Hayward finance staff warn of growing general-fund shortfall; Measure C/K1 funding falls far short of capital list

Interim Finance Director Shree Fatman told the City Council on April 15 that Hayward’s general fund faces an estimated structural shortfall and that corrective action will take years.

Fatman summarized current estimates: general-fund revenue for FY 2025–26 is projected at about $218 million while projected general-fund expenses total roughly $230 million, producing a projected deficit that staff currently estimate could be on the order of $12 million next year. “This is not a balanced budget,” Fatman told the council. “This is not something that’s not solvable. It just will take time and take some measured and thoughtful approaches to get there.”

Why it matters: roughly 80% of the city budget is personnel costs, and recent salary and benefits commitments are driving increased baseline expenses. Fatman recommended program-based prioritization and a new fall review process to assess course corrections earlier than the traditional midyear review.

Measure C / K1 capital math: staff also presented Measure C and Measure K1 revenue and obligation projections tied to major capital candidates. Director Mary O’Meary (presentation lead for capital projects) summarized the revenue picture and the council’s capital list:

- Measure C/K1 current annual revenue (midpoint) is roughly $18 million–$22.9 million per year in the near term; an estimated midyear position cited $36.9 million as a multiyear reference point. Current operating obligations charged to the measure are about $8.0 million; capital expenditures and debt service further constrain pay‑as‑you‑go capacity. - Major capital estimates on the council’s priority list include a new Public Safety Center (staff estimate $200–$250 million; estimated annual debt service if financed at $250M ~ $16.2M), a Corporation Yard rehabilitation (estimated $140M total; about $70M net to Measure C after enterprise-share assumptions; annual debt service ~$4.5M), a new Wicks Branch library (estimate $50M; annual payment ~$3M), a shortfall at the STAC Center (approximately $25M missing), Fire Station 9 (approx. $15M), and a pavement‑condition maintenance target of $4.0M per year to sustain a PCI of 76.

Taken together, Director O’Meary said the council’s capital list totals roughly $480 million with an annualized debt-service need of just over $30 million — well above the city’s Measure C/K1 midyear capacity. Staff estimated an unfunded gap on the order of $290 million to deliver the full list as currently conceived.

Council reaction and next steps: council members asked for more granular options, including down‑sizing or staging projects and pursuing grant and partnership funding. Several council members emphasized that shovel‑ready projects and partnerships (for example, funding for the STAC Center and library grants) should be prioritized to capture outside dollars. Council members also supported an earlier fall budget review and multi‑year plan to close the structural gap and rebuild reserves.

Reserves: later in the meeting, staff reported $32 million in spendable reserves (about 14% of the target base) with a 20% reserve goal; finance staff emphasized that reserves are at risk absent corrective action.

Ending: staff recommended a program-based prioritization approach and scheduled further briefings, including a May work session and a planned fall revise. No formal budget actions were approved at the April 15 meeting.