FY 2026-27
General Fund
Operating Budget
Preview
April 20, 2026
1 Budget Timeline
December 2025 February 2026 April 2025 June 2025
Budget
Kickoff
February 23
FY 2025-26 Mid-Year
Budget Updates
April 20
2026-27
Budget Preview
GF and CIP
June 1
Proposed Budget
Public Hearing
June 15
Budget Adoption
Public Hearing
Budget Process
FY 2026-27 Budget Goals
• Maintain baseline operating budget
• Integrate Financial Sustainability Plan activities
• Align with City Council strategic plan and priority
initiatives
• Support day-to-day operational needs
Economic Outlook
• Economic uncertainty continues
• Inflation remains a concern
• Federal Reserve back in “wait-and-see” mode
• Overall economic growth has slowed
Legislative Environment
• Potential Limits on Federal Funding
• State threat to Property Tax in-Lieu of Vehicle License Fee (VLF)
• Real Property Transfer Tax (RPTT) Statewide Proposed Ballot Measure
Budget Strategies
Maintain core budget techniques for FY 26-27:
• Use conservative approach
• Reduce VLF Funding
• Return to the fundamentals
• Focus on long-term stability, not short-term reactions General Fund Revenue Base
Tax Revenues
79%
Other Revenues
21%
$174.0 million
Top-3 tax revenues account for 90%
of total tax revenues:
• Property tax
• Sales tax
• Real property transfer tax (RPTT)
$137.9 million
Property Tax
Sales Tax
RPTT
Business Tax
Other Taxes
General Fund Revenue Base
Not all economic data affect us the same way:
• Housing Market Trends: Directly affect two of our largest revenue sources, Property Tax and Real Property Transfer Tax (RPTT). • Interest Rates: High borrowing costs may affect housing market. • Inflation: Persistent inflation drives up costs across the board—from construction materials and vehicles to staffing and service contracts. • Economic Growth: Reduction in growth expectations could impact sales tax revenue.
General Fund Revenue Base
Housing Market
Local housing market is
relatively stable:
• Market activity slowed in
2022/2023 and has been
increasing in 2024/2025
• Home prices remain stable, no
sign of sharp declines.
• Demand is still strong -
averaged days on market @
15~20 days
Data Source: San Mateo County Association of Realtors
$-
$0.4
$0.8
$1.2
$1.6
$2.0
$2.4
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
0 200
400
600
800
1000
Millions
City of San Mateo
Single Family Residential
# Sold Averaged Days on Market Averaged Median Sales Price General Fund Revenue Base
Sales Tax Trend
Diversified sales tax base:
• Not heavily reliant on auto
dealers or retail hubs
• Diverse set of business
types.
• Recover more quickly from
economic downturns
18.4 18.6 18.8 19.9 17.9 18.8
22.2 22.5 21.0 20.4 20.6 21.0
5.4 5.1 5.1
6.1 5.4 5.7
6.9 7.1
6.8 6.8 6.8 6.9
$-
$5
$10
$15
$20
$25
$30
SALES TAX (IN MILLIONS)
Local 1% Sales Tax (including Prop 172) Measure S
FY 2026-27
General Fund Operating Budget - Preview
General Fund Challenges
12 • Costs of providing essential city services
• Fund long-term, legally-obligated
liabilities
• Maintain and repair city facilities
• Provide for infrastructure needs
Costs to
Provide City
Services
Long-Term
Pension
Obligations
City Facilities
&
Infrastructure
Revenues
General Fund Challenges
VLF
Shortfall
Potential of no
backfill from
State
Threat to
RPTT
Potential to
eliminate 3rd
largest tax
revenue
Two Major Uncertainties
13 FY 2026-27 Budget Preview
General Fund Revenue Assumptions
• Property Tax: 3.17% growth
• VLF shortfall: assume receipt of 0% of FY 24-25 VLF shortfall • Sales Tax: flat @ $28.0 million
• Real Property Transfer Tax (RPTT): $9.0 million total • $8.4 million baseline
• $0.6 million from Measure CC
• Business Tax: $8.3 million baseline
• Transient Occupancy Tax (TOT) – $4.1 million baseline FY 2026-27 Budget Preview
General Fund Revenues
FY 2026-27 Budget Preview
General Fund Expenditure Assumptions
• Personnel Costs:
• Salaries and Wages: per labor contracts
• Benefits: rising health care and pension costs
• Non-Personnel Operating Costs:
• Supplies, services, maintenance costs: up 3%
• Insurance Premium: up about $1 million (20%)
• Utilities (PG&E and water): up 15-18%
• Transfer Outs: total $7.6 million, including $4.2 million to CIP Projects; $3.0 million to Debt Service Funds; and $410K to the Equipment Replacement Fund for building maintenance set-aside.
