CITY OF SEBASTOPOL CITY COUNCIL
AGENDA ITEM REPORT FOR MEETING OF: March 4, 2025
================================================================================ To: Honorable Mayor and City Councilmembers
From: Don Schwartz, City Manager
Subject: Long-term Budget Model and Projections and Preview of FY 25-26 Budget ================================================================================ RECOMMENDATIONS:
1. Accept report on City’s long-range budget projections.
2. Provide direction on alternative scenarios of Council interest.
3. Accept preview of FY 25-26 Budget.
EXECUTIVE SUMMARY:
For over a year, the City has been taking a thoughtful, data-driven approach to its long-term financial planning with the help of the financial model developed by Bob Leland of Baker Tilly. The "Baseline Scenario" offers a mixture of positivity as well as caution. While the budget figures have improved from a year ago, the City has ongoing financial hurdles.
Implementing Measure U fully and adding one or more hotels are key to our financial stability. Solving our longterm financial challenges will require two of the following three to occur:
a. Approval of the full ½ cent for Measure U
b. Completion and occupancy of the Barlow Hotel
c. Completion and occupancy of the Hotel Sebastopol
Staff is using the model in preparing the FY 25-26 budget; see Preview of FY 25-26 Budget and the attached presentation on the FY 25-26 budget for further information.
BACKGROUND AND DISCUSSION:
The City of Sebastopol has made significant strides in our long-term financial planning, which began in earnest in 2024 when we engaged Bob Leland of Baker Tilly to develop a comprehensive financial model and forecast for the City’s General Fund. With the ability to update the model regularly and conduct detailed yearly reviews of assumptions on revenues and expenditures, we can maintain a good sense of the City’s long-term financial outlook.
Mr. Leland will attend the Council meeting to present the latest results of the model, including a ‘Baseline Scenario’ which reflects our best understanding about our finances. The results of any model reflect assumptions that drive the results; the key assumptions are shown on Slides 3 and 4 of the attached presentation. They include:
a. Maintaining current levels of staff
b. 3% Cost of Living annual increases
c. Annual return for PERS of 6.2%
d. Property tax growth of 3.9% annually
e. Sales tax growth of 2.2% annually
f. Increasing amounts for ‘asset preservation’ (buildings, parks, street maintenance, vehicle replacement) to $600,000 in FY 25-26, $900,000 in FY 26-27, and commensurate with inflation thereafter) g. Receipt of ½ cent revenue from Measure U for six months, and ¼ cent for duration of Measure (12 years) h. Reorganization of Fire services with Gold Ridge occurs i. No new hotels
Agenda Item Number: 9 Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Mr. Leland will also present several alternative scenarios using different assumptions on key factors, such as the future of Measure U revenues and potential hotels. As the budget model is complex the details will be best communicated through a presentation at the Council meeting.
The material reflects the best available information as of mid-February 2025. Revenues and expenses are subject to frequent changes. Projections for future years, particularly several years or more into the future, carry inherent uncertainty. Even within the current fiscal year, changes will occur. As Mr. Leland notes, "the numbers never sleep," highlighting the dynamic nature of financial management.
STAFF ANALYSIS: The City’s financial situation is better than a year ago. This is due to several factors, the most important being the passage of Measure U (1/2 cent sales tax increase), which if fully implemented will generate about $1.5 million/year in sales tax revenue. However, because of legal uncertainties, the model assumes that we will receive ½ cent initially (for the last quarter of FY 24-25 and the first quarter of FY 25-26), and a ¼ cent for the remaining 11 ½ years of the Measure. We are awaiting an Attorney General opinion on this Measure or a resolution of the issue by the state Legislature.
The anticipated fire reorganization with Gold Ridge is a major development, with the projected $400,000 in annual savings starting in FY 25-26. This reorganization will also substantially improve service. There was also substantial savings from belt-tightening at the end of FY 23-24, showing a proactive approach to managing expenses.
Despite these improvements, the Baseline Scenario projects deficits to continue, at about $300,000 in FY 25-26 to about $2 million/year thereafter. Some key factors increasing future deficits include a peak of revenue in fees from new housing in the current fiscal year (FY 24-25) and FY 25-26. We do not expect these higher revenues to continue later years. Pension costs are another major factor, projected to increase from $1.7 million in the current fiscal year to $2.2 million within three years (26%), with further increases in later years.
The model projects going below the 15% policy minimum for Fund Balance in FY 26-27 (in part due to a projected recession), and a negative Fund Balance in FY 28-29. Projections from last year were for a $3 million/year annual deficit and a negative Fund Balance near the end of 2026. This illustrates that Measure U (and fire reorganization) will help to stabilize the City’s finances, even if we receive half of the anticipated revenue.
Alternative Scenario A (slides 7 and 8), includes the same assumptions as the Baseline Scenario, plus unspecified cuts averaging $1.2 million/year. These cuts would be needed to retain an acceptable unassigned Fund Balance.
Alternative Scenario B (slides 10 and 11), assumes that the full ½ cent from Measure U takes affect for the full 12 years. It suggests that we will have a modest surplus in FY 25-26, with deficits averaging about $1 million/year thereafter. The Fund Balance will go below the minimum goal of 15% in FY 28-29 and negative by FY 34-35. No major cuts (such as those in Alternative Scenario A) are anticipated in this scenario.
Additional slides show various scenarios in which hotels are built and generate significant taxes. While we consider these revenues too uncertain to include in our baseline forecasts, the model illustrates that even one hotel would make a substantial improvement in the City’s long-term fiscal condition.
