Finance Committee
April 23, 2025
FYs 26 & 27 Proposed
Biennial Budget
Presentation
Pg 1 Meeting Date: April 23, 2025
Key Driving
Factors
1 AGENDA
Budget Strategies
2 General Fund
Forecast
3 Budget
Overview
4 General Fund
Reductions
5 Capital Funding
Needs
6 Pension &
OPEB
7 ARPA
8 Pg 2 Meeting Date: April 23, 2025
Fiscal Stability
Increased employee costs
Reduce discretionary budgets
to preserve service levels
Raising Pension / OPEB
Capital / Internal Service
Fund Needs
Economic Uncertainty
Key Driving
Factors
Impacting
FY26 & FY27
Budget
Pg 3 Meeting Date: April 23, 2025
Align budget to actual need
and costs
Budget Strategies
Reduce services and supplies; preserve service
levels
Discretionary Costs
Prioritize fleet replacement; defer technology
enhancements; align budget with need and
costs
Internal Service Fund
Temporarily remove all budget allocations for
fixed assets
Fixed Assets
Establish realistic onboarding of vacant
positions, including anticipation of attrition
through retirements
Pg 4 Meeting Date: April 23, 2025
Personnel Costs
What is Fund Balance?
Pg 5 Meeting Date: April 23, 2025
➢ What is Fund Balance?
• Represents the difference between the City’s totals assets and current/future liabilities. It essentially shows the net available resources in that fund at a given point in time. • Categories of Fund Balance:
• Nonspendable – Resources that cannot be spent.
• Restricted – Resources with external restrictions (i.e. grants). • Committed – Set aside for specific purposes by formal government action. • Assigned – Intended for specific purposes but not legally restricted (i.e. encumbrances). • Unassigned – Available for any purpose.
➢ What is a Targeted Fund Balance?
• A targeted fund balance percentage refers to the desired level of reserves a government or organization aims to maintain in its General Fund.
• The Government Finance Officers Association (GFOA) recommends that general-purpose governments maintain unrestricted fund balance in their General Fund of at least two months (or approximately 20%) of regular operating expenditures (excluding transfers).
What is Fund Balance? (cont.)
Pg 6 Meeting Date: April 23, 2025
➢ Why is a targeted 20% fund balance important?
• Ability to pivot for unexpected expenses without resulting in direct to significant service reductions or borrowing.
• Improved ability to weather economic downturns.
• Ability to remain operational during natural disasters. • May impact / improve credit ratings, leading to lower borrowing cost. • Enhanced financial stability and resilience.
➢ What is the City Fund Balance Policy?
• $5M for Major Emergencies
• 20% of Total Expenditures for Economic Uncertainties
• Set policy meets and exceed industry best practice
What is a Structural Deficit?
Pg 7 Meeting Date: April 23, 2025
➢ What is structural deficit?
• A structural deficit is a persistent imbalance where a government's spending consistently outpaces its revenue.
➢ What are some causes that attribute to a structural deficit? • Insufficient revenue or fluctuating revenue
• Unpredictable rate changes to pensions
• Growing infrastructure needs
• Economic instability/uncertainties
• Excessive spending
➢ Why is a structural deficit is bad?
• Persistent structural deficits are unsustainable.
• Eventually, all available funds are expended, which can put the City in a position of filing for bankruptcy.
General Fund 10-Year Forecast
(prior to proposed budget)
($ in millions)
Pg 8 Meeting Date: April 23, 2025
General Fund 10-Year Forecast
(Proposed)
($ in millions)
Pg 9 Meeting Date: April 23, 2025
General Fund 5-Year Forecast (Proposed)
($ in thousands)
Pg 10 Meeting Date: April 23, 2025
2025-26 2026-27 2027-28 2028-29 2029-30
1Revenue
2 Property Tax $33,776 $35,392 $36,277 $37,184 $38,114
3 Sales Tax $54,874 $56,521 $56,944 $57,547 $58,792
4 Other Tax $29,893 $30,835 $31,452 $32,081 $32,723
5 Other Revenue $31,195 $31,458 $31,868 $32,300 $32,747 6 Total Revenue $149,738 $154,206 $156,542 $159,112 $162,375 7 8Expenditures
9 Salaries & Benefits $75,812 $80,709 $83,875 $87,551 $90,823 10 Operating Expenses $76,293 $77,644 $77,200 $78,787 $80,454 11 Transfers $7,400 $6,100 $6,200 $6,300 $6,500
12 Total Expenditures $159,504 $164,453 $167,275 $172,638 $177,776 13 14 Net / Use of Fund Balance ($9,766) ($10,247) ($10,733) ($13,526) ($15,401) 15 16 Beginning Balance $54,733 $44,967 $34,720 $23,987 $10,461 17 Ending Balance $44,967 $34,720 $23,987 $10,461 ($4,940) 18 19 Ending Balance as % of Expenditure 29.6% 21.9% 14.9% 6.3% -2.9%
A B C D E F
General Fund Estimated Fund Balance
