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Half Moon Bay adopts recommended FY 2025–26 budget framework; council flags structural deficit, risk‑fund choice and expiring golf fee
Summary
Council reviewed a recommended FY25–26 budget showing a near‑term deficit driven by one‑time revenues and ongoing cost pressures; members directed staff to seek revenue options (including negotiating an expiring golf nonresident fee) and begin organizational restructuring while preserving core services.
City staff presented the recommended fiscal year 2025–26 budget at the June 3 meeting, outlining a near‑term plan that preserves services this year but projects a structural deficit over the next two to three years unless revenues rise or expenditures are reduced.
Key figures and the problem - Recommended general‑fund revenue for FY25–26: approximately $23 million (including a conservative projection for Measure R sales tax revenue tied to tourism and the new sales tax rate). - Expenditures: about $24 million of operating costs plus roughly $1 million in planned capital contributions, producing an annual shortfall in the proposed budget of about $1.5 million. - The staff presentation highlighted that the recommended budget relies on one‑time sources (roughly $900,000 in one‑time revenue and roughly $500,000 of one‑time savings). Stripping those items out produces an ongoing structural deficit of roughly $3 million.
Immediate fiscal choices for council - Risk management fund: staff offered two options. Option A temporarily suspends the General Fund contribution to the city’s Risk Management Fund (saving roughly $500,000 for FY25–26) while the Risk Fund’s unspent balance covers claims for two to three years; Option B continues General Fund contributions but would leave the city with smaller unassigned reserves. Several council members preferred Option A to retain more flexible reserves for immediate budget pressure; others cautioned that restricting the Risk Fund could expose the city later to liability costs that would have to be covered. - Expiring revenue: the city will lose a contractual “nonresident golf fee” revenue stream in September 2026 unless renegotiated. Council members directed staff to open negotiations with the golf course owner and report back; members suggested forming a small negotiating team.
Policy and operational directions - Short‑term: council asked staff to prepare a mid‑year and near‑term strategy that includes reorganization options to reduce costs, to hold major executive hires (city clerk/communications director, assistant city manager, assistant to the city manager) pending a reorganization plan, and to pursue grants and fee‑recovery opportunities where appropriate. - Long‑term: staff was asked to accelerate capital and watershed planning (Pullman/Kehoe ditches) and to report back with scenarios showing the multiyear impacts of revenue options, fee adjustments and service‑level reductions.
Why it matters: a fiscal cliff and next steps - Staff’s financial model showed a potential “fiscal cliff” within two to three years if no structural changes are made—reserves would decline and the city would face unavoidable, deep service cuts or emergency use of reserves. - Council asked for a clearer multiyear plan and for staff to return on June 17 with final budget adoption options and with a timetable for reorganization and revenue/fee proposals. Councilors also requested follow‑up on sheriff contract negotiations and an examination of downtown enforcement revenues tied to citations and parking enforcement.
Ending The council adopted the budget framework and gave staff direction to return with a final budget on June 17, while beginning work on a reorganization, revenue negotiations (notably the expiring golf fee) and prioritized CIP and drainage work to address urgent stormwater concerns.
