CITY OF MORRO BAY
Notice of Special Meeting of the City Council
Agenda
Wednesday, May 28, 2025, 3:00 p.m.
Veterans Memorial Hall
209 Surf St., Morro Bay, CA
Public Participation
Public participation is offered in the following ways:
• Community members may attend the meeting in person at the Morro Bay Veterans Hall.
Alternatively, members of the public may watch the meeting and speak during general Public Comment or on a specific agenda item by logging into the Zoom webinar using the information provided below. Please use the "raise hand" feature to indicate your desire to provide public comment.
•
Zoom webinar link:
https://us02web.zoom.us/j/82722747698?pwd=aWZpTzcwTHlRTk9xaTlmWVNWRWFU QT09
•
• Password: 135692
Or Telephone Attendee: 1 (408) 638-0968 or 1 (669) 900-6833 or 1 (346) 248-7799; Webinar ID: 827 2274 7698; Password: 135692: Press *9 to raise hand for public comment.
•
• Meetings are also broadcast on cable Channel 20 and streamed on the City's website.
Community Members are encouraged to submit agenda correspondence via email to the City Council at [email protected] prior to the meeting. Agenda correspondence received by 10:00 a.m. on the meeting day will be posted on the City website. •
Pages
1. ESTABLISH QUORUM AND CALL TO ORDER
2. PUBLIC COMMENT FOR ITEMS ON THE AGENDA
3. SPECIAL MEETING AGENDA ITEM(S)
3.a BUDGET STUDY SESSION - REVIEW OF FISCAL YEAR 2025-26
DRAFT PROPOSED BUDGET
1 (City Manager/Finance Department)
Recommended Action
Receive the Proposed Fiscal Year (FY) 2025-26 Citywide Operating and Capital Budget and provide feedback prior to budget adoption, scheduled for June 24, 2025.
4. ADJOURN
/s/ Carla Wixom, Mayor
This agenda is subject to amendment up to 24 hours prior to the date and time set for the meeting. Please refer to the agenda posted at City Hall, 595 Harbor Street, Morro Bay, CA 93442 for any revisions or call the Clerk's office at (805) 772-6205 for further information.
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City meeting, please contact the City Clerk's office at (805) 772-6205 or [email protected] at least 24 hours prior to the meeting to ensure reasonable arrangements can be made to provide accessibility to the meeting.
Prepared By: ___EC____ Dept Review: _
City Manager Review: _______ City Attorney Review: _ ___ Staff Report
TO: Honorable Mayor and City Council DATE: May 18, 2025 FROM: Yvonne Kimball, City Manager
Emily Conrad, Finance Director
SUBJECT: Budget Study Session – Review of Fiscal Year 2025-26 Draft Proposed Budget
RECOMMENDED ACTION
Receive the Proposed Fiscal Year (FY) 2025-26 Citywide Operating and Capital Budget and provide feedback prior to budget adoption, scheduled for June 24, 2025.
BACKGROUND
The City of Morro Bay develops an operating and capital budget each fiscal year (FY), which runs from July 1st through June 30th. City Council must review and adopt a budget for the subsequent fiscal year prior to June 30th. Each January, the City Council adopts a budget calendar that guides the budget development process and informs the public about opportunities to provide input. The detailed calendar that City Council approved in January included the following:
February - Finance prepares budget framework, training, and instructions Feb 18 Midyear Measure E Budget Presentation to CFAC
Feb 25 Midyear Budget Presentation and Fiscal Update to Council March - Departments prepare FY 2025-26 budget submittals April - City Manager/Exec Team budget meetings; draft budget development April - Preliminary Council input on budget and/or fiscal policies if needed May 8 City Manager delivers draft proposed budget numbers to Council May 20 CFAC reviews budget and provides input, emphasis on Measure E May 27 Budget Study Session #1
May 28 Budget Study Session #2 (if needed)
June 10 Budget Adopted at Council Meeting
June 24 Backup date for Budget Adoption
Council goals inform the budget development process, ensuring that the budget includes funding for all core City services and, to the extent possible, one-time or additional City Council goals. This year’s City Council goals include Economic Vitality and Fiscal Health, Infrastructure Resiliency, and Morro Elementary School (Site). Each goal also outlines several short-term action items that are detailed in the Proposed Budget.
