CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
5/12/2025
1 SUBJECT:
Fiscal Year 2025-26 Base Budget and Introduction of the 2025-30 Capital Improvement Program.
RECOMMENDED ACTION:
Accept the report and provide feedback and direction on the proposed Fiscal Year 2025-26 Base Budget, and introduction of the FY 2025-30 Capital Improvement Program.
STAFF CONTACT:
Marisol Gómez, Director of Finance and Administrative Services 650-501-0257
[email protected]
Yulia Carter, Assistant City Manager
650-738-7301
[email protected]
Kevin Woodhouse, City Manager
650-738-7409
[email protected]
BACKGROUND:
Each year, the City of Pacifica adopts an annual operating budget that reflects the planned activities for the next fiscal year based on the best information available at the time of adoption.
Then, at mid-year, staff revisits the projections and reports to the Council any changes needed to reflect new information and keep the City on track. The FY 2024-25 Mid-Year adjustments were presented to the Council on March 24, 2025.
The Budget Study Session 1 was held on April 14, 2025, and staff presented the Narrative Budget report outlining the Budget planning process, methodology, timeline, and preliminary budget strategies. As part of the presentation, staff introduced the preliminary Long-Term Financial Forecast (LTFF) which highlighted the City’s ongoing structural deficit ranging from $2.1 million in the upcoming year to as high as $5.5 million in future years. If this deficit is left unaddressed, the forecast indicates that the City’s reserves could fall below the Government Finance Officers Association (GFOA)-recommended two months of operating expenditures reserves as early as FY2026-27.
The Council reviewed and supported incorporating the following budget strategies into the budget development process:
1. Modify the allocation of Excess Educational Revenue Augmentation Funding (ERAF) to ensure they remain in the General Fund to help address the projected budget deficit.
The Council may provide further direction on whether a portion of these revenues Pacifica City Council 2
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should continue to be allocated to the Disaster Accounting and Housing Action funds.
2. Address Financial Uncertainties Related to Vehicle License Fee In-Lieu Backfill Payments from the State by assigning a portion of the General Fund reserves as assigned fund balance designation to offset the potential loss.
3. Prioritize Revenue-Generating Development to Strengthen the City's Long-Term Financial Base and address the ongoing structural deficit.
DISCUSSION:
This report presents the FY 2025-26 Base Budget reflecting the current level of services and operations and the Introduction of recommended non-discretionary FY 2025-26 Capital Improvement Plan projects included with the Base Budget.
Specific budget options and recommendations will be presented as part of the Recommended Budget at the next budget meeting on June 9th, preceding the final Budget adoption hearing on June 23rd.
A summary of the FY 2025-26 budget schedule is presented below:
FY 2025-26 BASE BUDGET
The goal of the budget process is to develop a sustainable City Budget through a comprehensive analysis of the City's revenue and service level expenditures to identify necessary service enhancements and/or reduction options, which, when combined, will maintain a balanced budget and ensure fiscal responsibility and alignment with the Council’s strategic priorities.
Staff formulated various revenue and expenditure assumptions to construct the base budget for FY 2025-26. These assumptions were based on known projections and economic conditions and reflect the budget adjustments made by the Council during the mid-year budget review.
The resulting structural surplus or deficit at the base budget level is critical, as it informs discussions about departmental or other program funding beyond the baseline to accomplish identified priorities for the upcoming year.
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1. FY 2025-26 GENERAL FUND BASE BUDGET
The General Fund is the City's primary operating fund and is used to account for most day-today activities. It receives unrestricted revenues, and the City's general administrative services, public safety, and community development-related activities such as planning, building, and engineering are budgeted in the General Fund. Revenue sources include but are not limited to property tax, sales tax, transient occupancy tax (TOT), business license tax, and current fees for services. The FY 2025-26 General Fund Base Revenue budget is developed based on the current economic conditions and current projections of the City’s revenue base.
The City's FY 2025-26 General Fund Base Expenditure budget reflects the current level of services and operations. The base budget is not an exact duplication of the prior year's adopted Budget because of actions that the Council may have taken that modified the Budget over the course of the year and, most notably, because of the FY 2025-26 budget assumptions used to develop the base budget further described below.
