CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
6/8/2026
1 SUBJECT:
Fiscal Year 2026-27 Proposed Budget Program Options
RECOMMENDED ACTION:
Review and discuss the Fiscal Year 2026-27 Proposed General Fund and Other Funds Budget and provide additional policy direction on the desired budget options and strategies for the upcoming budget.
STAFF CONTACT:
Sean Charpentier, City Manager
650-738-7409
[email protected]
Yulia Carter, Assistant City Manager
650-738-7301
[email protected]
Marisol Gómez, Director of Administrative Service
650-501-0257
[email protected] <mailto:[email protected]>
BACKGROUND:
This year's budget cycle launched on March 7, 2026, with the Council’s review of the City’s Strategic Plan and Priority-Setting workshop. The updated Strategic Plan was presented for Council adoption on May 11, 2026. While departmental workplans are typically presented concurrently with Strategic Plan adoption, staff delayed finalization of the FY 2026-27 workplans due to the City’s projected structural budget deficit and anticipated service reductions. This approach allowed staff to better align workplan commitments with available funding, staffing capacity, and operational realities before presenting the FY 2026-27 workplans as part of the June 8, 2026 budget discussion.
As part of this year’s outreach the City conducted a community survey to receive feedback on City service needs and priorities. In our tradition of transparency and engagement around the City’s budget process, the City is launching The Pacifica Discussion 2026 to ensure all residents have an opportunity to voice their priorities. Residents have identified community priorities such as maintaining public safety services, maintaining 911 police, fire and emergency medical response times, attracting and retaining experienced medical responders, preventing further deterioration of streets and roads by paving those in the worst conditions and qualifying for Pacifica’s fair share of matching funds from state and federal governments.
The City continues to work hard to ensure resident priorities are addressed but given the current structural budget deficit the City is facing, core city services will need to be reduced.
Pacifica will be forced to reduce necessary city services, including public safety, public works, and community services. This could lead to fewer police officers and firefighters keeping our Pacifica City Council 2
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neighborhoods safe, popular community services, public works staff.
Despite the City’s best efforts, Pacifica still has among the worst-rated roads in the entire Bay Area, with only 28% of the City’s streets rated as at least “good” and 27% rated as “failed” to “very poor.” Pacifica has a backlog of $84 million in needed street and road repairs and maintenance needs, and without additional locally controlled funding, more than one-third of Pacifica’s streets will be rated as “failed” to “very poor” in five years, with repair costs becoming even more expensive and pushing the backlog up to $123 million in five years.
As for the City’s 911 emergency response and fire services, the current fire stations have no dedicated space for firefighters returning from calls to decontaminate and store personal protection equipment, which increases risk of exposure to carcinogens. Pacifica seeks to provide firefighters facilities that can reduce their risk of exposure to hazardous materials.
The City appreciates the community members who took the time to participate and share their perspectives thus far. This input is an important part of the City’s ongoing engagement efforts.
As we move into this year’s budget process, the City will continue to keep the community informed and involved as discussions about long term fiscal sustainability and potential funding options move forward.
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 to the City Council and staff 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. These revised budget estimates help shape the development of the budget assumptions for the following year’s budget. The FY 2025-26 Mid-Year adjustments were presented to the Council on March 9, 2026.
The City’s Long-Term Financial Forecast (LTFF) was developed based on the FY 2025-26 midyear review and presented to Council on March 7, 2026, as part of the Strategic Planning Study Session. At that time, the LTFF indicated that the City of Pacifica was facing an ongoing structural deficit at the current level of services, projected at $3.4 million for the upcoming FY 2026-27. Without additional sources of revenue or material service reductions, the forecast showed that the City’s reserves could fall below the GFOA-recommended two months of operating expenditures reserves as early as FY 2027-28 and could be fully depleted by FY 2031-32.
The fiscal outlook reflects several ongoing fiscal pressures, including softening sales tax and cannabis revenues, reductions in Transient Occupancy Tax (TOT), business license and permit revenues associated with Short-Term Rental (STR) ordinance changes, and continued uncertainty surrounding Vehicle License Fee (VLF) in-lieu backfill payments from the State in the upcoming years. While the forecast included the $1.06 million VLF backfill that is due to the City in FY 2026-27, this amount is currently not included in the State’s proposed budget. The City is continuing to engage in coordinated, countywide advocacy efforts to secure this funding.
The preliminary forecast represented a “status quo” scenario at the current level of services and did not assume ongoing General Fund contributions to the Capital Improvement Program (CIP).
Even without additional CIP funding, the General Fund was projected to remain structurally imbalanced, underscoring the magnitude of the City’s fiscal challenges.