AGENDA NO: 3.a
MEETING DATE: May 28, 2025
These goals are in addition to the full complement of services—police, fire, water, sewer, maintenance, community development, recreation, harbor, and code enforcement—that the City provides to the community on an ongoing basis.
DISCUSSION
The May 28
th Budget Study Session will first discuss the Operating Budget and then discuss the Capital Budget. The FY 2025-26 Proposed Operating and Capital Budget is available online in webbased and printable PDF formats (links listed under “Attachments”).
Citywide Revenue Budget Summary – All Funds
The Citywide FY 2025-26 Proposed Budget projects $63.7 million of revenue, down 10% from the prior year. Net of transfers, the revenue budget is $48.3 million, an 8% decrease from the prior year.
Current Services Revenue - The City receives the largest share of its revenue as payment for its services, including water, sewer, lease, planning, permitting fees, and recreation services. Charges for service are a relatively stable revenue source over time for Morro Bay, as the majority comes from water and sewer rate revenue remitted by ratepayers. Lease revenues in the Harbor Fund are also relatively stable in terms of base lease payments, but the portion of lease payments associated with a percentage of gross sales fluctuates over time. A study to update the user fees is underway and scheduled to be presented to City Council in August 2025. The anticipated impact of the study is an increase to actual revenues for current services beyond what is presented in the proposed budget.
Primary Tax Revenues - Tax revenues, including sales and use tax, property tax, and transient occupancy tax (TOT), represent the second-largest share of City revenues. These revenues provide general services not covered by anyone receiving an individual benefit from a service, such as public safety services and infrastructure maintenance. Property taxes are the most stable of the tax revenue sources and have increased by approximately 3-4% per year in recent years. The proposed budget projects a 5% increase over prior year, based on San Luis Obispo County estimates. Sales tax and TOT are more volatile and depend on the status of the economy and the tourism level. These more volatile revenue sources represent roughly one-quarter of the City's total revenues, making the City's financial reserves described below particularly important. Sales tax revenues surged coming out of the pandemic, with approximately six years of growth occurring in two years. However, FY 2023-24 saw quarterly declines across most industries as consumers returned to normal rates of spending.
The exceptions are restaurants/hotels and building/construction, which are the only two industries to see modest increases over FY 2022-23. In calendar year 2024, five of eight major industry groups saw increases compared to calendar year 2023: restaurants and hotels, state and county pools, general consumer goods, autos and transportation, and business and industry revenue increase, while fuel and service stations, building/construction, and food and drugs saw nominal decreases.
Overall, current year-end projections indicate actual sales and use tax revenues are on track with budgeted amounts. The FY 2025-26 budget projections for sales and use tax are a 2.6% increase over FY 2024-25 amended budget. Actual revenues for TOT are also projected to come in on target for FY 2024-25. Budget projections for TOT are a 2% increase over FY 2024-25 amended budget, and moderate growth (2-3% range) is projected for both revenue sources in FY 2026-27 and beyond.
Other Revenues - The other City revenues come from various smaller sources, including intergovernmental revenues, fines, cannabis taxes, and mutual aid reimbursements. As a note, the decrease between FY 2024-25 estimates and FY 2025-26 proposed is attributed not budgeting mutual aid reimbursements at this time, but rather completing a midyear budget adjustment based on actual activity. Interfund revenue transfers are transfers between funds to pay for capital improvement projects and other one-time expenses in accordance with the City’s updated Cost Allocation Plan.
Citywide Expenditure Budget Summary – All Funds
The City’s proposed budget covers all city services and capital projects in all funds from July 1, 2025 to June 30, 2026. It includes essential investments in operations, city staff, capital improvements, and pension liabilities while also maintaining healthy financial reserves to handle future emergencies and economic challenges.
