Pacifica projects $3.2 million structural gap in FY 2025–26 base budget; staff seeks council direction on ERAF and VLF risks

Pacifica city staff told the City Council on May 12 that the city’s FY 2025–26 base budget shows a structural gap unless the council provides further direction on reallocated ERAF revenues and potential state backfill of vehicle license fee (VLF) revenues.

Assistant City Manager Yuli Carter summarized the base‑budget approach, saying, “the base budget is what today’s services will cost us tomorrow.” City Finance Director Marisol Gomez gave the revenue estimate: “we're projecting 49,800,000.0 in revenues in general fund revenues, which is only 3% above the current year's revised budget level.”

Why it matters: the base budget is a staff exercise that keeps staffing and service levels unchanged and excludes policy‑level additions. Under that methodology staff projected $49.8 million in general‑fund revenue and $53.2 million in general‑fund expenditures — a roughly $3.2 million gap before accounting moves. Staff modeled a council‑directed reallocation of excess ERAF (Educational Revenue Augmentation Fund) receipts; applying $3.7 million of excess ERAF to the general fund reduced the projected shortfall and produced about $557,000 of one‑time available funds for council priorities. Staff also flagged a $2.3 million state VLF backfill as uncertain and said they are setting aside funds to cover a potential loss if the state does not provide the payment.

Key numbers and assumptions - General‑fund revenue (base): $49,800,000 (projected; +3% vs. FY24‑25 revised) - General‑fund operating expenditures (base): $53,200,000 (+11%) - Projected gap before ERAF reallocation: approximately $3.2 million - ERAF reallocation applied in staff model: $3,700,000, yielding $557,000 of one‑time availability - VLF backfill amount at risk: $2,300,000 (state backfill not yet confirmed) - Authorized/counted staffing (no changes in base): 200.75 FTEs; staff noted the city remains roughly 21% below peer staffing levels - Pension/OPEB and PERS trust contributions called out as drivers of cost increases: staff included a PEP trust contribution of $283,000 and an additional PERS pension trust allocation of $2,214,000

Capital and enterprise highlights - Staff included the full CIP in the base package so capital transfers are factored into the operating outlook. Major CIP items discussed included: - Ultraviolet (UV) disinfection system replacement at the Calera Creek Water Recycling Plant: $4.7 million; in construction and scheduled for completion in October 2025. - Headworks improvements at the wastewater plant (feasibility/design underway; engineers estimated a multi‑million dollar scope and said a more precise cost will follow). - Collection system projects: a planned Valimar / Rockaway Beach Avenue pipeline replacement (approximately $4.2 million; design under way, construction anticipated next fiscal year) and several pump station rehabilitation projects. - Pavement resurfacing (FY25‑26): $1.8 million (anticipated to start June/July); annual striping $75,000; concrete/ADA improvements $436,000. - Esplanade full trash capture device (stormwater treatment): $1.6 million, of which Caltrans is expected to contribute $1,440,000 because the device treats Caltrans right‑of‑way. - Annex lighting (general fund contribution): $50,000. - Enterprise funds (sewer/wastewater/parking) total roughly $37.9 million of the citywide budget; sewer charges alone were shown at about $22.3 million. Staff noted sewer rates will be returned to council for formal adoption in June so they can be placed on the tax roll.

Questions and council direction Council members pressed staff on staffing levels, market pay, and the city’s structural fiscal picture. Council member Wright noted the city’s longstanding understaffing and asked what it would cost to bring pay and staffing closer to market; staff said that analysis would require more work but estimated the gap could be in the “multimillion‑dollar” range. Council members also asked about the UV project’s expected energy and ownership model; public works said additional solar panels are likely to be city‑owned and would modestly increase on‑site generation.

Staff emphasized budget limitations in the base package: the base does not assume any new positions, does not include labor contract settlements (current MOUs expire at year‑end), and does not add targeted programmatic enhancements. Staff said decision‑package requests for new services, staffing or policy‑level changes will be developed and ranked for council consideration in the next study session.

No formal council vote on the budget took place; staff asked for council feedback. Next steps in the public schedule are: Planning Commission review of CIP conformity on June 2, a council budget study session to consider city manager recommendations on June 9, and the formal budget hearing and adoption on June 23.

Speakers quoted or cited in this report include Assistant City Manager Yuli Carter; Finance and Administrative Services Director Marisol Gomez; City Manager Kevin Woodhouse; Public Works Deputy Roland Yip; and Engineering Manager Daniel Patton.