Title
Fiscal Years 2025-2026 and 2026-2027 Biennial Budget Public Hearing and Adoption: 1) Adopt a Resolution Approving the Proposed City of San Leandro Biennial Budget for FYs 2025-2026 and 2026-2027; 2) Adopt a Resolution Approving the Proposed Biennial Budget for the Successor Agency to the Redevelopment Agency for the City of San Leandro for FYs 2025-2026 and 2026-2027; and 3) Adopt a Resolution Approving the Proposed San Leandro Public Finance Authority Biennial Budget for FYs 2025-2026 and 2026-2027
Staffreport
SUMMARY AND RECOMMENDATION
Staff recommends that the San Leandro City Council conduct a public hearing and take public comment regarding Proposed Fiscal Years (FYs) 2025-2026 and 2026-2027 Biennial Budget. At the conclusion of the public hearing, the City Council may adopt by Resolution the proposed biennial budget.
Staff recommends that the City Council approve resolutions adopting FYs 2025-2026 and 2026-2027 Biennial Budgets as follows:
1. Resolution adopting the Proposed City of San Leandro Biennial Budget for FYs 2025-2026 and 2026-2027;
2. Resolution adopting the Proposed San Leandro Public Finance Authority Biennial Budget for FYs 2025-2026 and 2026-2027;
3. Resolution adopting the Proposed Biennial Budget for the Successor Agency to the Redevelopment Agency for the City of San Leandro for FYs 2025-2026 and 2026-2027
BACKGROUND
The City Council approved the last biennial budget for FYs 2023-2024 and 2024-2025 General Fund and other funds on May 15, 2023. Approved budgets are the annual expenditure plan and resource allocation guide that ensures the implementation of City Council policies and priorities. The budget implements the vision, values, and direction for the broad range of services while meeting the needs of the community in accordance with City Council policy.
Total proposed expenditure budgets for FYs 2025-2026 and 2026-2027 are $272.9 million and $265.1 million, with the General Fund contributing approximately 60% of the total. The proposed budget authorizes a total of 457.52 full-time-equivalent positions in FY 2025-2026, and 453.78 full-time-equivalent positions in FY 2026-2027.
DISCUSSION
The City Manager’s Proposed Budget incorporates the estimated revenues and planned expenditures for all General Fund, Special Revenue Funds, Enterprise Funds including Internal Service Funds, and other agency funds (Successor Agency to the former Redevelopment Agency, and the Public Finance Authority). The resource totals for all funds in the biennial budget are $239.9 million in FY 2025-2026, and $240.1 million in FY 2026-2027. Total proposed expenditures amount to $272.9 million in FY 2025-2026, and $265.1 million in FY 2026-2027.
GENERAL FUND
The General Fund finances the operations of the City that have no special or dedicated revenue sources. The fund pays for the core services and basic operations of the City. Total FYs 2025-2026 and 2026-2027 General Fund expenditures are $156.1 million and $160.8 million, respectively. Estimated revenues for FYs 2025-2026 and 2026-2027 amount to $149.9 million and $154.5 million, respectively. Estimated revenue projections are intended to finance the anticipated expenditures.
General Fund Key Revenues
• Property Tax - Total property-related tax revenues are budgeted at $33.8 million in the proposed FY 2025-2026 budget, an increase of $1.8 million compared to the FY 2024-2025 adjusted budget. Property Tax is the City’s second largest revenue source and represents 22% of total General Fund revenue.
• Sales/Transaction Taxes - Sales/Transaction Tax revenues are budgeted at $54.9 million in FY 2025-2026, an increase of $1.5 million compared to the FY 2024-2025 adjusted budget. While this revenue source is impacted by economic conditions, Avenue Insights, the City’s sales tax advisor, estimates that the City will receive the projected budget amount in FY 2025-2026. Reviews and adjustments to this revenue source occur regularly, as economic conditions can be unpredictable. This amount includes Transaction Use Tax (Measure HH from 2014) that is estimated at $14.6 million in FY 2025-2026. Sales and Transaction Taxes are the City’s largest revenue sources and account for 37% of the General Fund revenue.
• Utility User’s Tax (UUT) - Total UUT revenues are estimated to decrease by $215,957 in the proposed FY 2025-2026 budget compared to the 2024-2025 adjusted budget. The FY 2025-2026 budget is estimated at $13.7 million in UUT revenues. UUT is not expected to increase significantly in future years due to the use of renewable energy and increased competition in the telecommunications market (e.g., cable TV and wired and wireless telecommunications).
