CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
3/9/2026
1 SUBJECT:
Mid-year budget review and adoption of a resolution to amend the Fiscal Year 2025-26 budget.
RECOMMENDED ACTION:
Adopt a resolution authorizing the mid-year FY 2025-26 Operating and Capital Budget amendments.
STAFF CONTACT:
Yulia Carter, Assistant City Manager
650-738-7301
[email protected]
Marisol Gómez, Director of Finance and Administrative Services 650-501-0257
[email protected]
BACKGROUND:
The Finance staff has completed a Mid-year Budget review and is proposing adjustments to the FY 2025-26 Adopted Budget.
The purpose of the mid-year budget review is to analyze the year-to-date revenues and expenditures to review assumptions made before the budget cycle and make necessary adjustments to reflect changes in the City's financial conditions. The mid-year budget review is also a segue to the next fiscal year's budget development process, as the mid-year analysis is used to develop the base budget assumptions for the new year.
On June 23, 2025, the City Council adopted a balanced FY 2025-26 Budget that reflected the Council's Strategic Plan and priorities for the upcoming fiscal year. This FY 2025-26 Mid-year Budget report will focus on the following key objectives:
1. Updating City Council on the status of revenues and expenditures within the FY 2025-26 General Fund and requesting mid-year amendments to the General Fund as follows:
revenue increase of $393,898 and appropriation expenditure increase of $289,576.
Recognizing all previously approved by the Council revenues of $68,896 (Attachment and 3) for a total revised revenue budget of $462,794 (Table 1). Recognizing all previously approved by the Council expenditure increases of $1,695,673 (Attachment 1 and 4) for a total revised expenditure budget of $1,985,249 (Table 2).
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2. Updating City Council on the status of revenues and expenditures within the FY 2025-26 Non-General Fund and requesting mid-year amendments to (Other) Funds of a revenue increase of $833,671 and expenditures amendments of $2,002,838. Recognizing all previously approved by Council adjustments to other funds in Attachments 1, 3 and 4.
3. Updating Council on the projected fund balance for all City Funds through June 30, 2026 (Attachment 5).
4. Updating Council on the progress of the FY 2025-26 service enhancements approved at budget adoption (Attachment 6).
The FY 2025-26 Revised General Fund budget reflects $53.6 million in revenue, $55.2 million in total expenditures, including $50,000 in capital project expenditures. The difference between the budgeted revenues and expenditures creates an initial gap of $(1,504,247). However, this gap is addressed through previously approved Council budget strategies, as described in Section 3 of this report. After applying these strategies, the mid-year revised budget is presented as balanced (Table 3). Based on the revised projections, the General Fund balance is estimated to be $21,081,400 as of June 30, 2026. It is important to note, that balancing the budget through on one-time revenue sources and other short-term strategies, does not represent a structurally balanced budget, where ongoing revenues are sufficient to support ongoing expenditures.
Staff used the following methodology for the mid-year budget analysis: the year-end estimates in operating revenues and expenditures exceeding the adopted budget by 5% and $25,000 in each revenue and expense category or cost center were considered material in nature and are being proposed for a budget adjustment.
1. Status of General Fund Revenues and Expenditures in FY 2025-26 Revised Budget FY 2025-26 General Fund Revenues
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 provides the City’s general administrative services, public safety, parks, beaches and recreation, public works, and community development-related activities such as planning, building, and engineering. Revenue sources include but are not limited to property tax, sales tax, transient occupancy tax (TOT), business tax registration, and current fees and charges for services.
The revised estimates for General Fund revenues are projected to be $53.6 million or $0.5 million (0.9%) higher than the Adopted Budget of $53.1 million. The following Table 1 demonstrates General Fund revenues for the FY 2024-25 actuals, FY 2025-26 adopted budget, and mid-year revised FY 2025-26 budget projections:
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Table 1 - General Fund Revenue Detail
FY 2025-26 Mid-Year Budget
FY 2025-26 General Fund Revenues Adjustments for Council Approval The following revenues are projected to reflect changes over the FY 2025-26 Adopted Budget and recommended for budget adjustment, this includes two department revenue amendment requests, more detail on those are included within Attachment 2:
• Property Tax is the City’s largest revenue source at 34% of operating revenues less transfers. Property Tax is showing an increase of $261,970 or 1.5% due to new projections from HdL. As part of forecasting services, HdL analyzes property valuation changes, including any appeals or pending litigation and settlements that may affect property tax distributions. The revised projection reflects updated valuation data and expected adjustments to the tax roll, resulting in a modest increase to the City’s anticipated property tax revenues for the fiscal year.
