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Tensions were high during Tuesday’s Pleasanton City Council meeting after the dais provided staff with feedback regarding the city’s proposed two-year budget, which ended with some proposed changes that divided the council.
The proposed changes were not related to the suggested budget reductions to various city services and amenities, but rather moving money from the city’s Capital Improvement Program back into other funding sources which Mayor Jack Balch said would help the city in the long run.
“We’re putting money into a deferred maintenance plan in the tone of $7.2 million in (year one) … and $9.3 million in year two total and how that money will be used is not quite known,” Balch said during the May 20 discussion. “So maybe we keep it in the home that’s generating those funds — the (Section 115 Trust Fund) and reserve accounts — until that becomes clearer. I think that would be fiscally prudent.”
Every two years, the City Council adopts a balanced two-year Operating and Capital Budget, along with the five-year Capital Improvement Program.
The city is facing a structural budget deficit that is projected to set the city back, on average, roughly $13 million each year over the next eight years — that number could go as high as $22 million if a recession hits. These projections came from a 10-year financial forecast that was previously found to be accurate by an independent accounting firm.
Following community engagement efforts and the formation of a Budget Advisory Committee, the city developed a balanced budget for the next two fiscal years.
The city’s 2025-26 expenditure budget across all operating funds totals $248.2 million — the expenditure budget for 2026-27 is projected to be $257.5 million, according to the staff report.
The General Fund budget anticipates modest revenue growth over the next two years — despite the use of significant cost reductions and one-time funds — with revenues totaling $162.9 million in the 2025-26 fiscal year and $169.3 million the following fiscal year.
The city’s two highest revenue streams continue to be property tax, which make up about 60% of the fund’s revenue, and sales tax, which makes up just under 16%.
As for the General Fund operating expenditure budget, the city is projected to spend a total of $154.7 million and $160.7 million for fiscal years 2025-26 and 2026-27, respectively. After factoring the transfers out, the overall General Fund expenditure budget is $165.2 million and $171.2 million for the next two years.
City Finance Director Susan Hsieh said personnel costs account for about 72% of the budget expenditures — excluding transfers out of the budget. The second largest expenditure category, she said, is materials, supplies and services.
One of the main ways the city was able to balance its budget was through the reductions and cuts it made across its departments. The council previously supported those reductions at its April 10 meeting.
At a high level the reductions total about $7 million annually across five key service categories. Internal services and operational support is the most impacted department that will see a $2.6 million reduction in year one and $2.8 million in year two, along with a 3.5 reduction in full-time equivalent staff positions.
The library, which has been a point of contention for many residents — including high school students who have been packing the council chambers during recent council meetings — is set to see a $1.6 million reduction in year one and $1.7 million in year two with a 6.5 reduction in full-time equivalent staff positions.
The third highest impacted category is parks, streets and facilities which will see a $1.5 million reduction in both years and a reduction of two full-time equivalent staff positions — although Balch did get confirmation from staff that Pleasanton’s parks will still be properly maintained despite the reductions.
Other budget reduction categories include community support and human services, which will see a $600,000 reduction in both years; planning and building, which will see a $400,000 reduction in both years; and police and fire, which will see a $300,000 reduction in both years. Both of the last two categories will see one full-time equivalent staff position reduction.
“The budget challenge has tested our city’s reputation but our community’s response has proven it more so,” Balch said regarding the recent turnout of students opposing the cuts to the library.
The city’s police and fire departments continue to make up about 45% of the city’s costs. However, according to the city’s proposed budget reduction recommendations, the police department is only seeing less than one percent of cuts to the department’s budget.
The police department, if the budget is approved, would see a reduction in the special enforcement and investigative unit through the freezing of one position. The unit is not currently staffed, which means the impact of eliminating these positions is “reducing the staffing pool available as sworn officers are on leave.”
That single reduction to the PPD special unit makes up over $200,000 of the total $300,000 budget reductions to the department.
In comparison, the city’s library department, which makes up just under 10% of the city’s General Fund expenditures by program, is facing a 15% reduction in funding in the proposed budget document.
The only major change after the council directed staff to move forward with incorporating the proposed cost reductions from the April 10 special meeting, was that staff pulled back on their recommendation to eliminate the fire marshal position from the budget and to freeze the Emergency Preparedness Manager. For the latter position, staff are now recommending adding the position back on the budget as a part-time position at a reduced cost.
Part of the associated departmental restructuring that would come from the proposed budget include key personnel changes like consolidating the Economic Development Division with the Community Development Department. This move would help “enhance focus on economic development activities, including review of city permitting processes,” and add an economic and business development manager to better support council strategic initiatives.
Another proposed departmental restructure listed in the budget is to add a management analyst in human resources to”continue handling expanded labor relations responsibilities that are currently managed through a limited-term position.”
Hsieh said any additional staff positions added onto the budget will not be funded by the General Fund and instead will be funded through other sources.
In regards to staffing impacts from the proposed budget, Hsieh said the city plans on eliminating 12 staff positions — two of those positions are currently staffed while the rest are vacant. City Manager Gerry Beaudin said the goal is to maintain the two employees impacted by the staffing changes by having them move around within the organization.
