C I T Y O F S A N P A B L O
CITY COUNCIL MEETING –
PUBLIC BUDGET HEARING
FY 2026-27 & FY 2027-28
Public Budget Hearing: June 1, 2026
AGENDA
1 Budget Process & Calendar
2 CM Fiscal Risk Warnings & Long-Term Forecast
3 10-Year Baseline Projection
4 Fiscal Austerity vs. Fiscal Discipline Approach
5 FRRP Operating Reserve Balances
6 Projected Deficits BEFORE Balancing
7 Budget Balancing Measures Applied
8 One-Time Reserves to Close Deficits
9 Impact on City Programs & Services
10 Biennial Budget Overview (All Funds)
11 Revenue Details & Comparison
12 Expenses, Personnel & Departments
13 CIP , Debt & GF Subsidies
14 CM Guidelines, New Proposals & Staff Recs
Budget Process & Calendar
R E V I S E D 0 2 / 1 7 / 2 0 2 6 — Z E R O - B A S E B U D G E T I N G 1 Oct 7, 2025
Budget
Kickoff
2 Oct-Dec 2025
Dept Budget
Development
3 Jan-Mar 2026
Finance
Review
4 Apr 1, 2026
BFLSC
Presentation
5 Apr 8, 2026
CC Special
Session
6 Jun 1, 2026
Public
Hearing
7 Jun 15, 2026
Council
Adoption
Personnel Budget
• 5-Year Employee Labor MOUs (2022-2027)
• Health Insurance Premium Escalation
• CalPERS UAL Increases ($5.8M-$6.0M)
• OPEB Retiree Healthcare New Funding
Services & Supplies
• Zero-Based Budgeting Model (ClearGov)
• Departmental Cost Containment
• Insurance Cost Escalation Addressed
• Technology & Infrastructure Investment
Key Milestones: Apr 20 — CC Sets Hearing | Jun 1 — Public Hearing | Jun 15 — Adoption | Jun 29-30 — Entered in Springbrook City Manager Budget Messages: Fiscal Risk Warnings
1 FY 2017-21 Adopted Quadrennial Budget Cycle
2 FY 2021-22 Adopted Budget (COVID-19 Recovery)
3 FY 2022-23 & FY 2023-24 Adopted Biennial Budget
4 FY 2024-25 & FY 2025-26 Adopted Biennial Budget
5 FY 2026-27 & FY 2027-28 PROPOSED BIENNIAL BUDGET
For several years, the City Manager has consistently cautioned the City Council about the financial risks associated with using one-time Operating Reserves to fund ongoing annual expenses. These warnings indicate that relying on temporary funding sources to cover recurring operational costs is not a sustainable fiscal strategy.
FISCAL RISK WARNING
FISCAL RISK WARNING
FISCAL RISK WARNING
FISCAL RISK WARNING
FISCAL RISK WARNING
Long-Term Forecast & Economic Outlook
PFM Multi-Year Financial Plan (December 2023)
STRENGTHS
• Strong General Fund Reserves ($51.8M total)
• Reserves exceed local peer cities (150% of GF)
• Proactive Leadership & Fiscal Discipline
• New Cannabis Revenue Stream ($350K-$750K)
• Proceeds from Strategic Property Sales
CHALLENGES
• Casino revenue 59% of General Fund (Fund 100)
• PFM projects $44.1M cumulative 10-yr deficit
• Expense growth outpaces revenue growth
• CalPERS UAL rising ($5.8M to $6.0M biennial)
• Insurance costs tripled since 2020
CASINO REVENUE CONTEXT:
• Casino revenue represents 59% of General Fund (Fund 100) baseline revenue ($33.3M of $56.2M in FY 2026-27). • Casino revenue has fluctuated significantly since 2020, including a 20% ($7M) COVID decline in FY2020, followed by recovery. • Total Casino cumulative shortfall over the last three fiscal years since FY 2022-23 ($2,448,437), underscoring the City's primary fiscal risk.