The ‘bottom line’ is that while Measure U and fire reorganization help to stabilize our finances, there is a clear need for some combination of substantial additional revenue (such as that from hotels) to avoid significant cuts in services. There are also opportunities for greater efficiency worth pursuing. Fire reorganization is an example of partnering with other agencies to leverage economies of scale that a small city such as Sebastopol cannot achieve on our own. There are other shared service models that we are part of today, such as REDCOM for fire and ambulance dispatch and the Laguna water treatment plant for wastewater, operated by Santa Rosa. Others may be Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
worth pursuing. Additionally, there are opportunities for internal efficiencies, such as investments in technology common in other cities, that can help us to provide the best value for the dollar to our residents.
PREVIEW OF FY 25-26 BUDGET: Staff have attached a separate presentation which previews some of the key topics for the FY 25-26 budget. We are basing the budget on the model’s “Baseline Scenario” as that is the most prudent and fiscally responsible approach.
The key points include:
1. We are projecting a deficit of around $300,000 for FY 25-26. This will likely change as we further develop the budget.
2. Measure U does not create an additional pool of funds for new initiatives or services. Its intent, as stated in the ballot measure, is to "maintain Sebastopol's City services."
3. The Council adopted a policy of using 40% of Measure U revenues for maintaining and repairing City roads, streets, drainage, and parks. This would come to about $375,000. We will likely be able to afford this allocation by using the Measure U funds for what is shown as “asset preservation” in the long-term model.
4. We expect to maintain current levels of police staffing, and to provide sufficient funding for fire services via a reorganization with Gold Ridge; this is another part of the Council-adopted Measure U policy.
5. We know that there is considerable interest in new recreational amenities; we will need to balance these against maintaining the facilities and infrastructure that we have.
6. We are unlikely to propose any new positions unless we delete an existing vacant position. We will also explore applying recommendations from the recent staffing study to improve efficiency and create greater depth in the organization.
7. We should pursue economic development to increase our revenues. There are many ideas about what this could mean. We should take a thoughtful approach to ensure we are focusing on the most promising ideas. And we should do so in collaboration with the local business community.
8. With financial pressures continuing, we should consider investments to increase efficiency. For example, the City has under-invested in technology that has become standard in other jurisdictions and that saves considerable staff time and/or improves services.
9. The City has two reserve funds – one for Buildings, Equipment, and Infrastructure, with an anticipated FY 24-25 Fund Balance of about $1 million. The second is for Fleet, Vehicles, and Technology, with an anticipated Fund Balance of nearly $800,000. We will likely recommend the use of substantial amounts of both funds to address pressing needs.
City staff and the budget committee will prepare a detailed thoughtful budget reflective of the ever-changing long term model.
For reference, we have attached the Council resolution outlining the approved use of Measure U funds. This resolution further clarifies the intended scope and limitations of Measure U funding.
COMMUNITY OUTREACH:
This item has been noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to schedule meeting date.
FISCAL IMPACT: There is no fiscal impact associated with accepting this item.
OPTIONS: The Council can provide feedback on the modeling results and preview of the FY 25-26 budget.
ATTACHMENTS:
Presentation by Bob Leland of Baker Tilly
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Resolution regarding use of Measure U funds
Presentation on Preview of FY 25-26 Budget
APPROVALS:
Department Head Approval: Approval Date: _________________ CEQA Determination (Planning): Approval Date: _______________ The proposed action is not a project under the California Environmental Quality Act (CEQA) If it is a project – Planning will need to include language Administrative Services (Financial) Approval Date:__________________ Costs authorized in City Approved Budget: ☐ Yes ☐ No N/A Account Code (f applicable) ___________________________ City Attorney Approval: Approval Date: __N/A____________ Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
City of Sebastopol
Long-Range Forecast Update
March 4, 2025
City Council Presentation
Bob Leland, Special Advisor
Baker Tilly Advisory Group, LP