• Sales Tax and Measure Y Sales Tax is the City’s second-largest revenue source, there is an approximately two-months lag of when the City receives Sales Tax revenues from the State. A decrease to Sales Tax of $116,000, or -3.6%, was based on the current year’s activity and the most recent projections from HdL, the City’s sales tax advisor.
The local sales tax is showing decreases in seven out of the ten business types compared to the prior year, with the largest percentage decreases occurring in the Cannabis related types based on year-to-date revenue trends. However, we did factor in an increase to Measure Y of $54,900 due to new projections from HdL indicating adjustments to the County pool allocation. Measure Y also had better returns with growth in ecommerce and new car purchases by locals supporting gains. • Transient Occupancy Tax has an increase of $626,221 or 26.6% for projected actuals with the mid-year review, largely due to STR Tax catchup payments from previous cycles. TOT for hotels also showed favorable increases. STR amounts for the current cycle are trending closer to the projected decrease incorporated with the ordinance change.
• Franchise Tax is reduced $181,110 or -13.4% due to correcting the Recology payments to match the agreed upon terms, they remain flat each year with no increase. • Utility Users Tax has increased $776,762 or 27.1% due to updated projections based on actuals, gas and electric rate increases across varying tiers and customer types.
This revenue source does experience some refund or exemption requests, which can change from year to year.
• Vehicle License Fee is reduced $771,845 or -14.3% due to the State withholding 1/3 of Pacifica City Council 4
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the backfill owed to the City. During the budget process, Council approved Budget Strategy #2, that earmarked fund balance reserves in case the VLF backfill was not received. The City has joined the County, and other Cities in the County to sue the State for the withheld funds.
• Cannabis Tax is reduced $100,000 or -12.5%, based on receipts for each cannabis operator, cannabis is still trending down statewide as well. Currently, there is no active interest from potential operators in the remaining available cannabis use permits. • Intergovernmental is reduced by a net of $37,404 due to a reduction in Senior Services Old Americans Act funding of $106,300, partially offset by an increase due to the recently received Cannabis Grant of $68,896. PBR’s revenue reduction budget request form can be found in Attachment 2, they have submitted matching cost reductions in order to offset this revenue decrease.
• Investment Earnings is showing a slight increase of $17,000. Administrative Services - Finance has submitted a revenue enhancement budget request to reflect the anticipated net revenue increase from engaging an investment advisor to maximize the use of idle cash beyond current staff capacity. The additional revenue is expected to cover consultant fees of approximately $3,000 per month, resulting in ongoing revenue generation while enhancing the strong interest earnings experienced in recent years. • Charges for Services is showing a decrease of $76,700 due to projections based on actual STR permits processed. This downswing relates to the TOT-STR renewal process, and the fact that renewals went down in both coastal and non-coastal areas.
FY 2025-26 General Fund Expenditures
Expenditure projections were reviewed based on five categories: personnel costs, contractual services, materials & supplies, transfer out for operating, and transfer out for capital listed below.
Table 2 - General Fund Expenditure Detail
FY 2025-26 Mid-Year Budget
Previously Approved Changes to the FY 2025-26 Budget
At every Council meeting, staff brings agenda items for the Council's consideration and approval. Some of these items require amendments to the original budget. During the mid-year budget review process, Finance staff incorporate all previously approved budget amendments year-to-date into the FY 2025-26 Revised Budget. These previously approved adjustments, along with year-end purchase order carryforwards, increased the General Fund appropriation by $1.6 million; previously approved department amendments are listed in Attachment 1.
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Mid-year Amendments
During the mid-year budget review process, staff makes a number of minor cleanup changes and adjustments within the department's budgets. Money is moved from various individual line items with savings to other line items within a department budget. This is done when a line item may go over its original budget amount. These changes are considered routine as they have minimal effects on the overall budget and remain within the FY 2025-26 Council-approved funding level. Again, only the year-end estimates in expenditures categories in excess of the adopted budget by 5% and $25,000 in each cost center are being proposed for a mid-year budget adjustment.