($ in thousands)
Pg11 Meeting Date: April 23, 2025
FY 2024-25
Adjusted Budget
FY 2025-26
Proposed
FY 2026-27
Proposed
FY 2027-28
Projected
FY 2028-29
Projected
1 Beginning Balance $75,454 $54,733 $44,967 $34,720 $23,987 2 3 Revenue $143,404 $149,738 $154,206 $156,542 $159,112 4 Expenditures $156,726 $153,404 $158,253 $160,975 $166,138 5 Transfers $7,400 $6,100 $6,200 $6,300 $6,500
6 7 Net / Use of Fund Balance ($20,721) ($9,766) ($10,247) ($10,733) ($13,526) 8 9 Ending Fund Balance $54,733 $44,967 $34,720 $23,987 $10,461 10 Ending Balance as % of Expenditure 34.9% 29.3% 21.9% 14.9% 6.3% 11 12 Fund Balance by Category
13 Non-spendable/Restricted/Assigned ($13,055) ($13,055) ($13,055) ($13,055) ($13,055) 14 Unassigned* $41,678 $31,912 $21,665 $10,932 ($2,594) 15 16 *Unassigned
17 Major Emergencies ($5,000) ($5,000) ($5,000) ($5,000) ($5,000) 18 Economic Uncertainties ($31,345) ($30,681) ($31,651) ($32,195) ($33,228) 19 Compensated Absences ($708) ($708) ($708) ($708) ($708) 20 Available Undesigned Funds $4,624 ($4,477) ($15,694) ($26,972) ($41,530)
A B C D E F
City Fund Balance Policy
Pg 12 Meeting Date: April 23, 2025
City’s Current Fund Balance Policy:
➢ $5M for Major Emergencies
➢ 20% of Total Expenditures for Economic Uncertainties
Proposed Revision to Other Policies FY 25 & FY 26
➢ Suspend PULL policy; and
➢ All unspent funds go toward rebuilding fund balance to meet City Fund Balance Policy in future years
Pg13Meeting Date: April 23, 2025
Service & Supplies Net Change
Pg14 Meeting Date: April 23, 2025
Fixed Asset Net Change
Pg 15 Meeting Date: April 23, 2025
Fixed Asset Reductions
General office
furniture / redesign
(new and
replacement)
Reduction in
equipment rental for
events
Replacement of
tables and chairs at
community facilities
Replacement of park
and tree
maintenance
equipment
Deferred technology
enhancements
Pg 16 Meeting Date: April 23, 2025
Capital Project Needs - Transfers
Estimated Available General Fund Allocation to CIP/Other: $5.9M Estimated Available General Fund Allocation to Fleet: $1.5M Pg 17 Meeting Date: April 23, 2025
Fleet Replacement Needs
➢ Ongoing Fleet Replacement Needs
• City Fleet
• Police Fleet
• Fire Fleet
➢ Procurement Challenges
• Public safety fleet
• Fire Fleet - Estimated date of delivery is approximately 4-5 years from date of order ➢ Legislative Requirements
• Transition to Electric Vehicles (EV)
• Increase costs for EV
➢ Continue efforts to establish sustainable fund balance for future purchases Unfunded Liabilities
Unfunded liability costs
continue climbing to
FY33
CalPERS rates
impacted by
unpredictable
economic landscape
Leverage investments
in trust to soften the
steep increase
Pension & OPEB
Costs Unpredictability Trust Fund
Pg 18 Meeting Date: April 23, 2025
Pg 19 Meeting Date: April 23, 2025
Supplemental Trust Information
➢ A pension trust fund established by a city, like San Leandro's, is a separate entity to manage assets for future pension payments. This trust helps stabilize pension costs, mitigate budget challenges, and ensures future financial obligations are met.
➢ Can only be used to:
• Reimburse City for CalPERS contributions
• Make payments directly to CalPERS
➢ More flexibility than paying CalPERS directly
• City decides if and when and how much money to put into the Trust • City decides if and when and how much to withdraw to pay CalPERS or reimburse the City ➢ Current funding ratio (including supplemental trust)
• Miscellaneous Plan - 72.5% Funded
• Safety (Police) Plan – 70.9% Funded
Pg 20 Meeting Date: April 23, 2025
ARPA Projects – Funding Needs
Pg 21 Meeting Date: April 23, 2025
Long-Range Financial Forecast
➢ Long-range financial forecast continues to project a structural deficit. ➢ Continue to explore budget balancing strategies, including expenditure control and revenue enhancements ➢ Remain focused on core services
➢ Continued General Fund support for Infrastructure / capital needs is growing and unsustainable • Roadways
• Fleet
• Facilities
• Information Technology
➢ Advance toward the exploration of revenue measure to support growing infrastructure / capital needs ➢ Council Ask: Increase FYs 26 & 27 by $500,000 for polling and campaign support in preparation of a potential revenue measure
Citywide Operating Budget
($ in millions)
Pg 22 Meeting Date: April 23, 2025
Pg 23 Meeting Date: April 23, 2025
Next Steps
Recommend Proposed Budget to
Council
Suspend
PULL Policy in
FY25 & FY26
FY25 & FY26 All Unspent Funds Go
Directly to General Fund
Fund Balance
Discussion &
Feedback
Pg 24 Meeting Date: April 23, 2025