Five Year Financial
Forecast
March 24, 2026
Jayme Fields
Overview
• The forecast is a tool
• Based on the current year's budget
• Analyzes potential trends
• Purpose
• Identify critical challenges
• Inform decision-making
1 2
Assumptions
• Economic Outlook
• Uncertain interest rates
• Uncertain inflation
• Key Assumptions
• Minimal growth in sales, property tax and TOT revenue • Salary step increases but no COLA
• CPI increases for most operating costs
• Completion of the deferred-maintenance-heavy CIP plan 3 Historic Trend and Five Year Forecast
4 Historic Trend and Five Year Forecast
5 Historic Trend and Five Year Forecast
6 Historic Trend and Five Year Forecast
7 Historic Trend and Five Year Forecast
8 Historic Trend and Five Year Forecast
9 Historic Trend and Five Year Forecast
10 Historic Trend and Five Year Forecast
11 Historic Trend
12 Five Year Forecast
13 Five Year Forecast-Policy Measures
Operating expense
spending policy = 90%
maximum 19,318 125,405
88.6% 88.5% 89.0% 89.8% 90.05% 90.3%
CIP spending policy =
10% minimum 2,590,866 6,124,490 5,610,464 5,163,562 6,654,737 6,138,937
16.9% 25.9% 24.2% 22.8% 26.1% 24.5%
FY 25-26
Estimated
Actual
FY 26-27
Projection
FY 27-28
Projection
FY 28-29
Projection
FY 29-30
Projection
FY 30-31
Projection
14 Five Year Forecast Available
Resources (Fund Balance)
15 Beginning Available Fund Balance
As of 6/30/25 Audit:
Nonspendable $14,936
Restricted 6,835,415
Assigned - Operational reserves 15,997,900
Assigned - Capital projects 4,702,557 (a)
Unassigned 17,055,685 (a) sum (a)=
Total fund balance $44,606,493 21,758,242 Max available for CIP
16 Deferred Maintenance
Deferred Maintenance Need Estimated Current Cost
New Police/PW Building 38,000,000
Streets 24,000,000
Storm Drain System 14,700,000
Shoreline Structures 8,000,000
Sidewalks 6,600,000
Parks and Facilities 10,685,000
Undergrounding unknown
Net Additional Need 101,985,000
17 Available Fund Balance Forecast
6/30/25 Available for CIP 21,758,242
Net Deficit Spent FY25-26 (3,071,955)
Starting Available 18,686,287
Net Deficit Spent FY26-27 (6,557,626)
Available After Year 1 12,128,662
Net Deficit Spent FY27-28 (5,204,448)
Available After Year 2 6,924,213
Net Deficit Spent FY28-29 (5,078,575)
Available After Year 3 1,845,638
Net Deficit Spent FY29-30 (6,674,054)
Available After Year 4 (4,828,416)
Net Deficit Spent FY30-31 (6,264,342)
Available After Year 5 (11,092,759)
18 Financial Sustainability and
Strategic Planning
• Gap Analysis
• Mitigation Strategies("Budget Options")
• Risk Assessment
• Policy Recommendations
• Community Input
19 Budget Options – “Levers”
• Consider “Levers” that can be pulled
1. CIP strategy (project focus and timing)
2. Services and service levels
3. Revenues
• Preliminary direction
20 1. CIP Budget Option “Lever”
• CIP strategy (project focus and timing)
21 2. Services Budget Option “Lever”
• Services and service levels
22 3. Revenue Budget Option “Lever”
• Revenue sources and rates
23 Conclusion
• Summary of Key Findings
• Identify critical challenges
• Inform decision-making
• Next Steps
• Accountability and Transparency
24 Questions?
25 Historic Trend and Five Year
Forecast
26 Proposed Fiscal Year 2026-2027
CIP Budget and
Five-Year CIP Plan FY 2027-
2031
City Council Meeting
March 24, 2026
Shari Carlet
CITY OF CARMEL-BY-THE-SEA
CITY OF CARMEL-BY-THE-SEA 1
Provide an initial overview of the proposed FY 2026–2027 Capital Improvement Program (CIP) and the FY 2026–2031 Five-Year Plan Introduce the proposed FY 2026–2027 Capital Projects
Present an update on CIP projects currently in progress during Fiscal Year 2025–2026 Highlight major Citywide infrastructure priorities and long-term investment needs Receive Council direction on project priorities and any needed adjustments before finalizing the CIP budget
CITY OF CARMEL-BY-THE-SEA
Purpose
2 Capital Improvement Program (CIP)
The Capital Improvement Program is prepared each year to guide the planning and funding of the City’s major infrastructure, facilities, assets, programs, and long-term capital needs.
