On May 23, 2024, a car passes through a turnoff at Portola Valley Town Center. Photo by Anna Hoch-Kenney.
The Portola Valley Town Council was presented with a variety of ways to increase town revenue, with the next step being creating a balanced budget, moving forward with a fiscal emergency declaration, becoming a charter town, or other options. We debated whether to explore it.
Mayor Sarah Wernikov has introduced a new idea: lease-leasebacks of town property, which could be another option to relieve financial pressure on the town.
After deliberation, the majority of City Council members, with the exception of Vice Mayor Judith Hasko, agreed that they did not want to declare a fiscal emergency and expressed strong support for becoming a charter town. Hasko said he was still “skeptical, but open-minded” to the idea of declaring a fiscal emergency.
Treasurer Tony McFarlane reported that the town currently has $1.5 million in reserves.
The Finance Committee amended the proposed budget for fiscal year 2024-25 to reduce development and payroll costs by $10,000, leaving the general fund at $910,000.
Mr. McFarlane’s presentation on the revised budget left council members feeling reassured about the town’s financial situation.
Previously, the town was presented with the options of enacting a 2% user utility charge, becoming a charter town, or increasing the baggage tax. A subsequent Finance Committee meeting on Oct. 15 brainstormed additional forms of revenue, including renegotiating the contract with the San Mateo County Sheriff’s Office, renegotiating property taxes with the county, and private financing. Ta.
McFarlane’s presentation estimated that while the UUT would provide the town with additional revenue for the next five years, expenses would exceed revenue by the 2029-30 fiscal year. As for the parcel tax, he estimates it will bring in $1 million in revenue starting in fiscal year 2025-26, which will help offset the increase in sheriff’s contracts. Becoming a charter town would generate $1.5 million a year for the town starting in 2027, but that would depend on the market value of the homes if they were sold.
Lease/Leaseback
Mayor Wernikov informed the council that he has spoken with County Supervisor Ray Moeller and San Mateo County Executive Mike Callagy and learned that the town could utilize lease-leaseback as another option to avoid financial crisis. A lease-leaseback arrangement involves Portola Valley leasing town-owned property to the county and then leasing it back after payments have been made.
Once the rent is repaid, the land will return to town control.
Other nearby cities, such as Belmont, have signed 10-year leaseback agreements for $6 million to build sports complexes. The City of Half Moon Bay similarly entered into a 2023 leaseback for the Half Moon Bay Library to refinance a loan the city received to develop an affordable housing project.
In Portola Valley’s case, Mayor Wernikov explained that the lease has a 2% interest rate and must be repaid to the county within five years.
“We don’t know what options we have in terms of real estate in town, but in addition to the obvious options… there is some land available in Woodside Highlands, so we need to consider all options. I think so,” Wernikov said.
Town Attorney Katherine Enberg said the county requires an appraisal of the property in the process, and the town needs to make sure the appraised value is sufficient to cover the required amount. Ta.
Councilman Jeff Ahlfus found the lease-leaseback option to be a useful tool to use when the town needs additional funds in its budget in the future.
Deputy Mayor Hasko expressed concern about the risk of town property being sold or confiscated if the town is unable to repay the county.
“I don’t have enough knowledge about this lease-leaseback, so I’m skeptical about its optics and perhaps its operation, because in order to get valuable amounts of money, you have to put valuable assets out there. “The town owns it,” said Hasko, who asked for more information to share her thoughts on the best route for the town.
At the Nov. 13 Town Council meeting, council will take action to approve the town’s budget.
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