Midyear budget review: finance staff project multi‑million shortfall, warn Public Safety Sales Tax fund will be largely drawn down

City finance staff told the City Council Finance Committee on Jan. 16, 2025, that the city faces a multi‑million dollar operating shortfall this fiscal year and that salary and benefit growth is the primary driver of the gap.

Mister Francisco, the finance presenter, said the city began the fiscal year with an available fund balance near $17.7 million and that, under current assumptions, the general fund is projected to run a net deficit of about $5 million in the current fiscal year. “We’re estimating that we will lose about $5,000,000 this fiscal year,” Francisco said, and urged the committee and council to “course correct” during this year’s budget process.

Why it matters: growing personnel and pension costs and capital obligations tied to the Public Safety Sales Tax (PSST) risk crowding out other city services and require council decisions about reserves, debt and potential new revenue tools.

Major points from the review

- Salary and benefits: Francisco said aggressive wage increases, added steps and cost‑of‑living adjustments in recent years are producing rapid expenditure growth in personnel lines. He noted an upcoming state pension formula change that will raise the city’s pension cost by about $400,000 on July 1.

- Public Safety Sales Tax Fund (PSST): The fund began fiscal year 25 with a carryforward balance of about $2.6 million from FY24 but is…