Mid-year appropriation amendments net to an increase of $289,576. Combined with the previously approved amount of $1,695,673, brings the total General Fund revised expenditure and transfer total to $55.2 mil, which is a 2.7% increase over the adopted budget. Adopted budget estimates for salaries and benefits were updated to account for Council approved MOU changes and various benefits updates. All other changes are listed below in the mid-year adjustments section. There are three mid-year department budget requests in the General Fund. The department mid-year requests include:
• $81,947 in total for the Police Department. Reclassing a part-time evidence clerk into fulltime due to a recent resignation of staff, to which there was a failed recruitment for the current part-time vacancy, $33,947 (cost for the remaining four (4) months of the fiscal year), with on-going costs in future years. Additionally, a one-time cost of $48,000 for the replacement of evidence storage equipment to preserve the chain of custody and maintain compliance for evidence requiring cooling or freezing, thus preserving evidence integrity. • $87,008 to transfer in from the Facilities Reserve in order to cover emergency remediation done for the mold at the Police Station and the asbestos at the Pacifica Library. The Facilities Reserve has a current balance of $205,000.
• Reclassification of the limited term Economic Development and Housing Specialist into permanent, in order to support the Economic Development Workplan recently presented to Council. $0 effect to this current year as this position is currently budgeted and vacant, ongoing costs to future years.
Overall, FY 2025-26 General Fund operating expenditures and transfers are proposed to be amended with a net increase of $1,985,249, or 3.7% over the adopted budget. More details on the department requests can be found in the budget request forms located within Attachment 2.
Finance recommended amendments and department requests originating from the other NonGeneral Fund funds, that have an impact on the General Fund are denoted and summarized in the Other Funds list in Section 2.
2. Status of Non-General Fund Revenues and Expenditures in FY 2025-26 Revised Budget Non-General Funds include the following categories.
• Enterprise Funds, including Sewer Operating and Capital and Beach Parking funds • Special Revenue and Capital Funds, including Gas Tax and Street funds, Drainage, General Capital, Housing and Park in lieu funds, PB&R Roy Davies Trust fund, Tree Replacement, Disaster Accounting and others.
• Internal Service Funds, including Motor Pool Operating and Replacement funds, Dental Pacifica City Council 6
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Benefit funds, and Risk Management (Workers' Comp and General Liability) funds. • Debt Service Fund
Non-General Fund Other Funds FY 2025-26 Revenues and Transfers-In In the mid-year revised FY 2025-26 Budget, revenues totaled $38.9 million or 41.97% of the City's $92.5 million total revenue budget. The non-general fund revenues are projected to increase by a net of $833,671 or 2.2% as shown in Attachment 3.
The following non-General Fund revenues are projected to reflect material changes over the FY 2025-26 Adopted Budget and are recommended for budget adjustment:
Special Revenue and Capital Funds:
• Gas Tax (Fund 210) after review of funds received, Measure M is projected to decrease by $220,000 due to funding levels typically received by this revenue source. The County indicated that this funding source should remain relatively flat. Gas Tax fund will be further analyzed with preparation of the FY 2026-27 CIP budget. • Street Improvement (Fund 213) after review of funds received, the revenue estimate received from Recology was reduced by $63,790 to match the agreement, this fee remains flat and does not increase annually.
• Tree Replacement (Fund 229) the Tree Replacement fund is supported by donations and fees, however work over the previous two years has caused this fund to end in a negative balance at the end of FY 2024-25, and it requires contribution from the General Fund in the amount of $55,867 to ensure the fund does not remain negative.
Non-General Fund Other Funds FY 2025-26 Expenditures and Transfers-Out In the mid-year revised FY 2025-26 Budget, expenditures totaled $59.5 million, or 51.9% of the City's $114.7 million total expenditure budget. These expenditures are proposed to be amended by a net of $5.5 million or 10.0% over the adopted expenditures budget. This includes $3.5 million from previously approved by Council items (Attachment 1), and $2.0 million from department requests and finance review as summarized below.