PFM 10-Year Baseline Projection (December 2023)
Source: PFM Multi-Year Financial Plan, December 2023
-2
-3
-4
-5 -5 -5 -5 -6
-4 -4
-6
-5
-4
-3
-2
-1
0 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Annual Surplus/(Deficit) in $Millions
$44.1M
Cumulative
10-Year Deficit
FY2032
Fund Balance
Depleted By
0.6%/yr
Casino Revenue
Growth Rate
$11.6M
CalPERS UAL
by FY2034
Key Drivers of the Structural Deficit (PFM Analysis)
• Casino revenue projected at 0.6%/yr vs. historic 5.6% CAGR; any stagnation severely impacts the budget • Casino revenue may be impacted by proposed by other regional Casino Threats (Vallejo, CA) • Expenditure growth (1.8%/yr) consistently outpaces revenue growth (1.5%/yr) driven by pensions, healthcare, and transfers • CalPERS costs projected to grow from $6.3M (FY2023) to $11.6M (FY2034) — reaching 19% of the total budget Major Revenue Sources
Casino, Sales Tax, Property Tax and Utility Users Tax — FY 2018-19 through FY 2025-26 0 5
10 15
20 25
30 35
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Casino Revenue Sales Tax Property Tax Utility Users Tax $30.9M
Casino Revenue
FY 2025-26
$5.2M
Sales Tax
FY 2025-26
$1.7M
Property Tax
FY 2025-26
$3.2M
Utility Users Tax
FY 2025-26
REVENUE TREND: Casino revenue dominates at $31M (59% of GF), but growth has slowed to 0.6%/yr since FY 2022-23. Sales Tax and Property Tax remain stable but modest.
Total four major sources represent 72% of General Fund revenue.
Casino Revenue Actuals (FY 2023-2026**)
Payment Schedule Comparison — Actuals vs. Adopted Budget Payment Schedule FY 2023 FY 2024 FY 2025 FY 2026
July – August $5,038,836 $5,002,965 $5,163,342 $5,344,164 September – October $7,396,670 $7,455,076 $7,529,478 $7,487,926 December – February $7,501,638 $7,510,831 $7,591,513 $7,591,513 March – May $7,698,296 $7,812,344 $8,087,281 $8,087,281 June $2,509,128 $2,475,756 $2,467,389 $2,467,389
Actuals: $30,144,568 $30,256,972 $30,839,005 $30,978,275 Adopted Budget $30,500,000 $31,500,000 $31,689,000 $31,879,000 Variance ($355,432) ($1,243,028) ($849,995) ($900,859)** CUMULATIVE SHORTFALL: Total Casino revenue shortfall over the last four fiscal years (FY 2023–2026): ($3,349,314) — underscoring the City’s primary fiscal risk. **Projected Year-end Casino Revenue Shortfall
4-Year Avg Shortfall: ($837,329)
Fiscal Austerity vs. Fiscal Discipline Approach
FISCAL AUSTERITY
"SLASH & BURN" — DRACONIAN APPROACH
DRACONIAN: INDISCRIMINATE "ACROSS THE BOARD" CUTS IN
ALL CITY DEPARTMENTS
❖ Common practice to meet a maximum expense threshold
ALL CUTS: CUTS TO ALL CONTRACTS, SERVICES/SUPPLIES,
PROGRAMS AND FTE STAFFING LEVELS
❖ Significant cuts in ALL Departments without strategic prioritization IMMEDIATE: IMMEDIATE IMPACTS TO THE PUBLIC, REDUCED
PROGRAM AND SERVICE DELIVERY
❖ Results in severe impacts to staff morale, recruitment & retention RESULT: Short-term, reactive, and potentially counter- productive. Can reduce demand, slow growth, increase
unemployment, and damage public trust.
FISCAL DISCIPLINE
"SLOW BURN" — PRACTICAL & STRATEGIC APPROACH
TIER I REDUCTIONS: FREEZE NON-BUDGETED FTE VACANCIES
❖ Ongoing City practice since FY 2024-25)
TIER II REDUCTIONS: USE OF ONE-TIME OPERATING RESERVES FOR
ANNUAL OPERATING & CAPITAL EXPENSES
❖ Ongoing City practice; $7M depleted since FY 2022-23
TIER III REDUCTIONS:
REDUCE/REVISE NON-ESSENTIAL CONTRACTS,
PROFESSIONAL SERVICES, CAPITAL OUTLAY &
OTHER SPENDING
❖ New City practice to meet current budget reduction
TIER IV REDUCTION: REDUCE OR LAYOFF EXISTING FTE POSITIONS ❖ USED AS LAST RESORT OPTION
RESULT: Long-term, preventive, and strategic. Growth-
compatible with counter-cyclical flexibility. This budget reflects disciplined and measured fiscal management.
