Authority dated January 28, 2009, that the Town complied with the requirements of the Agreement during the year ended June 30, 2023. Management is responsible for that assertion. Our responsibility is to express an opinion on management’s assertion based upon our examination.

Our examination was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether management’s assertion that the Town complied with the requirements of the Agreement is fairly stated, in all material respects. The nature, timing and extent of procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement.

In our opinion, management’s assertion that the Town complied with the requirements of the Agreement for the year ended June 30, 2023 is fairly stated, in all material respects.

This report is intended solely for the information and use of management, the Town Council and the San Mateo County Transportation Authority Board and Management and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record.

Pleasant Hill, California
May 15, 2026
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TOWN OF PORTOLA VALLEY

BALANCE SHEET
FOR THE YEARS ENDED JUNE 30, 2023
2023
Assets
Cash and investments $785,505
Accounts and Interest Receivable 4,170
Total assets $789,675
Fund Balance
Restricted $789,675
Total Liabilities and Fund Balances $789,675

SCHEDULES OF CHANGES IN FUND BALANCE
Revenues:

Sales tax - Measure A $306,500
Interest 15,392
Total Revenue 321,892
Expenditures:

Street resurfacing 274,697
Total Expenditure 274,697
Net Change in Fund Balances 47,195
Fund Balance - July 1 742,480
Fund balance - June 30 $789,675
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171
Town of Portola Valley
Measure W Funds
Report on Compliance with the
Agreement for Distribution of San Mateo County
Measure W Funds for
Local Transportation Purposes in Accordance
with the San Mateo County Congestion Relief Plan
For the Year Ended June 30, 2023
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INDEPENDENT AUDITOR'S REPORT
ON MANAGEMENT’S ASSERTION
Honorable Mayor and Members of the Town Council of the
Town of Portola Valley, California
We have examined management’s assertion, included in accompanying Management of the Town of Portola Valley’s (Town) Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in Accordance with the San Mateo County Congestion Relief Plan (the Agreement) between the Town and the San Mateo County Transportation Authority dated December 2, 2019, that the Town complied with the requirements of the Agreement during the year ended June 30, 2023.

Management is responsible for that assertion. Our responsibility is to express an opinion on management’s assertion based upon our examination.

Our examination was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether management’s assertion that the Town complied with the requirements of the Agreement is fairly stated, in all material respects. The nature, timing and extent of procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement.

In our opinion, management’s assertion that the Town complied with the requirements of the Agreement for the year ended June 30, 2023 is fairly stated, in all material respects.

This report is intended solely for the information and use of management, the Town Council, and San Mateo County Transportation Authority and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record.

Pleasant Hill, California
May 15, 2026
174

TOWN OF PORTOLA VALLEY

SCHEDULES OF MEASURE W FUND
AS OF AND FOR THE YEAR ENDED JUNE 30, 2023

BALANCE SHEET
Assets:

Cash and investments $485,203
Total Assets $485,203
Liabilities
Accounts Payable $350
Total Liabilities $350
Fund Balance:

Restricted $484,853
Total Liabilities and Fund Balances $485,203

SCHEDULE OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE
Revenues:

Measure W Sales Tax $146,552
Investment earnings (30)
Total Revenues 146,522
Expenditures:

Infrastructure Improve Exp 2,776
Total Expenditures 2,776
Other Financing Sources (Uses)
Operating Transfers In (Out) 61,000
Total Expenditures 61,000
Net Change in Fund Balance 82,746
Fund Balance - beginning 402,107
Fund Balance - ending $484,853
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TOWN OF PORTOLA VALLEY

STAFF REPORT
TO Mayor and Members of the Town Council
FROM: Darcy Smith, Town Manager
Catherine Engberg, Town Attorney
DATE: July 8, 2026
RE: Receive Information and Provide Direction on the Draft Ordinance Amending Chapter 3.12 of Title 3 (Revenue and Finance) of the Portola Valley Municipal Code Regarding the Real Property Transfer Tax

RECOMMENDATION
Staff recommends that the Town Council receive information and provide direction on the Draft Ordinance amending Chapter 3.12 of Title 3 (Revenue and Finance) of the Portola Valley Municipal Code regarding the Real Property Transfer Tax. The Ordinance will be considered at a future meeting for potential inclusion in a ballot measure for the November 3, 2026 Statewide General Election.