The proposed FY 2025-26 expenditure budget for all funds is $68.9 million, or $53.5 million net of transfers. The budget includes $39.7 million for operations and $13.9 million for 14 capital projects.
The budget funds the following: the operational departments that provide core services to our community, including police, fire, water, sewer, parks, roads, recreation, community development, code enforcement, and harbor; the supporting administrative services such as human resources, information technology, city clerk, and finance; and 14 capital projects to improve our shared built environment.
Citywide Expenditures by Type, Net of Transfers
This year, the Capital Budget includes four new projects:
Storm Drain Assessment
Police Radio Communications Upgrades
Floodproof Reverse Osmosis Water Treatment Facility
Water Meter Replacement.
There is one vehicle replacement request that qualifies as a capital request due to the cost exceeding $50K and the useful life exceeding 10 years:
Crane Truck for Utilities
There are new funding requests for 9 ongoing projects:
Annual Storm Drain Replacement and Major Maintenance
Annual Pavement Management Program
Sidewalk Improvements and Street Tree Replacements Project Morro Basic Wellfield Rehabilitation
Nutmeg Tank and Related Pressure Zone Improvements
Wastewater Treatment Plant Decommissioning
Boat Launch Ramp Replacement
North T-Pier Repairs
Storm Recover – Dock Repairs
More information regarding these requests are included in the project description.
The budget also funds efforts to achieve the strategic planning goals established by the City Council:
Economic Vitality and Fiscal Health, Infrastructure Resiliency, and Morro Elementary School (Site).
This budget reflects a moderate increase to core City revenues and increasing costs to provide existing service levels, a testament to the City's commitment to meeting community expectations.
Economic cooling has slowed revenue growth, while persistent inflation drives higher expenses. This dynamic of expenditure growth outpacing revenue growth is unsustainable in the mid-to-long term, and there is some economic uncertainty causing staff to recommend conservative spending in the coming fiscal year. The City is actively seeking additional revenue generation to keep pace with community expectations for a full-service City and to address robust City Council goals.
This budget contains personnel costs based on the adopted three-year agreements with bargaining groups, unrepresented management, and at-will employees. Staff recognize the challenge of tempering cost escalation in the wake of volatile revenues but ultimately believe that the benefits of retaining a knowledgeable and skilled workforce outweigh the expense. Although salary savings from vacant positions can appear to offset the cost of turnover, it places an additional burden on the remaining staff, who must absorb the additional workload of the exiting employee and train new hires, diverting their attention from their primary duties, which in turn results in decreased staff efficiency and potential burnout. Increased retention is a priority for City departments so teams can be strengthened, institutional knowledge retained, built upon, and passed on, while providing excellent service to the community.
General Fund Budget Summary
The FY 2025-26 Proposed General Fund Budget projects $20.2 million of revenue, a 3.3% decrease over the prior year. This can be partially explained by the change in how the Fire Department budgets for mutual aid revenue. By waiting until mid-year to include mutual aid revenues and expenditures, the Fire Department's budgeted revenues have decreased by over $1 million compared to the prior year. After accounting for this change, the net decrease in revenues from the previous year is approximately 13%, partly due to a $45K grant through California Office of Emergency Services received in FY 2024-25.
Budgeted expenditures, including transfers and one-time expenses, are projected to be flat, with a minor increase of 0.2% to $21.5 million in FY 2025-26. The expenditure budget net of one-time expenses is $20.1 million.
Measure Q/E Fund Budget Summary
The FY 2025-26 Proposed Measure Q/E Budget projects $4.4 million of revenue in FY 2025-26, a 2% increase over the prior year budget.
Projected expenditures exceed proposed revenue by approximately $766K. Budgeted expenditures are projected to increase by 34% to $5.2 million in FY 2025-26. The increase in expenditures over the prior year is a result of utilizing available fund balance to fund these capital projects: Annual Pavement Management Program, Sidewalks/Street Trees, Storm Drain Assessment, and Police Radio Communication Upgrades.
