Agenda packet — Capitola City Council, May 21, 2026

REVISED 5/20/2026 AT 10:20 AM
City of Capitola
Special City Council Meeting - Budget
Agenda
Thursday, May 21, 2026 – 6:00 PM
City Council Chambers
420 Capitola Avenue, Capitola, CA 95010
Mayor: Margaux Morgan
Vice Mayor: Gerry Jensen
Council Members: Joe Clarke, Melinda Orbach, Susan Westman Special Meeting of the Capitola City Council – 6 PM

1. Roll Call and Pledge of Allegiance
Council Members Joe Clarke, Melinda Orbach, Susan Westman, Vice Mayor Gerry Jensen, and Mayor Margaux Morgan

2. Additions and Deletions to the Agenda

3. Additional Materials
Additional information related to an agenda item on this agenda and submitted to the City after distribution of the agenda packet pursuant to Government Code §54957.5. All correspondence received prior to 5:00 p.m. on the Wednesday preceding a Council Meeting will be distributed to Councilmembers to review prior to the meeting. Information submitted after 5 p.m. on that Wednesday may not have time to reach Councilmembers, nor be read by them prior to consideration of an item.

A. Item 5A - Correspondence Received
B. Item 5C - Correspondence Received

4. Oral Communications by Members of the Public
Oral Communications allows time for members of the Public to address the City Council on any “Consent Item” on tonight’s agenda, or on any topic within the jurisdiction of the City that is not on the “General Government/Public Hearings” section of the Agenda. Members of the public may speak for up to three minutes, unless otherwise specified by the Mayor. Individuals may not speak more than once during Oral Communications. All speakers must address the entire legislative body and will not be permitted to engage in dialogue. A maximum of 30 minutes is set aside for Oral Communications.

5. General Government / Public Hearings
All items listed in “General Government / Public Hearings” are intended to provide an opportunity for public discussion of each item listed. The following procedure pertains to each General Government item: 1) Staff explanation; 2) Council questions; 3) Public comment; 4) Council deliberation; 5) Decision.

A. Presentation of the Proposed Fiscal Year 2026-27 Operation Budget and 5-year Capital Improvement Program
1 Special City Council Meeting - Budget Agenda – May 21, 2026 City of Capitola Page 2
Recommended Action: Receive the proposed budget, provide staff direction, and either: 1) continue budget deliberations to the next scheduled budget hearing on June 11, 2026, or 2) direct staff to prepare the documents for final budget adoption at a regular meeting in June and cancel future planned budget hearings.

B. Reprogramming of RTIP Funds for Capitola Trestle
Recommended Action: Authorize staff to submit a request to the Santa Cruz County Regional Transportation Commission (RTC) to reprogram up to $200,000 in Regional Transportation Improvement Program (RTIP) funds currently programmed to the City to support preliminary planning work for the Capitola Trestle.

C. Programming of Remaining RTIP Funds to Support Grant Leveraging and Project Development Recommended Action: Receive information regarding available transportation funding and provide direction to staff to: 1) Program approximately $50,000 in remaining RTIP funds toward local match requirements for the Bay Avenue improvements; 2) Reserve the remaining approximately $300,000 in RTIP funds to leverage future Safe Streets and Roads for All (SS4A) grant funding for additional active transportation and roadway safety improvements; and 3) Program approximately $50,000 in remaining RTIP funds toward development of a shovel-ready Community Development Block Grant (CDBG) application for roadway and pedestrian improvements within the Cliffwood Heights neighborhood.

6. Adjournment
The next regularly scheduled City Council meeting is on May 28, 2026, at 6:00 PM. _____________________________________________________
How to View the Meeting
Meetings are open to the public for in-person attendance at the Capitola City Council Chambers located at 420 Capitola Avenue, Capitola, California, 95010.

Other ways to Watch:

Spectrum Cable Television channel 8
City of Capitola, California YouTube Channel
How to Provide Comments to the City Council
Members of the public may provide public comments to the City Council in-person during the meeting.

If you are unable to attend in-person, please email your comments to [email protected] and they will be included as a part of the record for the meeting.

Notice regarding City Council: The City Council meets on the 2nd and 4th Thursday of each month at 6:00 p.m. in the City Hall Council Chambers located at 420 Capitola Avenue, Capitola.

Agenda and Agenda Packet Materials: The City Council Agenda and the complete Agenda Packet are available for review on the City’s website and at Capitola City Hall prior to the meeting. Need more information? Contact the City Clerk’s office at 831-475-7300.

Agenda Materials Distributed after Distribution of the Agenda Packet: Pursuant to Government Code §54957.5, materials related to an agenda item submitted after distribution of the agenda packet are available for public inspection at the Reception Office at City Hall, 420 Capitola Avenue, Capitola, California, during normal business hours.

Americans with Disabilities Act: Disability-related aids or services are available to enable persons with a disability to participate in this meeting consistent with the Federal Americans with Disabilities Act of 1990. Assisted listening devices are available for individuals with hearing impairments at the meeting in the City Council Chambers. Should you require special accommodations to participate in the meeting due to a disability, please contact the City Clerk’s 2 Special City Council Meeting - Budget Agenda – May 21, 2026 City of Capitola Page 3
office at least 24 hours in advance of the meeting at 831-475-7300. In an effort to accommodate individuals with environmental sensitivities, attendees are requested to refrain from wearing perfumes and other scented products.

Si desea asistir a esta reunión pública y necesita ayuda - como un intérprete de lenguaje de señas americano, español u otro equipo especial - favor de llamar al Departamento de la Secretaría de la Ciudad al 831-475-7300 al menos tres días antes para que podamos coordinar dicha asistencia especial o envié un correo electrónico a [email protected].

Televised Meetings: City Council meetings are cablecast “Live” on Charter Communications Cable TV Channel 8 and are recorded to be rebroadcasted at 8:00 a.m. on the Wednesday following the meetings and at 1:00 p.m. on Saturday following the first rebroadcast on Community Television of Santa Cruz County (Charter Channel 71 and Comcast Channel 25). Meetings are streamed “Live” on the City’s website by clicking on the Home Page link “Meeting Agendas/Videos.” Archived meetings can be viewed from the website at any time. 3 1
Gautho, Julia
From: Teresa Green <[email protected]>
Sent: Sunday, May 17, 2026 6:44 PM
To: City Council
Subject: Comments on Item 5A
Dear Council,
I am reviewing the agenda packet for the Budget meeting on May 21st. This question applies to Item 5A.

Issue 1:

Page 25 ends

In November 2024 Capitola voters approved Measure Y, a one-half percent district sales tax replacing Measure F, a one-quarter percent district sales tax. The Measure Y ballot language stated: “To protect essential city services including public safety and emergency services; repair potholes, maintain streets, sidewalks, bike lanes, beaches, the new wharf, and recreation programs for youth; improve traffic safety; and support local businesses, shall City-of-Capitola replace its quarter-percent sales tax, approved by voters in 2016, with a one-half percent sales tax, generating an estimated $2.2 million annually for general government use, for ten years, with independent audits, and all funds staying local?”

Page 15 ends

in 2024 to repeal Measure F and replace it with a new half percent local sales tax for 10 years. Voters passed Measure Y with 67% approval. The City implemented salary adjustments for most of city staff in January 2025 as a result of this tax measure passing to maintain competitive salary ranges.”
My understanding is that all of the Measure Y funding went to Salary adjustments which to me is not in the category of any of the items listed in the Measure that was approved by the voters. Did the council approve this? How can this be legal? Have any independent audits been conducted? If not, I think an audit is called for now. I feel totally misled by the usage of these funds and I guarantee I will not be voting on any future measures unless the funds are allocated to a special fund that can only be used for the reasons specified in the Measure.

Issue 2:

The chart on page 25 that shows Measure Y Revenues of $2,289,167, but Expenditures of $10,532,482. This makes no sense to me.

I would appreciate a response to my concerns.

Thank you.

Teresa J. Green
405 Hill Street, Capitola
4 Item 3 A.
1 Gautho, Julia
From: Malberg, Jim
Sent: Monday, May 18, 2026 3:50 PM
To: Teresa Green
Subject: RE: Comments on Item 5A
Attachments: 2.png; 1.png; Yes On Measure Y Letter.png
Follow Up Flag: Follow up
Flag Status: Flagged
Good afternoon,
Thank you for your email. The City Council approved the Memorandums of Understanding (labor agreements) with the Police Officers Association on May 30, 2024, and with all other labor groups on June 27, 2024. Language regarding equity adjustments contingent upon the passage of the November tax measure, later titled Measure Y, was included in each of the City Council-approved agreements.

Each year, the City is legally required to have its financial statements audited by an independent auditor, including a review of all revenues and expenditures. The City generally contracts with a new audit firm through a competitive selection process every five to six years. Our current auditor, Chaven & Associates, has conducted the City’s last two annual audits, including Measure Y revenue.

The chart on page 25 was provided to help show how much funding is proposed in this year’s budget for items mentioned in the Measure Y ballot language. As Measure Y is a general tax, the funds can be used for any governmental purpose, as determined by the City Council. As the table shows, the City is proposing to spend $10.5 million on the items mentioned in the ballot. Measure Y generates $2.3 million, so other general fund revenue is required to supplement the remaining $8.2 million in services mentioned in the ballot language.

I’ve also included some of the campaign material for your reference. Please let me know if you have any additional questions.

Thanks – Jim
Please note new email address below:

Jim Malberg, Administrative Services Director
City of Capitola
420 Capitola Avenue
Capitola, CA 95010
[email protected]
From: Teresa Green <[email protected]>
Sent: Sunday, May 17, 2026 6:44 PM
To: City Council <[email protected]>
Subject: Comments on Item 5A
5 Item 3 A.
2 Dear Council,
I am reviewing the agenda packet for the Budget meeting on May 21st. This question applies to Item 5A.

Issue 1:

Page 25 ends

Page 15 ends

Issue 2:

The chart on page 25 that shows Measure Y Revenues of $2,289,167, but Expenditures of $10,532,482. This makes no sense to me.

I would appreciate a response to my concerns.

Thank you.

Teresa J. Green
405 Hill Street, Capitola
6 Item 3 A.
7 Item 3 A.
8 Item 3 A.
9 Item 3 A.
1 Gautho, Julia
From: Leslie Nielsen <[email protected]>
Sent: Tuesday, May 19, 2026 11:14 AM
To: City Council; Malberg, Jim
Subject: May 21 Budget Hearing Item 5A - Comment
Staff, Thank you for including a comment in the staff report that you met with the FAC (Finance Advisory Committee) and Council and for highlighting the changes made to the budget.

There were a few additional items asked for by the FAC and Council that you did not mention;

1. A five-year multi year projection showing revenues, expenditures and fund balance included IN the document was requested. The assumptions in the added page appear to be copied and pasted forward each year with no explicit assumptions or policy response modeling. I would like to recommend the City Council require this to be a living document that is updated and reviewed with the Council on a quarterly basis. It should include a forecast for reserve depletion. Campbell and Scotts Valley are good examples of transparency on long term forecasts. This is a great first step in being able to actively evaluate strategies to enhance revenue and control costs.

2. A FAC member asked for a one-page summary on Measure Y forecasted revenue and expenditures. The added table is misleading. The City Manager letter specifically says, “Voters passed Measure Y with 67% approval. The City implemented salary adjustments as a result of this tax.” It was a general government use ballot measure, so just say it like it is and stop trying to defend the use for salaries in year 1, and instead show specific projects in the ballot categories that will be obtained in the new fiscal year by the competitively paid staff. Measure Y is required to balance the budget and expires in 2034. Transparency for new tax measures to replace this will be critical.

3. Council member Westman asked for a one-page summary showing the impact of a 1% increase in TOT fees. Perhaps this can be included in the policy response modeling for the first quarter review.

The budget process overview page says quarterly financial updates are published on the website and that the FAC “discusses elements of the budget” in MARCH. The first FAC discussion for this budget was May 5th this year. Let’s say what we are going to do and do what we say this coming year.

Also, please update the ending fund balance in the City Manager letter $125,445 to the number provided on the table $94,957.

Lastly, thank you for the five-year CIP plan. This provides much better transparency for the public on priorities and how projects are funded. It should be a useful tool for the City Council to manage priorities. I am a little confused on the distinction between “Active / Funded “ (eg. Stockton Bridge) and “Partially Funded” ( Cliff Drive Resiliency Project), both of which seem to be partially funded to me. Please confirm that this will also be updated, communicated and published quarterly. 10 Item 3 A.
2 Thank you,
Leslie Nielsen
FAC Member
11 Item 3 A.
12 Item 3 A.
13 Item 3 A.

Lack of Transparency
Measure Y
14 Item 3 A.

What was proposed?
15 Item 3 A.

Where are the reviews?
No Use of Revenue Audit!
No Financial Advisory Committee Review!
No City Council Review
City of Capitola is in Financial Trouble!
Reserves are Depleting
No Longterm forecast
How is the City Council supposed to
make sound decisions?
16 Item 3 A.

What Did Measure Y get us?
17 Item 3 A.
18 Item 3 A.

Anthony Rovai
Financial Planner & Volunteer Financial Advisory Committee Footnotes:
https://www.cityofcapitola.gov/301/Employee-Salary-Information-MOUs https://votescount.santacruzcountyca.gov/Portals/16/nov24/Measure%20Y.pdf 19 Item 3 A.
1 Gautho, Julia
From: Goldstein, Jamie
Sent: Monday, May 18, 2026 6:00 PM
To: City Council
Cc: Department Heads; Tran, Marc
Subject: Update
Follow Up Flag: Follow up
Flag Status: Flagged
RTIP Item
I know the agenda report for the grant item on this week’s agenda has a lot of moving pieces. In an eƯort to help explain the concepts maybe a bit more clearly Jessica and I put together the following table that summarizes how the existing funding could be shifted around to maximize grant funding potential. We will present this on Thursday night.
20 Item 3 B.
2 Jamie Goldstein, City Manager
City of Capitola
831.475.7300
21 Item 3 B.

Capitola City Council
Agenda Report
Meeting: May 21, 2026
From: Finance Department
Subject: Presentation of the Proposed Fiscal Year 2026-27 Operation Budget and 5-year Capital Improvement Program
Recommended Action: Receive the proposed budget, provide staff direction, and either: 1) continue budget deliberations to the next scheduled budget hearing on June 11, 2026, or 2) direct staff to prepare the documents for final budget adoption at a regular meeting in June and cancel future planned budget hearings.

Discussion: The City of Capitola proposed Fiscal Year (FY) 2026-27 and FY 2027-28 Operating Budget is a two-year financial plan for the City as outlined by Administrative Policy III-3: Financial Management Policies. The proposed budget was prepared based on a combination of known factors, such as increases in CalPERS (Public Employees’ Retirement System) costs, and conservative estimates for both revenues and expenditures.

The operating budget and Five-Year Capital Improvement Program (CIP) are the City’s operating plan and a primary mechanism by which the Council’s goals and vision for the City are transmitted to staff for implementation.

The operating budget document is organized to present information in several ways. General Fund revenues and expenditures are shown to provide information about longer-term patterns and overall fiscal stability, then revenues and expenditures for the City’s various departments are shown to provide additional detail and information about the City’s programs and projects.

The proposed CIP is organized to present a citywide overview of capital investment by fiscal year and funding source. The financial summary tables provide a citywide overview of projects while the detail project sheets present individual project descriptions, estimated costs, funding sources, and schedules. Project detail sheets include active projects, planning efforts, concept projects, completed projects, and emerging capital needs identified through ongoing infrastructure and facility planning.

Overall, the FY 2026-27 proposed budget is structurally balanced, as well as projections for FY 2027-28. However, current financial forecasts show that the budget becomes unbalanced beginning in FY 2028-29. The FY 2026-27 budget maintains services for residents of Capitola while simultaneously providing resources to address City Council Goals & Priorities.

Nevertheless, the City must also remain focused on the long-term budget picture, which includes unpredictable CalPERS costs, and a challenging economy in coming years.

The Finance Advisory Committee (FAC) met on May 5
th and the City Council on May 6th to review
the FY 2026-75 Proposed Budget. Based on City Council direction, the following changes have been incorporated into the proposed budget:
 City Council
 Reduced Community Television $19,000 – moved to PEG Special Revenue Fund  Reduced Training & Memberships by $9,000
22 Item 5 A.
 Administrative Services
 Personnel – reduced retiree healthcare premiums - $50,300, paid from Other Post Employment Benefit (OPEB)Trust
 Personnel – eliminated annual OPEB Trust contribution - $67,050  Finance – Increased contract services - $20,000 for fiscal transparency software  Police Department
 Reduced contract services $54,189 – Emergency Communication Center  Added back Multi-Service Officer position - $94,624
 Community & Economic Development
 Increased contract services – Economic Development - $20,000  Equipment Internal Service Fund
 Corrected - $100,000 general fund transfer and $100,000 from PD  $75,000 – patrol vehicle, $25,000 Gem car - PD
The result of these changes has increased the estimated general fund ending balance by $64,915 for a total of $94,957, which is significantly below the target balance of $500,000. The planned FY 2027-28 budget is projected to increase the fund balance to approximately $398,000.

The FAC will meet again on May 26, 2026, to review the 2nd draft of the proposed operating budget and the CIP.

The draft operating budget and CIP have been distributed and are available for public review at City Hall, as well as on the City’s website.

Fiscal Impact: The goal of these deliberations is to determine the allocation of funds to maintain a balanced budget, provide for essential City services, and support priority projects.

Attachments:

1. FY 2026-27 Proposed Operating Budget

2. Five Year Capital Improvement Program
Report Prepared By: Jim Malberg, Administrative Services Director Reviewed By: Julia Gautho, City Clerk
Approved By: Jamie Goldstein, City Manager
23 Item 5 A.

PROPOSED BUDGET
FISCAL YEAR 2026-27

CITY OF CAPITOLA
Capitola, California
2nd Draft May 15, 2026
24 Item 5 A.

CITY COUNCIL
Margaux Morgan, Mayor
Gerry Jensen, Vice Mayor
Joe Clarke
Melinda Orbach
Susan Westman
Jamie Goldstein, City Manager
Sarah Ryan, Chief of Police
Jessica Kahn, Public Works Director
Jim Malberg, Administrative Services Director / Treasurer Katie Herlihy, Community & Economic Development Director Nikki Bryant, Community Services & Recreation Director
Chloe Woodmansee, Assistant to the City Manager
Julia Gautho, City Clerk
25 Item 5 A.

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26 Item 5 A.

California Society of Municipal
Finance Officers
Certificate of Award
Operating Budget Excellence Award
Fiscal Year 2025-2026
Presented to the
City of Capitola
For meeting the criteria established to achieve a CSMFO Award in Budgeting.

February 5, 2026
Jennifer Wakeman James Russell-Field, Chair 2025 CSMFO President Recognition Committee Dedicated to Excellence in Municipal Financial Reporting 27 Item 5 A.

TABLE OF CONTENTS
Mission Statement ............................................................................................................. 1 City Manager’s Budget Message ..................................................................................... .3 Summary Information ……………………………………………… ............................ …….10 General Fund Revenues ................................................................................................. 23 General Fund Expenditures…………… .......................................................................... 32 Department Overview ................................................................................................... 49 City Council ......................................................................................................... 50 City Attorney ........................................................................................................ 51 City Manager ....................................................................................................... 52 Administrative Services……………………………………………………………….54
Police……………………………………………………………………………………57
Public Works…………………………………………………………………………...62
Community & Economic Development .................. ………………………………...67 Community Services and Recreation ............................... ………………………...71 Capitola Museum ................................................................................................. 73 Internal Service Funds .................................................................................................. 74 Stores Fund ......................................................................................................... 76 Information Technology Fund .............................................................................. 77 Equipment Replacement Fund ........................................................................... 78 Self-Insurance Liability Fund ............................................................................... 79 Workers’ Compensation Fund ............................................................................. 80 Compensated Absences Fund ............................................................................ 81 Special Revenue Funds ................................................................................................ 82 Supplemental Law Enforcement Services ........................................................... 85 Restricted Transient Occupancy Tax (TOT) ........................................................ 86 Road Maintenance & Rehabilitation Act (SB1). ................................................... 87 RTC Streets.………………………………………………………………… .............. 88 Gas Tax……………………………………….………………………… ............. . ….89
Wharf ………. ...................................................................................................... 90 General Plan Update and Maintenance .............................................................. 91 Green Building Education ................................................................................... 92 Public Art ............................................................................................................. 93 Parking Reserve … ............................................................................................ .94 Technology Fee .................................................................................................. 95 Public Education & Government Cable TV Access ............................................. 96 Capitola Village & Wharf BIA .............................................................................. 97 Community Development Block Grants (CDBG) ................................................ 98 CDBG Program Income. ...................................................................................... 99 Library………….……………………………………………… ............................... 100 HOME Program Reuse .................................................................................... 101 Housing Trust ................................................................................................... 102 Permanent Local Housing Allocation (PLHA) .................................................... 103 Capitola Housing Successor ............................................................................. 104

28 Item 5 A.

Reserves……. .............................................................................................................. 105 Emergency Reserves ........................................................................................ 107 Contingency Reserves ...................................................................................... 108 PERS Contingency Reserves ............................................................................ 109 Facility Reserves ............................................................................................... 110 Multi-Year Assets & Obligations ................................................................................ 111 City and Joint Powers Authority ......................................................................... 114 Pacific Cove Lease Financing ........................................................................... 115 Beach and Village Lot II Lease Financing ......................................................... 117 29 Item 5 A.

Mission and Values
Mission - Why we’re here
We are a vibrant coastal community committed to delivering dependable, accessible services that foster connection and belonging through participatory governance.

Vision - Where we’re going
The City of Capitola is a thriving, family-friendly community that prioritizes resident needs while fostering a healthy balance between sustainable tourism, economic growth, and coastal environment and lifestyle.

Values – The Capitola Way
 Collaborative Engagement
 Dynamic Innovation
 Fiscal Sustainability
 Resilient Community
 Respectful Service
 Responsible Growth
Strategic Priorities:

1. Accountable Government

2. Attainable Housing

3. Community Safety

4. Economic Opportunity

5. Healthy Families, Community, and Environment

6. Sustainable Infrastructure
Approved March 2025
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Item 5 A.

TO: City Council
FROM: City Manager
SUBJECT: FY 2026-27 Proposed and FY 2027-28 Planned Budget.

CITY MANAGER’S MESSAGE - STATE OF THE CITY
On behalf of City staff, I am pleased to submit the proposed budget for Fiscal Year (FY) 2026-27.

Staff was tasked with developing a budget that continues to deliver the high-quality of services the community is accustomed to while also allocating available resources to City Council goals and strategic priorities. The result is a balanced budget, however the projected ending General Fund balance of $125,445 is well below the typical minimum target general fund balance of $500,000.

The fund balance in the General Fund is projected to remain positive for the next fiscal year, however, based on known increases related to CalPERS pension costs and current assumptions regarding inflation, the General Fund will become structurally imbalanced in FY 2028-29. With overwhelming voter approval, Measure Y became a new revenue stream in early 2025. That revenue is critical in the proposed FY 2026-27 budget to avoid deep service level cuts. Without the Measure Y revenue, the City would have likely had to reduce staffing by approximately 6% this fiscal year, eliminate all discretionary contracts and eliminate funding for nonprofit service providers. More significant cuts would likely have been necessary in 2027, which was the expiration of Measure F.

The budget provides resources to maintain a high level of service for Capitola residents this coming fiscal year. Nevertheless, the City must also remain focused on the long-term budget picture, which not only includes a great deal of uncertainty around general fund revenues but must continue to address increasing pension costs. The erratic revenue data, uncertain economic stability at the national level, and projected rising pension costs will likely result in very challenging budgetary decisions for several years. In the coming fiscal year, staff will continue to closely monitor general fund revenues, paying extra attention to sales and transient occupancy tax performance, and continue to report to the City Council on a regular basis. Additionally, staff will develop options for Council consideration to balance the near- and longer-term budgets as well as focus on the long-term structural budget issues.

Storm damages from 2023 and 2024 were categorized into fifteen projects of which FEMA and Cal OES have approved fourteen for reimbursement totaling $291,918 with the City responsible for matching funds of $8,360. To date, we have received $291,918 with $962,069 still outstanding for wharf repairs.

Staff recommends the City hold off on allocating any additional FEMA/Cal OES reimbursement until those funds are received. One potential use for these funds is to replenish reserve funding used to respond to the recent series of emergency events. 3 32
Item 5 A.

The Capitola Mall remains a major funding source for the City; however, long-term national and local trends have put significant pressure on existing brick-and-mortar retailers to remain competitive with internet options. The Mall was purchased in 2016 by Merlone Geier Partners, which also acquired the old Sears building in 2018. In FY 2019-20 the new owners initiated a public process, including a public meeting and regional survey of residents to begin evaluating options to redevelop the Mall.

City staff remains actively engaged with Mall ownership to help them navigate the development review processes; however, the pandemic put the project on pause. Obviously, the long-term fiscal health of the City is closely related to a successful Mall that meets the community’s needs.

As the outcome of any potential Mall redevelopment is unknown at this time, the site remains a major opportunity, and challenge, as the City evaluates its long-term fiscal position.

In 2016 voters passed Measure F to extend a temporary quarter percent local sales tax for an additional 10 years. The primary purpose of Measure F was to utilize the funding to protect City infrastructure from storms and rising sea levels. The City completed Measure projects , including rebuilding the wharf, flume and jetty earlier than anticipated. In response to early project completion, the City put Measure Y on the ballot in 2024 to repeal Measure F and replace it with a new half percent local sales tax for 10 years. Voters passed Measure Y with 67% approval. The City implemented salary adjustments for most of city staff in January 2025 as a result of this tax measure passing to maintain competitive salary ranges.

BUDGETARY GOALS AND PRINCIPLES
The FY 2026-27 General Fund budget was developed with an emphasis on financial stability and maintaining core programs and services for Capitola residents and visitors. As a first step in developing the Budget, the City Council adopted the 2025-2029 Strategic Plan in the previous year. Budget highlights and proposed changes are presented in consideration of the six priorities included in the plan:
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Item 5 A.

OTHER BUGETARY HIGHLIGHTS AND PROPOSED CHANGES
While the budget was largely prepared to maintain core services and keep expenditures at the lowest level possible, there are several changes identified. 41st Avenue Pavement Rehabilitation and Multimodal Improvements This project rehabilitates pavement and implements multimodal safety improvements along 41st Avenue, a key regional corridor serving residential neighborhoods, commercial areas, and access to State Route 1. The project includes pavement rehabilitation along 41st Avenue, bicycle and pedestrian safety improvements, curb ramp upgrades, and updated pavement striping and signage
Stockton Avenue Bridge
The Stockton Avenue Bridge is a critical connection within Capitola and serves as a primary access route to Capitola Village and the surrounding coastal areas. On August 24, 2023, the City Council accepted $500,000 in grant funding from the California Department of Water Resources for the Stockton Bridge Debris Mitigation Project. The adopted FY 2022–23 budget also allocated $350,000 for the initial phase of the project, bringing total available funding to approximately $850,000.

