City Council Meeting
November 10, 2025
Pacifica’s Financial
Sustainability Challenges
& Revenue Generation
Opportunities
Kevin Woodhouse, City ManagerYulia Carter, Assistant City ManagerMarisol Gómez, Director of FASD Brian Moura, Consultant, RGS
1 COUNCIL
STUDY
SESSION
OBJECTIVES
¾Establish a Shared Understanding of
Pacifica’s Fiscal Sustainability Challenges
¾Identify Structural Gaps and Explore
Potential Revenue Generation Strategies
¾Provide direction to the City Manager
regarding potential voter-approved revenue measures for further feasibility assessment 2 AGENDA
INTRODUCTION1. Budget Challenges2. Lessons from Thriving San Mateo County Cities3. Pathways Toward Fiscal Sustainability A. Revenue Strategies Currently UnderwayB. Economic Opportunity SitesC. Housing DevelopmentD. Potential Revenue Measures – General FundE. Potential Revenue Measures – Capital Needs
4. Council Direction & Next Steps
3 Current Revenues Do NOT keep
pace with the cost of maintaining existing service levels.
Lower Staffing and Compensation Remain on average 10-20% below market, limiting service capacityOver $370M in unfunded projects, plus coastal climate accelerates deterioration, and each year of delay increases costs by 8-10% WHY WE ARE HERE:
LAYERS OF FISCAL CHALLENGES
Pacifica’s Fiscal Challenges are NOT One-Dimensional -They are Complex and Structural Complex Challenges Require Comprehensive, Strategic & Multi-Layered Solutions $15.4 M Operating Needs
4 SECTION 1:
BUDGET CHALLENGES:
UNDERSTANDING THE STRUCTURAL GAP
5 GENERAL FUND
DEFICIT
• 2025-26 Adopted Budget:
¾ Projected $42,109 positive balance¾ Only 2/3 of the VLF In-lieu backfill was funded, resulting in a $0.7M. revenue reduction
¾ The gap to be funded by General Fund
Reserves per Budget Strategy #2
• 10-Yr Long-Term Financial Forecast:
¾ Structural deficit peaks at $6.6M in Year 4¾ Baseline level of services, no enhancements • Upcoming Budget Challenges
¾ Balancing Future Budgets Require Both Cost
Control & New Revenue
Long-Term Structural Gap
6 FY 2026-27 PROJECTED DEFICIT
$3.1 MIL NEEDS ACTION
What $3.1 million in reductions could look like by Department and Staffing Department Est Reduction
Police -786,199
General Gov -506,743Fire -495,138PB&R -422,806Non-Dept -300,483 Public Works (Gen Fund) -299,256
Comm Dev -284,208
Total Est Reductions -$3,094,833
7 UNASSIGNED
GENERAL FUND
BALANCE
• GFOA Recommendation
• Two months of General Fund
expenditures
• Equivalent to $8.8 million or 16.7%
of the current budget
• Future Projections
• Unaddressed structural budget
deficit would deplete unassigned reserves by FY29
• LTFF detailed assumptions in
Attachment A
8 GENERAL FUND REVENUES DEFINE ORGANIZATIONAL CAPACITY:
STRONG REVENUES BUILD STRONG TEAMS
Pacifica improved from 17% (2024)
ĺ 13.3% (2025) below peers
¾ Pacifica: 201 FTEs (2025) — still §)7(VVKRUW of peer cities¾ &RVWWRUHDFKSDULW\ §0DQQXDOO\ (conservative estimate)¾ 6WDIILQJUHPDLQVEHORZ6DQ0DWHR&RXQW\SHHUV
9 41% below Menlo Park9 32.5% below Burlingame9 23.5% below San Bruno9 5.5% below Foster City ¾ &RPSHQVDWLRQ*DS
Citywide pay ranges on average 10-20% below
PDUNHW
§$4-0QHHGHGWRUHDFKPDUNHWSDULW\(a moderate
estimate, given regional wage increases and fluid labor market trends) Pacifica continues to operate as a full-service City with fewer staff and lower revenues than its peers.