This report presents the FY 2025-26 General Fund Base Revenue Budget of $49.8 million and Base Expense Budget of $53.0 million, resulting in a $3.2 million deficit between operating revenues and expenditures. This reflects an increase from a $2.1 million deficit in the longterm financial forecast presented in Budget Study Session 1 primarily due to more detailed analysis and updated projections related to the worker’s compensation premium and the PERS Unfunded Accrued Liability (UAL).
The summaries of the General Fund Base Budget Revenues and Expenditures are provided in Attachments 1 and 2. In coordination with other city departments, Finance developed the FY 2025-26 Base Budget assumptions to include all items previously approved by the City Council and factor in inflationary conditions.
Below are some key assumptions applied to the FY 2025-26 Base Budget.
FY 2025-26 Base Budget General Fund Revenues Assumptions Revenue estimates have been modified based on the most current information available from department feedback, external sources, and further analysis.
The following revenues are projected to reflect significant changes over FY 2025-26:
• Property Tax is the City's largest revenue source. Historically, Pacifica's property tax base has shown slower growth compared to some other Bay Area cities. For the FY 2025-26 Budget, property taxes comprise approximately 35% of City General Fund revenues. Both secured and unsecured property taxes are levied based on the assessed real property valuation (the basis for property tax levy) as of January 1, 2025.
The FY 2025-26 property tax revenues are conservatively projected at $17.5 million or $0.5 million (3%) above the FY 2024-25 Mid-Year Revised Budget of $16.9 million based on the information provided by the County and HdL, the City's property tax consultant.
• Charges for Services are the second largest revenue category, comprising about 15% of the total General Fund revenue budget. They include building, planning, other permits, recreation revenues, rentals, fines, and reimbursements. This revenue category reflects a modest increase of $0.1 million or 1% due to standard annual cost adjustments.
• Vehicle License Fee (VLF) in Lieu is the third largest revenue category that accounts for 11% of the General Fund revenues. The challenges around the VLF in Lieu revenues have been discussed at length during the mid-year budget review. There has Pacifica City Council 4
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been insufficient ERAF to fund the VLF in Lieu allocation for the past six years, resulting in a shortfall of revenue in the funding source the state traditionally used to cover its in-lieu obligations to cities and counties, and this gap is projected to continue going forward. In the past, the State has backfilled the VLF shortfall, but the State's payment lagged two years behind the shortfall year. Combined with the County estimates of the VLF base of $5.9 million, the City has consistently budgeted for the current year’s projected shortfall (-$2.8 million in FY2025-26) and the FY 2023-24 backfill of $2.3 million that is due to the City in the upcoming year, which brings FY2025-26 net VLF to $5.4 million, which is an overall increase of $789,902 or 17% from the prior year net VLF of $4.6 million. As indicated with budget strategy #2, staff will assign a portion of the General Fund reserves as assigned fund balance designation to offset the potential loss of the backfill if the State does not follow through on its obligations in the FY2025-26.
• Sales Tax is the City's fourth-largest revenue category. At the midyear budget review, staff reported that the sales tax revenues were down, resulting in a nearly $0.2 million reduction. Based on the most recent discussions with HdL, the City's sales tax advisor, and their sales tax projections, the local sales activities forecast is expected to slightly increase, projecting only a 3% or $0.1 million increase over the already reduced FY2024-25 Budget, leaving the sales tax revenues of $3.3 million essentially at the same level as the Revised FY 2024-25 Budget.