Citizens’ Finance Advisory Committee (CFAC) Input
Consistent with CFAC’s scope of work as outlined in the Advisory Bodies Handbook, the City Council invites CFAC input on the Measure Q/E Proposed Budget, as well as on the broader Citywide budget as time permits. CFAC met on May 20
th and provided the input outlined below.
Related to the review of future year revenue and expenditures projections for Measure Q/E, CFAC recommended that City Council:
Review the long-range revenue and expenditure projections Direct staff to complete a long-range capital needs assessment
Take an aggressive approach to selling or monetizing city-owned properties Related to the FY 2025-26 Measure Q/E Draft Proposed Budget, CFAC recommended that City Council:
Remove the $1M contribution to the Annual Pavement Management Program Focus on the downtown geographic area for the sidewalk/street repair work, including FY 2025-26 appropriation and any prior year carryforward
In the upcoming budget year, reevaluate personnel levels in Fire and Police as part of the Standards of Cover study
Related to the FY 2025-26 Citywide Draft Proposed Budget, CFAC recommended that City Council:
Look at Harbor Operating Fund revenue and direct staff to provide more realistic and granular revenue projections
Direct staff to create a Harbor Fund Reserve Policy on par with those for the Water Operating and Sewer Operating Funds
Use the Economic Development Fund balance to fund the CFAC Subcommittee on revenue generation’s recommendations, or on other ideas/research Projected Reserve Balances
By the end of FY 2025-26, the City is projected to be meeting all reserve policies as adopted by Council with projected minimum reserve balances of $15.4 million citywide, including in enterprise funds that are restricted as to use. Almost half of that total, at $7.8 million, is projected to be the General Fund Emergency Reserve Fund (fund 051) balance. Combined with the available fund balance in the General Fund (001), this meets the minimum General Fund Emergency Reserve policy of 33% of General Fund and Measure Q/E operating budgets and falls just short of the target of 50%.
Reserves are particularly critical for cities like Morro Bay, which have relatively small budgets and volatile revenue sources like sales tax and TOT, which comprise a large share of the general fund budget. The City relied on its reserves during the COVID-19 pandemic and again to respond to the winter storms of 2023. However, the City must strike a responsible balance to ensure optimal use of funds to achieve near-term objectives while preserving long-term sustainability.
Fiscal Forecasts for Major Funds
While the City has 45 active funds, just five of those funds account for most of the City’s financial activity. The Proposed Budget includes five-year forecasts for two of those five major funds and staff will complete five-year forecasts for the enterprise funds for inclusion in the Final Adopted version of the budget. Ten-year forecasts are linked in forecast pages in the digital budget book and are available for download there. As in the prior year budget, the five-year forecasts demonstrate that expenditure growth is currently outpacing revenue growth and may continue to do so during the forecast period. The economy is cooling, and the rapid post-pandemic revenue growth has ended.
Despite relatively flat revenues, inflation persists, and it is costing the City more to continue to deliver the same level of services. If expenditure growth does continue to outpace revenue growth in future years, this will leave the City with less funds available for growing capital needs and pension liabilities.
The City’s major funds, which include the General Fund, Measure Q/E Fund, and the City’s enterprise funds (Water, Sewer, and Harbor) may be unable to meet capital needs with current revenue streams.
Like so many of our neighboring cities, ongoing revenue increases will be needed to ensure the City
has both the financial resources and staffing to complete capital projects, tackle unfunded liabilities, and deliver core city services.
CONCLUSION
The City's financial situation has improved in recent years but still faces challenges. Inflation has increased operating costs and capital expenses, while revenue growth has slowed. This puts the city at risk of falling behind in areas like competitive compensation, infrastructure maintenance, and pension funding. However, the city has strong reserve policies to help navigate short-term uncertainty.
To ensure long-term financial stability, the city needs to focus on increasing revenue generation.
Guided by established Council goals, the draft budget aims to maintain the current level of services while balancing the needs of competitive compensation, infrastructure projects, and healthy reserves.
