|
Getting your Trinity Audio player ready...
|
Finances in Portola Valley have been a concern for town staff and residents for many years, but after an Oct. 1 Finance Committee meeting it was revealed that finances are far worse than expected. The town may have to declare a fiscal emergency to save its financial crisis, according to the Finance Committee.
The Finance Committee has evaluated the town budget and identified areas where costs can be cut as well as three revenue options which were presented to the council on Oct. 9.
Largest expenses
The town is currently catching up on years of financial audits. With the help of Finance Director Tony McFarlane, Portola Valley is starting to see that they will be entering a deficit sooner than expected if expenses are not cut and reevaluated.
“We’ve known about the structural deficit, the results of expenses associated with the housing element and increases to the sheriff’s contract exacerbated by staff turnover and increases in legal and consulting fees,” said Mayor Sarah Wernikoff during the Oct. 9 Town Council meeting.
During the Finance Committee meeting, McFarlane pointed out that the town’s biggest expense is the sheriff’s contract, which has cost the town over $6 million over the past four years.
“Without significant cuts to the proposed 2024-25 budget, general fund reserves will end in a deficit,” said Tony McFarlane.
The committee has been able to revise the 2024-25 budget to cut expenses by $1.9 million to ensure a reserve of approximately $695,000. Expenses were largely reduced from salaries, benefits, the sheriff’s contract and transfer of assets. The town will be taking advantage of the staff vacancies for the next fiscal year, said McFarlane during the meeting.
The committee identified that $95,000 of general funds toward the sheriff’s contract will be paid for by the Citizen’s Option for Public Safety, COPS, grant, which allows for funds to be allocated to other needs. The town has been using Public Safety Augmentation Funds, PSAF, and American Rescue Plan Act, ARPA, funds to pay for the sheriff’s contract and other recurring expenses.
In the fiscal year 2023-24, the town received about $17,000 in PSAF funding and $195,000 in COPS funding. The town uses approximately $160,000 of COPS funding every year to offset general funds, according to McFarlane.
Consulting costs have also impacted the town with a total of over $2 million spent from 2021-2024. The planning division has spent a total of $1.5 million excluding recurring annual costs of $80,000 to $100,000. Consulting for the housing element also cost the town about $1.2 million over three years.
“Additional revenue will need to be considered or the town is on the road to becoming unincorporated,” McFarlane added.
If the town were to unincorporate, Portola Valley would lose local control and everything would “revert to the county level,” said town resident Dave Cardinal. Although sheriff costs would be covered by the county, other services provided by the town would be nonexistent.
The town has been incorporated since 1964. Reverting back would take away all town services and legislative bodies that have been built over the last 60 years, according to Cardinal.
Town resident Rita Comes, who runs the organization Portola Valley Neighbors United, is feeling discouraged by the promises that have been made over the last few years on finances and the completion of audits.
“In the end of the day, we’re paying the cost of not reviewing the documents and receiving emails with lots of promises,” said Comes during the Town Council meeting.
Town resident Karen Vahtra has been following the town’s finances and analyzing the numbers. After the Finance Committee meeting, she was shocked to find out that the town only had $1.6 million in general funds after former Town Manager Sharif Etman presented in April that the projected balance would be at over $5 million.
“We need a detailed spreadsheet based analysis of our financials both for the past years and for budgeting purposes, and enforceable policies and procedures that ensure this never happens again,” Vahtra said.
Three forms of revenue
The Finance Committee has come forward with three ways the town can increase revenue: a 2% user utility tax, a parcel tax or to become a charter city. All options require the council to place a ballot measure during an election and require voter approval to take effect.
The UUT is the only avenue that would require the town to declare a fiscal emergency and will not increase taxes but temporarily redirect 2% of open space funds to the general fund. This tax measure can be placed on a ballot as soon as March 4, 2025 and will bring in revenue as soon as it is certified after the election. The town will need to file with the county by Dec. 6 if it wants to pursue the UUT and it would need a majority of voter approval to pass.
The parcel tax will “impose a parcel tax at a fixed rate per parcel for a fixed duration,” and can also be placed on the ballot for March 4, 2025. This tax will require a two-thirds majority to pass and increased revenue will come in around December 2025. This will not require a declaration of a fiscal emergency.
For the town to become a charter city, the measure must be included in a statewide general election. The next is in November 2026. Becoming a charter city would allow the town to gain revenue through a real estate transfer tax. If a measure were to pass in the 2026 election with a majority vote, revenue would be seen in January 2027.
Council member Mary Hufty has been a supporter of exploring becoming a charter city since her first campaign in 2020. In her weekly newsletter she states that she will continue to research charter cities and the benefits and risks of becoming one.
How residents are affected
The financial crisis has the potential to impact local residents in facilities management, approval of building permits and lack of town services.
“If revenue doesn’t keep pace with recurring costs, we will have to cut services,” said McFarlane, who adds that approvals on building permits might take longer due to the lack of staff.
Cardinal expects that the financial crisis will also affect the maintenance of public works facilities and projects.
“There’s a bunch of culverts in town that are troublesome that the town needs to step up to and we’re not gonna have the money to fix some of those,” said Cardinal.
Upcoming meeting
The Finance Committee is still evaluating the town’s finances and will be meeting on Tuesday, Oct. 15, to discuss further details. View the agenda here.
If the Town Council were to declare a fiscal emergency, Mayor Wernikoff estimates that it would occur during the regular meeting on Nov. 13.
A grammar point: The word “revert” does not need amplifying.
“Revert back” is redundant.
I see that all the time, drives me crazy. Thanks !
Clevenger –
This story is about a devastating financial issue and your point is a redundant phrase used by the reporter?
It would be interesting to know what the unfunded pension liability is. Potentially a back-breaking situation.