• Measure Y is a ½ cent Transaction & Use Tax that was passed by the voters in the City of Pacifica in November 2022 and went into effect April 1, 2023. Consistent with the sales tax category above, HdL projects this revenue to slightly increase over the reduced mid-year level and back to $2.5 million in FY 2025-26. • Other Taxes project normal inflationary increases consistent with historical averages, economic trends, and the prior year's returns. This includes the following:
• Utility Users Tax (UUT) is projected to increase by 3% or $70,000 to $2.87 million;
• Transient Occupancy Tax (TOT) revenue is projected to decline as a result of new Short-Term Rental (STR) Ordinance changes, with staff estimating a $1.3 million reduction over the next three years. Staff previously reported an immediate projected TOT revenue loss of $580k for FY2025-26 assuming the new ordinance would take effect in the non-coastal zone during the October, 2025 permit renewal cycle. Staff revised this assumption to reflect additional Council-approved restrictions, further reducing FY 2025-26 TOT revenues by $620k or 21%, which adds to the structural deficit previously reported at the April 12th Budget Study Session 1;
• Cannabis Operations Tax is estimated to stay flat at this time. However, staff will be closely monitoring this assumption due to reported decreases in cannabis sales tax revenues by HdL and potential changes to cannabis operators; • Business License Tax is projecting a 2% increase to a total of $0.58 million based on continuing compliance efforts provided by HdL; • Franchise Tax is estimated to increase by 4% or $52,550 to $1.35 million. • Intergovernmental revenues comprise state and federal government reimbursements for the City’s childcare program, estimated at $3.2 million. However, this category is always reviewed at the midyear budget review following the completion of the audit and reimbursement filings.
• Operating Transfers In include transfers from the Gas Tax and Street Construction Fund to cover a portion of the Public Works street maintenance staff budgeted in the General Fund. While the position allocation remains consistent with previous years, the increased transfer amount (up by $56,800 from the prior year) represents higher personnel costs due to increased pension and health benefits cost.
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FY 2025-26 Base Budget General Fund Expenditures Assumptions Total General Fund Base Budget expenditures are projected at $53.0 million at the Base Budget level, $5.3 million, or 11% more than the FY 2024-25 Revised Budget.
Operating expenses are set to remain consistent with the prior year's actuals and mid-year revised budget adjustments. This includes removing one-time budget allocations from last year and accounting for expected inflationary increases.
Attachment 2 demonstrates the General Fund expenditure estimates for FY 2025-26 at the Base Budget level. Below are the key base budget expenditure assumptions:
• Salary and Benefits projections include funding for 200.75 full-time equivalents (FTE) positions citywide and include all current MOU provisions. Funding for overtime and part-time positions remains consistent with the prior year's allocation. • Vacant positions are budgeted at the top step with the "employee family" cafeteria plan assumption for health benefits. Projections also incorporate all current Memorandum of Understanding (MOU) provisions, including merit increases for eligible staff members on their performance anniversary dates.
• FY 2025-26 PERS retirement rates are budgeted as provided by CalPERS for classic miscellaneous and safety members and Public Employees' Pension Reform Act (PEPRA) rates for miscellaneous and safety employees without prior municipal experience or those who have had a break in public service. • PERS Unfunded Accrued Liability (UAL) payment is budgeted at $6.3 million for Safety and Miscellaneous employees, which is a $0.6 million or 11% increase from FY2024-
25. The Base Budget continues to align with the Pension Funding Policy adopted last year, which commits the City to making an additional annual contribution to the Section 115 Trust administered by Public Agency Retirement Services (PARS). The goal is to accumulate reserves equal to 1.5% of the accrued pension liability by FY 2044-45. In compliance with this policy, the FY 2025-26 contribution to the trust has increased from $167,500 to $214,700 to support long-term pension obligations. The Base Budget also includes a continuing contribution to PARS in the amount of $283,750, which represents the funding of the Actuarily Determined Contribution (ADC) per the most recent Actuarial Valuation to fund Other Post Employment Benefits (OPEB) unfunded liability, consistent with the Council funding strategy approved in 2022. Attachment 6 provides additional insight into the City’s funding policy. • Most Professional Services contractual obligations were increased by 2% over the FY 2024-25 Revised Budget to account for regular inflationary increases unless further cost increases were noted and factored into the Budget by operating departments. The category also shows a reduction of $0.4 million or (-4.5)%, primarily due to the reductions in the previously approved one-time requests that are not part of the base budget assumptions.
• Similarly, most of the Material, Supplies, and Maintenance category assumes a modest 1% inflationary increase from the FY 2024-25 Mid-Year Revised Budget but removing one-time requests that are not part of base budget assumptions and keeping training and memberships category flat, leaving the Base Budget allocation for this category at $4.3 million or a (-10.5)% decrease over mid-year.