Council has the ultimate authority to make all appropriations in this budget. Upon Council review and direction at these budget study sessions, adjustments will be made by staff prior to the final budget approval which is scheduled for Tuesday June 24, 2025.
ATTACHMENTS
1) 1. FY 2025-26 Proposed Capital and Operating Budget
a) Web-Based Version: https://city-morro-bay-ca-budgetbook.cleargov.com/20037/introduction/public-officials-leadership b) Printable PDF Version: https://www.morrobayca.gov/DocumentCenter/View/20261/FY-2025- 26-Proposed-Operating-and-Capital-Budget
2) Staff Presentation
This Photo by Unknown Author is licensed under CC BY-NC-ND
BUDGET STUDY SESSION
FY 2025-26 PROPOSED OPERATING &
CAPITAL BUDGET
May 28, 2025
City Manager’s Remarks
Budget Purpose
Budget Approach
What’s New
High-Level Overview
Budget in Brief
Near-term Fiscal Outlook
Citywide Revenue &
Expenditures
Personnel Changes
Major Funds Revenue &
Expenditures
CFAC Recommendations
Capital Projects Overview
Fiscal Outlook & Action
Items
Agenda
• Budget Purpose
- a plan: revenues and expenditures
Rev= Taxes+Permits+Rents/User Fees+Investments+Grants
Exp= Salaries+Pensions+Operations+Capital Projects+Reserves - policy documents
- operation guide
- communication tool
• Budget Schedule: Development -January to June; Implementation – July to June • Balanced and Accurate
- Total Budget of $53.5 Million
- Appropriation across 30 funds,10 Departments/Divisions - Below State imposed appropriation limits
Overview
Fiscal Health Snapshot Conditions &
Priorities
Strong cash portfolio: $87,413,660 as of March
2025
Investment high yield
Robust fund balance: $13,330,540 GF
Slow and steady revenue growth
Large real estate portfolio
Secured funding sources: grants, loans
• Rising costs of conducting business
- Insurance rates
- regional services
- pension
• Economic uncertainty
- federal: tariffs
- volatile local economy
• Capital needs
- over 30 projects identified
- long term needs: One Water Plan, public
safety needs & Infrastructure
• Sustain existing accomplishments
- FEMA claims, STR, public safety efforts
• Implement new goals
FY 25-26 Proposed Budget
Cost Containment: precise expenditure estimates.
Budget line by line: closely tracking activities by GL accts, clean up baseline assumptions.
Updating Revenue Sources: evaluation and updating fee
schedules. New master fee schedule in August.
Proper Cost Allocation: updating the City’s cost allocation plan to reflect how costs are distributed across funds.
Project Prioritization: enhanced staffing, phase out some capital projects and initiatives over longer periods.
Possible Hiring Slowdown: non-essential vacancies open
longer, reevaluating them where appropriate.
Efficiencies: technology, cross –function collaboration Renegotiating Contracts
Goal alignment statements in Dept. sections
What’s new?
• Priority based
budgeting
• Back to basics
• 10-year financial
forecast
• Greater alignment
between Dept.
objectives and
adopted goals.
Best Practice Examples
Budget Awards
Budget in
Brief
TOTAL CITYWIDE
EXPENDITURE BUDGET
$53.5M (NET OF TRANSFERS)
$39.7M OPERATING
$13.8M CAPITAL
CITYWIDE RESERVES: $15.4M OPERATING BUDGET
SUMMARY
• General Fund: $20.1M
• Measure E: $3.5M
• Harbor: $2.2M
• Water: $5.1M
• Sewer: $4.2M
• Other: $4.6M
CITYWIDE NEAR
TERM
FISCAL OUTLOOK
Major revenues are projected to
increase moderately.
• Property Taxes up 5%
• Sales & Use Tax up 3%
• TOT up 2%
• Current Services down 3%
Personnel costs are projected to
increase by approximately 3.5%,
with the annual UAL cost increasing
by 13% (savings of 3% by paying
annual lump sum)
All funds are expected to meet the
reserve policies for FY 2025-26.
