CITY COUNCIL STAFF REPORT
Meeting Date: June 16, 2025
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: ADOPT RESOULTION NO. ____-25 APPROVING THE UPDATE TO
THE LONG-TERM FINANCIAL PLAN FOR FISCAL YEAR
2024/2025 THROUGH FISCAL YEAR 2028/2029
SYNOPSIS
In 2013, the City Council updated its goals and adopted the objective to “establish a long-term financial plan” as part of the goal of a “City that is financially sound.” The City published its first Long-Term Financial Plan (LTFP) in August 2015. This is an update to the Long-Term Financial Plan for Fiscal Year 2024/2025 through Fiscal Year 2028/2029 that was in the City’s third LTFP.
The City Council is requested to review the updated LTFP and adopt the proposed resolution to accept the plan, as recommended by the Budget Committee.
DISCUSSION
Background
On May 20, 2024, the City Council reviewed and accepted the Long-Term Financial Plan (LTFP) for Fiscal Year 2024/2025 – Fiscal Year (FY) 2028/2029. One of the recommendations by staff was to refresh the information in the LTFP based on the adopted biennial budget and update the estimates for FY 2024/2025. This would allow the City Council to have an updated LTFP prior to beginning the budget process for the next biennial budget. The LTFP will be prepared in the second year of the biennial budget, so that this document could be used as a planning tool to assist the City Council, staff, and the public in understanding the financial issues in the coming years.
The following information in the LTFP has been updated based on facts currently known. The challenging part is the uncertainty surrounding the economic environment from tariffs to possible changes by the Federal Reserve on interest rates, which would have local financial implications.
The Budget Committee reviewed the proposed update at its meeting of June 4, 2025, and forwarded a recommendation to approve the plan.
Long Term Financial Plan
Staff has prepared an Updated Long-Term Financial Plan for FY 2024/2025 through FY 2028/2029. In previous years the LTFP was done in conjunction with the Biennial Budget. This year, staff is preparing the LTFP sooner, so that it can be used as a planning document to assist and inform decision makers with goal setting and/or to assess financial challenges as the City prepares its next Biennial Budget. The Updated LTFP includes the Actuals for FY 2023/2024, Estimates for FY 2024/2025, and the Adopted Budget for FY 2025/2026 to revise the forecast.
The financial challenge that Pleasant Hill and many cities statewide continue to face is the rising cost of unfunded pension liabilities. The City has taken steps by adopting a Section 115 Trust and making an initial contribution of $1 million. Additional contributions plus interest income have nearly doubled that balance to $1.9 million as of March 2025. In the previous LTFPs and the Biennial Budgets, the unfunded pension costs were and continue to be the City’s largest liability and the reason for growing annual deficits in the budget and forecasts.
Financial Challenges
Revenue Growth
The City’s General Fund balance has grown to nearly $15.7 million in FY 2023/2024. The City continues to be financially prudent by contributing more into the pension savings accounts and agreeing to reasonable labor increases. Also, the City has been able to offset the budget deficits due to economic improvement from sales tax revenues, federal funding from the pandemic, and staffing vacancies attributable to retirements and challenges to recruit public safety personnel.
Based on current projections, sales tax revenue has leveled off as the pandemic spending has cooled. Current economic information paints an uncertain financial outlook with revenues around $10.5 million in FY 2024/2025, which is similar to the previous fiscal year. Also, higher interest rates have slowed property tax revenue growth with an average of 6% in recent years, but the figure is expected to rise between 3.9% to 4.5% in the forecast and estimated to be $9.0 million in FY 2024/2025.
Unfunded Pension Costs
The financial challenge is based on the assumptions that the forecasted deficit continues to grow from $2.6 million to $3.7 million between FY 2024/2025 and FY 2028/2029 (Executive Summary pp.1-3), as the unfunded pension liabilities payments grow from $4.59 million in FY 2024/2025 to nearly $6.5 million in FY 2028/2029. Staff have also included the Long Term Unfunded Actuarial Liability (UAL) Payment chart emphasizing the issue of the growing unfunded pension liability (see p.26) using a CalPERS pension tool to show the next 15 fiscal years; a material decrease in this payment is not expected to occur until FY 2037/2038.
Long Term Unfunded Actuarial Liability Payment
Labor Negotiations
The City reached labor agreements with the represented and non-represented partners through various dates in 2026. The City will be in negotiations in the coming fiscal year, and the results will have some impact on the City’s finances since salary and benefits represent 62% (not including the CalPERS UAL payment, which is 15%) of the General Fund Budget.
Summary
The table below shows the summary General Fund revenue and expenditures before the UAL payments and the impact afterwards (see p.40) based on the moderate service level. The City would be financially stable based on costs controlled by the City Council, but the UAL amount is determined by CalPERS and is a mandatory amount that the City is required to pay.
GENERAL FUND FY 23/24 FY 24/25 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 ($) THOUSANDS Actual Adopted Estimate Forecast Forecast Forecast Forecast Revenues $31,387 $31,353 $31,153 $31,681 $33,013 $34,040 $35,102 Expenditures (not including
UAL expense) $25,619 $29,352 $27,279 $29,246 $30,225 $31,237 $32,286 Surplus $5,768 $2,001 $3,874 $2,435 $2,788 $2,803 $2,816 UAL Expenditures $3,874 $4,590 $4,474 $5,052 $5,583 $5,883 $6,478 (Deficit) $1,894 ($2,589) ($600) ($2,617) ($2,795) ($3,080) ($3,662) Beginning Fund Balance $13,786 $15,680 $15,680 $15,080 $12,463 $9,668 $6,587 Ending Fund Balance $15,680 $13,091 $15,080 $12,463 $9,668 $6,587 $2,925 On June 4, staff presented the Updated LTFP for FY 2024/2025 - FY 2028/2029 to the Budget Commitee, which recommended forwarding the report to the City Council for review and acceptance.
FISCAL IMPACT
Approving the Updated LTFP for FY 2024/2025 - FY 2028/2029 does not have any specific fiscal impact to the City.
PUBLIC CONTACT
Public Contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the resolution accepting the Updated Long-Term Financial Plan for Fiscal Year 2024/2025 - 2028/2029, as recommended by the Budget Committee.
ALTERNATIVES TO RECOMMENDED ACTION
Do not adopt the resolution and provide direction to staff.
ATTACHMENT(S)
1. Proposed Resolution
2. Long Term Financial Plan Updated 2025 Fiscal Year 2024/2025 – Fiscal Year 2028/2029 Prepared by: Erick Cheung, Chief Financial Officer
Approved by: Ethan Bindernagel, City Manager