Summary of previously approved items:
At every Council meeting, staff brings agenda items for the Council's consideration and approval. Some of these items require amendments to the original budget. During the mid-year budget review process, Finance staff incorporated all previously approved budget amendments year-to-date into the FY 2025-26 Revised Budget. These adjustments increased the Other Funds appropriation by $1.9 million as further described in Attachment 1, which contains the list of previously approved items with Council dates and resolution numbers; year-end purchase order carryforwards are included in the previously approved totals of Attachment 4, but not detailed. Adopted budget estimates for salaries and benefits were updated to account for Council approved MOU changes and known benefits updates, which impacted most funds. All other changes are listed below in the mid-year amendments section.
Mid-year amendments:
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• Supplemental Law Enforcement Services Fund (Fund 207): An additional $59,775 to fund the purchase of equipment with existing fund balance in order to support front-line law enforcement services.
• Gas Tax (Fund 210): An additional budget appropriation of $40,000 is needed to maintain traffic signals and streetlights.
• Street Improvement (Fund 213): An additional budget appropriation is requested in the amount of $38,570, for sidewalk shaving, ADA compliance, and repair flashing beacons in Manor Plaza.
• Wastewater (Fund 518):
o $150,000 for the Linda Mar Stormwater Pump (C0047) electrical wiring replacement, to be funded by the 2017 Bond funds.
o $89,900 transfer from P0040 - CCWRP Headworks Rehab project to the P0033 CCWRP Repair and Replace project, in order to replace the Sequencing Batch Reactor (SBR) mixing pump. Net zero effect.
o $85,000 transfer from project C0051Linda Mar Peralta Project to equipment maintenance in order to support procurement of a Spydercrane. Net zero effect. • Risk (Fund 667): A request of $20,000 for the installation of a security camera system at the Corporation Yard that houses important City assets such as vehicles and heavy machinery, following a recent attempted break-in, of which a police report has been filed.
• Motor Pool (Fund 672): Accounting entry needed to support the previously approved Council action for use of the 2017 Bond Revenue for eligible purchase of Wastewater maintenance vehicles in the amount of $992,814 from Fund 518. As well as a replacement of a PD vehicle totaled in a crash earlier this year in the amount of $42,780, and a truck bed and tool box replacement for an in-service vehicle $26,000, both funded by the General Fund.
Additional information on individual non-general fund mid-year budget requests are presented in Attachment 2.
Capital Improvement Program
There are no other adjustments to the Capital Budget, aside from the project transfers listed above. The Capital expenditures will be further reviewed by staff during the FY 2025-26 CIP Budget development process that is now being prepared by the Public Works Department.
3. Projected Fund Balance Structure
After incorporating all mid-year budget adjustments described in this report, the General Fund is projecting a $(1.5) million deficit. However, during the labor negotiations process, Council approved use of salary savings of up to 5% to help offset increases. After incorporating the Budget Strategy #2, using previously assigned fund balance for anticipated withholding of VLF funds by the State, only 2.0% of salary savings for the FY 2025-26 revised budget was needed.
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Table 3 - FY2025-26 REVISED BUDGET (MID-YEAR)
NET GENERAL FUND FY 2025-26 PROJECTED SURPLUS (DEFICIT) The FY 2025-26 revised budget amounts have been updated from the adopted budget figures following the independent audit of FY 2024-25. Under GASB 54, this balance consists of the following components: non-spendable items or portions of fund balance that cannot be liquidated, restricted amounts for use by outside agencies, committed amounts by Council action such as emergency/contingency reserves, and assigned balances to pay off unfunded liabilities and fund infrastructure improvements.
As shown in Table 4 below and Attachment 5, the mid-year budget review reflects restricted reserves and operating contingencies at $6.7 million, leaving an unassigned projected balance of $14.3 million. This unassigned amount represents 26% of the General Fund operating expenditures (excluding one-time and capital transfers). This is an increase of $4.1 million from the Adopted Budget, adjusted by the beginning fund balance.
The General Fund balance complies with the Government Finance Officers Association of the US and Canada (GFOA) recommendation for government entities to meet the minimum unassigned reserve recommendation of at least two months of operating expenditures ($9.2 million or 16.67%). This minimum reserve recommendation is being met before considering any additional assigned reserves previously set aside by Council policy, as listed in the table below.
