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DATE: June 15, 2026
TO: Mayor and Members of the City Council
President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
FROM: Stefan Chatwin, City/District Manager
Nate Cruz, Finance Director
DEPARTMENT: City Manager, Finance
SUBJECT: ADOPTION OF FY 2026-27 AND FY 2027-28 CITY/DISTRICT BUDGET
RECOMMENDATION
It is recommended that the City Council/EMID Board of Directors (City Council) approve the attached resolutions approving the FY 2026-27 and FY 2027-28 City/EMID Budget.
EXECUTIVE SUMMARY
On May 19, 2026 the Council reviewed the preliminary budget at a special meeting and then held a public hearing on the preliminary budget on June 1. Staff now recommends City Council’s approval of the FY 2026-27 and FY 2027-28 City/EMID Budget.
There have been a number of revenue and expenditure changes to the preliminary budget that result in lower, but still positive, net operating revenues in each year of the five-year forecast (prior to the transfer to capital). See the table in the next section for details on each change by year.
BACKGROUND/ANALYSIS
On May 19, City staff presented the FY 2026-27 and FY 2027-28 Preliminary Budget and 5-year financial plan for all Funds, including the General Fund (Funds 001 to 003).
The preliminary budget and five-year plan showed an operating surplus in each of the five years, before the transfer to capital.
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A number of changes have been made to the Preliminary Budget in the proposed Final Budget, which is available at https://www.fostercity.org/finance/page/annual-budget.
The General Fund changes are detailed in the table below which reconciles the net revenues from the Preliminary Budget to the Final Budget:
Revenue Changes
Property Tax forecast was increased to reflect actual collections and updates through the 3rd Quarter of FY 2025-26.
Sales Tax was decreased to reflect reduced retail activity in the business-to- business sector.
Business License Tax income was reduced to reflect the loss of a maximum rate taxpayer and reductions in the gross receipts reports by several larger payers. Interest revenue was increased to be less conservative, and now assume rates revert to 3% over the five-year forecast instead of 2%.
Expenditure Changes
Personnel costs were increased due to the costs of the recently adopted POA MOU and the 3.8% cost of living increase effective July 1 (higher than previously forecasted at 3.0%); costs decreased because of the reallocation of some planning staff costs to Fund 128 and the elimination of a new Recreation Supervisor position that may be considered at a future date. Supplies and Services decreased in FY 2026-27 due to savings from district elections being less costly than general city-wide elections and reductions in Public Works contracting resources. The cost of fireworks was restored in both budget years. In FY 2027-28, costs were increased due to SMC Fire updating their cost projections.
Changes to Net Revenue from Preliminary to Final Budget 26-27 27-28 28-29 29-30 30-31
Revenue Changes
Property Tax Increases 632,603 680,608 880,758 937,328 996,318 Sales Tax Decreases (365,000) (419,000) (467,000) (511,000) (551,000) Business License Tax Increases (189,000) (194,670) (200,510) (206,525) (212,721) Interest Increases - 167,004 297,267 397,119 471,882
Subtotal 78,603 233,942 510,515 616,922 704,479
Expense Changes
Personnel Increases 731,196 1,000,689 1,169,465 1,205,497 1,091,331 Supplies and Services Increases (71,883) 93,785 8,813 7,501 (2,850) Other Changes (1,765) (603) (2,088) 1,023 1,799
Subtotal 657,548 1,093,871 1,176,190 1,214,021 1,090,280 Net Change from Preliminary Budget (578,945) (859,929) (665,675) (597,099) (385,801) 1 1
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Other Funds
Water Enterprise costs were increased to correctly reflect the cost of wholesale water from the San Francisco PUC.
The Internal Service Fund for Self-Insurance was corrected for a data entry error, reducing costs in FY 2027-28.
The FY 2026-27 and FY 2027-28 Final City/EMID Budget for all funds totaling $171,320,806 and $155,503,725, respectively, includes direction received from the City Council at various budget study sessions and a public hearing. The City Council also provided direction to use General Fund reserves to address the FY 2026-27 and FY 2027-28 General Fund deficit after the transfer to capital.
Having reviewed the Preliminary Budget and having held a public hearing on the Preliminary Budget, it is recommended that the City Council/EMID Board adopt the attached resolutions approving the proposed FY 2026-27 and FY 2027-28 City/EMID Budget. The financial and personnel summary pages of the FY 2026-27 and FY 2027- 28 Budget are attached to this report (Attachment 3).
CEQA
Not Applicable
FISCAL IMPACT
Adoption of the annual budget authorizes expenditures identified in the budget for FY 2026-27 and FY 2027-28.
CITY COUNCIL VISION, MISSION, and VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1 - City Resolution
Attachment 2 - EMID Resolution
Attachment 3 - Exhibit to City/EMID Resolutions: Financial and Personnel Summaries