I was recently the guest speaker at a Friends of Holbrook Palmer Park Reception. I spoke about the various Town projects and activities, as well as the Town's Budget.
During my presentation, a question was asked about how much the Town receives from the basic property taxes paid by local residents. I advised that the Town receives approximately 8 1/2 cents for every dollar a local resident pays in basic property taxes. There was a bit of shock to that answer as many believed that the Town receives much more than that.
The basic 1% property tax paid on the assessed valuation of your property is divided up amongst various taxing entities based on your tax rate area. The percentage that the Town receives is not under its control and was set by the State after the passage of Proposition 13 in 1978. In addition to the basic percentage, the Town, County, and the Menlo Park Fire Protection District also receive a portion of ERAF (Educational Revenue Augmentation Fund). ERAF is technically local tax dollars subverted by the State in the 1990s to fund its mandate for local schools. For those counties where basic aid is sufficient, ERAF is returned, in part, to the agencies from whence it came. It is not a guaranteed source of revenue and all or portions of it may be held by the State at any time. As such, the Town does not rely on ERAF as an operational revenue source. Nonetheless, it is added to the Town's allocation of property tax raising our amount by roughly 2 cents for each dollar.
In general, the largest allocations for most Atherton property owners of each dollar of basic property taxes (including any ERAF) is distributed as follows: 23.6 cents goes to the County of San Mateo, 16.6 cents goes to Menlo Park City Elementary Schools, 15.7 cents goes to Menlo Park Fire Protection District, 15.6 cents goes to Sequoia High School, and 10.6 cents goes to the Town of Atherton.
So how does that compare to other agencies in the County?
Some communities impose special assessments, such as landscape and lighting, etc. on top of their basic collection rates. These are shown in the table below. The table shows the basic collection rate (before the State takes away ERAF), adds any other rates of collection, and provides a total. Atherton is toward the bottom of the pack in terms of its tax collection.
Atherton has 2,460 single-family residential parcels with a total taxable value of $9,057,200,997. The average property assessed valuation is approximately $3,681,789. The basic 1% property tax on that valuation is $36,817.89. The Town would receive (including ERAF) $3,887.97 plus the Parcel Tax - average of $750. If the Town's Parcel Tax were added as a percentage to the above table, the Town's total percentage would be 0.1259 moving us up 1 spot in the table. It's important to recognize that nearly every community in the list above Atherton has commercial sales tax as a revenue source in addition to what they receive in basic residential property taxes. Atherton does not. Basic property taxes represent the largest single revenue source to the Town's operations.
So how do those revenues compare to the operational budget?
In Fiscal Year 2016/17, the Town received $7,525,720 in basic secured property taxes. Compare that to Fiscal Year 2011/12, the Town received $5,947,515. Revenue from basic secured property taxes increased by $1,578,205 over that 5-year period (a little over 5% a year).
Revenue from the Parcel Tax each year is static and restricted at an additional $1,860,000. The Parcel Tax may only be used for capital infrastructure (streets/drainage only) or front-line law enforcement (police services). It is presently divided 80% to capital infrastructure and 20% to front-line law enforcement - it provides for two (2) additional officers beyond basic deployment requirements - one (1) traffic officer and one (1) school resource officer.
The Town's Operational Budget in Fiscal Year 2011/12 was $11,736,304. In Fiscal Year 2016/17, the Town's Operational Budget was $12,406,719. Expenditures increased by $670,415 over that 5-year period (a little over 1% a year).
In Fiscal Year 2016/17, revenue from the basic secured property tax and the front-line law enforcement portion of the parcel tax totaled $7,897,720. Operational expenditures (not capital infrastructure costs) for Fiscal Year 2016/17 totaled $12,406,719. Revenue from the basic secured property taxes and the operational portion of the parcel tax falls far short of the annual requirement for Town operations, let alone the costs required for capital infrastructure.
To close the operational and capital infrastructure funding gap, the Town uses revenue from various other sources, to include:
- 80% of the Parcel Tax for streets/drainage - $1,488,000
- Franchise Fees (CalWater, Refuse Services, Cable) - $793,245
- Business Licenses - $235,916
- Planning/Zoning Fees - $265,300
- Building Permit Fees - $1,720,950
- Police Services Revenues - $95,049
- Public Works Revenues - $324,994
- Park Program Revenues - $256,422
- Other Miscellaneous Grants and Revenues - $334,294
Revenues that come in over and above the Town's operational budget requirements are generally directed to three (3) priorities:
- Paying down any pension or other post employment benefit (OPEB) liabilities
- Contributing toward the Town's Capital Project Needs
- Mandatory Reserve
The Town has met its funding obligation for OPEB and is contributing the full annual required contribution amounts for any pension obligations. The Town also meets its required 35% Mandatory Reserve. That leaves Capital Project needs. The strategy for future revenues over expenditures are directed largely to Capital Project needs in one or more of five (5) Master Plan buckets:
- Civic Center Project
- Drainage Master Plan
- Bicycle & Pedestrian Master Plan
- Park Master Plan
- Streets Master Plan
High-priority projects are identified in each Master Plan and the Council prioritizes each project based on priority, funding required, and timing. These projects are laid out in the Town's 5-Year Capital Improvement Plan (CIP). Over the next 5-years (excluding the Civic Center Project), the Town's CIP allocates $12,812,750 toward drainage, streets/roads, transportation, facilities and park projects - an average of $2,562,550 per year.
For more information on any of the above, feel free to give me a call or send me an email.
* Property Tax Data provided by HdL Coren & Cone