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Menlo Park is expecting a $1 million surplus in its general fund for this fiscal year, city staff told the city council on Tuesday, May 13. The general fund is used to fund most of the city’s operations, like the police and recreation departments, excluding special projects and capital improvements.
Now, the city council is debating what to use the surplus on and how to balance ensuring continued funding for current services with capital intensive improvement projects.
The city automatically transfers $3.2 million to the capital improvement fund and transfers additional funds throughout the year to pay for additional projects. On average, the city transfers $4.86 million annually.
Menlo Park city staff says the capital improvement fund will not have enough to pay for all of the projects the city is hoping to accomplish and the city can either risk draining reserves, or cut capital improvement projects.
If the city continues to transfer $3.2 million annually, the city will run a deficit starting in the 2026-27 fiscal year. What’s more, with the exception of a surplus in the 2027-28 fiscal year due to payments from the state (which have been under threat due to the state’s significant deficit), will continue to do so until the end of the forecast.
The city’s financial state has significantly improved since voters passed Measure CC, which allowed the city council to raise its tax on short-term rentals and hotels. The city’s tax on lodging is its second-largest revenue source.Â
The city factored in a potential decrease in travel spending due to economic uncertainty and Administrative Services Director Britney Mello told the council that she believes the estimate was “appropriately conservative.” The city’s budget could also get a significant boost from transient occupancy taxes associated with the planned Hotel Moxie, although city staff did not incorporate it into the budget.
If the city keeps the capital improvement fund transfer the same, the city will draw from its unassigned fund balance. As a result, that would decrease from $10.2 million to $4.7 million in the 2029-30 fiscal year.
All of the city’s reserve funds, the emergency contingency fund and the economic stabilization reserve fund, will maintain their balance at 15% of general fund expenditures and 20% of general fund expenditures respectively through the 2029-30 fiscal year.
If the city transfers $4.86 million annually to the capital improvement fund, an increase from the current planned annual transfer but in line with the average yearly transfer, reserve funds will need to be drained. The city would run deficits between $1 million and $3 million every year over the next five fiscal years. Due to this, the unassigned fund balance would be entirely depleted by fiscal year 2027-28 and the emergency contingency fund would fall below 15% of general fund expenditures in the 2029-30 fiscal year.
Public Works Director Azalea Mitch recommended the city increase the transfer to the capital improvement fund to $4.86 million. Vice Mayor Betsy Nash and Councilmember Jeff Schmidt said they were leaning toward the increase, at least temporarily, as long as they were not permanently limiting the options of future city councils.
The city council also held a study session on the capital improvement plan and projects that are part of it. Making that work more difficult, currently six of the 12 staff positions that work on capital improvement projects are vacant.
At present, 43% of the capital improvement plan is funded by special revenue funds, such as the gas tax, fees and bonds, 35% is funded by the general fund and the rest is funded by revenue from municipal water services.
Mitch is requesting the city allocate $4.3 million from the general fund to pay for $1.8 million for upgrades to city buildings, $1 million for stormwater projects, $1 million for electric vehicle chargers at city hall and $380,000 for sidewalk repair. Public works is also using $2 million in grants to pay for the electric vehicle chargers.
The capital improvement plan also includes a five-year street maintenance and improvement plan that is expected to cost $20 million total.
The public works department expects to need $30 million from the general fund over the next five years.
Some of the largest expenses under the capital improvement plan are $10 million for the middle underground crossing project and $27 million for a water reservoir.
The largest project the general fund needs to cover is a $6 million project to improve Burgess pool.
The capital fund budget is expected to have a $8.4 million deficit this fiscal year and a $10.6 million deficit next fiscal year without any general fund transfer and if a federal grant is canceled.
Editor’s Note: This story was updated to clarify Measure CC applies to hotels and short-term rentals.
Menlo Park sends Citibank’s ‘jarring’ branch remodel back to drawing boardMarch 24, 2026 2:58 pm
Spend some of the surplus on Downtown civic improvements. Here is my wish list: https://mpcdforum.com/downtown-civic-improvement-wish-list/.
Put the money toward making Caltrain quiet zones a reality!