Amid Wealth, a Town Hall Poorhouse

In this leafy haven of wealth and fame, ivy-skirted homes sell for seven figures and annual incomes average $330,000. Silicon Valley kings and venture capitalists mix at the polo club. Stock guru Charles Schwab wakes up here. Willie Mays lives around the corner.

But there’s trouble in this tiny town, ranked the third-richest in the United States by Worth magazine. Smart and savvy Atherton is awash in controversy--and struggling to pay its bills.

Atherton’s police chief recently resigned after being charged with voter fraud. Town leaders forced out the city manager amid complaints that he had a better grip on his tennis game than the municipal ledger.

Civic ire has also been ignited over sloppy record keeping at Town Hall, a $22,000 settlement over the botched sale of a police dog, and the practice of handing out city credit cards and cellular phones to even the lowliest municipal workers.

Residents--normally too absorbed with private enterprise, social engagements and family to give city governance much heed--lashed out at their leaders this month, refusing to renew a $750-a-home tax that fuels a quarter of the city’s $6.2-million annual budget.

“I’ve never seen it so ugly,” said Mayor Nan Chapman, a 20-year veteran at Town Hall. “All we’ve been doing is putting out fires. We’ve been almost paralyzed.”

The town’s misfortunes have made regular headlines in Bay Area newspapers big and small. From the aisles of Draeger’s gourmet market to the Atherton Dames charity club, denizens are rankled by this surge of municipal infamy.

“It used to be the only time you’d see Atherton in the paper was for marriages, births or deaths,” said Bob Huber, 72. “We’ve got this beautiful little area. We don’t need this negative publicity.”

Homes Boast Marble and Faux Michelangelo

None of the fuss, of course, would be of much note if it weren’t Atherton.

This is, after all, the burg where an average home sells for $2.3 million. Around here, dot-com millionaires sweep into town and erect Mediterranean-style mansions, heavy on the French limestone and marble. Joe Montana’s place, replete with faux Sistine Chapel ceiling, just went on the block for $20 million.

Though it is surrounded by a sea of Silicon Valley suburbia, the smallest lot is an acre. Oak and ash trees arch along peaceful lanes meandering past high stone walls and wrought-iron gates.

But not a single commercial enterprise dots the town’s immaculate six square miles, and therein lies one root of the current problem. The ban on private enterprise dates to 1923, when forefathers rushed to incorporate the town--and preserve its bucolic appeal--before neighboring Menlo Park could gobble it up.

This absence of business hits town coffers hard. Atherton’s government runs solely on property taxes, and not much of them--the town gets back only 8 cents on every dollar collected by the state. The revenue shortfall grew particularly worrisome after tax-cutting Proposition 13 in 1979.

To keep the civic machinery running, residents approved the first special parcel tax in 1980 and have regularly renewed it.

But not this year.

The high jinks at Town Hall, a collection of sedate old homes next to the tile-roofed train station, have unraveled the faith this community of 8,000 has long held in the local government.

Most of the complaints have focused on Don Guluzzy, the former city manager, and erstwhile Police Chief Steve Cader.

The town’s toppled top managers “didn’t exercise a lot of common sense and good judgment,” said Ralph Freedman, the interim manager. Brown Taylor, the interim police chief, called the department top-heavy and dysfunctional.

Cader drew attention tooling around town in a $40,000 sport utility vehicle leased by the city. The former chief was investigated last year by the San Mateo County district attorney for allegedly using the department’s database to check criminal records of family members and business associates, city officials say. They also said Cader cost the town more than $5,000 in overtime pay while helping a private security firm schedule off-duty officers to provide protection at the estate of Oracle chief Larry Ellison.

In December, prosecutors charged Cader with election fraud for registering to vote in Atherton even though he didn’t live there. His trial on the misdemeanor charge is scheduled for May. Cader could not be reached and his attorney did not return phone calls for comment.

With Guluzzy, who also declined to be interviewed, the complaints are more about benign neglect. Disgruntled residents say he seemed more concerned about keeping the six tennis courts at the town’s only park up to snuff than about keeping a careful eye on city affairs.

On Guluzzy’s watch, the city finance director got an $18,000 windfall when she left last year for another job. It turned out she hadn’t bothered to process a pay raise she had gotten a few years earlier, according to city officials. There also were nettlesome legal tiffs, like the more than $25,000 the city paid residents of adjoining Menlo Park over a heritage tree a municipal work crew toppled by mistake.

“Here’s the manager going out to lunch at the most expensive places around. We don’t know who with, we don’t know why,” said John Sisson, a leader of a residents group seeking reform. “Here’s the police chief with two Palm Pilots, $559.90 each. And the chief had two!”

Sisson and other naysayers save their biggest gripes for City Council members, whom they accuse of ignoring the mess and then acting slowly to clean it up.

“They’re not watching the store,” Sisson said. Kathy McKeithen called the council arrogant and said the leaders have “lost touch with the people.”

New Fees, Assessments on the Horizon

Mayor Chapman conceded that former administrators had grown sloppy, but said that an outside audit had found no evidence of fraud or malfeasance. A lot of the problems, she said, “have been PR mistakes.”

The town faces severe financial pains in the near future.

Freedman has outlined plans to take an ax to operations. He wants to boost revenues by raising building fees and establishing new assessments. In Atherton, half the home security systems are wired to the Police Department, but the city may charge for the service.

“Now,” said the mayor, “we’re going to have to nickel-and-dime people to survive.”

Chapman said she won’t be surprised if some high-profile residents, irked by the controversy, simply move away.

Some residents wonder aloud why there’s been such an uproar over a few thousand dollars here, a few thousand there, particularly in a wealthy town like Atherton.

Others beg to differ. Howard “Sandy” Crittenden III, a lifelong Atherton resident, said that for him the issue boils down to a matter of principles.

“I’m a typical conservative Republican,” said Crittenden, 47, a commercial real estate investor. “I hate seeing this waste in my backyard, with the council members I elect.”