The City Council held study sessions on November 10, 2025, and November 24, 2025, to review Pacifica’s long-term fiscal sustainability challenges and explore potential short and long- Pacifica City Council 3
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term strategies to address structural budget deficits, limited staffing capacity, and significant unfunded capital needs. These discussions established a shared understanding of the City’s fiscal baseline and identified a range of tools to address structural deficits, limited staffing capacity, and significant unfunded capital needs.
Consistent with the City’s multi-layered Fiscal Sustainability Framework, presented as a fivepiece puzzle requiring multiple strategies working together rather than a single solution, the discussion focused on a comprehensive set of interconnected short- and long-term approaches, including strengthening and diversifying revenue streams, maintaining appropriate organizational investment and staffing capacity, advancing economic development to revitalize commercial areas and opportunity sites, recognizing housing development as an economic driver, and leveraging community partnerships, grants, and financing tools to supplement local resources.
The Budget Study Session 1 was held on April 13, 2026, and staff presented the Narrative Budget report outlining the Budget planning process, methodology, timeline, and preliminary budget strategies. The Council reviewed and supported incorporating the following budget strategies into the budget development process:
1. Continue 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 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.
4. Complete the Citywide Cost Allocation Plan (CAP) to establish fully burdened service costs, improve transparency in how administrative and overhead costs are allocated across departments, and support more accurate cost recovery and long-term fiscal sustainability.
5. Update the City’s Development Impact Fees and User Fee Schedule to better align fees with the actual cost of services and growth-related impacts, while providing the City Council with policy options related to cost recovery levels and General Fund subsidies.
Collectively, the strategies outlined above are intended to help reduce the City’s structural deficit and improve long-term fiscal sustainability. However, while these actions are important Pacifica City Council 4
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and necessary, they will address only part of the challenge.
Even with successful implementation, the City is likely to continue facing structural imbalance that will require broader evaluation of service levels and alignment of ongoing operating expenditures with available revenues. This process will require a thoughtful, measured, and transparent approach and will inevitably involve difficult choices.
As part of these discussions, the City Council also provided direction in November to further evaluate long-term funding strategies, including the potential feasibility of future revenue measures related to public safety and infrastructure funding, and to engage professional services to support community outreach, public education, and community opinion research efforts.
The goal of this work is to better understand community priorities, service expectations, and community perspectives regarding long-term fiscal sustainability and service priorities.
In response to that direction, the City initiated a community survey effort designed to provide additional insight into community priorities and service expectations. The survey results have since been published on the City’s website and shared through the City’s community newsletter.
The City appreciates the residents who took the time to participate and provide thoughtful feedback, which will continue to help inform ongoing fiscal sustainability and service-level discussions.
As part of the FY 2026-27 budget development process, the City also launched the “Pacifica Discussion” community engagement initiative to continue gathering resident input regarding City service needs, priorities, and potential tradeoffs. The outreach effort is intended to foster continued community dialogue during a challenging economic environment facing both the City and residents alike, while ensuring that future policy and budget discussions remain informed by community values and priorities.
Initial outreach and survey feedback has highlighted strong community interest in maintaining public safety services, preserving police, fire, and emergency medical response times, attracting and retaining experienced emergency responders, and addressing the City’s significant infrastructure needs, particularly the condition of local streets and roads.
As the City moves forward through this year’s budget process, it will continue to prioritize transparency, public engagement, and ongoing communication with the community regarding long-term fiscal sustainability challenges, service priorities, and potential future funding strategies.
On May 11, 2026, the City Council conducted Budget Study Session #2, which included a review of the FY 2026-27 Base Budget, the preliminary FY 2026-31 Capital Improvement Program (CIP), long-term fiscal sustainability challenges, and the City’s projected structural budget deficit.
Staff presented an updated General Fund Base Budget reflecting current service levels and operations. Through the budget development process, and after applying council-approved preliminary budget balancing strategies and updated assumptions, staff was able to reduce the projected FY 2026-27 Base Budget structural deficit of approximately $2.3 million, with a targeted citywide reduction amount of approximately $2.8 million, or 5% of the operating budget, prior to consideration of additional recommended program reductions and revenue adjustments.
At the meeting, staff also presented the results of the initial citywide service categorization effort, which organized departmental services into Mandated/Public Health and Safety Services, Core/Essential Services, and Discretionary/Community Enhancement Services to guide future service-level discussions and budget decision-making.