CIP serves as a planning tool to:
• Maintain and rehabilitate aging infrastructure
• Enhance public safety and improve overall accessibility • Meet required regulatory standards and environmental obligations • Carry out long-term infrastructure development plans
• Coordinate and manage major capital investment projects
CITY OF CARMEL-BY-THE-SEA
Background slide
3 CITY OF CARMEL-BY-THE-SEA
FY 25/26 CIP STATUS
4 Completed
Project: Forest
Theater Stage
Improvements
Stage
replacement
project completed
Supplemental
electrical work
performed by
Facilities Division
CITY OF CARMEL-BY-THE-SEA
Completed and On-Going CIP
Projects
5 Completed
Project: Fire
Station Exterior
Painting
Exterior painting
completed.
Leak repairs
finalized.
CITY OF CARMEL-BY-THE-SEA
Completed and On-Going CIP
Projects
6 Completed
Project: Fire
Station Interior
Remodel
Interior remodel
completed with
updated
finishes.
CITY OF CARMEL-BY-THE-SEA
Completed and On-Going CIP
Projects
During the Remodel After the Remodel
7 Completed Project:
Rio Road Median
Restoration Project
• Old landscaping
replaced with
native,
drought-resistant
plants.
• Improvements
include new
irrigation, mulch,
and boulders.
CITY OF CARMEL-BY-THE-SEA
Completed and On-Going CIP
Projects
Before the Restoration After the Restoration 8
Ongoing Project:
Conglomerate
Paving Project
• 7,000 ft of AC overlay
completed
• Work includes Street
AC Overlay, Street
Reconstruction,
Micro-seal, Berm
installation, ADA
Ramp Installations,
Drainage
Improvements
• Will Include Sunset
Center Main Parking
Lot AC Overlay
CITY OF CARMEL-BY-THE-SEA
Completed and On-Going CIP
Projects
During the Paving Operation along
Torres (3rd to 4th Aves)
After: Completed AC Overlay Work
along Torres St (2nd to 3rd Aves) 9
On-going Project: Conglomerate Paving Project
CITY OF CARMEL-BY-THE-SEA
Completed and On-Going CIP
Projects
During Paving: Ocean Ave (Highway 1 to Carpenter St.) After Paving: Ocean Ave (Highway 1 to Carpenter St.) 10 The 5-Year CIP Plan serves as the City’s long-term capital planning tool. Identifies priority projects set by Council, deferred maintenance, and infrastructure needs.
Includes high-priority projects based on condition assessments and studies.
Addresses emergency repairs, safety concerns, and community needs.
Provides a sequenced project schedule across 5 fiscal years. Outlines projected costs for each project within the 5-year period.
CITY OF CARMEL-BY-THE-SEA
PROPOSED 5-YEAR CIP PLAN
11 CITY OF CARMEL-BY-THE-SEA
5-YEAR CIP PLAN
City of Carmel – Capital
Improvement Program
Project Categories
Streets & Sidewalks
Drainage
City Facilities
Forest/Beach & Parks
Environmental Programs
12 CITY OF CARMEL-BY-THE-SEA
5-YEAR CIP PLAN
13 CITY OF CARMEL-BY-THE-SEA
5-YEAR CIP PLAN
14 CITY OF CARMEL-BY-THE-SEA
5-YEAR CIP PLAN
15 CITY OF CARMEL-BY-THE-SEA
5-YEAR CIP PLAN
16 Proposed Annual FY 2026–2027 CIP Budget:
Identifies projects recommended for implementation in the upcoming fiscal year.
Provides expenditure authority needed to carry out those projects. Represents the first year of the 5-Year CIP Plan.
Highlights all projects proposed for FY 2026–2027 implementation.
CITY OF CARMEL-BY-THE-SEA
PROPOSED ANNUAL
FY 26/27 CIP BUDGET
17 CITY OF CARMEL-BY-THE-SEA
PROPOSED ANNUAL
FY 26/27 CIP BUDGET
18 CITY OF CARMEL-BY-THE-SEA
PROPOSED ANNUAL
FY 26/27 CIP BUDGET
19 CITY OF CARMEL-BY-THE-SEA
FY 26/27 CIP BUDGET CHART
20 The CIP program is funded through multiple sources including:
1. Capital Improvement Fund
2. Vehicle and Equipment Fund
3. Grants and external funding
4. Future potential funding sources
CITY OF CARMEL-BY-THE-SEA
FISCAL IMPACT
21 Staff requests Council direction on project priorities and any needed adjustments before finalizing the Proposed CIP budget.
