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Capitola council hears budget shortfall tied to rising CalPERS costs, approves targeted one-time allocations
Summary
Finance staff told the City Council that Measure Y revenues mostly matched new personnel costs and rising CalPERS unfunded liability, leaving little discretionary surplus; council approved a package of small project allocations and canceled remaining budget hearings, moving toward adoption June 26.
Capitola City Council members on May 29 reviewed a draft fiscal 2025–26 budget staff described as “structurally balanced” but squeezed by rising pension costs and dependence on volatile sales and transient occupancy taxes.
Finance Director Jim Mulberg told the council the proposed budget still showed a limited ending fund balance for June 2026 — “an estimated ending fund balance of June of 20 26 of 653,000” — and later presented a corrected estimate of roughly $753,000 after several technical adjustments.
The shortfall stems largely from a jump in the city’s CalPERS unfunded actuarial liability (UAL). Mulberg reported the UAL rose from about $21,000,000 to $35,000,000 in two years and the city’s annual CalPERS payment increased from roughly $2,100,000 to $2,900,000 over that period. He said Measure Y revenue (estimated at just over $1,100,000) was largely matched by new personnel-related costs tied to…
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