Cliff Drive Resiliency Project
In January 2023, major storm events caused significant erosion along the bluff southwest of Hooper Beach, undermining a retaining wall originally installed in the mid-1990s. Following this damage, the City received approval from Caltrans and the Federal Highway Administration (FHWA) to pursue permanent improvements through the Emergency Relief (ER) program. The Cliff Drive Resiliency Project aims to stabilize the roadway and protect the critical infrastructure it contains, while also improving public access and pedestrian safety along this important coastal segment in Capitola. The project area extends along cliff drive from the parking area where Portola Drive becomes Cliff Drive to the staircase leading to the beach near the base of the Capitola Wharf—an arterial roadway serving residents, utility infrastructure, and coastal visitors.

Esplanade Park
The project, currently in the design phase following an award of $275,000 from the State Coastal Conservancy, will evaluate sea level rise, coastal flooding, and storm impacts at Esplanade Park and develop conceptual design alternatives to improve long-term resilience and maintain public coastal access.

Monterey Park
The FY 2025-26 provided initial seed money to begin conceptual planning for a small play structure at Monterey Park. Staff plans to begin initial neighbor outreach in Spring.

Countywide Radio Project
FY 2026-27 Budget proposes using general fund and restricted SLEF funding to fund the City’s portion of the major countywide public safety radio upgrade project known as RING. The project will facilitate high-quality radio frequency across Santa Cruz County and increase interagency law enforcement collaboration. The project includes significant new radio infrastructure in the City, 5 34
Item 5 A.
compliant with new DOJ standards. The County, which is leading this effort, plans to enter into a contract with all the public safety organizations in the County and a vendor this fall. While final costs to the City have not yet been established, staff anticipates the cost will be roughly $45,000 a year for the next 10-years.

Measure S
Measure S is a special tax on all developed property within the Santa Cruz Public Libraries District boundary (all of Santa Cruz County except the City of Watsonville); it was approved by voters in 2016 for a 30-year period. Tax funds are restricted to repair, upgrade, and modernize the local library facilities. The Santa Cruz Libraries Financing Authority Community Facilities District was formed for the purpose of levying the special tax to each of the four members: Cities of Capitola, Santa Cruz, and Scotts Valley and the County of Santa Cruz.

The City of Capitola completed the $16.5 million Capitola Branch library in 2022 using $10,476,529 in Measure S funding, funds from the County Library Fund, former Redevelopment Agency Funds, and $856,000 in City general fund.

Recent projections indicate that Measure S will generate more revenue than initially anticipated, with the City expected to receive approximately $165,000 annually for eligible library expenditures. The FY 2026–27 Budget proposes allocating this amount to the General Fund to continue repaying the $856,000 previously advanced for the construction of the Capitola Library.

General Fund Balance
The general fund balance is estimated to end FY 2025-26 below the minimum target of $500,000.

Additionally, both the Contingency and Emergency reserves are currently below their target balance amounts pending reimbursements from FEMA and Cal OES. The FY 2026-27 Proposed Budget currently does not return the general fund to the $500,000 target balance; staff will be updating year end estimates once the Jan. – Mar. sales tax is received at the end of May.

Current revenue and expenditure projections show revenues not keeping pace with expenditures, requiring usage of Measure Y revenues to structurally balance the budget in the 5-year forecast.

Staff will continue to closely monitor revenues, expenditures, and fund balance throughout FY 2026-27 and will report to the Council during the mid-year budget report.

PRIOR YEAR ACCOMPLISHMENTS
In FY 2025-26 the City completed several significant projects, which provided residents and visitors with increased recreational and public art opportunities, while continuing to strengthen public safety and community development activities. Some of the City’s accomplishments include:
 Redesigned the City’s website to enhance user experience, improve accessibility, and modernize digital engagement.
 Completed the Community Center Renovation project.
 Completed the Treasure Cove Playground project.
 Completed Jade Street Park restroom renovation
 Completed the Rispin Park project.
 Completed the FY24/25 Pavement Management Program
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Item 5 A.
 Updated and amended zoning code and general plan to facilitate housing production on the Capitola Mall Site.
 Completed Housing Element-required rezones of multi residential sites in the City  Worked with Kings Plaza property owners to bring Tesla dealership to Capitola  Implemented a system that allows the public to pay for business licenses and other city services such as permits online.
 Received more than $1,200,000 in grant funding for key projects such as Esplanade Park redesign, traffic and sidewalk improvements and key public safety efforts.  Bid and awarded the 41st Avenue Pavement Rehabilitation and Multimodal Improvements project contract, construction begins summer 2026.

Goal Setting
On March 26, City Council received a presentation regarding ongoing projects and future potential projects, programs and goals, and identified potential new goals. At that meeting, the following ongoing CIP projects were identified by staff.

Project Current Phase Status / Key Milestone
Stockton Bridge
Rehabilitation
Assessment / Design Structural evaluation underway; results expected Spring 2026.

Community Center
Complex
Construction Construction underway; opening
scheduled for Summer 2026.

Cliff Drive Planning / Engineering Technical studies underway; advancing toward environmental clearance and
funding for construction phases.

Park at Rispin
Mansion: Landscaping
and Additional
Elements
Implementation Park open; funding needed for additional landscaping; community fundraiser
identified for additional elements (MOU in
April). Measure Q grant for restoration and
interpretive signs submitted.
41st Avenue Pavement
Rehabilitation and
Multimodal
Improvements
Construction Bids
Received
Council contract approved
Pavement
Management
Ongoing Program Annual street resurfacing and pavement
preservation program (FY 2025-26: 41st
Avenue Rehab & Multimodal; FY 2026-27:
residential street project)
Esplanade Park
Design
Concept Planning /
Design
$275,000 Coastal Conservancy grant
award. RFP for design team issued.

Grand Avenue
Pathway (Depot Hill)
Feasibility / Alignment
Study
4/9: Council action: funding could be
considered during Budget process
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Item 5 A.

Bay Avenue Corridor
Improvements
Design Development Corridor study and design underway with RTC funding. Council review of draft
design scheduled in April.

Five-Year Capital
Improvement Program
Program Development Draft FY 2026-31 CIP anticipated for Council review in Spring 2026.

Capitola Wharf Master
Plan
Project Planning Design presentation scheduled for Council review in April.

Climate Action Plan
Update
Project Planning Update underway; completion anticipated within ~6 months.

Active Transportation
Plan (ATP)
Project Planning Planning and community outreach to begin May 2026.

The following projects and programs were proposed by staff at the City Council Goal setting meeting.

Department Draft Goals
City Manager Election: three Council seats
Employee contract negotiations
Beach Lifeguard Service Organizational Study
Police Anti Human Trafficking Ordinance
Countywide records management system rollout
Continued funding for: Drone Program, RING, Body
Worn Cameras
Community & Economic Development Continue working with Mall, Village hotel owners and other economic development opportunities.

Ordinance updates: Community Benefits, ADUs,
Bicycle Parking, Hotel Incentives
Review Outdoor Dinning Program
Development impact fees - 41st Avenue
Housing Element Implementation: Down payment
assistance program, update nexus study for rental
housing.

Community Services & Recreation Update Community Center rental package Explore and develop new opportunities related to
renovated facilities
Administrative Services Improve fiscal transparency
Transition to paperless HR Division
Return TOT administration to internal staff
Also, during the goal setting session City Council identified the following potential new goals for next fiscal year. The table below notes if a majority of the members mentioned the item at the meeting as a goal, and if the item would require funding or just staff time. 8 37
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Funding
Required
Goal Majority of
Council
Notes
Yes Evaluation opportunity to use
Trestle
✔
Yes Seek funding for sidewalk infill
Projects
$125k funding from RTC
obtained in FY 25/26
Yes Examine if bike-detection
technology can help with bike
safety

No Look at rent control costs/risks
No Report back on Economic
Development opportunities

No Options to manage PERS costs
No Review options for revenue-neutral
programs in

No Ensure CS&R balance of programs
for youth and seniors

No Community engagement (fun facts)
Yes Ebike safety plan Program initiated 2026
No Parking rate evaluation Rates last updated in 2024
Yes Village clean up & new trashcans
No Work with community groups to
help fund projects

No Tree maintenance near streetlights
Yes Funds to match private donation at
Rispin Park

Yes Improved bike facilities on
38th Avenue

No Present info about GF spend by
geographic area

No Study Citywide vacation rental zone
revenue

Yes Additional sidewalk cleaning when
weather is nice, off season

CONCLUSION
The development of the annual budget takes a great amount of staff time and effort and must be completed in a compressed timeline. I sincerely appreciate all the department directors and departmental budget liaisons for their contributions. Special recognition is extended to the Finance Department for its efforts in coordinating the budget process and preparing the annual budget document.

As the new fiscal year approaches, I wish to express my thanks and appreciation to the Mayor, and members of the City Council for their leadership and support in planning and conducting the financial operations of the City in a responsible and progressive manner. I know that with continued citizen participation, City Council leadership, and ongoing efforts of dedicated employees, Capitola will continue to be a great place to live, work, and enjoy. 9 38
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SUMMARY INFORMATION
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Budget Process Overview
Each year the City of Capitola prepares an Operating Budget, a Successor Agency Budget, and a fiveyear Capital Improvement Program (CIP) budget. The Operating Budget contains the summary and detail information for revenue and expenditure appropriations for the fiscal year (beginning July 1st and ending June 30th) for several funds as well as a projection for the second fiscal year. The information from the CIP is incorporated, in summary form, in the City’s annual budget. The Successor Agency budget is included in its entirety in the City’s annual budget.

Capitola municipal code (3.200.010 E.) defines a balanced budget as one in which “financing uses including expenditures, inter-fund transfers out, reserves and contingencies should equal financing sources including beginning available fund balance, revenues and inter-fund transfers in.” A key concept in the developmental process for the General Fund Budget revolves around City fiscal policy that current year expenditures are balanced with current year revenue.

The City’s budget process continues throughout the year, with quarterly financial updates published on the Finance Department website and at weekly department head meetings with the City Manager. An outline of the on-going budget process is listed below:

Month Responsibility Budget Function
December Finance Budget Cycle Begins
Finance Finance prepares mid-year calculations
January City Manager / Departments Review accomplishments related to prior year Budget Principles Finance / Departments Provides year-end estimates
Finance Publishes quarterly reports for October - December Finance / City Manager Presents mid-year report to Council and FAC February City Council Establishes Budget Principles
Finance Projects non-departmental revenues and position costs Departments Prepares budget and CIP
March Finance / Departments Continue budget projections Finance Advisory Committee FAC discusses elements of the budget City Manager Reviews departments budget requests
April Finance Adjusts proposed budget based on City Manager review Planning Commission Reviews CIP
Finance Publishes quarterly reports for January - March Finance Advisory Committee Distributes proposed budget
May Finance / City Manager Presents proposed budget and CIP to City Council Finance Advisory Committee Provides recommendations to Council Community Organizations Provides funding request information to Council June City Council Deliberates
City Council Adopts Budget
July Finance Publishes quarterly reports for April - June October Finance Publishes quarterly reports for July - September 11 40
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Financial Policies
Basis of Accounting
The City’s operating budget consists of governmental funds that include the General Fund, Special Revenue Funds, Internal Service Funds, Debt Service Funds and Capital Project Funds for both the City and the Successor Agency. Governmental fund types and agency fund budgets are developed using the modified accrual basis of accounting. This method is consistent with the presentation of the City’s Annual Financial Statements. Under this basis, revenues are estimated for the fiscal year under the condition that they are identifiable and will be collected within sixty (60) days, and sales tax within ninety (90) days, of the close of the fiscal year. Principal and interest on general long-term debt are budgeted as expenditures when due, whereas other expenditures are budgeted for liabilities expected to be incurred during the current period or shortly thereafter.

Level of Budget Control
Both the City and the Successor Agency appropriate (control) the budget at the Budget Unit level. The Budget Unit level is defined as “department, fund, or other organizational unit whose financial activities are accounted for separately.”
Expenditures for the General Fund are considered a Budget Unit at the Department level, with Community Grants controlled at the grantee level. The Successor Agency are considered Budget Units to be at the category level as defined in the budget document.

Budget Adjustments
After the budget is adopted, any supplemental appropriations of fund balance, or budget transfers over $25,000 within a Budget Unit will require Council approval. Budget adjustments that are less than $25,000 and within the same Budget Unit may be approved by the City Manager.

All requests for budget adjustments will include an explanation for the change along with a discussion of fiscal impact. This information will also be documented on a Budget Adjustment Form, which will be reviewed by the Finance Department for fiscal impact, correct account coding, and policy consistency prior to receiving City Council or City Manager approval.

Financial Committees and Boards
The following committees and boards assist the City in the budget review and development process:

Finance Advisory Committee
The Finance Advisory Committee (FAC) works closely with the Finance Director/Treasurer to make recommendations on financial projections or policies identified by the City Council or City Manager. The Committee consists of four Council-appointed members, the Mayor, and a Council Member. The FAC meets several times throughout the year and operates in an advisory capacity with the overall fiscal well-being of the City serving as its guiding principle. 12 41
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Financial Forecast
The City maintains a ten-year fiscal forecast model for the long-term budget picture, which includes unpredictable CalPERS costs, and a challenging economy in coming years. The first five years include conservative revenue and expenditure projections as well as the estimated amount of the City’s CalPERS Unfunded Actuarial Liability (UAL) provided by CalPERS Annual Actuarial reports. Years six through ten are estimates that follow the trends of the first 5 years of the model and subject to bigger swings each year when the new actuarial reports are released. Below is a summary of the 5-year financial forecast including revenue and expenditure assumptions. 13 42
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Measure Y
In November 2024 Capitola voters approved Measure Y, a one-half percent district sales tax replacing Measure F, a one-quarter percent district sales tax. The Measure Y ballot language stated: “To protect essential city services including public safety and emergency services; repair potholes, maintain streets, sidewalks, bike lanes, beaches, the new wharf, and recreation programs for youth; improve traffic safety; and support local businesses, shall City-of-Capitola replace its quarter-percent sales tax, approved by voters in 2016, with a one-half percent sales tax, generating an estimated $2.2 million annually for general government use, for ten years, with independent audits, and all funds staying local?” Below is a table showing estimated Measure Y revenue and total expenditures for eligible costs:

Revenue Budgeted Amount
Measure Y Revenue $2,289,167
Expenditure Budgeted Amount
Public Safety $ 7,840,926
Potholes, streets, traffic safety, sidewalks, bike lanes 1,878,763 Beaches & Wharf 220,000
Recreation programs for youth 592,793
Total $10,532,482
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General Fund Summary
The General Fund balance remained steady during FY 2025-26. The projected General Fund FY 2025- 26 ending budgetary fund balance totals $38,300. The FY 2026-27 Proposed Budget is estimating the general fund to have an ending balance of $94,957.

The chart below summarizes projected and historical General Fund revenues, expenditures, and fund balances. The table illustrates the effects the improving local economy has had on general fund revenue.

Revenue variances primarily include an increase in sales and property tax revenues.

An overview of district taxes (Measure O and F), reserves, and internal service funds are provided within this summary section.
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Revenue Summary
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Expenditure Summary
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Emergency, PERS Contingency and Contingency Reserves
In 2000 the City adopted Financial Management policies, establishing a fifteen percent Contingency and a ten percent Emergency Reserve Fund. The Contingency Reserve provides a prudent level of financial resources to protect against temporary revenue shortfalls or unanticipated operating costs, and/or to meet short-term cash flow requirements. The Emergency Reserve protects against significant one-time costs, which might arise from major unpredictable emergency events.

As the 2011 pipe failure demonstrated, a sufficient Emergency Reserve Fund is needed to respond quickly to local disasters, as well as sustain low debt ratios. Due to the City’s location in an active geologic region, adjacency to the ocean, and proximity to a major creek and highway, the City chose to also increase the Emergency Reserve funding level to ten percent of operating expenditures. In FY 15/16 the City implemented a PERS Contingency Reserve Fund to ensure future funding availability for potential CalPERS contribution increases.

The City was able to navigate the fiscal impacts associated with the COVID-19 Pandemic without utilizing reserve funds, however, the atmospheric river storms on Jan. 5, 2023, caused the City to utilize funds from the Emergency Reserve to make emergency repairs. Additionally, as the City made storm damage repairs the general fund balance has been drawn down and therefore the FY 2026-27 Proposed Budget does not include any general fund transfers into the reserves. As storm damage repair costs are reimbursed through FEMA and Cal OES the City anticipates returning reserves to minimum target balances.
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OPEB and PERS Trust Funds
The City has been proactive in planning for future liabilities. The City has established two trust funds for future retirement costs. The two trust funds are the OPEB (Other Post-Employment Benefits) Trust Fund, which is used for retiree health premiums, and the PERS Trust Fund, which is used for future PERS retirement costs.

OPEB Trust Fund:

Balance 6/30/2025 $1,104,842
FY 2025/26 Contributions 67,050
Estimated Interest Earned 5,000
Estimated Balance 6/30/2026 $1,042,792
FY 2026/27 Contributions 0
FY 2026/27 Expenditures 50,000
Estimated Interest Earned 40,000
Estimated Balance 6/30/2027 $1,032,792
PERS Trust Fund:

Balance 6/30/2025 $1,561,142
Estimated Interest Earned 30,000
FY 2025/26 Contributions 0
Estimated Balance 6/30/2026 $1,591,142
Estimated Interest Earned 30,000
Estimated Balance 6/30/2027 $1,621,142
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General Fund Resources
General Fund resources include reserve funds (Emergency, Contingency, PERS Contingency, Facilities) and Internal Service Funds designated for funding equipment purchases, risk management, workers’ compensation, and compensated absences. The reserve funds have specific purposes and require a vote of the Council to expend.

The following table shows the estimated General Fund available resources:

The corresponding chart and graph illustrate internal service fund expenditures and the impact of transfers on the affected funds.
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Fund Balance Summary
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Fund Balance Summary
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GENERAL FUND REVENUES
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General Fund Revenues
Revenues for the FY 2026-27 General Fund operating budget total $22.4 million, an increase of approximately $1.2 million or 5.7 percent above FY 2025-26 estimated revenue. Property tax revenues remain strong as assessed values (basis for property tax levies) continue to increase with changes in ownership and an additional 2% CPI increase per Prop 13 provisions. Staff anticipates sales tax revenue to increase around 2% over FY 2025-26 as the economy shows signs of slowing. Transient occupancy tax is expected to increase approximately 3.5%.

A summary of major revenue changes between the FY 2025-26 proposed and FY 2026-27 proposed budgets is listed below:
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General Revenue Information
The City does not receive General Fund revenues in equal monthly increments. While the City receives some revenue regularly throughout the fiscal year, some is received quarterly or annually.

The variable nature of these revenues results in an uneven cash flow. For example, the City of Capitola’s lowest cash balances occur in April and again in mid-December prior to property tax revenue being received. The City developed a cash flow model to assist with on-going cash flow variability and to identify reserve requirements. While monitoring the City’s cash flow has always been a priority, the need to identify patterns became more critical during the disaster recovery period when reserves were nearly depleted. In FY 2012-13 the City approved increasing the Contingency Reserve balance from 10 percent to 15 percent to assist in covering potential cash flow deficits.

Projections for each source of revenue include a review of historical trends, the local economy, new business development, and pending legislation. Due to significant changes, the City is closely monitoring the following five core revenues, which represent over 80 percent of the General Fund:
 Sales Tax $10,010,195
 Transient Occupancy Tax 2,300,000
 Parking Meters 1,166,000
 Parking Fines 850,000
 Property Taxes 3,613,050
$17,939,245
Additional information related to the five core revenues is detailed within this section. In addition, fiveyear trends for each revenue source are provided in the Revenue Summary.

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Sales Tax
The City of Capitola sales tax consists of one percent Bradley Burns, a half percent Capitola District Tax (Measure Y), and a permanent quarter percent Capitola District Tax (Measure O). In FY 2026-27 annual sales tax revenue is estimated to be $10 million, with approximately $3.4 million in revenues contributed by Measure O, and Measure Y.

The Finance Department works closely with HdL, the City’s sales tax consultant, on tax recovery, statistics, and projections. Sales tax projections are based on a combination of “most likely” estimates provided by HdL, internal quarter over quarter analyses, and the impact of one-time events. In FY 2026-27, Bradley Burns sales tax revenue is anticipated to increase by approximately 2 percent, or $294,318 above the FY 2025-26 estimated sales tax receipts. The City’s sales tax collections are heavily dependent on the top five generators.

The chart below illustrates sales tax performance including the sunset of Measure D and end of Measure F and start of Measure Y.
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Transient Occupancy Taxes (TOT)
Hotel tax, also known as the Transient Occupancy Tax (TOT), charges rental accommodation of less than 30 days a 12 percent tax of which 0.75 percent is restricted for local business groups and early childhood and youth programs. In FY 2025-26 TOT tax generally accounts for approximately 13 percent of General Fund operating revenues. The City’s TOT revenues come from the following sources:
 Hotels, Motels and Inns
 Other Rentals
o Bed and Breakfasts
o Vacation Rentals
TOT revenues are anticipated to increase during FY 2026-27. For the last several years, hotels have experienced high occupancy rates leaving little room for increased TOT revenues. As the industry slows down little revenues are expected to continue to grow slightly as has been the case for the last couple of years.

The following chart illustrates TOT revenues within the City. Due to Capitola’s seaside location, proximity to regional attractions, and continued signs of economic recovery, the City is continuing efforts to attract another hotel to the area.
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Parking Meters and Parking Fines
In FY 2026-27 parking meter and parking fine revenues are estimated to contribute approximately $2.0 million to the General Fund. Revenue sources include fees collected from the meters and fines resulting from expired meters and improper parking. Factors affecting these revenues include tourism and seasonal trends. During the summer, the City offers shuttle bus service from the parking lots to the Village, beach, and Capitola Wharf. Projected revenues for each location are estimated below:

The following chart illustrates parking meter revenue and parking citation revenue trends within the City. Overall, the revenue trend reflects the previously mentioned parking meter rate increase while showing citation revenue remaining flat. In FY 2015/16 the City implemented 3-hour parking in the Village. The change has had a positive impact on meter revenue while decreasing citations. 28 57
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Property Taxes
Property Taxes, an Ad Valorem Tax imposed on real property and tangible personal property, are levied at one percent of the assessed value of the property. The City receives 7.47 percent of each one percent, or 75 cents per $1,000 of assessed property value.

In FY 2026-27 property tax revenue is estimated to be $3.6 million, representing a five percent increase over the estimated collection amount from FY 2025-26. The City’s collections are slightly higher than the information from the County Auditor-Controller’s Office due to the increased cost of housing and a robust housing market.

In the FY 2026-27 proposed budget, base property tax revenues are projected to increase approximately five percent. The City based the projection on information from the Auditor-Controller’s Office, historical trends, and a review of the current housing market.

Property taxes are received based on the following distribution schedule:
 December: 50%
 April: 45%
 June: 5%
Property Taxes in-lieu-of Vehicle License Fees
Property Tax in-lieu-of Vehicle License Fee revenue has increased an average of six percent per year over the last several years. This increase continues to be consistent with the rising property values outlined by the Auditor-Controller’s Office. Due to the relatively flat history associated with these revenues, conservative estimates of four percent have been applied to the upcoming fiscal years. 29 58
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Revenue Summary
30 59
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31 60
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GENERAL FUND EXPENDITURES
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General Fund Expenditures
The total FY 2026-27 General Fund expenditure budget proposes an increase of approximately $1 million from the FY 2025-26 Amended Budget as existing resources are programmed towards City Council Goals.

Increases have been programed in most major categories as inflation continues to impact City expenditures. Key differences between the two fiscal years include:
o Total personnel costs (salary and benefits) are estimated to increase $527,000 from the FY 2025-26 Amended Budget due to significant increases in the annual Cal PERS Unfunded Actuarial Liability payment, cost of living adjustments, increased employee health care contributions, scheduled step increases in 2026.
o Salary costs are estimated to decrease $42,000 due to the elimination of a part-time position and several long-time employees leaving.
o Salary – Seasonal/Temp increased $53,000 as summer recreations programs remain at full capacity.
o Overtime is anticipated to increase $57,000 primarily in the Police, however the increased cost is offset by additional grant revenue.
o Specialty Pay – decreased 13,400.
o Benefits – increased $472,000 as a result of CalPERS rates increasing.  Contract services are slightly above the prior year.

The following chart provides an overview of expenditures for FY 2023-24 to FY 2027-28. A complete description of major changes will follow in the related expenditure detail pages. 33 62
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General Fund Department Expenditures
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General Fund Expenditures

SALARIES & BENEFITS
All positions listed in the General Fund are fully funded with full benefit costing. Fully benefited positions are budgeted at their current step plus an assumption that they will move to the next step unless they are already at the top step of their classification. Specialty pays are budgeted as a separate line item.

Positions budgeted for in FY 2025-26 include the addition of two maintenance workers in the public works department and the reorganization of the City Manager and Finance Departments.

The table below summarizes the total FTE count by department, and the following page provides a detailed summary of the staffing budget changes.
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General Fund Expenditures

SALARIES & BENEFITS
City services are primarily staff delivered; therefore, staffing is the most significant expenditure. The FY 2026-27 proposed budget estimated staffing costs total $15 million. This represents a 3.63% increase from the prior year’s amended budget. This is primarily due to significant increases in the Cal PERS Unfunded Actuarial Liability annual payment, estimated cost of living adjustments, and scheduled step increases.
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General Fund Expenditures
Salaries & Benefits - Salary Assumptions
There are five bargaining groups in the City. Management employees are hired by the City Manager pursuant to a City Council approved compensation plan. Hourly employees are not included in any of these groups and are not represented by a union. The following table lists the different groups and the start and end dates of their current agreements.

Group Current Agreement Expiration Date
Assoc. of Capitola Employees/Gen. Govt. 6/23/2024 6/30/2027 Confidential 6/23/2024 6/30/2027
Mid-Management 7/7/2024 6/30/2027
Police Captains 7/7/2024 6/30/2027
Police Officers Association (POA) 6/7/2021 6/30/2027
Overtime
The following table provides the details for the overtime budget. The overtime budget for the Police Department increases this year in anticipation of additional special events.

Specialty Pay
The FY 2026-27 proposed budget includes the following specialty pays in the calculation of staffing costs, which are also included in overtime calculations: education, longevity, bilingual, motorcycle, detective pay, senior officer, canine, and shift differential pay.