FRRP Operating Reserve Balances
As of June 1, 2026
# Fund Reserve Name % Source Balance
01/20/2026
Balance
04/08/2026
1 150 Catastrophic Reserve 50% Op Budget $28,160,289 $28,160,289 2 170 Budget Stabilization Reserve 5% Op Budget $2,816,029 $2,816,029 3 190 CM Contingency Reserve 1% Op Budget $563,206 $131,396 4 130 Bldg/Facilities/Parks Maint. 3% Op Budget $3,383,822 $0 5 140 Asset & Vehicle Replacement 2% Op Budget $1,932,127 $1,126,412 6 110 General Fund Designated Reserve 10% Fund Bal $6,922,779 $5,249,202 7 103 Sales Tax Revenue Sustainability 10% Fund Bal $1,836,566 $1,565,724 8 104 General Liability Sustainability 5% Fund Bal $918,283 $379,454 9 105 Pension (CalPERS) Liability 5% Fund Bal $918,283 $421,928 10 180 Casino Revenue Sustainability Discr. Fund Bal $12,855,957 $11,955,071 TOTAL RESERVES $60,307,341 $51,805,503
Op Budget = % of Annual Total Operating Funds Budget Fund Bal = % of net change in year-end audited fund balance (after ACFR) Total Variance: ($8,501,838)
Major Budget Changes — Key Drivers
COST INCREASES
CalPERS UAL
+$1.03M (FY27) 22% increase
OPEB Retiree Healthcare
+$717K (FY27) New funding line
Insurance (Prop/Fire)
+$948K (FY27) Continued escalation
Utilities
+$205K (FY27) Rate increases
Software/Network
+$479K (FY27) Tech modernization
Prof. Svcs Multi-Dept
+$4.2M (FY27) Centralized contracts
SAVINGS & NEW REVENUE
Cannabis Revenue
+$350K (FY27) Growing to $750K
Proceeds from Sale
+$2.0M (FY27) Asset disposition
Use of Property & Money
+$2.7M (FY27) Earned interest properly allocated
Medical Benefits
-$486K (FY27) Actual costs vs. blanket Kaiser rate
IT Cost Optimization
-$264K (FY27) Consolidation
Dept S&S Containment
Various Zero-based budgeting reductions
Original Budget Forecast — December 2025
B E F O R E B U D G E T B A L A N C I N G M E A S U R E S , R E V E N U E A D J U S T M E N T S , O R C O S T R E D U C T I O N S FY 2026-27
Total Revenue: $71,766,250
Total Expenditures: $73,934,670
SHORTFALL: ($2,168,420)
FY 2027-28
Total Revenue: $74,079,618
Total Expenditures: $76,300,158
SHORTFALL: ($2,220,539)
Biennial Total Original Shortfall: ($4,388,960)
Key drivers from December 2025 budget forecast:
• CalPERS UAL +$1.03M (FY27), +$1.26M (FY28) — 22% increase over prior year • OPEB Retiree Healthcare +$717K (FY27) — new funding line not previously budgeted • General liability insurance +$948K — costs tripled since 2020 • Casino revenue growth constrained to +0.6%/yr since FY 2022-23; New Casino Threat (Vallejo, CA) to impact future Casino Revenuegrowth Proposed DRAFT Budget — March 2026
A F T E R B U D G E T B A L A N C I N G M E A S U R E S , R E V E N U E A D J U S T M E N T S , A N D C O S T R E D U C T I O N S FY 2026-27
Total Revenue: $72,417,492
Total Expenditures: $73,230,466
SHORTFALL: ($812,975)
Improvement: +$1,355,445
FY 2027-28
Total Revenue: $74,625,290
Total Expenditures: $75,839,355
SHORTFALL: ($1,214,065)
Improvement: +$1,006,474
Biennial Proposed Shortfall: ($2,027,040) Total Improvement:
+$2,361,919
Budget balancing measures applied:
• Zero-based budgeting cost reductions across all departments • New cannabis revenue (+$350K FY27, +$750K FY28) and proceeds from property sales (+$2.0M/$2.4M) • Earned interest properly allocated (+$2.7M); Medical benefits corrected to actual costs (-$486K) • IT consolidation (-$264K); Remaining deficits closed with Services & Supplies/Contract Reductions and One-time FRRP reserves Budget Balancing Measures to Reduce Deficits
C I T Y- W I D E R E V E N U E A D J U S T M E N T S & C O S T R E D U C T I O N S FY 2026-27
