City of Pacifica
Long Term Financial Forecast Table and AssumptionsGeneral Fund revised September 2025 S1.3
REVENUE
2025-2026
Adopted Budget
2026-2027
Projected
2027-2028
Projected
2028-2029
Projected
2029-2030
Projected
2030-2031
Projected
2031-2032
Projected
2032-2033
Projected
2033-2034
Projected
2034-2035
Projected
Property Tax 17,466,700 17,990,700 $ 18,530,400 $ 19,086,300 $ 19,658,900 $ 20,248,700 $ 20,856,200 $ 21,481,900 $ 22,126,400 $ 22,790,200 $ Vehicle License Fees 5,410,902 4,974,173 4,623,976 5,953,841 6,856,277 7,876,674 7,781,402 8,772,534 10,301,412 9,761,571 Sales Tax 3,241,230 3,306,100 3,372,200 3,456,500 3,542,900 3,631,500 3,722,300 3,815,400 3,910,800 4,008,600 Measure Y 2,505,100 2,555,200 2,606,300 2,671,500 2,738,300 2,105,100 - - - - Transient Occupancy Tax 2,358,000 2,217,100 1,580,700 1,628,100 1,676,900 1,727,200 1,779,000 1,832,400 1,887,400 1,944,000 Utility Users Tax 2,870,000 2,927,400 2,985,900 3,045,600 3,106,500 3,168,600 3,232,000 3,296,600 3,362,500 3,429,800 Other Tax - Franchise Tax 1,352,550 1,386,400 1,421,100 1,456,600 1,493,000 1,530,300 1,568,600 1,607,800 1,648,000 1,689,200 Other Tax - Business License Tax 582,000 596,100 608,400 623,600 639,200 655,200 671,600 688,400 705,600 723,200 Other Tax - Cannabis Tax 800,000 816,000 832,300 853,100 874,400 896,300 918,700 941,700 965,200 989,300 Excess ERAF 3,860,000 3,917,900 3,976,700 4,036,400 4,096,900 4,158,400 4,220,800 4,284,100 4,348,400 4,413,600 Department/Program Revenues 11,260,824 11,621,100 11,890,200 12,306,400 12,737,100 13,182,900 13,644,200 14,121,700 14,615,900 15,127,500 Transfers In 1,478,800 1,593,800 1,625,700 1,658,200 1,691,400 1,725,200 1,759,700 1,794,900 1,830,800 1,867,400 Total Annual Revenue 53,186,106 $ 53,901,973 $ 54,053,876 $ 56,776,141 $ 59,111,777 $ 60,906,074 $ 60,154,502 $ 62,637,434 $ 65,702,412 $ 66,744,371 $ Revenue Year-to-Year 8.65% 2.85% 0.28% 5.04% 4.11% 3.04% -1.23% 4.13% 4.89% 1.59%
EXPENDITURES
2025-2026
Adopted Budget
2026-2027
Projected
2027-2028
Projected
2028-2029
Projected
2029-2030
Projected
2030-2031
Projected
2031-2032
Projected
2032-2033
Projected
2033-2034
Projected
2034-2035
Projected
Salaries & Benefits 36,454,015 38,463,323 41,768,715 42,864,923 44,150,871 45,475,397 46,839,659 48,244,848 49,692,194 51,182,960 Contract Services 8,719,867 8,894,300 9,072,200 9,253,600 9,438,700 9,627,500 9,820,100 10,016,500 10,216,800 10,421,100 Material/Supplies/Maintenance 4,501,536 4,569,100 4,637,600 4,707,200 4,777,800 4,849,500 4,922,200 4,996,000 5,070,900 5,147,000 Transfers Out - Debt Service 1,419,798 2,990,583 3,067,962 3,088,206 2,895,486 1,797,046 1,781,108 1,570,438 1,520,294 1,520,412 Transfers Out - Allocations 2,048,781 2,079,500 2,110,700 2,142,400 2,174,500 2,207,100 2,240,200 2,273,800 2,307,900 2,342,500Total annual operating Expenditures 53,143,997 $ 56,996,806 $ 60,657,177 $ 62,056,329 $ 63,437,356 $ 63,956,543 $ 65,603,266 $ 67,101,586 $ 68,808,088 $ 70,613,971 $ Transfers Out - Capital 50,000 - - - - - - - - -
