Carmel council receives FY 2025–26 proposed budget; council asks for more detail on reserves, capital and fees
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Summary
City staff presented the proposed $39.7 million spending plan and a $34.7 million revenue forecast for fiscal year 2025–26; council members and residents pressed staff for additional detail on fund balance, capital projects, revenue options and transparency around salaries and program costs.
City finance staff gave the Carmel-by-the-Sea City Council an overview of the proposed fiscal year 2025–26 budget on May 6, laying out a $39.7 million spending plan and a $34.7 million revenue forecast and prompting extensive council and public questions about reserves, capital spending and long-term revenue risks.
Finance staff said the recommended budget reflects a shift in assumptions: revenues were forecast conservatively based on current collections rather than simply rolling forward prior budgets, and salary budgeting now uses expected actual step levels instead of assuming every position is at top step. Staff also applied a 2.4% Bay Area CPI where appropriate and proposed a $7.8 million list of new capital projects while expecting to carry forward approximately $23.8 million of projects already underway.
The presentation highlighted that salaries and benefits are the largest recurring cost (about $19.5 million) and that pension contributions remain a significant and increasing expenditure. Staff warned the council that, under the recommended plan, the city would draw down unassigned fund balance to help finance capital projects, noting the city could use about $5.0 million of fund balance to cover planned expenditures if projects proceed as scheduled.
Council members and members of the public raised a range of questions. Several asked for a clearer breakdown of authorized positions and salaries by department so residents can see how payroll drives costs. Others asked for clearer, rough order-of-magnitude estimates when staff brings design-only capital items to the council (for example, Junipero bypass and Piccadilly restroom work) so the council can assess the likely overall project cost before authorizing design funds. Multiple councilmembers asked staff to prioritize roadway repairs and to provide better detail on how capital projects are charged and tracked so the community can see where public dollars are invested.
Council members also renewed the earlier discussion about the city’s reserve policy and the 90% operating-cost guideline adopted by the council’s financial stewardship work group; staff said the proposed budget sits close to that target, with operating expenditures equal to about 92% of current-year revenue under the assumptions used and that the city would continue efforts to trim operating costs and accelerate the planned fee study.
Staff asked the public and council to submit written questions before a May 21 workshop so answers can be compiled and distributed. Councilmembers directed staff to return with additional detail on unassigned fund balance math, clearer salary and position schedules, CIP cost estimates when only design funds are proposed, and potential revenue options — including ambulance billing and other program revenues — for further analysis.
The presentation was informational; the council did not vote on the budget on May 6 and will revisit the plan during the May 21 study session.