Investing in people AND revenue growth is critical to Pacifica’s long-term sustainability
9 UNFUNDED CAPITAL IMPROVEMENT PROJECTS
10 SECTION 2:
THE ECONOMICS OF THRIVING CITIES
LESSONS FROM NEIGHBORING CITIES
11 LEARNING FROM THRIVING CITIES:
STRONG REVENUES=BETTER QUALITY OF LIFE
F I S C A L G R OW T H OV E R 1 5 Y E A R S ( 2 0 1 0 - 2 0 2 5 ) •.
Long-term fiscal health through:• Balanced Housing, • Commercial Growth, and• Strategic Ec. Development Investment.
MENLO PARK
SAN CARLOS
BURLINGAME
Diversified economies create stronger, faster-growing revenue bases 12 HOUSING AND ECONOMIC GROWTH DRIVE FISCAL SUSTAINABILITY ¾ Burlingame, Menlo Park, and San Carlos grew populations, housing, and jobs, reinforcing economic vitality.¾ Every new home = development impact fees, property tax, local spending, and workforce stability.¾ Commercial and Mixed-use Developments = Diversified Revenues:
• Burlingame: Airport corridor expansion – hospitality, biotech, higher TOT from business travel. • Menlo Park: Bayfront redevelopment anchored by tech and life-science – higher assessed property value, added jobs, and daytime business activity).
• San Carlos: Innovation Zone - modern life-science and manufacturing hub, driving up property values and new business activity (jobs, bus. travel, etc).
• Pacifica: no new commercial growth, only 2% new housing units added over 15 years, population decline = limited fiscal capacity.
FY 2010–11 to FY 2024–25
CITY HOUSING
UNITS ADDED
POPULATION CHANGE
Menlo Park +1,190 (+9%) +3.8%
Burlingame +976 (+7%) +4.9%
San Carlos +390 (+3%) +4.4%
Sustained Growth = Stronger Revenues, Better Services, Higher Quality of Life Pacifica +334 (+2%) -4.4% 13 REVENUES GROWTH TRANSLATES INTO
QUALITY OF LIFE
Peer Cities Reinvest in Their Communities.Burlingame• Built $52.3M LEED-Gold Community Center (2022).• Advancing Downtown Town Square & Waterfront Redevelopment.• Expanded cultural, recreation, and senior programs.Menlo Park• Opened Belle Haven Community Campus (2024) – library, gym, youth & senior centers.
• Redeveloping SRI Campus and Bayfront area into mixed-use innovation hubs.
• 9 community facilities supporting year-round programs.San Carlos• Innovation District: $80M in community benefits, +$11.6M impact fees.• Investments in parks, youth, and citywide events (Hometown Days, Music in the Park).
• Vibrant Downtown with planned $125M investment (promenade, fountain, public restrooms, trees, outdoor dining)
Cities with diversified revenues have modern facilities, vibrant public spaces, and enhanced quality of life.
BURLINGAME
MENLO PARK
SAN CARLOS
14 SERVICE & INFRASTRUCTURE COMPARISONS
15 SERVICE & INFRASTRUCTURE COMPARISONS
16 SERVICE & INFRASTRUCTURE COMPARISONS
17 SERVICE & INFRASTRUCTURE COMPARISONS
18 SERVICE & INFRASTRUCTURE COMPARISONS
19 SERVICE & INFRASTRUCTURE COMPARISONS
20 SERVICE & INFRASTRUCTURE COMPARISONS
21 SERVICE & INFRASTRUCTURE COMPARISONS
22 SERVICE & INFRASTRUCTURE COMPARISONS
23 SERVICE & INFRASTRUCTURE COMPARISONS
24 SECTION 3:
PATHWAYS TOWARD FISCAL SUSTAINABILITY
MOVING BEYOND SHORT-TERM FIXES TOWARD STRUCTURAL BALANCE 25 INTEGRATED FISCAL
SUSTAINABILITY FRAMEWORK:
BUILDING BLOCKS OF LONG-TERM FISCAL HEALTH
26 REVENUE STRATEGIES
CURRENTLY
UNDERWAY
,QLWLDWLYHV$OUHDG\LQ0RWLRQ
¾ 10-<HDU)LQDQFLDO)RUHFDVW guiding long-term revenue/expenditure trends.