BACKGROUND
One of the Town Council’s priorities is financial responsibility and long-term viability. In a recent community survey and through The Portola Valley Conversation – a discussion involving hundreds of residents about protecting emergency services and our financial stability – residents said that ensuring the Town’s fiscal stability and protecting the Town’s autonomy were top priorities. Strategies to demonstrate financial responsibility have included efforts by the Town to educate the community on Town finances, complete the backlog of financial audits, implement the recommendations from the Krisch & Co Report, conduct a user fee study, and develop and implement the necessary infrastructure to improve operational efficiency and effectiveness.

The recommendation to provide direction on a draft Real Property Transfer Tax Ordinance for voter adoption at the upcoming election would address resident priorities identified through the Portola Valley Conversation. Hundreds of residents have participated in that Conversation, and they identified priorities including maintaining wildfire prevention services such as vegetation and brush management/clearance programs to reduce the chance of a wildfire; maintaining 911 emergency response times and police patrols; maintaining Town autonomy by preventing a County takeover of local zoning and planning services; and repairing deteriorating storm drains to prevent system failure, flooding and water pollution and sinkholes.
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The updated long-range General Fund fiscal forecast indicates an ongoing structural deficit of approximately $700,000 per year. Without new revenue, the General Fund reserve will fall below the minimum reserve policy level of 20% of annual operating expenditures by the end of FY 2027-28 and will be depleted by the end of FY 2029-30.

Additionally, the Town has identified funding needs for a range of other priorities, including capital projects, road resurfacing, fleet and equipment replacement, deferred maintenance, safety and resilience projects, etc.

The following graph shows the predicted shortfall in General Fund Reserves:

Ensuring the Town’s fiscal solvency will require locally controlled revenue enhancement.

As a strong fiscal steward of taxpayer dollars, the Town has already taken steps to close the revenue gap by completing a comprehensive user fee study. The Town Council adopted an updated Master Fee Schedule for FY2026-27 to ensure the Town achieves appropriate cost recovery in building and planning services, field and facility rentals, and other administrative charges.

To address long-term viability, the Finance Committee was tasked in May 2024 with researching several topics that could address the Town’s structural deficit. Over the summer of 2024, the Finance Committee made several presentations of their findings and made recommendations for the Town Council to consider that would address the Town’s structural deficit. In May 2025, the Town Council initiated a work program that included a community survey. In August 2025, the Town Council received additional information regarding the Town’s current financial situation and provided direction to the Ad Hoc Town Council Subcommittee and staff regarding Locally Controlled Revenue Options.

As highlighted above, a community survey of Portola Valley registered voters was completed in September 2025, and the results were presented to the Town Council in November 2025. The community survey identified the need to be prepared for natural disasters such as wildfires, earthquakes, flooding, or landslides. Community priorities include prevention measures, evacuation planning, and reliable emergency response 179
communication systems to help keep residents safe.

Finally, Portola Valley residents responded that they wish to protect Town autonomy and the Town’s ability to make its own zoning decisions as an incorporated community.

Survey responses indicated that residents do not want zoning and planning decisions to be made by the County, which would occur if the Town lost its independent status. The survey indicated that 60% of Town residents are supportive of the Town’s becoming a Charter Town. This input has led Town staff to continue engaging the community and Town Council on the Charter approach.

Based on this input, the Town Council began the formal Charter process and on April 22, 2026, the Town Council directed staff to proceed with the recommended limited and "simple" charter. They further directed staff to schedule two public hearings on the Draft Charter to fulfill the requirements of the California Government Code Section 33458(b).

On May 13, 2026, the Town Council conducted the first noticed public hearing and on June 24, 2026, the Council conducted the second noticed public hearing. Thus, the Town has fulfilled the California Government Code hearing requirements.

The Town’s research and survey indicated that the most viable option for increasing Town revenue, which is supported by residents, is the potential to adopt a Real Property Transfer Tax (RPTT). RPTTs are solely applied to the sale of real property, and are ONLY paid by the purchasers or sellers of real properties; i.e., not by real property owners who do not sell their property. An agreement between the buyer and seller may determine who pays the cost. If enacted, the RPTT would develop a locally generated and controlled funding source that the Town could use to maintain and/or increase the current level of services and facilities provided by the Town.

However, only Charter Cities and Towns may adopt an RPTT beyond the minimal “documentary transfer tax” amount authorized under state law. Pursuant to California Revenue and Taxation Code sections 11901 et seq., a general law city or town is authorized to impose a documentary transfer tax of up to 27.5¢ per $500 of the sales price for real property transfers. The Town adopted such a documentary transfer tax in 1967. However, as a General Law Town, it is restricted from adopting a real property transfer tax beyond the minimum allowed in state law. As other towns/cities have done, our Town would need to obtain voter approval to adopt a Charter and become a Charter Town in order to have the authority to adopt the RPTT beyond the minimum authorized in state law.

Both the Town Charter and the RPTT would become effective only if adopted by a 50 percent plus one vote of the Portola Valley electorate. If voters approve the ballot measure, the Town would be converted from a General Law Town to a Charter Town, and the RPTT would be effective ten (10) days after the Town Council declares the results of the election.

DISCUSSION
This agenda item presents the Draft Ordinance for Council review and discussion. At a future meeting, Council will consider adopting a resolution submitting to the voters of the Town a measure that adopts a Town Charter and the RPTT. 180
The Draft Ordinance would amend Portola Valley Municipal Code Section 3.12 to eliminate the existing 27.5 cents/$500 tax and replace it with a new tax. The Draft Ordinance does not currently specify the tax amount. The Town Council will discuss and provide direction on the anticipated additional locally controlled revenue needed. The Council will consider and finalize the tax amount at a future Council meeting. If the voters approve the ordinance, the Town would collect the specified tax amount per $1000, and the Town would no longer collect the separate 27.5 cents/$500 “documentary transfer tax.” This is the most commonly used and legally appropriate approach, and it aligns with advice in the League of California Cities California Municipal Revenue Sources Handbook, published on January 29, 2026.

For this agenda item, staff is seeking feedback on the draft ordinance. It will be finalized and presented in final form at the next meeting.

NEXT STEPS
At its next meeting on July 22, 2026, the Town Council is tentatively scheduled to consider action on a resolution that would:
• Submit to the voters of the Town a ballot measure both to adopt the Town Charter and to authorize the RPTT;
• Approve an ordinance enacting the RPTT for submission to the voters; and • Call for a consolidated election regarding the ballot measure.

The ballot measure would be placed on the November 3, 2026 Statewide General Election Ballot. Pursuant to Proposition 62 (Government Code Section 53724), a twothirds (2/3) vote of the Town Council membership is required to place the measure on the ballot.

In parallel with the Council meeting timeline, the Town is conducting community education and outreach to ensure transparency and equitable public access to the Charter development process. Public outreach activities may include articles in regular Town publications.

FISCAL IMPACT
It is estimated that the County will charge the Town approximately $6,000 to $7,200 to place the ballot measure on the November 3, 2026 Statewide General Election Ballot. In addition, there are legal, community education, and other direct costs associated with this effort. A total cost has not been calculated at the time, but the current Town operating budget includes budget appropriations to cover the current expenditures.

ATTACHMENTS

1. Draft Ordinance
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EXHIBIT “A”
ORDINANCE NO. 2026-

AN ORDINANCE OF THE PEOPLE OF THE TOWN OF PORTOLA
VALLEY, CALIFORNIA, AMENDING CHAPTER 3.12 OF TITLE 3
(REVENUE AND FINANCE) OF THE PORTOLA VALLEY MUNICIPAL
CODE REGARDING THE REAL PROPERTY TRANSFER TAX.

THE PEOPLE OF THE TOWN OF PORTOLA VALLEY DO ORDAIN AS
FOLLOWS:

SECTION 1. Subject to the approval of a majority of the voters of the Town of Portola Valley at the General Municipal Election so designated by the Town Council in a separate resolution placing the proposal on the ballot for such election, Chapter 3.12 of the Town of Portola Valley Municipal Code is hereby amended to add, delete or modify its provisions as follows (section titles are shown in bold font, additions are shown in underline font, and deletions are shown by strikethrough font; sections that do not contain underline or strikethrough font have not been modified or amended):

3.12.010 Title—Statutory authority.

The ordinance codified in this chapter shall be known as the "Real Property Transfer Tax Ordinance of the Town of Portola Valley." It is adopted pursuant to the authority contained in Part 6.7, commencing with Section 11901, of Division 2 of the Revenue and Taxation Code of the state, and pursuant to the authority contained in the Portola Valley Charter section 100.

3.12.020 Imposed—Rate.

There is imposed on each deed, instrument or writing by which any lands, tenements, or other realty sold within the town shall be granted, assigned, transferred or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his, her, or their direction, when the consideration or value of the interest or property conveyed, exclusive of the value of any lien or encumbrances remaining thereon at the time of sale, exceeds one hundred dollars, a tax at the rate of ($XX.XX) for each one thousand dollars ($1,000.00) of the value of consideration twenty-seven and one-half cents for each five hundred dollars or fractional part thereof paid for a transfer of real property.