Minimum city reserves equate to
39% of operating.
FY 2025-26 Proposed
Citywide Revenues
• Overall, citywide revenues are projected
to decrease net 2%
• Increase in Property Taxes, Sales &
Use Tax, TOT, Franchise Fees,
Interfund Revenue Transfers
• Decrease in intergovernmental
revenues (mutual aid to be budgeted
based on actuals at midyear),
Licenses & Permits, Current
Services, Use of Money & Property
• In August 2025, User Fee Study Report
and Updated Master Fee Schedule will be
presented and, if approved, updated fee
structure will be implemented. Likely to
result in revenue exceeding budget.
FY 2025-26 Proposed
Citywide Expenses
• Overall, citywide expenditures
are projected to decrease 10%
• Net of transfers, down 8%
• Decrease in all objects
except Personnel
• Personnel costs up 3.5%
• Note: debt service was
estimated in FY24-25, FY25-
26 is actual amount due
Citywide Services Budget $25.8M Includes:
• Association Memberships $54K
• Consulting Services $1.6M
• Contractual Services $12.4M
• Digital Services $656K
• Disposal Services $453K
• Electricity $882K
• Emergency Equipment Repairs Contingency, Water and
Sewer $220K
• Engineering Services $1.7M
• Equipment Rental $52K
• Financial Audits $55K
• Fingerprinting $12K
• Insurance $3M (Earthquake & Flood, Gen Liability,
Hull/Vessel, Property Damage, Unemployment, Vehicles,
Workers’ Comp)
• Internet/Cable $42K
• Investigations $6K
• Janitorial $7K
• Laserfiche Scanning $67K
• Legal Services $295K
• Licenses & Permits $154K
• Maintenance Contracts $244K
Citywide Budget for Services $25.8M (continued)
• Mandated Fees/Inspections $2K
• Medical Examinations $20K
• Financial charges $32K (credit card readers,
custodial fees, bank fees)
• Natural Gas Service $28K
• Notices & Publications $23K
• Other Professional Services $321K
• Outside Equipment Repair $204K
• Outside Ground Repair $8K
• Outside Laboratory Testing $120K
• Outside Vehicle Repair/Maint $150K
• Pest Control $3K
• Postage $16K
• Pre-Employment Testing $7K
• Professional Development $220K
• Promotion & Advertising $7K
• Recruitment $20K
• Space Rental $65K
• State Water Contract $2M
• Telephone $133K
• Travel Expense $78K
• Utilities $1K
• Water Use $311K
• General Fund revenues are
projected to decrease 3.3%
• Property taxes up 5.6%
• Intergovernmental Revenues
up 181%
• Current Services decrease is
Fire Mutual Aid Revenue, to
be budgeted at midyear
based on actuals
• Other Revenues decreased
by developer reimbursement
• Use of $ down for est. interest
• Transfers higher last year
from ARPA and DIF for study
FY 2025-26 Proposed
Revenues –
General Fund
Sales & Use Tax
History • Measure E passed
2020
• COVID rebound
evident in 2022 &
2023
• Revenue projections
for FY 2025-26
reflect net 2.5%
increase over FY
2024-25 estimated
actuals
FY 2025-26 Proposed
Expenses –
General Fund
• Overall, General Fund
expenditures are projected to
decrease 0.2%
• Decrease in:
• Supplies: Uniforms/Safety
Equip
• Other Exp: decr in Comm
Grants from $60K to $35K
• Capital Outlay: Cons
Maint equipment in FY25
FY 2025-26 Proposed
Revenues –
Measure Q/E Fund
• Revenues are
projected to increase
slightly, budgeted a 2%
increase
Budgeted and Historical Measure Q/E Revenue
FY 2025-26 Proposed
Expenses –
Measure Q/E Fund
• Overall, the Measure Q/E exp.