¾ *UDQWSXUVXLWV (partner with Townsend + departments) for capital and operating programs.
¾ 7D[DQG)HH&RPSOLDQFH$XGLWV — business license, cannabis, UUT, and STR.
¾ &RVW5HFRYHU\
Updating Cost Allocation Plan, User Fee Schedule,
and Development Impact Fees to reflect true service costs ¾ 6PDOO%XVLQHVV6XSSRUW — local programs and initiatives to attract, retain, and grow businesses, while ensuring compliance. ¾ (FRQRPLF'HYHORSPHQW:RUNSODQto advance Strategic Plan priorities by revitalizing commercial areas, expanding housing and mixed-use opportunities, and positioning the City as a destination and a place to live, work, and invest. 27 DEVELOPMENT
IMPACT FEES
• Purpose of the Fee Study Project
• Ensure fees reflect the cost of
delivering services
• Comprehensive review of
development-related and citywide fees
• Importance of the Study
• Some fees have not been reviewed
in decades
• Adjust fees to reflect true costs of
infrastructure expansion
• Project also includes CAP and
Comprehensive Fee review
Project Progress
28 RECENT
DEVELOPMENT
PROJECT – 801
FASSLER
• Fiscal Impact
• Hard to estimate fiscal impact• FY 2025–26 budget does not assume new DIF revenue
• Revised fees could generate
meaningful on
• 801 Fassler Avenue (Pacifica Heights)
• 24-unit townhome project• $540,326 in one-time fees
• Including $333,313 in
Development Impact Fees
29 OPPORTUNITY
SITES
• (FRQRPLF2SSRUWXQLWLHV6WXG\
• Prepared by Kosmont Companies• Presented to City Council in March 2023• Outlined 30 potential economic development strategies • 3ULRULW\2SSRUWXQLW\6LWHV
• 8 priority sites = ~ $3.4M in Annual Revenues Potential (fiscal analysis updated to reflect TOT & sales tax increases)
• %HDFK%OYG3URSHUW\
• 3.5-acre coastal site• Top redevelopment opportunity for potential hotel & restaurant 30 HOUSING AS AN ECONOMIC DRIVER
HOUSING =ECONOMIC VITALITY
¾ Each new home generates construction jobs, development impact fees, new property tax, and local spending. ¾ 3DFLILFD
UHVLGHQWLDOSDUFHOVFRPPHUFLDOĺQDUURZVDOHVWD[EDVH ¾ Typical restaurant = $5–10 K sales tax/year; small retailers = $4–.ĺOLPLWHGLPSDFW6WUDWHJLFKRXVLQJH[SDQGV population, workforce, and consumer base.
¾ Pacifica’s RHNA target (1,892 new housing units) presents both the challenge and the opportunity to generate meaningful economic impact while fulfilling the City’s goal to be a more inclusive and sustainable community x 1,044 moderate-income and market-rate units, and 848 lower-income units x Total = 18.93% City share of AV = $4.00\HDU + DIF and broader econ. activity (construction jobs, local spending) + Number of housing units
ĺ market analysis whether or not open a new business.
+ New residents diversify economy and support economic vitality of neighborhoods, can increase market demands and improve retail, community amenities, etc.
31 DOES HOUSING STRAIN CITY FINANCES?
THE FACTS TELL A DIFFERENT STORY
¾New homes “pay their way” – assessed at full market value, generating higher property tax, and development impact fee revenue
¾Most City costs are fixed, not per unit, so additional residents rarely increase expenses proportionately
¾Strategic infill projects use existing infrastructure efficiency, lowering maintenance costs¾Community Facilities Districts (CFDs) can help fund infrastructure, maintenance, and certain public safety services in new developments, helping cities recover costs and enable projects. ¾Housing drives economic circulation – residents shop and dine locally, expanding sales tax rev.¾The real fiscal risk is stagnation, not growth. Limited housing leads to slower AV growth and aging infrastructure (as demonstrated above in comparison to other cities) 32 REVENUE MEASURES TO CONSIDER
Business License Tax (BLT)• The BLT is charged to anyone doing business in the city and funds city services.• Current rates range from $0.35 to $0.77 per $1,000 of gross receipts, generating $582,000 in revenue for the current fiscal year.