The Council reviewed the City’s fiscal outlook, ongoing revenue uncertainties, including Vehicle License Fee (VLF) in-lieu backfill funding, and the City's continued reliance on a combination of expenditure controls, revenue strategies, and long-term fiscal sustainability initiatives to address structural imbalances. The Council also received an introduction to the FY 2026-31 Capital Improvement Program and the recommended list of non-discretionary projects supported by Pacifica City Council 5
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available funding sources, grant funding, regulatory requirements, or immediate public health and safety needs.
Through the discussion, the Council provided feedback and emphasized the importance of maintaining transparency throughout the budget process, preserving critical public services where feasible, and continuing to evaluate both expenditure reductions and revenue-generating opportunities to improve the City’s long-term fiscal sustainability. The purpose of this Budget Study Session #3 is to present the recommended balancing strategies and service-level adjustment options that would translate into a proposed operating budget for Council consideration for adoption on June 22, 2026.
The recommendations presented as part of Budget Study Session #3 reflect the City Manager’s review of departmental budget requests, service-level evaluations, fiscal sustainability objectives, and Council feedback received during the prior budget study sessions.
DISCUSSION:
City Manager’s Recommendations for the FY 2026-27 Budget The overarching goal of the budget process is to develop a balanced and sustainable Budget by thoroughly analyzing the City's revenue structure and current service levels. This includes analysis of necessary service increases and/or reduction options, which, when combined, will achieve a balanced and sustainable budget, which also involves making difficult decisions about where to invest limited resources and where to delay or scale back, while ensuring alignment with the City Council’s adopted Strategic Plan.
Since the last meeting, each City Department has been given an opportunity to submit their prioritized budget requests with reference to the Council’s specific goals and strategies in the newly adopted Strategic Plan. After a comprehensive review of these requests, the City Manager has developed a balanced FY 2026-27 Recommended Budget that reflects both the City’s financial constraints and its long-term vision.
Developing this budget required tough choices, as the City continues to face a structural deficit and relies on uncertain or one-time revenues. As a result, the City Manager had to weigh each request against future fiscal sustainability, existing staffing and organizational capacity, and the ability to maintain essential services to the community to identify necessary and required service change options, which, in combination, maintain a balanced and sustainable budget.
Each recommended item aligns with one or more of the Strategic Plan goals and is detailed in Attachments 1 and 4-7, which outline the needs, funding impact, and strategic alignment.
Despite all efforts to balance priorities and address critical needs, 11 requests, including 9 within the General Fund, 2 in other funds, and 9 new capital projects, totaling $2.5 million, remain unfunded due to resource limitations. These include essential services and program enhancements that would advance Council priorities but could not be accommodated within the City's limited fiscal capacity this year. Leaving these requests unfunded limits departmental capacity to maintain service levels, deliver on strategic goals, and respond effectively to community needs.
The FY 2026-27 budget reflects a difficult but necessary response to the City's ongoing structural deficit. To achieve a balanced budget, approximately $2.1 million in reductions and service-level adjustments were required across multiple departments. While every effort was made to preserve core public safety, legally mandated, and essential services, some programs and service enhancements could not be sustained at prior levels. This budget represents a Pacifica City Council 6
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measured approach to aligning expenditures with available revenues, strengthening the City's long-term fiscal sustainability, and preserving organizational stability while minimizing impacts to the community wherever possible.
General Fund Department Target Reductions
At the last Council meeting, staff reported that the FY 2026-27 Base Budget included a structural deficit of $3.8 million, which was reduced to $2.3 million after applying the City’s 5% salary savings strategy. To provide additional structural flexibility and establish a buffer against future projected imbalances identified in the Long Term Financial Forecast, departments were asked to identify reduction options equal to approximately 5% of their operating budgets, totaling approximately $2.8 million, even though the immediate remaining budget gap was lower. This approach was intended to provide the City Manager with flexibility as the budget was refined, while also accounting for ongoing fiscal uncertainty and future revenue risks.
Every department met their budget target reduction providing options totaling $3.5 million in reduction options for the City Manager’s review. Staff across all departments worked collaboratively and thoughtfully through a very difficult and challenging process, carefully evaluating operational impacts, service levels, staffing capacity, and organizational priorities in an effort to help address the City’s structural deficit while minimizing impacts to core services wherever possible.
Following additional department budget meetings, and discussing the preliminary options with the Executive Team, the City Manager’s recommendations include revenue increases of $310,722 and expenditure reductions of $2.1 million, creating a modest surplus in the General Fund of $169,119. It is important to note that some of the recommended reductions and balancing strategies represent temporary measures intended to help stabilize the FY 2026-27 budget and are not be sustainable long-term solutions. Without meaningful growth in revenue and/or new sustainable and recurring revenues sources or long-term funding solutions, the City will need to consider more substantial organizational and service-level changes in future years to align ongoing expenditures with available resources.
