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Atherton has achieved something of a fiscal rarity for a Bay Area jurisdiction in this challenging economy. At its meeting June 17, the City Council adopted the town’s 2026-27 budget with no general fund deficit – something that other communities on the Peninsula have been struggling to do.
Atherton is budgeting for a $2.8 million surplus in the general fund, which generates revenue primarily from property, sales and other taxes, along with various fees. It covers core services such as public safety, infrastructure, parks and administration.
According to the town’s online budget dashboard, revenues are projected at $26.2 million while expenditures are projected at $23.4 million.
“This is an excellent budget,” Councilmember Elizabeth Lewis said at the meeting.
Lewis also praised the town’s decision to direct funds toward improving street safety and addressing other needs.
“We’re putting our funds into the infrastructure and improving our streets and drainage problems that our residents have been telling us (about),” she said.
City Manager George Rodericks attributed Atherton’s strong budget position to the town exercising fiscal discipline.
“Atherton is fiscally conservative,” Rodericks said in an email to The Almanac, “and we budget within our means.”
One strategy that has helped is not treating certain state funding mechanisms like the Educational Revenue Augmentation Fund (ERAF) as a consistent revenue stream, he said.
“More than a decade ago, we recognized that ERAF was always at risk of attack by the state,” he said, “so we removed it from our operational budget expectations as a guaranteed revenue.”
Instead, he said, the town taps money from ERAF to cut down on long-term debt such as pension liabilities or for one-time capital expenses.
“We do not count on it for general operations or for annual capital projects except where specifically dedicated in a given year,” Rodericks said.
“Beyond that, our approach is simple,” he added. “We tend to save for projects and then build them rather than take on debt or pursue independent revenue measures.”
But the yearslong wrangling over the state’s in-lieu vehicle license fee (VLF), which is paid by ERAF still has an impact on Atherton, as it does for all the other jurisdictions in San Mateo County.
This year, San Mateo County officials said Atherton has a $741,000 VLF shortfall. The county government and San Mateo County cities had a combined shortfall of $119 million.
The state budget recently passed by the California Legislature and signed by Gov. Gavin Newsom on June 29 includes reimbursing approximately 65% — $77 million to bridge a significant portion of the fee owed to the county and its cities.
That funding would provide relief to local governments and support services such as police and fire protection, transportation infrastructure, libraries and childcare programs.
That fee “has always been included in our basic property tax revenues,” Rodericks said, “and we do depend on it for operations so its reduction has been a noticeable hit to the town.”
According to Rodericks, property tax — including the vehicle fee — accounts for 78% of Atherton’s general fund revenues, with strong home construction and permit activity adding another 11%.
On the expenditure side, he said, the police department accounts for nearly 50% of the town’s budget and public works 18% with the balance spread across the other departments.
“The key point is that this represents spending about 89% of what we take in,” he said.
Atherton’s budget also shows a projected year-end positive fund balance of $11.7 million, according to a summary by Rodericks. The town exceeds its 30% reserve requirement at $7 million with unallocated reserves of $4.7 million. The Capital Improvement Program totals $5.2 million across street, drainage, bike/pedestrian, parks and facilities projects.
Other jurisdictions are grappling with balancing their budgets.
East Palo Alto is projecting a deficit of $4.7 million in the general fund and plans to draw from its reserves to cover that gap.
Menlo Park had to make steep cuts and raise fees in order to eke out a balanced budget. Redwood City is down $1.3 million in the general fund for the fiscal year that begins July 1 but is forecasting annual deficits ranging from $22 million to $29 million starting in 2027-28.
At the same Atherton meeting, the council approved a $7,374 raise for Rodericks consisting of a 2.5% cost-of-living adjustment, bringing his salary to $302,347 a year. The council also awarded him a one-time $15,000 bonus.
“I am deeply appreciative of the council’s confidence in me and in the town’s team,” Rodericks told The Almanac.
