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The Menlo Park City Council is considering ending the city’s annual holiday tree-lighting event and scaling back maintenance as they grapple with a structural budget deficit which threatens to deplete its already-reduced reserve funds.
City staff projects a growing revenue shortfall over the next five fiscal years, including a proposed $2.8 million deficit in the city’s $90.5 million budget for the next fiscal year, starting July 1. To help reduce the gap, city staff are recommending the Menlo Park City Council approve an additional $700,000 in cuts at its June 9 meeting. On the chopping block is the annual winter tree-lighting event at Fremont Park, as well as the holiday tree at the Belle Haven Community Campus, for a combined savings of $70,000.
Staff also recommend ending a $43,000 contract to maintain decorative string lights on trees in downtown Menlo Park. While the existing lights would remain in place, a city contractor would no longer repair or replace them when they fail.
Additional reductions include cutting contracts for maintaining city medians, right-of-ways and weed removal by 20%, saving $210,000. Recreation and library programs would be reduced, saving more than $270,000, and a half-time consultant position supporting the Safe Routes to Schools program would be eliminated, saving $105,000.
If approved by the City Council, the city would still have a projected deficit of $2.1 million next year. Menlo Park planned for a $2.5 million deficit in the current, 2025-26 fiscal year.
A potential $2.1 million deficit would be a significant improvement from the projected budget deficit earlier this year. Staff expected a nearly $7 million deficit for fiscal year 2026-27, so the City Council agreed in April to raise fees for city services, generating an estimated additional $4.3 million in revenue. The council also elected to make a million-dollar reduction in general fund contributions to the city’s capital improvement fund, from $4.9 million to $3.9 million.
Other cost saving measures that have already been rolled out include cutting back on staff travel and professional conferences, replacing computers and other technology less frequently and suspending the city’s funding grants to local nonprofits.
Staff said the City Council could consider additional cost-cutting measures, like reducing funding for aquatics programs at the Belle Haven Community Campus. The city recently approved an additional $400,000 after Team Sheeper, the contractor running aquatics facilities at Belle Haven and Burgess Park, warned it could become insolvent without the city’s help.
Menlo Park’s reserves are already below its target. Combined, the city’s two general fund reserves are supposed to have 35% of the city’s general fund expenditures. However, Menlo Park has already started dipping into the reserves which are expected to total $24.3 million, only 29% of the city’s annual expenditures, when the current fiscal year ends on June 30.
City staff are already signaling that tax increases may come before voters in 2028. A City Council study session this fall is planned to consider ideas that include a half-cent sales tax increase and updates to the city’s utility and business license fees.
The City Council will discuss the fiscal year 2026-27 budget at its June 9 meeting in the City Council Chambers and via Zoom.
