Budget Study Session
FY 2026-27 Proposed Operating & Capital Budget
Item 8a
May 26, 2026
Agenda
• Proposed Operating Budget
− Guided by City Council Goals
− Citywide Budget Overview
• Major Funds: Revenue & Expenditures
− CFAC Input on Measure Q/E Budget
• Capital Projects Budget
• Fiscal Outlook & Action Items
2025-2027 City Goals
2025-2027 City Goals
2025-2027 City Goals
Feb 17
CFAC
Meeting
Midyear
Q/E
Budget
Feb 24
Midyear
Budget &
Fiscal
Update to
Council
April 21
Special
Joint
CouncilCFAC
meeting
May 8
FY 26-27
Proposed
Budget
Posted
May 26
FY 26-27
Budget
Study
Session
June 9
FY26-27
Budget
Adoption
(or June 23)
Budget Timeline
Citywide Proposed Budget Totals - ALL
• Revenue Budget: $63.0 million
• $53.4 million for Operations
• $9.6 million for Capital Projects
• Increase of 5% from FY 2025-26 Budget
• Expenditure Budget: $58.7 million
• $49.1 million for Operations
• $9.6 million for Capital Projects
• Decrease of 12% from FY 2025-26 Budget
Citywide Operating Revenue by Fund
Personnel Changes –
Permanent Staff
• No added positions
• for FY 2026-27
• Total FTE 117.5
• Four Vacancies:
• PW Director
• Sr Civil Engr
• Police Officer
• Asst to City Mgr
Personnel Changes –
Part-time/Temporary Staff
• Total FTE 26.7
• Adding 1.6 FTE
• IT Support Tech
• Clerk/Fin Intern
• Additional Hours
• Recreation
• Community Dev.
• Harbor
Major Funds
• The City has 41 active funds
• 31 funds have budgeted activity in FY 2026-27
• 5 funds represent 90% of the budget
• General Fund
• Measure Q/E Fund
• Water Operating Fund
• Sewer Operating Fund
• Harbor Operating Fund
General Fund
General Fund Revenues
General Fund Revenues
General Fund Expenditures
General Fund Expenditures
General Fund Summary
General Fund Revenues $21,469,722
General Fund Expenditures $22,383,929
Surplus (Shortfall) ($914,207)
Estimated Morro Elementary School
site purchase loan payment $664,221
Adjusted Surplus (Shortfall) ($249,986)
Measure Q/E Fund
Measure Q/E Revenue
• Revenue is estimated at $4.5 million
• $4.5 million in local sales tax revenue
• $5K in interest income
• 2.4% increase over prior year
Measure Q/E Use
• Revenue allocated to following four activities, per City Council April 13, 2021:
• Maintain public safety services
• Maintain or enhance cleanliness and safety of
public space
• Invest in infrastructure and equipment
• Ensure financial health of the City by maintaining
appropriate reserves
Measure Q/E Use
Measure Q/E Use
Measure Q/E Use
Measure Q/E Use
Measure Q/E Revenue
Measure Q/E Fund Revenues $4,505,000
Measure Q/E Fund Expenditures $5,212,434
Surplus (Shortfall) ($707,434)
General Fund & Measure
Q/E Fund Combined
General Fund & Measure Q/E
General Fund Revenues $21,469,722
General Fund Expenditures $22,383,929
Surplus (Shortfall) -$914,207
Adjust to Remove Yr 1 Debt Service -$249,986
Measure Q/E Fund Revenues $4,505,000
Measure Q/E Fund Expenditures $5,212,434
Surplus (Shortfall) -$707,434
• Options:
• Adopt budget with revenue short-fall, spending
from available fund balance in both funds, or
• Reduce/Eliminate Expenditure Budgets
• General Fund Morro Elem Loan Payment $664K
• Measure Q/E Fund Investment in Infrastructure
• $1,000,000 Annual Paving
• $ 317,000 PD Radio Comm Upgrade Project
• $ 200,000 On-Call Street Repair
General Fund and Measure Q/E
General Fund & Measure Q/E
Combined Shortfall -$1,621,641