Model version 2.11 revised 2/11/25
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Original Baseline Forecast Assumptions Still Valid
• FY24 based on estimate and FY25 based on budget
• 3% COLAs plus 0.25% net merit increase offset by turnover savings • 4% vacancy rate ongoing
• Maintain current FY25 staffing levels (does affect ability to respond to future workload increases) • Pension scenarios per CalPERS Pension Outlook, assumes 6.8% discount rate but lower average return of 6.2% (more conservative than CalPERS actuarial assumptions) • Assumes Pension Trust reimburses 20% of pension costs starting FY27 until balance is depleted • O&M expense grows at 2.5%
• Interest is 1.5% return on fund balance, with 4.5% on Pension Trust portion • Moderate recessions starting FY27 on 7-year cycle thereafter • Property tax growth averages 3.9%, FY25 per County assessed values • Sales tax growth averages 2.2%, FY25 per Avenu forecast • Transfers In/Out from other funds grows from FY25 base • Debt service per debt maturity schedules
• Capital outlay $150K per year
• Asset preservation increases for building/park/street maintenance and vehicle replacement (first $300K in FY25 budget, add $300K ongoing in FY26 and another $300K starting FY27) • $1.1M loan to Wastewater Fund in FY24 repaid over FY28-32 2 Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Revised Baseline Assumptions
3 • FY24 based on actuals; FY25 based on staff estimate • Measure U Local Sales Tax
Voters approved a ½ cent rate for 12 years, but conflicts with Measure I, which together puts the total sales tax rate at 10.50%, which is over the 10.25% limit per state law CA Dept of Tax and Fee Administration is seeking CA Attorney General’s opinion, and as a backup, legislative remedies are being explored to allow the City to keep the full ½ cent rate approved by the voters
Temporary agreement between the City and County is expected to result in 6 months of revenue at a ½ cent rate level, followed by a ¼ cent tax for 11.5 years, assuming no legal or legislative remedy is obtained Presentation will show the impact of both a ¼ cent rate and a ½ cent rate • Fire Service
Consolidation of fire service with Gold Ridge Fire Protection District results in no City Fire expense starting FY26
$1.11M direct payment to Gold Ridge starting FY26 (with 2.5% growth) $40K fire inspection fees paid to GRFPD starting FY26 (with 2.0% growth) • Hotels
Hotel Barlow is moving faster toward development than Hotel Sebastopol, but neither hotel is included in the revised baseline assumptions
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Result is Steady Decline in Unassigned Balance
4 • Pension Trust use starts in FY27 and is
depleted in FY34, but unassigned balance
goes into deficit earlier in FY29
• Additional revenue or expense
reductions required in 3 years
• Structural shortfall averages $2M
per year
• Requires additional revenues or
reduced spending to close gap
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Summary
Revised
Baseline
Forecast
Measure U at ½
cent for 6 months
and ¼ cent for 11.5
years
No Cuts, No Hotels
are Built
5 ($ in 000) FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax 3,293 $3,444 $3,620 $3,664 $3,813 $3,891 $4,009 $4,211 $4,422 $4,644 $4,830 $5,023 Sales Tax 2,365 2,305 2,251 2,331 2,271 2,259 2,467 2,591 2,720 2,791 2,864 2,801 Local Sales Taxes 2,353 2,322 2,634 3,316 3,224 3,056 3,374 3,486 3,640 3,712 3,808 3,716 Utility Users Tax 851 863 877 924 949 975 1,002 1,030 1,058 1,087 1,117 1,148 Transient Occup Tax 544 519 519 549 537 565 610 627 644 646 664 649 Other Taxes 688 692 717 732 744 749 762 783 804 825 842 856 Intergovernmental 1,726 115 51 51 51 51 51 51 51 51 51 51 Building Permits 558 349 1,040 980 400 408 416 424 433 442 450 459 Fees & Charges 190 171 142 145 140 140 146 153 160 163 166 161 Interest (31) (3) 100 38 1 19 - - - - - -
Other Revenues 1,228 673 179 266 269 272 275 278 281 285 288 291 Transfers In 103 102 188 125 126 127 128 130 131 132 133 135 Cost Allocation* 2,190 2,303 1,762 1,802 1,842 1,884 1,926 1,969 2,014 2,059 2,105 2,153 Total Revenue 16,058 13,855 14,080 14,922 14,384 14,379 15,167 15,732 16,359 16,837 17,319 17,443 Salaries 3,987 4,433 4,278 4,452 4,830 4,987 5,149 5,316 5,489 5,667 5,851 6,041 Part-time 415 67 102 104 106 108 110 113 115 117 120 122 Overtime 431 257 251 243 250 258 266 274 282 290 299 308 Pension 1,574 1,512 1,746 1,910 2,121 2,192 2,363 2,400 2,432 2,521 2,540 2,562 Health/OPEB 870 966 972 1,140 1,208 1,244 1,281 1,319 1,358 1,399 1,440 1,483 Other Personnel 888 1,051 977 983 1,009 1,036 1,063 1,091 1,120 1,149 1,180 1,211 Vacancy Savings - - - (353) (381) (393) (409) (420) (432) (446) (457) (469) Subtotal Personnel 8,164 8,286 8,326 8,478 9,143 9,431 9,823 10,092 10,363 10,698 10,972 11,258 Services & Supplies 3,384 3,345 4,412 3,226 3,307 3,390 3,474 3,561 3,650 3,742 3,835 3,931 Liability Insurance 571 651 641 554 567 582 596 611 626 642 658 675 Utilities 341 354 553 550 564 578 592 607 622 638 654 670 Contributions 580 257 80 82 84 86 88 91 93 95 97 100
