Presented by Ana Kwong June 2026
Presentation to City Council
City of Sebastopol Budget
July 1, 2026 - June 30, 2027
Budget Hearing
1 City of Sebastopol Budget July 1, 2026 - June 30, 2027 Agenda for Tonight’s Budget Discussion
• Citywide (All fund) Overview
• Where the city gets money (revenue)
• Where the city spends money (expenses)
• General Fund Two-Year Financial Position
• Measure U Overview
• Financial Forecast Presentation by Bob Leland (Baker Tilly) • Staffing Overview
• Enterprise Fund Summary
• Special Revenue Funds
• Insurance Fund
• Questions and Council Input
Budget Committee Members: Vice Mayor Maurer & Councilmember Carter, City Manager Mary Gourley, Administrative Services Director Ana Kwong
2 FY 2026-27 ALL FUND - Revenue | Expenditures Overview
0.00 M 4.00 M 8.00 M 12.00 M 16.00 M 20.00 M
General Fund
Special Revenue Fund
Wastewater Fund
Water Fund
General Fund "Assigned"
Reserves
Assessment District
Non-Governmental Funds
$15,622,473
$4,040,702
$6,992,336
$4,476,583
$170,000
$94,970
$58,900
$16,582,911
$2,199,667
$6,368,812
$4,543,433
$373,300
$106,365
$940,126
Revenue Expenses
3 FY 2026-27 General Fund Revenue Sources %
*user taxes, franchise fees, charges for services, cost allocation plan, transfers Property Tax, 3,863,165 ,
25%
Sales Taxes, 6,139,000 ,
39%
Transient Occupancy Tax,
539,845 , 4%
Licenses & Permits,
1,144,000 , 7%
All Others *, 3,936,463 ,
25%
4 FY 2025-26 Expenditures By Department
'- 1,750,000 3,500,000 5,250,000 7,000,000
Police
Public Works
Administrative Services
Fire
Transfers
Planning
City Attorney
City Manager
Assistant Cty Mgr | City Clerk
Building
Ives Pool
City Council
Debt Service
Non Departmental
Community Center
Senior Center
$6,114,895
$2,714,201
$1,529,943
$1,292,820
$1,122,800
$781,203
$593,750
$614,996
$428,618
$431,126
$259,483
$194,107
$150,755
$149,500
$147,059
$57,655
($1.14M contract + pension cost and fire inspection fee passthrough) 5 General Fund Two Year Financial Position
6 FY26-27 Measure U Overview
7 Forecast Summary
• Forecast depends on key factors, including a potential recession around FY28, whether Measure U is renewed, the impact of the Barlow Hotel, and whether the Sewer Fund loan is repaid • The City is facing a structural imbalance, meaning ongoing revenues are not keeping pace with ongoing expenses under current practices
• Under the baseline scenario:
o The City experiences an average annual shortfall of about $1.4M o Reserves steadily decline and fall below minimum policy levels starting around FY29 o Without action, reserves could reach a significant deficit by FY36 • Different scenarios were modeled to show how outcomes change:
o If the Sewer loan is not repaid, the situation worsens (larger deficit) o If the Barlow Hotel is built, it helps reduce the gap but does not eliminate it o In all cases, reserves still decline over time without corrective action • Across all scenarios, the City must act by:
o Increasing revenue or reducing expenditures annually -- adjustment ranges roughly from $210K to $860K per year, depending on the scenario
o With proactive adjustments, the City can stabilize reserves and maintain fiscal health, but action must begin early (starting FY27)
8 Major Forecast Variables
• Moderate recession starting FY28 on 7-year cycle (timing and magnitude may vary) • No staffing growth and 3.25% total wage growth (net growth from COLAs, step increases, employee turnover savings when re-filled at lower step, reclassifications and other pay adjustments)
o These are budgetary and labor negotiation decisions; if growth is higher, forecast outcome worsens • Low vacancy rate of 1% (higher rate of vacancies will reduce expenses in near-term) • Barlow Hotel uncertainties:
o Will it be built? (baseline forecast excludes hotel, alternate scenario includes it) o Will it be successful at developer’s plan for $600 average room rate? (forecast assumes conservative $350 average room rate; to extent it is higher this will improve forecast) • Sewer Fund $1.1M loan repayment (one-time revenue to GF if loan is repaid) o Baseline forecast includes repayment, alternate scenario assumes no repayment • Whether Measure U sales tax is ultimately renewed significantly affects forecast starting FY38 9 Baseline Forecast Summary
• End of one-time revenues plus assumed
recession in FY28 creates ongoing structural
shortfall in revenues versus anticipated expenses
under status quo budget (no staffing change,
costs increasing at inflation)
10 Baseline Forecast: Steady Decline in Fund Balance
• Measure U sales tax at 0.5% until FY37, hit by
FY28 recession with subsequent recovery;
recessions every 7 years thereafter
• Structural shortfall averages $1.3M per year
from FY27-FY36 (before trust use and Sewer
loan repayment)
• Assumes 1% vacancy rate starting FY28
• Pension Trust use starts in FY27 based on NHA
Advisors’ proposal (trust remains at 2/3rds of
current balance by FY36 instead of being
depleted as previously assumed)
• Assumes $1.1M loan to Sewer Fund is repaid
• Assumes no Barlow Hotel
• Unassigned balance continues to fall to deficit
of $4.4M by FY36; below minimum 15% reserve
level starting FY30
• Requires $710K additional annual revenues or
reduced spending starting FY27 to achieve
unassigned balance of 20% by FY36
Before corrective budget actions
Without renewal of Measure U
forecast worsens starting FY38