Eliminate Capital Contributions $1,317,687
Eliminate On-Call Street Repair (Q/E) $200,000
Eliminate On-Call Services (Both) $103,954
Shortfall $0
• Shortfall and Options for current shortfall:
Water Operating Fund
Water Fund Revenues
Water Fund Expenditures
Sewer Operating Fund
Sewer Fund Revenues
Sewer Fund Expenditures
Harbor Operating Fund
Harbor Fund Revenues
Harbor Fund Expenditures
Capital Improvement
Program Budget
• Budget invests total of $9.6 million in critical infrastructure • NEW
• $5,300,000 Morro Elementary School Acquisition
• $ 770,000 Wildland Fire Engine Replacement
• $ 300,000 Update Engineering Standard Drawings
and Specifications
• $ 300,000 Bayshore Bluffs Stairs & Landing Repair
• $ 300,000 Quintana Water Line Repair (Water)
• $ 150,000 Supplemental Harbor Dredging (Harbor)
CIP One-Year Plan
CIP One-Year Plan
Capital Project Fund Amount
FY 25-26
Project
Carryforward
Total Project
Budget FY 26-
27 Bayshore Bluffs Landing Improvements Governmental CIP Fund 300,000 - 300,000 Morro Elementary School Site Governmental CIP Fund 5,300,000 - 5,300,000 Update Engineering Standard Drawings and Specs Governmental CIP Fund 300,000 - 300,000 Wildland Fire Engine Replacement Governmental CIP Fund 770,000 - 770,000 Supplemental Harbor Dredging Harbor CIP Fund 150,000 - 150,000 Quintana Water Line Replacement Water CIP Fund 300,000 - 300,000 Totals 7,120,000 7,120,000
New Projects
CIP One-Year Plan
Existing/Continuing
• $1,296,214 Annual Paving Management Program
• $ 317,000 PD Radio Comm Upgrade Project
• $ 30,000 Trash & Recycling Cans, Phase II
• $ 300,000 North-T-Pier Repairs (Harbor)
CIP One-Year Plan
• Existing/Continuing Projects
Capital Project Fund Amount
FY 25-26
Project
Carryforward
Total Project
Budget FY 26-
27 Annual Pavement Management Program Governmental CIP Fund 1,296,214 3,616,953 4,913,167 PD Radio Communications Upgrades Governmental CIP Fund 317,687 317,687 635,374 Trash Enclosure Project Phase II Governmental CIP Fund 30,000 20,000 50,000 North T-Pier Renovations Harbor CIP Fund 300,000 1,505,056 1,805,056 Totals 1,943,901 7,403,597
CIP One-Year Plan
• REPLACEMENT EQUIPMENT/VESSEL
• $ 90,000 Replace Asphalt Sealer
• $437,000 Harbor Vessel Re-Power (Harbor)
Capital Project New/Existing Fund Amount
FY 25-26
Project
Carryforward
Total Project
Budget FY 26-
27 Replace Asphalt Sealer Equip Repl Governmental CIP Fund 90,000 - 90,000 Harbor Vessel Repower Vessel Harbor CIP Fund 437,652 - 437,652 Totals 527,652 527,652
Ten-Year Forecasts
• Assumptions have been refined to align more closely with actual revenue and expenditure trends in recent years.
• Current Services Revenues/Other O&M Expenditures: 3% CPI • Sales Tax: 3% CPI
• Property Tax: 4% per SLO Co estimates
• Harbor Lease: 3%
• Personnel (Operational): 6-8% increases per MOUs for FY 2026-27, then modest COLA
• Personnel (Pension): Based on latest projections from CalPERS • Normal Costs average annual 1.05% increase
• UAL increasing up to 8% annually through FY2031-32,
decreasing thereafter
10-Year Forecast Assumptions
Staff recommends that the City Council
• Approve assignment increase for Support Services
Technician from 0.75 FTE to 1.0 FTE, funded by
eliminating part-time/temporary position
• Approve General Fund and Measure Q/E Fund Proposed
Budgets as presented, or direct staff to bring into
structural balance
Recommendations