PRE-BALANCING DEFICIT: ($2,168,420)
Balancing Measures Applied:
• Zero-based budgeting cost reductions
• New cannabis revenue (+$350K)
• Proceeds from property sales (+$2.0M)
• Earned interest properly allocated (+$2.7M)
• Departmental Services & Supplies/Contract Services
reductions
• IT consolidation & optimization (-$264K)
• Medical benefits corrected to actual costs (-$486K)
REMAINING DEFICIT: ($812,975)
FY 2027-28
PRE-BALANCING DEFICIT: ($2,220,539)
Balancing Measures Applied:
• Continued zero-based budgeting
• Cannabis revenue growth (+$750K)
• Proceeds from property sales (+$2.4M)
• Continued earned interest allocation
• Ongoing Departmental Services & Supplies/Contract
Services reductions
• Continued actual-cost medical benefits
• Technology cost optimization
REMAINING DEFICIT: ($1,214,065)
One-Time Operating Reserves to Eliminate Remaining Deficits P E R F I S C A L R E S I L I E N C Y R E S E R V E P O L I C Y ( F R R P N o . 5 ) FY 2026-27
REMAINING DEFICIT: ($812,975)
• GFDR Fund 110:
• Sales Tax Fund 103:
$250,000
$250,000
• Casino Sustainability Fund 180: $312,975
BUDGET BALANCED: $0
FY 2027-28
REMAINING DEFICIT: ($1,214,065)
• GFDR Fund 110:
• Sales Tax Fund 103:
$250,000
$250,000
• Casino Sustainability Fund 180: $714,065
BUDGET BALANCED: $0
OPERATING RESERVE FUND USAGE:
• GFDR Fund 110 ($250K each year) + Sales Tax Reserve Fund 103 ($250K each year): One-time expenses per FRRP; requires BFLSC + Council approval
• Casino Revenue Sustainability Fund 180 ($1,027,040): Discretionary; requires BFLSC + Council approval • Total biennial reserve usage combined: $2,027,040 — consistent with PFM recommendation for strategic reserve deployment Operating Reserves Sub-Total: $812,975 Operating Reserves Sub-Total: $1,214,065 Percentage of Cost Reductions vs. One-time Funding
U S E D T O E L I M I N A T E F O R E C A S T E D D E F I C I T S F O R P R O P O S E D B U D G E T PROPOSED BUDGET (COMBINED BOTH FISCAL YEARS 2026-27 & 2027-28):• Original Forecasted Deficit (December 2025): ($4,388,960) • Less Tier I-III Cost Reductions (March 2026): $2,361,919 53.8% • Use of One-time Operating Reserves (March 2026): $2,027,040 46.2%_ FORECASTED DEFICITS ELIMINATED / BUDGET BALANCED: $0 100.0% Summary of Reductions to City Programs & Service Delivery
I M P A C T O F C O S T R E D U C T I O N S F R O M B U D G E T B A L A N C I N G M E A S U R E S COMMUNITY SERVICES -$550,000
• 30% part-time salary reduction ($300K)
• Elimination of secondary preschool program site
• Teen Lounge reduced from 5 to 4 days/week
• Summer camp reduced from 9 to 8 weeks
DUE TO WCCUSD FISCAL CUTBACKS & UNCERTAINTY:
• 20% S&S reduction in Recreation/Seniors/YSCP
• 25% cut to Beacon Community Schools Initiative/YSCP
($250K)
POLICE DEPARTMENT -$767,000
• Part-time and overtime personnel containment
• Contracted services reduction (-$767K vs. prior year) CITY-WIDE REDUCTIONS -$750,000
• IT consolidation & optimization (-$264K)
• Medical benefits corrected to actual costs (-$486K)
PUBLIC WORKS -$150,000
• Reductions to program costs & supplies
• Reduction to professional services (Engineering & Admin) • Absorbing new facility maintenance costs from Community Services
COMMUNITY DEVELOPMENT -$80,000
• Zeroed Interwest & TRB contract lines ($45K)
• Reduced 4 Leaf contract inspector budget ($35K)
TIER III BUDGET REDUCTIONS: NECESSARY TO PROVIDE BALANCED AND STRATEGIC APPROACH TO REDUCING OPERATING COSTS TO REMAIN IN ALIGNMENT WITH AVAILABLE GF REVENUE INCOME .
