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Belmont presents FY2025‑26 budget introduction; general fund gap tied to unresolved VLF reimbursement
Summary
Finance staff introduced the proposed FY2025‑26 budget and five‑year capital improvement plan. The city projects a $1.4 million general fund gap for next year that would be closed if the state reimburses an outstanding vehicle license fee (VLF) shortfall; the VLF remains unresolved in the state May revise and presents a multi‑year fiscal risk.
City finance staff presented the proposed fiscal year 2025‑26 operating budget and five‑year capital improvement plan at the May 27 Belmont City Council meeting, outlining a proposed $66.1 million city operating budget and a $13.5 million capital program for FY2025‑26.
Finance staff told the council the proposed general fund resources total $32.9 million while proposed general fund expenditures are $34.3 million, creating a $1.4 million shortfall that would require a draw on reserves if unaddressed. Staff emphasized the shortfall is partly contingent on a recurring state reimbursement historically paid as an in‑lieu vehicle license fee (VLF) payment. “The VLF funding … that the state hasn't agreed to reimburse us on and that, therefore, we did not budget is $1,700,000,” the finance presentation said. The staff presentation added that if the state includes the VLF reimbursement in the legislative budget, the city would not need to draw from reserves to balance next year’s budget.
The presentation described longer‑term implications if the state withholds VLF backfill: a projected $30 million revenue loss to the city over the next 10 years and an erosion of reserves below the city’s 33% target by fiscal year 2030‑31 if the shortfall persists. Staff said those projections represent a worst‑case scenario tied to the current state budget posture; last year the state restored a delayed VLF payment after late negotiations with local governments.
Staff also reviewed the city’s capital program. The FY2025‑26 CIP is proposed at $13.5 million for the coming year and approximately $61.9 million over five years. Major projects highlighted for the coming year include the San Juan pump station rehabilitation, pavement rehabilitation, Alameda/Old County Road corridor improvements and the Twin Pines Park creek restoration project, which staff said will start construction in early June.
Council members and staff discussed revenue mix, the importance of local control over revenue sources and the need to monitor state budget negotiations closely. Staff noted the operating budget and CIP were developed to align with council strategic priorities and to preserve infrastructure investments amid inflationary pressures.
No formal action was taken; this was the budget introduction and staff will return for planning commission review, audit committee and public hearing prior to final adoption in June.
