Cuts recommended by staff would shrink Atherton's shortfall in projected revenues to $1.6 million for the fiscal year ending June 30.
The City Council sat down with its city manager and department heads and, for three hours, painstakingly looked at ways to cut the budget. Cuts range from small gestures — fewer trips to conferences, no more meals at council meetings that run through dinner time — to bigger, more aggressive moves, like postponing major capital improvement projects and traffic studies, reducing police officer hours, and tightening the screws on the legal services budget.
"I read this cover letter 15 times and every time I shook my head and said, 'You guys just don't get it.' This is a severe economic depression," said Councilwoman Kathy McKeithen, who told staff that they were looking at the budget problem backwards.
The town needs to figure out what it really needs, and then maybe it can add on a little. "It's not just cut a little here, or a little there," she said.
Town staff will come back with more proposals for deeper cuts, said City Manager Jerry Gruber.
About $1.1 million of the projected shortfall is due to problems with Atherton's former method for calculating the business license fees charged to building contractors, according to Finance Director Louise Ho. Not only is Atherton projected to lose a budgeted $425,000 in business license fees, but it could be out as much as $680,000 in refunds to contractors who were overcharged in the past two years.
Property tax revenues are likely to be lower than projected, sales tax revenue is down, and building permit fees could be off by a half-million dollars, according to Ms. Ho.
"We're looking at this as a short-term thing, and this is not a short-term thing," said Mayor Jerry Carlson about the economic forces impacting Atherton. "This is going to last a couple of years, at least."
Council members were not enthusiastic about dipping into the town's reserves to backfill the bulk of the revenue shortfall, but City Manager Gruber said there would be no easy way to come up with the entire $2 million the town needs.
Faced with the $1.1 million loss due to business license fees, the only way to make up the money is to lay off staff, said Mr. Gruber.
Council members were particularly upset by the staff's request for an additional $100,000 for legal services.
Ms. McKeithen said that the town was billed $30,000 for legal fees in the month of January alone. "I think this tells us no one has been looking after the legal bills," she said. "What on earth was Marc Hynes doing" that cost $30,000? she asked, referring to the former city attorney.
Atherton's newly hired city attorney didn't escape scrutiny, either. Council members questioned a request for an additional month's fees so that the town's new counsel, Wynne Furth, could get up to speed on its myriad legal matters. That extra month was supposed to be gratis, council members said.
"You've got to let attorneys know that someone's going to be really looking at those bills every month," said Councilman Jim Dobbie. "Once they know that, the bills will go down. They'll bill whatever they can get away with."
Some of the town's biggest savings could come from postponing public works projects such as road and drainage repairs, cutting back on tree-trimming, and deferring upgrades to street lights and Holbrook-Palmer Park facilities.
An open post in the police department will go unfilled, as will an office specialist job in town hall. The communications sergeant will devote some of his weekly hours to working one of the dispatcher's shifts, said police Lt. Mike Guerra.
There's some hope for improvement in Atherton's revenues — the town is also in the midst of a comprehensive study of its fees, which should determine the actual cost of providing services. However, the end of the current parcel tax, which adds about $1.8 million to Atherton coffers annually, is only a year away.
"People's perception is that we're very rich, we're flush with money, and it's just not true," said Councilwoman Elizabeth Lewis. "We're having a cultural shift in how we're running our town."
The Atherton City Council is holding a special meeting at 5 p.m. Tuesday, March 10, to consider deeper mid-year budget cuts. The meeting will be held in the Town Council Chambers, 94 Ashfield Road.