CITY OF CARMEL-BY-THE-SEA
CONCLUSION
22 City of Carmet-by-the-sea
Pretiminary Estlmate of Delerred Maintenance
As ot 12110/25
lmprovement
Estimated Totat
Cost (orig)
This is the estimated cost to buitd a new 60,000 sq ft buitdingto house the Potice and Pubtic Works functions.
Streets - repair streets to a 5 24,000,000 Tolat identified need: $8M - $24f4 ptus design, proj mgt, drainage, ADA ptustimetogetptanned and buitt . Breakdown updatedforthe tatest repairs:
o A PClofTl over the next len years we would need $899,176 a year for the next ten years.
APClofT2 over the nexttenyearswoutd need$1,392,929 ayearforthe next tenyears.
A PClofTS-80 overthe no(t ten years wouLd need $1,513,708 a year for the next ten years o Deferred Maintenance on streets in Poor/Very Poor <55 Year 1: $1,065,623
Year2: $1,131,207
Year3: $1,434,937
Year4: $1,87,081
YearS: $1,945,970
14,700,000 Totat identified need: $14.714 plus softcosts based on "Storm 0rain l"laster Ptan Updated Finat Repon . Breakdown:
o Capacity improvements: Major pipe upsizing (e.g., runipero, Mission bypass), New parattel pipe systems, lmprovements to reduce street ftooding and ovedtow, New cutverts and outfal[ reptace_ments, Modeting- identified bottte nec k corrections: $ 12.76t4 o Condition lmprovements: FaiLed orfaitingpipe tiners, Structurat damage, Sediment-fitted or cottapsed pipes, Btocked ordegraded intets: $1.9414
Storm Drain System - major
8,000,000 Totatidentified need: $8M plus soft costs
. Breakdown:
o Beach stairs (stoping, dlainage/eIosion, foundation, corrosion repairs, reptacements): $1.5M o Revetments (4): tut( armoring over 5yrs $214
o Sand ramp reptacement (tongterm): $11'l
o SeawatLs (4)$3f4
o Scenic Pathway(edge stabitization, pathway wolk) $500k Shoretine Structures - beac
6,600,000 Totat identified need: $6.6f4 pLus softcosts
. Breakdown:
o LeveLing and resetting existing pavers at 607 tocationsr$13,068 o Removatand reptacement of 582 sidewatk segments: $6,633,643. (107,465 sqft otsidewatk panetsto be removed and repLaced. 18,6801F ofcurbsto be removed and reptaced).
Sidewatks - teveting or resett
Na., dats
'\fu/* -"'{ 3-zcl-7ozL
New PoLice/PW Buitding - dd s8,00o,ooo I
Maintain Our Current Overatt PClolT0
Year 1: $486,769
Year 2: $378,168
Year3: $181,707
Year 4: $103,914
Year 5: $347,589
o Total network treatment needs identilied regardtess of rcl is$24,073,000 ifdone attin oneyear. o lnctudes overlays, ADAcurb ramps, concrete sidewatk repairs.
Totat identified need: $3.8l\4 ptus softcosts
. Breakdown:
o Retainingwatts: repai/reptacementneeds: $1.2|v1
o Exterior Ramps &Stairs, AssembtyA.ea, Restrooms (ADA):$2.614 Sunset Center (lnf rastructur@
Totat identified need: $3.0M based on Forest Master Ptan dated 2024 . Breakdown:
o Tree pruning/removaUreplacement (-$114/yr for 3 yrs).