Biennial Budget Overview — FY 2026-27
A L L F U N D S B U D G E T S U M M A R Y
FY 2025-26
Adopted
General
Funds
Spec Rev
Funds
FY 2026-27
Total
Variance % Chg
Baseline Revenue 58,904,893 56,761,822 7,744,216 64,506,038 5,601,145 9.5% Transfers In 7,655,407 163,925 7,732,276 7,896,201 240,794 3.1% From Available Fund Bal. 3,415,335 0 15,252 15,252 (3,400,083) -100% Total Revenue Sources 69,975,635 56,925,747 15,491,744 72,417,492 2,441,857 3.5% Personnel (incl. UAL) 39,117,547 35,420,422 5,354,147 40,774,570 1,657,023 4.2% Services & Supplies 21,626,768 17,247,449 7,312,246 24,559,695 2,932,927 13.6% Transfers Out 7,655,407 7,732,276 163,925 7,896,201 240,794 3.1% Total Uses of Resources 68,399,722 60,400,148 12,830,319 73,230,466 4,830,744 7.0% Surplus/(Shortfall) 1,575,913 (812,975)
Reserve Allocation:
GFDR Fund 110 250,000
Sales Tax Fund 103 250,000
Casino Sustain. Fund 180 312,975
Balanced: $0
Biennial Budget Overview — FY 2027-28
A L L F U N D S B U D G E T S U M M A R Y
FY 2026-27
Proposed
General
Funds
Spec Rev
Funds
FY 2027-28
Total
Variance % Chg
Baseline Revenue 64,506,038 58,475,920 7,976,260 66,452,180 1,946,142 3.0% Transfers In 7,896,201 163,925 7,979,293 8,143,218 247,017 3.1% From Available Fund Bal. 15,252 0 29,892 29,892 14,640 96% Total Revenue Sources 72,417,492 58,639,845 15,985,445 74,625,290 2,207,798 3.0% Personnel (incl. UAL) 40,774,570 36,369,221 5,500,153 41,869,373 1,094,804 2.7% Services & Supplies 24,559,695 18,175,828 7,651,110 25,826,938 1,267,243 5.2% Transfers Out 7,896,201 7,979,119 163,925 8,143,044 246,843 3.1% Total Uses of Resources 73,230,466 62,524,168 13,315,188 75,839,355 2,608,889 3.6% Surplus/(Shortfall) (812,975) (1,214,065)
Reserve Allocation:
GFDR Fund 110 250,000
Sales Tax Fund 103 250,000
Casino Sustain. Fund 180 714,065
Balanced: $0
Baseline Revenue Details — FY 2026-27
Revenue Source FY 2025-26
Adopted
General
Funds
Spec Rev
Funds
FY 2026-27
Total
Variance %
Casino Pilot 2,318,968 2,365,348 — 2,365,348 46,379 2%
Casino Revenue 31,879,134 30,951,565 — 30,951,565 (927,569) -3% Cannabis Revenue 0 350,000 — 350,000 350,000 NEW
Fines and Fees 250,000 190,000 — 190,000 (60,000) -24%
Intergovernmental 2,364,450 768,350 1,940,061 2,708,411 343,961 15% Other Taxes 1,463,750 1,108,757 — 1,108,757 (354,993) -24% Property Taxes 3,096,200 2,200,665 1,931,882 4,132,547 1,036,347 33% Proceeds from Sale 0 2,000,000 — 2,000,000 2,000,000 NEW Sales Tax 7,242,725 5,075,747 2,151,925 7,227,672 (15,053) -0.2% Use of Prop. & Money 1,307,000 3,767,416 238,348 4,005,764 2,698,764 206% Utility Users Tax 3,075,000 3,240,061 — 3,240,061 165,061 5% VLF In-Lieu 3,754,665 3,941,913 — 3,941,913 187,248 5%
Charges for Services 1,308,000 767,000 1,055,500 1,822,500 514,500 39% Miscellaneous 845,000 35,000 426,500 461,500 (383,500) -45% Total Revenue 58,904,893 56,761,822 7,744,216 64,506,038 5,601,145 9.5% Baseline Revenue Details — FY 2027-28
Revenue Source FY 2026-27
Proposed
General
Funds
Spec Rev
Funds
FY 2027-28
Total
Variance %
Casino Pilot 2,365,348 2,412,655 — 2,412,655 47,307 2%
Casino Revenue 30,951,565 31,261,080 — 31,261,080 309,515 1% Cannabis Revenue 350,000 750,000 — 750,000 400,000 114% Fines and Fees 190,000 190,000 — 190,000 0 0%
