Dear Councilmembers,
I am writing as a Menlo Park resident who has been following the FY 2026-27
budget closely. I developed a tool to help contextualize year-over-year
changes, funding sources, and to further distill the complexity of
multi-fund, multi-year budgeting. Its at menloparkbudget.com and may help
anyone wrap their head around the complex budget hearing discussion. I want
to share 3 concerns and 3 suggestions for what we might do next ahead of
the meeting:
Three concerns
*1. **The reserve trajectory.*** The FY 2026-27 proposed budget shows a
$2.5 million baseline deficit, balanced through $2.5 million of one-time
unassigned fund balance drawdown. Menlo Parks General Fund reserve is 37%
of operating expense, which is the lowest among the eight comparable San
Mateo County cities (peers average above 80 percent). The 5-year forecast
shows the Emergency Contingency Reserve fully depleting by FY 2029-30, with
roughly $22 million of cumulative operating deficits through FY 2030-31.
Drawing reserves to balance is a one-time source, not a structural fix.
*2. **The proposed $703,000 in cuts works against stated Council
priorities, and direct community input.*** The $43,000 cut to Downtown
median and street tree lighting and the $105,000 cut to Safe Routes to
School reduce funding for programs that both Council and residents have
named as priorities. In the Citys annual community input analysis,
Downtown vibrancy ranked #1 (244 respondents) and Safe Routes ranked #3
(174 respondents). These are not abstract priorities, they are what
residents directly asked the City to focus on. Council and the public
deserve to see a side-by-side comparison of alternative paths to closing
the $2.5 million baseline before any cuts are adopted. These alternatives
could include vacancy savings, deferring or phasing other expenditures,
mid-year revenue actions, or right-sizing recent policy commitments where
utilization is running below forecast. Small cuts add up quickly in their
cumulative effect on Menlo Parks quality, and they do not address the
structural mismatch driving the deficit. The risk is degrading community
services without making meaningful progress on the underlying structural
problem.
*3. **Major grant-funded project activity is not visible in the published
5-year CIP, and grant rules can shift costs back to the General Fund.***
The FY 2026-31 Proposed CIP shows $830,000 for the Middle Avenue
Undercrossing across the entire 5-year window; the June 8 Planning
Commission staff report describes approximately $16.79 million currently
available in City and grant funding, plus $9 million in transfer to
Caltrain, plus Stanfords contingent $6.34 million, plus an SS4A grant
pending. Separately, the June 9 staff report includes a $426,814 General
Fund appropriation absorbing BHCDC indirect costs because those costs are
not grant-reimbursable, a documented case of the structural pattern where
grant rules push indirect costs back to the General Fund. The same risk
pattern applies to most major grant-funded capital projects, including the
Middle Avenue Undercrossing and many others. The broader principle we must
establish is transparency: the published budget should surface the full
scope and cost of every capital project so that Council and residents see
the true General Fund exposure in advance, even when grants cover all or
part of the work.
Three suggestions for what we might do next
*1. Stand up a Section 115 Trust for pension and OPEB stabilization.* A
cost-volatility management tool that lets the City absorb CalPERS rate
spikes without service cuts. Peer cities in San Mateo County including
Burlingame, San Bruno, Foster City, and Belmont have stood these up.
*2. Add a commercial vacancy tax to the November 2028 revenue measures
shortlist.* San Francisco implemented one to discourage commercial property
owners from holding storefronts vacant beyond a threshold. The mechanism
generates modest direct revenue and creates behavioral pressure that aligns
directly with Downtown vibrancy as a stated Council priority.
*3. Quantify forward-year indirect cost exposure on grant-funded capital
projects at the mid-year budget review.* The magnitude of grant-rule
cost-shift back to the General Fund is non-trivial. Quantifying this
exposure for the Middle Avenue Undercrossing and other major grant-funded
projects would give Council and residents a clearer view of what share of
"grant-funded" project budgets will actually fall on the General Fund
through indirect costs, federal match requirements, cost overruns, and
reimbursement timing.
Thank you for the careful work this cycle and for considering these
suggestions.
Thanks,
Laura Melahn