Totat identified need: $1.2lvl ptus soft costs, consistentwith Facitity Condition Assessment dated 6/9/23 . Breakdown:
o Seismic retrofit (rool watts, crawtspace, basement) - $640,000 o Electricat, fire a larm, ADA egress, - $260,000
o HVAC/ptumbing-$120,000
o Finishes(windows,doors,ceiting)-$220,000
City Hatt
Totat identified need: $1M ptus soft costs, consistent with Dudek study d arcd ALA|L9 . Breakdown:
o Stream stabitity, erosion controt, tributary reroute, flood management o Pedestrianboardwatkimprovements
o Concreteford removal
o Bridge reptacement
Mission TraiL Nature Prese
Totat identiried need: $887K pLus softcosts. consistent with Fac itity Cond ition Assessment dated6/9/23 . Breakdown:
o Roof replac eme nt & seismic anchorage - $352,900
o ALarm and egress ADA upgrades - $96,800
o lnter iorlexterior fin ishes, d oors/ha rdwa re -$93,900 o Windowreptacement, HVAG$266,100
o Remaining fire protection upgrades - $77,630
Fire Station
2,000,000 Iotat adenlified need: $2M defefled maintenance onLy . Breakdown:
o Water intrusion repairs atetecttica{ paneLs & roofstab-$1,205,000 o Seismic retrofit of equipment anchorage, retaining waLt, co(umns - $135,000 o Electrjcat service and panet upgrades -$59,000
o Fire atarm reptacement and ADA devices-$42,680
o Exterior envetope renewa( - $462,680
o lnterior upgrades & ongoang system reptacements - $157,840 Publ.ic Works / PoLice Buitdi
566,000 Total identified need: $566k ptus softcosts, consastentwith Facitity Condition tusessment dated 6/9/23 . Breakdown:
o Seismic retrofits (roof diaphragm, shear wa[s, canopy) - $144,000 o Etectricat- $175,460
o HVAC Systems - $8,500
o Ptumbing - $46,000
o ADA comptiance (restrooms, tire-rated watts/ceitings) - $24,000 o Fire protection upgrades - $42,910
o Rema ining systems, ,inishe s - $124,960
Vista Lobos Community Ce
Forestry/ Urban Trees (catcl 1,000,000 |
I r,zoo,ooo I
1,000,000
I aez,ooo
Totat identified need: $120k
. Breakdown:
o Exterior Painting: Window frames
o Roof reptacement
Ftanders Mansion @
70,000 Totat identified need:$7ok ptus soft costs
. Breakdown:
o Dev Park - Roof repLacement, Drinkingwater repairs $25k o Det f4ar beach - Paint, ATV room door& ptumbing- $20k o Scenic - SS door frame reptacements - $15k
o FH Park'fixture replacements & pLumbing- $10k
Restroom Facitities (7)
Totat identified need: $22k
. Breakdown:
o Painting.
o Dry rot repairs
o Pathwayrepairs
First Murphy House
20,000 Total identified need: $20k
. Breakdown:
o Water Line repair
Scout House
Undergrounding - unknown Estimated to be $2.5 - 7.5 mitLion per mite 22,OOO
)
Net Additional. Need 101,985,000
Mayor Byrne’s slides
CITY OF CARMEL-BY-THE-SEA
Five-Year Financial Forecast: Stress-Tested Alternative Scenario Prepared for the March 24, 2026 Special Budget Meeting | For Discussion Purposes Only Executive Summary
Staff Forecast
5-Year Cumulative Deficit
($28.8M)
Fund balances exhausted: FY 29-30
Less Optimistic Forecast
5-Year Cumulative Deficit
($60.6M)
Fund balances exhausted: FY 27-28
Additional Gap
Less Optimistic vs. Staff Forecast
($31.8M)
Nearly doubles the projected deficit
Assumption Comparison
Category Staff Assumption Realistic Assumption Rationale Property Tax Growth 2.5% annually 1.5% annually Reflects slowing real estate market and tariff-driven economic headwinds Sales Tax Growth 1.8% yr1, 2.7-2.8% after 1.0% all years Consumer spending pressure from tariffs and cost-of-living impacts on local retail
TOT Growth 1.3% annually 0.5% annually Tourism softening, reduced room inventory growth, visitor spending caution Salary COLA No COLA assumed 2.0% COLA added Unrealistic to assume zero COLA across 5 years of MOU negotiations CalPERS Return 6.8% investment return 5.0% investment return CalPERS has missed its 7% target in multiple recent years; discount rate risk
Services/Supplies
Inflation
2.8% (general CPI) 4.5% (construction CPI) Actual contractor and materials costs running well above general CPI CIP Cost Escalation Planned spend + minor adj. 8% annual cost escalation Construction inflation makes deferred projects more expensive each year Note: This alternative forecast is prepared for discussion purposes using publicly available staff forecast data with adjusted assumptions. It is not an official City financial document. Figures are rounded. Prepared March 2026.