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General Fund Expenditures
Salaries & Benefits – Retirement Assumptions
Benefits – Post Retirement Medical Benefit
The City of Capitola contributes the minimum amount toward retired employees’ health insurance premiums in accordance with Government Code Section 22892 of the Public Employees’ Medical and Hospital Care Act (PEMHCA). This expenditure is accounted for in the City Manager’s personnel department budget. Below is a table showing the PEMHCA minimum over the last 10 years.  January 1, 2017 $128
 January 1, 2018 $133
 January 1, 2019 $136
 January 1, 2020 $139
 January 1, 2021 $143
 January 1, 2022 $149
 January 1, 2023 $151
 January 1, 2024 $157
 January 1, 2025 $158
 January 1, 2026 $162
Benefits – Public Employee Retirement System (PERS)
The City offers various defined benefit retirement plans to safety and miscellaneous employees. These retirement plans are administered by the California Public Employee Retirement System (“CalPERS” or “PERS”). The safety plan benefit formula is 3% @ 50, and the miscellaneous plan is 2.5% @ 55 for “classic” PERS members. For employees hired after January 1, 2013, who are subject to the Public Employees’ Pension Reform Act (PEPRA), the safety benefit formula is 2.7% @ 57, and the miscellaneous plan is 2% @ 62. A CalPERS member becomes eligible for retirement benefits upon reaching the age of 50 with at least 5 years of service credit (total service across all CalPERS employers).

The City’s retirement costs are defined as a percentage of payroll, along with a fixed dollar amount to address the City’s Unfunded Actuarial Liability (UAL), which is actuarially determined annually by CalPERS. The UAL in FY 2025-26 was $2,895,386 and is increasing to $3,271,340 (12.98%) in FY 2026-27. The most recent CalPERS actuarial reports estimate the UAL through FY 2030-31 at an amount of $3,789,000 which equates to an increase of approximately 176% over ten years from FY 2020-21.

PERS Rates. The FY 2026-27 PERS total rate for classic safety members is 39.7%, with employees paying 15% and the city 24.7%. Safety PEPRA members are responsible for 13.75% and the city pays

13.99%. For classic miscellaneous members, the total contribution rate is 24%, with employees paying

13.4% and the city 10.6%. Miscellaneous PEPRA employees pay 7.75% and the city pays 7.96%.

The FY 2025-26 PERS total rate for classic safety members was 39.6%, with employees paying 15% and the city 24.6%. Safety PEPRA members are responsible for 13.75% and the city pays 13.76%. For classic miscellaneous members, the total contribution rate was 23.9%, with employees paying 13.4% and the city 10.5%. Miscellaneous PEPRA employees pay 7.75% and the city pays 7.87%.

Public Employees’ Pension Reform Act (PEPRA). On September 12, 2012, Governor Brown signed the California Public Employees' Pension Reform Act of 2013 (PEPRA) into law. PEPRA became effective on January 1, 2013, and requires all employees who are not previously members of the PERS reciprocal system to be placed in an alternate retirement plan. The City’s PEPRA plan for Safety employees is 2.7% at 57 and 2% at 62 for Miscellaneous employees. This new plan requires that the 39 68
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City and plan members contribute an equivalent share of retirement costs. The rates for public safety and miscellaneous employees are 13.75% and 7.75%, respectively.

Retirement Costs Summary
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General Fund Expenditures - Contract Services (4 pages) 41 70
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Community Based Social Service Providers
Community Based Social Service Providers are funded by the General Fund and restricted Transient Occupancy Tax (TOT) revenue. Each year a determination is made regarding funds available and allocation. Due to COVID-19 the Community Grant program continues to be funded in FY 2026-27 with a combination of general fund, restricted TOT, and federal grants. The table below shows the general fund and restricted TOT funding while the federal grant funding is highlighted in the Community Development Block Grant Special Revenue funds.
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GENERAL FUND EXPENDITURES

SUPPLIES
The following table provides a history of the supply budgets by department. Additional information is available in the General Fund Department section.

TRAINING AND MEMBERSHIPS
The following table provides a history of the training and memberships budgets by department. Refer to the General Fund Department section for additional information. 47 76
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INTERNAL SERVICES
Internal Service Funds finance special activities and services performed by one City department for another on a cost and reimbursement basis. These funds share costs, designate targeted reserves levels, and allocate costs to all departments benefiting from the activities and services. The methodology for cost allocation for each Internal Service Fund is described in the Internal Service Fund section.

The FY 2026-27 proposed budget provides funding for increased insurance premiums as well as equipment purchases for equipment funded in prior years.

GENERAL FUND TRANSFERS
General Fund Transfers move funds from the General Fund to a specific fund for a designated purpose.

The CIP is detailed in a separate section and debt issuances are detailed in the Multi-Year Assets and Obligations section. Below is a summary of the transfers from the General Fund to other funds/reserves. 48 77
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DEPARTMENTAL BUDGETS

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CITY COUNCIL

GENERAL GOVERNMENT

DEPARTMENT PURPOSE
The City Council is composed of five generally elected Council Members, serving four-year staggered terms. Council members select a Mayor and Vice Mayor annually. In 2002, the voters approved a consecutive term limit of two terms for Council Members. The City's Municipal elections are held the first Tuesday of November in even-numbered years. The Council meets regularly twice monthly, on the second and fourth Thursday.

The City Council establishes local law, sets policy, approves programs, allocates funds, and provides direction to the City Manager and staff to implement its policy. Council also appoints members to local and regional committees, commissions, and boards. Capitola is a General Law City, organized under the general laws of the state. Local laws are established by ordinance, compiled in the Municipal Code, and enforceable by the City. Other directives and policies of the City Council are implemented through Council Resolutions and recorded in Council Minutes.

ESTABLISHED PRINCIPLES OF THE CITY
 Fiscal Policy – practice sound financial management
 Public Service – uphold the public trust.
 Public Improvement – maintain a safe and healthy environment.

FISCAL YEAR ACCOMPLISHMENTS – 2025/26
 Provide services, staff, and equipment to ensure public safety and trust  Develop projects and programs to maintain and enhance the quality of life in Capitola  Collect public input and determine path forward for Capitola Wharf Master Plan  Review and update, if necessary, the City Council Code of Conduct FISCAL YEAR GOALS - 2026/27
 Balanced budget while using resources for public improvements  Provided services, staff, and equipment to ensure public safety and trust  Approved projects and programs to maintain and enhance the quality of life in Capitola 1000-10-10-000
FY23/24
Actual
FY24/25
Actual
FY 25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Revenues
General Fund $ 99,496 $ 137,761 $ 127,259 $ 127,259 $ 104,580 $ 114,156 Revenue Total $ 99,496 $ 137,761 $ 127,259 $ 127,259 $ 104,580 $ 114,156 Expenditures
Personnel $ 40,752 $ 41,200 $ 40,689 $ 40,689 $ 40,689 $ 40,689 Contract services 19,150 56,602 29,711 29,711 10,711 10,711 Training & Memberships 20,531 19,380 31,380 31,380 23,380 32,380 Supplies 2,082 2,411 5,500 5,500 6,800 6,800
Internal service fund charges 16,981 18,168 19,979 19,979 23,000 23,576 Expenditure Totals $ 99,496 $ 137,761 $ 127,259 $ 127,259 $ 104,580 $ 114,156 Authorized Positions
FY23/24
Actual
FY24/25
Actual
FY 25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Mayor 1.00 1.00 1.00 1.00 1.00 1.00
Vice Mayor 1.00 1.00 1.00 1.00 1.00 1.00
Council Members 3.00 3.00 3.00 3.00 3.00 3.00
FTE Total 5.00 5.00 5.00 5.00 5.00 5.00

CITY COUNCIL
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CITY ATTORNEY

GENERAL GOVERNMENT

DEPARTMENT PURPOSE
The City Attorney represents the City as primary Counsel in all legal matters. The City Attorney is appointed by the City Council. The City Attorney provides legal analysis and advice on interpretation and application of municipal code, State law, and Federal law, drafting legal documents, and laborrelated issues. The City Attorney is currently a contract position with the firm Burke, Williams & Sorensen

KEY CHANGES
Marc Tran of Burke, Williams & Sorensen is Capitola’s City Attorney FISCAL YEAR ACCOMPLISHMENTS – 2025/26
 Advised City on matters associated with pending legal actions.  Advised City on legal matters related to City policies and procedures.  Represented the City in litigation.

FISCAL YEAR GOALS – 2026/27
 Advise Council on potential and pending litigation.
 Assist and advise staff on contracts, labor relations, and other legal assessments.  Resolve existing litigation.
 Assist City in labor negotiations with all employee groups. 51 80
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CITY MANAGER

GENERAL GOVERNMENT

MISSION STATEMENT
The mission of the City Manager’s Office is to ensure that all City programs and services are provided effectively and efficiently.

DEPARTMENT PURPOSE
The City of Capitola is a Council-Manager form of government, under which the City Council appoints a City Manager who serves as the City's chief administrative officer and is responsible for implementing Council policies. The purpose of this department is to implement the policies of the City Council and provide leadership and direction to the city departments. Core services of the City Manager’s Office are administrative direction and leadership for City departments, programs, and services to ensure the community receives a high level of service.

KEY CHANGES
The City Manager Department internally promoted the former Office Coordinator to the Deputy City Clerk position and hired a new Office Coordinator.

The FY2025/26 Budget includes a proposed organizational change, shifting Human Resources and Information Systems from the City Manager Department into the newly titled Administrative Services Department, along with Finance services (formerly the Finance Department). With this new structure, the City Manager remains the Personnel Officer, with the ability to designate these duties to other staff as needed. The City Manager Department will keep the Assistant to the City Manager position, now allocated to the department 100% rather than 50% with 50% Personnel, to support expanding public outreach and community engagement efforts, managing special projects and contracts, such as the Annexation Feasibility Study, and providing support to the City Manager and all City departments.

FISCAL YEAR 2025/26 ACCOMPLISHMENTS
 Successfully facilitated a well-attended civic-engagement program, Discover Capitola  Completed annexation feasibility study and partnered with LAFCO to modify the City’s sphere of influence
 Expanded following of City social media platforms and subscriptions to the City digital newsletter
 Prepared content for and facilitated positively received Town Hall meeting  Partnered with County Park Friends on the Treasure Cove Playground project.

FISCAL YEAR GOALS – 2026/27

FISCAL POLICY
 Evaluate potential revenue ballot measures.
 Continue city-wide Economic Development efforts including working with the Capitola Mall to improve the mall facility.
 Continue to work to create a safer work environment and reduce employee injuries.  Review and prioritize City services.
 Support economic development.
 Debut new City website.
 Seek opportunities to partner with other agencies for greater outcome or savings.

PUBLIC SERVICE
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 Increase public outreach
 Support election: three Council seats up for election this Fall  Continue to improve public meeting access.
 Use dedicated funds for youth programming.

PUBLIC IMPROVEMENT
 Work with community partners to enhance public serving spaces, like the fundraising partnership with Capitola Cares
 Continue increased street and facility maintenance through use of Measure D resources. 53 82
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ADMINISTRATIVE SERVICES - PERSONNEL

GENERAL GOVERNMENT

MISSION STATEMENT
To provide excellent internal and external customer service and assist departments in recruiting and retaining exceptional employees.

DEPARTMENT PURPOSE
Personnel functions are the responsibility of the City Manager. Functions include employee recruitment and selection, benefits coordination, insurance and retirement programs, labor negotiations, compensation plan maintenance, regulatory training, and risk management. 1000-10-12-000
FY23/24
Actual
FY24/25
Actual
FY 25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Revenues
General Fund $397,852 $465,845 $3,343,009 $3,344,359 $3,652,665 $3,768,013 Revenue Totals $397,852 $465,845 $3,343,009 $3,344,359 $3,652,665 $3,768,013 Expenditures
Personnel $287,608 $385,395 $3,268,866 $3,268,866 $3,533,499 $3,656,848 Contract services 74,211 55,576 47,000 47,000 90,600 82,100 Training & Memberships 4,620 (607) 3,000 4,050 1,000 1,000 Supplies 14,809 6,355 6,000 6,300 6,500 6,500
Internal service fund charges 16,604 19,126 18,143 18,143 21,066 21,565 Expenditure Totals $397,852 $465,845 $3,343,009 $3,344,359 $3,652,665 $3,768,013 Authorized Positions
FY23/24
Actual
FY24/25
Actual
FY 25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
City Manager 0.20 0.20 0.20 0.20 0.20 0.20
Finance Director - - - - 0.25 0.25
Human Resources Analyst 1.00 1.00 1.00 1.00 1.00 1.00
Assistant to the City Manager 0.50 0.50 0.50 0.50 - 0.00 FTE Total 1.70 1.70 1.70 1.70 1.45 1.45

PERSONNEL
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ADMINISTRATIVE SERVICES – FINANCE AND INFORMATION TECHNOLOGY

GENERAL GOVERNMENT

MISSION STATEMENT
The Finance Department’s mission is to present timely, accurate and transparent financial information to the public while providing City Management with financial data to facilitate informed decision-making on the allocation of City resources. The department strives to provide excellent customer service to the public, elected officials, and all departments within the City.

DEPARTMENT PURPOSE
The Finance Department oversees all financial transactions of the City to ensure legal and accounting policies are adhered to. The Department maintains all City funds and oversees budget development, the Annual Comprehensive Financial Report, accounts payable, payroll, accounts receivable, cash receipts, banking, business licenses, and transient occupancy tax. The Department provides quarterly and annual financial reports to the City Council and the public.

The FY2025/26 Budget included an organizational change, shifting Human Resources and Information Systems from the City Manager Department into the newly titled Administrative Services Department, along with Finance services (formerly the Finance Department). With this new structure, the City Manager remains the Personnel Officer, with the ability to designate these duties to other staff as needed. The new structure allows for the personnel, finance, and information technology divisions to improve communications and efficiencies as the City continues to implement more and more technology solutions, personnel and finance.

FISCAL YEAR ACCOMPLISHMENTS – 2025-26
 Continued TOT vacation rental audit and enforcement program.  Implemented new bail schedule
 Implemented transition of IT to a contracted service
 Provided analytical support to operations departments.

FISCAL YEAR GOALS – 2026-27
 Prepare and maintain a balanced budget.
 Plan for and meet future PERS increases.
 Work with the Finance Advisory Committee to identify future revenue opportunities and address increasing costs.
 Meet regulatory financial reporting requirements and provide reports on the City website.  Develop long term financial plan for Measure Y
 Continue partnerships with departments to maintain financial accountability and transparency.  Continue to improve City financial transparency to the public. 55 84
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POLICE SUMMARY
POLICE

MISSION STATEMENT
The Capitola Police Department prides itself in providing the highest level of safety and service to enhance the quality of life of our community through professional, engaged, and empowered employees.

VISION STATEMENT
The Capitola Police Department is comprised of professional and dedicated members who strive to demonstrate high character, fairness, compassion, and the non-biased delivery of policing services.

CORE VALUES
We pride ourselves on representing the City of Capitola and providing policing services based upon these values:
 Human Life - Nothing is more valuable than the preservation of life  Loyalty - Simple loyalty to our best convictions
 Honesty - The essence of moral character
 Respect - Our success is measured by how we treat others  Integrity - Values, and morals that represent our sincerity and commitment  Diversity - We value differences
 Ethics - Our commitment to principles that govern behavior FISCAL YEAR ACCOMPLISHMENTS – 2025-26
 Converting CSO to MSO
 Filling PEO positions
 Successful PO recruitment ongoing
 Axon interview room
 EOP- almost complete
 Grants:
 Cannabis
 Body armor
 Pay station replacement plan completed
 Ecite technology rolled out for use
FISCAL YEAR GOALS –2026-27
 Build a realistic budget for the new technology and upgraded technology used at PD  Axon
 Drones
 RMS
 RING
 ALPR
 MSO trained and embedded in NBMS and community outreach  Bring on new Chief Advisory Committee members
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LAW ENFORCEMENT
POLICE
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PARKING ENFORCEMENT
POLICE

DEPARTMENT PURPOSE
The Parking Enforcement Unit enforces California Vehicle Code regulations and Municipal Parking Ordinances to minimize parking problems, reduce traffic congestion, and maximize access to parking by visitors and residents alike.

FISCAL YEAR ACCOMPLISHMENTS – 2024/25
 Maintain existing pay stations.
 Begin upgrading pay stations with a new payment interface.  Explore hybrid vehicle options for parking enforcement vehicles.

FISCAL YEAR GOALS –2025/26
 Continue upgrading the pay stations with a new payment interface.  Evaluate the cost of hourly parking and the bail schedule for parking citation violations. 60 89
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ANIMAL SERVICES
POLICE

DEPARTMENT PURPOSE
The Animal Services Unit (ASU) promotes and protects public safety and animal care through sheltering, pet placement programs, education, and animal law enforcement. Our purpose is to provide responsive, efficient, and quality animal control services that preserve and protect the public and promote animal safety.
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PUBLIC WORKS SUMMARY

PUBLIC WORKS

MISSION STATEMENT
The Capitola Department of Public Works, through our valued employees, develops, maintains, and operates the City’s infrastructure and natural resources and provides environmental stewardship for the benefit of our residents, businesses, and visitors.

DEPARTMENT PURPOSE
Public Works stewards Capitola’s public infrastructure. We are dedicated to providing safe, functional and sustainable systems improving the quality of life for the residents, businesses and visitors of the City of Capitola in a responsive and cost-effective manner and in accordance with local, state and federal regulations.

To provide this stewardship, the department has three divisions.

The Maintenance Division is responsible for the day-to-day operations, maintenance, and repair of the public infrastructure and facilities including streets and medians, streetlights and traffic signals, street trees, sidewalks and pathways, parks, public buildings, and maintains the City's fleet of vehicles and equipment.

The Engineering Division designs and oversees the construction of all capital improvement projects for the City’s public infrastructure systems and public buildings/facilities; prepares technical studies/reports; regulates construction activities within the public right-of-way by private entities and utility companies; and maintains infrastructure records. The Engineering Division also works closely with the Community Development Department and Building Division to perform plan review and inspection services of tract/parcel maps for subdivisions and grading and drainage improvements on private property; provides technical support to the Public Works Maintenance Division.

The Environmental Division provides environmental support services to Public Works and other City Departments to ensure compliance with federal, state, and local environmental laws, regulations, and policies. The Environmental Division also manages the City's Storm Water Management Program and Solid Waste Franchise Agreement which includes industrial, construction, and municipal activities and operations within the City; staffs the Commission on the Environment.

FISCAL YEAR ACCOMPLISHMENTS – 2025-26
 Completed Community Center Renovation
 Completed Treasure Cove Playground
 Completed Jade Street Restroom Renovation
 Completed 41st Avenue Multimodal Improvements
 Advanced Bay Avenue Corridor Project through planning and concept development  Advanced Cliff Drive Resiliency Project through preliminary design  Secured grant funding for Esplanade Park Improvement development 62 91
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FISCAL YEAR GOALS – 2026-27
 Complete Citywide Active Transportation Plan (ATP)
 Complete update of the Climate Action Plan
 Advance Esplanade Park Improvements into design and implementation phases  Advance Cliff Drive Resiliency Project into final design  Advance additional capital improvement projects
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STREETS

PUBLIC WORKS
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PUBLIC WORKS

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PUBLIC WORKS

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COMMUNITY AND ECONOMIC DEVELOPMENT

MISSION STATEMENT
The Building, Planning, and Economic Development Department (BPED) promotes development which supports attainable housing, economic opportunities, community wellbeing, and the environment. The Department provides responsive, high-quality services and programs which enhance the quality of life for the City’s residents, businesses, and visitors within the built and natural environment.

DEPARTMENT PURPOSE
The BPED administers the City's land use policies and standards adopted by the City Council including Zoning Code (Title 17), Housing and Development Administration (Title 18), General Plan, Housing Element, Local Coastal Program, and other regulations. The Department’s key functions include review of development applications, application of CEQA, maintenance of regulatory and long-range planning documents, implement economic development strategy, building plan check and inspection services, code compliance, administration of the affordable housing programs, and grant administration related to planning, housing, economic development, public facilities, and public services. The Department provides staff support to the Planning Commission and City Council.

KEY CHANGES
During the past fiscal year, the department focused implementation of the Housing Element related to the Capitola Mall redevelopment, the 41st Avenue Corridor Plan, the Wharf Master Plan, and recruitments for the Building Official and Senior Planner. Priorities for FY2026-27, include ongoing collaboration toward redevelopment of the Capitola Mall, implementation of the Wharf Master Plan, implementation of the 41st Avenue Corridor Plan, and ongoing housing element implementation.

FISCAL YEAR ACCOMPLISHMENTS – 25/26
 Rebrand the department as the Community and Economic Development Department and realign priorities toward housing and economic development initiatives.  Promoted economic growth through place making and branding initiatives of commercial corridors and adopted zoning incentives to catalyze redevelopment of the Capitola Mall.  Implementation of the 6th Cycle Housing Element including objective standards for Mall Redevelopment and amendments to the Multifamily Residential zoning.  Adopted the Capitola Wharf Master Plan and solicited proposals for development.  Adopted the 41st Avenue corridor study incorporating Clares Street and Capitola Road.  Issued occupancy for a 36-unit 100% affordable development at 4401 Capitola Road.  Administered CDBG Grant of $300,000 to nonprofit for low-income food and transit services.  Administered CDBG Grant of $3.3 million for renovation of the Jade Street Community Center and $3.3 million for Treasure Cove Park.
 Initiated rehabilitation program with Habitat for Humanity. 7 applications received, 2 completed  80 planning and 407 building permit application submitted July 1, 2025, through April 15, 2026.

FISCAL YEAR GOALS – 26/27
 Engage property owners of economic development opportunity sites including Capitola Mall, Redtree’s 1 Bay Avenue, and Swenson’s 120 Monterey.
 Issue building permits for new 52-unit affordable housing development at 1098 38th Ave.  Issue occupancy of Tesla Dealership at 1601 41st Avenue  Provide training opportunities for building staff to bring building plan review in as an internal staff function to encourage growth and job satisfaction while providing savings to the City.  Apply for 2026 CDBG grant for Community Facilities or Public Infrastructure for up to $5 million
 Issue building permits for new hotel at 720 Hill Street and affordable housing at 1098 38th Ave.  Issue occupancy of 36-unit, 100% affordable housing at 4401 Capitola Road.  Complete Capitola Wharf Master Plan and research funding opportunities for implementation. 67 96
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 Complete 41st Avenue corridor study.
 Administer grants to support Capitola residents with food services and housing production.  Provide training opportunities for all staff to encourage growth, job satisfaction, and longevity. 68 97
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COMMUNITY AND ECONOMIC DEVELOPMENT
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COMMUNITY AND ECONOMIC DEVELOPMENT
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COMMUNITY SERVICES AND RECREATION

CULTURE & LEISURE

MISSION
The City of Capitola Community Services and Recreation Department is dedicated to providing safe, affordable, and enjoyable recreational opportunities that enrich the quality of life for residents and visitors of all backgrounds and abilities. Committed to excellence and public safety, the Department continuously strives to enhance its programs, services, and operations to best serve the evolving needs and interests of the community.

DEPARTMENT PURPOSE
The Community Services and Recreation Department enhances the quality of life for Capitola residents and the broader community by offering a wide range of recreation and leisure services. These include Cityrun programs such as Junior Lifeguards, Camp Capitola, and community events, as well as over 500 classes provided by contracted instructors. Youth programs serve more than 2,000 children annually. The Department also manages key community assets, including the Capitola Community Center, Jade Street Park, and Monterey Park. From Memorial Day weekend through the end of October, the Department operates a USLA-certified Lifeguard Division to ensure the safety of beachgoers at Capitola Beach. The Department represents the City through its staff, instructors, seasonal hires, and the condition of its facilities. It also fosters youth development through job training programs like the Junior Lifeguard Captains Corps and Camp Capitola Junior Leader Program and promotes access through scholarships for underresourced youth.

KEY CHANGES
With the Community Center remodel project complete, the Community Services and Recreation Department will return offices and programs.

FISCAL YEAR ACCOMPLISHMENTS – 2025/26
 Provided Lifeguard services to event organizers and maintained tower services at Capitola Beach through the end of October.
 Sustained a robust schedule of Classes for Adults and Youth with minimal disruption during Community Center remodel.
 Provided Wharf programming with fun, family friendly activities by hosting a new “Boogie on the Wharf” dance event series.
 Modified Camp Capitola in response to the Community Center remodel while maintaining the program’s high quality at the temporary location
 Celebrated the 10th annual Plein Air event with new artist engagement opportunities for the public and record exhibition attendance.
 Introduced two new music events: “New Music Sundays” featuring local youth bands, and “Dueling Pianos” offering a fresh and interactive community opportunity.  Enhanced Junior Guard youth development by redistributing age division throughout the session providing smaller group sizes for effective instruction.

FISCAL YEAR GOALS –2026/27
 Strengthen partnerships with county recreation agencies to expand regional initiatives such as Park Rx, Family Fun Day, and other collaborative programs.  Develop a new Community Center Rental package incorporating new use opportunities provided by the Community Center Remodel.
 Enhance structure of the Beach Lifeguard Service and Junior Guard program.  Provide Camp Capitola with an increased capacity and utilize the new Jade St Park features and Treasure Cove Playground.
 Utilize lessons learned for new music events “Dueling Pianos” and New Music Sunday’s” and provide an improver series for residents.
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MUSEUM

CULTURE & LEISURE

MISSION
The Capitola Historical Museum preserves and promotes the history of Capitola through creating exhibitions, maintaining a collection of historic photographs and artifacts, conducting oral histories, and participating in special events.

DEPARTMENT PURPOSE
To promote, through the establishment and maintenance of a museum and allied projects, a program that will bring a better understanding and appreciation by the Capitola community of its history, architecture, culture, technology, and its creative and natural environments.

FISCAL YEAR ACCOMPLISHMENTS – 2025/26
 Installed “Multiple Personalities: the stories behind Capitola’s historic buildings” exhibition  Installed rotating exhibits at the Capitola Library.
 Increased visitation to museum
 Increased volunteer count for continuous museum open hours  Installed Whard model in City Council Chambers for public viewing  Increased donations with advent of online payments and QR Code deployment FISCAL YEAR GOALS – 2026/27
 Continue exhibition “Multiple Personalities: the stories behind Capitola’s historic buildings”  Recognize the Museum’s 60th anniversary
 Continue to scan images to digitize collections
 Review collections to reduce storage need
 Continue to develop Museum Membership
 Shift museum newsletters to digital platform
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INTERNAL SERVICE FUNDS

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INTERNAL SERVICE FUNDS
Stores (City Manager): The Stores Fund accounts for general supplies, postage, and rental of office equipment.

Information Technology (City Manager): The Information Technology Fund provides funding for the replacement and upgrade of the existing computer network. The number of personal computers, laptops, printers, and servers each department uses forms the basis for department allocations.

Equipment Replacement (Public Works): The Equipment Replacement Fund provides funding for the replacement of city vehicles, including passenger cars, parks maintenance vehicles, police vehicles and other specialty vehicles. Departments contribute to this replacement fund based on the depreciation expense of existing vehicles. This fund also receives the revenue received from the sale, or trade-in, of surplus vehicles.

Self-Insurance Liability (City Manager): The Self-Insurance Liability Fund collects funding from departments to pay for self-insured liability and property protection insurance premiums provided through the Monterey Bay Area Self Insurance Authority (MBASIA) joint powers authority.