Total General Fund Expenditures 53,193,997 $ 56,996,806 $ 60,657,177 $ 62,056,329 $ 63,437,356 $ 63,956,543 $ 65,603,266 $ 67,101,586 $ 68,808,088 $ 70,613,971 $ Exp Year-to-Year 10.06% 8.63% 6.42% 2.31% 2.23% 0.82% 2.57% 2.28% 2.54% 2.62% GF Structural Surplus/Deficit 42,109 $ (3,094,833) $ (6,603,301) $ (5,280,188) $ (4,325,579) $ (3,050,469) $ (5,448,764) $ (4,464,151) $ (3,105,676) $ (3,869,600) $ Surplus/Def as % of GF Revenues 0 -5.74% -12.22% -9.30% -7.32% -5.01% -9.06% -7.13% -4.73% -5.80% Beginning Fund Balance 19,309,076 19,251,960 16,157,128 9,553,827 4,273,638 (51,941) (3,102,410) (8,551,174) (13,015,326) (16,121,001) Total Revenues 53,186,106 53,901,973 54,053,876 56,776,141 59,111,777 60,906,074 60,154,502 62,637,434 65,702,412 66,744,371 Total Expenditures 53,193,997 56,996,806 60,657,177 62,056,329 63,437,356 63,956,543 65,603,266 67,101,586 68,808,088 70,613,971 Projected Ending Fund Balance 19,301,185 $ 16,157,128 $ 9,553,827 $ 4,273,638 $ (51,941) $ (3,102,410) $ (8,551,174) $ (13,015,326) $ (16,121,001) $ (19,990,602) $ Non-Spendable 8,287 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Restricted 542,791 710,291 877,791 1,045,291 1,212,791 1,380,291 1,547,791 1,715,291 1,882,791 2,050,291 Assigned Reserves Policy Level of 10% of Expenditures 5,314,400 5,699,681 6,065,718 6,205,633 6,343,736 6,395,654 6,560,327 6,710,159 6,880,809 7,061,397 VLF Restriction Budget Strategy #2 2,300,000 - - - - - - - - - Facility Maintenance & Replacement 205,000 205,000 205,000 205,000 205,000 205,000 205,000 205,000 205,000 205,000 Compensated Absences 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 Child Care Reserve 488,591 488,591 488,591 488,591 488,591 488,591 488,591 488,591 488,591 488,591 Legal Reserves 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Assigned Reserves 8,607,991 6,693,272 7,059,309 7,199,224 7,337,327 7,389,245 7,553,918 7,703,750 7,874,400 8,054,988 Non-Spendable, Restricted & Assigned 7,561,964 7,428,563 7,962,100 8,269,515 8,575,118 8,794,536 9,126,709 9,444,041 9,782,191 10,130,279 Unassigned Fund Balance 11,689,997 $ 8,728,565 $ 1,591,727 $ (3,995,876) $ (8,627,058) $ (11,896,946) $ (17,677,883) $ (22,459,366) $ (25,903,192) $ (30,120,881) $ Unassigned balance as % of Op. Exp. 21.98% 15.31% 2.62% -6.44% -13.60% -18.60% -26.95% -33.47% -37.65% -42.66% GFOA Recommended Reserves 8,857,333 9,499,468 10,109,530 10,342,722 10,572,893 10,659,424 10,933,878 11,183,598 11,468,015 11,768,995 Above/(Below) GFOA Guidelines 2,832,664 (770,903) (8,517,803) (14,338,598) (19,199,951) (22,556,370) (28,611,760) (33,642,964) (37,371,207) (41,889,876) $WWDFKPHQW$
LONG-TERM FINANCIAL FORECAST (LTFF)
ASSUMPTIONS
The long-term financial model features a set of assumptions for revenues and expenditures based on conservative projections and information available at the time of publication. The forecast starts with the FY 2025-26 adopted budget, plus nine (9) forecasted years, for a ten (10) year financial forecast. This forecast is intended to be used to guide strategic budgeting and financial stability efforts, in accordance with Strategic Goal #1 – Enhance organizational and fiscal stability.