• A 2022 study by HdL Companies proposed three models for increasing BLT revenue
Utility User Tax (UUT)• The UUT is imposed on utility services like electricity, gas, and water, collected by utility companies and remitted to the city.• Rates range from 1% to 11% across the state, with over 150 cities imposing a UUT.
• Pacifica's current rate is 6.5% on
electricity and gas, estimated to generate $2.87 million in 2025-26. • A 2022 study by HdL Companies provided options for adjusting the UUT Parcel Tax• The parcel tax is a non-ad valorem
tax on property parcels, requiring a 2/3 vote at a general election. • Revenue is used for specific
purposes, with the highest potential yield among General Fund options. • Rate structure options include a
single tax rate per parcel, tax rate per building square foot, lot size, or units, and tax rate by land use Bus License Tax UUT Parcel Tax
Estimated Annual
Revenue Generation
$88,750 to
$490,070
$2.0 million to
$3.1million
Approx. $6.0 million
33 OTHER REVENUE MEASURES
General Obligation Bonds (G.O.
Bonds)
Funded by property tax based on
property value
Used for infrastructure and capital
projects
Requires 2/3 voter approval
Measure Q in San Bruno
$102 million bond for infrastructure
repairs
Financed by $30 per $100,000 of
assessed property value
Passed with 73% Yes vote
Other Financing Alternatives
Certificates of Participation (COPs)
Direct Bank Loans
Parcel Tax Secured Bonds
Example
Type of
Financing
G.O. Bonds COPs Direct Bank
Loans
Parcel Tax
Secured Bonds
Voter Approval 2/3 vote None None 2/3 voteUsage Infrastructure Infrastructure Infrastructure Infrastructure and Operating
34 WHY WE ARE HERE:
LAYERS OF FISCAL CHALLENGES
Pacifica’s Fiscal Challenges are NOT One-Dimensional -They are Complex and Structural Complex Challenges Require Solutions that are:9 Comprehensive 9 Strategic, and 9 Multi-Layered
$15.4 M Operating Needs $14.9M Revenue Options
35 COUNCIL DIRECTION
Staff Recommendations
1. Explore options to generate revenues to cover the operating deficit (approx. $6M) to maintain current level of service in Pacifica for voter consideration in November 2026
2. Council direction on which revenue options to explore - Parcel Tax, Business License Tax, Utility Users Tax.
3. Return to Council in the future to review Infrastructure needs and explore a bond + revenue measure to begin to address these needs at an election in 2028 or later. 36 ALTERNATIVES
Other Actions the Council Could Consider:
1. Explore revenue options to generate an additional $3.8 Million per year to add 25 full time equivalent (FTE) staff to the City staff to bring Pacifica to the market average.
2. Explore revenue options to generate an additional $4 to $5 Million per year to bring the salary and benefit compensation of Pacifica employees to market level.
3. Explore long-term strategies to increase City revenues, which could include Opportunity Sites, Housing and Economic Development options in the report.
4. Other options the Council may discuss and propose.
37 NEXT STEPS
1. Further work on assessing the feasibility of placing one or more revenue measures (Business License Tax, Utility Users Tax, Parcel Tax, or General Obligation Bond) on the November 2026 ballot.
2. Retaining consultant expertise to assist the City with educational community outreach and public engagement and polling on the potential revenue measure.
3. Returning to the City Council with more detailed fiscal estimates and voter feasibility of the revenue option(s) that the City Council has selected.
4. Returning to the City Council for a decision on moving ahead with a revenue measure - by April 2026.
5. If the Council moves ahead with a revenue measure, developing the proposed ordinance(s) and ballot measures on a timeline to meet County ballot requirements - by June 2026. 38