Not satisfied with the draft budget presented that night, the council sent it to the town's Finance Committee to help with the arduous process of creating a plan that confines spending to the $9.2 million of projected revenue, instead of the $10.5 million in spending proposed by the staff.
The budget discussion that night was launched with bad news: Finance Director Louise Ho told the council that she learned earlier that day from the county that property tax revenue is expected to decline this year, although just weeks ago it was projected to increase by 1.25 percent.
After the meeting, Ms. Ho said that, based on the latest information from the county, Atherton is projecting property tax revenue to drop between 1.0 and 1.5 percent. That represents a decrease of about $106,650, she said.
Ms. Ho said that the draft budget was based on the earlier projection of a 1.25 percent increase in property tax revenue. But the unexpected decline from that revenue source would be offset by a higher-than-expected pay-out to the town from the so-called ERAF (Educational Revenue Augmentation Funds) refunds from the county. The "Excess ERAF" revenue had been projected at $530,000, but is now projected at $630,000, Ms. Ho said.
The draft budget includes no money for employee raises. It puts aside money to go toward the town's nearly $8 million in unfunded liability for post-retirement health care costs promised to employees. Based on an actuarial report, the town should set aside a specified amount each year for the next 30 years to pay off the unfunded liability.
The draft budget reflects City Manager Jerry Gruber's recommendation that the town fund only half the amount specified in the actuarial report — $327,000 instead of $655,000 — but some council members were unhappy with that plan.
Some were also unhappy with the recommendation to tap the special parcel tax fund for some $888,500 for police services. When Councilman Jim Dobbie challenged that recommended expenditure, Mr. Gruber countered that voters overwhelming passed the tax to balance the budget while still providing public works and police services.
After the meeting, Mr. Dobbie told The Almanac that he didn't think residents intended the tax "to be a fill-in for a deficiency in revenue." He said it is "unacceptable" to have a budget that allows more spending than general fund revenue can provide for.
"The town needs to do more to find efficiencies" or it could have no reserves by 2011, he said.
Councilmen Dobbie and Jerry Carlson reiterated their belief that the town must come up with a five-year financial projection and spending plan, without which council members don't have enough information to make the best choices while crafting budgets from year to year.
Before the council meets again to discuss the budget, the Finance Committee is expected to examine the draft budget for possible cuts, and review options for reopening employee contracts to find cost savings.