Workers’ Compensation (City Manager): The Workers’ Compensation Fund collects funding from departments to pay for Workers’ Compensation coverage through the MBASIA.

Compensated Absences (Finance): The Compensated Absences Fund accumulates money to pay future employee benefit costs, such as vacation and sick leave payouts, at termination or retirement.

The City Council sets the policy to ensure the City can fulfill future obligations. 75 104
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STORES FUND
The Stores Fund accounts for general supplies and postage. This also includes the rental of the postage machine and the repair and maintenance of shared office equipment. 76 105
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INFORMATION TECHNOLOGY FUND
The Information Technology Fund collects and designates funds for the future replacement of citywide hardware and software. Annual on-going information technology costs are allocated based on the distribution of resources.

Contract services: on-going technology licenses
Supplies: replacement technology equipment

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EQUIPMENT REPLACEMENT FUND
The Equipment Replacement Fund is designed to provide funding for replacement of City vehicles, including passenger cars, maintenance vehicles, police vehicles and other specialty vehicles.

Departments contribute to this replacement fund based on the depreciation costs of existing vehicles.

This fund receives revenue from trade-ins and surplus equipment sales. The General Fund charges for services based on the prior year fleet depreciation costs adjusted by the CPI index.

During the annual budget process, the Public Works and the Police Department review the current vehicle inventory listing and make recommendations for vehicle acquisitions and replacements, considering on-going maintenance costs.

FY 2025-26 CAPITAL OUTLAY
PD Patrol vehicles $ 75,000
Gem Car 25,000
FY 2027-28 CAPITAL OUTLAY
Depreciation $ 200,000
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SELF-INSURANCE LIABILITY FUND
The Self-Insurance Liability Fund accumulates funds for deductible expenditures and excess incidents above the City’s liability coverage. The fund pays for the following expenses:
 Excess Insurance Premiums - The City belongs to the Monterey Bay Area Self Insurance Authority (MBASIA) joint powers authority. MBASIA covers all liability expenses, fire, property protection, and general liability claims up to $10,000 per occurrence.  Property Insurance – The City receives property insurance through the Public Entity Property Insurance Program and is insured by Lexington. The City’s premium is $100,000.  Vehicle and Equipment Insurance Coverage - Coverage for vehicles and equipment with a purchase value of $25,000 or more. The annual premium is $7,500 with a $2,000 deductible.  Unemployment Insurance - The California Employment Development Department (EDD) defines the City as a “State Unemployment Insurance Reimbursement Client.” The City does not pay unemployment insurance premiums to the State. When an employee files for and receives unemployment benefits from the State, the City is responsible for that benefit.

Charges for services are allocated to each General Fund department based on their percentage of the total operating budget from the prior fiscal year less the budget for unanticipated events. 79 108
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WORKERS’ COMPENSATION FUND
The Workers’ Compensation Fund satisfies the requirements of Capitola municipal code section

3.24.030, which states, “The City Manager and City Treasurer shall establish a reserve fund for purposes of paying future workers’ compensation claims and shall, hereafter, make such annual deposits into that fund as the city is advised are actually necessary to provide a suitable reserve.” This program also covers City volunteers.

The City belongs to a Joint Powers Authority (JPA), Monterey Bay Area Self Insurance Authority, composed of several local agencies: Del Rey Oaks, Gonzales, Greenfield, Hollister, King City, Marina, Sand City, Scotts Valley, and Soledad. The City retains exposure to temporary disability payments as long as the injured worker remains an employee of the City. MBASIA purchases excess coverage beyond $500,000 per occurrence up to statutory requirements.

The annual premium that is assessed to each of the participating cities in the JPA is based on three primary factors: the number of employees in each of the two major categories (Safety & Miscellaneous), the experience rate (cost incurred) of each participating agency, and debt service allocation.

When an employee files a claim, the City pays the employee’s salary portion directly from the general fund based upon the standard workers’ compensation formula, for the “temporary” claim. The formulas for employees receiving workers’ compensation are as follows:

1. Public Safety: Compensation is 100% of salary, non-taxable.

2. Miscellaneous: Compensation is 2/3 of salary with a cap of $840 per week, non-taxable.

For non-safety staff, City policy allows that accruals (i.e., sick, vacation, etc.) may be used to supplement workers’ compensation payments. If the person becomes “permanently disabled” then the JPA picks up the salary portion. The JPA pays all other costs including legal and medical. While on workers’ compensation status, the safety and non-safety staff continue to accrue sick and vacation leave balances.

Distribution to General Fund Departments:

The allocation methodology for workers’ compensation charges to the General Fund Departments corresponds closely to the cost allocation method used by the JPA. The City divides employees into three classifications: Sworn, Non-Sworn and Volunteers, with cost per FTE calculated. A fund balance accommodates future premium fluctuations, deductibles, and excess liability. 80 109
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COMPENSATED ABSENCES LIABILITY FUND
The Compensated Absences Liability Fund accumulates reserves to pay for employee cash-outs, such as accumulated sick leave and vacation, due to employees upon termination or retirement. The following is an itemized description of the various liabilities of this fund.

Vacation > 360 hours: An employee who has accumulated more than 360 hours (504 hours for POA) as of the last pay period in April of any year shall be paid in cash at a rate equal to 100% of his/her current hourly rate for hours exceeding 360 (504 for POA). The hourly rate includes specialty pays.

Vacation - Voluntary Cash Out: In accordance with various memoranda of understanding between the employee bargaining groups and the City of Capitola, employees may elect voluntary cash outs up to 80 hours of vacation.

Police Captain Cashable Sick Leave: Refer to contract.

Final Pay: Upon resignation, employees are eligible for vacation cash outs.

Severance Pay: The City provides the following severance payout packages:

City Manager 12 months
Police Chief 6 months
Public Works Director 4 months
Community Development Director 4 months
Finance Director 4 months

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SPECIAL REVENUE FUNDS

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Item 5 A.

SPECIAL REVENUE FUNDS
Supplemental Law Enforcement Services (Police): Funds provided by a State of California COPS grant to provide funding for Community Oriented Policing & Problem Solving (COPPS) programs.

Restricted Transient Occupancy Tax (TOT) (City Council): Capitola voters passed Measure J in 2018 increasing the TOT from 10% to 12% and restricting 0.4% for local business groups and 0.35% for early childhood and youth programming.

Road Maintenance and Rehabilitation Act (SB1) (Public Works): Funds received from the state and used for road maintenance, rehabilitation, and critical safety projects on local streets and roads.

Regional Transportation Commission (RTC) Streets (Public Works): Santa Cruz County voters passed a 0.5 percent user sales tax to fund local roads. The RTC Streets fund will be utilized to increase the City’s Street program.

Gas Tax (Public Works): Funds received from gasoline tax revenue from the state and used for new construction, maintenance, and the reconstruction of City streets.

Wharf (Public Works): Accounts for rental income generated from wharf operations and expended on operations and major repairs and improvements.

General Plan Update and Maintenance (Community Development): Funds received as General Plan Maintenance Fee to support future updates to the City’s General Plan, implementing ordinances and plans.

Green Building (Community Development): Green Building funds are solely for program management, training, publications, public educational purposes, incentive programs, materials, and supplies to promote sustainable development, water conservation, storm water pollution prevention, and climate action planning.

Public Art (City Manager): This fund accumulates money received as public art fees to acquire works of art to be displayed in or about public places within the city.

Parking Reserve (Public Works): In 2009 the Council authorized a special reserve fund from the Village parking meters for parking-related projects.

Technology Fee (Community Development): 5% of building permit fee funds permit processing technology.

Public Education & Government Cable TV Access (City Manager): This special revenue fund accounts for PEG cable television fees. The expenditures are restricted to PEG access-related activities.

Capitola Village & Wharf Business Improvement Area (Finance): Established to generate revenue for the exclusive purpose of promoting business in the Capitola Village and Wharf Business Improvement Area.

Community Development Block Grants (Community Development): This fund accounts for active CDBG reimbursement grants that are awarded to the City on a project-by-project basis.

Community Development Block Grant Program Income (Community Development): This fund accounts for income from housing loans that are funded with Community Development Block Grant funds. Loans and interest repaid to the fund are restricted to CDBG approved uses.

Library (City Manager): The new Capitola Branch Library opened in June 2021. The Friends off the Capitola Branch Library raised over $600,000 of donations for project enhancements with approximately $50,000 remining in the Library fund.
83 112
Item 5 A.

HOME Program Reuse (Community Development): This fund accounts for housing loans due to the City from the recipients of previous HOME Program grants. Receipts in the Home Program Reuse Fund are restricted to affordable housing activities in accordance with the federal HOME program re-use guidelines.

Housing Trust (Community Development): The City Council adopted an Inclusionary Housing Ordinance in November 2004, which created an Affordable Housing Trust Fund. It is funded from in-lieu fees, which can be used for new affordable housing and rehabilitation of existing affordable housing.

Permanent Local Housing Allocation (PLHA): In 2017, Senate Bill 2 (SB 2) established a $75 recording fee on real estate documents and created the Permanent Local Housing Allocation Fund (PLHA). PLHA funds are allocated to local governments for eligible housing and homelessness activities and provide a permanent, on-going source of funding for housing-related projects and programs that address the unmet housing needs of communities.

Capitola Housing Successor (Community Development): When the Capitola Redevelopment Agency dissolved, the City elected to become the Housing Successor to the former Low- and Moderate-Income Housing Fund of the RDA.
84 113
Item 5 A.

SUPPLEMENTAL LAW ENFORCEMENT SERVICES
POLICE
In 1996, California's state legislature (AB 3229) established the Citizens Options for Public Safety (COPS) program, allocating $100,000,000 annually to local governments for front-line law enforcement. These funds are administered through the Supplemental Law Enforcement Services Fund (SLESF) program. The COPS program received its initial funding in the 1996-1997 California state budget and has been consistently funded since then. Section 30061 (c) (1) of the Government Code outlines the future funding details for the COPS program through SLESF.

SLESF funds are grants, and the legislation requires that each municipality receive annual funds to be used for "front-line law enforcement services." These funds cannot be used to replace existing resources but must be used to enhance them. Eligible expenses include salaries, services, supplies, equipment, and administrative costs.

Furthermore, SLESF funds cannot be redirected to a municipality's general fund but must be exclusively used for front-line law enforcement services. The total award to each recipient entity is based on population size, with a minimum annual award of $100,000 for all entities. For example, the Capitola Police Department receives an annual award of $100,000. Fund distributions are made regularly throughout the year.

Contract Services – Utility services – Gas & Electric
Supplies – Front line law enforcement
Capital Outlay – Online report writing, electronic ticket writing. 85 114
Item 5 A.

RESTRICTED TRANSIENT OCCUPANCY TAX (TOT)

CITY COUNCIL
This fund accounts for the 0.75% of restricted Transient Occupancy Tax (TOT) as approved by Capitola voters in 2018. The Restricted TOT Fund is used to receive and distribute half of the 0.40% of restricted TOT revenues for local business groups with the other half going directly to the Capitola Village & Wharf Business Improvement Area fund and the 0.35% of restricted TOT revenue dedicated to early childhood and youth programming.

ECYP Enrichment
 Field Trips and similar activities
Community Grants – Early Childhood & Youth Community Grants - $60,000 Other financing uses – payment to Capitola-Soquel Chamber of Commerce - $35,000  Equal amount distributed directly to Capitola BIA fund. 86 115
Item 5 A.

ROAD MAINTENANCE & REHABILITATION ACT (SB1)

PUBLIC WORKS
This fund accounts for receipt and expenditure of revenue as provided by state law. The Road Maintenance & Rehabilitation Act Fund is primarily used to cover the expenses related to street maintenance and rehabilitation projects on City roads and streets.

Capital Outlay – Annual pavement management plan.
87 116
Item 5 A.

REGIONAL TRANSPORTATION COMMISSION (RTC) STREETS

PUBLIC WORKS
This fund accounts for receipts and expenditures of money received from the Santa Cruz County Regional Transportation Commission. A description of proposed projects is listed in the summary section of this budget.

Capital Outlay – Annual pavement management plan.
88 117
Item 5 A.

GAS TAX

PUBLIC WORKS
This fund accounts for receipt and expenditure of gasoline tax revenue as provided by state law. The Gas Tax Fund is primarily used to cover the expenses related to maintenance and operation of the City’s traffic signals and streetlights. Other Gas Tax Fund programs include street maintenance patching and striping project, street sweeper lease payments, and engineering.

The Gas Tax funds must be spent within 5 years of receipt. Future Gas Tax funds cannot be pledged for current projects with future repayment; therefore, the funds can only be spent once they have been received.

Contract Services:
 Admin & Engineering - $50,000
 Streetlights & traffic signals - $140,000
 Street & sidewalks - $35,000
 Street painting - $30,000
 Street sweeper maintenance - $30,000
89 118
Item 5 A.

WHARF

PUBLIC WORKS
The Wharf Fund accounts for rental income generated from Capitola Wharf operations and is used to cover ongoing maintenance, operating costs, and periodic repairs. Revenues accumulate in the fund to help meet expenditure needs; however, major repairs—typically required on a 3–5-year cycle—have occasionally required General Fund support to keep the facility safe and accessible.

Following the passage of Measure F, the City reconstructed and reopened the Wharf in September 2024.

Measure F revenues are managed through the Capital Improvement Fund (CIP) and supported the design and construction of the improved Wharf. The Wharf Fund continues to be used for maintenance and repair of the now-rebuilt facility.

Contract Services:
 Utilities - $36,500
 Janitorial services - $7,000
 Property & Equipment repairs & maintenance - $4,500
 Rentals (portable toilets) - $10,000

90 119
Item 5 A.

GENERAL PLAN UPDATE & MAINTENANCE

COMMUNITY DEVELOPMENT
In 2002, the State Legislature passed AB 2936 to enable cities to collect fees “reasonably necessary to prepare and revise the plans and policies that a local agency is required to adopt before it can make any necessary findings and determinations”. The General Plan Maintenance Fee is currently 0.5 percent of the total building valuation to cover the cost of a future comprehensive update of the City’s General Plan.

The City adopted a comprehensive update to the General Plan in 2013. To implement the General Plan, the City updated the Zoning Code in 2018 which was certified by the California Coastal Commission in 2021. In 2024, the 6th Cycle Housing Element Update was certified by the state. The adopted budget provides adequate resources to implement the General Plan and the 6th Cycle Housing Element in FY 2026-27. The City plans for the next comprehensive update of the General Plan around 2033.

The City adopted a comprehensive update to the Zoning Code which was certified by the California Coastal Commission in 2021. The 6th Cycle Housing Element Update was certified by the state in 2024. The adopted budget provides adequate resources to fund consultant contracts and staff time to finalize the Housing Element implementation efforts in FY 2026-27.

Contract services:
 RRM - $10,000 – Housing Element
 Update Housing Impact Fee – Rental - $30000
 City Staff time – Housing Element - $30,000
91 120
Item 5 A.

GREEN BUILDING

COMMUNITY DEVELOPMENT

The Green Building Ordinance (Chapter 17.10 to the Capitola Municipal Code) was adopted in May 2008 and later amended in November 2014. The Green Building Ordinance establishes the Green Building Fund, which provides funding for the administration and implementation of the Green Building program and related sustainability initiatives. The intent of the Green Building fund is to provide resources for programs and initiatives which promote environmental sustainability, resource conservation, greenhouse gas emission reductions, and solid waste reduction. The fund is utilized for the City’s participation in regional climate action planning as a member of the Resilient Central Coast, fund a consultant contract to update the Climate Action Plan, and implement the Green Halo construction waste tracking system.

Application and Use of Funds (per City municipal code): The Capitola Green Building Regulation applies to non-residential additions and/or exterior remodels totaling 1,000 or more square feet and residential additions and/or remodels totaling 350 square feet or more. Building permits which are required to comply with the Green Building Regulations shall be assessed a fee of 0.0025 times the overall valuation of the project.

Revenues collected shall be maintained by the Finance Department as a revolving Green Building Fund and shall be used only for program management, training, publications, public educational purposes, incentive programs, materials and supplies necessary to promote sustainable development, water conservation, storm water pollution prevention, and climate action planning activities.

Contract services:

Resilient Coast California Working Group - $5,000
92 121
Item 5 A.

PUBLIC ART

CITY MANAGER
The City established a Public Arts fee in 2004. The purpose is to ensure that 2% of the cost of eligible municipal capital improvement, renovation, or restoration projects are funded in whole or in part by the City of Capitola or any private, non-residential development project with a total building permit valuation of $250,000 or more is set aside for the acquisition of works of art to be displayed in or about public places within the City. For a private development, there is an in-lieu option to contribute 1% of the total budget to the Public Art Program. As part of the program expenses, up to 20% of the art allocations may be expended on program administration, project management and community outreach activities.

Projects completed in 2025-26
 Begonia Festival Commemorative Public Art Project
Projects for 2026-27
 Monterey Ave Railing Public Art Project-in contract
Contract services: Contracts with artists on various projects - $85,000 93 122
Item 5 A.

PARKING RESERVE

PUBLIC WORKS
In 2009, as part of a parking meter rate increase, the City Council established the Parking Reserve Fund.

Revenues deposited into this fund represent 16% of parking meter revenues from the Village area (Parking Meter Zone A1). The fund was established to fund parking improvement projects throughout the Village. As part of the FY 2023-24 City Council Goals this debt was paid off. 94 123
Item 5 A.

TECHNOLOGY FEE

COMMUNITY DEVELOPMENT
On November 12, 2009, the City of Capitola adopted a resolution establishing the Technology Fee. The fee is 5% of the Community Development and Public Works permit fees. The City has updated building, planning, and public works permitting software. The system better coordinates plan review activities among departments and will allow the public to inquire and search records and monitor progress of applications through the internet. The City will continue to make changes to the system in order to provide better service to the public and to improve internal processes. The zoning update process and its implementation will also benefit from the system’s data resources and enhanced reporting capabilities.

Contract Services:
 iWorQ annual fee – Public Works - $3,500
 iWorQ annual fee – Community Development - $12,500
95 124
Item 5 A.

PUBLIC EDUCATION/GOVERNMENT CABLE TV ACCESS (PEG)

CITY MANAGER
This Special Revenue Fund accounts for Public, Education & Government (PEG) cable television fees. The PEG Access fee from all cable service providers is 64 cents per subscriber and is due to the City concurrent with the Franchise Fee Payments. The City is required to segregate PEG access fees and related purchases.

The funds received through PEG fees are retained by the City and utilized for capital equipment purchases in support of PEG access only. PEG channels are set aside for the following purposes:
- Public - available for use by the public
- Education - available for use by educational institutions for educational programming - Government – available for programming by local governments Contract Services – Community Television
Capitola Outlay – Technology upgrades – City Council Chambers Fund - 1320
Public Education & Gov't.

FY23/24
Actual
FY24/25
Actual
FY25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Beginning Fund Balance $ 45,080 $ 57,530 $ 68,094 $ 68,094 $ 63,594 $ 44,594 Revenue
Licenses and permits $ 10,453 $ 9,215 $ 10,000 $ 10,000 $ 10,000 $ 10,000 Use of money & property 1,997 2,757 1,500 1,500 1,500 1,500 Revenue Totals $ 12,450 $ 11,972 $ 11,500 $ 11,500 $ 11,500 $ 11,500 Expenditures
Contract services $ - $ 1,408 $ 6,000 $ 6,000 $ 24,000 $ 24,000 Supplies - - - - - -
Capital Outlay - - 10,000 10,000 6,500 6,500
Expenditure Totals $ - $ 1,408 $ 16,000 $ 16,000 $ 30,500 $ 30,500 Fund Balance at 06/30 $ 57,530 $ 68,094 $ 63,594 $ 63,594 $ 44,594 $ 25,594

SOURCES AND USES
96 125
Item 5 A.

CAPITOLA VILLAGE/WHARF BUSINESS IMPROVEMENT AREA (BIA)

FINANCE
In June 2005, the City of Capitola adopted Ordinance No. 889, which added Chapter 5.10 to the Capitola Municipal Code establishing the Capitola Village and Wharf Business Improvement Area (BIA). It was established to generate revenue for the sole purpose of promoting business in Capitola village and on the wharf. State law requires certain annual actions and public hearing to continue this assessment district. The program is run with the assistance of a BIA Board of Directors, which provides city council with an annual budget proposal.

Contract services and supplies: Capitola Village & Wharf Business Improvement Area annual report to be submitted to the Capitola City Council in late May or early June.

Fund - 1321
CVWBIA
FY23/24
Actual
FY24/25
Actual
FY25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Beginning Fund Balance $ 44,242 $ 32,485 $ 19,231 $ 19,231 $ 5,031 $ 7,231 Revenue
Charges for services $ 53,854 $ 54,945 $ 55,000 $ 55,000 $ 55,000 $ 55,000 Use of money & property 43,640 48,200 59,100 $ 59,100 $ 55,300 $ 55,300 Restricted TOT 36,761 37,315 35,000 $ 35,000 $ 37,000 $ 37,000 Revenue Totals $134,254 $140,460 $ 149,100 $ 149,100 $ 147,300 $ 147,300 Expenditures
Contract services $ 46,642 $ 22,878 $ 25,500 $ 25,500 $ 25,100 $ 25,100 Supplies 99,369 130,836 140,000 137,800 $ 120,000 $ 120,000 Expenditure Totals $146,011 $153,715 $ 165,500 $ 163,300 $ 145,100 $ 145,100 Fund Balance at 06/30 $ 32,485 $ 19,231 $ 2,831 $ 5,031 $ 7,231 $ 9,431

SOURCES AND USES
97 126
Item 5 A.

COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)

COMMUNITY DEVELOPMENT
The Community Development Block Grant (CDBG) program is a flexible program that provides communities with resources to address a wide range of unique community development needs. The program is funded though the Federal Department of Housing and Urban Development (HUD) and Capitola participate in the competitive Small Cities Grant Program administered by the California Department of Housing and Community Development.

In recent years, the City has been awarded CDBG grants to fund the City’s Local Hazard Mitigation Plan (LHMP), Safety Element of the General Plan Update, CARES Act funding in response to the pandemic and food assistance and transit in cooperation with local nonprofits. In FY 2025-26, the City was awarded two CDBG Grants including $3.3 million for the Jade Street Community Center, $3.3 million for Treasure Cove Park, and $300,000 for food services. In 2026-27 the City plans to apply for another $5 million CDBG grant.

Fund - 1350
CDBG Grants
FY23/24
Actual
FY24/25
Actual
FY25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Beginning Fund Balance $ (70,889) $(149,941) $ 106,739 $ 106,739 $ 667,539 $ 667,539 Revenue
Intergovernmental revenues $ 160,560 $ 495,515 $4,010,392 $4,010,392 $ - $ - Revenue Totals $ 160,560 $ 495,515 $4,010,392 $4,010,392 $ - $ - Expenditures
Contract services $ 83,548 $ 65,590 $ 169,080 $ 169,080 $ - $ - Grants and subsidies 156,064 173,246 80,512 80,512 - -
Other financing uses - - 3,200,000 3,200,000 - -
Expenditure Totals $ 239,612 $ 238,836 $3,449,592 $3,449,592 $ - $ - Fund Balance at 06/30 $(149,941) $ 106,739 $ 667,539 $ 667,539 $ 667,539 $ 667,539

SOURCES AND USES
98 127
Item 5 A.

COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM INCOME

COMMUNITY DEVELOPMENT
This special revenue fund accounts for issuance and repayment of CDBG-funded housing loans made by the City to income-qualifying households. These funds are referred to as CDBG Program Income. CDBG Program Income must be used for CDBG-approved purposes. The three primary sources of CDBG Program Income are the payoff of Loma Vista Mobile Home Park resident loans, CDBG-funded First Time Homebuyer Program loans, and CDBG-funded Rehabilitation Program loans.

If the total amount of Program Income received in any fiscal year is less than $25,000, the funds received are not subject to Federal CDBG regulations. If the amount exceeds $25,000, all Program Income received during that fiscal year is restricted to CDBG-approved Federal spending guidelines.

During FY2025-26, one CDBG loan was paid off in the amount of $8,894.32. 99 128
Item 5 A.

LIBRARY

CITY MANAGER
This special revenue fund accounts for revenue and expenses related to the design and construction of the new Capitola Branch Library. The former Redevelopment Agency contributed $2.6 million to the County of Santa Cruz which was held in a trust fund for the future construction of a new branch library.

The Voters of Santa Cruz County authorized the Santa Cruz Libraries Facilities Financing Authority to issue general obligation bonds in an aggregate principal amount not exceeding $67 million. The City of Capitola will receive $10.0 million from the bonds to be used towards the construction of the new branch library, bringing the City’s total available funds to $12.6 million.

The City started utilizing the County Trust Fund money in FY 2016-17 to hire a project manager to oversee the development of plans and ultimately the construction of the Library. Under the trust fund agreement, the City can utilize 15 percent of the funds for pre-construction activities.

In addition to the funding sources mentioned above, the Friends of the Capitola Branch Library (Friends) conducted a fundraising campaign raising over $600,000. The funds donated to the Friends were utilized for enhancement projects throughout the Library. The City completed construction of the new Library in June 2021, however, there remains approximately $50,000 of donated funds that the Friends are evaluating for the best use of those remaining funds.

Additionally, Capitola is scheduled to receive approximately $165,000 annually for the next 20 years as a result of additional Measure S revenues. The first $855,000 will be used to repay the general fund for contributions to the Library project.
100
129
Item 5 A.

HOME PROGRAM REUSE

COMMUNITY DEVELOPMENT
This special revenue fund accounts for revenue from the repayment of Federal Home Investments Partnership Program (HOME) loans. Expenditures in this fund must be used for affordable housing activities in accordance with the Federal HOME Program Reuse Guidelines, including first-time homebuyer loans, owner-occupied rehabilitation projects, and affordable housing assistance projects. As loans are paid off, those funds are returned to the Home Program Reuse Fund and become available for affordable housing activities.

Annual revenue represents principal and interest payments on the 30-year $238,000 Wharf Road Manor Mobile Homeowners Association Acquisition and Rehabilitation Project loan from 2004 as well as other HOME loan payoffs.

In January 2009, the City of Capitola entered a Standard Agreement with the California Department of Housing and Community Development for a HOME grant in the amount of $2,000,000 for rehabilitation expenses related to the 109-unit Bay Avenue Senior Apartments Project. Construction of the project was completed in May 2011. The grant was provided to First Community Housing, the Bay Avenue Senior Apartments project developer, as a residual receipts loan at 3% interest. In May 2011, the HOME program increased the grant award by $1.2 million dollars to cover additional costs related to required rent level revisions, which are lower than estimated in the original pro-forma. The grant funds have been received and dispersed. In recent years, multiple loans have been paid off creating a healthy fund balance for future HOME projects.