In developing the FY 2026-27 Recommended Budget, the City Manager evaluated all departmental requests, reduction options, and enhancement proposals using a priority-based framework intended to balance fiscal sustainability, organizational capacity, service delivery impacts, and long-term strategic objectives.
Category 1: The highest priority category included revenue-generating opportunities, legally mandated or regulatory compliance items, operational efficiencies, and requests where deferral could create operational, financial, infrastructure, or liability risks to the City.
Category 2: The second tier of recommendations focused on preserving core services, addressing critical operational and organizational needs, maintaining essential staffing and service delivery capacity, and advancing high-priority Strategic Plan initiatives where feasible within the City’s constrained fiscal environment.
Requests that could not be accommodated within available resources were identified as unfunded and not recommended for FY 2026-27 consideration.
The City Manager’s recommended options are listed in Attachment 1, and department’s budget forms contain more detailed information and can be found in Attachments 4-7.
General Fund City Manager’s Recommended Program Options by Category:
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Service Enhancements - Additional Revenues.
Category 1
• Additional grant funding in Police Department from California Office of Traffic Safety (OTS), California Highway Patrol Cannabis Tax Fund Grant Program and from the California Department of Alcoholic Beverage Control Alcohol Policing Partnership Program for a net increase of $95,999 to the General Fund (one-time) • Net positive General Fund impact from utilizing Opioid Settlement funds in Police Department to offset shared costs of the Mental Health Clinician, resulting in a net increase of $78,900 to the General Fund (one-time)
• Net positive General Fund impact from increased planning application fee revenue generated through the Community Development Department’s strategic use of contracted services to accelerate and support specialized development review activities, resulting in a net increase of $120,000 to the General Fund (ongoing) Service Enhancements - New Expenditure Requests.
Category 1
• Special Financing District Feasibility Study - $30,000 (one-time). Feasibility study evaluating a Special Financing District for streets & road infrastructure improvements. • Library Modernization Project Support - $20,000 (one-time). Continues strategic communications, outreach, and web hosting support through external consultants for the Library Modernization Project.
• SB 1383 - $75,000 (ongoing). Provide funding to support new SB 1383 Recovered Organic Waste Products (ROWP) compliance requirements.
• Convert Limited-Term Maintenance to Permanent - $0 (ongoing) Convert (1) Limited-Term Maintenance Worker I position to a permanent position. Zero effect as term expires within the fiscal year, thus budgeted in the base.
Category 2
• GIS Implementation Consultant - $52,000 (one-time) Continuing Consultant Support for inprogress Geographic Information System (GIS) implementation.
Service Reduction Options:
Total City Manager Department Reduction Program Options totaled $1.7 million. To address the remaining General Fund deficit, departments identified reduction options, with the City Manager recommending a balanced approach that prioritizes minimizing impacts to core services while preserving operational flexibility.
The recommended adjustments include a combination of one-time and ongoing expenditure reductions, strategic staffing actions, funding reallocations, program modifications, and the deferral of selected initiatives across all departments.
The City Manager’s recommended options are listed in Attachment 1, and department’s budget forms contain more detailed information and can be found in Attachments 4-7.
In addition to the service-level adjustments outlined below, departments identified a series of budget refinements and operational efficiencies that reduced the General Fund deficit by approximately $515k. Since the last Budget Study Session, when Finance and the City Manager’s Office presented the FY 2026-27 Base Budget, the Administrative Services Director and Assistant City Manager met with each department for a detailed review of departmental budgets, operational needs, expenditure trends, and revenue assumptions. Through this collaborative review process, staff identified alignment opportunities and budget refinements that could be categorized as adjustments to the Base Budget rather than direct service-level reductions.
Unlike the recommended service reductions, these adjustments generally do not represent direct reductions to service levels, but rather better align budgeted revenues and expenditures with actual operational trends, historical spending patterns, contractual obligations and the most current financial information available during the budget development process. Examples Pacifica City Council 8
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include revised revenue projections based on updated HdL sales tax estimates and other revenue trend analysis that became available after the Base Budget was presented; right-sizing contractual services and operating budgets; identifying accounts with historically lower utilization; reallocating expenditures between funds where appropriate; and reducing discretionary spending in select operational areas such as postage, travel, supplies, and other non-essential operating accounts. Collectively, these refinements improve budget accuracy and fiscal stewardship while minimizing direct impacts to service delivery wherever possible.