The following projections have been updated since the preliminary projections were presented at Budget Study Session 1, on April 14, 2025, during the FY 2025-26 budget cycle. Most notable updates for the current year include changes to ERAF, vehicle-in-lieu (VLF) backfill, transfer allocations, and salaries and benefits structure with the completion of labor negotiations, which will be further discussed in their respective sections below.
Revenue Assumptions
1. Property Tax is the City's biggest revenue category. Based on the current collection trends, consistent with the anticipated increases in the assessed market value and information provided by the county and HdL, the City’s property tax consultant, these revenues assume a 3% increase for the upcoming year and annually thereafter.
2. Vehicle License Fees (VLF) are tied to property-assessed value growth and a corresponding growth in tax revenue. Utilizing the estimates from San Mateo County, VLF assumes a 6.6% increase year over year, however the State has been unable to fulfill its payments in the year due, causing a shortfall each year. The shortfall becomes an estimate to be received two-years later, which is referenced as a backfill. The FY 2025-26 Adopted Budget includes the projected shortfall in the current year of $2.8 million, which will be due in FY 2028. The preliminary assumptions included the backfill to be received in the current year owed from FY 2024, in the amount of $2.3 million. After the Budget Study Session 1, Council approved Budget Strategy #2, that placed $2.3 million as assigned reserves in case the State doesn’t fulfill its obligation. This revenue is in constant jeopardy, depending on the State’s budget situation, and the City is continuing to monitor this issue and coordinate with the County of San Mateo on the matter.
3. Sales Tax assumes a modest increase of 2% for three years based on the most recent projections by HdL (the City’s Sales Tax consultant), followed by a 2.5% increase for the next seven years to consider the cyclical nature of these revenues driven by the local economy.
4. Measure Y is the new ½ % voter-approved Transaction and Use Tax that went into effect on April 1, 2023. The same projection method is applied to Measure Y as the other regular 1% of Bradley Burns Local Sales and Use Tax mentioned above, assuming 2% increase for FY 2026 through FY 2028 and 2.5% for the future years. Measure Y transactions and use tax measure is scheduled to sunset in 2031and the forecast reflects that revenue reduction.
5. Transient Occupancy Tax assumes a 2.5% increase for FY 2026 through FY 2028 and a normal inflation change of 3% thereafter for the subsequent seven years. Unfortunately, due to the Council’s recent ordinance changes related to short-term rental (STR) regulations, the forecast incorporates a reduction of almost $1.5 million over the next three years.
6. Utility Users' Taxes (UUT) also assume a uniform 2.0% increase for all ten years, consistent with current collections trends.
7. Other Taxes include business license tax, cannabis operations tax, and franchise tax. A modest
2.5% increase is projected for these tax categories in future years. However, this category was also affected by the Council’s recent ordinance changes related to STR regulations and a slight decrease in business license activity was incorporated.
8. For FY 2025-26 the General Fund received 100% of the Excess Educational Revenue Augmentation Fund (ERAF) revenues projected. This is a one-time change from the Council Policy of allocating only $145K of ERAF to the General Fund and splitting the rest of the ERAF funding 50% each between the Disaster Accounting Fund (Fund 238) and the Housing In lieu Fund (Fund 224). For FY 2027 through FY 2035, the financial forecast keeps the current allocation to the General Fund in place. Council direction could change from year to year on this allocation methodology.
