Council reviews preliminary FY 2025–26 budget; staff warns of economic uncertainty, council asks staff to explore targeted items

Mountain View — City staff presented a preliminary review of the proposed FY 2025–26 general fund budget at the April 8 council meeting and the Council unanimously accepted the staff recommendations while directing staff to analyze several follow‑up items.

The presentation and the Council's response Finance and Administrative Services Director Derek Rampone and Assistant Director Grace Zhang presented a budget preview that focused on the general fund. Staff reported that the current fiscal year is trending to end with a larger operating balance than originally adopted: revenues are running above budget and expenditures slightly below. For FY 2025–26 staff proposed a structurally balanced general fund budget with a modest projected operating balance of about $96,000, limited new ongoing positions and approximately $5.6 million in limited‑period funding.

The staff memo highlighted several areas of uncertainty, including the recent federal actions that could affect inflation, tariffs that raise construction and materials costs, and potential changes to municipal tax‑exempt bond rules under consideration in Congress that could raise borrowing costs for the city's planned public safety building. Staff also noted the sensitivity of the city's pension costs to CalPERS investment returns.

Key numbers and staff recommendations Staff presented these preliminary figures and recommendations: an estimated available balance at the end of the current fiscal year of roughly $26 million, with approximately $4.4 million carried forward as available for FY 2026–27 after funding nondiscretionary items and reserves. Staff recommended converting two limited‑period positions to ongoing status, adding two new ongoing positions (four ongoing position changes total) and funding $5.6 million of limited‑period expenditures in 2025–26. The recommended budget assumed a small operating balance entering FY 2025–26 and projected modest deficits in later years (between about $2 million and $3.7 million in FY 2026–27 and beyond) unless revenues improve or budget adjustments are made.

Measure G and other revenue notes Staff provided an update on Measure G, the higher property transfer tax tier for transactions over $6 million approved by voters in November 2024. Staff estimated the new tier could produce about $9.5 million annually, but cautioned revenues will vary with real‑estate activity: only two qualifying transactions had been noticed to staff to date.

Council directions and community‑service follow‑ups Council accepted the preliminary plan and asked staff to explore several ideas, many of them requested by councilmembers during deliberation or public comment. The Council gave staff direction to analyze and return with cost estimates for: - Expanding library weekend hours (Council asked staff to estimate costs and staffing requirements), - A live or near‑real‑time AI translation tool for council meetings and public materials to improve multilingual access, - Enhancements to economic‑vitality staffing / revenue generation strategies for downtown and entertainment districts, - Whether and how equipment replacement reserve funds could be used to help close the funding gap for the Public Safety Administration Building (Council asked staff to explore scenarios such as transferring up to $5 million from the equipment replacement reserve to the public safety building financing reserve), - Highlighting community‑facing budget items (neighborhood grants, community for all grants) in the budget‑in‑brief for improved public clarity.

Council also asked staff to continue closely monitoring federal actions that might affect tax‑exempt municipal bond interest rates; staff warned that losing the ability to issue tax‑exempt debt would increase borrowing costs by a substantial margin and could raise project costs for the city's planned public safety building.

Outcome and next steps Councilmember Ramirez moved and Councilmember Hicks seconded acceptance of the preliminary budget recommendations with staff‑recommended amendments and additional items for exploration. The motion passed unanimously. Staff will incorporate Council direction into the draft recommended budget to be published in May; the Council will hold a hearing on the recommended budget on June 10 and is scheduled to adopt the final budget on June 24.

Clarifying details - Estimated end‑of‑current‑year available balance: ~$26 million - Carryforward available for FY 2026–27 after reserves and limited‑period funding: ~$4.4 million - Recommended limited‑period funding in FY 2025–26: ~$5.6 million (down from $10.8M in prior year) - Ongoing position recommendations: 4 (two conversions from limited period to ongoing; two new ongoing positions) - Projected small operating surplus in 2025–26 (~$96,000) with projected deficits in 2026–27 and beyond if revenue conditions do not improve - Staff estimate of Measure G potential revenue: ~$9.5 million annually (subject to market activity)