Capitola adopts FY 2025–26 budget and CIP; council places hold on $150,000 in seed spending pending grant agreement

The Capitola City Council adopted the fiscal year 2025–26 operating budget and capital improvement program on June 26, approving staff’s recommended resolution while adding a council instruction to withhold $150,000 in previously authorized seed funding until the city has a signed grant agreement tied to a park project.

Finance Director Jim presented the budget and told the council the general fund for the coming year and the next two is structurally balanced using Measure Y revenues, while cautioning that longer‑term structural pressures — principally CalPERS unfunded actuarial liabilities — could challenge balance beyond the next three years. He said the city is maintaining an estimated ending general‑fund balance target of $1,103,000 and had appropriated $150,000 of general‑fund resources for council goals including a flashing crosswalk on Stockton Avenue, Esplanade Park improvements, Park Avenue work and seed money for a Monterey Park playground.

Councilmember Jensen moved and colleagues accepted a friendly amendment to delay releasing the $150,000 until the city has a signed CDBG agreement for the Jade Street site; staff clarified that $60,000 of that $150,000 was intended for a roadway pavement contract and might need to proceed. Council asked staff to hold discretionary releases until the grant paperwork is signed or until staff returns with recommended adjustments. The motion to adopt the budget and CIP, with that amendment, passed unanimously.

Key CIP notes: the budget lists seven active capital projects totaling roughly $11 million; one recommended appropriation is $656,000 of Measure D/RTC and SB1 funds for the 40 First Avenue multimodal pavement project. Staff also described the mid‑year budget review schedule and will provide quarterly updates for Measure Y revenues, TOT, cannabis tax and permit revenues.

Staff outlined a reorganization that moves HR and IT functions into administrative services and expands the assistant to the city manager role to add public‑outreach and communications responsibilities. The budget includes new and updated job descriptions and the recommended FY25–26 salary schedule consistent with existing labor agreements; council adopted those staff recommendations earlier in the meeting.

Why it matters: the council’s vote completes the city budgeting process for FY25–26 and establishes resources for council goals; the hold on $150,000 signals a conservative approach to matching city disbursements to executed grant agreements and to avoid committing general funds until external funding is contractually secure.

Council asked staff to return early in the fiscal year with any required midyear adjustments and to report on sales‑tax and TOT trends; staff also said the city expects FEMA and CalOES reimbursements related to Wharf storm repairs that would improve reserve positions when received.