Category 1 reductions and adjustments recommended by the City Manager include the following:
• Eliminate annual contribution to the OPEB Trust this year for unfunded retiree health liability ($283,750)
• Decrease annual transfer to the Fire Equipment Replacement Fund ($65,000 alternative program option recommended as per budget form)
• Fund a Limited-Term Senior Planner position for LCP/CARP implementation through reallocation of existing funds and matching grant revenues ($31,716 net General Fund impact)
• Reallocate funding for Objective Design Standards (Zoning) to the Housing Action Fund ($85,000)
• Unfund vacant Management Analyst I/II position and repurpose funding toward Administrative Assistant III classification ($50,406)
• Convert City Council and Planning Commission minutes to action minutes format and eliminate a part-time Stenographer position ($26,585)
• Transfer Police Department employee wellness funding to Workers’ Compensation Fund ($34,686)
Category 2 reductions and adjustments recommended by the City Manager:
• Hiring freeze for (1) Vacant Firefighter Engineer position for 6 months ($108,295 alternative program option recommended as per budget form) • Reduce consulting services, software, and equipment replacement budget items in IT Division ($75,336)
• Reduce Executive Recruitment Budget ($25,000)
• Reduce Conference Registration Budget ($8,125)
• Transfer Employee Wellness/Recognition Budget to Risk Management Fund ($33,495) • Reduce General Legal Services in CDD, including legal support for the Planning Commission ($25,000)
• Reduce General Legal Services in City Attorney’s Office Department budget ($57,000) • Eliminate Funding for Portable Restroom (American Portables) Supporting the Temporary Safe Parking Program ($25,000)
• Deferral of funding for Special Financing District Feasibility Study (CFD / EIFD / PBID) for Sharp Park and other commercial areas ($75,000)
• Remove Economic Development Committee Budget ($7,750) • Freeze Vacant Lead Teacher Position ($118,090)
• Discontinue the Senior Services Transportation Program ($115,761) • Phase out City Aquatics Services ($154,462)
• Hiring freeze of (1) Vacant Police Officer position for 6 months ($110,394) • Transfer salary and benefit costs for a Community Services Officer position to the Supplemental Law Enforcement Services Grant Fund ($38,300) • Reassign the Community Emergency Response Team (CERT) Program from Police to NCFA oversight ($20,000 alternative program option recommended as per budget form) • Reduce Janitorial Services in Public Parks ($70,000)
• Hiring freeze of (2) .5 FTE Vacant Part-Time Maintenance Assistant Positions (48,550) Pacifica City Council 9
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Not Recommended Options:
The City Manager does not recommend the following General Fund program options due to the potential impacts on core service delivery, organizational capacity, operational responsiveness, and already limited staffing resources. In several cases, as listed above, the recommended budget instead reflects alternative balancing strategies intended to minimize service disruptions while still achieving necessary fiscal reductions.
Accordingly, the vacant positions identified below as potential reduction options are not recommended for elimination or extended hiring freezes. If the City Council approves the City Manager’s Recommended Budget, departments would be authorized to continue recruitment efforts for these positions in order to minimize impacts to service delivery and maintain operational capacity.
Similarly, while certain reductions to community outreach and engagement programs are recommended, the City Manager does not recommend elimination of all related programs.
Instead, staff recommends an alternative approach that would transfer administration of the Community Emergency Response Team (CERT) program from the Police Department to North County Fire Authority (NCFA) oversight, while preserving other community-oriented programs such as the Teen Academy and related outreach efforts.
Below are the budget options NOT recommended at this time:
• Hiring freeze of (1) Firefighter Engineer Vacant position ($216,590) • Unfund vacant Management Analyst position in City Manager's Office ($200,177) • Funding for professional event planning support and community activation efforts per Economic Development plan ($30,000)
• Hiring freeze of (1) Vacant Police Officer Position ($220,778) • Hiring freeze of (1) Vacant Community Service Officer Position ($80,432) • Reduction in Police Department community outreach and engagement programs (75,000)
• Add Management Analyst position for Public Works Department (General Fund 0.5 FTE allocation) ($104,252)
Some of these requests may need to be revisited during the Mid-Year Budget Review, pending further analysis, refined cost estimates, or change in revenue conditions, either improving (possible revenue measure) or deteriorating (VLF backfill withheld).
Council Consideration Community Programs:
During the annual budget process, the Council often receives requests from community organizations for financial support for discretionary community programs, sponsorships, pilot initiatives, and contributions to outside organizations. Given the City’s current fiscal constraints and structural budget challenges, the City Manager’s FY 2026-27 Recommended Budget is primarily focused on maintaining core municipal operations, essential services, regulatory obligations, and organizational sustainability.
