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Portola Valley’s Town Council was presented with the various methods of increasing town revenue and deliberated on whether next steps should be to create a balanced budget, move forward in declaring a fiscal emergency, become a charter town or to explore other options.
Mayor Sarah Wernikoff introduced a new idea of a lease-leaseback on town property that may be another option to help alleviate financial pressures on the town.
After deliberation, the majority of council members, except Vice Mayor Judith Hasko, agreed that they would not want to declare a fiscal emergency and showed strong support toward becoming a charter town. Hasko said she was “skeptical but open minded” to the idea of declaring a fiscal emergency yet.
Finance Director Tony McFarlane reported that the town currently has $1.5 million in reserve.
The Finance Committee has revised the proposed budget for fiscal year 2024-25 to reduce development and personnel costs by $10,000, which will leave the general fund at $910,000.
McFarlane’s presentation on the revised budget made council members feel at ease on the current state of the town’s finances.
Previously, the town was presented with options of enacting a 2% user utility tax, becoming a charter town, or raising a parcel tax. During the following Finance Committee meeting on Oct. 15, additional forms of revenue were brainstormed including renegotiating the contract with the San Mateo County Sheriff’s Office, renegotiating property taxes with the county and private fundraising.
McFarlane’s presentation approximated that with a UUT the town would gain additional revenue for the next five years but expenses would exceed revenue by fiscal year 2029-30. For a parcel tax, he estimates it would bring $1 million in revenue starting in fiscal year 2025-26 and help offset increases to the sheriff’s contract. Becoming a charter town would generate $1.5 million per year for the town starting in 2027 but would depend on the market rate if houses are sold.
Lease leaseback
Mayor Wernikoff informed the council that she spoke with County Supervisor Ray Mueller and San Mateo County Executive Officer Mike Callagy and learned that the town can utilize a lease leaseback as another option to divert a financial crisis. In a lease leaseback, Portola Valley would lease town owned property to the county and then would lease it back after payments are made.
Once the lease is paid back, the property will return under the control of the town.
Other neighboring cities such as Belmont have signed a 10-year lease leaseback for the construction of its sports complex for $6 million. Half Moon Bay similarly entered a lease leaseback in 2023 for the Half Moon Bay Library to refinance a loan the city had taken to develop an affordable housing project.
For Portola Valley, Mayor Wernikoff explained that interest rates on the lease would be at 2% and would need to be paid back to the county within five years.
“I don’t know what options are available to us in respect to town properties but I know in addition to obvious ones … there are several parcels up in Woodside Highlands so I think we should be thinking about all options,” said Wernikoff.
Town Attorney Catherine Engberg said the county will require an appraisal of the property in this process and the town must make sure that the appraisal is sufficient to cover the needed amount.
Council member Jeff Aalfs found the option of a lease leaseback as a useful tool for the future that can be utilized in times when the town needs additional funds in its budget.
Vice Mayor Hasko expressed concerns on the risks of the town property being sold or forfeited if the town is unable to pay back the county.
“I don’t know enough about this lease leaseback so I am skeptical of the optics of it and possibly the operations of it because in order to get a valuable amount of money, we’d have to put out there a valuable piece of property owned by the town,” said Hasko who called for more information in order to share her thoughts on the best route for the town.
During the Town Council meeting on Nov. 13, the council will take action to approve the town’s budget.