FY 2026-27 Budget Preview
General Fund Expense Assumptions
General Fund Expenditures
(in millions)
2023-24
Actuals
2024-25
Actuals
2025-26
Adopted
Budget
2026-27
Budget
Preview
Change in
$
Change
in %
Personnel Costs:
Salaries and Wages 52.8$ 56.1$ 56.8$ 59.7$ 2.9$ 5.1% Benefits 21.0$ 23.5$ 23.8$ 22.6$ (1.2) -5.0% Pension Unfunded Liability (UAL) 11.4$ 13.0$ 13.6$ 14.7$ 1.1 8.1% Non-Personnel Operating Expenses 37.0$ 40.1$ 42.3$ 44.7$ 2.4 5.7% SMC Fire and Legacy Costs 34.2$ 36.1$ 38.8$ 40.7$ 1.9 4.9% Transfers Out 15.7$ 11.6$ 12.4$ 7.6$ (4.8) -38.7% Total General Fund Expenditures 172.2$ 180.4$ 187.7$ 190.0$ 2.3$ 1.2% 18 0.0
1.0 2.0
3.0 4.0
5.0 6.0
7.0 8.0
2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 Est
2026-27
Forecast
2027-28
Forecast
2028-29
Forecast
2029-30
Forecast
2030-31
Forecast
Pandemic / Post-Pandemic Forecast: Stable with 1-2% moderate growth Measure S Revenue Trend
How we use the Measure S fund?
Police (Total FTE 4.0)
1.0 Traffic Sergeant
0.5/0.5 Traffic Officers
2.0 Police Officers (DTU)
Total: $1.55 million
Parks & Rec (Total FTE 1.16)
0.16 Community Service Supervisor
1.0 Community Service Coordinator
Operating Expenses to support
• Get Around! Senior Ride Program
• Mobile Recreation program
Total: $407,000Library (Total FTE .75)
0.75 Library Assistant –to support
circulation
Operating Expense to support restoring
service hours at Main Library and the two
branches.
Total: $202,000
Debt Service Cost
2020A Rev. Bonds (Street & Flood Control)
Total: $2.63 million / year
19 Measure S Five-Year Forecast (in millions)
20 FY 2025-26
Adopted Budget
FY 2026-27
Proposed
FY 2027-28
Forecast
FY 2028-29
Forecast
FY 2029-30
Forecast
FY 2030-31
Forecast
Revenues 7.1 7.0 7.2 7.3 7.5 7.6 Expenditures 2.2 2.2 2.3 2.4 2.5 2.5 Transfers Out:
Transfers Out to General Fund 0.3 0.3 0.3 0.3 0.3 0.3 Transfers Out to Debt Service Fund 2.7 2.7 2.7 2.7 2.7 2.7 Transfers Out to Capital Projects Fund 3.0 - - - - - Total Transfers Out 6.0 3.0 3.0 3.0 3.0 3.0 Available Capacity 0.7 2.4 1.7 1.7 1.7 Net Change in Fund Balance (1.1) 1.1 (0.5) 0.3 0.3 0.4 Unrestricted Fund Balance, beginning 0.8 (0.3) 0.8 0.3 0.5 0.9 Unrestricted Fund Balance, end of year (0.3) 0.8 0.3 0.5 0.9 1.3 FY 2026-27 General Fund Budget Preview
General Fund
(in millions)
2025-26
Adopted
Budget
2025-26 Mid-
Year
Projection
2026-27
Budget
Preview
Change in
$
Change in
%
Total Revenues $ 175.8 $ 176.8 $ 174.0 $ (2.8) -1.6% Total Expenditures 187.7 183.7 190.0 $ 2.3 1.3% TOTAL $ (12.0) $ (6.9) $ (16.0) $ (0.5) General Fund Balance
GENERAL FUND 2023-24
Actuals
2024-25
Actuals
2025-26 Mid-
Year
Projection
2026-27
Budget
Preview
Beginning Fund Balance 117.9$ 117.9$ 119.5$ 87.6$ Total Revenues 172.2 179.3 176.8 174.0 Total Expenditures 172.2 177.7 183.7 190.0 Net - 1.6 (6.9) (16.0)
Transfer to Capital Investment Reserve (25.0)
Ending Fund Balance 117.9$ 119.5$ 87.6$ 71.6$ General Fund Balance
GENERAL FUND
2025-26 Mid-
Year
Projection
2026-27
Budget
Preview
