The conservative projections reflect "the worst scenario the town could face," said finance director Louise Ho at the March 17 Atherton City Council meeting. While it might be a worst-case scenario, it was one that council members seemed inclined to believe.
"Certainly, this is not an acceptable plan, and it's not one we will even try to pretend to make," said Councilman Jerry Carlson. "The rate of growth of expenses every year exceeds the rate of growth of revenue. That's a problem."
Ms. Ho's forecast shows property tax revenue, the town's single largest source of revenue, will not be sufficient to support the town's police and public works departments.
"It's shocking to have it spread out like this, because clearly things are going to have to change," said Councilwoman Elizabeth Lewis. "We have to make some severe cuts."
The council called for a study session meeting to delve into the problem more deeply.
"This is a 'When did we go bankrupt?' five-year plan," said Councilman Jim Dobbie.
City Manager Jerry Gruber said his goal is to create a balanced budget this year that doesn't dip into the town's reserves.
"We keep saying this is the worst-case, but frankly, it's not," said Mayor Kathy McKeithen, who pointed out that town is still facing significant legal expenses that aren't reflected in the five-year projections.
Compounding the budget problems is the recent loss of a significant source of infrastructure funding — road-impact fees. In December, the council rescinded the fee upon advice that it left the town vulnerable to lawsuits over its legality. The fee, which was charged to builders for wear and tear on roads, was used to fund road-repair projects.
A plan to refund $1.6 million in road impact fees is entangled in a procedural vote.
Mayor Kathy McKeithen used the five-year forecast as her reason for opposing a transfer of $1.1 million in general fund reserves into a road- impact fee fund for refunds.
Staff characterized the transfer as correcting an accounting error that improperly put road-impact fees into the general fund.
"It's one thing to say that we are legally obligated to replenish those funds, but I do not believe that it should come from reserves when we don't have a balanced budget," Ms. McKeithen said.
By council policy, transfers from the general fund require a four-fifths super-majority vote, but both Ms. McKeithen and Mr. Dobbie voted against the transfer, which failed on a 3-2 vote. Mr. Dobbie said he doesn't believe the council should have rescinded the road-impact fee at all.
"It's a simple issue. We're taking ill-gotten gains that ended up in our general reserves," countered Mr. Carlson. "I don't see why we need to keep bickering about it."
Next month's Atherton council meeting will likely see the same item back on the agenda, along with a new item: changing the policy requiring a fourth-fifths vote to a simple majority. Ironically, changing the policy requires only a simple majority vote.