Fiscal Year 2026-27
General Fund Base
Budget Development Update
CITY COUNCIL
APRIL 21, 2026
SCOTT WAGNER,
CHIEF FINANCIAL OFFICER
FY 2026-27 Budget Process
2 Public Hearing on
Budget Priorities
January 27, 2026
City Manager
Review of
Department Budgets
March 2026
Budget Review with
LTFPA
April 9, 2026
City Council
Study Session
April 21, 2026
City Council Study
Session
May 5 & 6, 2026
Draft of Budget
Books available to
the public
June 2, 2026
Budget Adoption
Public Hearing
June 16, 2026
Overview
FY 2026-27 General Fund base budget projects a $17.5 million deficit Deficit is structural in nature, driven by expenditure growth (7.7%) outpacing revenue growth (3.6%)
Structural deficit will continue to grow, with an additional $8 million increase expected in FY 2027-28 if no corrective action is taken Total revenues projected to increase by $7.8 million to $222.9 million, expenditures projected to increase by $16.7 million to a total of $233.6 million Presentation does not include proposed reductions recommended by departments for fiscal year starting July 1, 2026, currently under review by the City Manager 3 Overview
General Fund base budget does includes programing that have had outside funding sources decrease or end including InResponse and SAFER grant General Fund base budget does address pre-existing funding gaps in overtime that are causing budget overruns in the current year of $3.1 million City Council to review proposed deficit reduction strategy during May 5th & 6th Study Sessions
4 Long Range Financial Forecast
General Fund Long-Range Financial
Forecast (in $ millions)
6 7
FY2025 FY2026 FY2027 FY2028 FY2029
6/30/2025 Final Reserves 79,582,000$
FY 26/27 Budget Deficit (17,500,000)$
6/30/2026 Projected Reserves 62,082,000$
FY 27/28 Budget Deficit (25,300,000)$
6/30/2027 Projected Reserves 36,782,000$
FY 28/29 Budget Deficit (31,300,000)$
6/30/2028 Projected Reserves 5,482,000$
FY 29/30 Budget Deficit (33,600,000)$
6/30/2029 Projected Reserves (28,118,000)$
* Council Mandated Reserve was $39.2M in FY2025, expected to be $44.9M in 2027 Upcoming Budget Adoptions
Projected General Fund Reserve
Without Action
Revenue & Expenditures
FY 2026-27 General Fund Revenues
by Category (in millions)
9 Category
2025-26
Adopted
Budget
2026-27
Base
Budget
$
Change
%
Change
Property Tax $41.4 $43.5 $2.1 5.1%
Sales Tax 70.5 71.5 1.0 1.4%
Utility Users Tax 14.4 15.1 0.7 4.9%
Vehicle License Fees 19.8 20.8 1.0 5.1%
Other Taxes 33.3 36.0 2.7 8.1%
Permits, Fines & Charges 14.1 13.3 (0.8) (5.7%)
Interfund Charges 12.4 12.3 (0.1) (0.8%)
Recreation Revenues 3.3 4.1 0.8 24.2%
Intergov’t, Interest & Other 5.9 6.3 0.4 6.8%
Total $215.1 $222.9 $7.8 3.6%
General Fund Revenues by Category
10 11
FY 2026-27 General Fund Expenditures
by Category (in millions)
Category 2025-26
Adopted Budget
2026-27
Base Budget
$
Change
%
Change
Salaries $98.7 $109.1 $10.4 10.5%
Benefits 67.0 69.3 2.3 3.4%
Professional Services 13.6 15.7 2.1 15.4%
Vehicle Expense 10.9 11.6 0.7 6.4%
Operational Supplies 3.3 3.8 0.5 18.2%
Utilities 5.9 6.1 0.2 3.4%
Information Technology 6.7 7.2 0.5 7.5%
Liability/Property Insurance 5.7 5.1 (0.6) (10.5%)
Other Miscellaneous 2.6 3.0 0.4 15.4%
O&M Projects 2.4 2.6 0.2 8.3%
Total $216.8 $233.5 $16.7 7.7%
General Fund Expenditures by Category
12 13
FY 2026-27 Base Budget General Fund Expenditures
by Department (in millions)
Department
2025-26
Adopted
Budget
2026-27
Base
Budget
$
Change
%
Change
CC,CMO, FIN, HR, CIRO, CAO $11.9 $12.2 0.3 2.5%
Fire 58.9 66.7 7.8 13.2%
Planning & Economic Development 19.1 19.8 0.7 3.7%
Police 80.0 84.5 4.5 5.6%
Recreation 18.4 11.3 (7.1) (38.6%)
Transportation & Public Works 27.8 38.2 10.4 37.4%
SR Water (Storm Water GF only) 0.7 0.8 0.1 14.3%
Total $216.8 $233.5 $16.7 7.7%
General Fund Base Budget Expenditures by
Department
14 Base Budget Increases by
Department
16 General Fund $16.7M Expenditure Increase
by Department
17 Police & Fire Department Budget Increases
18 Fire Department Amount
Overtime $2.5M
SAFER Grant 2.4
In RESPONSE 1.2
All Other 1.4
Total $7.5M
Police Department Amount
Overtime $600K
All Other 3.1M
Total $3.7M
19 Pre-existing
budget
shortfall –
Fire Overtime
We expect the Fire Department to
actuals to exceed budget by up to
$2.5 million in the current year.
FY2026-27 Base Budget aligns
overtime to actuals and
increases overtime budget by
$2.5 million
Pre-existing
budget shortfall
– PD Overtime
We expect to exceed
budgeted overtime for Police by
$600K in current year
FY2026-27 Base Budget aligns
overtime to actuals
20 Summary
Baseline budget of $17.5 million deficit
Includes grant funded programs and positions - 19 FTEs Includes correction of pre-existing funding gap in public safety OT of $3.1 million causing over budget in current year
Includes contractually approved compensation adjustments 21 Actions Taken to Date
Budget Engagement
Budget engagement efforts over the past year:
Monthly Fiscal Update Meetings with labor representatives with agenda driven by labor including:
Investment portfolio, CalPERS pension expenses, CIP funding, all assumptions in the City’s Long Range Financial Forecast & FY 2026-27 budget development strategy
Formation of City Manager Budget Working Group with community members LTFPA Subcommittee line-by-line review of all department’s budget 23 Phase One: FY2024-25 & FY2025-26
Multi-year Strategy
The City has been engaged in a multi-year process to address the structural deficit in the General Fund that began with mid-year adjustments in fiscal year 2024-25.
This has included:
$15.2 million in ongoing reductions
Workforce reduction of 54 full time equivalent positions $10.2 million in one time funding re-allocated from projects to shore up reserves Voter approved revenue measure EE & FF which generated an additional $3.7 million in Business and Transient Occupancy Taxes
No mid-year cuts in fiscal year 2025-26
24 Prior Adopted
Budget
Reductions
- Council adopted $15.2 million of
ongoing budget reductions since
mid-year FY 2024-25
- FY 2025-26 original deficit amount
of $19.3 million reduced to $8.4
million
25 Phase Two : FY 2026-27 & FY2027-28
Multi-pronged Deficit Reduction
Strategy
One-year full correction of $17.5 million deficit
Cut positions with vacancies
Major apparatus leasing
Use of reserves
Pensions savings strategy
Department reductions
27 Strategies Considered
Two-Year Deficit Strategy (FY 2026-2028)
Adress the projected $17.5 million total deficit
Implement a multi-pronged strategy over two years
Year One: Fewer reductions to departments and core public services Year Two: Transparent and thorough analysis of the potential impacts to core public services if additional General Fund revenue is not generated to address these out-year shortfalls
28 Year 1 (FY 2026-27) Multi-Pronged Approach
Strategic Reserve Usage: Utilizing reserve funds partially to prevent major cuts to services
Vacancy Management: Eliminating and defunding specific vacant positions Pension Cost Smoothing: Implementing an innovative pension strategy using the Fresh Start plus 115 Trust balance
Major Apparatus Lease Financing: Purchases (over $250k) based on the useful life of the equipment
Targeted cost recovery improvements
29 Year 2 (FY 2026-27) Department Reductions
This multi-pronged approach results in the need for fewer reductions to departments and core public services in Year 1