The adopted budget provides adequate resources to assist an existing affordable housing development through a rehabilitation project and provide resources to an affordable housing developer to acquire land or develop a project. The budget also covers long-term monitoring of the Bay Avenue Senior Apartments Fund - 1370
HOME Reuse
FY23/24
Actual
FY24/25
Actual
FY25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Beginning Fund Balance $ 808,386 $ 881,691 $1,005,956 $1,005,956 $1,015,956 $ 35,956 Revenue
Use of money & property $ 77,005 $ 128,715 $ 20,000 $ 20,000 $ 20,000 $ 20,000 Revenue Totals $ 77,005 $ 128,715 $ 20,000 $ 20,000 $ 20,000 $ 20,000 Expenditures
Contract services $ 3,700 $ 4,450 $ 979,000 $ 10,000 $1,000,000 $ - Other financing uses - - - - - -
Expenditure Totals $ 3,700 $ 4,450 $ 979,000 $ 10,000 $1,000,000 $ - Available Fund Balance
at 06/30 $ 881,691 $1,005,956 $ 46,956 $1,015,956 $ 35,956 $ 55,956

SOURCES AND USES
101
130
Item 5 A.

HOUSING TRUST

COMMUNITY DEVELOPMENT
In November 2004, the City Council adopted an inclusionary housing ordinance as part of the City’s ongoing efforts to provide affordable housing. This ordinance created the Affordable Housing Trust Fund to use as a flexible local source of funding for the creation of new affordable housing, rehabilitation of existing affordable housing, funding of local programs to assist lower and moderate-income buyers purchase affordable housing, or as leverage of local funds for larger State and Federal grants. This housing activity is funded through inlieu fees collected from development projects and does not impact on the General Fund.

The Affordable Inclusionary Housing Ordinance refers to a City Municipal Code Section that requires that fifteen percent (15%) of the units in a new for-sale residential construction project be made available to low or moderate-income buyers. Condominium conversion projects are also covered under this ordinance. As outlined in the ordinance, project developers provide affordable set-aside units or under certain conditions can pay an in-lieu fee.

The City’s Housing Trust Fund allows for up to $75,000 per year to be spent on affordable housing program administration. This includes working with developers on fee collection, administration of the Housing Trust Fund, and implementation of the Inclusionary Ordinance.

A housing rehabilitation program was initiated on FY2025-26. The housing rehabilitation program had seven applications of which two were completed. The City has funding to assist up to 16 deed restricted households through the rehab program.

A homebuyer assistance program was initiated in FY 2025-26. This program is being set up to provide up to $20,000 of down payment assistance to prospective buyers of affordable deed restricted units within the City of Capitola.

Contract Services: Down Payment Assistance
102
131
Item 5 A.

PERMANENT LOCAL HOUSING ALLOCATION

COMMUNITY DEVELOPMENT
In 2017, Senate Bill 2 (SB 2) established a $75 recording fee on real estate documents and created the Permanent Local Housing Allocation Fund (PLHA). PLHA funds are allocated to local governments for eligible housing and homelessness activities and provide a permanent, on-going source of funding for housing-related projects and programs that address the unmet housing needs of communities.

On May 10, 2023, the City of Capitola was awarded $481,732 in PLHA funds for the first three years of the allocation (2019-2021) and a total five-year estimate of $630,557. The City anticipates additional funding on an annual basis. The first PLHA activity approved is for predevelopment costs related to affordable housing developments. The second activity is to fund the very low income homeless through an annual contribution of $35,000 to the Housing for Health Partnership to support year-round emergency shelter operations in Santa Cruz County. A portion of the funding will cover administrative expenses.

The Adopted budget proved adequate resources to support the development of the 52-unit 100% affordable housing development project at 1098 38th Avenue.

Contract services: Affordable housing and homelessness program development and activities. 103
132
Item 5 A.

CAPITOLA HOUSING SUCCESSOR

COMMUNITY DEVELOPMENT
In 2011, the California State Legislature passed ABX1 26 to dissolve redevelopment agencies. The legislation was contested and upheld by the California Supreme Court. It requires a number of actions to be taken by the city in the winding down of the RDA. Among other things, it allows cities to elect to retain the former RDA Low- and Moderate-Income Housing Fund. The Capitola City Council elected to retain the former RDA Housing with the following new city special revenue fund, the Capitola Housing Successor.

A further requirement of the legislation is the establishment of a program income fund to segregate loan payoffs received by the Housing Successor after the dissolution of the Redevelopment Agency. These funds were initially restricted in their use, repayment, and reuse and the Housing Successor continues this restriction. As payments are received on loans associated with the original RDA Low- and Moderate-Income Housing Fund or the Capitola Housing Successor will be applied to the Capitola Housing Successor.

Newly implemented SB341 requires annual reporting on the Housing Successor Assets to be included with the Annual Financial Statements and the Housing and Community Development (HCD) Annual Progress Report on the Housing Element of the General Plan.

The Adopted budget provides adequate resources to continue supporting security deposit assistance, emergency rental assistance, administration of the City’s affordable housing program, and the MidPen loan to help fund the preconstruction and construction for the 52-unit 100% affordable development at 1098 38th Avenue.

Contract Services: Homeless Action Plan
104
133
Item 5 A.

RESERVES
105
134
Item 5 A.

RESERVES
Emergency Reserves (Finance Department): The City Council established the Emergency Reserve Fund to accumulate funds to meet future unanticipated needs. The City of Capitola Administrative Policy III-3, Financial Management Policy, amended on February 28, 2013, to increase the required level of emergency reserves from five to ten percent of operating expenditures.

Contingency Reserve (Finance Department): The City Council established the Contingency Reserve Fund to accumulate a prudent level of financial resources to protect the City against temporary revenue shortfalls or unanticipated operating costs, and/or to meet short-term cash flow requirements. The City of Capitola Administrative Policy III-3, Financial Management Policy, amended on February 28, 2013, to increase the level of contingency reserves from 10 to 15 percent of operating expenditures.

PERS Contingency Reserve (Finance Department): The City Council established the PERS Contingency Reserve Fund in FY 2015/16. The Council discussed possible uses of a General Fund positive ending balance and wanted to set aside funds for future PERS increases. In FY 2022-13 an additional $500,000 was deposited into the Trust to add to the previously deposited $800,000.

Facilities Reserve (Finance Department): The City Council established the Facilities Reserve Fund to serve as a resource to fund capital improvements and major repairs on City facilities. Based on the National Research Council Stewardship of Federal Facility guidelines, the City’s goal is to provide annual contributions equal to two percent of the facility replacement values. This annual contribution will be determined each budget year.

106
135
Item 5 A.

EMERGENCY RESERVES
The City of Capitola adopted an Emergency Reserve Policy as part of the City’s Financial Management Policies. This reserve protects against significant one-time costs that arise from major unpredictable emergency events. In FY 2012/13, the City amended the Financial Management Policies to increase the funding level of Emergency Reserves from five to ten percent of the General Fund budgeted expenditures, or approximately $1.6 million in FY 2024-25.

The Emergency Reserve fund was nearly depleted in March of 2011 due to an underground storm drain failure that flooded Capitola Village and the surrounding area. The City was required to recognize a $1.4 million extraordinary loss on the FY 2010/11 and FY 2011/12 financial statements. An additional $200,000 was needed to fund a related retaining wall project. In FY 2012/13, a settlement was reached with the City’s insurance carrier to pay $1.35 million in damages to the City.

The March 2011 pipe failure repairs were paid from the City’s Emergency Reserve Fund. As funding in the Emergency Reserve Fund fell short of the flood-related costs, additional funding to respond to the flood event was provided through interfund loans from the Contingency Reserve Fund and Capital Improvement Fund. In FY 2011/12, the Emergency Reserve Fund balance was $410,000 lower than the targeted balance. In FY 2012/13, funds were transferred from the internal service funds, Measure O revenue receipts, and the General Fund operating balance to assist in replenishing the reserves.

In FY 2014/15 and FY 2015/16, $465,100 and $213,000, respectively, were budgeted for transfer to the fund to prepare for any unforeseeable emergencies and to meet the new Emergency Reserve targeted levels. As the chart below shows, the reserve balance is currently below the target level for FY 2024-25 in part due to the transfer of $80,000 for damages from the Jan. 2023 storms. The City anticipates receiving reimbursements from FEMA and Cal OES and plans to fund reserves to target balances once received.

Fund - 1020
FY23/24
Actual
FY24/25
Actual
FY25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Beginning Fund Balance $ 1,461,506 $ 1,631,506 $ 1,631,506 $ 1,631,506 $ 1,631,506 $ 1,631,506 Revenue
Other Financing Sources 250,000 $ $ 250,000 -$ -$
Revenue Totals $ 250,000 $ 250,000 -$ -$ -$ -$
Expenditures
Other Financing Uses $ 80,000 $ 250,000 -$ -$ -$
Expenditure Totals $ 80,000 $ 250,000 -$ -$ -$ -$
Fund Balance at 06/30 1,631,506 $ $ 1,631,506 $ 1,631,506 $ 1,631,506 $ 1,631,506 $ 1,631,506 Personnel $12,099,946 $12,692,358 $14,260,987 $14,260,987 $14,984,535 $15,417,536 Contract Services 3,704,267 3,799,530 3,851,191 3,820,000 3,991,445 3,905,719 Training & Memberships 143,324 114,877 169,480 150,000 115,380 146,230 Supplies 958,158 854,877 801,700 850,000 879,350 856,350 Grants 125,000 125,000 133,425 133,425 133,425 133,425
Total GF Expenditures $17,030,695 $17,586,641 $19,216,783 $19,214,412 $20,104,136 $20,459,260 Target Balance (10%) $ 1,758,664 1,703,070 $ $ 1,921,678 $ 1,921,441 $ 2,010,414 $ 2,045,926 Over / (Short) of Target $ (127,159) (71,564) $ $ (290,173) $ (289,936) $ (378,908) $ (414,420)

SOURCES AND USES
Reserve Target equals 10% of General Fund expenditures excluding transfers and internal service charges 107
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CONTINGENCY RESERVES
The City of Capitola adopted a Contingency Reserve Policy as part of the City’s Financial Management Policies. This reserve was established to provide a prudent level of financial resources to protect against temporary revenue shortfalls, unanticipated operating costs, and/or to meet short-term cash flow requirements. In FY 2012/13, the City amended the Financial Management Policies to increase the Contingency Reserve target from 10 to 15 percent of General Fund budgeted expenditures, or approximately $2.6 million in FY 2024-25.

Due to the expenses associated with the March 2011 pipe failure, a loan was made from the Contingency Reserves Fund to the Emergency Reserves Fund. As a result, Contingency Reserves were $727,000 below their Financial Management Policy funding goal in FY 2011/12. In FY 2012/13, funds were transferred from the Internal Service Funds, Measure O revenue receipts, and the General Fund operating balance to assist in replenishing and building the reserves.

In FY 2014/15 and FY 2015/16, a total of $182,600 and $89,400 were transferred to the fund to meet the new Contingency Reserve targeted levels. As the chart below shows, the reserve balance is currently estimated to be below the target level for FY 2024-25. The City anticipates receiving reimbursements from FEMA and Cal OES and plans to fund reserves to target balances once received. 108
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Item 5 A.

PERS CONTINGENCY RESERVES
The City of Capitola established a PERS Contingency Reserve as part of the FY 2015/16 Budget process. The fund was set up to help stabilize the City’s finances and help manage future increases in PERS contributions.

The PERS Contingency Fund was initially funded with a $300,000 transfer from the General Fund. The $300,000 allows for two years of PERS projected increases and time to evaluate options to address the larger unfunded liability and yearly obligations.

In December 2016, $300,000 was invested in a moderately conservative trust fund with Public Agency Retirement Services (PARS). The FY 17/18 budget transferred an additional $500,000 into the PERS trust fund to offset rising pension costs. During the FY 2022-23 goal setting session the City Council allocated $500,000 of existing fund balance to the PERS Trust reserve.

Fund - 1015
FY23/24
Actual
FY24/25
Actual
FY25/26
Amended
FY25/26
Estimated
FY26/27
Proposed
FY27/28
Planned
Beginning Fund Balance $ 904,275 $ 1,187,772 $ 1,531,142 $ 1,531,142 $ 1,601,142 $ 1,651,142 Revenue
Use of money & property 33,497 93,370 10,000 70,000 50,000 50,000 Other Financing Sources 250,000 $ 250,000 - - - -
Revenue Totals 283,497$ 343,370$ $ 10,000 70,000$ $ 50,000 $ 50,000 Expenditures
Other Financing Uses $ - -$ -$ -$ -$ -$
Expenditure Totals $ - -$ -$ -$ -$ -$
Fund Balance at 06/30 1,187,772 $ 1,531,142$ 1,541,142$ 1,601,142$ 1,651,142$ 1,701,142$

SOURCES AND USES
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Item 5 A.

FACILITIES RESERVES
The Facilities Reserve Fund was established in FY 2014-15 to serve as a resource to fund capital improvements and major repairs on City facilities. The National Research Council Stewardship of Federal Facilities recommends setting aside two to four percent of building replacement costs to preserve or extend the life of facilities. The estimated replacement value of the City’s facilities is $17.5 million.

The Facilities Reserve is used to fund future facility needs of the City. The Proposed FY 2026-27 Budget does not include nay funding for the Facilities Reserve. 110
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Item 5 A.

MULTI-YEAR ASSETS & OBLIGATIONS

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Item 5 A.

MULTI-YEAR ASSETS & OBLIGATIONS
City & Joint Powers Authority (JPA) Multi-Year Obligations: The City of Capitola has six multiyear obligations, two of which are part of a Joint Powers Authority. The obligations are paid from various funding sources.

Pacific Cove Lease Financing: In March 2011, a pipe failure flooded the City-owned Pacific Cove Mobile Home Park. The City of Capitola entered into a $2,390,000 lease/sublease agreement to finance the relocation of mobile home residents and close the park.

Beach and Village Parking Lot II: The City of Capitola initiated a $1,372,500 California Infrastructure and Economic Development Bank (I-Bank) loan to fund the development of a parking lot and related improvements at the site of the former Pacific Cove Mobile Home Park. 113
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Item 5 A.

CITY/JOINT POWERS AUTHORITY MULTI-YEAR ASSETS & OBLIGATIONS

GENERAL GOVERNMENT
The City of Capitola has seven multi-year obligations, three of which are part of a Joint Powers Authority. The obligations are paid from various funding sources. All obligations are shown in the budgets of the applicable funds and all payments are current.

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Item 5 A.

PACIFIC COVE LEASE FINANCING

DEBT SERVICE
The City of Capitola owns 426 Capitola Avenue, which formerly housed the 41 mobile home Pacific Cove Mobile Home Park. On March 24, 2011, a 72” storm drain that carries Noble Gulch Creek water from Bay Avenue to Soquel Creek catastrophically failed following a heavy rain storm. This resulted in flooding of the Pacific Cove Mobile Home Park, City Hall and village residences and businesses.

The initial estimate to bring the park up to code was $1.33 million. Due to the high cost and potential for future liability, Capitola City Council approved a Relocation Impact Report (RIR) for the closure of Pacific Cove Mobile Home Park in January 2012. The RIR provided a cost estimate for relocating residents and professional relocation consultants to help displaced residents find suitable replacement housing. The City executed a $2.39 million lease/sublease agreement using the existing City Hall site and adjacent upper parking lot as the pledged property. The City verified income status as part of the relocation process and determined that a percentage of Housing Trust Fund monies could be used to repay the debt service at a proportion no greater than the number of low income mobile home occupants that were relocated. The funding sources for debt service payments will be determined annually. Any General Fund monies for the share of allowable costs from other funding sources may be reimbursed in subsequent years as funds become available.

At the time the loan was issued, there was some uncertainty as to whether the property would be developed for public or private use. This resulted in the City entering into a 20–year taxable lease/sublease agreement at an interest rate of 5.14%. In FY 12/13, the City determined that the site would be converted to a public parking lot, now named Beach & Village Parking Lot II (BVPL II). This public use allows the City to refinance the existing debt at a 3.25% tax-exempt interest rate with a 10- year Treasury Bill reset + 1.5% in year 10. As a result of the refinancing, annual loan payments were reduced by approximately $28,000, with an estimated nine-year interest savings of approximately $350,000. In FY 12/13 the City reached a $1.35 million insurance settlement related to the pipe failure. This resulted in a principal reduction of $476,200, with a prepayment penalty of $23,800.

During the FY 2023-24 City Council Goal setting the Council allocated $725,000 to pay off the outstanding balance saving approximately $150,000 of interest costs over the next several years. 115
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Item 5 A.

Payment
Date Principal
Interest
/Prepmt
penalty Total Fiscal Year
9/1/2012 30,815 $ 53,893$ 84,708$
3/1/2013 35,871 60,632 96,503
6/28/2013 476,200 23,810 500,010 $ 681,221
9/1/2013 42,440 22,843 65,283
3/1/2014 53,207 29,326 82,533 147,816
9/1/2014 46,196 36,337 82,533
3/1/2015 46,947 35,586 82,533 165,066
9/1/2015 47,710 34,823 82,533
3/1/2016 48,485 34,048 82,533 165,066
9/1/2016 49,273 33,260 82,533
3/1/2017 50,074 32,459 82,533 165,066
9/1/2017 50,887 31,645 82,533
3/1/2018 51,714 30,819 82,533 165,066
9/1/2018 52,555 29,978 82,533
3/1/2019 53,409 29,124 82,533 165,066
9/1/2019 54,277 28,256 82,533
3/1/2020 55,159 27,374 82,533 165,066
9/1/2020 56,055 26,478 82,533
3/1/2021 56,966 25,567 82,533 165,066
9/1/2021 57,891 24,641 82,533
3/1/2022 58,832 23,701 82,533 165,066
9/1/2022 59,788 22,745 82,533
3/1/2023 21,773 60,760 82,533 165,066
9/1/2023 61,747 20,786 82,533
3/1/2024 62,751 19,782 82,533 165,066
9/1/2024 63,770 18,763 82,533
3/1/2025 64,807 17,726 82,533 165,066
9/1/2025 65,860 16,673 82,533
3/1/2026 66,930 15,603 82,533 165,066
9/1/2026 68,017 14,515 82,533
3/1/2027 69,123 13,410 82,533 165,066
9/1/2027 70,246 12,287 82,533
3/1/2028 71,387 11,145 82,533 165,066
9/1/2028 72,548 9,985 82,533
3/1/2029 57,304 7,887 65,191 147,724
9/1/2029 - - -
3/1/2030 - - - -
9/1/2030 - - -
3/1/2031 - - - -
9/1/2031 - - -
3/1/2032 - - - -
TOTAL 2,390,000 $ 897,681$ 3,287,681$ $ 3,287,681
Pacific Cove Financing Lease Debt Service
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Item 5 A.

BEACH & VILLAGE PARKING II – LEASE FINANCING

DEBT SERVICE
In April 2013, the City of Capitola received $1,372,000 in funding from the California Infrastructure and Economic Development Bank (I-Bank) for development of a parking lot on the former Pacific Cove Mobile Home Park site. The funding was used to create the 226 space Beach & Village Parking Lot II. The project included grading, pay station installation, shuttle bus stops, landscaping, pedestrian walkways, and pay stations for the upper parking lot. The I-Bank loan is 2.26% tax exempt reimbursement financing.

This project improved parking capacity for Capitola Village, Capitola Beach, and Capitola Wharf, and is especially helpful during peak seasons. The additional parking spaces are also anticipated to facilitate the development of a hotel. The parking lot contributes about $62,500 annual revenue to the General Fund and the I-Bank annual debt service of $87,116 is paid with funds transferred from the General Fund.
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Item 5 A.

Payment
Dates Principal Interest Total
Fiscal
Year
8/1/2014 55,040 $ 15,922 70,962
2/1/2015 14,887 14,887 $ 85,849
8/1/2015 56,284 18,840 75,124
2/1/2016 14,251 14,251 89,375
8/1/2016 57,556 18,035 75,591
2/1/2017 13,601 13,601 89,192
8/1/2017 58,857 17,212 76,069
2/1/2018 12,936 12,936 89,004
8/1/2018 60,187 16,370 76,557
2/1/2019 12,256 12,256 88,812
8/1/2019 61,547 15,509 77,056
2/1/2020 11,560 11,560 88,616
8/1/2020 62,938 14,629 77,567
2/1/2021 10,849 10,849 88,416
8/1/2021 64,360 13,729 78,089
2/1/2022 10,122 10,122 88,211
8/1/2022 65,815 12,809 78,624
2/1/2023 9,378 9,378 88,002
8/1/2023 67,302 11,868 79,170
2/1/2024 8,618 8,618 87,788
8/1/2024 68,823 10,905 79,728
2/1/2025 7,840 7,840 87,568
8/1/2025 70,379 9,921 80,300
2/1/2026 7,045 7,045 87,344
8/1/2026 71,969 8,915 80,884
2/1/2027 6,231 6,231 87,116
8/1/2027 73,596 7,886 81,482
2/1/2028 5,400 5,400 86,881
8/1/2028 75,259 6,833 82,092
2/1/2029 4,549 4,549 86,641
8/1/2029 76,960 5,757 82,717
2/1/2030 3,680 3,680 86,396
8/1/2030 78,699 4,657 83,356
2/1/2031 2,790 2,790 86,146
8/1/2031 80,478 3,531 84,009
2/1/2032 1,881 1,881 85,890
8/1/2032 82,297 2,380 84,677
2/1/2033 951 951 85,627
8/1/2033 84,156 1,204 85,360 85,360
Total $ 375,736 1,372,500 $ 1,748,236 $ 1,748,236 $
Beach & Village Parking Lot II Lease Financing
Debt Service
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Item 5 A.

CITY OF

CAPITOLA
Capital Improvement Program
Fiscal Years 2026/27 – 2030/31
Adopted: June x, 2026
Resolution Number: 2026-xx

CITY COUNCIL PREPARED BY
Margaux Morgan, Mayor Jessica Kahn, Public Works Director Gerry Jensen, Vice Mayor Jim Malberg, Administrative Services Director Joe Clarke
Melinda Orbach
Susan Westman
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City of Capitola | Capital Improvement Program FY26-31 Page 2 Capital Improvement Program (CIP)
Overview and How to Use This Document
What This Document Is
The Capital Improvement Program (CIP) is the City’s five-year planning document for major capital investments, including transportation infrastructure, parks and recreation facilities, municipal buildings, stormwater systems, and coastal resilience improvements.

The CIP identifies projects the City expects to plan, design, fund, or construct over the next five fiscal years. While the CIP presents a five-year outlook, only the first fiscal year is formally appropriated through the annual budget process. Projects identified in future years may change based on funding availability, project readiness, regulatory requirements, and City Council direction.

What Is Included in the CIP
Projects are generally included in the CIP if they:
• Have a total estimated cost of $50,000 or greater
• Involve the construction, rehabilitation, replacement, or significant improvement of a public asset
• Represent planning, feasibility, or design work necessary to advance a future capital project
Routine maintenance and operational activities funded through annual operating budgets are generally not included in the CIP.

How Capital Projects Are Developed
Most capital projects advance through multiple phases over several years:

Planning / Feasibility
Studies, alternatives analysis, environmental review, and conceptual development Design & Permitting
Engineering, cost refinement, regulatory coordination, and permit approvals 149
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City of Capitola | Capital Improvement Program FY26-31 Page 3 Construction
Implementation of physical improvements and project closeout Not all projects move through these phases at the same pace. Some projects included in the CIP are planning-only efforts, while others are actively under construction or substantially complete. Inclusion in the CIP allows the City to track infrastructure needs over time, coordinate funding and project delivery, position projects for grant opportunities, and support long-term asset management and replacement planning.

How Projects Are Funded
Capital projects are funded through a combination of City, regional, state, federal, and partnership sources. Project sheets identify currently assigned funding sources, as well as future funding needs where additional resources will be required.

Common funding sources used in the CIP include:

General Fund and Capital Reserves
Used selectively for facilities, parks, accessibility improvements, required grant match, and high-priority capital needs
Transportation Funds
Including SB 1, Measure D, Gas Tax, Regional Transportation Commission (RTC) funding, and transportation grant programs
State and Federal Grants
Competitive and formula-based funding programs that often require project readiness, local match, or defined eligibility
Community Development Block Grant (CDBG) Funds
Used for eligible accessibility, community facility, and neighborhood improvement projects
Donations and Partnerships
Primarily supporting park, recreation, and community projects Future Funding Needs
Used to identify projects or future phases where costs are known or anticipated but funding has not yet been secured
Capital funding sources are subject to important constraints. Restricted funds must be used for eligible purposes, grant funding often depends on project readiness, and larger capital projects may require local match or additional leveraging sources. Construction 150
Item 5 A.

City of Capitola | Capital Improvement Program FY26-31 Page 4 cost escalation, permitting requirements, and coastal construction complexity may also increase funding needs as projects advance.

To address these constraints, the City prioritizes restricted and external funding wherever possible and uses local capital funding strategically for grant match, urgent asset repair needs, and projects with clear community benefit that lack dedicated funding sources. The City will continue to evaluate grant, partnership, financing, and other revenue opportunities as capital needs evolve.

How Projects Are Prioritized
Projects included in the CIP reflect a combination of factors, including:
• Public safety and risk reduction
• Asset condition and lifecycle needs
• Regulatory or legal requirements
• Consistency with adopted plans and City Council priorities • Funding availability and project readiness
• Long-term maintenance and operational considerations
Projects that address multiple factors or demonstrate higher readiness for implementation typically advance earlier within the five-year program.

Project Funding Status
Projects in the CIP may be identified as:

Funded
Sufficient funding has been identified to proceed
Partially Funded
Some funding has been identified; additional funding sources are needed Unfunded
An identified capital need with no secured funding currently available Emerging Capital Need
A potential future capital project or infrastructure need identified for long-term planning that is not yet fully scoped or funded
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City of Capitola | Capital Improvement Program FY26-31 Page 5 Unfunded, conceptual, and emerging capital need projects are included to support longterm planning, funding strategy development, and future project readiness as opportunities arise.

How to Read the CIP
This document is organized as follows:

Financial Summary Tables
Provide a citywide overview of capital investment by fiscal year and funding source.

Project Detail Sheets
Present individual project descriptions, estimated costs, funding sources, schedules, and project status information.

Projects are also grouped into general infrastructure categories, such as transportation, parks and recreation, municipal facilities, and stormwater/coastal resilience, to help identify the primary infrastructure focus of each project.

Project detail sheets include active projects, planning efforts, concept projects, completed projects, and emerging capital needs identified through ongoing infrastructure and facility planning.

Annual Review
The CIP is reviewed and updated annually to reflect project progress, updated cost estimates, new funding opportunities, and City Council direction.