Given the scope and negative impact of the service reductions included in the City Manager’s recommended budget, the programs and requests identified below are not included in the City Manager’s Recommended Budget. However, because several of these items reflect broader community priorities, policy considerations, or Council-directed interests expressed during prior Council discussions, they are presented separately for potential City Council consideration during the budget adoption process. Inclusion of these items would require additional Pacifica City Council 10 June 08, 2026
appropriations, and may require alternative funding sources or policy tradeoffs with additional reductions elsewhere in the budget, subject to Council policy direction. • Community Grants as follows:
➢ Pacifica Resource Center (PRC) - $100,000
➢ Pacifica Beach Coalition (PBC) - $10,000
➢ Fog Fest - $25,000
➢ Pacifica Coast Pride - $5,000
• OneShoreline - $40,000
A contribution to support regional efforts related to climate resilience and sea-level rise adaptation, coordinated through the San Mateo County Flood and Sea Level Rise Resiliency District (OneShoreline).
• Throne Labs Public Restroom at Fairmont Park - $79,110 A request to install a portable Throne Labs Public Restroom at the Fairmont Rec Park for a 1-year pilot program.
• Throne Labs Public Restroom at Municipal Pier - $54,110 A request to install a portable Throne Labs Public Restroom at the Pier for a 1-year pilot program, offset by eliminating the maintenance cost of the existing bathroom.
Projected Fund Balance Structure and Budgetary Reserves The Proposed FY 2026-27 Operating Budget is being presented as a balanced budget.
However, it is important to note that this is not a structurally balanced budget, meaning that the City’s operating expenditures exceed operating revenues. Even considering the program reduction options, the budget would not be balanced without the salary savings mechanism.
Although the City’s use attrition and vacancy savings to offset costs, this has become an increasingly significant component of the City’s budget strategy. Reliance on ongoing vacancy savings is not a long-term sustainable solution, as it assumes positions remain unfilled and can contribute to increased workloads, service delivery challenges, employee burnout, recruitment and retention difficulties, and the deferral of organizational priorities. Addressing the City’s structural imbalance will ultimately require a combination of expenditure reductions, revenue enhancements, operational efficiencies, and policy decisions that align ongoing costs with recurring revenues.
If all program options identified in this report are approved by the City Council, as presented the General Fund will project an ending surplus of about $169k.
After factoring in the above-mentioned budget options, the General Fund Proposed Budget revenues and transfers-in are projected at $53.6 million. The total General Fund operating expenditures and transfers-out are budgeted at $55.0 million, and the capital transfer-out remains at $50,000. The table below demonstrates the Net change to the General Fund balance.
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After applying all the changes described above, the Proposed General Fund Budget will have a $169k surplus, leaving $12.4 million in the Unassigned General Fund Balance, which is about
22.6% of the City’s Operating expenditures in addition to 10% or $5.5 million in the minimum policy reserve.
The City’s Fund Balance Policy identifies fund balances (or reserves) that fall into the following categories: 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 to fund infrastructure improvements.
In accordance with GASB Statement No. 54 requirements and the City policy, the Council established the following designations or contingencies of the General Fund Committed Balance.
o Budget Shortfall Policy Reserve of 10% of Expenditures ($5.5 million) o VLF Restriction Budget Strategy #2 ($1.06 million)
o Facilities Maintenance & Replacement ($0.2 million)
o Compensated Absences Reserve ($0.2 million)
o Child Care Reserve ($0.5 million)
o Legal Reserves ($0.1 million)
The General Fund balances for the FY 2026-27 Recommended Budget are detailed in the table below. If all options presented in this report are approved by the Council, the City will have a balanced FY 2026-27 Budget with an undesignated General Fund Balance of approximately $12.4 million.
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Maintaining a sufficient level of the projected ending fund balance is necessary for fiscal and operational sustainability. After factoring in the restricted reserves and operating contingency, the ending undesignated General Fund balance is projected to be close to $12.4 million or
22.6% of the General Fund operating expenditures (excluding one-time capital transfers), which equates to slightly less than three months of regular operating expenditures and is slightly above the Government Finance Officers Association of the US and Canada (GFOA) minimum recommendation for government entities of no less than two months of regular general fund operating expenditures (approx. $9.2 million for the City of Pacifica in FY2026-27).
Other Funds Program Options:
The City Manager’s FY 2026-27 Budget recommendations for non-General Fund programs are summarized below and further detailed in Attachment 7.
These recommendations total $1.1 million, which include receiving transfers from the General Fund reductions in the Risk, COPS Grant, and HAF funds.