Intergovernmental 2,708,411 770,350 1,958,975 2,729,325 20,914 1% Other Taxes 1,108,757 1,116,355 — 1,116,355 7,598 1%
Property Taxes 4,132,547 2,769,842 2,104,882 4,874,724 742,177 18% Proceeds from Sale 2,000,000 2,400,000 — 2,400,000 400,000 20% Sales Tax 7,227,672 4,369,407 2,176,925 6,546,332 (681,340) -9.4% Use of Prop. & Money 4,005,764 3,960,976 248,478 4,209,454 203,690 5% Utility Users Tax 3,240,061 3,766,085 — 3,766,085 526,024 16% VLF In-Lieu 3,941,913 4,084,170 — 4,084,170 142,257 4%
Charges for Services 1,822,500 595,000 1,055,500 1,650,500 (172,000) -9% Miscellaneous 461,500 30,000 431,500 461,500 0 0%
Total Revenue 64,506,038 58,475,920 7,976,260 66,452,180 1,946,142 3.0% Revenue by Type — General Fund (Fund 100)
0 5000000
10000000
15000000
20000000
25000000
30000000
35000000
Casino Rev
54.8%
Casino Pilot
4.2%
Sales Tax
8.9%
Intergov
1.4%
Other Tax
2.0%
UUT
5.7%
Prop Tax
3.9%
Use Prop/$$
6.6%
VLF
6.9%
Chg Svc
1.4%
Proceed
3.5%
Cannabis
0.6%
FY 2026-27 FY 2027-28
Expenses Summary — All Funds
FY 2025-26
Adopted
FY 2026-27
Proposed
Change FY 2027-28
Proposed
Change
Personnel (incl. UAL) 39,117,547 40,774,570 1,657,023 41,869,373 1,094,804 Services & Supplies 21,626,768 24,559,695 2,932,927 25,826,938 1,267,243 Transfers Out 7,655,407 7,896,201 240,794 8,143,044 246,843 Total 68,399,722 73,230,466 4,830,744 75,839,355 2,608,889 FY 2026-27
56%33%
11%
Personnel ($40.8M) S&S ($24.5M) Transfers ($7.9M)
FY 2027-28
55%34%
11%
Personnel ($41.9M) S&S ($25.8M) Transfers ($8.1M)
Personnel Costs Breakdown
FY 2025-26
Adopted
FY 2026-27
Proposed
Change FY 2027-28
Proposed
Change
Salaries/Wages 26,538,561 26,785,448 246,887 27,517,420 731,972 Benefits (excl. UAL/OPEB) 7,797,856 7,459,332 (338,524) 7,559,085 99,754 CalPERS UAL 4,781,130 5,812,788 1,031,658 6,040,016 227,228 OPEB Retiree Healthcare 0 717,002 717,002 752,852 35,850 Total Personnel 39,117,547 40,774,570 1,657,023 41,869,373 1,094,804 $5.81M
CalPERS UAL
FY 2026-27
$6.04M
CalPERS UAL
FY 2027-28
$717K
OPEB New
FY 2026-27
59%
Personnel as
% of Budget
Services & Supplies by Department
# Department FY25-26
Adopt
FY26-27
Prop
Variance FY27-28
Prop
Variance
1110 City Council 4,027,043 179,915 (3,847,128) 178,815 (1,100) 1210 City Attorney 112,650 150,000 37,350 165,000 15,000 1310 City Manager 554,872 338,241 (216,631) 347,766 9,525 1320 Economic Dev 124,763 119,313 (5,450) 119,313 0
1330 City Clerk 0 75,536 75,536 78,021 2,485
1340 Human Resources 0 181,802 181,802 181,474 (328)
1420 Finance/Admin 299,535 433,504 133,969 468,205 34,701 1430 Multi-Dept Gen Gov 4,381,052 10,523,383 6,142,332 11,219,404 696,021 1510 I.T. 339,436 75,064 (264,372) 31,440 (43,624)
1755 Dev Services 427,800 371,670 (56,130) 368,050 (3,620) 2110 Police 4,620,240 4,653,400 33,160 4,953,350 299,950 3310 PW Engineering 308,734 461,370 152,636 460,044 (1,326) 3410 PW-Bldg Maint 503,020 792,857 289,837 793,714 857
3710 PW-Street Maint 577,381 693,404 116,023 703,822 10,418 5110 YSCP 1,125,977 892,602 (233,375) 899,896 7,294
5210 Recreation 499,790 451,350 (48,440) 463,247 11,897 Total S&S 17,902,292 20,393,410 2,491,118 21,431,560 1,038,150 CIP & Debt Service Summary
2015 LRB
Fund 315
FY 26-27 $136,320
FY 27-28 $136,320