Fire District/Contract - - - 1,150 1,220 1,292 1,366 1,444 1,524 1,607 1,693 1,783 Debt Service 254 300 208 446 389 111 86 86 86 86 86 86
Capital/Other Tfrs Out 1,176 1,074 433 432 442 453 465 476 488 500 513 526 Asset Preservation Adds - - - 300 600 615 630 646 662 679 696 713 Total Expense 14,470 14,267 14,653 15,218 16,316 16,538 17,122 17,614 18,116 18,688 19,205 19,741 Net Annual 1,587 (412) (573) (296) (1,932) (2,159) (1,955) (1,882) (1,757) (1,851) (1,886) (2,298) Pension Trust Contribs - - - - 424 438 473 480 486 504 508 512 Balance Sheet Adjusts - (1,039) - - - - - - - - - -
Wastewater Loan - (1,100) - - - 220 220 220 220 - 220 - Beginning Fund Balance 5,644 7,231 4,680 4,107 3,811 2,303 802 (460) (1,642) (2,693) (3,819) (5,197) Ending Fund Balance 7,231 4,680 4,107 3,811 2,303 802 (460) (1,642) (2,693) (3,819) (5,197) (6,983) less: Commit/Assign 1,423 200 200 200 200 200 200 200 200 200 200 200 Unassigned Balance 5,809 4,480 3,907 3,611 2,103 602 (660) (1,842) (2,893) (4,019) (5,397) (7,183) Pension Trust (105) 2,781 2,906 3,037 3,173 2,892 2,584 2,227 1,848 1,444 1,005 542 54 Total Avail Balance 8,589 7,386 6,944 6,784 4,995 3,186 1,568 6 (1,448) (3,014) (4,855) (7,129) Unassign as % of Exp 40.1% 31.4% 26.7% 23.7% 12.9% 3.6% -3.9% -10.5% -16.0% -21.5% -28.1% -36.4% *net of G&A expense for FY18-24
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Alternate Forecast Scenarios
6 Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
A - ¼ cent Measure U + $1.2M in Expense Cuts
7 • Assumes Measure U continues at ¼ cent rate and is not renewed by the voters • Assumes $1.2M of ongoing expense reductions (5.6% cut) are phased in over three years starting FY26; if cuts are delayed, the level of future cuts will need to be higher to compensate
• Balance continues to decline, making additional reductions likely in 10 years Expense Reduction Annual Impact (000)
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Summary
Forecast
for
Alternate
Scenario A
Measure U at ½
cent for 6 months
and ¼ cent for 11.5
years
$1.2M in
Expense Cuts, No
Hotels are Built
8 ($ in 000) FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax 3,293 $3,444 $3,620 $3,664 $3,813 $3,891 $4,009 $4,211 $4,422 $4,644 $4,830 $5,023 Sales Tax 2,365 2,305 2,251 2,331 2,271 2,259 2,467 2,591 2,720 2,791 2,864 2,801 Local Sales Taxes 2,353 2,322 2,634 3,316 3,224 3,056 3,374 3,486 3,640 3,712 3,808 3,716 Utility Users Tax 851 863 877 924 949 975 1,002 1,030 1,058 1,087 1,117 1,148 Transient Occup Tax 544 519 519 549 537 565 610 627 644 646 664 649 Other Taxes 688 692 717 732 744 749 762 783 804 825 842 856 Intergovernmental 1,726 115 51 51 51 51 51 51 51 51 51 51 Building Permits 558 349 1,040 980 400 408 416 424 433 442 450 459 Fees & Charges 190 171 142 145 140 140 146 153 160 163 166 161 Interest (31) (3) 100 42 30 25 25 26 29 32 35 32
Other Revenues 1,228 673 179 266 269 272 275 278 281 285 288 291 Transfers In 103 102 188 125 126 127 128 130 131 132 133 135 Cost Allocation* 2,190 2,303 1,762 1,802 1,842 1,884 1,926 1,969 2,014 2,059 2,105 2,153 Total Revenue 16,058 13,855 14,080 14,926 14,396 14,402 15,192 15,758 16,388 16,869 17,354 17,475 Salaries 3,987 4,433 4,278 4,452 4,830 4,987 5,149 5,316 5,489 5,667 5,851 6,041 Part-time 415 67 102 104 106 108 110 113 115 117 120 122 Overtime 431 257 251 243 250 258 266 274 282 290 299 308 Pension 1,574 1,512 1,746 1,924 2,132 2,205 2,356 2,387 2,391 2,445 2,439 2,423 Health/OPEB 870 966 972 1,140 1,208 1,244 1,281 1,319 1,358 1,399 1,440 1,483 Other Personnel 888 1,051 977 983 1,009 1,036 1,063 1,091 1,120 1,149 1,180 1,211 Vacancy Savings - - - (354) (381) (393) (409) (420) (430) (443) (453) (464) Subtotal Personnel 8,164 8,286 8,326 8,492 9,153 9,444 9,816 10,080 10,324 10,625 10,876 11,125 Services & Supplies 3,384 3,345 4,412 3,226 3,307 3,390 3,474 3,561 3,650 3,742 3,835 3,931 Liability Insurance 571 651 641 554 567 582 596 611 626 642 658 675 Utilities 341 354 553 550 564 578 592 607 622 638 654 670 Contributions 580 257 80 82 84 86 88 91 93 95 97 100
Fire District/Contract - - - 1,150 1,220 1,292 1,366 1,444 1,524 1,607 1,693 1,783 Debt Service 254 300 208 446 389 111 86 86 86 86 86 86
Capital/Other Tfrs Out 1,176 1,074 433 432 442 453 465 476 488 500 513 526 Asset Preservation Adds - - - 300 600 615 630 646 662 679 696 713 Total Expense 14,470 14,267 14,653 14,831 15,526 15,351 15,885 16,341 16,785 17,290 17,751 18,217 Net Annual 1,587 (412) (573) 94 (1,130) (948) (693) (584) (397) (421) (398) (741) Pension Trust Contribs - - - - 426 441 471 477 478 489 488 485 Balance Sheet Adjusts - (1,039) - - - - - - - - - -
