Atherton staff must sharpen their pencils and find more spending cuts to avoid reaching into reserves and the parcel tax fund to balance the 2010-11 budget, the City Council told the city manager at a May 19 meeting.
Not satisfied with the draft budget presented that night, the council sent it to the town's Finance Committee to help with the arduous process of creating a plan that confines spending to the $9.2 million of projected revenue, instead of the $10.5 million in spending proposed by the staff.
The budget discussion that night was launched with bad news: Finance Director Louise Ho told the council that she learned earlier that day from the county that property tax revenue is expected to decline this year, although just weeks ago it was projected to increase by 1.25 percent.
After the meeting, Ms. Ho said that, based on the latest information from the county, Atherton is projecting property tax revenue to drop between 1.0 and 1.5 percent. That represents a decrease of about $106,650, she said.
Ms. Ho said that the draft budget was based on the earlier projection of a 1.25 percent increase in property tax revenue. But the unexpected decline from that revenue source would be offset by a higher-than-expected pay-out to the town from the so-called ERAF (Educational Revenue Augmentation Funds) refunds from the county. The "Excess ERAF" revenue had been projected at $530,000, but is now projected at $630,000, Ms. Ho said.
The draft budget includes no money for employee raises. It puts aside money to go toward the town's nearly $8 million in unfunded liability for post-retirement health care costs promised to employees. Based on an actuarial report, the town should set aside a specified amount each year for the next 30 years to pay off the unfunded liability.
The draft budget reflects City Manager Jerry Gruber's recommendation that the town fund only half the amount specified in the actuarial report -- $327,000 instead of $655,000 -- but some council members were unhappy with that plan.
Councilmen Jim Dobbie and Jerry Carlson reiterated their belief that the town must come up with a five-year financial projection and spending plan, without which council members don't have enough information to make the best choices while crafting budgets from year to year.
Before the council meets again to discuss the budget, the Finance Committee is expected to examine the draft budget for possible spending cuts, and review options for cutting employee costs.