FY 2425 2526 Recommended Operating Budget

personnel budget for FY 25-26 decreased by 1%, or $0.3 million compared to the Recommended FY 24-25 budget, mainly due to the ending of the Innovative Transit Program ($0.5 million), funding of the Other Post Employment Benefits (OPEB) Section 115 Trust ($0.3 million), and no election cost in the second year ($0.3 million), partially offset by the inflation factor.

General Fund Reserves

The City is fortunate that its General Fund Reserves have accumulated to a healthy level despite the negative financial impacts caused by the COVID-19 pandemic. This is a result of prior City Council actions including the implementation of various cost containment strategies, better than expected revenue growth, and one-time fiscal stimulus received from the federal government to assist state and local governments with the impact from the revenue loss caused by the pandemic. However, the projected higher cost to provide City services due to high inflation as well as staffing the Third Fire Station and additional staffing for Police are consuming a large portion of general fund reserves. As currently projected, the General Fund reserve is expected to dip below the long term goal of 25% of revenues in the third year of the six-year forecast, FY 26-27. As adopted by the City Council, General Fund reserves shall never be depleted below a minimum level of 15% of revenues which shall be maintained as an ongoing reserve for emergencies. It is worth noting that the projected General Fund Reserve level includes the continuing policy of employees sharing in the employer share of the PERS cost increases. It is assumed that this increase will continue, and approximately 6.12% of all employee, except Public Safety PEPRA members, salaries will be paid by employees, to cover a portion of the increase in PERS employer costs. Additionally, the forecast in salaries only includes a one-time small cost of living adjustment (COLA) of 2.0% at the end of the current two-year term MOU with all the bargaining groups, as well as unrepresented employees (i.e. meaning no salary adjustments after December 2026). Staff understands this may be unrealistic, especially as inflation continues to remain elevated. What this tells us is the City needs to either increase its revenue from its existing revenue base or through a

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