Wastewater Loan - (1,100) - - - 220 220 220 220 - 220 - Beginning Fund Balance 5,644 7,231 4,680 4,107 4,201 3,497 3,210 3,208 3,322 3,624 3,912 4,002 Ending Fund Balance 7,231 4,680 4,107 4,201 3,497 3,210 3,208 3,322 3,624 3,912 4,002 3,745 less: Commit/Assign 1,423 200 200 200 200 200 200 200 200 200 200 200 Unassigned Balance 5,809 4,480 3,907 4,001 3,297 3,010 3,008 3,122 3,424 3,712 3,802 3,545 Pension Trust (105) 2,781 2,906 3,037 3,173 2,890 2,579 2,223 1,846 1,451 1,027 586 127 Total Avail Balance 8,589 7,386 6,944 7,175 6,187 5,589 5,232 4,968 4,875 4,739 4,388 3,673 Unassign as % of Exp 40.1% 31.4% 26.7% 27.0% 21.2% 19.6% 18.9% 19.1% 20.4% 21.5% 21.4% 19.5% *net of G&A expense for FY18-24
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
B - ½ cent Measure U for 12 years + No Cuts
9 As Approved by Voters Limited by State Local Rate Cap • Assumes tax not renewed by the voters
• Amounts include partial first and last year receipts
• Includes impact of economic cycles
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
B - ½ cent Measure U for 12 years + No Cuts
10 • Assumes Measure U continues at ½ cent for 12 years (legal issues with cap resolved in City’s favor, but no voter renewal)
• Balance still declines over time (but more slowly), going negative in FY35 • Additional reductions likely required in 6 years
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Summary
Forecast
for
Alternate
Scenario B
Measure U at ½
cent 12 years
No Cuts, No Hotels
are Built
11 ($ in 000) FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax 3,293 $3,444 $3,620 $3,664 $3,813 $3,891 $4,009 $4,211 $4,422 $4,644 $4,830 $5,023 Sales Tax 2,365 2,305 2,251 2,331 2,271 2,259 2,467 2,591 2,720 2,791 2,864 2,801 Local Sales Taxes 2,353 2,322 2,634 3,905 3,796 3,849 4,268 4,363 4,537 4,607 4,722 4,605 Utility Users Tax 851 863 877 924 949 975 1,002 1,030 1,058 1,087 1,117 1,148 Transient Occup Tax 544 519 519 549 537 565 610 627 644 646 664 649 Other Taxes 688 692 717 732 744 749 762 783 804 825 842 856 Intergovernmental 1,726 115 51 51 51 51 51 51 51 51 51 51 Building Permits 558 349 1,040 980 400 408 416 424 433 442 450 459 Fees & Charges 190 171 142 145 140 140 146 153 160 163 166 161 Interest (31) (3) 100 43 30 21 17 14 13 11 2 10
Other Revenues 1,228 673 179 266 269 272 275 278 281 285 288 291 Transfers In 103 102 188 125 126 127 128 130 131 132 133 135 Cost Allocation* 2,190 2,303 1,762 1,802 1,842 1,884 1,926 1,969 2,014 2,059 2,105 2,153 Total Revenue 16,058 13,855 14,080 15,516 14,968 15,191 16,078 16,623 17,268 17,743 18,243 18,334 Salaries 3,987 4,433 4,278 4,452 4,830 4,987 5,149 5,316 5,489 5,667 5,851 6,041 Part-time 415 67 102 104 106 108 110 113 115 117 120 122 Overtime 431 257 251 243 250 258 266 274 282 290 299 308 Pension 1,574 1,512 1,746 1,924 2,132 2,205 2,356 2,387 2,391 2,445 2,439 2,423 Health/OPEB 870 966 972 1,140 1,208 1,244 1,281 1,319 1,358 1,399 1,440 1,483 Other Personnel 888 1,051 977 983 1,009 1,036 1,063 1,091 1,120 1,149 1,180 1,211 Vacancy Savings - - - (354) (381) (393) (409) (420) (430) (443) (453) (464) Subtotal Personnel 8,164 8,286 8,326 8,492 9,153 9,444 9,816 10,080 10,324 10,625 10,876 11,125 Services & Supplies 3,384 3,345 4,412 3,226 3,307 3,390 3,474 3,561 3,650 3,742 3,835 3,931 Liability Insurance 571 651 641 554 567 582 596 611 626 642 658 675 Utilities 341 354 553 550 564 578 592 607 622 638 654 670 Contributions 580 257 80 82 84 86 88 91 93 95 97 100
Fire District/Contract - - - 1,150 1,220 1,292 1,366 1,444 1,524 1,607 1,693 1,783 Debt Service 254 300 208 446 389 111 86 86 86 86 86 86
Capital/Other Tfrs Out 1,176 1,074 433 432 442 453 465 476 488 500 513 526 Asset Preservation Adds - - - 300 600 615 630 646 662 679 696 713 Total Expense 14,470 14,267 14,653 15,231 16,326 16,551 17,115 17,602 18,077 18,614 19,109 19,608 Net Annual 1,587 (412) (573) 285 (1,359) (1,360) (1,037) (979) (808) (872) (866) (1,274) Pension Trust Contribs - - - - 426 441 471 477 478 489 488 485 Balance Sheet Adjusts - (1,039) - - - - - - - - - -
Wastewater Loan - (1,100) - - - 220 220 220 220 - 220 - Beginning Fund Balance 5,644 7,231 4,680 4,107 4,392 3,460 2,761 2,415 2,134 2,024 1,861 1,483 Ending Fund Balance 7,231 4,680 4,107 4,392 3,460 2,761 2,415 2,134 2,024 1,861 1,483 693 less: Commit/Assign 1,423 200 200 200 200 200 200 200 200 200 200 200 Unassigned Balance 5,809 4,480 3,907 4,192 3,260 2,561 2,215 1,934 1,824 1,661 1,283 493 Pension Trust (105) 2,781 2,906 3,037 3,173 2,890 2,579 2,223 1,846 1,451 1,027 586 127 Total Avail Balance 8,589 7,386 6,944 7,365 6,149 5,139 4,439 3,780 3,275 2,688 1,868 620 Unassign as % of Exp 40.1% 31.4% 26.7% 27.5% 20.0% 15.5% 12.9% 11.0% 10.1% 8.9% 6.7% 2.5% *net of G&A expense for FY18-24
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
C – Potential Impact of New Hotels
12 • Assumes both hotels currently in the
planning stages are ultimately
constructed
• Will they get built? Will market support
ultimately two high-end hotels?