Contingency Reserve (15% of GF Expenses) 26.3$ 28.5$ Housing Set-Aside Reserve 6.5 6.5
CIP Carryover 9.2 8.2
Budget Stabilization Reserve (15% of GF Revenues) 26.4 18.4 Pension Stabilization Reserve 10.0 10.0
Unassigned Fund Balance 9.2 -
Capital Investment Reserve 25.0 25.0
Ending Fund Balance 112.6$ 96.6$
General Fund 10-Year Forecast
Four Ten-Year Forecast Scenarios
• Optimistic
• Practical
• Grave
• Dire
24 General Fund 10-Year Forecast
Expenditure Assumptions:
• Personnel Costs
• Salaries and Wages – increase with general alignment of historical CPI • Medical Costs – an annual growth rate of 6%
• Pension Costs – based on CalPERS valuation data
• Non-Personnel Costs – 4% compounded annual growth rate was used for FY 2026-27 and 2027-28, then 3% for the out years in the forecast • Transfer Out – $7.5 million of baseline annual contribution to CIP except in FY 26-27, and required debt service
25 General Fund 10-Year Forecast
26 Revenue Assumptions:
• Property Tax: Secured property tax growth of 3.17% in FY 26-27 and 4% going forward
• Sales Tax: Relatively flat with moderate 1-2% increase • TOT: Maintain new baseline at $4.1 million with slight 2% growth • Property Transfer Tax: New baseline of $9 million (includes Measure CC) • Fees and Other Revenues: Moderate growth
General Fund 10-Year Forecast
27 Revenue Assumptions: Uncertainty in some property taxes drives four scenarios Property
Tax:
Optimistic Scenario Practical Scenario Grave Scenario Dire Scenario VLF
Shortfalls
No State backfill in
FY 26-27
100% backfill in
future
(2-year gap)
No State backfill in
FY 26-27
67% backfill in
future
(2-year gap)
No State
backfill in
future
No State
backfill in
future
RPTT No change No change No change No RPTT
General Fund 10-Year Forecast
Optimistic Scenario
28 • No VLF Shortfall
in FY 26-27
• 100% VLF
Shortfall into FY
2035-36
• Three more
schools move to
basic aid status
General Fund 10-Year Forecast
Practical Scenario
29 • No VLF Shortfall
in FY 26-27
• 67% VLF
Shortfall into FY
2035-36
• Three more
schools move to
basic aid status
General Fund 10-Year Forecast
Grave Scenario
30 • No VLF Shortfall
in FY 26-27
• 0% VLF Shortfall
into FY 2035-36
• Three more
schools move to
basic aid status
General Fund 10-Year Forecast
Dire Scenario
31 • No VLF Shortfall
in FY 26-27
• 0% VLF Shortfall
into FY 2035-36
• Three more
schools move to
basic aid status
• No RPTT two
years following
potential ballot
measure
FY 2026-27 General Fund Budget Preview
Financial Sustainability Activities
Expenditure
Control
• Frozen
positions
• Non-General
Fund Charges
• Benefit Savings
• Operating
Budget Savings
Revenue
Enhancements
• Sales Tax
Measure
• Revenue
Agreements
Cost Recovery &
Cost Allocation
• Cost Recovery
• Citywide
Updated Cost
Allocation
Grant
Opportunities
• Grants
Coordination &
Acquisition
Economic
Development
• Adopted Work
Plan Activities
$3.2 Million
Est. Savings
Thank you
Abby Veeser
Finance Director
[email protected]
650-522-7102
33