Council adopts conservative two-year operating budget; reserves remain above policy target

Atascadero’s City Council unanimously adopted the biennial 2025–27 operating budget after presentations by Administrative Services Director Jerry Rangel and City Manager J. Lewis outlining revenue projections, reserve policy and planned investments.

Staff emphasized the general fund as the focus of the discussion, with property tax the largest single revenue source (projected at about $14 million in 2025–26) and sales tax included in general fund totals. Rangel said sales tax is volatile but staff projects modest growth in Bradley-Burns and Measure D revenues. Transient occupancy tax (TOT) projections were conservative (about 1.5% growth in 2025–26, rising to 4.5% in 2026–27) because of increased lodging supply in the region.

The budget includes no new ongoing general-fund positions; manager Lewis said a previously approved zoo position is funded by a grant. Staff recommended four reclassifications to create supervisory roles in public works (lead operator to lead/supervisor for wastewater operations; lead worker promotions to supervisors in parks and streets) and to reclassify the assistant (deputy) city manager position to assistant city manager to reflect duties while strengthening internal supervision and succession. Lewis framed those changes as improving operational accountability and efficiency.

The draft budget schedules over $58 million in capital investments across the two-year cycle, with major projects identified as downtown infrastructure enhancements, road projects, the public safety center, and wastewater improvements. Staff recommended continued set-asides for replacement reserves (technology, vehicles) and an annual $1.8 million set-aside for public safety facilities. A 7-year projection in the budget keeps general fund reserves above council policy (target 20%) and staff reported projections would not drop below 30.6% during the outlook period.

The budget assumes wastewater user-rate increases (discussed separately at tonight’s Prop 218 hearing) and sets conservative estimates for other variable revenues. Rangel highlighted the city’s conservative budgeting approach and the inclusion of Measure F-14 funds in a separate, transparent section of the budget document.

Council members thanked staff and finance-committee members for extensive pre-meeting review. After public comment — in which residents thanked staff for clear presentation and asked a small number of clarifying questions about utilities and operating items — Council member Funk moved to approve the budget; Council member Newsom seconded. The motion passed unanimously (Funk, Newsom, Peake, Mayor Pro Tem Derez, Mayor Bobo recorded as yes).

Council and staff emphasized the budget’s conservative assumptions, planned investments in core services, and continued monitoring of reserve levels and revenue performance during the two-year cycle.