3.12.030 Person responsible for payment.

Any tax imposed pursuant to Section 3.12.020 shall be paid by any person who makes, signs or issues any document or instrument subject to the tax, or for whose use or benefit the same is made, signed or issued. The transferor and transferee of real property subject to the tax shall be jointly and severally liable for payment of this tax to the Town and may apportion the tax among themselves.
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3.12.040 Exemption—Instrument to secure debt.

Any tax imposed pursuant to this chapter shall not apply to any instrument in writing given to secure a debt.

3.12.050 Exemption—Instrument by which public agency acquires title.

Any deed, instrument or writing to which the United States or any agency or instrumentality thereof, any state or territory or political subdivision thereof, is a party, shall be exempt from any tax imposed pursuant to this chapter when the exempt agency is acquiring title.

3.12.060 Exemption—Conveyances for reorganization or adjustment.

Any tax imposed pursuant to this chapter shall not apply to the making, delivering or filing of conveyances to make effective any plan of reorganization or adjustment:

A. Confirmed under the Federal Bankruptcy Act, as amended; B. Approved in an equity receivership proceeding in a court involving a railroad corporation, as defined in subdivision (m) of Section 205 of Title 11 of the United States Code, as amended;
C. Approved in an equity receivership proceeding in a court involving a corporation, as defined in subdivision (3) of Section 506 of Title 11 of the United States Code, as amended; or
D. Whereby a mere change in identity, form or place of organization is effected.

Subsections A to D, inclusive, of this section shall only apply if the making, delivery or filing of instruments of transfer or conveyances occurs within five years from the date of such confirmation, approval or change.
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3.12.070 Exemption—Conveyance to make effective orders of the Securities and Exchange Commission.

Any tax imposed pursuant to this chapter shall not apply to the making or delivery of conveyances to make effective any order of the Securities and Exchange Commission, as defined in subdivision (a) of Section 1083 of the Internal Revenue Code of 1954, but only if:

A. The order of the Securities and Exchange Commission in obedience to which such conveyance is made recites that such conveyance is necessary or appropriate to effectuate the provisions of Section 79k of Title 15 of the United States Code, relating to the Public Utility Holding Company Act of 1935;
B. Such order specifies the property which is ordered to be conveyed; or C. Such conveyance is made in obedience to such order.

3.12.080 Levy not imposed on transfer of interest in continuing partnership.

A. In the case of any realty held by a partnership, no levy shall be imposed pursuant to this chapter by reason of any transfer of an interest in a partnership or otherwise if:

1. Such partnership, or another partnership, is considered a continuing partnership within the meaning of Section 708 of the Internal Revenue Code of 1954; and

2. Such continuing partnership continues to hold the realty concerned.

B. If there is a termination of any partnership within the meaning of Section 708 of the Internal Revenue Code of 1954, for purposes of this chapter, such partnership shall be treated as having executed an instrument whereby there was conveyed, for fair market value, exclusive of the value of any lien or encumbrance remaining thereon, all realty held by such partnership at the time of such termination.

C. Not more than one tax shall be imposed pursuant to this chapter by reason of a termination described in subsection B, and any transfer pursuant thereto, with respect to the realty held by such partnership at the time of such termination.

3.12.090 Exemption—Instrument resulting from or in lieu of foreclosure.

Any tax imposed pursuant to this chapter shall not apply with respect to any deed, instrument, or writing to a beneficiary or mortgagee, which is taken from the mortgagor or trustor as a result of or in lieu of foreclosure; provided, that such tax shall apply to the extent that the consideration exceeds the unpaid debt, including accrued interest and cost of foreclosure. Consideration, unpaid debt amount and identification of grantee as beneficiary or mortgagee shall be noted on the deed, instrument or writing or stated in an affidavit or declaration under penalty of perjury for tax purposes.
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3.12.100 Exemption—Instrument to effect division of community property.

A. Any tax imposed pursuant to this chapter shall not apply with respect to any deed, instrument, or other writing which purports to transfer, divide, or allocate community, quasi-community, or quasi-marital property assets between spouses for the purpose of effecting a division of community, quasi-community, or quasi-marital property which is required by a judgment decreeing a dissolution of the marriage or legal separation, by a judgment of nullity, or by any other judgment or order rendered pursuant to Part 5, commencing with Section 4000, of Division 4 of the Civil Code, or by a written agreement between the spouses, executed in contemplation of any such judgment or order, whether or not the written agreement is incorporated as part of any of those judgments or orders.