budget is increasing by 34%
compared to the prior year
• Personnel up by 3%
• Supplies budget is increasing
by 980% (~$60K)
• Services budget is decreasing
by 37%
• Interfund transfers (CIP
contributions) are increasing
337%
Measure Q/E Expenditures by Department
CFAC Recommendations Regarding Measure Q/E
Reduce Project Funding
Removing the $1M contribution to
Annual Pavement Management
Program
Direct staff to focus on downtown
area for the sidewalk/street repair
work
Upon completion of Standards of
Cover study, reevaluate personnel
levels in Fire and Police
Review long-range
revenue/expenditure projections
Direct staff to complete a longrange capital needs assessment Take an aggressive approach to
selling/monetizing city-owned
properties
CFAC Recommendations Regarding Citywide Proposed
Budget
Look at Habor Operating Fund
revenue; direct staff to provide
more realistic and granular
projections
Direct staff to create a Harbor Fund
Reserve Policy on par with those of
Water and Sewer Operating Funds
Use available money in the
Economic Development Fund to
fund the CFAC Subcommittee on
Revenue Generation’s
recommendations, or other
ideas/research
FY 2025-26 Capital Projects
Total New Funding Allocation Requested
Planned Use of Sewer Reserve
Total Capital Requested FY2025-26
$13,817,953
$150,000
$13,967,953
Capital Projects – Funding by Source
General Fund (001) Funded Projects Amount
Annual Pavement Management Program
Plus $233K projected carry-forward budget
$1,000,000
Annual Storm Drain Replacement & Major Maint.
Plus $200K projected carry-forward budget
$300,000
Road Maint. & Rehab. Fund (260) Funded Projects Amount
Annual Pavement Management Program $266,556
Capital Projects – Funding by Source
Measure E (003) Funded Projects Amount
Annual Pavement Management Program $1,000,000
Sidewalk Improvements & Street Tree Replacements
Plus $150K projected carry-forward budget
$300,000
Storm Drain Assessment
Plus $250K projected carry-forward budget
$86,300
Police Radio Communication Upgrades
New Project
$317,687
Grant Funding - FEMA Amount
Storm Drain Assessment $1,008,900
Capital Projects – Funding by Source
Water Operating Fund (311) Funded Projects Amount
Floodproof Reverse Osmosis Water Treatment Facility
New Project
$287,085
Morro Basin Wellfield Rehabilitation
Plus $1.7M projected carry-forward budget
$1,734,900
Nutmeg Tank & Related Pressure Zone Improvement
Plus $2.9M projected carry-forward budget
$2,500,000
Water Meter Replacement
New Project
$500,000
Capital Projects – Funding by Source
Sewer Operating Fund (321) Funded Projects Amount
Crane Truck Replacement
$150K Sewer Reserve for Equip Replacement
$150,000
Wastewater Treatment Plant Decommissioning
Plus $5.0M projected carry-forward budget
$4,097,000
Capital Projects – Funding by Source
Harbor Operating Fund (331) Funded Projects Amount
Boat Launch Ramp Replacement
Plus $65K projected carry-forward budget
$69,525
North T-Pier Repairs
Plus $5K projected carry-forward budget
$150,000
Storm Recovery – Dock Repairs
Plus $111K projected carry-forward budget
$200,000
FY 2025-26 General Fund Ten-Year Forecast
Current-year revenues are sufficient to fund Operating Expenses for most years
Projected capital needs exceed projected available funding – spending from fund balance required in the absence of additional funding
Operating Surplus (Shortfall) Plus Capital and One-Time Transfers Out
Projected spending on capital needs would reduce reserve below minimum Projected Reserve Levels and Ending Fund Balances
Alternative Look – Max Contributions AND Meeting