Other Funds - Recommended Program Options:
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Category 1 reductions and adjustments recommended by the City Manager include the following:
• Funding for zoning modernization & code updates to align with General Plan ($185,000) Fund 221 HAF
• Funding for development and implementation of Objective Design Standards within the Zoning Code ($85,000) Fund 221 HAF
• Transfer-in funding for CSO position from GF to the Supplemental Law Enforcement grant ($38,300) Fund 207 COPS
Category 2 reductions and adjustments recommended by the City Manager:
• Funding to evaluate housing opportunities on publicly owned lands consistent with General Plan Program HE-I-3 ($150,000) Fund 221 HAF
• Funding for on-call professional services supporting Housing Element implementation activities ($80,000) Fund 221 HAF
• Funding for the purchase of four vehicles for Public Works and Police Department operations ($286,500) Fund 671/672 Motor Pool
• Additional funding for Wastewater Operations and Maintenance Expenses ($140,701) Fund 518 Wastewater
• Funding for a predictive maintenance study to support long-term infrastructure and asset management planning ($50,000) Fund 518 Wastewater
• Funding for implementation of a Computerized Maintenance Management System (CMMS) for the WWTP ($25,000) Fund 518 Wastewater
• Transfer-in Police Department and HR Wellness funding to the Workers' Compensation Fund ($68,181) Fund 518 Wastewater
Not Recommended Options:
• Management Analyst Position - As mentioned above, the City Manager did not recommend funding an additional management analyst shared between the General Fund and Wastewater at this time.
• Continuation of the Temporary Safe Parking Program (TSPP) The City Council may also wish to provide direction on whether to continue funding the Temporary Safe Parking Program (TSPP) in FY 2026-27, and if so, at what level. The TSPP program currently includes 15 spaces total, consisting of 10 leased RV spaces and 5 on-street spaces, with support services provided by the Pacifica Resource Center. The current annual program cost is approximately $463,000, including PRC support services, leased RV spaces, portable restrooms, and partial (.25 FTE) Community Service Officer support.
The program was originally established as a temporary initiative. Given the City’s structural budget challenges and the significant cost of the program, staff is presenting this item separately for Council consideration. If the Council wishes to continue the TSPP in some form, the City Manager recommends that the Housing Action Fund be used to support eligible program costs. With the current Housing Action Fund balance of approximately $2 million, funding all recommended Housing Action Fund requests and the TSPP would reduce the projected ending fund balance to approximately $934,000.
In addition, with ERAF revenues now retained within the General Fund as part of the City’s broader fiscal stabilization strategy, the Housing Action Fund no longer has an ongoing dedicated revenue source to replenish fund balance reductions in future years.
Additional information about these budget options can be found in Attachment 7 to this report.
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Capital Improvement Program (CIP) 2026-31:
The five-year Capital Improvement Program (CIP) was introduced to Council at the Budget Study Session 2 on May 11, 2026, outlining the City's infrastructure priorities and planned capital investments. Following that presentation, the draft CIP was reviewed by the Planning Commission on June 1, 2026, for consistency with the City’s General Plan.
Attachment 9 - FY 2026-31 Capital Improvement Program provides a comprehensive overview of planned infrastructure projects and reflects Council’s strategic priorities and community needs.
The CIP is intended to ensure that Pacifica’s public facilities and infrastructure are safe, functional, and positioned to serve both residents and visitors for years to come. This year’s CIP book includes a newly formatted project template that includes pictures, districts, related Council Strategic Goals, and more description and justification of the project. The CIP also includes a summary of fund balances for CIP related funds that provide a future projection on fiscal ability to support future CIP needs.
The enhanced CIP format was developed collaboratively by the Public Works and Finance teams and reflects the City’s continued commitment to organizational excellence, transparency, and long-range financial planning. The updated document structure was intentionally designed to align more closely with Government Finance Officers Association (GFOA) and California Society of Municipal Finance Officers (CSMFO) best practices for capital planning and public budget communication, while making the document more accessible and informative for the City Council and community.
The final 5-year CIP document will be brought forward for adoption on June 22, 2026.
Not Funded FY 2026-27 General Government CIP Requests:
As the City Council reviews the City Manager’s Recommended Budget, associated program reductions, and potential community program requests, it is also important to recognize that several General Government capital improvement requests were not included in the FY 2026-27 Recommended CIP due to the City’s ongoing structural budget deficit and limited General Fund capacity. While City Manager and staff recognize the operational value and long-term benefit of many of these needs, available funding was prioritized toward other critical infrastructure obligations, essential operational needs, regulatory requirements, and projects already underway or externally funded.