• Risk Management Premium Increase. The FY 2025-26 general liability and worker’s compensation premiums both increased substantially. The 6% or $135k increase in Pacifica City Council 6
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General liability is due to a combination of a challenging insurance market, particularly in property coverage, and the City’s past claims history. After a few favorable years when the City experienced a reduction in the workers’ compensation premium, the upcoming year showed a significant increase of nearly $0.4 million or 34% primarily driven by a spike in new claims involving extended injury-related leaves that remain open. These open claims have adversely affected the City’s claims history and renewal rates. Staff will continue to closely monitor active claims to bring them to resolution and will continue implementation of the Injury and Illness Prevention Program (IIPP) citywide to help prevent this from becoming a recurring trend. • Maintained the “status quo” for annual funding of non-profit organizations as directed by Council last year for PRC ($100,000) Pacific Beach Coalition ($10,000) and removed the one-time allocations for Fog Fest ($25,000), and Pride ($5,000). • The Operating Transfers Out Category accounts for a transfer to the Debt Service Fund to fund Pension Obligation Bonds and other debt service obligations, as well as transfers to the Internal Service Funds for Risk Management programs, Motor Pool operations, and Fire Equipment replacements, totaling $3.9 million. This category reflected a $1.9 million increase over the prior year’s one-time reduction in debt service transfers. Last year, the Debt Fund was able to cover the debt obligations from the fund balance; this year shows a return to the normal debt service level supported by a transfer from the General Fund.
• The Capital Transfers Out Category includes an allocation of $50,000 for the Annex Lighting project, which is further described in the Capital Improvement Program section of this report. This is the only CIP project that the General Fund contributed to this year.
As previously demonstrated in the financial forecast, the General Fund does not have the means to fund an ongoing CIP Program.
Projected Fund Balance Structure - General Fund
After factoring in the Base Budget assumptions and prior to including the reallocation of Excess ERAF as the General Fund revenues, the FY 2025-26 Base budget would have a projected deficit of approximately $3.2 million. After factoring in the Excess ERAF revenues the Base Budget will project a modest projected surplus of $0.55 million, barely enough to fund the FY 2025-26 workplan priority items. As mentioned above, this also represents the policy change that reallocates all Excess ERAF revenues to the General Fund, leaving no dedicated revenue source for the Disaster Accounting or Housing Action funds.
While Excess ERAF has remained stable in recent years, it is traditionally categorized as one- Pacifica City Council 7
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time funding and should not be considered a reliable long-term revenue source. The City has seen firsthand how the State’s shifting fiscal policies, such as un-funding the VLF backfill obligations, can impact local revenues. Excess ERAF remains vulnerable to similar policy changes, particularly as the State faces its own ongoing budget challenges. As noted in the Government Finance Officers Association (GFOA) best practices, “there is a major distinction between a balanced budget that is balanced on the uses of one-time resources and a structurally balanced budget.” Without addressing the City’s ongoing structural deficit, the annual shortfalls may eventually exceed the capacity of internal resource reallocations or reserves, requiring the Council to consider reductions in services and/or staffing levels.
FY 2025-26 therefore represents a tipping point, a year in which Pacifica may largely maintain existing service levels and avoid deeper cuts, but only with potentially unstable revenue source like Excess ERAF. In this context, the City’s focus on economic development initiatives that prioritize revenue-generating development (Budget Strategy #3) to achieve additional ongoing revenue becomes even more critical. Expanding the City’s ongoing revenue base is essential to achieving long-term fiscal sustainability and advancing Strategic Plan priorities without compromising core services.
Again, the numbers presented in this report only reflect the current Base Budget level of services and include funding for non-discretionary capital projects. It does not consider all budget strategies and other recommendations by the City Manager that will be brought forward at future budget meetings for a more in-depth discussion of the proposed budget and the Council's direction on how to reach a balanced and sustainable budget at the desirable level of services.
CAPITAL IMPROVEMENT PROGRAM
As reported previously, the City does not have a designated funding source to fund the robust Capital Improvement Program at the desired level. Due to the City's financial limitations and limited staff capacity to manage major capital projects, the FY 2025-26 CIP Program recommendations are only limited to projects with available grant funding sources, legally mandated projects, or projects that pose an immediate threat to public health and safety. These projects are considered non-discretionary.
