During a recent city council meeting, Finance Director Carla Carvallo Degroff presented a comprehensive five-year financial forecast for the city's general fund, highlighting significant fiscal challenges ahead. The forecast, developed in collaboration with financial consultant Andrew Heath, aims to provide a clearer picture of the city's financial health and guide future policy decisions.

The forecast indicates a systematic deficit beginning in fiscal year 2023-2024, projected to grow annually, with estimates ranging from $3.4 million to $3.8 million by fiscal year 2025-2026. This trend is attributed to a combination of rising personnel costs, which account for approximately 70% of the city's expenditures, and the depletion of one-time funds previously used to balance budgets.

Carvallo noted that the city has made efforts to stabilize its finances, including reducing operating expenses and implementing new revenue measures, such as the recently approved increase in the transit occupancy tax. However, these measures have not been sufficient to offset the ongoing deficits, which are exacerbated by increasing costs associated with employee benefits and pension obligations.

Heath elaborated on the assumptions underlying the forecast, emphasizing the importance of conservative estimates in projecting revenues and expenditures. He highlighted that the forecast excludes one-time revenues and focuses on ongoing financial conditions to provide a realistic baseline for future budgeting.

The council discussed the implications of the forecast, particularly the potential impact of a proposed sales tax increase on the November ballot, which could generate an additional $10.5 million annually. If approved, this measure could help alleviate some of the projected deficits and allow the city to maintain its current level of services.

The meeting underscored the urgency for the council to address these financial challenges proactively, as the forecast indicates that without significant changes, the city could exhaust its general fund reserves by fiscal year 2026-2027. The council members expressed a commitment to exploring strategies to enhance revenue and manage expenditures effectively to ensure the city's long-term financial sustainability.