• Assumes Hotel Barlow at 80 rooms,
$550 average room rate, 70%
occupancy rate, opens Jan 2028
• Assumes Hotel Sebastopol at 66 rooms,
$350 average room rate, 75%
occupancy rate, opens Jan 2030
• To be conservative, assumes both
hotels start at 60% of full revenuegenerating level and phase into that full TOT=Transient Occupancy Tax at 12% of room revenue level over 5 years receipts for stays of under 30 days
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
C - ¼ cent Measure U + Two New Hotels + No Cuts
13 • Assumes Measure U at ¼ cent rate expires after 12 years (no voter renewal) • Assumes both hotels are built and phase into full expected revenue generating levels • Balance (including Pension Trust ) remains above 15% reserve goal • Hotel revenues subject to wide variance depending on health of the economy; risk is associated with including revenues from two projects that are not yet completed Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Summary
Forecast
for
Alternate
Scenario C
Measure U at ½
cent for 6 months
and ¼ cent for 11.5
years
No Cuts, Both
Hotels are Built
14 ($ in 000) FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax 3,293 $3,444 $3,620 $3,664 $3,813 $3,891 $4,009 $4,211 $4,422 $4,644 $4,830 $5,023 Sales Tax 2,365 2,305 2,251 2,331 2,271 2,259 2,467 2,591 2,720 2,791 2,864 2,801 Local Sales Taxes 2,353 2,322 2,634 3,316 3,224 3,056 3,374 3,486 3,640 3,712 3,808 3,716 Utility Users Tax 851 863 877 924 949 975 1,002 1,030 1,058 1,087 1,117 1,148 Transient Occup Tax 544 519 519 549 537 971 1,604 2,002 2,481 2,656 2,890 2,881 Other Taxes 688 692 717 732 744 749 762 783 804 825 842 856 Intergovernmental 1,726 115 51 51 51 51 51 51 51 51 51 51 Building Permits 558 349 1,040 980 400 408 416 424 433 442 450 459 Fees & Charges 190 171 142 145 140 140 146 153 160 163 166 161 Interest (31) (3) 100 38 5 18 2 4 12 22 34 39
Other Revenues 1,228 673 179 266 269 272 275 278 281 285 288 291 Transfers In 103 102 188 125 126 127 128 130 131 132 133 135 Cost Allocation* 2,190 2,303 1,762 1,802 1,842 1,884 1,926 1,969 2,014 2,059 2,105 2,153 Total Revenue 16,058 13,855 14,080 14,922 14,384 14,788 16,163 17,111 18,208 18,869 19,579 19,715 Salaries 3,987 4,433 4,278 4,452 4,830 4,987 5,149 5,316 5,489 5,667 5,851 6,041 Part-time 415 67 102 104 106 108 110 113 115 117 120 122 Overtime 431 257 251 243 250 258 266 274 282 290 299 308 Pension 1,574 1,512 1,746 1,924 2,132 2,205 2,356 2,387 2,391 2,445 2,439 2,423 Health/OPEB 870 966 972 1,140 1,208 1,244 1,281 1,319 1,358 1,399 1,440 1,483 Other Personnel 888 1,051 977 983 1,009 1,036 1,063 1,091 1,120 1,149 1,180 1,211 Vacancy Savings - - - (354) (381) (393) (409) (420) (430) (443) (453) (464) Subtotal Personnel 8,164 8,286 8,326 8,492 9,153 9,444 9,816 10,080 10,324 10,625 10,876 11,125 Services & Supplies 3,384 3,345 4,412 3,226 3,307 3,390 3,474 3,561 3,650 3,742 3,835 3,931 Liability Insurance 571 651 641 554 567 582 596 611 626 642 658 675 Utilities 341 354 553 550 564 578 592 607 622 638 654 670 Contributions 580 257 80 82 84 86 88 91 93 95 97 100
Fire District/Contract - - - 1,150 1,220 1,292 1,366 1,444 1,524 1,607 1,693 1,783 Debt Service 254 300 208 446 389 111 86 86 86 86 86 86
Capital/Other Tfrs Out 1,176 1,074 433 432 442 453 465 476 488 500 513 526 Asset Preservation Adds - - - 300 600 615 630 646 662 679 696 713 Total Expense 14,470 14,267 14,653 15,231 16,326 16,551 17,115 17,602 18,077 18,614 19,109 19,608 Net Annual 1,587 (412) (573) (310) (1,942) (1,763) (952) (491) 132 255 470 106 Pension Trust Contribs - - - - 426 441 471 477 478 489 488 485 Balance Sheet Adjusts - (1,039) - - - - - - - - - -
Wastewater Loan - (1,100) - - - 220 220 220 220 - 220 - Beginning Fund Balance 5,644 7,231 4,680 4,107 3,797 2,281 1,180 919 1,126 1,956 2,919 3,877 Ending Fund Balance 7,231 4,680 4,107 3,797 2,281 1,180 919 1,126 1,956 2,919 3,877 4,468 less: Commit/Assign 1,423 200 200 200 200 200 200 200 200 200 200 200 Unassigned Balance 5,809 4,480 3,907 3,597 2,081 980 719 926 1,756 2,719 3,677 4,268 Pension Trust (105) 2,781 2,906 3,037 3,173 2,890 2,579 2,223 1,846 1,451 1,027 586 127 Total Avail Balance 8,589 7,386 6,944 6,771 4,971 3,558 2,943 2,772 3,207 3,747 4,263 4,395 Unassign as % of Exp 40.1% 31.4% 26.7% 23.6% 12.7% 5.9% 4.2% 5.3% 9.7% 14.6% 19.2% 21.8% *net of G&A expense for FY18-24
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
D - ½ cent Measure U + One New Hotel + No Cuts
15 • Assumes Measure U at ½ cent rate expires after 12 years • Assumes one hotel opens in Jan 2028 at lower revenue level, and the other is not built • Balance (including Pension Trust ) levels off above 15% reserve goal • Requires resolution of local sales tax rate cap; there is still some risk of assuming new hotel TOT revenue, but includes only one, not two
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Summary
Forecast
for
Alternate
Scenario D
Measure U is ½
cent for 12 Years
No Cuts, One Hotel
is Built
16 ($ in 000) FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax 3,293 $3,444 $3,620 $3,664 $3,813 $3,891 $4,009 $4,211 $4,422 $4,644 $4,830 $5,023 Sales Tax 2,365 2,305 2,251 2,331 2,271 2,259 2,467 2,591 2,720 2,791 2,864 2,801 Local Sales Taxes 2,353 2,322 2,634 3,905 3,796 3,849 4,268 4,363 4,537 4,607 4,722 4,605 Utility Users Tax 851 863 877 924 949 975 1,002 1,030 1,058 1,087 1,117 1,148 Transient Occup Tax 544 519 519 549 537 794 1,169 1,266 1,363 1,426 1,521 1,487 Other Taxes 688 692 717 732 744 749 762 783 804 825 842 856 Intergovernmental 1,726 115 51 51 51 51 51 51 51 51 51 51 Building Permits 558 349 1,040 980 400 408 416 424 433 442 450 459 Fees & Charges 190 171 142 145 140 140 146 153 160 163 166 161 Interest (31) (3) 100 43 30 23 25 29 35 41 48 49