Staff will continue to monitor funding conditions, asset performance, regulatory requirements, and project readiness and will return to City Council with recommendations 152
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CIP Financial Summary – Funding Sources
Project Funding Source Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Park at Rispin Mansion
General Fund/RDA $ 1,218,844 - - - - - $1,218,844
Measure Q $ 50,000 - - - - - $50,000
State Parks Grant $ 178,000 - - - - - $178,000
Project Total $1,446,844
Treasure Cove Playground & Restroom Improvements
General Fund (Design) $351,000 - - - - - $351,000
Fundraising $965,000 - - - - - $965,000
CDBG (2025) $2,207,500 - - - - - $2,207,500
Project Total $3,523,500
Community Center Renovation
General Fund $1,867,000 - - - - - $1,867,000
CNRA Grant $1,000,000 - - - - - $1,000,000
CDBG 2024 $3,365,000 - - - - - $3,365,000
CDBG 2025 $1,055,000 - - - - - $1,055,000
Project Total $7,287,000
41st Avenue Multimodal Improvements
RTC Measure D $695,000 - - - - - $695,000
RMRA SB1 $587,000 - - - - - $587,000
Gas Tax $60,000 $60,000
Transportation Grant $1,000,000 - - - - - $1,000,000
Project Total $2,342,000
Project Funding Source Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Stockton Bridge – Bridge Alternatives Evaluation
General Fund $350,000 - - - - - $350,000
WRCB Grant $500,000 - - - - - $500,000
Future Funding Needs - - - - - - TBD
Project Total $850,000
Esplanade Park Improvements
Coastal Conservancy Grant $275,000 - - - - - $275,000
Future Funding Needs - - - - - - TBD
Project Total $275,000
Pavement Management Program (FY26–31)
RTC Measure D - $ 398,000 $ 409,000 $ 422,000 $ 435,000 $ 448,000 $2,112,000 RMRA SB1 - $ 277,000 $ 285,000 $ 294,000 $ 302,000 $ 311,000 $1,469,000 Program Total $3,581,000
Project Funding Source Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Cliff Drive Resiliency Project - Phase 1
FHWA Emergency Relief $ 743,000 - $ 9,658,000 - - - $10,401,000 Coastal Commission Grant $ 450,000 - - - - - $450,000
Non-Federal Match (TBD) - - $ 1,108,000 - - - $1,108,000 Project Total $11,959,000
Sidewalk Infill Program
RTC Grant - $100,000 - - - - $100,000
Future Funding Needs (Estimate) - - - - - - $1,300,000
Program Total $1,400,000
Bay Avenue Corridor
General Fund 271,096 - - - - - 271,096
Gas Tax 50,285 - - - - - 50,285
RTC Grant - 500,000 - - - - 500,000
Federal Grant - 250,000 - - - - 250,000
Unfunded Needs (To Be Determined) - - - - - - TBD
Project Total $1,071,381
Monterey Park Play Area
General Fund $10,000 - - - - - $10,000
Future Funding Needs - - - - - - TBD
Project Total TBD
Grand Avenue Bluff Overlook Improvements
General Fund $31,090 - - - - - $31,090
Future Funding Needs - - - - - - TBD
Project Total TBD
Project Funding Source Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Cliff Drive Resiliency Project - Future Phases
Future Funding Needs (Estimate) - - - - - - $33,000,000 Project Total $33,000,000
Noble Gulch Dog Park
Future Funding Needs (Estimate) - - - - - - $75,000
Project Total $75,000
Corporation Yard EV Charging Infrastructure
Future Funding Needs (Estimate) - - - - - - $300,000
Project Total $300,000
Project Funding Source Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Perry Park Bridge Rehabilitation
Future Funding Needs - - - - - - TBD
Project Total TBD
Noble Gulch Culvert and Drainage System
Future Funding Needs - - - - - - TBD
Project Total TBD
Corporation Yard Facility Modernization
Future Funding Needs - - - - - - TBD
Project Total TBD
City Hall / Police Station Facility Improvements
Future Funding Needs - - - - - - TBD
Project Total TBD
Completed or Substantially Completed
Partially Funded Projects
Conceptual / Unfunded Projects
Active Programs and Funded Projects
Emerging Capital Needs
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Item 5 A.

CIP Financial Summary – Projected Expenditures
Project Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Park at Rispin Mansion
Construction/Improvements $ 1,446,844 - - - - - $1,446,844 Project Total $1,446,844
Treasure Cove Playground & Restroom Improvements
Design $351,000 - - - - - $351,000
Construction/Improvements $2,930,500 - - - - - $2,930,500 Construction Management $242,000 - - - - - $242,000
Project Total $3,523,500
Community Center Renovation
Design $650,000 - - - - - $650,000
Construction/Improvements $6,337,000 - - - - - $6,337,000 Construction Management $300,000 - - - - - $300,000
Project Total $7,287,000
41st Avenue Multimodal Improvements
Design/Permitting $357,377 - - - - - $357,377
Construction/Improvements - $1,980,623 - - - - $1,980,623 Project Total $2,338,000
Project Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Stockton Bridge – Bridge Alternatives Evaluation
Planning/Alternatives Analysis $134,602 $ 715,398 - - - - $850,000 Construction/Improvements - - - - - - TBD
Project Total $850,000
Esplanade Park Improvements
Design Development - $ 275,000 - - - - $275,000
Construction/Improvements - - - - - - TBD
Project Total $275,000
Pavement Management Program (FY26–31)
Construction/Improvements - $ 675,000 $ 694,000 $ 716,000 $ 737,000 $ 759,000 $3,581,000 Program Total $3,581,000
Project Funding Source Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Cliff Drive Resiliency Project - Phase 1
Design/Permitting $ 512,668 $ 680,332 - - - - $1,193,000 Construction/Improvements - - $ 10,766,000 - - - $10,766,000 Project Total $11,959,000
Sidewalk Infill Program
Construction/Improvements - $100,000 - - - - $100,000
Future Improvements - - - - - - TBD
Project Total $100,000
Bay Avenue Corridor
Pilot – Alternatives Analysis/Design 161,741 0 0 0 0 0 161,741 Pilot – Construction/Improvements 83,998 0 0 0 0 0 83,998 Corridor Planning/Development $75,642 0 0 0 0 0 75,642
Future Improvements (TBD) 0 0 0 0 0 0 TBD
Project Total $321,381
Monterey Park Play Area
Planning - - - - - - TBD
Construction/Improvements - - - - - - TBD
Project Total TBD
Grand Avenue Bluff Overlook Improvements
Planning/Alternatives Analysis $12,308 - - - - $12,308
Construction/Improvements - - - - - - TBD
Project Total $12,308
Completed or Substantially Completed
Active Programs and Funded Projects
Partially Funded Projects
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Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Park at Rispin Mansion
Park Development and Public Access Improvements
Project Description
The Park at Rispin Mansion project transformed the grounds surrounding the historic Rispin Mansion into a publicly accessible neighborhood park with pathways, seating areas, and landscaping. The project preserves the historic setting while providing a high-quality passive recreation space. Development occurred over multiple years with community engagement and planning. Funding shown reflects construction-related costs associated with park improvements dating back to the Rispin ADA pathway project in FY17-18.

Project Justification
Prior to construction, the site was overgrown, fenced, and inaccessible to the public. Development of the park fulfilled a long-standing community goal to open the Rispin property, provide new neighborhood green space, enhance habitat, and stabilize the landscape surrounding the historic structure.

Projected Schedule/5-year Plan Information
Completed. The park is open and actively used by the community. Future enhancements or amenities may be evaluated as opportunities and funding become available.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Construction/Improvements 1,466,844 0 0 0 0 0 1,446,844 Total 1,466,844 0 0 0 0 0 1,446,844
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund/RDA 1,218,844 0 0 0 0 0 1,218,844
Measure Q 50,000 0 0 0 0 0 50,000
State Parks Grant 178,000 0 0 0 0 0 178,000
Total 1,466,844 0 0 0 0 0 1,446,844
Operating Budget Impacts
The addition of this park increases ongoing maintenance needs. Two additional maintenance staƯ positions were added in FY 2025–26 to support this park and other citywide responsibilities. Ongoing costs are incorporated into the Public Works maintenance budget.

Project Category Parks & Recreation
Project Status Complete
Project Initiated FY15-16
Total Funding $1,446,844
City Funding FY26-27 $0
External Funding $228,000
Funding Sources General Fund, Parks Grants
Strategic Plan Alignment Healthy Families,
Community, and Environment
Location Rispin Mansion Property,
Wharf Road
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Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Treasure Cove Playground & Restroom Improvements
Universal Play Area, Restroom Renovation, and Park Accessibility Upgrades Project Category Parks & Recreation
Project Status Substantially Completed
Project Initiated FY22-23
Total Funding $3,523,500
City Funding FY26-27 $0
External Funding $3,172,500
Funding Sources CDBG, Fundraising
Strategic Plan Alignment Healthy Families,
Community, and Environment
Location Jade Street Park
Project Description
This project upgrades Jade Street Park through construction of the Treasure Cove Playground and renovation of existing restrooms. Improvements include a fully inclusive play area with new equipment, poured-in-place surfacing, seating, and site improvements, along with restroom upgrades addressing accessibility, reliability, and code compliance.

Project Justification
The existing playground has exceeded its useful life and does not meet accessibility standards. The new inclusive playground expands equitable play opportunities and reflects strong community support through fundraising and CDBG investment. Restroom improvements address aging infrastructure, reduce maintenance needs, and support increased park use associated with the playground and Community Center.

Projected Schedule/5-year Plan Information
Construction is underway and expected to be completed by the end of FY 2025–26.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Design 351,000 0 0 0 0 0 351,000
Construction/Improvements 2,930,500 0 0 0 0 0 2,930,500 Construction Management 242,000 0 0 0 0 0 242,000
Total 3,523,500 0 0 0 0 0 3,523,500
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund 351,000 0 0 0 0 0 351,000
Fundraising 965,000 0 0 0 0 0 965,000
CDBG 2025 2,207,500 0 0 0 0 0 2,207,500
Total 3,523,500 0 0 0 0 0 3,523,500
Operating Budget Impacts
The new playground equipment and poured-in-place surfacing are expected to reduce near-term maintenance needs. Restroom upgrades will improve reliability and reduce repair frequency. No significant increase in operating costs is anticipated.
156
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Community Center Renovation
Facility Upgrades and Accessibility Improvements
Project Category Municipal Facilities
Project Status Completed / Substantially Completed
Project Initiated FY22-23
Total Funding $7,287,000
City Funding FY26-27 $0
External Funding $5,420,000
Funding Sources CNRA, CDBG
Strategic Plan Alignment Healthy Families, Community, and Environment; Sustainable Infrastructure
Location Jade Street Park
Project Description
The Community Center Renovation Project upgrades the facility to improve safety, accessibility, and overall functionality. Improvements include restroom renovations, new outdoor patios, interior and exterior repairs, accessibility upgrades, replacement of aging building systems, and installation of EV charging equipment.

Project Justification
Many building components are outdated, do not meet current codes, and require renovation to maintain safe and accessible community use. Under the Long-Term Use Agreement (LTUA) with the school district, the City is responsible for maintaining and improving major building systems. The project leverages CNRA and CDBG funding to complete improvements that would otherwise exceed local resources, while reducing long-term maintenance needs and supporting sustainability goals.

Projected Schedule/5-year Plan Information
Construction is underway and expected to be completed within FY 2025–26.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Design 650,000 0 0 0 0 0 650,000
Construction/Improvements 6,337,000 0 0 0 0 0 6,337,000 Construction Management 300,000 0 0 0 0 0 300,000
Total 7,287,000 0 0 0 0 0 7,287,000
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund 1,867,000 0 0 0 0 0 1,867,000
CNRA Grant 1,000,000 0 0 0 0 0 1,000,000
CDBG 2024 3,365,000 0 0 0 0 0 3,365,000
CDBG 2025 1,055,000 0 0 0 0 0 1,055,000
Total 7,287,000 0 0 0 0 0 7,287,000
Operating Budget Impacts
The project is expected to reduce long-term maintenance needs and improve operational eƯiciency. No significant increase in operating costs is anticipated. 157
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
41st Avenue Multimodal Improvements
Corridor Safety and Multimodal Upgrades
Project Category Transportation & Mobility
Project Status Construction
Project Initiated FY24-25
Total Funding $2,342,000
City Funding FY26-27 $0
External Funding $1,000,000
Funding Sources RTC, SB1, Transportation
Grant
Strategic Plan Alignment Community Safety;
Sustainable Infrastructure
Location 41st Avenue, Clares Street to
northern City Limits
Project Description
The 41st Avenue Multimodal Improvements Project will reconstruct pavement and upgrade bicycle, pedestrian, and wayfinding features along Capitola’s busiest corridor. Improvements include pavement rehabilitation, resurfacing, enhanced bike lanes, high-visibility crossings, new curb ramps, and improved SR-1 wayfinding.

Project Justification
41st Avenue has significant pavement distress, outdated striping, and inconsistent multimodal facilities identified through the Pavement Management Plan and corridor evaluations. The project addresses longstanding safety and access issues while improving overall roadway condition. Design and construction are funded through RTC and related transportation funding sources, reducing local cost impacts.

Projected Schedule/5-year Plan Information
Design and Caltrans coordination were completed in late 2025. Construction will begin in spring 2026.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Design/Permitting 357,377 0 0 0 0 0 357,377
Construction/Improvements 0 1,980,623 0 0 0 0 1,980,623 Total 357,377 1,980,623 0 0 0 0 2,338,000
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total 1309 RTC Measure D 695,000 0 0 0 0 0 695,000
1308 RMRA SB 1 587,000 0 0 0 0 0 587,000
Gas Tax 60,000 0 0 0 0 0 60,000
Transportation Grant 1,000,000 0 0 0 0 0 1,000,000
Total 2,342,000 0 0 0 0 0 2,342,000
Operating Budget Impacts
Ongoing maintenance will be incorporated into routine street and sign maintenance activities. No significant increase in operating costs is anticipated.
158
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Stockton Bridge
Bridge Alternatives Evaluation and Future Improvement Planning Project Category Transportation & Mobility
Project Status Planning / Evaluation
Project Initiated FY23-24
Total Funding $850,000
City Funding FY26-27 $0
External Funding $500,000
Funding Sources General Fund, WRCB Grant
Strategic Plan Alignment Community Safety;
Sustainable Infrastructure
Location Stockton Bridge
Project Description
This project expands ongoing work to evaluate options for the future of the Stockton Avenue Bridge, including replacement, retrofit, and deck rehabilitation alternatives. Work is expected to include preliminary concepts, cost estimates, environmental and permitting considerations, anticipated timelines, expected service life evaluations, and potential funding strategies.

Project Justification
The Stockton Avenue Bridge is an aging structure with known flood and debris risks and limited remaining service life. On April 9, 2026, Council directed staƯ to return with a proposed scope of work to evaluate a full range of alternatives and support selection of a preferred long-term approach.

Projected Schedule/5-year Plan Information
StaƯ is preparing an additional scope of work under the existing consultant contract and will return to Council for consideration. Alternatives analysis will follow, with a future decision point to select a preferred approach.

Final design, permitting, and construction will proceed based on Council direction and funding availability.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Planning/Alternatives Analysis 134,602 715,398 0 0 0 0 850,000 Construction/Improvements - - - - - - TBD
Total 134,602 715,398 0 0 0 0 850,000
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund 350,000 0 0 0 0 0 350,000
WRCB Grant 500,000 0 0 0 0 0 500,000
Future Funding Needs - - - - - - TBD
Total 850,000 0 0 0 0 0 850,000
Operating Budget Impacts
No significant impacts during the evaluation phase. Future operating and maintenance costs will depend on the selected alternative. Some options may reduce long-term maintenance needs, while others may require continued maintenance.
159
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Esplanade Park
Shoreline Adaptation and Park Enhancements
Project Category Parks & Recreation;
Stormwater & Coastal
Resilience
Project Status Planning / Evaluation
Project Initiated FY25-26
Total Funding $275,000
City Funding FY26-27 $0
External Funding $275,000
Funding Sources Coastal Conservancy Grant
Strategic Plan Alignment Healthy Families, Community,
and Environment; Sustainable
Infrastructure
Project Description
The Esplanade Park Improvements Project focuses on planning and design to enhance the park’s appearance, amenities, and accessibility while addressing long-term coastal conditions. The project will develop conceptual improvements and adaptation strategies to create a more functional and resilient waterfront space.

Project Justification
Esplanade Park is a highly visited coastal space, but aging features, storm impacts, and shoreline exposure aƯect comfort, safety, and usability. Upgrades are needed to refresh the park experience and improve resilience to coastal conditions. In FY 2025–26, City Council allocated $50,000 to initiate planning. Early planning and design are funded through a Coastal Conservancy grant, allowing the City to advance improvement concepts and position the project for future construction funding.

Projected Schedule/5-year Plan Information
Consultant work will begin in FY 2025–26, including concept development and community engagement.

Preliminary design, environmental review, and coastal permitting will follow. Construction will advance as additional funding becomes available.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Design Development 0 275,000 0 0 0 0 275,000
Construction/Improvements - - - - - - TBD
Total 0 275,000 0 0 0 0 275,000
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Coastal Conservancy Grant 275,000 0 0 0 0 0 275,000
Future Funding Needs - - - - - - TBD
Total 275,000 0 0 0 0 0 275,000
Operating Budget Impacts
No significant operating impacts are anticipated during planning. Long-term improvements may reduce emergency maintenance needs associated with storm events. 160
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
2026-2027 Pavement Management Program
Annual Street Maintenance and Rehabilitation Program
Total Funding (5-Year Cycle) $3,581,000
City Funding FY26-27 $0
External Funding $3,581,000
Funding Sources RTC, SB1
Project Category Pavement & Streets
Project Status Active
Location Various
Origin of Request Public Works
Initiated FY21-22
Project Description
The Pavement Management Program provides annual funding to resurface and repair City streets. Typical work includes slurry seals, thin overlays, pavement patching, striping refresh, and minor curb and gutter repairs.

Street selections are based on pavement condition data, available funding, and coordination with other capital projects. In some years, larger roadway segments are delivered as standalone capital projects and tracked separately in the CIP (e.g., 41st Avenue improvements in FY 2025–26).

Project Justification
Routine pavement maintenance prevents streets from deteriorating into costly reconstruction and helps preserve the City’s roadway network. The 2022 Pavement Management Plan reported a citywide PCI of 54, indicating many streets are in “fair” condition and require ongoing maintenance. Annual funding allows staƯ to apply cost-eƯective treatments at the appropriate time and coordinate work with utilities and other capital projects.

Projected Schedule/5-year Plan Information
This is an ongoing annual program. Specific streets and treatment types are determined each fiscal year based on updated pavement condition data, available funding, and coordination needs. The next Pavement Management Plan update is anticipated in FY 2027–28.

Funding Information
Expenditures FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Construction/Improvements 675,000 694,000 716,000 737,000 759,000 3,581,000 Total 675,000 694,000 716,000 737,000 759,000 3,581,000 Funding Sources FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total 1309 RTC Measure D 398,000 409,000 422,000 435,000 448,000 2,112,000 1308 RMRA SB 1 277,000 285,000 294,000 302,000 311,000 1,469,000 Total 675,000 694,000 716,000 737,000 759,000 3,581,000 Operating Budget Impacts
Ongoing maintenance is incorporated into routine operations. No significant increase in operating costs is anticipated.
161
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
CliƯ Drive Resiliency Project – Phase 1
Critical BluƯ Stabilization and Resiliency Improvements Project Category Stormwater & Coastal Resilience
Project Status Planning / Design
Project Initiated FY23-24
Total Funding $11,959,000
City Funding FY26-27 $0
External Funding $10,851,000
Funding Sources FHWA ER, Coastal Commission
Grant
Strategic Plan Alignment Community Safety; Sustainable
Infrastructure
Location CliƯ Drive
Project Description
The CliƯ Drive Resiliency Project – Phase 1 focuses on the most critical bluƯ failure area along CliƯ Drive. The project includes geotechnical evaluation, coastal hazard modeling, drainage assessment, environmental review, permitting, and preparation of engineering plans for bluƯ stabilization and roadway protection improvements.

Project Justification
Ongoing bluƯ retreat and storm damage along CliƯ Drive present risks to roadway stability, underground utilities, emergency access, and adjacent coastal resources. Phase 1 addresses the most vulnerable section of the corridor and is intended to stabilize critical infrastructure while advancing long-term coastal resiliency planning. The broader CliƯ Drive corridor includes additional bluƯ stabilization and resiliency needs that are expected to require future phased improvements beyond the scope of this initial project. Initial planning, engineering, and future construction funding for Phase 1 are supported through FHWA Emergency Relief and Coastal Commission grant funding.

Projected Schedule/5-year Plan Information
Technical studies, engineering design, environmental review, and permitting for Phase 1 are underway. Construction is anticipated following completion of permitting and final funding coordination.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Design/Permitting 859,000 334,000 0 0 0 0 1,193,000
Construction/Improvements 0 0 10,766,000 0 0 0 10,766,000 Total 859,000 334,000 10,766,000 0 0 0 11,959,000
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total FHWA ER 743,000 0 9,658,000 0 0 0 10,401,000
Coastal Commission Grant 450,000 0 0 0 0 0 450,000
Non-Federal Match (TBD) 0 0 1,108,000 0 0 0 1,108,000
Total 1,193,000 0 10,766,000 0 0 0 11,959,000
Operating Budget Impacts
No significant operating impacts are expected during planning and design. Future improvements may reduce emergency maintenance needs along the corridor.
162
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Sidewalk Infill Program
Ongoing Sidewalk Infill and Gap Closure Program
Project Category Transportation & Mobility
Project Status Partially Funded
Project Initiated FY25-26
Total Funding $100,000
City Funding FY26-27 $0
External Funding $100,000
Funding Sources RTC Grant
Strategic Plan Alignment Community Safety;
Sustainable Infrastructure
Location Various
Project Description
The Sidewalk Infill Program addresses missing sidewalk segments throughout the City to improve pedestrian safety, accessibility, and neighborhood connectivity. The program focuses on closing short but critical gaps where pedestrians currently walk in the roadway or along narrow shoulders. Funding identified for FY 2026–27 will support construction of a priority segment, with additional locations to be advanced as future funding becomes available.

Project Justification
StaƯ has identified approximately $1.4 million in citywide sidewalk infill needs. These gaps create safety concerns and limit access to schools, parks, and neighborhood destinations. The City was awarded approximately $100,000 in Regional Transportation Commission (RTC) funding, which may support construction of one priority segment in FY 2026–27. Additional funding will be required to address remaining identified gaps over time. Future sidewalk infill projects may also be competitive for Community Development Block Grant (CDBG) funding where projects support accessibility, neighborhood connectivity, or low/moderate-income areas Projected Schedule/5-year Plan Information
This is an ongoing program. A priority segment will be constructed in FY 2026–27 based on available funding.

Additional segments will be implemented as funding becomes available.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Construction/Improvements 0 100,000 0 0 0 0 100,000
Total 0 100,000 0 0 0 0 100,000
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total RTC Grant 0 100,000 0 0 0 0 100,000
Future Funding Needs (Estimate) 0 0 0 0 0 0 1,300,000
Total 0 100,000 0 0 0 0 1,400,000
Operating Budget Impacts
Ongoing maintenance will be incorporated into routine sidewalk maintenance activities. No significant increase in operating costs is anticipated.
163
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Bay Avenue Corridor
TraƯic, Pedestrian, and Bicycle Improvements
Project Category Transportation & Mobility
Project Status Planning / Evaluation
Project Initiated FY22-23
Total Funding $1,071,381
City Funding FY26-27 $0
External Funding $750,000
Funding Sources General Fund, RTC Grant, Federal Grant
Strategic Plan Alignment Community Safety; Sustainable Infrastructure Location Bay Avenue, Monterey Avenue to Highway 1
Project Description
The Bay Avenue Corridor Improvements Project evaluates transportation safety, pedestrian, bicycle, and circulation improvements along Bay Avenue from Monterey Avenue to the Highway 1 ramps. Work has included corridor analysis, safety review, community outreach, operational evaluation, and temporary pilot improvements used to evaluate corridor safety and circulation.

Project Justification
Bay Avenue serves schools, neighborhoods, commercial areas, and regional traƯic and experiences congestion, turning conflicts, pedestrian safety concerns, and bicycle access challenges. The Bay Avenue / Hill Street Pilot Project evaluated near-term safety improvements and provided operational data and community feedback that informed the broader corridor planning eƯort and future evaluation of potential improvements within the corridor.

Projected Schedule/5-year Plan Information
Corridor analysis, conceptual planning, community outreach, and pilot project evaluation have been completed. Future eƯorts may include lower-cost operational, pedestrian, bicycle, or traƯic safety improvements as funding opportunities are identified. The project has secured RTC funding for future project development and $250,000 in federal funding for eligible construction activities.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Pilot – Alternatives Analysis/Design 161,741 0 0 0 0 0 161,741 Pilot –
Construction/Improvements 83,998 0 0 0 0 0 83,998
Corridor Planning/Development 75,642 0 0 0 0 0 75,642
Future Improvements (TBD) 0 0 0 0 0 0 TBD
Total 321,381 0 0 0 0 0 321,381
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund 271,096 0 0 0 0 0 271,096
Gas Tax 50,285 0 0 0 0 0 50,285
RTC Grant 0 500,000 0 0 0 0 500,000
Federal Grant 0 250,000 0 0 0 0 250,000
Unfunded Needs (TBD) 0 0 0 0 0 0 TBD
Total 321,381 750,000 0 0 0 0 1,071,381
Operating Budget Impacts
No significant operating impacts are anticipated during planning and project development. Future improvements may add minor maintenance needs that can be incorporated into routine Public Works operations. 164
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Monterey Park Play Area
Play Area Evaluation and Neighborhood Outreach
Project Category Parks & Recreation
Project Status Planning / Outreach
Project Initiated FY25-26
Total Funding $10,000
City Funding FY26-27 $0
External Funding $0
Funding Sources General Fund
Strategic Plan Alignment Healthy Families,
Community, and Environment
Project Description
The Monterey Park Play Area Project will explore options to add or improve recreational amenities at Monterey Park. The project is in the early planning stage and will begin with community outreach and concept development to identify desired improvements for this neighborhood park, which currently includes a walking loop and sports field.

Project Justification
In FY 2025–26, City Council allocated $10,000 to initiate planning for potential upgrades at Monterey Park. The park serves a residential neighborhood and currently lacks defined play features. Outreach and concept development are needed to identify community priorities and determine the scale, cost, and feasibility of future improvements. A defined concept will position the City to pursue design and construction funding.

Projected Schedule/5-year Plan Information
Initial community outreach is underway in FY 2025–26. Based on outreach results, concept development may continue into FY 2026–27. Future design and construction will depend on identified priorities and funding availability.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Planning 0 0 0 0 0 0 0
Construction/Improvements - - - - - - TBD
Total 0 0 0 0 0 0 0
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund 10,000 0 0 0 0 0 10,000
Construction/Improvements - - - - - - TBD
Total 10,000 0 0 0 0 0 10,000
Operating Budget Impacts
Minimal impacts are expected during planning. Future operating needs will depend on the type of improvements selected.
165
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Grand Avenue BluƯ Overlook Improvements
BluƯ-Top Overlook and Safety Improvements
Project Category Parks & Recreation
Project Status Planning/Concept
Development
Project Initiated FY25-26
Total Funding $31,090
City Funding FY26-27 $0
External Funding $0
Funding Sources General Fund
Strategic Plan Alignment Community Safety; Healthy
Families, Community, and
Environment
Location Grand Avenue street ends
Project Description
This project will evaluate and develop concepts for public safety and coastal access improvements at the Grand Avenue street termini along the Depot Hill bluƯ. The project focuses on small-scale overlook improvements rather than a continuous pathway, including evaluation of bluƯ stability, drainage, and basic features such as viewing areas, fencing, seating, and signage.