Mayor Byrne’s slides
Five-Year Forecast Comparison
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 5-Year Total Total Revenue (Staff) $38,620,137 $39,523,532 $40,449,502 $41,398,633 $42,371,527 $202,363,331 Total Revenue
(Less Optimistic) $37,736,255 $38,188,402 $38,647,044 $39,112,287 $39,584,237 $193,268,225 Revenue Gap ($883,882) ($1,335,130) ($1,802,458) ($2,286,346) ($2,787,290) ($9,095,106) Annual Deficit (Staff) ($5,557,626) ($5,204,449) ($5,078,575) ($6,674,055) ($6,264,343) ($28,779,048) Annual Deficit
(Realistic) ($7,513,165) ($9,280,488) ($11,158,027) ($15,206,571) ($17,432,540) ($60,590,791) Additional Gap ($1,955,539) ($4,076,039) ($6,079,452) ($8,532,516) ($11,168,197) ($31,811,743) Avail. Fund Balance
(Staff) $12,128,661 $6,924,212 $1,845,637 ($4,829,068) ($11,093,411) Avail. Fund Balance
(Less Optimistic) $11,173,122 $1,892,634 ($9,265,393) ($24,471,964) ($41,904,504) Key Findings and Questions for the Council
Finding Implication and Question for the Record
The deficit is twice as large under
less optimistic assumptions
The staff forecast produces a $28.8M cumulative deficit. Realistic assumptions produce $60.6M. The additional gap alone is $29.3M. The Council should ask: has a downside scenario been formally modeled and presented? Fund balances exhausted 2 years
earlier
Staff forecast shows fund balances surviving to FY 29-30. Realistic assumptions exhaust them by FY 27-28, deepening to ($41.9M) by FY 30-31. This changes the urgency of every decision made today.
No COLA assumption is not credible The forecast assumes zero cost-of-living adjustments across five years of MOU negotiations. A 2% COLA adds over $350K in year one alone, compounding each subsequent year. What is the contingency if negotiations result in any COLA? CalPERS return assumption carries
significant risk
A 6.8% return assumption when CalPERS has repeatedly missed its own 7% target understates UAL payment growth. A 5% return scenario adds roughly $400K annually in year one, growing each year thereafter. $102M deferred maintenance sits
entirely on top of these deficits
Neither the staff forecast nor this alternative scenario addresses the $101.985M deferred maintenance backlog. Combined with the realistic operating deficit, the total financial gap facing Carmel over the next decade exceeds $160M.
New revenue is not optional Expense discipline alone cannot close a $60M operating deficit while funding $102M in deferred maintenance without gutting services. The Council should direct staff to develop a comprehensive new revenue strategy as part of the FY 26-27 budget process.
Mayor Byrne’s slides
CITY OF CARMEL-BY-THE-SEA
A sample path to $10 M in annual capex
Sources Total Assumptions
Baseline capex funding $3.86 M Current Council policy: devote 10% of revenue to capex Budget cuts (90/10 --> 85/15) $1.93 M Council shifts policy to devote 15% of revenue to capex TOT increase $1.93 M Raise TOT from 10% --> 12%
"Windfall" ambulance revenue $0.70 M ~350 out of town trips per year at $2,000/trip Subtotal $8.42 M
TBD additional revenue source $1.58 M
Total annual capex funding $10.00 M
Councilmember Buder's Slides
A more realistic 5 year projection
FY 24-25
Actual
FY 25-26
Estimated
Actual
FY 26-27
Projection
FY 27-28
Projection
FY 28-29
Projection
FY 29-30
Projection
FY 30-31
Projection
Revenues
Existing Revenue Sources 37,782,913 37,290,499 38,620,137 39,523,532 40,449,502 41,398,633 42,371,527 Incremental TOT (10%-->12%) - - 1,930,117 1,955,208 1,980,626 2,006,374 2,032,457 TBD Additional Revenue Source - - 1,650,000 1,691,250 1,733,531 1,776,870 1,821,291 Revenue Total 37,782,913 37,290,499 42,200,254 43,169,991 44,163,660 45,181,877 46,225,276 Expenditures
Baseline Expenses 28,281,371 33,042,538 34,191,259 35,165,164 36,319,565 37,278,088 38,259,780 Budget Cuts: 5% Opex Reduction - - (2,013,507) (2,060,739) (2,109,152) (2,158,775) (2,209,641) Operating Expense Total 28,281,371 33,042,538 32,177,752 33,104,425 34,210,414 35,119,313 36,050,139 Revenue Net of Operating Costs 9,501,542 4,247,961 10,022,502 10,065,566 9,953,246 10,062,564 10,175,137 Capital Expenditures 3,862,210 6,319,916 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Surplus/(Deficit) * 5,639,332 (2,071,955) 22,502 65,566 (46,754) 62,564 175,137 Additional Pension Mitigation 1,000,000 1,000,000 1,000,000 - - - - Unassigned and CIP Fund Balances 21,758,242 18,686,287 17,708,789 17,774,356 17,727,602 17,790,166 17,965,303 Rainy Day Fund 15,997,900 16,477,837 16,972,172 17,481,337 18,005,777 18,545,951 Rainy Day Fund as % of Opex 48% 50% 51% 53% 54% 56%
Councilmember Buder's Slides