City presents $2.207 billion proposed FY 2025-26 budget, highlights $50 million PSPRS paydown and reserve drawdown
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Summary
City staff presented the proposed $2.207 billion fiscal 2025-26 budget to the Budget Review Commission, outlining a $885.5 million operating budget, $952 million in capital improvements, a $50 million one‑time PSPRS police pension prepayment, and an expected drawdown of reserves.
City finance staff on April 7 presented the proposed fiscal year 2025-26 budget to the Budget Review Commission, describing a $2.207 billion spending plan that includes $885.5 million in operating budgets, $952 million for capital improvements and $370.4 million in contingencies and reserves.
The presentation said the total represents a 3.8% decrease from the current year overall budget but includes a 8% increase in operating spending when reclassifications and transfers are excluded. Sonia (presenting budget staff) said the operating budget increase reflects a combination of new full-time positions, transfers from capital to operating, salary adjustments and a one‑time $50 million prepayment to the Public Safety Personnel Retirement System (PSPRS) for police pension unfunded liabilities.
Commissioners pressed staff on several points: how the $50 million PSPRS payment affects long-term structural balance, whether the budget relies on drawdowns of beginning fund balance, and how transfers from capital to operating (about $12.5 million) should be read. Staff noted the general fund is projected to draw down $79.7 million in the coming year—about $50 million attributable to the PSPRS prepayment and $33 million transferred to capital projects—and that, across five-year forecasts, the general fund shows periods of both modest surplus and deficit tied to debt service and one-time items.
Staff described revenue assumptions that informed the budget: continued population growth (~1.4%), an unemployment rate near 2.7%, more than 11 million annual visitors, and a diversified sales-tax base. The materials also call for a change in local sales tax composition: a sunset of the 0.20% preserve tax concurrent with a new 0.15% park-and-preserve tax (effective July 1, 2025), and an ongoing full-year loss of residential rental sales tax revenue estimated at $16 million. Staff also cited the state’s flat income tax changes as reducing state shared income tax distributions to the city by about $6 million next year relative to what otherwise would have been expected.
On capital, the proposed CIP was presented at $978.5 million, down from a previously budgeted level after reclassifications and carryforwards. Staff said about $536.1 million of capital was carried forward from earlier years (projects delayed or unstarted) and the budget adds roughly $442.4 million in newly proposed spending to reach the proposed total.
Commissioners emphasized transparency in the adopted documents (several corrections were requested for the published draft), asked for clearer scheduling of capital projects, and discussed potential tradeoffs between using reserves for capital work versus pension prepayments. Staff agreed to provide additional detail on levy calculations, fund-by-fund five-year plans, and clearer wording in publicly posted materials.
Ending: Staff told the commission the proposed budget will go to City Council and that the commission’s comments will be compiled for a report and a presentation to Council later in April.