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Table 4 - FY 2025-26 REVISED BUDGET (MID-YEAR)
GENERAL FUND (ASSIGNED & UNASSIGNED BALANCES)
A major contributing factor to the healthy unassigned fund balance is prudent fiscal management by the City Council and demonstrated financial discipline by the City Manager and all City Departments in keeping their operations within their limited budget means. This projected General Fund balance will be used as a starting point in preparation for the new FY 2025-26 Budget.
Staff will continue monitoring remaining fund balances and reevaluate strategies for future use of these funds as part of the FY 2026-27 budget development. Please refer to the attached summary schedule presented in Attachment 5 for additional information on the City's Revised FY 2025-26 projected fund balances across all funds.
The City of Pacifica prides itself on an open, inclusive, and comprehensive budget process.
This process traditionally takes place over the course of several months and involves several Council study sessions. The City Council will hold a Strategic Planning workshop on March 7, 2026, which will provide a critically important roadmap for the organization as it updates the framework for the City's short and long-term priorities and objectives. Subsequently, staff will translate the Council’s vision into the workplan for the upcoming year to be later reflected in the City Manager’s Recommended FY 2025-26 Budget that will be brought forward for the Council’s adoption in June 2026.
ALTERNATIVE ACTION:
The City Council is being asked to adopt a resolution amending the FY 2025-26 Budget. No reasonable alternative action is identified.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
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A balanced and structurally sustainable budget is consistent with all the City Council's goals.
FISCAL IMPACT:
As part of the FY 2025-26 mid-year review, General Fund revenues are amended to $53.65 million, an increase of $462,794 or 0.9%, and General Fund operating expenditures are amended to $55.2 million, a net increase of $1,985,249 or 3.7% over the FY 2025-26 Adopted budget.
As part of the FY 2025-26 mid-year review, the Other Funds revenues are amended to a combined total of $38.8 million, a 2.2% increase, and expenditures are amended to a combined total of $59.5 million, a 10.0% increase.
ORIGINATED BY:
Finance Department
ATTACHMENT LIST:
Attachment 1 - City Council Previously Approved Budget Amendment (PDF) Attachment 2 - FY 2025-26 Department Mid-Year Budget Request Forms (PDF) Attachment 3 - FY 2025-26 Summary of Revenues and Transfers In by Fund (PDF) Attachment 4 - FY 2025-26 Summary of Expenditures and Transfers Out by Fund (PDF) Attachment 5 - FY 2025-26 Fund Balance Summary by Fund (PDF) Attachment 6 - FY 2025-26 Service Enhancements Progress (PDF) Pacifica City Council 11 March 09, 2026
RESOLUTION NO. ________
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA ADOPTING THE FISCAL YEAR 2025-2026 MID-YEAR OPERATING AND CAPITAL BUDGET WHEREAS, the City Council adopted the FY 2025-26 Operating and Capital Budget on June 23, 2025; and
WHEREAS, the Adopted FY 2025-26 budget was a balanced expenditure plan that ensured the maintenance of adequate reserves; and
WHEREAS, City Staff has completed a mid-year budget review to validate budget assumptions and conduct an analysis of the year-to-date revenues and expenditures; and WHEREAS, the City Council has reviewed the Mid-Year Budget analysis and requested budget adjustments; and
WHEREAS, the table included herein summarizes the mid-year amendments needing Council approval; and
WHEREAS, the previously approved items and year-end carryforwards are reflected in the staff report and attachments; and
WHEREAS, the staff report and attachments provide further detail of mid-year analysis and department requests, including project and fund transfers; and WHEREAS, the City of Pacifica now desires to adopt the revised Fiscal Year 2025-26 Operating and Capital budget as shown in Attachment 5;
NOW, THEREFORE, THE CITY COUNCIL HEREBY RESOLVES: The City Council of the City of Pacifica hereby approves the mid-year adjustments to the FY 2025-26 budget.
The citywide revenues, transfers, and appropriations are amended as follows:
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• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 9
th day of March, 2026, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Christine Boles, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney