CITY COUNCIL STAFF REPORT
Meeting Date: June 15, 2026
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: ADOPT RESOLUTION NO. __-26 APPROVING THE CITY OF PLEASANT HILL BIENNIAL BUDGET FOR FISCAL YEARS 2026-2027 AND 2027-2028
SYNOPSIS
Staff has prepared the Fiscal Year 2026/2027 through 2027/2028 (FY 26/27 & FY 27/28) Proposed Biennial Budget, which is attached for review. On May 28, 2026, the Budget Committee reviewed the proposed biennial budget and recommended City Council approval. As recommended, staff is seeking City Council’s adoption of the Proposed Biennial Budget for FY 26/27 – FY 27/28.
DISCUSSION
The Proposed Biennial Budget for Fiscal Years 2026/2027 (FY 26/27) - 2027/2028 (FY 27/28) has been attached for the City Council’s review and comments. The proposed budget assumes maintaining current service levels and programs at current levels. The budget incorporates revenues and expenditures assumptions consistent with the Updated Long Term Financial Plan FY 24/25 through FY 28/29.
This proposed budget also includes a few changes from the Preliminary General Fund Budget that was presented to the Budget Committee on April 30 and City Council on May 18, which results in a net reduction of $294 thousand:
a. Reduced $155 thousand – reduction for CORE Homeless Program; b. Reduced $100 thousand – reduced the transfer for vehicle replacement from $200 thousand annually to $100 thousand per year for both fiscal years. This amount was to replace police vehicles, which may require more future maintenance of the current fleet; c. Reduced $47 thousand – adjusted maintenance staff allocations to other eligible funds; d. Reduced $15 thousand – reduced IT services for building software no longer needed; e. Increased $23 thousand – MPA increased the insurance premiums for general liability and workers compensation.
Overall, the City anticipates that General Fund revenues will total $32.1 million in FY 26/27 and increase to $33.0 million in FY 27/28. General Fund expenditures exceed revenues, totaling $36.2 million in FY 26/27 and $37.6 million in FY 27/28. The proposed budget is projecting that the General Fund Balance will be $10.1 million in FY 26/27 and $5.5 million in FY 27/28. The table below provides a summary of the General Fund:
REVENUE:
The City’s main revenue sources are sales tax and property tax, which account for approximately 64% of General Fund revenue for both fiscal years, with estimates of $20.5 million in FY 26/27 and $21.1 million in FY 27/28. The revenue projections are based on recent projections provided by the City’s consultant, HdL Companies. Most other major revenues are projected to grow at a rate of 3 percent.
EXPENDITURES:
The City’s main expenditure is salaries and benefits, which are projected to be $22.4 million in FY 26/27 and $23.2 in FY 27/28, and represent approximately 62% of the City’s General Fund.
Since the City’s Memoranda of Understanding with its bargaining groups expire this calendar year, staff projected a salary cost increase of 3.25% based on assumptions in the Updated Long-Term Financial Plan. Medical costs are assumed to increase 6%, and pension costs are based on the recent CalPERS Actuarial Valuations. The City’s pension costs continue to rise, as the CalPERS unfunded actuarial liability payment is expected to increase from $5.1 million in FY 25/26 to $5.5 million in FY 26/27 and $6.0 million in FY 27/28. Overall, most non-personnel expenditures are projected to increase year over year by approximately 3 percent.
The proposed budget shows that absent any additional cost reductions beyond those noted earlier or pursuit of any revenue enhancements, the City will have significant budget deficits in FY 26/27 and FY 27/28 that are unsustainable. The challenge has been and consistently remains the increasing CalPERS unfunded liability payment - a cost over which City Council has no control, and one that will grow to nearly $6.0 million by FY 27/28 based on CalPERS current projections.
In conclusion, consistent with the City Manager’s message, the FY 26/27 - FY 27/28 Biennial Budget maintains current service levels, attempts to mitigate the impact of rising costs, and makes targeted investments responsive to community priorities and Council goals. The City continues to provide excellent services and programs this budget supports. Finally, the City will manage costs responsibly and within the resources available, but it is essential to find solutions that secure sustainable financial stability in the near and long term.
Budget Committee:
On May 28, 2026, the Budget Committee reviewed the Proposed Biennial Budget and recommended forwarding to the City Council for approval. The Budget Committee understands that the budget deficit is not sustainable and requested staff to bring back options for consideration in the first quarter of the fiscal year with a tentative date schedule for August 13, 2026.
FISCAL IMPACT
The City shall adopt a budget prior to the beginning of the of the new fiscal year, so funds are appropriated and eligible to spent beginning on July 1, 2026.
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
Move to approve the proposed resolution to adopt the City of Pleasant Hill Biennial Budget for Fiscal Years 2026-2027 through 2027-2028.
ATTACHMENT(S)
Proposed Resolution – Approval of the Fiscal Year 2026/2027 through 2027/2028 Biennial Budget Attachment A - Proposed City of Pleasant Hill Biennial Budget FY 2026/2027 and FY 2027/2028 Prepared by: Erick Cheung, Chief Financial Officer
Approved by: Ethan Bindernagel, City Manager