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The Pleasanton City Council is set Tuesday to discuss the city’s 2025-26 midyear budget update and the general fund’s long-term financial forecast, all of which set the scene on the city’s current financial health and what the next nine years might look like based on economic trends and potentially new revenue sources.
According to the Feb. 17 staff report, apart from accepting the budget update report and reviewing the financial forecast, the council will also vote on adopting a resolution to approve several amendments to the 2025-26 budget, which would effectively allow the city to not have to dip into its Section 115 Pension Trust in order to achieve a balanced budget.
“The Adopted FY 2025/26 (budget) included using $1 million from the Section 115 Pension Trust; however, with the recommended mid-year adjustments, funds from the Section 115 Pension Trust are no longer needed,” staff stated in Tuesday’s report. “As a result of these changes, along with the use of $0.35 million in program reserves, staff expects the General Fund will have a year-end revenue over expenditure net total of just over $0.02 million.”
Every other year, Pleasanton’s City Council approves the city’s two-year operating budget, which is then followed by the approval of a midterm budget after the first year and the adoption of midyear budget adjustments during each of the two years of the operating budget. Tuesday’s discussion will focus on the midyear budget for the first year of the biennial budget that the council adopted last June.
“Staff regularly monitors expenditures, cautiously forecasts revenues, and recommends addressing changes whenever appropriate to maintain a balanced budget,” according to staff. “The Mid-Year Budget report helps staff address budget variances in a timely manner.”
During Tuesday’s council meeting, staff will present several revenue and expenditure projections including information on how property tax increased by less than 3% last fiscal year, which is lower than previously estimated, due to a “cooling real estate market” and how while modest growth is expected in fiscal year 2025-26, the increase for the next fiscal year is expected to be lower if certain scenarios play out.
Staff will also be discussing how the city’s business licence tax experienced significant growth during the last fiscal year, how the city’s pension investment return was relatively strong and how these increases in revenue help offset low sales tax revenue that was mainly seen as a result of consumers focusing on buying essential items during these uncertain economic times.
“In summary, lower property and sales taxes are partially offset by increases in business license tax and one-time development revenues, anticipated savings from vacant positions, and reduced pension costs,” according to the staff report. “As a result of these key changes, the FY 2025/26 General Fund budget is balanced without using the $1.0 million pension trust funds approved in the adopted budget, mainly due to vacancy savings and a recommended $0.5 million in additional transfer from the Capital Reserve Fund.”
Another point that will be discussed during Tuesday’s meeting is the city’s long-term financial health.
According to the staff report, Pleasanton is still projecting a structural deficit during each year over the next nine years that ranges from “approximately $6 million to approximately $10 million, consistent with the gap reflected in the forecast in the 2025-27 adopted budget”.
That’s why staff will be going over the city’s general fund long-term financial forecast and how things like a recession, the passing of a hotel tax measure and new development projects could affect the city’s finances over the next decade. Staff will also go over the U.S. economy and how that plays a part in the city’s financial health.
“Overall, economic indicators suggest the U.S. economy will soften through the first part of 2026, driven by policy uncertainty, inflationary pressure, and a cooling labor market,” according to the staff report. “Growth is expected to resume later in 2026 and 2027, driven by artificial intelligence (AI) investment, tax incentives, and additional Fed Reserve rate cuts. However, risks remain due to potential tariffs/trade tensions, as well as persistent inflation.”
The updated financial forecast does not reflect any additional funding for deferred maintenance projects that would be identified in the city’s Asset Management Plan, which the city is still developing. According to the staff report, when the city returns for council direction on funding for the management plan, the budget will be adjusted accordingly.
Lastly, staff will be presenting a number of proposed budget adjustment recommendations across the general fund, enterprise funds, internal service funds, special revenue funds and capital projects funds for the council to approve.
These recommendations, in part, include decreasing revenue and expenditure totals by $60,000 and $570,000, respectively, and increasing the net transfer total by $500,000.
The City Council meeting is scheduled to begin at 7 p.m. Tuesday (Feb. 17). The full agenda can be accessed here.
In other business
* City staff will also be presenting a financial plan analysis for the 2026 sewer rate study and seek council approval to move forward with developing an implementation plan that, if approved at a later date, would offer a “balanced approach of near-term improvement spending versus program risk”.
According to the staff report, the sewer rate study will help ensure the financial sustainability during the implementation of the city’s Sewer System Management Plan and supplemental long-term sewer capital improvement program, which helps “guide management of the sewer program, ensure the sustainability of its infrastructure, and reduce the risk of sewer overflows”.
“The goal of the Rate Study is to establish cost-based, fair, and legally defensible rates and connection fees to support the City’s sewer program,” according to staff.
After receiving direction on the implementation scenario, staff will perform a “cost-of-service analysis” and work on developing rate and connection fee schedules before coming back to the council for final approval. If approved, the fees would go into effect on Jan. 1, 2027.
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