Below is a preliminary list of new non-discretionary projects proposed for FY 2025-26 funding included with the Base Budget:
General Capital Projects:
1. Annual Pavement Striping & Marking Refresh Project $75k (Fund 213) - This annual project will refresh centerlines, bicycle lanes, edge lines, crosswalks, stop bars, and more striping on City roads.
2. FY 2025-26 Pavement Resurfacing Project $1.8m (Funds 209 and 210) - Project will rehabilitate the pavement along roads designated in the 5-year paving plan. It will also include pavement grinding for base repair as well as installation of thermoplastic traffic striping, markings and pavement markers. The project was previously approved on March 24th, 2025. The allocation of funds between various street funds have changed as reflected in Attachment 5.
3. FY 2025-26 Concrete and ADA Improvement Project $436k (Fund 211) - Improvement of ADA curb ramps in the vicinity of the yearly resurfacing project and associated sidewalk sections.
4. Esplanade Full Trash Capture Device $1.6m (Fund 216) - Installation of Full Trash Capture device to improve stormwater quality and meet NPDES permit requirements. The project captures runoff from a 31.4-acre tributary area, including Caltrans roadways.
Caltrans will be contributing $1.44m and the City is responsible for design, construction, Pacifica City Council 8
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and long-term maintenance.
5. Annex Lighting $50k (General Fund 101) - Install solar street lights on poles at the old Wastewater Treatment Plant Yard to provide lighting for field vehicles at night.
6. Sharp Park Road Slope Erosion Repair $125k (Fund 238) - This project will repair slope erosion due to storm damage at Sharp Park Road.
Wastewater Projects (funded by Enterprise Sewer Utility Fund 518):
7. CCWRP Parking Lot Restoration $100k - Repaving the CCWRP parking lot.
8. CCWRP Photovoltaic System Improvement Project $150k - Replacing aging solar panels, and identify areas for additional panel coverage.
9. Crespi to Anza Sewer Replacement Project $500k - Replacing the sewer main from the Equalization Basin to the Pacifica State Beach Lot A.
10. Pump Station & CCWRP Condition Assessment Update $450k - Updating condition assessments and providing a roadmap for future capital improvement projects.
11. Anza and Linda Mar Storm Water Pump Station SCADA Connection and Improvements $100k - Improve communication and connections to the City’s stormwater pump stations.
12. Calera Creek Water Recycling Plant Piping Improvements Project $625k - Replacing sludge pipelines, utility water and plumbing at the CCWRP.
13. Easement R&R Projects $600k - Replacing key sewer mains along easements.
14. Sequencing Batch Reactor (SBR) Improvements Feasibility Study $100k - Identifying improvements to improve performance and reduce energy and maintenance cost of the Calera Creek Water Recycling Plant’s SBRs.
15. Calera Creek Water Recycling Plant Permit Update $30k - Updating the Calera Creek Water Recycling Plant's Notice of Pollutant Discharge Elimination System (NPDES) permit.
The following continuing non-discretionary Projects that are currently underway and will require additional funding in FY 2025-26:
General Capital Projects: None at this time
Wastewater Projects (funded by Enterprise Sewer Utility Fund 518):
16. San Pedro Creek and Pacifica State Beach Total Maximum Daily Load (TMDL), Monitoring Plan and Best Management Plan $105k - The San Francisco Regional Water Quality Control Board requires through the Total Maximum Daily Load (TMDL), the development and implementation of a bacteria water quality monitoring and best management plan for San Pedro Creek and Pacifica State Beach bacteria.
17. Collection System Projects $500k - Various projects to repair and/or replace the aging sewer mainlines around the City. Location will be determined and evaluated annually.
18. Digesters - ATAD Modification Phase 3 $100k - This Project will upgrade the existing nozzle configuration in each of the 4 ATAD tanks.
19. CCWRP Pump Replacement $50k - On-going purchase to replace aging pumps, valves and motors for the Calera Creek Water Recycling Plant.
20. Calera Creek and Wetlands Maintenance $100k - On-going Maintenance and Monitoring requirements for the restored Calera Creek wetlands and frog ponds.
21. CCWRP Blower Replacement $50k - On-going purchase to replace aging blowers and motors for the Calera Creek Water Recycling Plant.
