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The Pleasanton City Council will be reviewing staff’s presentation on the results of a consultant’s independent assessment of the city’s 10-year Financial Forecast model, which found the city’s budget forecast model to be accurate, during an off-schedule special meeting Thursday afternoon.
Over the past year, staff has been telling residents that the city is facing a structural deficit averaging $10 million every year or $22 million if a recession hits.
In its general fund 10-year financial forecast — a model which uses revenue and expenditure assumptions to help cities plan out their long-term financial health — city officials have projected a yearly budget shortfall starting at $10,788,817 in 2026, with that number rising as high as $15,678,578 in 2030.
However, the accuracy of the city’s financial forecast was one of the main criticisms residents had during last year’s Measure PP campaign as many people didn’t think it validated the city’s reasons for wanting residents to pass the half-cent sales tax increase measure. For this and other reasons, the council majority directed staff to have a consultant assess that forecast — which is what staff will review on Thursday.
The assessment was done by Eide Bailly — an accounting firm based in Menlo Park — and a representative from the firm will discuss the details of its findings with the city’s financial forecast as well as some recommendations for the city to implement.
According to the Feb. 20 special council meeting report, the assessment report concluded that the city’s “financial forecast employs an appropriate and standard methodology common in California local governments.”
“The report also noted the City’s existing short-term property tax and sales tax forecasts are prepared by the most widely recognized consultants providing these services in California and, absent any additional information not previously considered by the consultants, Eide Bailly did not observe any reason to deviate from its recommendations relative to property tax and sales tax growth rates,” the staff report stated.
One of the recommendations the consultant will be presenting to the council for implementation is incorporating an infrastructure funding plan and any other funding plans into the city’s financial forecast in order to “build a comprehensive financial forecast for the City.”
“Eide Bailly notes that the additional work to be completed in the near-term will only further illustrate that the City’s resources are constrained and that its long-term funding needs are significant,” according to the staff report.
The City Council meeting is scheduled to begin at 3 p.m. Thursday (Feb. 20). The full agenda can be accessed here.
In other business:
* City staff will be presenting an overview of the city’s General Fund Baseline Budget projection that will be used for framing budget development for fiscal years 2025-26 and 2026-27 along with the city’s preliminary 10-year Financial Forecast.
According to the staff report, the baseline budget represents the “extension of the current year’s service levels and budget.”
“The baseline budget will be further refined, considering input from the City Council, the Budget Advisory Committee, the community and the final proposals submitted by City departments, to develop a proposed (fiscal year) 2025-2027 City budget which, along with an updated long-term forecast, will be presented to the City Council in May 2025,” according to the staff report.
Staff will also go over the two forecast scenarios they have developed given the current economic climate.
Some of the key fiscal assumptions used to develop the city’s forecast include property and sales tax increases (especially with the recent opening of the new Costco in town), operating revenue increases and salary and benefit increases.
According to the staff report, the first scenario “assumes the city’s revenues will continue to grow at a measured pace, with the local economy experiencing no major downturn during the 10-year period,” while the second scenario assumes a recession in 2027 that will impact the city’s major revenue categories.
In that second recession scenario, staff said sales tax revenue is expected to decrease by 5% in 2027 and 2% the following year while other taxes will decrease by 2% between 2027 and 2029
“The city’s expenditures are expected to continue outpacing revenues for the next several years due to rising operating costs and revenue limitations,” according to the staff report. “Based on the underlying assumptions, the baseline scenario forecast projects annual deficits of $10.4 million to $16.9 million.”
An important observation was made at Tuesday’s council meeting by long-time resident and close observer of city government, Jan Batceheller. She astutely encouraged staff and council to base projections on actual prior-year performances, not some dire predictions based on unown factors in the future. Yielding to the new policy of raising hands if the audience agrees with a speaker, I joined several others in that affirming gesture. It seems so simple! Those of us who were in council chambers also heard the mid-year budget report, which actually showed revenues and reserves were both up as a result of recent changes in policies. Failure to consider these changes will naturally skew the results of any future predictions.
Reining in expenditures will be key, and actions are being employed toward that end. The sky is not falling, the change in leadership is beginning to show results. Pulling numbers out of a hat to support the narrative that disaster is just around the corner benefits no one.
My trust is in a well-informed and intentioned team on the dias that will employ constraint moving forward while working to keep safety a priority and enhancing our economic development.