Home to wealthy Silicon Valley executives, the quiet “bedroom community” of Portola Valley is grappling with a financial crisis so deep that some are seeking donations for town improvements.
From a possible new sheriff’s desk at the community hall to bathroom renovations and speed bumps, the Town Council gathered late into the night last week to meticulously scrutinize proposed capital improvements for the upcoming fiscal year.
The small town famed for its wealth is aiming to pass a budget by June 30 — a plan that will shape its financial future.
“My perspective, we’re in an existential crisis. We’ve got to get this right,” Mayor Judith Hasko declared at the May 28 meeting.
Portola Valley, which has a population of less than 4,500 people, is nestled on the eastern slopes of the Santa Cruz Mountains, and is known for its sprawling estates and mansions. It is largely reliant on property taxes and has very little sales tax revenue.
To avert a structural deficit or outright fiscal collapse, the town is evaluating a range of revenue-raising measures, including a ballot initiative that could appear before voters in November 2026. Possible options include a parcel tax, transfer tax, updated user fees, a utility user tax or new sales taxes.
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Hasko’s urgent tone at the meeting centered on the proposal for possible new taxes or other revenue-generating measures. To prepare, the council discussed hiring consulting firms to conduct polling and educational outreach, though even the less-than-$70,000 price tag drew sharp scrutiny.
While the current budget was balanced through staffing and service cuts, town leaders are now searching for longer-term solutions that won’t compromise public services. They’re particularly keen to maintain the quality of life in this Peninsula community, known for its rural ambiance, open spaces and extensive trail network.
“We are currently operating a balanced budget by pausing most capital expenses and not filling vacant positions, scrutinizing all consultant spending,” said Councilmember Rebecca Flynn.
Finance Director Tony McFarlane added, “We’re operating under a balanced budget by not using reserves — but over the past three years, we spent down about $2 million, largely related to implementing the housing element, and we had a 58% increase in just one year with our sheriff’s contract.”
The town’s cash reserves are under mounting pressure, strained by rising costs — notably a $2.6 million San Mateo County Sheriff’s Office contract that has more than doubled from last year and now makes up nearly 30% of the budget — and more than $1 million spent on housing consultants to secure state approval of the town’s housing plan.
California housing regulators decertified Portola Valley’s housing plan last year for allegedly stalling on required rezoning, forcing the town to spend more money on consultants.
Although Portola Valley is now in compliance with state housing laws — as confirmed by the California Department of Housing and Community Development’s tracker — and has achieved over 20% of its required 253 affordable units, residents and critics argue that the town’s steep terrain and limited infrastructure make major rezoning for multi-unit housing unrealistic.
As state regulators crack down on slow-moving cities, housing element critics in Portola Valley have pushed back against what they call a “one-size-fits-all” approach.
Another financial lifeline has emerged in the form of the Portola Valley Fund, a new nonprofit group founded by residents Jon Goulden, John Richards and Sarah Dorahy to support certain public projects through private fundraising.
Earlier in May, the council formally approved the fund and passed a resolution establishing a donation and gift acceptance policy, a necessary step to channel community contributions.
“Portola Valley has a long history of donations supplementing town finances,” Flynn said. “Our residents raised $20 million to rebuild our town center further off the San Andreas fault. The idea is not new, but the nonprofit will now take on more of the administrative and fundraising work.”
Portola Valley counts among its residents figures like LinkedIn co-founder Reid Hoffman and Nike CEO John Donahoe. Yet, in October 2024, the finance committee revealed cash reserves had fallen to just about $3.8 million, much of it already earmarked for salaries and public safety.
“A majority of our budget comes from property taxes,” Flynn said. “Although tax revenue has reliably gone up about 5% a year, our general expenses are rising far faster — benefits, insurance, maintenance, consultants.”
McFarlane said the town is “taking a comprehensive look” at its financial model, launching a user fee study, planning a study for development impact fees, and exploring alternative service delivery methods.
“We’re working closely with our consultants to keep costs in check, define how much service we need, and find the most cost-effective methods for delivery,” he said. “That could include revenue enhancements, cost-sharing with neighboring jurisdictions, and other possible approaches.”
More than 70% of the town’s staff have already left. To survive the current fiscal year, the council slashed the $10 million budget by 25%, cutting deep into operations.
Despite the challenging fiscal outlook ahead, town leaders remain cautiously hopeful. In the coming weeks, the finance committee and council will review the proposed budget and weigh next steps.
“Solutions for our structural deficit will become clear in two weeks during the finance presentations at the next town council meeting,” Flynn said.