22. CCWRP R&R Project $100k - The CCWRP is more than 20 years old and a Condition Assessment has identified equipment and processes in need of replacement, rehabilitation or enhancement.
23. Lateral Grant Assistance $200k - Incentives to residents to replace privately-owned sewer laterals.
24. Ultraviolet Disinfection System Upgrade $4.57m - CCWRP is now more than 20 years Pacifica City Council 9
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old and the ultraviolet System is nearing the end of its useful lives. This project will perform Feasibility Study of different new technology on Ultra-Violet disinfection system to replace or enhance the existing system at CCWRP. The Project also includes design, UV equipment purchase, construction which will also include temporary UV.
25. CCWRP Process Optimization Project $50k - Continuous treatment improvements at Calera Creek Water Recycling Plant.
26. CCWRP Electrical Condition Assessment and Improvements $50k - The Plant electrical system has been updated as needed but is aging with some existing replacement parts no longer available. The purpose of the project is to conduct a condition assessment of electrical systems including backup generation to identify improvements for future CIP Projects. Several critical projects were identified, and City will proceed with.
27. CCWRP Headworks Feasibility and Improvements $4.75m - This Project will evaluate adding bar screening facilities at the Plant, rehabilitating or repairing grit removal equipment, and providing a backup influent pipe or channel.
28. Forcemain Condition Assessment - $75k - Assessing the force main connecting the Sharp Park, Rockaway and Linda Mar Pump Stations with the Calera Creek Water Recycling Plant.
29. Linda Mar Pump Station R&R Project $250k - Completing engine pump, electrical and controls improvements to the Linda Mar Pump Station.
30. Rockaway Pump Station R&R Project $375k - The existing generator is nearing the end of its useful life and will be replaced with a portable temporary emergency generator.
31. Sharp Park Pump Station R&R Project $179k - Improvements to the Sharp Park Pump Station which include but not limited to odor control, sanitary sewer mainline relocation and wet well improvements.
32. Collection System Rehabilitation & Replacement Projects: Vallemar and Rockaway Beach Avenue $4.215m - Work includes the replacement of approximately 30,000 LF sewer main and appurtenant work in the Vallemar neighborhood.
33. CCWRP Admin Building Elevator Assessment $120k - Repair the Administration Building Elevator and make improvements to meet current industry standards.
34. Linda Mar Peralta Project $100k - Improvements along Linda Mar and Peralta Blvds, including pipe bursting approximately 1000' and open trench replacement (approximately 500 feet) of sanitary sewers.
Staff have identified probable funding sources for these projects as listed in Attachment 4.
These include Federal and State Grants, County contributions, Gas Tax, and various other tax measures. Other projects are funded from available fund balances of various capital and special revenue funds, including Measure A, Measure W, Roy Davies, and Disaster Accounting Funds. All capital transfers and appropriations for projects referenced above and in Attachment 4 have already been included in the Base Budget. However, once the Council provides additional direction regarding this list or other CIP projects, staff will incorporate the final FY 2025-26 CIP Budget recommendations in the complete five-year CIP program.
Other Previously Approved active CIP projects that are non-discretionary ongoing projects not requesting funding, rollover projects that were not started last year due to staffing constraints, unfunded discretionary projects, and projects awaiting FEMA review are included in Attachment
4. Additionally, Attachment 5 provides information on the currently unfunded projects and estimates the funding needed to address the City’s infrastructure needs totaling over $172 million within the next five years.
The Pacifica Discussion initiative completed last year, served as an important platform for community engagement and dialogue on various municipal matters, including the City’s diverse infrastructure needs. Given the ongoing funding constraints within the Capital Improvement Pacifica City Council 10 May 12, 2025
Program (CIP), along with limited financial and staff capacity to manage major capital projects the City is forced to take a strategic approach to prioritizing the City’s capital needs to those with secured grant funding, legal mandates, or immediate public health and safety concerns.
OTHER FUNDS - BASE BUDGET
The Base Budget revenue and expenditure for all other funds have also been updated and are summarized in Attachment 3. This includes all the Special Revenue, Debt Service, Enterprise, and Internal Service Funds. The full budget discussion will include "All Funds," which we typically divide into the General Fund (the majority in terms of dollars and completely discretionary) and Other Funds (largely designated for specific purposes) as well as the Capital Budget (significant projects expected to begin or continue in 2025-26). The Base Budget figures include the CIP budget allocations.
