Atherton's civic budget is looking so good that some long-time council members appear to be having trouble believing it can continue.
"That's pretty good, compared to other years in the recent past," said council member Elizabeth Lewis at a June 3 budget study session after hearing that the town's general fund budget projects spending of about $800,000 less than it will bring in.
"This is not a bubble?" asked Ms. Lewis, who was first elected in 2008.
"This is not a bubble," City Manager George Rodericks assured the council.
Mr. Rodericks said Atherton continues to project healthy balances in its operating budget and to pay down long-term liabilities, but still needs to figure out how it will fund major capital improvement projects such as drainage systems repairs, work in Holbrook-Palmer Park and street improvements.
At the study session, in preparation for the June 17 City Council meeting where the town's 2015-16 budget is scheduled for adoption, Mr. Rodericks said Atherton has general fund revenues of about $12.6 million and general fund spending of about $11.8 million.
The budget presentation is available on the town's website.
The revenue figure does not include an estimated $1.2 million the town expects to get in additional property taxes from the educational revenue augmentation funds (ERAF), money that the state years ago shifted from local governments to schools. Only San Mateo, Napa and Marin counties do not use all of their ERAF to support their schools, so some of the money is returned to local governments in those counties each year.
In 2013 Atherton decided not to count the ERAF money as part of its general fund revenue, because it could be taken away by the state at any time. Instead, the town uses ERAF funds to pay one-time expenses, such as reducing long-term liabilities that include retirement pensions and benefits, and workers' compensation.
The town also has healthy reserves, including a 15 percent emergency reserve of about $1.8 million and a 20 percent contingency reserve of about $2.4 million.
The town is in even better shape than the general fund numbers indicate, because it is starting the year with nearly $11.5 million in the general fund. Once the projected spending and the reserves are taken out, and money is budgeted so the town can continue paying down its long-term retirement and workers compensation costs, Atherton is expected to end up with an ending balance of $7.3 million, Mr. Rodericks said.
He has recommended that the council put a big chunk of that balance into its capital improvements fund, to save for major expenditures that are predicted for the near future.
While just how much of that balance will be moved into the town's capital improvements fund will be decided at the June 17 meeting, Mayor Rick DeGolia said he is comfortable moving $3 million, and council member Cary Wiest said he would accept moving $3.5 million into the capital improvements fund.
The town must start building up money to pay for major upcoming expenses, Mr. Wiest said, such as the town's drainage system. Otherwise, he said, "we can continue to look the other way and watch the (Marsh Road drainage) channel fall in on itself."
The capital improvements budget was also part of the discussion about the town's parcel tax, which varies by lot size but is a maximum of $750 for homes on lots of between one-half and two acres.
The council must set the tax rate each year, and will formally vote on doing so on June 17. City Manager Rodericks has proposed that about $1.5 million of the $1.86 million raised by the parcel tax go into the capital improvements budget, with the remaining $372,000 put into the general fund to augment police department funding.
The town has $1.6 million in capital improvement projects budgeted for 2015-16, and the special tax will provide 68 percent of the funding.
Council members briefly discussed reducing the parcel tax for the coming year by about 20 percent because the town had received what is believed to be a one-time use tax payment from the state of over $324,000. Mr. Rodericks said no one has yet been able to tell him why the town received the payment.
"My inclination is to approve the entire parcel tax," Mr. DeGolia said. "I think we have a lot of infrastructure work to do.
"We need every dollar we can get and we need to use it," he said.
Council member Mike Lempres said spending the money on capital improvements now could save the town money in the long run as costs increase. "Who knows what the future will bring?" he said.
"We have a lot of need. ...I think we can spend this money productively now."
Budgeted spending for most town departments decreases or shows only slight increases in the currently proposed budget. The police department, however, shows an increase of nearly $340,000, mostly because an additional dispatcher is being added to the staff, and midway through the current budget year a code enforcement officer was added.
The public works department also shows an increase because midway through the current year a town arborist was added to the staff, and the department also bears part of the cost of the code enforcement officer.