2018 JPFA
Fund 469
FY 26-27 $807,600
FY 27-28 $807,600
2022 Rev Bonds
Fund 420
FY 26-27 $1,781,000
FY 27-28 $1,784,000
CIP
Fund 320
FY 26-27 $1,000,000
FY 27-28 $1,000,000
Total Debt Service + CIP: FY 2026-27: $3,724,920 FY 2027-28: $3,727,920 DEBT SERVICE ISSUES OF CONCERN: **CRITICAL ISSUE**
• City’s Credit Rating (AA-) must be maintained AT ALL COSTS to ensure debt refinancing occurs in next 1-3 years; • City’s annual debt service must be refinanced once interest-rates drop; City must position itself to take advantage of bond markets; • Reliance on One-time Operating Reserves to balance operating costs increases City’s costs of issuance and bond insurance requirements • Declining Casino Revenues increases City’s costs of issuance, bond insurance requirements and credit worthiness from rating agencies General Fund Subsidies to Special Revenue Funds
T R A N S F E R S O U T F R O M F U N D 1 0 0 T O S P E C I A L R E V E N U E F U N D S Fund Fund Name FY 2025-26
Adopted
FY 2026-27
Proposed
FY26-FY27
Change
FY 2027-28
Proposed
FY27-FY28
Change
200 Gas Tax $432,460 $819,324 $386,864 $848,581 $29,257 201 Measure K $760,455 $1,007,887 $247,432 $1,085,860 $77,973 212 Development Services $838,417 $1,101,825 $263,408 $1,169,340 $67,515 237 Street Lighting & Landscaping $1,028,309 $1,078,321 $50,012 $1,147,592 $69,271 Total GF Subsidies $3,059,641 $4,007,356 $947,715 $4,251,373 $244,017 Total Biennial GF Subsidies: $8,258,729 (+$2,139,447 over prior biennium) FUND-SPECIFIC CONTEXT: GF SUBSIDIES IMPACTS
• Gas Tax (200): Revenue trends are decreasing state-wide • Measure K (201): Emergency Medical Services/ConFire service contracts increasing (5-year Contract) • Dev Services (212): Revenues impacted by City’s decreased development capacity • Street Lighting (237): LLAD property assessments last amended in 1997 ($840,000/yr.); Expenses subsidized by General Fund City Manager Financial Guidelines (Adopted Dec. 2023)
1 Maintain STATUS-QUO on all City programs until new revenue sources identified 2 Explore new efficiencies using emerging technologies to minimize operating costs 3 Promote capital, economic, housing & technology infrastructure investment 4 Exercise fiscal discipline; spend WITHIN appropriated GF revenue levels 5 Managed restraint on use of Unassigned Reserves for operating expenses 6 Pursue long-term employee labor MOU agreements for multi-year planning 7 Eliminate or reduce all GF operating subsidies; promote full-cost recovery 8 Avoid creating GF structural deficits/shortfalls
9 Be prudent and strategic in managing new FTE staffing investments until revenue capacity increases 10 Create NEW revenue opportunities to meet operational requirements & debt obligations Additional City Manager Financial Guidelines: (June 2026) NEWLY PROPOSED FOR NEXT BUDGET CYCLE (FY 2028-29 & FUTURE YEARS) 12 Explore implementation of a Priority-Based Budgeting (PBB) Model:
Focus spending on community priorities (i.e. public safety, illegal dumping, parks, and road repairs);. Rank programs by how well they support top-priorities adopted by the City Council; direct funds to highest-priority programs while reducing or redesigning lower- value services to improve cost efficiencies.
