CITY COUNCIL AGENDA PACKET - Laserfiche WebLink

Page 2 of 9 Recommended service reductions were vetted with the Budget Advisory Committee at meetings from January to April 2025, and community feedback was also considered in developing the Proposed Budget. As the City faces an ongoing structural deficit, with revenues not keeping pace with expenses, the Proposed Budget and CIP do not fully account for the City's true capital investment needs due to a lack of funding. As a result, the Proposed Budget incorporates a range of reductions while balancing commitments to the community. The CIP addresses improvements and a range of maintenance projects related to facilities, transportation and streets, parks, water, sewer, and storm drain systems. On April 10, 2025, staff presented its recommendations for the General Fund supported projects and received the City Council’s input. The City Council supported staff’s recommendations for seven critical/urgent CIP projects and funding for two core projects – a total of $16.6 million of General Fund-supported projects that went through the City's recently adopted CIP Prioritization Process. The prioritized projects will address regulatory requirements, minimize the likelihood of facility closures, or be significantly grant-funded. DISCUSSION This agenda report is intended to provide the City Council and the public with an opportunity to review recommended expenditures, revenues, and assumptions for the next two-year budget and five-year CIP. It also provides the City Council with an opportunity to request additional information, if necessary, prior to the adoption of the budget, scheduled for June 17, 2025. Operating Budget The operating budget represents the City’s two-year financial plan for delivering General Fund programs and services in a fiscally responsible manner consistent with City Council priorities, goals, and objectives. The Proposed Operating Budget reflects the need for approximately $10 to $12 million in ongoing General Fund reductions in each of the next two fiscal years, as identified in the City’s 10-Year Financial Forecast and confirmed by an independent financial assessment. That report was presented to the City Council at its March 4, 2025, meeting and can be viewed at: https://pleasantonca.portal.civicclerk.com/event/386/files/report/1935. The FY 2025/26 expenditure budget across all operating funds totals $248.2 million, including General Fund, Enterprise Funds, Special Revenue Funds, Internal Service Funds, Debt Service Funds, and Trust Funds. The FY 2026/27 budget totals $257.5 million. The General Fund operating expenditure budget totals $154.7 million and $160.7 million for FY 2025/26 and FY 2026/27, respectively. With transfers out, the overall General Fund expenditure budget is $165.2 million and $171.2 million for the next two years. The General Fund Budget anticipates modest revenue growth over the next two years, with the projected General Fund revenue budget totaling $162.9 million in FY 2025/26 and $169.3 million in FY 2026/27. While this projected growth will enable the City to continue providing critical, core programs and services to the community, it is not enough to address all the City’s needs and close the structural deficit as expenditures are projected to continue growing faster than revenues. As such, the balanced proposed budget was achieved using one-time funding, including $4.0 million from the Section 115 Pension Trust, $2.1 million from the Retiree Medical/Other Post-Employment Benefits (OPEB) Trust over the next two years, $3.0 million from the Capital Reserve, as well as service reductions that will impact nearly all of the City’s operating areas. Page 265 of 682