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Atherton previews FY 2025–26 general fund; council debates pension paydown vs. capital projects
Summary
Finance director presented a FY2025–26 general fund review showing a provisional operating surplus before one‑time ERAF money; council and Audit & Finance Committee discussed using reserves to pay down CalPERS liabilities, fund CIP projects (notably El Camino drainage and a roundabout), and preparing shovel‑ready grant applications.
Finance Director Robert (presentation) told the Town Council and Audit & Finance Committee at a joint April 2 study session that the town’s FY 2025–26 general fund operating budget projects operating revenues of about $24.6 million and operating expenditures of roughly $22.01 million, producing an operating surplus before one‑time items. The presentation also included one‑time Educational Revenue Augmentation Fund (ERAF) receipts the staff budgets at $2.5 million, which bring total available resources reported on the slides to about $27.1 million.
The budget review framed major revenue and expenditure drivers: property taxes remain the largest single revenue source and were described as about 70% of general fund operating revenue; charges for services (building, planning, public works, police) were shown near 17%; franchise and other fees comprised the remainder. The staff report and slides noted an ongoing vulnerability in a property tax in‑lieu line the presentation referred to as “VOF,” describing two recent shortfalls totaling about $1.4 million that the county and other agencies are working with the state to remediate in a later year’s budget.
On expenditures, Robert said the FY 2025–26 budget includes salary and benefit placeholders equal to a 2.7% adjustment (roughly $565,000), an estimated CalPERS unfunded actuarial liability (UAL) increase of about $320,000, and department‑level changes: a Planning Department reduction tied to winding down housing‑element work, a roughly $183,000 increase for Public Works (including a full‑year analyst and contract adjustments) and a Police Department increase that staff summarized in the presentation as a six‑hundred‑plus‑thousand dollar change (staff noted overtime is budgeted at $750,000). The presentation also highlighted an operational OPEB (retiree health) savings that staff attributed to using the PARS trust to pay retiree health costs; that was characterized as about a $500,000 reduction in operating expenditures.
On reserves and transfers, the presentation reported transfers to the capital improvement program (CIP) in the current year and proposed transfers in the budget; staff showed the town meeting its emergency reserve and contingency targets (each at 15% on the slides) and presented a multi‑year financial planning model with “set aside” buckets for future CIP priorities. Robert summarized the current CIP transfers made in the prior year’s budget (a $4.45 million general fund transfer to CIP broken into drainage, roads, park master plan, bike/ped projects, green infrastructure and facility replacement items).
Council and committee discussion focused on how to use the projected surplus and reserves. Audit & Finance Committee members recommended applying $1 million to $3 million toward CalPERS obligations; several council members supported the maximum recommended payoff within that range to reduce long‑term pension costs. At the same time, other council members pressed for visible capital projects—particularly El Camino Real drainage work and bicycle/pedestrian safety investments—arguing residents want tangible improvements. The council asked staff to prioritize getting key CIP projects “shovel ready” (design and grant readiness) so the town can apply for grants and so the council can make an informed decision about paying construction costs versus pursuing outside funding. City staff said they will return with recommendations in the CIP conversation scheduled later in May and analyze how $1–3 million of pension prepayment could be accommodated alongside the town’s capital priorities.
Councilors and committee members raised specific CIP items repeatedly: the Alameda de las Pulgas corridor work (design reported near 65% complete), the El Camino Real drainage study and the cost estimate for the roundabout and corridor work (staff said conceptual construction costs for El Camino Real concepts are in the multiple‑millions and that project will be phased over several years), and channel relining/restoration on the Atherton Channel north and west of Alameda (design and regulatory coordination ongoing). Staff identified Army Corps of Engineers, State Water Board and California Department of Fish and Wildlife as the principal regulatory contacts for channel work and said the town is pursuing federal aid and FEMA/Cal OES grant avenues for drainage work.
No formal council vote or final budget adoption occurred at the study session; staff and council described the session as a routine review and said the item will return for formal council consideration and approval in a future meeting.
Ending: Staff will return with more detailed CIP phasing and a recommendation on how to combine a possible $1–3 million pension prepayment with funding for shovel‑ready projects and grant applications. The council scheduled further discussion during the upcoming CIP review.
