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The Pleasanton City Council talked about the city’s current economic outlook, up-to-date highlights from its budget, proposed budget adjustments and Pleasanton’s long-term financial forecast last week.
The discussion, which was part of the city’s 2025-26 midyear budget review, focused on key updates like how both property and sales tax revenue was lower than originally projected, but thanks to certain expenditure savings and increases to the capital reserve fund, the city will not have to dip into its pension trust fund in order to balance its budget.
“I think all of us are focused on helping Pleasanton become revenue resilient … and address the structural deficit,” Mayor Jack Balch said, noting the city’s projected structural deficit over the next few years caused in part by expenditures outpacing revenues.
Balch also pointed out that the city has implemented several cost-saving initiatives to recover credit card processing fees, reviewed the general fund subsidy for water and revised the city’s water discount program, which have all helped strengthen the city’s general fund. He additionally noted that the city updated developer impact fees and user fees and updated sponsorship agreements, which also helped the city financially.
“All of these things are steps in the right direction,” Balch said. “We are not through the woods, I don’t want to assert that we are, but we are taking this seriously and I think staff is obviously doing that well.”
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. The discussion Feb. 17 focused on the midyear budget for the first year of the biennial budget that the council adopted last June.
Susan Hsieh, the city’s finance director, led the presentation and went over the city’s economic outlooks for the future including projections that the U.S. economy is projected to soften through the first part of this year before rebounding.
She also noted that while the U.S. economy is expected to grow thanks to investment in artificial intelligence, tax incentives and potential rate cuts by the federal reserve, certain risks remain due to “policy uncertainty, inflationary pressure, and a cooling labor market”.
Hsieh then went on to talk about specifically Pleasanton’s finances and how the city is projecting lower revenue and expenditures compared to what was previously projected in the budget when it was adopted last June.
However, she noted that despite lower sales and tax revenues, the city saw increases in the contribution from the capital reserve fund, higher business license tax revenues and other positives that led to the city not having to use $1 million from its Section 115 Pension Trust, which the council previously approved the use of last year.
Hsieh then went on to talk about other budget highlights like the increase in development impact fees, which bring one-time restricted revenues, and increases in expenditures across various funds to support programs. She also discussed the revised revenue and expenditures budgets and the adjustments that the council eventually approved, which represented the decreases or increases in those revenues and expenditures.
But what took up most of the conversation last week was Pleasanton’s long-term fiscal health and what the city’s financial health might look like over the next decade.
Hsieh presented four scenarios: a baseline, which is the most likely to happen; a recession scenario, which is looking at things pessimistically; a scenario where the city’s proposed hotel tax increase is approved; and a very optimistic scenario where major new developments in places like East Pleasanton would generate significant revenue growth.
This is all also considering the fact that Pleasanton is facing an annual structural deficit of about $10 million for the next several years.
According to the presentation, while the hotel tax will provide a couple million dollars of revenue, what would really help Pleasanton’s finances is if several of the proposed developments are completed over the next few years. Balch noted this and said that even with the hotel tax, otherwise known as the transient occupancy tax (TOT), the city will need to continue to find ways to increase its revenue streams.
“That is why the TOT was a conversation that we’ve already had but I do believe that we need to continue to foster economic vitality, invest in things that will produce revenues for the city,” Balch said. “I think we need to continue to have a can-do attitude to address these challenges ahead of us,” Balch said.
However, Councilmember Julie Testa said the city would have still benefited from Measure PP, a half-cent sales tax revenue measure that failed at the polls in 2024 and noted how the city has been challenged with significant service reductions due to its fiscal health — one example she noted was the reduction of library hours.
“$10 million of additional revenue, every year … for the next 10 years would have been helpful, but we still would have had to control costs,” City Manager Gerry Beaudin said in regards to Measure PP not having been passed by voters.
“I don’t want to say that we would have been quite as aggressive as we were in that first round (of budget cuts),” Beaudin said. “I think we would have been able to meter things out a little differently … it would have bought us some time to invest in those kinds of tools (but) we’re doing that work anyway — we’re going to have to.”
Testa later proposed talking about placing another half-cent sales tax measure on the November ballot this year, during the matters initiated portion of the meeting, but she failed to get enough support from the rest of the council, except for Councilmember Jeff Nibert.
