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Vacaville staff outline FY26 budget shortfall; propose department cuts, fee study and possible tax measures
Summary
City staff presented a draft FY2025-26 budget showing a $294.8 million operating budget and a $158.4 million general fund, warned of a structural deficit, and outlined $5.5 million in department and citywide cost-savings with an estimated remaining budget gap that will require further action such as fee updates and possible ballot measures.
City staff presented the final budget study session on June 10 for the Fiscal Year 2025'26 operating and capital budgets. The proposed operating budget totals $294.8 million citywide, with a general fund budget of roughly $158.4 million.
Staff warned of a continuing structural deficit driven by rising costs and revenues growing more slowly. Earlier projections shown in study sessions placed a possible general fund shortfall in the coming year at roughly $11 million; staff said a package of recommended cost savings and one'time changes yields about $5.5 million of reductions targeted to the general fund but that a financing gap remained and a multi'pronged approach will be required.
Key points - Total proposed operating budget: $294,789,615; general fund portion: $158,400,000 (approximate and down 1.7% from the current year). - Cost-saving measures presented earlier and reflected in the draft include: a citywide 2.5% departmental reduction plan, pausing new CPI additions to services and supplies budgets, paused pilot programs, deferred capital, and reductions in internal service fund contributions (estimated citywide savings roughly $9 million, with about $5.5 million to the general fund). - Remaining gap: after the planned cuts, staff estimated a remaining shortfall that will require additional measures to protect reserve policy levels; the presentation flagged a roughly $16 million gap in certain forecasting scenarios. - Utilities: the water and sewer enterprise funds make up about 25% of the citywide budget and were shown to be at risk without rate adjustments. The water fund projected to finish the current fiscal year near 9% reserves and risk going negative in subsequent years absent rate action; the sewer fund reserves also decline in the five'year forecast without additional revenue.
Next steps and possible revenue actions Staff said they will complete a cost-of-service fee study and bring an updated service and facility rental fee schedule to council in late summer/early fall with public hearings. The utility rates work, already on the calendar, will proceed as required by law.
Staff also reviewed options for voter'approved taxes (sales tax, transient occupancy tax, business license tax) and noted Vacaville's rates are among the lowest in the county. Staff proposed issuing an RFP for ballot-measure consulting and community polling this summer if the council wants to explore a tax measure; any tax proposal would require voter approval and planning this fall to place a measure on a future ballot.
Ending Staff emphasized a fiscally conservative approach and said the final FY26 budget will return to the council for adoption at the June 24 meeting, along with a revised five'year forecast. Councilmembers asked questions about utility reserves and program impacts and reiterated interest in a public outreach process before any voter measures.