11 Alternate 1: Baseline+No Sewer Loan Repayment
• Same Baseline assumptions except that
$1.1M Sewer loan is not repaid to the
General Fund
• Structural shortfall averages $1.3M per
year from FY27-FY36 (before trust use and
Sewer loan repayment)
• Unassigned balance continues to fall to
deficit of $5.5M by FY36; below minimum
15% reserve level starting FY30
• Requires $810K additional annual revenues
or reduced spending starting FY27 to
achieve unassigned balance of 20% by FY36
Before corrective budget actions
Without renewal of Measure U
forecast worsens starting FY38
12 Balance After Added Resources/Expenditure Reductions • Baseline Forecast after $710K increase
in revenues or reduced expenditures
starting FY27:
• Alternative 1 after $810K increase in
revenues or reduced expenditures
starting FY27:
13 Alternate 2: Baseline+Barlow Hotel
• Same Baseline assumptions except assumes
Barlow Hotel opens July 2027 (83 rooms,
$350 average daily rate, 70% occupancy
ramped up over 5 years)
• Developer assumes $600 average daily rate
and 65% occupancy; with a high-end hotel in
a new market, experience will be required to
determine revenue generation capability of
this property, so this forecast is purposely
more conservative
• Structural shortfall averages $670K per year
from FY27-FY36 (before trust use and Sewer
loan repayment)
• Unassigned balance is below 15% of total
expense even after hotel opens
• Requires $150K additional annual revenues
or reduced spending starting FY27 to achieve
unassigned balance of 20% by FY36
Before corrective budget actions
Without renewal of Measure U
forecast worsens starting FY38
14 Alternate 3: Baseline+Barlow Hotel+No Sewer Loan Repay • Same Baseline assumptions except assumes
(1) Barlow Hotel opens July 2027 (83
rooms, $350 average daily rate, 70%
occupancy ramped up over 5 years), and (2)
no repayment of Sewer loan
• Developer assumes $600 average daily rate
and 65% occupancy; with a high-end hotel
in a new market, experience will be
required to determine revenue generation
capability of this property, so this forecast
is purposely more conservative
• Unassigned balance drops below minimum
15% of expense in FY30 and continues to
fall even after hotel opens
• Requires $250K additional annual revenues
or reduced spending starting FY27 to
achieve unassigned balance of 20% by FY36
Before corrective budget actions
Without renewal of Measure U
forecast worsens starting FY38
15 Balance After Added Resources/Expenditure Reductions • Alternative 2 after $150K increase in
revenues or reduced expenditures
starting FY27:
• Alternative 3 after $250K increase in
revenues or reduced expenditures
starting FY27:
16 City Personnel
•56 Full-Time Equivalent
positions
• FY 2627 Budget Includes
COLA or step increases
• Maintains current staffing
levels
• 2 Positions Remains Frozen
(Maintenance Assistant &
Police Officer)
• No layoffs or furloughs
proposed for FY 2627
25 15
5 4
3 2
11 05 10 15 20 25 30
Police
Public Works |
Engineering
City Council
Administrative
Services
Planning
Building
Assistant City
Manager | City
Clerk
City Manager
17 FY 2026-27 Water Fund Revenue Proposed Budget
Single Family
$1.83 M
52%
Commerical
$1.57 M
44%
Water Tower
$.05 M
1%
Others *
$.10 M
3%
*Others: interest income, new
account set up fee, penalties
18 FY 2026-27 Water Fund Expenses Proposed Budget
Salaries & Benefits
$.68 M
20%
Professional
Services & Others
$.63 M
19%
Utilities
$.26 M
8%
Cost Allocation
Plan
$.79 M
24%
All Others
$.98 M
29%
19 FY 2026-27 Wastewater Fund Revenue Proposed Budget
Single Family
$2.76M
49%
Commerical
$2.88M
50%
Others *
$.04M
1%
*Others: interest income, penalties
20 FY 2026-27 Wastewater Fund Expenses Proposed Budget
Salaries & Benefits
$.59M
12% Professional
Services & Others
$.41M
9%
Subregional
$2.16M
44%
Cost Allocation
Plan
$.84M
17%
All Others
$.89M
18%
21 FY 2026-27 Special Revenue Funds Proposed Budget
• Money that comes with rules about how it can be spent, like having separate piggy banks for different purposes. For instance:
• Gas Tax income can only fix roads
• Park Fees can only improve parks
• Supports ongoing capital projects
• We keep 25+ different funds to follow these rules
• Each of these fund can be found on pages 127-159
22 FY 2026-27 Insurance Fund Proposed Budget
• The City is part of a joint powers authority (JPA) risk pool. • Insurance Budget - pages 160-161
• Each year, the California Intergovernmental Risk Authority (CIRA) determines the premiums for various types of insurance, and the City budgets and distributes those costs accordingly. • Workers’ compensation premium and deductible costs are paid from the insurance fund, then proportionally allocated to all departments based on their total salary • General liability premium and deductible costs are paid from the insurance fund, then distributed proportionally across all departments based on prior year expenditures 23 Open Public Hearing to Receive Comments from
the Public
Additional City Council Questions of Staff
Council Discussion/Deliberations
Budget Discussion continues with the following options:
Budget continues at next scheduled meeting on June 16
If budget isn’t adopted by June 16, schedule a special meeting before June 30 th
Or budget continues at next scheduled meeting on July 7 and/or July 21, 2026 Council discussion/deliberations/action will be conducted at a future city council meeting 24