Project Justification
This area has a long history of bluƯ erosion, storm damage, and drainage issues that have aƯected prior pathway concepts and limit long-term feasibility. On April 9, 2026, City Council directed staƯ to shift focus from a continuous pathway to smaller, safer improvements at bluƯ-top street ends. This approach maintains public access and coastal views while responding to ongoing erosion and site constraints.

Projected Schedule/5-year Plan Information
Concept development may occur in FY 2026–27. Future design, permitting, and construction will depend on feasibility, Coastal permitting, and funding availability.

Funding Information
Expenditures Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total Planning/Alternatives Analysis 12,308 - - - - - 12,308
Construction/Improvements - - - - - - TBD
Total 12,308 0 0 0 0 0 12,308
Funding Sources Prior FYs FY26-27 FY27-28 FY28-29 FY29-30 FY30-31 Total General Fund 31,090 - - - - - 31,090
Construction/Improvements - - - - - - TBD
Total 31,090 0 0 0 0 0 31,090
Operating Budget Impacts
Minimal impacts are expected during planning. Future operating needs will depend on the type of improvements selected.
166
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Noble Gulch Park – Dog Park Improvements
Concept Development and Future Implementation
Project Category Parks & Recreation
Project Status Concept Phase / Unfunded
Project Initiated FY22-23
Total Funding Need (Estimate) $75,000
City Funding FY26-27 $0
External Funding $0
Funding Sources Future Funding Needs
Strategic Plan Alignment Healthy Families,
Community, and Environment
Location Noble Gulch Park
Project Description
The Noble Gulch Dog Park Project would create a small dog park area within Noble Gulch Park, improving accessibility and providing new recreational space within a constrained site. Concept improvements include fencing, an accessible entry, ADA-compliant pathways, waste receptacles, and signage. Final design, drainage solutions, and amenities will be shaped by site constraints and community input.

Project Justification
Noble Gulch Park has known ADA access deficiencies and seasonal drainage issues, and the proposed dog park area currently lacks accessible routes. City Council supported the concept and approved a Coastal Development Permit in 2024 but deferred funding, noting the need for additional design refinement and potential community fundraising.

A dog park would expand recreational opportunities in an underutilized portion of the park; however, additional work is needed to define scope, cost, and feasibility before the project can advance. A prior conceptual estimate for the project was approximately $75,000; however, costs will be refined through future design.

Projected Schedule/5-year Plan Information
No work is currently scheduled. Future steps such as community outreach, concept refinement, and design will proceed only if funding is identified in a future budget cycle or through donations.

Funding Information
No funding is currently identified. Project costs will be determined through future concept development and design. Potential funding sources may include City funds, grants, or community fundraising.

Operating Budget Impacts
No operating impacts are anticipated until the project advances. If constructed, the dog park would add minor annual maintenance needs related to fencing, waste management, and seasonal closures.

167
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Corporation Yard EV Charging Infrastructure
Fleet Electrification Support Improvements
Project Category Municipal Facilities
Project Status Grant Dependent
Project Initiated FY26-27
Total Funding Need (Estimate) $300,000
City Funding FY26-27 $0
External Funding $0
Funding Sources Future Funding Needs
Strategic Plan Alignment Sustainable Infrastructure;
Accountable Government
Location Corporation Yard
Project Description
The Corporation Yard EV Charging Infrastructure Project would install the on-site (“behind-the-meter”) electrical infrastructure needed to support electric vehicle (EV) charging. Improvements include electrical service upgrades, trenching, conduit, wiring, and infrastructure to support Level 2 and Level 3 chargers.

Utility-side upgrades up to the meter are being provided separately through Pacific Gas and Electric Company and are not part of this project.

Project Justification
State regulations adopted by the California Air Resources Board require public agencies to transition to zeroemission vehicles over time, including requirements for new light-duty vehicle purchases to be zero-emission beginning in 2027. The Corporation Yard currently lacks the electrical capacity needed to support future fleet electrification.

Utility upgrades to the meter are being provided at no cost through Pacific Gas and Electric Company, though program availability is limited. The City is responsible for on-site charging infrastructure improvements. Grant funding and rebates are expected to oƯset project costs.

Projected Schedule/5-year Plan Information
No construction is currently scheduled. The project is dependent on securing grant funding and utility coordination. If funding is not secured, the project will be deferred.

Funding Information
The total estimated project cost is approximately $300,000. Potential funding sources may include future grants through the Monterey Bay Air Resources District, along with incentives from Central Coast Community Energy and Pacific Gas and Electric Company. No City funding is currently identified, and the project will not proceed without securing suƯicient external funding.

Operating Budget Impacts
No significant operating impacts are anticipated. The project supports transition to electric vehicles, which may reduce long-term fuel and maintenance costs.
168
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Perry Park Bridge Rehabilitation
Potential Future Rehabilitation Need
Project Category Parks & Recreation
Project Status Emerging Capital Need
Project Initiated FY25-26
Total Funding Need (Estimate) TBD
City Funding FY26-27 $0
External Funding $0
Funding Sources Future Funding Needs
Strategic Plan Alignment Community Safety; Healthy
Families, Community, and
Environment
Location Perry Park / Rispin Property
Crossing
Project Description
The Perry Park Bridge rehabilitation eƯort would address aging structural components, corrosion, and long-term maintenance needs associated with the pedestrian and bicycle bridge connecting Perry Park and the Rispin property. Potential future work may include steel repairs, repainting, deck improvements, drainage modifications, and rehabilitation of structural connections and bearings.

Project Justification
The bridge was constructed in 1996 and consists of parallel pedestrian and bicycle bridge spans crossing Soquel Creek. A 2021 structural evaluation identified moderate to severe corrosion in several bridge components, including end vertical members, floor beams, chord splices, welded joints, and bearing areas. The evaluation also identified localized areas of through-thickness corrosion and recommended ongoing repair and maintenance work to extend the bridge’s service life.

Since that time, the City has completed targeted repair work and additional investigation of concealed structural elements, including repairs to corroded floor beams and end vertical members. StaƯ continues to monitor bridge condition and remaining service life as part of ongoing infrastructure maintenance planning.

Funding Information
Currently unfunded. Future scope, schedule, and project costs will be determined following completion of ongoing evaluation and maintenance work.
169
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Noble Gulch Culvert and Drainage System
Potential Future Drainage and Culvert Rehabilitation Need Project Category Stormwater & Coastal
Resilience
Project Status Emerging Capital Need
Project Initiated FY25-26
Total Funding Need (Estimate) TBD
City Funding FY26-27 $0
External Funding $0
Funding Sources Future Funding Needs
Strategic Plan Alignment Community Safety;
Sustainable Infrastructure
Location Lower Noble Gulch Drainage
System
Project Description
This project would address long-term rehabilitation and replacement needs within the lower Noble Gulch culvert and drainage system. Potential future work may include culvert rehabilitation or replacement, storm drain improvements, drainage capacity upgrades, bank stabilization, and related infrastructure improvements needed to improve long-term system reliability and flood resilience.

Project Justification
The lower Noble Gulch drainage system includes aging stormwater infrastructure with a history of flooding and ongoing maintenance needs. A 2024 condition assessment of the Noble Gulch Culvert identified areas of deterioration, prior repairs, and infrastructure components that may require future rehabilitation or replacement as part of long-term system planning.

The drainage system also functions as part of the broader Zone 5 regional stormwater network evaluated through the 2023 Zone 5 Storm Drain Master Plan Update. Future capital improvements may be necessary to improve long-term condition, drainage performance, maintenance access, and resilience to future storm events and climate impacts. Future evaluation, maintenance coordination, and funding eƯorts may also occur pursuant to the existing cooperative agreement between the City, Zone 5, and the County regarding portions of the Noble Gulch drainage system.

Funding Information
Currently unfunded. Future scope, schedule, and project costs will be determined through additional evaluation, coordination with Zone 5 regional planning eƯorts, and future condition assessment work. 170
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
Corporation Yard Facility Modernization
Long-Term Facility and Operational Needs
Project Category Municipal Facilities
Project Status Emerging Capital Need
Project Initiated FY25-26
Total Funding Need (Estimate) TBD
City Funding FY26-27 $0
External Funding $0
Funding Sources Future Funding Needs
Strategic Plan Alignment Sustainable Infrastructure;
Accountable Government
Location Corporation Yard
Project Description
This project would evaluate long-term modernization and operational improvements at the Corporation Yard.

Potential future work may include rehabilitation or phased improvements to aging buildings and site infrastructure; improved circulation and storage areas; utility and drainage upgrades; fleet and equipment accommodations; employee support facilities; and operational eƯiciency improvements.

Project Justification
The Corporation Yard serves as the primary operations, maintenance, fleet, and equipment facility for the Public Works Department. Existing buildings and site infrastructure were developed incrementally over time and may no longer fully support current operational, storage, maintenance, fleet, safety, accessibility, sustainability, and employee facility needs.

Original facility plans indicate the site was developed for a smaller-scale municipal operation and includes aging building systems, utility infrastructure, fuel system components, and operational layouts that predate many current building, accessibility, energy, and operational standards. The site may require substantial long-term investment to support continued Public Works operations, emergency response readiness, and long-term continuity of City maintenance and field operations.

Funding Information
Currently unfunded. Future scope, schedule, and project costs will be determined through additional facility planning, operational evaluation, condition assessment, and identification of future funding opportunities. 171
Item 5 A.

CIP FY26-27 • 5-YEAR PLAN PROJECT NARRATIVES
City Hall / Police Station Facility Improvements
Long-Term Facility and Operational Needs
Project Category Municipal Facilities
Project Status Emerging Capital Need
Project Initiated FY25-26
Total Funding Need (Estimate) TBD
City Funding FY26-27 $0
External Funding $0
Funding Sources Future Funding Needs
Strategic Plan Alignment Community Safety;
Accountable Government;
Sustainable Infrastructure
Location City Hall / Police Station
Campus
Project Description
This project would address long-term facility and operational needs associated with City Hall and the Police Station. Potential future improvements may include accessibility upgrades, replacement of aging building systems, space reconfiguration, flood resilience measures, modernization of public service areas, and evaluation of long-term facility options needed to support continued City operations and public services.

Project Justification
The City Hall and Police Station facilities were expanded into their current configuration in 1976 and are reaching a stage where significant investment may be required to maintain long-term functionality and operational reliability. A 2024 Facility Needs Assessment identified deficiencies related to building systems, accessibility, space limitations, operational functionality, and floodplain constraints.

The assessment identified aging roofing, HVAC, drainage, lighting, accessibility, and exterior circulation systems, along with space limitations that no longer meet accepted operational standards for City Hall and Police Department functions. Future capital planning will be needed to evaluate long-term facility needs, operational requirements, and potential improvement strategies to support continued public service operations.

Funding Information
Currently unfunded. Future scope, schedule, and project costs will be determined through additional facility planning, operational evaluation, and future City Council direction.

172
Item 5 A.
1 Gautho, Julia
From: Mick <[email protected]>
Sent: Tuesday, May 12, 2026 8:52 PM
To: City Council
Subject: Budget ideas
Follow Up Flag: Follow up
Flag Status: Flagged
Council members,
As you finalize the budget, keep these ideas in mind. I sent something similar at this time last year.

I wanted to share with you several ideas / project proposals that I think the city could pursue during your tenure. These are in random order, no priority, based on past experience and what I observe around the city.

STREET SWEEPING -Public Works used to have a regular weekly schedule for sweeping residential and commercial streets. I don't know why the regular weekly schedule on the city website is not adhered to.

BRAIN STORM IDEAS TO IMPROVE THE CITY -Each year prior to budget time, the city council would meet in the community room to present ideas for projects they wanted. It was a brainstorming session for ideas to make the city better. Any idea could be added to the list. The public was invited to participate. The list was narrowed down to a handful of projects that the council decided were achievable. These brainstorming sessions resulted in a lot of good ideas being implemented to add amenities and dress up Capitola.

BEACH SAND SIFTING -The city used to sift the beach a couple of times each summer. Thats not done anymore. The city may still have the sand sifter. We also borrowed the one from Santa Cruz. It makes a huge difference in the cleanliness of the beach.

STAFFING LEVELS - its incumbent on the council to determine if staffing levels are appropriate. If the city is overstaffed because of duplication of effort or other reasons, or understaffed, that could be determined by a management audit. Those used to done on a regular basis. I don't believe Jamie has ever had one done. It could make the city administration more efficient, result in cost savings if the study determined the city is overstaffed.

NO RIGHT TURN AT 41st and CAP RD - Despite the Public Works Director’s report - The No Right Turn prohibition on westbound Cap Rd at 41st creates more problems then it solves. Pedestrian conflicts occur when the right turns are allowed only on green because thats when pedestrians cross 41st Ave. There are very few pedestrians crossing Cap Rd at that intersection but many crossing 41st. It also creates a longer queue of backed up traffic in the right lane on Cap Rd blocking entrances and exits from the Whole Foods center. It would be safer for pedestrians and improve traffic flow if the No Right Turn prohibition was removed.

VILLAGE HOTEL - Meet with Swenson to encourage him to develop a hotel plan for the theater parking lot. A concept was presented years ago and died. The city has made no effort to restart talks about a hotel on that site.

ELIMINATE REDUNDANT / USELESS STREET SIGNSOne example - On Wharf Rd from the freeway to Capitola Rd there are over 100 various street signs, signs that simple common sense says they do nothing but provide visual blight “Start bike lane” “End bike lane”, multiple No Parking signs when a red curb would suffice. Signs that warn of speed, curve, driveways etc etc. They are a blight and if you removed many of the signs around town it would have no impact on safety. Previous city councils tried to limit the number of signs but that seems to have been long forgotten. We should look to Carmel or Coronado as our role model.
45th AVE - At one time there was a plan to construct a tree lined median on 45th Ave. If that idea were brought back, that could really enhance that residential area.

WHARF RD HANDRAIL - Near the Shadowbrook sign at the top of Wharf Rd the top rung of the metal handrail has been bent down in the middle for at least
3-4 years and never repaired. It is unsightly and should be repaired.

ARTIFICIAL TURF ON MEDIANS - 41st Ave and Cap Rd medians are forever growing weeds and poorly maintained. The artwork on 41st Ave medians hasn’t been cleaned in years. Installing artificial turf on the medians would solve the weed problem, reduce maintenance, and visually enhance the 41st Ave and Cap Rd corridors.

BAY AVE - A tree lined median on Bay Ave, discussed years ago, would create a nice entrance to the city and provide an opportunity for a traffic design that might actually work to make it safer for motorists, cyclists, and pedestrians.

BIG TICKET ITEMS - Pursue undergrounding utilities on Capitola Ave between Bay and Riverview Dr and on 41st Ave. 173
Item 5 A.
2 VILLAGE BEAUTIFICATION - Offer incentives to Village commercial property owners to paint, fix up store fronts. Work with the BIA to establish a theme. Eliminate the on-street outdoor seating on Capitola Ave.

ORDINANCE ENFORCEMENT - Instruct city staff to enforce the city sign ordinance and ordinance 8.16.020 prohibiting rubbish in front yards.

Sent from my iPhone
174
Item 5 A.

Fiscal Year
2026-27
Proposed
Budget &
Capital
Improvement
Program
175
Item 5 A.

Overview of Tonight
Review budget process
Draft budget updates/edits
Capital Improvement Program (CIP) Overview
Follow-Up items from May 6th:
◦ Reserves and one-time revenue
◦ Paid parking rates
◦ Additional paid parking zones
◦ Village Holiday parking
◦ TOT Rates
◦ CalPERS Trust
◦ TOT rates
◦ CS&R Seasonal Hours
◦ Measure Y
◦ Year-end statistics
176
Item 5 A.

Budget Preparation Process
Draft Budget
Published
• April 17
Initial FAC
Budget Review
• May 5
City Council
Budget Hearings
• May 6: Overview
& questions
• May 21: CIP,
follow-up from
5/6
• June 11:

Receive FAC
recommendation,
if any
City Council
Budget Adoption
• June 25
We are here
177
Item 5 A.

Budget
Summary
• Estimated fund balance June 30, 2027: $94,957
Proposed General Fund budget
structurally balanced
• Estimated PERS Contingency reserve balance: $1.8
million
• Unfunded Actuarial Liability (UAL) decreased from
$35 to $34 million
• 2024: $21 million
• Annual payment increased from $2.9 to $3.3 million
• 2024: $2.1 million
Ongoing PERS costs remain major threat
to City resources
Heavy reliance on volatile sales &
transient occupancy tax
• Still awaiting additional 2023 storm damage
reimbursements
Reserves below target balances
178
Item 5 A.

Multiyear Budget Projection
179
Item 5 A.

Multiyear Budget Projection
180
Item 5 A.

Multiyear Budget Projection: +1% Sales Tax
181
Item 5 A.

Multiyear Budget Projection: -1% Sales Tax
182
Item 5 A.

Balanced Budget Estimated Ending Fund Balance
183
Item 5 A.

Changes to 1st Draft Budget: Expenditures
Item Original request Amended request Net Change Reason Moved from GF to
special revenue fund
Community Television $19,000 $ 0 ($19,000)
Reduced to $2,000 /
new CC member
City Council Training & $15,000 $6,000 ($9,000)
Memberships
Retiree Healthcare $50,300 $0 ($50,300) Paid from OPEB trust Premiums
OPEB Trust Contribution $67,050 $0 ($67,050) Trust has $1 million Improve public access
& transparency
Fiscal Transparency $0 $20,000 $20,000
Software
Received revised
budget from 911
Emergency $826,724 $772,535 ($54,189)
Communication Center
CC direction /
identified funding
Added back MSO position $0 $94,624 $94,624
Economic Development $0 $20,000 $20,000 CC direction
Separated GF transfer
from vehicle purchase
Equipment ISF $200,000 $200,000 $0
184
Item 5 A.

General Fund Balance
Net Impact from changes
◦ Increased estimated ending general fund balance: $64,915 Estimated beginning fund balance July 1, 2026
◦ Decreased $30,488: updated expenditure estimates
◦ Sales Tax on budget: no changes to revenue estimates
Estimated ending fund balance June 30, 2027
◦ $94,957
◦ Well below historical target of $500,000
185
Item 5 A.

FAC Recommendations
◦ FAC met May 5th to review 1st draft
◦ No recommendation
◦Next FAC meeting Tuesday May 26th
◦ Review changes to 1st draft
◦ Receive update on sales tax and year-end estimates
◦ Receive CIP overview
◦ Recommendations, if any, can be presented to City
Council on June 11th or June 25th
186
Item 5 A.

Capital Improvement
Program (CIP) Overview
187
Item 5 A.

Council Follow-Up Items 5/6
◦ Reserves and one-time revenue
◦ Parking items
◦ Paid parking rates
◦ Additional paid parking zones
◦ Village Holiday parking
◦ TOT Rates
◦ CalPERS Trust
◦ CS&R Seasonal Hours
◦ Measure Y
◦ Year-end statistics
188
Item 5 A.
• Contingency: $2.5 million
• $520,000 below June 30, 2027 target
• Estimated Districting costs $100,000
• Emergency: $1.6 million
• $379,000 below June 30, 2027 target
• Reserve deficits due to 2023 storm impacts
Reserve Fund Balances
189
Item 5 A.

Potential One Time Revenue
Back Payment TOT
$300,000
Building Permits
$180,000
Insurance Claims
$500,000
FEMA/CalOES
Reimbursement
$969,000
Surplus Land
$90,000
190
Item 5 A.

Potential One Time Revenue
Back Payment TOT
$300,000
Building Permits
$300,000
Insurance Claims
$750,000-$1M
FEMA/CalOES
Reimbursement
$969,000
Surplus Land
$90,000
191
Item 5 A.

Reserves & One-Time Revenue
General Fund and Reserves below target balances: $1.4 million General Fund Balance: $400,000
 Contingency & Emergency Reserves: $1,00,000
Potential One-Time Revenue: $2 - $2.25 million
 Insurance proceeds: $750,000 - $1,000,000
 Building Permits: $300,000
 FEMA/Cal OES Reimbursements: $969,000
Staff recommends one-time revenues be used to restore
balances and fund one-time uses/projects
Can evaluate fund balance position quarterly
192
Item 5 A.

Parking

1. Increasing rates

2. Expanding Village zone to the north

3. Holiday parking
193
Item 5 A.

Paid Parking Rates
Current Parking Rates:
 Village: $2.00/hr. with 3 hr. limit
All other locations: $1.00/hr. with 12 hr. limit
Coastal Commission
No initial negative feedback
Open to increase but keep upper & lower lots less than Village
Estimated Annual Revenue Increases
 Each additional $0.25/hr. in Village: $100,000
 Each additional $0.25/hr. in Lots: $60,000
194
Item 5 A.

Additional Paid Parking Zone
Initial Coastal Commission Feedback
Need to show alternative free access
opportunities:
 Bike lanes
 Bike parking
 Pedestrian trails
 Relocated free vehicular parking spaces
 Fully mitigate any potential negative impacts and
maximize access opportunities
195
Item 5 A.

Village Holiday Parking
Annual request from BIA for free from
Thanksgiving to Christmas, causes estimated:
 Paid parking revenue loss: $65,000 - $70,000
 Reduction in parking citation revenue: $30,000 -
$35,000
Portion of additional revenue could be used in
Village
 Replace trash cans
Other Village enhancements
196
Item 5 A.

Transient Occupancy Tax Rates
 Current rate is 12%
 Paid by visitors at hotels/STRs
 Each 1% is approximately $180,000
 STRs restricted to Visitor Zone in
Village
Any increase requires voter
approval
 This could be evaluated prior to
November 2028 election
 Requires public outreach
Jurisdiction Hotel STR
Capitola 12%
Santa Cruz (County) 12% 14%
Santa Cruz (City) 12% 14%
Watsonville 12%
Scotts Valley 11%
Monterey (County) 10.5%
Monterey (City) 12%
Carmel-by-the-Sea 10%
Pacific Grove 12%
Marina 14%
Anaheim 15%
197
Item 5 A.

CalPERS Retirement Trust
 Current balance $1.8 million
 Can only be used on retirement expenses
 Established in 2016 to mitigate impact from Mall
Redevelopment
 Current annual UAL payment is $3.3 million and growing  Could be utilized towards annual UAL payment
 Staff recommends holding CalPERS Trust for Mall
redevelopment or when UAL payments peak
198
Item 5 A.

Community Services & Recreation
Seasonal Hours
◦ Updated seasonal hours for FY 2023-24 – FY 2025-26
◦ 1
st draft only had updated hour amounts for FY 2026-
27 & FY 2027-28
◦ Year-over-year increase 1,329 hours
Jr. Guard Parking
◦ Currently included with registration
◦ Intent to encourage parking in lower lot to mitigate
traffic in Village
◦ Considering nominal fee
◦ If approved, would become effective spring 2027
199
Item 5 A.

Measure Y Summary
Revenue Budgeted Amount
Measure Y Revenue $2,289,167
Expenditure Budgeted Amount
Public Safety $ 7,840,926
Potholes, streets, traffic safety, sidewalks, bike lanes 1,878,763 Beaches & Wharf 220,000
Recreation programs for youth 592,793
Total $10,532,482
200
Item 5 A.

FY 2026-27 Measure Y
201
Item 5 A.

Imbalanced Budget Balanced Budget
202
Item 5 A.

Year-End Statistics
Community Profile & Supplementary Information
◦ Includes year-end statics and comparable information
◦ Included in Final Budget published in September
◦ Received request to include Police Dept., CS&R, and Business License information
◦ Significant workload for interim data.

License
Canceled
License
Revoked
License
Renewed
New
License
Issued
Application
Approved
Application
Denied
Application
License Type Category Received
COIN OPERATOR - COIN OPERATED VENDING Business 3 0 0 3 2 0 0

MACHINE
CONTRACTOR - CONTRACTOR/BUILDERS Business 97 0 0 94 277 50 0 MISCELLANEOUS - MISCELLANEOUS Business 6 0 0 6 65 6 0
PROF/PERSONAL - PROFESSIONAL/PERSONAL Business 79 0 0 72 407 63 0

SERVICE
QTRLY CONTRACTOR - QUARTERLY Business 29 0 0 28 8 4 0

CONTRACTOR
RETAIL/GEN. BUS. - RETAIL/GENERAL BUSINESS Business 37 0 0 44 324 31 0 Grand 251 0 0 247 1083 154 0
Totals
203
Item 5 A.

Next Steps
May 26: Special FAC
Meeting
June 11: Regular City
Council Meeting
Continue budget hearings or
consider FAC recommendation
and budget adoption
June 25: Regular City
Council Meeting
Deadline to adopt FY 2026-
27 Budget
204
Item 5 A.

Recommendation
Receive FY 2026-27 Proposed Budget Presentation
 Identify additional budget questions, if any
Provide direction on follow-up items
Direct staff to cancel remaining special budget
meetings and either:
 Continue budget deliberations to June 11 Regular Meeting, or
 Prepare final budget for consideration on June 25
205
Item 5 A.

Capital Improvement
Program (CIP)
Fiscal Years 2026/27 – 2030/31 City Council
May 21, 2026
206
Item 5 A.

Investing in Capitola’s
Infrastructure &
Public Spaces
Presented During National
Public Works Week 2026
207
Item 5 A.

What is the Capital
Improvement Program?
• Identifies major infrastructure investments over a five-year period • Tracks planning, funding, design, and construction
• Helps prioritize projects based on safety, condition, and community needs
• Positions City to compete for grant funding
• Includes both active and long-term capital projects
208
Item 5 A.

Funding Strategy

FUNDING SOURCE DESCRIPTION
Competitive funding for infrastructure and
community projects. Federal & State Grants
State transportation funding for roadway
improvements. SB1 / Gas Tax
Regional funding for transportation and
mobility projects. Measure D / RTC
Funding for public improvements benefiting
eligible communities. CDBG
Local funding used to support grants and
project delivery. Local Match & Partnerships
Capitola relies heavily on external funding to advance major capital projects Local funding is often used strategically to position projects for future grant opportunities. • Project readiness is critical • Funding availability changes over time• Competitive grant environment • Matching funds often required KEY FUNDING

CONSIDERATIONS
209
Item 5 A.

Capital Delivery Challenges
Funding Availability
Grant cycles and funding
levels vary over time
Regulatory
Requirements
Permitting and
environmental review
affect schedules
Project Readiness
Planning and design are
often needed before grants
become available
Construction Costs
Material and construction
costs continue to fluctuate
Coordination &
Staffing
Coordination with agencies,
utilities, and consultants is
often required
Timing Opportunities
Some projects advance
quickly when funding
opportunities emerge
The CIP includes both active projects and longer-term concepts to maintain flexibility as priorities and funding evolve
210
Item 5 A.

