Sunset council reviews FY26 budget proposals; staff recommends $600,000 transfer to public works capital projects; council debates pay increases

Council members and city finance staff conducted an extended review of proposed FY26 budget figures during a work session on April 1, discussing a possible transfer from the general fund to the Public Works Capital Projects Fund, capital needs for parks and buildings, and employee compensation adjustments.

Staff presentation and proposed transfer: Office manager Nicole walked the council through line-item changes and fund-balance calculations. She presented a scenario in which transferring $600,000 to the Public Works Capital Projects Fund would reduce the city’s general-fund reserve from the then-estimated percentage down to roughly 28% of the state statute threshold — a level staff described as reasonable for long-term stability. The transfer was presented as an option for council consideration; no final vote on the transfer occurred at the meeting.

Capital needs and maintenance: Staff and councilors moved several capital items (Sunset Room renovations, fencing at the new shop, washout at the new shop and playground resurfacing) from departmental budgets into the Public Works Capital Projects Fund to show the effect on the operating budget if the transfer is made. Council members emphasized maintenance priorities for parks being used for city events while Central Park is impacted by the 1800 North project.

Compensation discussion: The council discussed cost-of-living adjustments (COLA) and merit pay. Staff provided three illustrative scenarios (a modest 5% COLA, a mid-range 7% option, and an 8% option) and the estimated citywide fiscal impact; a 5% COLA was estimated at about $86,247 across funds, while 8% was shown at approximately $139,211. Council members debated whether to prioritize across-the-board COLA increases or merit-based raises tied to performance evaluations. Concerns were raised about rising health-insurance costs (staff reported an approximate 6.65% increase in insurance premiums) and the impact of higher benefit costs on net take-home pay. Several council members expressed support for a higher COLA (7% was raised in discussion) to offset health-insurance increases; no final COLA decision was made.

Budget timing and next steps: Staff asked council members to respond to an email with their budget preferences before the next budget session and to consider whether to approve a transfer of $600,000; council members asked for more time to review highlighted changes and for clearer documentation on fund balances, project timing and capital priorities. The finance presenter said she would show numbers in the next draft both with and without the proposed transfer so the council could compare scenarios.

Ending: Staff and council agreed to continue detailed budget review in the next scheduled budget meeting; no tax rate changes or final budget approvals were made at this session.