Staff used the same basic assumptions for all other funds to factor in a 2% cost of living increase for the contract services category and 1% for material, supplies, and maintenance.
Enterprise Funds consist of Sewer/Wastewater and Beach Parking funds. Enterprise funds are used for services that are financed and operated as a private business enterprise. The FY 2025-26 total enterprise funds base expense budget is $37.9 million, which is 35% of the City's overall Budget. Sewer funds are used to account for sewage collection, treatment, major replacements, and maintenance and protection improvements to the sewer system. Sewer charges of $22.3 million are based on a 3.5% rate increase in FY 2025-26. The sewer operating expenditures include the same inflationary base budget assumptions. The Salaries and Benefits costs of approximately $5.8 million are based on 30 FTE allocated to the Sewer Fund and include all current MOU provisions. The Beach Parking Fund is used to account for parking services to residents and visitors. The Beach Parking revenues have declined in recent years and no longer fully cover the staffing and operating costs allocated to the fund. Staff will be conducting additional analysis of this fund as part of the upcoming cost allocation study to ensure the fund remains balanced and financially sustainable in future years. The combined Enterprise Funds revenues are projected at $22.8 million.
Special Revenue and Capital Funds are used to account for specific revenue sources or financial resources for which expenditures are restricted by law or administrative action for specific purposes. This Category includes Gas Tax and Streets Funds, General Capital, Drainage, Housing Action, Housing Successor, Housing in-lieu, Parking in-Lieu, Park in-Lieu, PB&R Special Revenue and Roy Davies Trust, Disaster Accounting, and other funds. The FY 2025-26 expenditures of $7.0 million for this Category represent around 6.5% of the City's total Budget.
Internal Service Funds serve the City’s needs and are used to account for Citywide services on a cost-reimbursement basis. These funds accommodate the motor pool, employee selfinsured dental benefits, and risk management needs of the City and are supported by the funds that receive benefits. The FY 2025-26 budget for this Category is $6.5 million, which is 6% of the City's Budget.
Debt Service Fund is used to account for long-term debt obligations. The FY 2025-26 budget for the debt service category is based on the updated debt service schedule and includes a new debt service payment of $125k for the new Fire Truck lease purchase approved last year.
The total budget for this Category is $2.6 million, representing 2.4% of the City's Budget.
NEXT STEPS
Pacifica City Council 11 May 12, 2025
At the next budget meeting on June 9, 2025, staff will be presenting the proposed FY 2025-26 Operating budget. All departments are currently working on their budget recommendations for service-level changes that will be submitted to the City Manager in order of department priorities. Over the next few weeks, the City Manager will meet with each department to review and discuss their requests and ultimately formulate a plan for the balanced FY 2025-26 budget.
Given the City’s limited financial and organizational capacity, FY 2025-26 marks a transitional year for Pacifica. While the City may only maintain current service levels, this is made possible largely by uncertain revenue sources like Excess ERAF. As such, any new service requests must be weighed against reductions elsewhere to stay within the City's organizational capacity and preserve progress on Strategic Plan priorities.
The City Manager’s final FY 2025-26 Budget recommendations will be based on many factors, including the Council's strategic vision and service-level impact on the overall City operations and services provided to the community.
FISCAL IMPACT:
There is no action associated with this item; this is an informational presentation only with Council comments being sought to help guide the preparation of the Proposed Budget for future Council consideration.
ORIGINATED BY:
Finance Department
ATTACHMENT LIST:
Attachment 1 – FY 2025-26 General Fund Baseline Budget Revenue Summary (PDF) Attachment 2 – FY 2025-26 General Fund Baseline Budget Expenditures Summary (PDF) Attachment 3 – FY 2025-26 Fund Balance Summary (PDF)
Attachment 4 – FY 2025-26 Recommended Non-Discretionary CIP Budget (PDF) Attachment 5 - List of Unfunded CIP Projects (PDF)
Attachment 6 - Unfunded Pension and OPEB Liability Funding Strategy (PDF)