Other Revenues 1,228 673 179 266 269 272 275 278 281 285 288 291 Transfers In 103 102 188 125 126 127 128 130 131 132 133 135 Cost Allocation* 2,190 2,303 1,762 1,802 1,842 1,884 1,926 1,969 2,014 2,059 2,105 2,153 Total Revenue 16,058 13,855 14,080 15,516 14,968 15,421 16,645 17,276 18,009 18,552 19,139 19,219 Salaries 3,987 4,433 4,278 4,452 4,830 4,987 5,149 5,316 5,489 5,667 5,851 6,041 Part-time 415 67 102 104 106 108 110 113 115 117 120 122 Overtime 431 257 251 243 250 258 266 274 282 290 299 308 Pension 1,574 1,512 1,746 1,924 2,132 2,205 2,356 2,387 2,391 2,445 2,439 2,423 Health/OPEB 870 966 972 1,140 1,208 1,244 1,281 1,319 1,358 1,399 1,440 1,483 Other Personnel 888 1,051 977 983 1,009 1,036 1,063 1,091 1,120 1,149 1,180 1,211 Vacancy Savings - - - (354) (381) (393) (409) (420) (430) (443) (453) (464) Subtotal Personnel 8,164 8,286 8,326 8,492 9,153 9,444 9,816 10,080 10,324 10,625 10,876 11,125 Services & Supplies 3,384 3,345 4,412 3,226 3,307 3,390 3,474 3,561 3,650 3,742 3,835 3,931 Liability Insurance 571 651 641 554 567 582 596 611 626 642 658 675 Utilities 341 354 553 550 564 578 592 607 622 638 654 670 Contributions 580 257 80 82 84 86 88 91 93 95 97 100
Fire District/Contract - - - 1,150 1,220 1,292 1,366 1,444 1,524 1,607 1,693 1,783 Debt Service 254 300 208 446 389 111 86 86 86 86 86 86
Capital/Other Tfrs Out 1,176 1,074 433 432 442 453 465 476 488 500 513 526 Asset Preservation Adds - - - 300 600 615 630 646 662 679 696 713 Total Expense 14,470 14,267 14,653 15,231 16,326 16,551 17,115 17,602 18,077 18,614 19,109 19,608 Net Annual 1,587 (412) (573) 285 (1,359) (1,129) (470) (326) (68) (62) 30 (389) Pension Trust Contribs - - - - 426 441 471 477 478 489 488 485 Balance Sheet Adjusts - (1,039) - - - - - - - - - -
Wastewater Loan - (1,100) - - - 220 220 220 220 - 220 - Beginning Fund Balance 5,644 7,231 4,680 4,107 4,392 3,460 2,991 3,213 3,585 4,215 4,862 5,380 Ending Fund Balance 7,231 4,680 4,107 4,392 3,460 2,991 3,213 3,585 4,215 4,862 5,380 5,475 less: Commit/Assign 1,423 200 200 200 200 200 200 200 200 200 200 200 Unassigned Balance 5,809 4,480 3,907 4,192 3,260 2,791 3,013 3,385 4,015 4,662 5,180 5,275 Pension Trust (105) 2,781 2,906 3,037 3,173 2,890 2,579 2,223 1,846 1,451 1,027 586 127 Total Avail Balance 8,589 7,386 6,944 7,365 6,149 5,370 5,236 5,231 5,466 5,689 5,765 5,403 Unassign as % of Exp 40.1% 31.4% 26.7% 27.5% 20.0% 16.9% 17.6% 19.2% 22.2% 25.0% 27.1% 26.9% *net of G&A expense for FY18-24
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Pension Cost Forecast
17 Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Basis for Lower CalPERS Investment Return Assumption
18 • CalPERS investments are volatile, and have been on slow overall downward trend over past 30 years
• CalPERS plans to leverage its investments in private
equity (carries greater risk and volatility of return) to achieve its 6.8% return target
• Forecast assumes 6.2% average returns to be
conservative, given risks inherent in CalPERS’
investment strategy
• Discount rate is investment rate of return assumed
by CalPERS
• Discount rate has been lowered several times over
past 45 years, from high of 8.75% to current 6.8%
• Following the 45-year linear trend of discount rates, in 20 years discount rate would theoretically be 6.0%
• However, forecast assumes the current 6.8%
discount rate is maintained; if discount rate is
lowered, City costs will be higher in near-term, and
lower in long-term Source: CalPERS
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Summary of Pension Costs-Citywide
19 • Assumes 6.8% discount rate and 6.2% average return • UAL shrinks significantly, but begins to grow again assuming returns average less than the discount rate; if discount rate drops, costs to City increase in near-term but UAL eventually is paid off
• If returns are higher, then UAL is paid down faster; at 6.8% returns and 6.8% discount rate UAL is (in theory) paid off completely in 2045 Source: CalPERS Pension Outlook Model
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
RESOLUTION NUMBER: 6615-2024
CITY OF SEBASTOPOL
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEBASTOPOL ADOPTING A POLICY REGARDING THE
USE OF REVENUE GENERATED BY THE SEBASTOPOL PUBLIC SAFETY, ROADS, CITY SERVICES MEASURE
WHEREAS, on November 5, 2024, Sebastopol voters will consider Measure U, the Sebastopol Public Safety, Roads, City Services Measure; and
WHEREAS, if adopted, the Sebastopol Public Safety, Roads, City Services Measure will generate revenue through a ½-cent transaction and use tax (sales tax); and WHEREAS, prior to placing the measure on the ballot, the City conducted a community priorities survey to gather feedback from residents regarding their priorities; and WHEREAS, the top three issues identified in the community survey as a “high priority” by respondents:
providing effective public safety, managing city finances, and responding to natural disasters; and WHERAS, maintaining and repairing City streets, and maintaining park, trails, bike lanes and the City pool were the next two issues that the respondents identified as a high priority; and WHEREAS, the City Council desires to use revenue from the Sebastopol Public Safety, Roads, City Services Measure for the priorities identified by the community as high priorities; and WHEREAS, if the measure is adopted, the City anticipates receiving two months of the revenue for fiscal year 2024-2025; and
WHEREAS, the City Council desires to adopt a spending policy identifying how it will use the revenue from the Sebastopol Public Safety, Roads, City Services Measure, if adopted by the voters.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Sebastopol adopts the following policy with respect to expenditure of revenue generated by the Sebastopol Public Safety, Roads, City Services Measure beginning for FY 2025-2026:
1. 40% of the revenue shall be allocated for maintaining and repairing City roads, streets, drainage, and parks.
2. Sufficient revenue shall be allocated for maintaining public safety, including retaining existing Police Department staffing levels and providing sufficient funding for fire services after the reorganization of such services with the Gold Ridge Fire Protection District.
3. If there is sufficient revenue allocated for items 1 and 2 above remaining revenues will be allocated to maintain Sebastopol’s City services such as 911 emergency medical/police/fire response, wildfire/emergency preparedness, maintenance of streets/roads, parks/trails, library, youth and senior services, retaining/attracting local businesses; and for general government use.
Docusign Envelope ID: 3DD721F3-8071-4841-9CB4-46D68FC6617A Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
BE IT FURTHER RESOLVED that any revenue generated by the Sebastopol Public Safety, Roads, City Services Measure during FY 2024-2025 shall not be allocated until the fourth quarter of the fiscal year, once the actual revenues and expenditures for FY 2024-2025 are clearer.
The above and foregoing Resolution was duly passed, approved, and adopted at a meeting by the City Council on the 17th day of September, 2024, by the following vote:
VOTE:
Ayes: Councilmembers Hinton, Maurer, McLewis, Vice Mayor Zollman and Mayor Rich Noes: None
Absent: None
Abstain: None
APPROVED: __________________________________________
Mayor Diana Gardner Rich
ATTEST: _______________________________________________________________ Mary Gourley, Assistant City Manager/City Clerk, MMC
APPROVED AS TO FORM: _______________________________________________ Alex Mog, City Attorney
Docusign Envelope ID: 3DD721F3-8071-4841-9CB4-46D68FC6617A Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
FY 25-26 Budget:
Issues and Challenges
City of Sebastopol
City Manager Don Schwartz
March 4, 2025
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Starting Point: Long-term Projections
Projected FY 25-26 Deficit: $296,000
Projected future deficits: $2 million
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Measure U
“To maintain Sebastopol’s City
services”
Does not provide funding for new
initiatives or services
Unless you reduce something else
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Measure U
Council Policy (non-binding):
1. 40%: maintain/repair streets, drainage, and parks (40% = $375K)
2. Sufficient funding for public safety, including retaining Police staffing and sufficiently funding fire
3. Remainder: Other City services
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
New Positions?
Staffing Study Identified Significant
Needs
Most likely will need to replace
existing to add new
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Facilities & Infrastructure:
Balancing the Existing with Anything New
Examples:
Trails prioritized in ATP
Pickleball courts
We have many facilities and much
infrastructure with great needs
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Economic Development
Can mean many things
Includes potential EIFD and Hotels
Potential framework:
Foundation of good planning practices and culture
Three overlapping components:
Business
Attraction
Visitor
Attraction
Business
Retention
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Efficiency Opportunities
Technology: we are behind
Service models: leverage economies of scale
Fleet replacement?
Cross-training & more generic positions
As recommended in staffing study
Move Building Dept. to City Hall
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Consider Using Reserve Funds
Buildings, Facilities, and Infrastructure
FY 24-25 Year-end Balance: $1,040,000
Could complement Measure U
Equipment, Technology, and Vehicles
FY 24-25 Year-end Balance: $792,000
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Additional Revenues:
Recommendations from September
1.Expand Economic Development: Yes
2.Pursue EIFD: Yes
3.Review User Fees: In Spring
4.Initiate Development Impact Fees: Not yet
5.Update Building Valuation Fees: Done
6.Consider Trench Cut Ordinance: Not yet
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025
Next Steps
Staff Developing Recommendations
Budget Committee to Review
Goal-setting: April 1
Follow up to goal-setting: April 15
Completion of Rec. Budget: May
Budget Hearings: June
Agenda Item Number: 9
Agenda Item Number: 9
City Council Meeting Packet for Meeting of: March 4, 2025