The very predictable reason why Bay Area town full of billionaires is going broke

A small, wealthy Bay Area community nestled on the eastern slopes of the Santa Cruz Mountains is about to go broke despite the town being full of billionaires.

Portola Valley, about an hour drive south of San Francisco, is home to 4,500 people.

The small town is well known for its wealthy residents and includes the founders of several well known Silicon Valley companies. 

The median income per household in Portola Valley is around $235,000 while mansion-like homes are averaged at close to $4million. 

But the town’s cash reserves are running out fast, driven by rising costs including from a new sheriff’s contract and California’s affordable housing requirements, set by the Democrat state.

The town’s cash reserves are running out fast, driven by rising costs including from a new sheriff’s contract and California ’s affordable housing requirements. Pictured, the Portola Valley Library 

It would essentially compel the town to build low-income housing if they are to receive government funds despite such homes being completely out of place. 

Local officials recently raised concerns about their dwindling cash reserves which despite sitting at around $1.6 million, most of it is set aside and earmarked for retiree benefits.

It means that in next month’s election, some municipalities will be asking voters to approve tax hikes to cover such expenses. 

California Governor Gavin Newsom together with various cities have sued to block a proposed ballot measure that would make it harder to increase state and local taxes.

Despite the affluence of those living in Portola Valley, like other many small towns in the area, they rely on the San Mateo County Sheriff’s Office for policing. 

In 2022, the sheriff’s union negotiated a more expensive labor agreement, and the increased costs are now being passed in turn onto local governments. 

The town’s payments to the sheriff’s office have doubled in the space of just three years from $1 million in 2021 to $2.1 million in 2024.

Aside from the cost of policing the town, Portola Valley is also dealing with the expenses of complying with the state’s affordable housing mandates, which require the town to hire consultants. 

Some have even joked about asking some of the town’s wealthy residents including venture capitalists Reid Hoffman, left, and Vinod Khosl, right, to donate

The average home in Portola Valley is valued at around $3.8 million, but the state wants the town rezone land to make room for more low-income housing

The State of California is pushing the town to rezone land for multi-family housing, and threatening to withhold federal and state grants if it doesn’t meet the requirements. 

The average home in Portola Valley is valued at around $3.8 million, but the state wants the town to rezone land to make room for more low-income housing. 

But the issues facing Portola Valley are not a one-off. Many other California towns are struggling with rising costs, particularly when it comes to the benefits and pensions earned by public employees. 

Such policies are advocated by Vice President Kamala Harris who wants to use  government funding as leverage and a way to push for the development of more affordable housing.

It means local officials are now having to come up with other ways to boost their coffers including introducing a tax on home sales, although such taxes don’t normally generate significant income. 

Some have even joked about asking some of the town’s wealthy residents including venture capitalists Reid Hoffman who co-founded LinkedIn  and co-founder of Sun Microsystems, Vinod Khosla, to donate. The pair have both given to political causes in the past. 

In next month’s election, some municipalities are also asking voters to approve tax hikes to cover such expenses. 

California Governor Gavin Newsom together with various cities have sued to block a proposed ballot measure that would make it harder to increase state and local taxes.