“We’ve really worked hard to not touch existing positions, people who are currently seated,” Beaudin said. “We’re using vacancies to the largest extent possible … our hope and expectation is that we’ll be able to shift people around within the organization using attrition and other (things like) retirement.”
Hsieh also went over the different one-time funds that the city used — apart from the roughly $7 million in annual cost reductions to departments — to also balance its budget. These one-time funds included using up both $300,000 of COVID reserves for year one and $3 million from the city’s capital reserve over the next two years.
The council also OK’d the use of $4 million from the city’s Section 115 Pension Trust Fund over the next two years ($2 million each year) and the use of $2.1 million from the city’s retiree medical and post-employment benefits trust funds over the next couple of years.
However, Councilmember Julie Testa was concerned about dipping into one-time funds as a long-term solution, especially given the city’s growing pension obligations.
“It’s really concerning to me, and I know it is to staff,” Testa said. “The (staff) report says again and again, this is not sustainable. This is not a solution. We are not solving our structural deficit.”
To date, the city has allocated $38 million toward a Section 115 Pension Trust Fund and the citywide pension costs for fiscal years 2025-26 and 2026-27 are projected to be $29.2 million and $31.2 million, respectively.
Testa said the city should have cut more services — as much as she didn’t want to admit — instead of drawing from the trust fund because the pension obligations are only beginning to hit the city and have not peaked.
In regards to the CIP, Balch pointed out that the proposed program includes a General Fund contribution of approximately $45.8 million over the five-year period, including approximately $30.3 million for deferred maintenance and $15.5 million for CIP projects.
The $30 million, according to staff, is required to address “deferred maintenance needs and fund critical projects from the Asset Management Plan, which is expected to be completed at the end of 2025,” according to the proposed budget.
In order to buffer the impacts to services, Balch suggested taking money out of what he called the “nebulous” deferred maintenance and asset management plan fund and putting that toward the unrestricted General Fund reserve. The reserve target is 20% and while that target is projected to be met this next fiscal year, it falls short by 1% in 2026-27.
Balch said that money could still be transferred to the CIP if the economy remains strong.
Vice Mayor Jeff Nibert asked staff about Balch labeling the Asset Management Plan and deferred maintenance program as a “nebulous” fund to which Beaudin stated that the mayor was correct in that while it is a known expense that the city is trying to begin setting money aside for now, there is no concrete plan quite yet.
He also suggested that the city should draw $1.5 million — instead of the proposed $2 million — from the 115 trust fund each year.
“Because the Asset Management Plan is not done yet, I feel like this keeps it in its home, it earns more interest, it can compound in that time longer and (it can) help to continue to work toward the pension obligation,” Balch said.
Lastly, he suggested the city look at using “a volunteer brigade” for services that might not be as costly but take up time.
However, Nibert said he did not support any money being transferred out of the CIP program, even though Balch said that money originates from the city’s operating budget and that money could later be reallocated to the CIP.
Testa also said she did not support moving money around and questioned the futility of Balch’s recommendations.
“It just isn’t a fix,” Testa said. “I feel like we’re creating an illusion.”
Balch reasserted that leaving the $1 million in the 115 trust fund allows that money to compound in that account, which helps with the city’s pension obligations, instead of going to a deferred maintenance fund for a plan that isn’t yet developed.
He said keeping more money in the city’s reserves — at least until that Asset Management Plan is complete — allows those funds to be used for emergencies and maintains that 20% reserve target.
Testa challenged Balch by saying that he was the one who wanted to take the money out of the 115 trust fund in the first place to which Balch said he always wanted to take out as minimal as possible.
Ultimately, the council voted 3-2 to support Balch’s directions to take out $3 million, instead of $4 million, from the 115 trust fund and to put money back into the second year General Fund reserve fund. Both Nibert and Testa dissented.
Another main focus of the meeting was the failure of Measure PP — a half cent sales tax measure — which many said would have solved a lot of the city’s budget-related problems.
“This has been just a painful, disappointing process and I do feel that the loss of Measure PP was just a real disservice to our community,” Testa said. “And I do feel our community was misled to believe that there was fraud or … we weren’t being honest.”
Former mayor Karla Brown slammed members of the council for not supporting the half-cent sales tax measure during their recent election campaigns.
“If it had passed, Measure PP could have funded our library, our swim center — it could have continued to support our budget so that we didn’t have to tap into the (Section) 115 trust.”
Shashank Vedula, a teen who spoke during public comment in opposition to the library cuts, said Measure PP did not pass due to a lack of information and supported the revenue measure being reintroduced with a detailed spending plan so residents know where the money is being spent.
Testa asked staff about what the city plans on doing to find new revenue sources, to which Beaudin said the city plans on looking at different options over the next year, including various economic development initiatives that they will be bringing to the council in the future.
Beaudin also said the city might have to revisit the idea of putting a measure back on the ballot.
“The reality of the kinds of revenue that the city needs to be able to stabilize our budget and move ourselves forward is that we’ll likely be talking about something at the ballot box one way or another in the coming years,” Beaudin said.
Tax and spend (Measure PP) does not improve/help the deficit; it compounds it.