CIP Project Overview
Completed / Near Completion
• Park at Rispin Mansion
• Community Center Renovation
• Treasure Cove/ Restroom
• 41st Avenue Multimodal
Improvements
Active / Funded
• Stockton Bridge Alternatives
Evaluation
• Esplanade Park Improvements
• Pavement Management Program
Planning / Partially Funded
• Cliff Drive Resiliency Project (Ph1)
• Sidewalk Infill Program
• Bay Avenue Corridor
• Monterey Park Play Area
• Grand Avenue Bluff Overlook
Conceptual / Unfunded
• Cliff Drive Resiliency Project
• Noble Gulch Dog Park
• Corporation Yard EV Infrastructure
211
Item 5 A.

Completed / Near Completion
Projects
Park at Rispin Mansion
Treasure Cove Playground &
Restroom Improvements
Community Center Renovation
41st Avenue Multimodal
212
Item 5 A.

Park at Rispin Mansion
Park Development and Public Access Improvements
WHY THIS PROJECT?
Restore historic site
Improve public access
Activate open space
STATUS
Construction complete
Park opened to public

FUNDING SNAPSHOT
~$1.4M total investment
State Parks + Measure Q
General Fund support
NEXT STEPS Public
programming
Long-term
maintenance
Capitola
Cares/pavers
fundraising 213
Item 5 A.

Treasure Cove Playground & Restroom
Improvements
Universal Play Area, Restroom Renovation, and Park Accessibility Upgrades WHY THIS PROJECT?
Replace aging playground
Improve accessibility
Upgrade park amenities
STATUS
Playground near completion
Restroom renovation
underway

FUNDING SNAPSHOT
~$3.5M total investment
$2.2M CDBG grant
~$1M community
fundraising
NEXT STEPS Public activation June 17 Grand
Opening
Complete
construction
214
Item 5 A.

Community Center Renovation
Facility Modernization & Accessibility Improvements
WHY THIS PROJECT?
Modernize facility
ADA and safety upgrades
Long-term community use
STATUS
Substantially complete
Punch list underway
Move-in ongoing

FUNDING SNAPSHOT
~$7.3M total investment
CDBG + CNRA grant
NEXT STEPS Public activation
and programming
June 17 Grand
Opening
Occupancy
and closeout
215
Item 5 A.
41st Avenue Multimodal
Corridor Safety and Multimodal Upgrades
WHY THIS PROJECT?
Improve safety
Repair pavement
Upgrade bike & ped access
STATUS
Design complete
Project bid
Construction starting

FUNDING SNAPSHOT
~$2.3M investment
Meas D + SB1 funded
Grant supported
NEXT STEPS Night
Construction
Project
Coordination
Outreach to
properties
216
Item 5 A.

Active / Funded Projects
Stockton Bridge Alternatives
Evaluation
Esplanade Park Improvements
Pavement Management Program
217
Item 5 A.

Stockton Bridge Alternatives
Bridge Alternatives Evaluation and Future Improvement Planning WHY THIS PROJECT?
Aging bridge conditions
Long-term reliability
Evaluate options
STATUS
Evaluation underway
Scope development
Council direction

FUNDING SNAPSHOT
~$850K investment
WRCB grant funded
General Fund Support
NEXT STEPS Future funding
strategy
Preferred
option
Alternatives
analysis
218
Item 5 A.

Esplanade Park
Shoreline Adaptation and Park Enhancements
WHY THIS PROJECT?
Improve waterfront access
Address coastal impacts
Plan for resiliency
STATUS
Planning underway
Consultant selected
Outreach upcoming

FUNDING SNAPSHOT
$275K Conservancy grant
$50K General Fund*
Future funding needed
NEXT STEPS Adaptation
planning
Community
engagement
Concept
development
219
Item 5 A.
26-27 Pavement Management Program
Annual Street Maintenance and Rehabilitation Program
WHY THIS PROJECT?
Preserve street conditions
Extend pavement life
Reduce long-term costs
STATUS
Annual paving program
FY26-27 streets identified
Maintenance focused

FUNDING SNAPSHOT
~$3.6M five-year program
Measure D + SB1 funded
Often grant supported
NEXT STEPS PMP update in
FY27-28
Summer 26 or
Spring 27 Work
26-27 Streets
May 28
220
Item 5 A.

Planning / Partially Funded
Cliff Drive Resiliency Project –Ph1
Sidewalk Infill Program
Bay Avenue Corridor
Monterey Park Play Area
Grand Avenue Bluff Overlook
221
Item 5 A.

Cliff Drive Resiliency – Phase 1
Bluff Stabilization and Resiliency Improvements
WHY THIS PROJECT?
Address bluff erosion
Protect infrastructure
Improve coastal resiliency
STATUS
Future phases identified
Additional funding needed
Long-term planning

FUNDING SNAPSHOT
~$12M Phase 1 project
FHWA ER funded
Grant support
Future funding needed
NEXT STEPS Request FHWA
funds
Coastal
permitting
Environmental
review
222
Item 5 A.

Sidewalk Infill Program
Ongoing Sidewalk Infill and Gap Closure Program
WHY THIS PROJECT?
Close sidewalk gaps
Improve pedestrian safety
Neighborhood connectivity
STATUS
Priority gaps identified
Initial funding secured

FUNDING SNAPSHOT
~$100K RTC funding
~$1.4M identified need
NEXT STEPS Pursue grant
funding
Identify future
phases
Construct
priority segment
223
Item 5 A.

Bay Avenue Corridor
Traffic, Pedestrian, and Bicycle Improvements
WHY THIS PROJECT?
Improve corridor safety
Crossings and lighting
Bike and ped access
STATUS
Corridor planning
Pilot project removed
Concepts in development

FUNDING SNAPSHOT
~$750K identified funding
RTC + federal funding
Additional funding
potential
NEXT STEPS Pursue grant
opportunities
Eval lighting
and crossings
Develop
improvements
224
Item 5 A.

Monterey Park Play Area
Play Area Evaluation and Neighborhood Outreach
WHY THIS PROJECT?
Expand recreation
Add new opportunities
Improve park amenities
STATUS
Initial outreach underway
Survey feedback in June
Concept plan anticipated

FUNDING SNAPSHOT
General Fund support
Future funding needed
Grant opportunities
anticipated
NEXT STEPS Identify funding
strategy
Develop
concept options
Review survey
results
225
Item 5 A.

Grand Avenue Bluff Overlook
Bluff-Top Overlook and Safety Improvements
WHY THIS PROJECT?
Improve bluff-top safety
Maintain coastal access
Improve overlook areas
STATUS
Prior pathway concept
paused
Focus shifted to overlooks

FUNDING SNAPSHOT
~$31K General Fund
Additional funding needed
Coastal permitting
anticipated
NEXT STEPS Pursue future
funding
Community
input
Develop
concepts
226
Item 5 A.

Conceptual/Unfunded Projects
Cliff Drive Resiliency Project
Noble Gulch Dog Park
Corporation Yard EV Charging
Infrastructure
227
Item 5 A.

Cliff Drive Resiliency Project –
Future Phases
Critical Bluff Stabilization and Resiliency Improvements WHY THIS PROJECT?
Address bluff erosion
Protect infrastructure
Improve coastal resiliency
STATUS
Planning/design underway
Technical studies ongoing
Permitting in development

FUNDING SNAPSHOT
~$33M estimated need
Currently unfunded
Multi-phase
implementation
NEXT STEPS Continue corridor
planning
Refine phase
priorities
Pursue future
grant funding
228
Item 5 A.

Noble Gulch Dog Park
Concept Development and Future Implementation
WHY THIS PROJECT?
Expand opportunities
Activate park space
Improve accessibility
STATUS
Concept approved in 2024
Project currently unfunded
Additional design needed

FUNDING SNAPSHOT
~$75K estimated cost
No funding identified
Fundraising potential
NEXT STEPS Identify funding
strategy
Evaluate
drainage needs
Refine project
scope
229
Item 5 A.

Corporation Yard EV Infrastructure
Fleet Electrification Support Improvements
WHY THIS PROJECT?
Support EV fleet transition
Prepare for state mandates
Upgrade infrastructure
STATUS
Grant dependent
PG&E coordination
underway

FUNDING SNAPSHOT
~$300K estimated cost
Grant and rebate focused
No City funding identified
NEXT STEPS Coordinate utility
upgrades
Finalize
charging plan
Pursue grant
funding
230
Item 5 A.

Emerging Capital Needs

PERRY PARK
BRIDGE
Structural and
corrosion repairs

NOBLE GULCH
Culvert
rehabilitation
Flood resiliency

CITY HALL / PD &

CORP YARD
Aging facility
upgrades
Long-term
operational needs
WHARF
FACILITIES*
Restroom needs
Lifeguard facility
planning
NEXT STEPS Funding
strategies
Long-term
planning
Condition
assessments
231
Item 5 A.

Future Funding Opportunities
• Up to ~$5M possible
• Competitive funding
• Limited to low/mod income
areas

POTENTIAL CDBG
• Short timelines
• Environmental clearance
• Shovel-ready projects

KEY CONSIDERATIONS
• Parks and recreation
• Bike and pedestrian projects
• Community facilities
• Drainage improvements

ELIGIBLE TYPES
232
Item 5 A.

Potential Future CDBG Project

BAY AVENUE
• Safety improvements
• Lighting and crossings

JADE STREET
• Athletic field
improvements
• Drainge Improvements

MONTEREY PARK
• New neighborhood park
amenities
• Community-prioritized
features

CLIFFWOOD HEIGHTS

Future Funding Opportunities
• Federal safety grant program
• LRSP required for eligibility
• Focus on serious injury
reduction

SAFE STREETS FOR ALL
• Corridor safety projects
• Systemic safety improvements
• Pedestrian and bicycle safety
• Safety education programs

FUNDING FOCUS
• Crosswalk upgrades
• Lighting improvements
• Visibility enhancements
• Traffic calming

IMPROVEMENTS
234
Item 5 A.
• Major capital projects are underway
• Significant future infrastructure needs
remain
• Grant readiness is increasingly
important
• Funding opportunities require
flexibility and timing
• CIP will continue to evolve annually
Discussion &
Council Feedback
Looking Ahead
Positioning Capitola for Future Investment
235
Item 5 A.

Capitola City Council
Agenda Report
Meeting: May 21, 2026
From: Public Works Department
Subject: Reprogramming of RTIP Funds for Capitola Trestle Recommended Action: Authorize staff to submit a request to the Santa Cruz County Regional Transportation Commission (RTC) to reprogram up to $200,000 in Regional Transportation Improvement Program (RTIP) funds currently programmed to the City to support preliminary planning work for the Capitola Trestle.

Background: The Capitola Trestle is located within Segments 10–11 of the Santa Cruz Branch Rail Line corridor, which is part of the larger Coastal Rail Trail network. The Rail Trail is a multi-jurisdictional project to develop a continuous bicycle and pedestrian facility along the rail corridor from Watsonville to Davenport.

Segments 10–11 of the interim trail within the City of Capitola are currently funded for construction and are being delivered by the County of Santa Cruz in partnership with the Santa Cruz County Regional Transportation Commission (RTC). However, the existing Capitola Trestle is not included in that scope, as the structure is not suitable for trail use in its current condition. As a result, the planned improvements for these segments do not provide a continuous facility across Soquel Creek. The trail would terminate near Cliff Drive and resume at Monterey Avenue, creating a gap in the system.

Advancing preliminary planning for the Capitola Trestle is identified as a key City goal for Fiscal Year 2026–2027.

The Capitola Trestle is located within the RTC right-of-way and is owned by the RTC, but lies within the City of Capitola. Addressing the trestle is necessary to achieve a continuous trail connection through Capitola.

The City has initiated discussions with the RTC regarding a potential collaborative effort to evaluate the feasibility of repurposing the trestle for active transportation as part of the proposed Segments 10-11 interim trail. The City has $500,000 in RTIP funds currently programmed for the Bay Avenue Corridor through RTC’s adopted funding programs. Staff is proposing to request reprogramming of up to $200,000 of these funds to support preliminary planning work for the Trestle.

This action would initiate the funding request process with the RTC. A separate Memorandum of Agreement (MOA) is anticipated to be considered at a future meeting and would define roles, responsibilities, and implementation of the work effort. Advancing this work in 2026 would allow the City and RTC to evaluate potential grant funding opportunities in the future.

Discussion: The proposed reprogramming would allow the City to partner with the RTC to begin a focused preliminary planning and feasibility assessment of the Capitola Trestle. This effort is intended as an initial step toward developing a viable project that could close the gap in Segments 10–11 of the interim trail and provide a continuous active transportation connection through Capitola.

While the trestle has been the subject of prior inspections and studies, those efforts were not intended to advance a specific project or position the structure for funding. This effort would build on that prior work and focus on identifying a feasible path forward, including updated assessment of existing conditions and constraints, evaluation of alternatives, and planning-level cost and implementation considerations.

The work would be administered by RTC using its on-call engineering contracts. The anticipated scope of work would include:
 Review of existing bridge data, prior reports, and site conditions; 236
Item 5 B.
 Existing structure condition assessment, including timber trestle, concrete approach spans, and main span elements;
 Preliminary geotechnical and seismic assessment, with the potential for targeted field investigation to better understand subsurface conditions and liquefaction potential;  Evaluation of alternatives for repair, retrofit, or replacement of key structural components;  Development of planning-level cost information and identification of next steps;  Preparation of a technical memorandum summarizing findings and recommendations; and  Presentation of findings to the City Council.

The intent of this effort is not to advance a final design, but to develop sufficient technical information to identify a feasible path forward, understand key constraints and costs, and position the project for future grant funding.

Fiscal Impact: The proposed action would reprogram up to $200,000 in existing RTIP funds currently allocated to the Bay Avenue Corridor Project. No new funding is requested with this item; a separate item on the May 21st agenda will consider potential grant applications to fully fund all identified work on the Bay Avenue Corridor.

Alignment with 2025-2029 Strategic Plan Priority: Sustainable Infrastructure; Healthy Families, Community, and Environment
Report Prepared By: Jessica Kahn, Public Works Director Reviewed By: Julia Gautho, City Clerk; Marc Tran, City Attorney Approved By: Jamie Goldstein, City Manager
237
Item 5 B.

Capitola Trestle RTIP Reprogramming
City Council
May 21, 2026
238
Item 5 B.

Authorize request to RTC
• Reprogram to
$200,000 in RTIP
funds
• Support preliminary
trestle planning work
Future agreement with
RTC would return to
Council
Recommended Action
Capitola Trestle RTIP Reprogramming
239
Item 5 B.

Project Background
Capitola Trestle RTIP Reprogramming
• Trestle located within Rail Trail
Segments 11
• Trestle owned by RTC within
Capitola
• Current County/SCCRTC
project does not include the
trestle
• Existing gap across Soquel
Creek
• Advancing trestle planning is a
FY26/27 City goal
240
Item 5 B.
241
Item 5 B.
• Existing condition review
• Preliminary structural and seismic review
• Evaluation of improvement options
• Planning-level cost information
• Technical memorandum and Council presentation
Work Effort – Lead by RTC
• Evaluates potential trail connection across Soquel Creek • Builds on prior technical studies
• Identifies key constraints and next steps
• Helps position future funding opportunities
Expected Outcomes
Preliminary Assessment Overview
Capitola Trestle RTIP Reprogramming
242
Item 5 B.

Prior Study vs. Proposed Next Phase
Capitola Trestle RTIP Reprogramming
2021 RailPros Study Proposed Next Phase
Conceptual conversion study Preliminary feasibility work Evaluated deck concepts Updated condition review
Evaluates potential pathways
forward Identified major bridge issues
Recommended additional study Develops next-step information Concept-level cost estimates Supports future funding readiness 243
Item 5 B.

Fiscal Impact
Capitola Trestle RTIP Reprogramming
• Reprograms up to $200k from $500k Bay Avenue
RTIP
• Backfill Bay Avenue funding strategy in separate
item
Uses Existing RTIP Funds
• RTC to manage consultant work and coordination
• City staff participation and support as needed
RTC Administrated
244
Item 5 B.

Recommended
Action
Authorize staff to
submit a request to
the RTC to reprogram
up to $200,000 in
Regional
Transportation
Improvement Program
(RTIP) funds currently
programmed to the
City to support
preliminary planning
work for Capitola
Trestle.
245
Item 5 B.

Capitola City Council
Agenda Report
Meeting: May 21, 2026
From: Public Works Department
Subject: Programming of Remaining RTIP Funds to Support Grant Leveraging and Project Development
Recommended Action: Receive information regarding available transportation funding and provide direction to staff to: 1) Program approximately $50,000 in remaining RTIP funds toward local match requirements for the Bay Avenue improvements; 2) Reserve the remaining approximately $300,000 in RTIP funds to leverage future Safe Streets and Roads for All (SS4A) grant funding for additional active transportation and roadway safety improvements; and 3) Program approximately $50,000 in remaining RTIP funds toward development of a shovel-ready Community Development Block Grant (CDBG) application for roadway and pedestrian improvements within the Cliffwood Heights neighborhood.

Background: On May 14, 2026, the City Council adopted the City’s Local Roadway Safety Plan (LRSP), establishing a framework for future roadway safety investments and positioning the City for future state and federal transportation grant opportunities.

At that same meeting, the Council considered the Bay Avenue Corridor Study and directed staff not to advance the previously proposed larger corridor concept. Instead, Council directed staff to continue pursuing a more focused project centered on pedestrian safety improvements, including enhanced lighting and a mid-block pedestrian crossing.

Earlier on the May 21, 2026, agenda, the City Council is considering a related item authorizing staff to request reprogramming of approximately $200,000 in Regional Transportation Improvement Program (RTIP) funds to support preliminary planning work for the Capitola Trestle project.

If approved, approximately $300,000 in RTIP funding associated with the Bay Avenue Corridor Project and approximately $100,000 in RTIP funding associated with the sidewalk infill program would remain available for future transportation and infrastructure priorities.

Staff recommends strategically programming these remaining funds to maximize competitiveness for future grant opportunities while maintaining flexibility to deliver scaled projects if grants are not awarded.

Bay Avenue Improvement Project: Following City Council direction on May 14, 2026, staff recommends advancing a reduced-scope Bay Avenue Improvement Project focused on targeted pedestrian safety improvements rather than the previously studied larger corridor concept.

The proposed project would generally include:
 A new enhanced mid-block pedestrian crossing;
 Lighting improvements, including lighting at the north corner of the Bay/Capitola Avenue;  Targeted pedestrian visibility and safety enhancements; and  Related accessibility improvements.

The project is consistent with recommendations identified in the recently adopted LRSP and responds directly to Council direction to focus on lower-cost, implementable safety improvements. Staff estimates the revised Bay Avenue project could be delivered for approximately $800,000.

The City previously secured approximately $250,000 in federal funding through Congressman Panetta’s office for Bay Avenue improvements. Staff recommends using approximately $50,000 of the remaining sidewalk infill RTIP funding toward this local match requirement.

Staff proposes obtaining the remaining $500,000 in project funding from an SS4A grant request, as explained further below.
246
Item 5 C.

If additional grant funding is not secured, staff believes the currently identified funding sources would still allow delivery of a more limited version of the Bay Avenue improvements.

Cliffwood Heights CDBG Project Development: Staff also recommends programming approximately $50,000 in remaining RTIP funding toward development of a shovel-ready Community Development Block Grant (CDBG) application.

Staff has identified the Cliffwood Heights neighborhood as a strong potential candidate area due to existing roadway conditions, infrastructure needs, and potential grant eligibility considerations.

Potential improvements could include:
 Pavement reconstruction on low Pavement Condition Index (PCI) streets;  ADA sidewalk upgrades;
 Sidewalk gap closure;
 Targeted pedestrian safety improvements; and
 Related accessibility improvements.

The proposed project concepts are informed by previously completed City planning documents and studies, including the Pavement Management Program, ADA Transition Plan, and prior school traffic safety studies.

The final project scope and grant application would return to the City Council for consideration during the summer 2026 grant cycle process. If grant funding is ultimately not secured, the City would still move forward with the more limited scheduled pavement management improvements as specified in the PMP in the Cliffwood Heights neighborhood.

Future SS4A Grant Leveraging: As mentioned above, staff recommends utilizing the remaining approximately $300,000 in Bay Avenue RTIP funding to leverage a $1.5 million federal Safe Streets and Roads for All (SS4A) implementation grant application. The next SS4A application cycle is anticipated to close within the next two weeks.

The recently adopted LRSP positions the City well for future SS4A funding opportunities. Staff believes the Bay Avenue Improvement Project is a strong candidate for that program. Staff proposes to apply for $500,000 in SS4A funds for Bay Avenue, which would fully fund the $800,000 project The remaining $1 million in SS4A funding capacity could support additional pedestrian and roadway safety improvements associated with the Clares Street corridor identified through the 41st Avenue Corridor Plan. The 41st Avenue Corridor Plan is returning for Council adoption on May 28, 2026.

All future projects funded through this strategy would return to the City Council for final design review, scope confirmation, and authorization prior to construction.

Fiscal Impact: The proposed action would program existing RTIP funds previously allocated to transportation projects and would not require additional General Fund appropriations at this time.

The proposed programming strategy is summarized below:

Funding Source Amount
Sidewalk Infill RTIP Funds $100,000
Remaining Bay Avenue RTIP Funds $300,000
Proposed Use
Bay Avenue local match $50,000
CDBG project development $50,000
SS4A grant leverage $300,000
247
Item 5 C.

This strategy is intended to maximize the City’s competitiveness for future grant opportunities while maintaining flexibility to deliver scaled infrastructure improvements. Even if grant funding is not secured, the proposed programming strategy would still position the City to deliver scaled improvements using currently identified funding sources.

Alignment with 2025-2029 Strategic Plan Priority: Sustainable Infrastructure; Community Safety; Healthy Families, Community, and Environment
Report Prepared By: Jessica Kahn, Public Works Director Reviewed By: Julia Gautho, City Clerk
Approved By: Jamie Goldstein, City Manager
248
Item 5 C.

Programming of RTIP
Funds to Support Grant
Leveraging and Project
Development
City Council
May 21, 2026
249
Item 5 C.
• LRSP adopted May 14, 2026
• Bay Avenue corridor concept narrowed to focused
safety improvements
• Separate item proposes ~$200k RTIP for Trestle
Recent Council Actions
• Deliver near-term improvements
• Strengthen grant competitiveness
• Maintain flexibility for future projects
RTIP can be reprogrammed
Project Background
Programming of Remaining RTIP Funds
250
Item 5 C.

Future Funding Opportunity
CDBG
• Up to ~$5M possible
• Competitive funding
• Limited to low/mod income
areas

POTENTIAL CDBG
• Short timelines
• Environmental clearance
• Shovel-ready projects

KEY CONSIDERATIONS
• Parks and recreation
• Bike and pedestrian projects
• Community facilities
• Drainage improvements

ELIGIBLE TYPES
251
Item 5 C.

Potential Future CDBG Project

JADE STREET
• Athletic field
improvements
• Drainge Improvements

MONTEREY PARK
• New neighborhood park
amenities
• Community-prioritized
features

CLIFFWOOD HEIGHTS

INFRASTRUCTURE
• Neighborhood
pavement and drainage
improvements
• Sidewalk and
accessibility upgrades
NEXT STEPS Submit
application in fall
Select priority
project
Public hearing
process
252
Item 5 C.
• Existing Conditions /
Opportunity
• Existing infrastructure needs
• Potential grant eligibility
• Prior planning documents
already completed
• Potential Improvements
• Pavement reconstruction
• ADA upgrades
• Sidewalk gap closure
• Pedestrian safety
improvements
• Proposed RTIP Use
• ~$50,000 for project
development
Cliffwood Heights CDBG Development
Programming of Remaining RTIP Funds
253
Item 5 C.

Future Funding Opportunity
SS4A
• Federal safety grant program
• LRSP required for eligibility
• Focus on serious injury
reduction

SAFE STREETS FOR ALL
• Corridor safety projects
• Systemic safety improvements
• Pedestrian and bicycle safety
• Safety education programs

FUNDING FOCUS
• Crosswalk upgrades
• Lighting improvements
• Visibility enhancements
• Traffic calming

IMPROVEMENTS
254
Item 5 C.
• Proposed RTIP Use
• $300k for SS4A leverage
• Supports 20% local match for ~$1.5M implementation
grant
• Potential Improvements
• Clares Street improvements (per pending Corridor Plan) • Bay Ave funding augmentation
• Systemic roadway safety upgrades
• Project Approach
• Combined SS4A grant strategy
• Funding may shift between projects
• Final scopes return to Council prior to implementation SS4A Grant Strategy
Programming of Remaining RTIP Funds
255
Item 5 C.
• Existing Conditions / Direction
• Existing federal funding secured
• Focused pedestrian safety
improvements
• Competitive for SS4A funding
• Potential Improvements
• Mid-block crossing
• Lighting improvements
• Visibility enhancements
• ADA improvements
• Proposed RTIP Use
• ~$50,000 local match for earmark
• Supports SS4A request
Bay Avenue Improvements
Programming of Remaining RTIP Funds
256
Item 5 C.

Summary
Programming of Remaining RTIP Funds
Existing Allocations Funding Amount
RTIP Bay Ave $500,000
RTIP Sidewalk Infill $100,000
Earmark (requires 20% Match) $250,000
Total $850,000
Total Notes Clares/
LRSP
Bay
Ave Trestle CDBG
Potential
Funding
Strategy
RTIP $200k $50k $50k $300k $600k Local Match Funding
Earmark $250k $250k Existing federal funds
Combined Bay + Clares
application* SS4A $500k $1.0M $1.5M
CDBG $5.0M $5.0M Future grant opportunity
Total $200k $5.05M $800k $1.3M $7.35M 257
Item 5 C.
• Bay Avenue
• Scaled improvements could still proceed using
existing funding sources
• Cliffwood Heights
• Pavement management using road funds in PMP for
identified streets in 2027/28
• Overall Approach
• Strategy maintains flexibility while maximizing
competitiveness for outside funding
If Additional Funding Is Not Secured
Programming of Remaining RTIP Funds
258
Item 5 C.

1. Program approximately $50,000 in remaining RTIP funds toward local match requirements for the Bay Avenue
improvements;

2. Reserve the remaining approximately $300,000 in RTIP funds to leverage future Safe Streets and Roads for All (SS4A) grant funding for additional active transportation and roadway safety improvements; and

3. Program approximately $50,000 in remaining RTIP funds toward development of a shovel-ready Community
Development Block Grant (CDBG) application for roadway and pedestrian improvements within the Cliffwood Heights
neighborhood.

Recommended Action
Programming of Remaining RTIP Funds
259
Item 5 C.

Capitola City CouncilMay 21, 2026

Capitola City Council
May 21, 2026