San Mateo adopts FY 2025–26 budget, sets $25 million seed for capital reserve

San Mateo — The City Council adopted the Fiscal Year 2025–26 operating budget, five-year capital improvement program and a $25 million initial contribution to a new capital investment reserve on June 16.

Finance Director Karen Huang told the council that two developments improved the city’s near-term fiscal outlook since an April presentation. First, state action on the budget made it likely San Mateo would receive a 100% vehicle license fee (VLF) backfill rather than the 50% assumed earlier. Second, real property transfer tax collections were running higher than earlier projections (including Measure CC receipts), boosting near-term revenue.

Huang said the revised assumptions reduced the projected budget gap. The total proposed citywide budget remained about $333.5 million; the general fund operating budget totaled roughly $187.7 million. Under updated revenue assumptions the projected deficit for the upcoming fiscal year was reduced to approximately $12 million (from a prior projection of about $15.2 million), and the city now expects to close the current fiscal year with a roughly $3 million drawdown instead of the larger shortfall previously projected.

Huang emphasized that even with the planned $25 million transfer to the capital investment reserve, the city’s overall fund balance remains strong — projected to be above $77 million at fiscal year-end — giving the city several years’ runway to undertake structural budget adjustments. Council members asked for a follow-up facility-assessment presentation and staff indicated they would present options for using the capital reserve later this year.

The council adopted the budget on a 5–0 roll call.

What’s next: Staff will present a facility assessment and options to prioritize capital projects for the new capital investment reserve and continue work on structural budget solutions.