Portola Valley council hears budget shortfall, directs staff to model 2.5% COLA and modest merit options
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Summary
Council members were presented with the proposed FY26–27 expenditure budget and warned of an approximate $700,000 structural deficit driven largely by an increase in the sheriff contract; staff were asked to model a 2.5% cost‑of‑living adjustment and modest merit scenarios for further review.
Portola Valley Town Council received a detailed review of the proposed FY26–27 expenditure budget and gave staff direction to model specific cost scenarios after a presentation that identified a roughly $700,000 structural deficit.
Tony, the staff presenter, told the council the town faces a structural deficit “about $700,000,” driven in large part by increases in contracted public‑safety costs and baseline pension and medical expenses. He said the sheriff’s contract will increase total costs and that the impact to the town’s general fund is approximately $508,000 for FY26–27. Tony also presented personnel cost options: a 3% COLA would add about $63,000; a 2% COLA would add about $42,000; and a 4% COLA about $84,000. He reported the town’s unfunded accrued pension liability at roughly $1,970,000 and the town’s amortized UAL payments rising year to year.
Why it matters: the budget presentation showed expenses outpacing revenues, putting reserves at risk and forcing the council to weigh staff retention and service levels against steep cuts or a new revenue measure. Tony described reserve trends and said, absent new revenue, the town would need expense reductions that could touch personnel, committee funding, consultant services, fire mitigation, or capital projects.
Council discussion centered on two immediate modeling questions: whether to include a COLA in next year’s salary schedule and whether to fund a merit pool. Council members voiced a range of views. One member said the town must “take care of our staff” while others warned that further increases would deepen the structural deficit. Several members urged caution on merit funding until the town has greater revenue certainty.
What the council asked staff to do: the mayor and council directed staff to include a 2.5% COLA in the working budget model and to show the impact of both a 3% COLA and a 2.5% COLA; staff also agreed to model modest merit‑pool options (staff said they could produce scenarios for 1% and 2% merit pools and agreed to show the budget impact of moving merit higher). The mayor suggested using 1.5% as an interim merit assumption for the model so the council can see trade‑offs; Tony said he could produce those modeled scenarios.
Numbers and options noted in the presentation: general fund revenue is primarily taxes (about 76%); salaries and benefits represent roughly 40% of general fund expenses; the sheriff contract increase and associated credits together translate into about $508,000 more to the general fund; projected medical premium and CalPERS contribution changes added tens of thousands of dollars; the town’s capital improvement plan baseline totals included roughly $1.295 million in identified projects in the current CIP, with individual line items for road resurfacing and right‑of‑way work.
Next steps: staff will return with modeled budget scenarios reflecting the requested COLA and merit permutations and further CIP detail. No final budget action or formal adoption occurred at the meeting.
Quote: “Without new revenue, corrective action on the expense side would impact council priorities,” Tony said, summarizing the fiscal challenge. The council closed the discussion by asking staff for iteration-ready models to inform a later decision.
Ending: The budget review will continue in subsequent meetings as staff refines scenarios and the council considers revenue options and potential service trade‑offs.