• Real Property Transfer Tax (RPTT) - Total projected RPTT revenues are estimated at $10.4 million in FY 2025-2026. This is an increase of $1.6 million compared to the FY 2024-2025 adjusted budget. Ballot Measure VV, increasing the Real Property Transfer tax rate from $6 per $1,000 in valuation to $11, is estimated to achieve an increase of $4.9 million annually. This tax is highly volatile, relying on the timing of changes in property ownership.
Given the economic uncertainties, the City will continue to monitor potentially volatile key revenue sources, such as sales tax and real property transfer tax, and make adjustments as information becomes available. The conservative approach to revenue estimates helps mitigate large variances in revenues, which could negatively impact the City’s net fiscal position. As the economic landscape continues to evolve, the City will remain attentive and fiscally aware of any changes that have an impact on the long-term fiscal forecast.
General Fund Expenditures
Budgeted operating expenditures for FY 2025-2026 are projected to be $156.1 million, a decrease of 5% compared to the FY 2024-2025 adjusted budget. Employee salaries and benefits are the largest line-item expenditures in the General Fund. The Alameda County Fire Department contract for services and equipment accounts for 22% of General Fund expenditures.
General Fund salaries and benefits are estimated at $74.0 million for FY 2025-2026. Total personnel costs are 1.6% lower than the FY 2024-2025 projected budget. Due to impacts of a competitive labor market, full-time and part-time positions remain vacant in the current fiscal year. To balance the operating budget, current vacant positions were evaluated to determine the feasibility of eliminating positions. The proposed FYs 2025-2026 and 2026-2027 biennial budget include the elimination of specific vacant positions and a reduction in part-time employee hours. As the City works to address and resolve the City’s ongoing structural deficit, it must also take a strategic approach to staffing to ensure that it can manage workloads and respond effectively to the needs of the community. Balancing staffing needs will require careful and strategic analysis. The City remains committed to thoughtful and sustainable workforce planning over the next year and beyond. Personnel costs represent 47% of the General Fund budget. As a service organization, the City’s core expenditures are personnel-related.
General Fund reserves are used to support the continuity of existing services, prevent the disruption of projects and programs, and pay for one-time costs and investments. These investments will benefit the City in the long run by enhancing services and building infrastructure. A total of $6.1 million for FY 2025-2026 and $6.4 million for FY 2026-2027 is proposed for allocation from the General Fund Undesignated (unassigned) Reserve.
General Fund Reductions
For several fiscal years, the City has adopted budgets that projected structural deficits - rising expenditures with limited revenue growth, resulting in the projected use and drawdown of fund balance. Ongoing structural deficits are unsustainable and detrimental to the long-term fiscal health of the organization. In the continuing effort towards long-term fiscal stability, the City proposes several reductions in General Fund expenditures in FYs 2025-2026 and 2026-2027. The City’s departments conducted a thorough review of budgetary needs and proposed reductions that had the least amount of impact on service levels, while ensuring that the City continues to deliver on core services. While some proposed reductions will result in minimal to no impact on service delivery levels, others are anticipated to have notable impacts on the community and service delivery levels. General Fund reductions that will result in impacts to the community, including reductions in service delivery levels, primarily affect the Public Works, Recreation and Parks, Library, Human Services, and Community Development Departments.
The City remains focused on providing core services to the community despite the ongoing budget challenges. While more work is needed to achieve long-term fiscal sustainability, through the leadership of the City Council and the support of City staff, the City will take meaningful and thoughtful steps toward presenting future balanced budgets while preserving essential services to the San Leandro community. While difficult conversations and policy decisions are expected as the City continues the hard work to develop a sustainable and balanced budget, the City Council and City staff remain dedicated to providing excellent public service to the community.
Key Expenditures and Assumptions
Salary Adjustments
The budget includes funding salaries and benefits based on the terms of the current Memorandums of Understanding (MOUs) for all labor groups.
Medical Insurance
The budget and multi-year forecast include a 6% annual rate increase for medical and dental insurance costs.
Retirement Plan Costs (CalPERS)
The City contracts with CalPERS to administer its pension plans. Pension costs are made up of normal costs and unfunded accrued liability (UAL). Normal cost represents service credits earned by active employees in the current year and is calculated as a percentage of payroll. UAL is an amortized dollar amount to fund the difference between the estimated cost of pension benefits for current and future retirees when compared to current assets.
Based on actuarial valuation reports provided by CalPERS, the normal cost rates for Miscellaneous and Safety plans are expected to be higher than the FY 2024-2025 rates. While benefits remain unchanged, employer contributions continue to increase due to the fluctuating performance of the investment portfolio. Pension costs are estimated at approximately $23.5 million paid for out of the General Fund.
