San Gabriel reviews proposed $57.7 million general fund budget; $2.7 million in new CIP funding

Mayor Ricardo Menchaca and the San Gabriel City Council heard a presentation April 21 on the city’s proposed fiscal year 2025–26 operating budget and capital improvement program from Finance Director Will Kahulakula and budget staff.

The proposal projects $57.7 million in general fund revenues and $56.8 million in expenditures and transfers, leaving a projected net change in fund balance of $933,000 and an ending reserve above the city’s 25% policy target. “It is my pleasure, to present to you tonight our, our initial proposed operating capital improvement budget for the fiscal year 2526,” Finance Director Will Kahulakula said during the presentation.

The nut of the staff presentation was that taxes and transfers are the dominant revenue sources: property taxes (including a property tax in lieu of vehicle license fee line) and the city’s Measure SG sales tax together account for the largest shares of projected general fund revenue. Staff told the council that transfers in from the retirement fund—budgeted at about $12 million to pay CalPERS pension costs—account for roughly 21% of general fund resources in the proposal.

Staff laid out the major budget drivers. Personnel costs make up the largest share of general fund expenditures—Linda (finance staff) said personnel "makes up 77% of the general fund expenditure." The budget includes a 3% vacancy savings factor and does not include any prospective salary adjustments; Kahulakula told the council that "that 933 is based on the salaries as of today so there are no- incorporated cost of living allowances in in the salary numbers." The plan also includes a $250,000 contribution to the city’s OPEB (other post‑employment benefits) trust and a continued allocation for CalPERS unfunded accrued liability, which staff reported has increased in the most recent valuation period.

On the revenue side, staff reported that property tax is the largest tax line (about 40% of tax revenue). Measure SG and state sales tax combined account for a large portion of the remaining tax receipts, while utility user tax and transient occupancy tax (TOT) are secondary revenue streams. Councilmember Kevin Wu asked whether the revenue projections included cost‑of‑living adjustments; staff reiterated that the proposal is based on current salary levels and does not incorporate speculative labor adjustments.

Council members discussed options for using reserves above the 25% target. Kahulakula and staff said the council could direct additional amounts to OPEB funding or capital replacement once the contingency target is met; staff described the current approach as earmarking additional fund balance to OPEB and capital rather than immediately transferring it to an external trust.

Capital and one‑time items: the proposed CIP included $2.7 million in new funding across seven projects, with the largest line item the Mission/Las Tunas intersection improvement (about $1.4–$1.5 million). Staff also highlighted smaller one‑time capital items such as vehicle replacement funding in the fleet internal service fund and modest investments in facility cameras and park repairs.

Mission Playhouse and special funds: staff showed a projected Mission Playhouse year with roughly $713,000 in revenue, a proposed $629,000 transfer from the general fund, and $1.5 million in proposed expenditures; staff said the playhouse will continue to be monitored in the city’s strategic planning process. The retirement special fund was shown as property‑tax based and projected to transfer $11.9 million to the general fund next year; staff noted that retirement liabilities remain sensitive to investment returns and actuarial assumptions.

Grants and parks: councilmembers asked about Smith Park and other park projects. Rebecca (staff) said the city has applied to the Outdoor Recreation Legacy Program (ORLP) and other grant sources and that the pool and associated improvements have specific eligibility and matching requirements. "We recently applied for the ORLP funds," Rebecca said; staff noted the city must still provide matching funding for many of the programs if awarded.

Other policy matters: council members and staff discussed local sales taxes. Mark (staff) explained that county and regional formulas will determine how a recently enacted countywide quarter‑cent tax will be allocated and that some homelessness and outreach funds will flow through the Council of Governments (COG) for regional administration. The council briefly discussed whether to consider placing additional local sales tax measures on future ballots to retain revenues locally; staff noted the city has budgeted funding for ballot and education outreach consulting in coming work.

Events and services: council members raised the farmers market and special events funding. Staff said the farmers market expenses were included in the current budget at roughly $24,000 for the prior year but that next year’s budget contains no specific line until the city completes an RFP and determines staffing and operator costs. The council suggested considering stronger funding for popular events but staff cautioned that additional events require careful staffing and cost analysis.

Next steps: staff said the presentation was a study session and no action was requested. Councilmembers will have individual budget briefings between April 28 and May 8; an informal community budget presentation is scheduled for May 22, and the formal public hearing and potential adoption of the budget is scheduled for June 3, with a continuation date of June 17 if needed. The new fiscal year would begin July 1.

The meeting closed after council discussion; no formal votes were taken on the budget at this session.