Emeryville study session projects $9.7M to $14.6M five‑year general fund shortfall; council told to consider reserves, revenue measures, cuts

A Regional Government finance consultant told the Emeryville City Council on Monday that an updated five‑year general fund forecast shows a projected deficit of about $9.7 million in the next fiscal year growing to roughly $14.6 million by year five, and that the city will need a mix of one‑time reserves, new revenue and likely program or staffing reductions to close the gap.

"The projected deficit in the general fund has continued to get worse," Brian Mora said, citing a range from "$9,700,000 deficit next year all the way up to ... $14,600,000 in the fifth year." Mora presented an updated five‑year model and described factors behind the deterioration, including lower development fees, reduced sales tax, unexpected Social Security payments tied to an IRS settlement and higher labor costs.

Why it matters: Emeryville is in the second year of a two‑year budget cycle and the council will begin formal budget hearings and ballot‑measure planning this year. Mora emphasized that one‑time windfalls such as recent property transfer taxes can strengthen the near‑term balance but do not solve structural shortfalls.

Mora told the council that the city finished the 2023–25 budget cycle with larger deficits than first projected: the 2023–24 year closed about $2 million worse than expected and the current year shows an $8.8 million deficit versus $2.7 million budgeted. He attributed most of the gap to a $4 million drop in development fees and a $1.3 million decline in sales tax receipts, offset in part by higher investment income and utility tax receipts. He also said two years of unanticipated Social Security payments and higher labor agreements added roughly $3 million to expenditures over estimate.

On reserves and one‑time options, Mora outlined actions the council previously took in March: transferring $3.2 million per year in residual property tax payments to the general fund, moving $7 million from capital and uncertainty reserves to meet a target reserve level, combining disaster and economic uncertainty funds, and assigning $3.3 million to cover the anticipated Social Security settlement. He also noted a one‑time $11.2 million property transfer tax from a sale of a biomed site under Measure O (a 2022 voter measure) that strengthened the current‑year balance, and cautioned the council that the purchaser (identified in the presentation as Sutter) is a health foundation exempt from some future taxes.

Mora presented three broad approaches to address the forecast: 1) rely on one‑time reserves and transfers (which could exhaust key funds over five years); 2) pursue voter‑approved revenue measures (parcel tax, business license changes, sales or hotel tax adjustments, community facilities districts); and 3) implement operating and staffing reductions beyond the baseline 5% vacancy factor already modeled. He said the city could model combinations of these options but warned that relying solely on one‑time funds is not recommended.

On revenue measures, Mora described updated estimates prepared with staff and an outside firm: potential revenue from a parcel tax/facility district could be $3.5 million to $5 million annually; a business license tax modernization could yield roughly $3.7 million on the low end to $9 million on the high end depending on rate and category changes; sales tax measures were estimated at about $2.1 million (down from prior estimates); and hotel tax could generate up to $1 million. "If you add all of those together, you're looking at almost $20,000,000 a year in revenue potential," Mora said, noting that some of those measures require voter approval and timing depends on general election schedules.

Council members asked about specific revenue tools and implementation timelines. Vice Mayor Carr asked about a payment‑in‑lieu‑of‑taxes (PILOT) model used with Sutter in other Bay Area cities; Mora reviewed examples (Palo Alto, Mountain View, San Carlos) and said arrangements vary from one‑time payments to multi‑decade target payments backed by a foundation account. Council member Preyfors and others pressed for further study of a business license tax update; Mora said staff is contracting a study (HDL) to refine rates, categories and cap options and recommended engaging the business community and the council’s business and governance subcommittee.

Mora recommended a phased approach: rely on reserves, existing vacancies and the recent one‑time revenues in the near term; transfer $4 million from the economic uncertainty fund in the second year to maintain a benchmark reserve level; and by fall begin public outreach and polling on a narrowed set of revenue measures so the council can consider placing measures on the 2026 or later general election ballots. He also warned that state pension costs (CalPERS rates), stock market performance and broader economic conditions could change the outlook.

No formal action was taken: the item was listed as informational and the council did not vote on policy changes during the session. Council members generally thanked staff and the consultant and signaled support for further study and outreach in the fall.

Ending: Mora closed by offering to return with refined analyses and outreach plans; the council asked staff to schedule further study and to provide detailed polling and fiscal‑impact information ahead of any decision to place measures on a ballot.