The following eight projects at combined value of $1.8 million have therefore been identified as unfunded capital requests for FY 2026-27 and have been placed on the City’s unfunded CIP list for future consideration. The City Council may revisit these requests in future budget cycles as fiscal conditions, grant opportunities, operational priorities, or available funding sources evolve.
Pacifica City Council 15 June 08, 2026
STRATEGIC PLAN AND FY 2026-27 WORKPLAN:
The City’s Strategic Plan is intended to serve not only as a long-term visioning document, but also as a practical framework for operational decision-making, resource allocation, staffing priorities, and budget development. As discussed during the Strategic Plan workshop on March 7, 2026 and reflected in strategic planning best practices, the budget and the Strategic Plan should operate as integrated and aligned processes rather than parallel exercises competing for limited organizational resources.
For that reason, the FY 2026-27 Staff Work Plan is being presented concurrently with the Proposed Budget rather than separately from the budget adoption process for better transparency, accountability, and organizational alignment between the Council’s strategic priorities with the City’s actual fiscal realities, staffing levels, and operational capacities. The Work Plan serves as the implementation action plan for the Strategic Plan and reflects the specific projects, tasks, and operational efforts staff believe can reasonably be advanced within available resources during the upcoming fiscal year.
At the same time, the City continues to face significant organizational and fiscal challenges, including structural budget deficits, substantial infrastructure funding gaps, staffing shortages across multiple departments, unfunded capital and facility needs, and rising operational and contractual costs. As reflected throughout the FY 2026-27 Proposed Budget, the City is being required to make difficult service-level decisions and reductions in order to maintain essential core services and preserve long-term fiscal sustainability.
These fiscal and operational constraints directly impact the City’s organizational capacity and ability to advance many of the aspirational goals, strategies, and initiatives identified in the Strategic Plan at the pace originally envisioned. As part of the FY 2026-27 budget development process, Department Directors and executive staff conducted a comprehensive review of the Strategic Plan implementation matrix, including all associated goals, strategies, tasks, and subtasks, to evaluate staffing capacity, operational feasibility, funding availability, and competing organizational priorities.
As a result of that review, staff is recommending that certain work plan items be delayed, deferred, or extended beyond their originally anticipated completion timelines in order to better align organizational commitments with realistic operational capacity. In the interest of transparency and improved accountability, the FY 2026-27 Work Plan also includes a new Pacifica City Council 16 June 08, 2026
tracking category identifying selected items as “Not Selected for FY 2026-27” due primarily to organizational capacity constraints related to staffing and budget limitations. Many of these items were previously identified as “Not Started” or “Off Track,” and staff believes it is important to provide the City Council and community with a realistic assessment of what can reasonably be accomplished given current fiscal and operational conditions (Attachment 11).
The FY 2026-27 Proposed Budget and Work Plan represent staff’s best effort to balance day-today operational responsibilities, mandated services, organizational sustainability, and advancement of the City Council’s strategic priorities in a financially responsible and operationally achievable manner.
ALTERNATIVE ACTION:
The City Council has been asked to provide input and direction on the FY 2026-27 Proposed Budget. No alternative action is identified.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
A balanced and structurally sustainable budget is consistent with all City Council strategic goals and ensures that Citywide revenue meets the cost of providing Citywide services.
FISCAL IMPACT:
Because the recommendation is to review and discuss budget options, no direct fiscal impact is associated with this item. City Council direction on the proposed budget options will be factored in the FY 2026-27 Budget document that will be brought forward for adoption on June 22, 2026.
ORIGINATED BY:
City Manager's Office
ATTACHMENT LIST:
Attachment 1 - FY 2026-27 City Manager Recommended Budget Options (PDF) Attachment 2 - FY2026-27 Recommended Budget General Fund Revenues (PDF) Attachment 3 - FY 2026-27 Recommended Budget General Fund Expenditures (PDF) Attachment 4 - FY 2026-27 Recommended Revenue Amendment Options - Budget Forms (PDF)
Attachment 5 - FY 2026-27 Recommended Expenditure Amendment Options - Budget Forms (PDF)
Attachment 6 - FY 2026-27 Recommended Transfer Amendment Options - Budget Forms (PDF)
Attachment 7 - FY 2026-27 Recommended Other Funds Budget Options - Budget Forms(PDF) Attachment 8 - FY 2026-27 Projected Fund Balance Schedule (1) (PDF) Attachment 9 - FY2026-31 Capital Improvement Program (PDF) Attachment 10 - Proposed FY 2026-27 Not Recommended (Operating and CIP) (PDF) Attachment 11 - FY 2026-27 Strategic Work Plan (PDF)