San Rafael council reviews preliminary FY 2025–26 budget and three‑year capital plan; accepts report 5-0

San Rafael Mayor Kate Collins and city staff presented a preliminary citywide budget for fiscal year 2025–26 and an accompanying three‑year capital improvement program (CIP) at the May 19 city council meeting, and the council voted 5‑0 to accept the report and direct staff to prepare a final proposed budget for adoption on June 2.

The presentation laid out proposed general fund revenues of about $106.5 million, total revenues and transfers in of roughly $189.6 million, and proposed appropriations and transfers of approximately $191.7 million. Paul Navazio, director (finance), told the council there was “no action being asked of the council this evening” while staff sought feedback and refinements before formal adoption.

The proposed general fund budget assumes modest revenue growth (about 2.5 percent overall) driven by property tax growth and largely flat sales tax projections. Navazio said staff now project the city will increase its general fund balance by about $1.5 million relative to the current budget at year‑end, after downgrading revenue expectations because sales tax has flattened. The draft 2526 budget includes $6 million of one‑time general fund transfers intended to address shortfalls in insurance/liability, capital needs, pavement maintenance and vehicle replacement; those transfers draw on available fund balance rather than recurring revenue.

Why it matters: the budget determines staffing, services and capital projects for the coming year and shapes reserve levels and how the city will address deferred maintenance, infrastructure and public safety needs. City staff emphasized the budget aligns with a new three‑year strategic plan the council will consider June 2 that sets priorities and annual work plans.

Key details: - The general fund is heavily dependent on property and sales tax; those two revenue sources together provide about 70 percent of general fund support, including voter‑approved measures such as Measure E and Measure R. - The draft budget shows personnel costs rising by approximately $4.5 million, primarily as the second year of multiyear labor agreements; the proposed staffing level is 416.15 full‑time equivalent positions, a net decrease of 0.2 FTE from the current year. - Staff proposed one‑time transfers totaling roughly $6 million: $2.5 million to the liability fund (insurance/claims), $1.5 million to the capital fund, $1 million for pavement maintenance, and $1 million to the vehicle replacement fund. Net of those transfers, the draft budget would draw down about $862,000 of general fund balance for one‑time needs. - The recreation special revenue (recreation revolving) fund remains supported by a $2.4 million general fund transfer in the draft; staff plan a fee and cost recovery analysis to inform future fee adjustments. - Measure P, the recently approved parcel tax for the library and community center, is anticipated to generate roughly $6.3 million annually once fully phased in; staff will create a restricted capital fund for Measure P and expect about $1.6 million in year‑one revenues.

Capital program: Assistant public works director and city engineer Joanna Kwok presented a proposed FY25–26 CIP of about $15.4 million for year one of the three‑year plan. Kwok said roughly 31 percent of that amount funds annual programs (ongoing smaller efforts) and the remainder supports onetime projects and multi‑year rollovers. The CIP includes building and facilities projects (about $4.8 million proposed for FY25–26), parks improvements, storm drain projects (with substantial grant support), and transportation projects including grant‑funded safety work (notably an HSIP award for Lincoln Avenue).

Staffing and capacity: Council members pressed staff on capacity to deliver CIP projects and on long‑term staffing needs. City leaders said the city has substantially reduced vacancy levels after recent labor agreements and that adding ongoing staff would increase long‑term structural costs; therefore the draft budget includes no net new ongoing FTEs and relies on one‑time funding where possible. Navazio and the city manager said staff will continue to explore partnerships, grant funding, consultant support and fee studies to manage workloads and capital delivery.

Risks and outlook: staff warned of a modest projected structural gap in FY26–27 if revenues underperform and as labor agreements continue; Navazio said the city could mitigate a gap of the size currently projected without drastic service reductions but will monitor sales tax and other revenues closely. The draft budget preserves the council’s 15 percent general fund reserve policy (10 percent emergency reserve, 5 percent economic uncertainty, plus a $1 million infrastructure reserve).

Action taken and next steps: Mayor Kate Collins moved to accept the report and direct staff to prepare the final FY25–26 proposed budget; the motion was seconded and passed 5‑0 (Vice Mayor Bushey; Council members Hill, Kurtz, Ian Scalotti; Mayor Collins). Staff will return to the council June 2 with adoption resolutions, the master fee schedule and other budget actions.

The council and staff emphasized the presentation is part of an iterative public process; the budget remains subject to revision based on new revenue data, grant awards, and council direction.