However, it does require that additional measures are taken in Year 2 to address the remaining structural deficit, unless there is additional General Fund revenue to offset costs The City Manager’s formal Proposed Budget for the fiscal year beginning July 1, 2026, to be presented to the City Council for adoption on June 16, 2026, will not include anticipated Year 2 departmental cuts
It is imperative that there is a transparent and thorough discussion of the potential impacts to core public services if additional General Fund revenue is not generated Staff will be presenting this information at the May 5th and 6th Study Sessions 30 Year 1 (FY 2026-27) Deficit Reduction
Strategy
Use of Reserves (adopted deficit) of $8.4M
matches FY2025-26 adopted deficit
Savings identified moving major apparatus to
lease financing program
Potential pension program savings from
Fresh Start and Usage of 115 trust
More than half of proposed reductions from
new financing strategies for liability
management
31 (17.50)$ Draft Deficit
8.40$ Use of Reserves (Adopted Deficit)
(9.10)$ Ongoing Reduction Target
1.00$ Fire Apparatus Lease Strategy
3.80$ Pension Savings
4.30$ Department Reductions
-$
Major Apparatus Lease Strategy
$1.0 million in ongoing reductions has been identified from a capital leasing of major apparatus replacement program
Accumulated funding has cash flowed all fire engines which the City has on order Future purchases will utilize lease financing which will smooth out payments over the useful life of the asset
Maintains $2.0 million in ongoing funding to meet future leasing needs 32 Year 1 Department Reductions
$4.3 million department target addresses 25% of deficit Critical for maintaining mandated reserves
Departments were asked to develop 1% and 3%
Proposed reductions presented to City Manager in March Review included tiered approach
Reviewed all vacant positions versus filled positions
Developed plans which can maintain service on an ongoing basis Remain under review for City Council Study Session presentation on May 5th & 6th 33 General Fund
1% and 3%
Reduction
Targets
34 - Proposed department
reductions recommended
to be reviewed on May 5th
and May 6th
Scenario Analysis
Analysis was completed to understand organizational impact of fully addressing the $17.5 million deficit in the coming adopted budget, FY 2026-27
The City’s proposed budget will need to balance maintaining core services versus abrupt change
These scenarios are illustrative and not being recommended They illustrate FTE reduction necessary to obtain the target 35 Scenarios Analysis – Full Cut Across the Board
*Not being recommended
Scenarios Analysis – Full Cut Across the Board
Excluding Public Safety
*Not being recommended
*19.2 Additional Employee Cuts
General Fund FTE Count by Fiscal Year
38 Conclusion
The General Fund has been experiencing deficits and extensive efforts have been undertaken over the past two years to address the shortfalls A two-year strategy has been developed to reduce expenses while maintaining core services in FY2026/27
Innovative financing strategies for pension costs and major apparatus costs will save almost $5 million in year 1
Additional revenue options will need to be considered to ensure sustainability Year 2 scenarios will be presented during the May 5th and May 6Th Study Sessions
39 Next Steps
April 21, 2026: Pension Cost Reduction Strategy Study
Session
May 5 & 6, 2026: City Council Budget Study Session
detailed review of proposed FY 26-27
June 2, 2026: Draft of Budget Books available
June 16, 2026: FY 26-27 Budget Adoption Public Hearing 40 Questions