13 Explore Tier-IV Budget Reductions (3rd-party Independent Analysis):
If Casino revenue continues to decline, conduct comparative organizational analysis of FTE staffing and structural models with similar-sized cities (subject to collective bargaining and labor requirements)
• Phase I: Administrative City Departments
• Phase II: Police Department
CITY COUNCIL ADOPTED POLICY #405.2 ADHERENCE:
New programs and FTE investments (STATUS QUO – ON-HOLD) POLICY #405.2: ADOPTED BY CITY COUNCIL ON 12/19/24 (Reso #2024-149) Adopt a new fiscal discipline and financial practice to minimize new general fund spending on any new program or service without a new, fiscal impact analysis conducted by city staff, including funding options, while maintaining existing city service delivery and budgeted FTE staffing levels in the adopted FY 2024-25 class and comp plan until June 30, 2027, or until the City generates a total of +$1,000,000 in new, net increase in annual general fund revenue capacity.
Note: For New Spending Programs added to GF Operating Budget:
(1) Must first modify or rescind Council Adopted Policy #405.2; and (2) Any new spending program must be adopted in FY 2025-27 Council Priority Workplan; and (3) Must require a Fiscal Impact Analysis before funding appropriation via Resolution; and (4) Reconsider at Mid-Year Budget Cycle (Post-November 2026) when new revenue sources materialize NEW GF REVENUE SOURCES + MEASURE S TAX SHIFT:
In process for potential implementation in FY 2027-28 until Casino Revenue Rebounds
NEW GF REVENUE SOURCES
POTENTIAL
ANNUAL REVENUE (EST.) NOTES
• New Master Fee Schedule Update $200,000 - $400,000 Adopted Nov. 2025; Effective Jan. 16, 2026
• New Commercial Cannabis Retailers (3) $2,200,000 In-process; (2 of 3 CUPs approved as of March
2026)
• New Half-Cent (1/2) Sales Tax Measure $2,000,000 Council decides July 2026; Nov. 2026 Ballot (subject to voters)
• New PD HQ Training Center Revenue $200,000 - $400,000 Under Construction; Full Operation during FY 2026-27
POTENTIAL REVENUE INCREASE: $4,000,000 - $5,000,000
LESS MEASURE S SALES TAX SHIFT
(10/01/2027):
($1,000,000) ($1M) Revenue Loss (1/2 to ¼
cent); (Adopted by voters in Nov.
2020)
NET GF REVENUE INCREASE: $3,000,000 - $4,000,000
Next Steps: Following June 1, 2026 Council
Action
1 Prepare BUDGET ENABLING RESOLUTIONS for the FY 2026-27 & FY 2027-28 Biennial Operating Budget & Capital Improvement Program (CIP) Budget for the scheduled Council Adoption on June 15, 2026
2 Following the Public Budget Hearing this evening, City Council will direct Budget Enabling Resolutions to be prepared for formal adoption on June 15, 2026 via Consent Calendar action.
3 Once Resolutions are adopted, new FY 2026 -2028 Biennial GF Operating Budget & CIP Budget becomes effective July 1, 2026.
Questions?
C I T Y O F S A N P A B L O
FY 2026-27 & FY 2027-28 Proposed Biennial Budget