B. In order to qualify for the exemption provided in subsection A, the deed, instrument, or other writing shall include a written recital, signed by either spouse, stating that the deed, instrument, or other writing is entitled to the exemption.

3.12.110 Administration.

The county recorder shall administer this chapter in conformity with the provisions of Part 6.7 of Division 2 of the Revenue and Taxation Code and the provisions of any county ordinance adopted pursuant thereto. The Town Council may adopt additional rules for the collection of this tax, as well as provide for penalties and interest for nonpayment of this tax, provided said additional rules are consistent with this voter-approved ordinance.

3.12.120 Claims for refund.

Claims for refund of taxes imposed pursuant to this chapter shall be governed by the provisions of Chapter 5, commencing with Section 5096, of Part 9 of Division 1 of the Revenue and Taxation Code of the state.

3.12.130 Operative date.

This chapter shall become operative upon the operative date of any ordinance adopted by the county, pursuant to Part 6.7, commencing with Section 11901, of Division 2 of the Revenue and Taxation Code of the state, or December 13, 1967, whichever is the later.

3.12.130 – Council amendments.

The Town Council is hereby authorized to amend Chapter 3.12 of Title 3 (Revenue and Finance) of the Portola Valley Town Code in any manner that does not increase the tax rates, or otherwise constitute a tax increase that requires voter approval pursuant to the California Constitution.

Council amendments may include, but are not limited to, amendments that:
(A) Repeal or reduce the tax.
(B) Reduce tax rate and later restore the tax rate to a rate that does not exceed the tax rate approved by the voters.
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(C) Interpret or clarify implementation or enforcement of the tax so long as the interpretation or clarification does not increase the tax rate. (D) Create exemptions from the tax.

SECTION 2. California Environmental Quality Act (CEQA). Approval of this Ordinance is exempt from review under CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines, because it can be seen with certainty that there is no possibility that creation of a government funding mechanism would have a significant effect on the environment.

SECTION 3. If any section, subsection, paragraph, or sentence of this Ordinance, or any part thereof, is for any reason found to be invalid, unconstitutional, or beyond the authority of the Town of Portola Valley by a court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Ordinance.

SECTION 4. This Ordinance shall take effect 10 days after the certification of its approval by the voters at the November 3, 2026 election pursuant to Elections Code Section 9217. 186

TOWN OF PORTOLA VALLEY

LIAISON MEMO
TO: Mayor and Members of the Town Council
FROM: Vice Mayor Hufty
DATE: July 8, 2026
RE: 06/22/2026 ASCC Liaison Memo

BACKGROUND
OVERVIEW: Carter Warr absent
Public comment: Bart Dolmatch - 16 Santa Maria is concerned about a possible recurrence of landslide. He shares landslide risk with his neighbor at 42 Santa Maria. After the previous landslide, construction was limited to 2,480 sq feet, at 42 Santa Maria a new house was permitted at 3200 sq feet and they are concerned about further increase above the 100% adjusted maximum floor area. In 1998 both houses were red tagged in a landslide. The 2,480 limit was the maximum safe build. Neighbor is asking that they informed if permitting moves forward, that complete engineering be done and that there be no further expansion.

Approval Requests:
25 Toro Court - renovation and partial rebuild of an existing two-story, single-family residence, ailing redwoods are being removed. - approved
501 Wayside –1.5-acre vacant lot with Horseshoe Drive below, asking for major modifications to previously approved permits. Adding a second story. Parts of the lot is geologically unstable but only SLS type soils are under the building site. Plan includes 2 ADU’s a new driveway. No comments on the ADU by Commission. There will be removal of 2 significant live oaks. Conservation has reviewed. Not on stable land. Public comments- most houses are 1400 sq ft or less but this is much larger than the rest of the neighborhood, the 2-story garage fronts the street. Not fitting for the neighborhood. Drainage and massive build on a narrow one-way road with a self-maintained road system. This house has been recited to bring it right up to the road. Blocks exit of upper Wayside and concern about the emergency exit. Gables jut out and increase the massing. Overhead utility wires and hazard zone make for a difficult site. Massing is greater than previous. Consider lowering the finished floor level down. Motion for continuance passed unanimously.
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