Minimum 33% Reserve
FY 2025
Estimated
FY 2026
Proposed
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 FY 2036 Starting Fund Balance 450,998 2,314,220 1,548,149 1,070,203 904,559 806,057 878,443 774,587 1,075,790 1,116,104 1,253,892 1,499,561 Revenue
Tax Revenue 4,440,638 4,400,000 4,532,000 4,667,960 4,807,999 4,952,239 5,100,806 5,253,830 5,411,445 5,573,788 5,741,002 5,913,232 Other Revenue - - - - - - - - - - - -
Transfers In 1,200,000 - - - - - - - - - - -
TOTAL REVENUE 5,640,638 4,400,000 4,532,000 4,667,960 4,807,999 4,952,239 5,100,806 5,253,830 5,411,445 5,573,788 5,741,002 5,913,232 Expense
Personnel 2,611,283 2,762,855 2,802,303 2,859,762 2,915,974 2,972,141 3,029,250 3,076,669 3,126,395 3,171,922 3,211,333 3,259,265 Other Operations & Maintenance 736,133 524,229 539,956 556,155 572,840 590,025 607,726 625,957 644,736 664,078 684,000 704,520 Transfers Out (operating) - 175,000 - - - - - - - - - - Debt Service Payments - - - - - - - - - - - -
TOTAL EXPENSE 3,347,416 3,462,084 3,342,259 3,415,917 3,488,813 3,562,166 3,636,975 3,702,627 3,771,131 3,836,000 3,895,333 3,963,786 Net Surplus (Shortfall)-Operating 2,293,222 937,916 1,189,741 1,252,043 1,319,185 1,390,073 1,463,831 1,551,203 1,640,314 1,737,788 1,845,669 1,949,446 Capital 430,000 1,703,987 1,667,687 1,417,687 1,417,687 1,317,687 1,567,687 1,250,000 1,600,000 1,600,000 1,600,000 1,600,000 Police Digital Radio Communications
Upgrade - 317,687 317,687 317,687 317,687 317,687 317,687 - - - - - Morro Bay Bridge Inspection & 80,000 - - - - - - - - - - - Storm Drain Assessment - 86,300 - - - - - - - - - -
Local Road Safety Plan (LRSP)
Implementation and Safety - - 100,000 100,000 100,000 - - - - - - - Sidewalk Improvements and Street Tree
Replacements Project - 300,000 250,000 - - - - - - - - - Annual Pavement Management Program 350,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,250,000 1,250,000 1,600,000 1,600,000 1,600,000 1,600,000 Net Surplus (Shortfall) including Capital 1,863,222 (766,071) (477,946) (165,644) (98,502) 72,386 (103,856) 301,203 40,314 137,788 245,669 349,446 ENDING FUND BALANCE 2,314,220 1,548,149 1,070,203 904,559 806,057 878,443 774,587 1,075,790 1,116,104 1,253,892 1,499,561 1,849,007 MEASURE Q/E FUND (003)
Forecast
Harbor Operating
Fund
5.4%
Revenue
Growth
3.4%
Expenditure
Decrease,
(Net of
Transfers)
Water Operating Fund
0% Revenue
Growth
1.4%
Expenditure
Growth
(Net of
Transfers)
Sewer Operating Fund
0% Revenue
Growth
30.1%
Expenditure
Decrease
(Net of
Transfers)
Water and Sewer Funds:
Loan Repayments Begin
FY 2025-26
• Debt service started for
WRF project lowinterest loans
• Environmental
Protection Agency
(EPA), Water
Infrastructure
Finance and
Innovation Act
(WIFIA): 0.83%
Interest
Debt Service Summary
Water Fund $936,053 WIFIA
Sewer Fund
$645,651 WIFIA
Total Debt Service $1,581,704
CITYWIDE LONG
TERM
FISCAL OUTLOOK
Revenues
The City faces revenue shortfalls in the
coming fiscal years as cost increases
continue to outpace revenue growth.
Operating costs are 100% funded; capital
costs need funding.
Risk-Based Reserve
Strategy
Administrative Services plans to complete a
risk-based reserve analysis and may bring
recommendations to Council regarding the
City’s reserve thresholds. Capital Projects
Funding sources for future capital projects
remain limited, absent new revenue
streams.
Action Items for
Consideration Provide direction to staff re:
CFAC recommendations
Provide direction to staff re:
capital project funding levels
Provide direction to staff re:
other Council priorities