9. Departmental or Program Revenues include building, planning, and other permits, recreation revenues, grants, and rentals. In FY 2026 through FY 2028, this category includes a 2% increase, and a 3.5% increase thereafter based on the anticipated continuation of the current service activity level, plus inflationary adjustments to the Wastewater Fund administrative service fee and an anticipated increase in investment income. However, this category was also affected by the Council’s recent ordinance changes related to STR regulations and a slight decrease in STR permits was incorporated.
10. Operating Transfers in reflect a modest increase of 2% in the out years to account for the cost increases that drive this transfer relationship. This category mainly includes the cost recovery reimbursements from Fund 216 (NPDES), Fund 210 (Gas Tax) and Fund 209 (Measure A).
Expenditures Assumptions
1. Salaries and Benefits (S&B) The FY 2025-26 adopted budget includes a full-time equivalent count of 201.75 Citywide. FY 2026 through FY 2028 include some projections for changes to recently amended labor contracts, as well as a projected 5% in salary savings. During the budget process Council made a one-time policy decision to not allocate $214k to the pension trust for FY 2025-26. The remaining years include a 4.0% increase annually thereafter to account for increases related to cost of medical, dental, and vision benefits, PERS rates, and unfunded pension liability payments, merit, and other labor-related increases, with a 5% salary savings factor, and include contributions to both the pension and OPEB trusts.
2. Contractual Services category assumes an annual increase of 2.0% for most City contracts to account for inflation and regular CPI increases in existing contracts.
3. Materials, Supplies, and Maintenance category assumes a modest 1.5% increase each year to account for inflation.
4. Operating Transfers Out Debt Service category is projected to be in accordance with the City’s updated debt service schedule for each projected year. These are the major debt service obligations included in financing: 2016 COP, 2019 POB, 2021 Civic Center, and the new 2023 Fire Equipment Lease. A reduction of the debt payment starting with FY 2031 is related to the projected payoff for the Pension Obligation Bond.
5. Operating Transfers Out Allocations category accounts for transfers to Internal Service Funds, including the Risk Management funds for General Liability and Worker's Compensation insurance premiums and Motor Pool funds to cover motor pool operating expenditures. Also included in this category is an ongoing allocation to the motor pool vehicle replacement fund in order build up fund balance for future fleet replacement. The forecast shows a modest 1.5% increase each year to account for rising insurance premiums.
6. Capital Transfers Out category contains the approved allocation of $50k for the FY 2025-26 budget year. The forecast does not incorporate ongoing contribution to capital in future years.
Council Policy / Other Factors
The LTFF does not include recessionary trends. Property Tax is the only General Fund revenue source that is somewhat recession-proof, unless a recession last over several years. Property Tax values are slow to adjust and typically lag in times of recession by at least 24 months. But nearly all the other GF revenue sources would be impacted by reductions in times of a recession whether mild or not.
The unfunded pension liability is also impacted by economic dips, such as during the COVID-19 downturn, and a smaller downturn from earlier this year due to political changes. These factors, since they are currently unknown are not factored into the LTFF model.
After the State of California adopted its budget, the VLF backfill owed to Pacifica was reduced by 1/3, a reduction of $775k. This has caused a budget deficit to be addressed through the mid-year process.
Budget Strategy #2, which was previously approved by Council, allows us to fill this gap in the current year with the General Fund reserves, preserving planned service levels for the current fiscal year. This revenue is in constant jeopardy, depending on the State’s budget situation, and the County of San Mateo filed a writ of mandate for the wrongfully withheld 1/3 of funds.
The City’s current Sales Tax rate is 9.875%, which is the maximum rate. Pacifica would need to seek special legislative authority to exceed the 2% cap in order to implement an additional (or larger) district tax.
Council Policy direction may change from budget cycle to budget cycle. For instance, the ERAF allocation methodology may be subject to frequent changes in the coming years depending on the budget balancing needs. Other items subject to Council Policy could be the contribution to the OPEB and Pension Trusts, salary savings usage, allocations to motor pool, and capital contributions.