Sonoma City presents balanced FY26 budget with narrow margin, council keeps reserves under close watch

City Manager David Keelan told the Sonoma City Council at a budget workshop that the proposed fiscal 2025–26 spending plan is balanced, with $28.8 million in proposed general-fund revenue and $28.7 million in proposed general-fund spending, producing a narrow $152,000 surplus.

The proposal comes amid rising personnel and utility costs, uncertain state and federal revenue flows and broadly flat tourism receipts. "This budget we're bringing to you today is balanced," Keelan said during the presentation. Finance Director Prathy outlined the economic assumptions behind the numbers and the major drivers on the expense side.

Why it matters: Sonoma’s operating budget is tightly balanced and relies on conservative revenue projections, the recently passed Measure T and careful use of reserves. Council and staff agreed the city should preserve reserve levels amid federal and state uncertainty and return with updated revenue and expense figures before final adoption.

What the budget shows - Proposed citywide revenue: $45.6 million; proposed general-fund revenue: $28.8 million. - Proposed general-fund expenditure: $28.7 million; projected surplus: $152,000. - Key revenue drivers: sales and use tax ($9.2 million), transient occupancy tax (TOT, $6.0 million), property tax ($6.0 million) and emergency-medical-service (EMS) collections (about $3.5 million). - Measure T was projected to add roughly $2.6 million in fiscal 2025–26.

Staff emphasized conservative assumptions on volatile lines such as TOT and sales tax. Prathy said the city is forecasting TOT to be essentially flat for 2025–26 and that sales tax receipts were expected to remain flat or slightly down in 2025. The finance director also described a moderate property-tax forecast (3–5% growth) and conservative five‑year projections.

Rising costs and fiscal risks Staff flagged several cost pressures the council explicitly discussed: a 3% cost-of-living adjustment (COLA) assumption for wages, a staff‑estimated 15% increase in employer health contribution, a 10% projected increase in workers’ compensation, and a 20% preliminary estimate for property and liability insurance. In addition, pension-related (PERS) unfunded actuarial liability costs rose modestly; staff said a lower-than-expected PERS investment return in the valuation raised the city’s UAL payment by about $168,000 compared with the prior year.

Reserves and the outlook Keelan and Prathy walked the council through reserve levels and multi-year forecasting. Staff described an operating-reserve policy and an emergency reserve and recommended preserving as much reserve capacity as practicable given federal uncertainty around disaster funding. Keelan said the budget will be revisited at midyear and that staff will return with updated revenue and expense data in January and for the June adoption. He asked council members to view the $152,000 surplus as effectively zero for planning purposes and to plan for a small range of adjustment between now and adoption.

Public comment and council direction Members of the public urged the council to fund community services and facilities, including food assistance and the community pool. Lynn Joyner of the community nonprofit SOS told the council, "we project by the end of this year, we'll probably provide about 80,000 meals to people in Sonoma and the Valley," and asked the city for additional one‑time support. Jane Hanson, project director for Sonoma Splash, told the council that "investing in Sonoma Splash Community Pool is not just a commitment to recreation. It's a commitment to public safety, youth development, and community strengthening." Councilors and staff discussed the requests; they asked staff to pursue county and philanthropic matches and to return with more formal funding plans.

Process and next steps Staff recommended adopting a conservative balanced budget on June 18 (the date mentioned in the presentation), continuing to hold some capital projects for possible midyear funding, and bringing a midyear revenue update in January. Council members asked staff to provide clearer department‑level revenue/expenditure alignments and to make the CIP and reserve projections easier for the public and council to monitor.

Ending note Councilors thanked staff for narrowing the prior-year deficit and for the clearer presentation of departmental costs. Staff said the final budget book and an online, searchable CIP dashboard will follow, and that staff will update the council and the public as revenue figures and insurance/workers’ compensation quotes finalize before adoption.