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As the town of Portola Valley wrestles with a structural deficit, Town Council members pushed back on a proposal for staff cuts, arguing for the need to maintain stability during a tumultuous time.
During a Town Council meeting on April 8, Finance Director Tony McFarlane presented the council with projected operational costs and expenditures for the 2026-27 fiscal year, which will start in July. Currently, the town estimates it will face a $700,000 structural deficit next year due to increased public safety costs, town projects and cost-of-living adjustments (COLA) for employees.
“There are some baseline adjustments each year that are beyond our control, and they also exceed growth of our revenue,” McFarlane said during the meeting.
He added that without new revenue methods, there will be an impact on council priorities, which include the town’s financial long-term viability, safety, operational efficiency and effectiveness, and community services.
The town is exploring a so-called revenue enhancement ballot measure for the November 2026 election that could help alleviate rising financial pressures. Although the council has not voted on which measure to pursue, three options are under consideration: adopting a town charter, imposing a parcel tax and modifying the utility users tax.
If the town does not pursue a revenue enhancing measure, the council may need to consider reducing personnel, suspending town committees, reducing staff development and limiting building and planning consultant hours, McFarlane said.
“The staff are the reason the town has stabilized and losing staff actually is expensive as well as demoralizing,” Councilmember Helen Wolter said.
The town might also have to reduce fire mitigation services and its level of San Mateo County Sheriff’s Office services, McFarlane said. Since the town doesn’t have its own police department, it contracts with the county Sheriff’s Office for police services.
The Sheriff’s Office contract remains the town’s largest expense and is expected to increase each year. The next fiscal year will see a $197,000 increase in the contract compared to this year, as well as a $508,000 increase to the general fund budget when grants and funds used in previous years expire. The total cost for the policing contract is projected to reach $2.5 million.
This year, the town was able to offset contract expenses by using a $211,000 credit provided by the Sheriff’s Office and tapping $100,000 in remaining funds from the American Rescue Plan Act.
Capital improvement projects (CIP) for parks, roadways, open space and town facilities will also be costly for the town, with a total of $1.29 million budgeted. The most expensive projects include street resurfacing for $900,000, schoolhouse IT upgrades for $100,000 and Town Hall energy efficiency upgrades for $64,000.
Other projects ranging between $20,000 and $51,000 include town tennis court resurfacing, trail rehabilitation, storm drain repairs and designs to replace the Ford Field bathrooms. To better prepare for town priority projects, McFarlane recommended the town council create a capital improvement plan.
McFarlane also suggested the council provide a cost-of-living adjustment for its 13 staff members as the Consumer Price Index (CPI) is rising about 3% annually. He recommended the council approve a 3% COLA increase totalling to $63,000.
The town also plans to hire an assistant town manager and a senior development review technician, positions which are currently vacant.
McFarlane emphasized that the town staff has not received a merit increase in two years and suggested the council look into a 2% pool for salary bonuses.
Councilmember Judith Hasko explained that with declining revenue and rising expenses, she does not feel comfortable providing staff merit raises until the town passes a revenue ballot measure.
Hasko recommended holding off on issuing merit bonuses until later in the year but expressed her support for a 2.5% COLA increase.
“I think COLA and merit is part of retention and also we don’t have extra money to spend,” said Mayor Craig Taylor as he expressed his support of a 3% COLA increase.
As council members were trying to balance staff appreciation and dwindling reserves, they ultimately agreed on exploring a 2.5% COLA increase and 1.5% merit bonus. The council asked McFarlane to provide a model of how the budget would be impacted with these increases.
“I do think that we need to take care of our staff and people need to feel they’re respected, supported and compensated,” Councilmember Mary Hufty said.
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