Fire Contract
The FY 2025-2026 proposed budget for the fire services contract with the Alameda County Fire Department amounts to $33.6 million; this amount is expected to increase to $36.1 million in FY 2026-2027. The contract provides for both emergency and non-emergency fire services in the City. The FY 2025-2026 proposed budget reflects a one-time reduction of $1.4 million due to projected salary savings from vacant plan checker positions, a one-time reduction in retiree medical contributions for unfunded liability payments, as well as the reduction of medical equipment replacement in FY 2026-2027. This reduction in medical equipment replacement is not expected to affect the level or quality of emergency medical services provided by the Fire Department.
Transfers Out
Transfers out of $7.0 million in FY 2025-2026 and $4.9 million in FY 2026-2027 include General Fund contributions to Capital Improvement Program projects, the Fleet Fund, Stormwater Fund, and Parking Fund. In FY 2025-2026, $4.9 million will contribute to the Capital Improvement Program projects, the parking fund will receive a subsidy of $376,000; the stormwater fund will receive a transfer of $225,000, and the Fleet Fund will receive a transfer of $1.5 million to cover the cost of a new fire vehicle. In FY 2026-2027, the Capital Improvement Program will receive a contribution of $4.9 million from the General Fund.
SPECIAL REVENUE FUNDS
Special Revenue Funds are used to account for revenue derived from specific taxes from other revenue sources that are restricted by law or administrative action to expenditures for specific purposes. Special revenue funds have either a restriction on their use or special reporting requirements, such as funds received related to AB 1600 development impact fees.
In FY 2025-2026 expenditures for Special Revenue Funds total $20.0 million, with expenditures totaling $23.4 million in FY 2026-2027.
ENTERPRISE AND INTERNAL SERVICE FUNDS
Four Enterprise Funds make up the City’s business type operations. The Water Pollution Control Plant Fund, Environmental Services Fund, Shoreline Enterprise Fund, and the Storm Water Fund are City municipal operations designed to fully recover costs through user fees. Internal Service Funds also operate as business activities, exclusively supporting the City’s internal operations. Facilities Maintenance, Information Technology, Insurance Services, and Equipment Maintenance make up these funds.
The Storm Water Enterprise Fund is the only enterprise fund that is not self-sufficient. To be made whole, the General Fund subsidizes operational needs related to stormwater activities. For the Fund to remain self-sufficient over the long term, it will require new voter-approved funding or continued subsidy from the General Fund.
In FY 2025-2026 expenditures for Enterprise Funds total $51.3 million, with expenditures totaling $42.1 million in FY 2026-2027.
In FY 2025-2026 expenditures for Internal Service Funds total $32.2 million, with expenditures totaling $27.4 million in FY 2026-2027.
CAPITAL IMPROVEMENT PROGRAM
The Capital Improvement Project (CIP) program represents the spending plan for infrastructure improvements and other specific large-scale capital purchases. Projects include major street and park improvements, building construction, and significant facility maintenance or upgrades.
In FY 2025-2026 expenditures for the General Fund Capital Fund total $5.9 million, with expenditures totaling $4.9 million in FY 2026-2027. The total CIP program in the biennial budget consists of $31.4 million in FY 2025-2026 and $28.3 million in FY 2026-2027 (all capital expenditures). These amounts include miscellaneous department projects. The CIP plan significantly contributes to the total budget and to the community.
Public Noticing
The Proposed FYs 2025-2026 and 2026-2027 Biennial Budget was reviewed and discussed by City Council at a public meeting on June 2, 2025. The Proposed FYs 2025-2026 and 2026-2027 Biennial Budget was further discussed at the monthly Finance Committee on April 23, 2025 and May 12, 2025.
A public notice was published in the San Leandro Times on June 5 and June 12, announcing the date, time, location, and subject matter of this public hearing. The Proposed FYs 2025-2026 and 2026-2027 Biennial Budget is available on the City of San Leandro’s website at
<https://www.sanleandro.org/1462/Proposed-City-Budget-Fiscal-Year-26-27>, and available and on file at the City of San Leandro Finance Department for public review from 8:30am-5:00pm, Monday through Friday.
ATTACHMENTS
• Attachment A - Resolution Adopting the Biennial Budget of the City of San Leandro for FYs 2025-2026 and 2026-2027
• Attachment B - Resolution Adopting the Biennial Budget of the San Leandro Public Financing Authority for FYs 2025-2026 and 2026-2027
• Attachment C - Resolution Adopting the Biennial Budget of the Successor Agency to the Redevelopment Agency for FYs 2025-2026 and 2026-2027
• Attachment D - All Funds Budget Summary for FYs 2025-2026 and 2026-2027
• Attachment E - Proposed FYs 2025-2026 and 2026-2027 Biennial Budget Presentation
PREPARED BY
Nicole Gonzales, Finance Director