Santa Clara finance director previews proposed biennial budget, restores 25% stabilization reserve

Ken Lee, Santa Clara’s finance director, told the City Council at a May 20 study session that the city is presenting the second of three budget study sessions ahead of a June 10 public hearing and adoption vote. Lee said the proposed two‑year budget includes targeted additions for police and fire services, development review, housing and homelessness efforts, sustainability and library materials, and start‑up funding to implement the city’s Measure I (geo bond) program and to staff stadium major events. He said the proposed FY25–26 total budget is about $1.55 billion before carrying forward capital projects, and the second year is about $1.4 billion; staff expects first‑year totals to rise when capital carryovers are added at adoption.

Lee emphasized restoring the city’s budget stabilization reserve to the policy level of 25% of expenses for the first time since before the pandemic and said the proposal uses one‑time funds largely for one‑time uses and funds a fiscal sustainability study to examine longer‑term capacity and funding gaps across the 10‑year forecast. He described an allocation for pension stabilization reserve deposits and a land‑sale reserve policy. For the proposed FY25–26 operating budget Lee said the plan adds roughly 21 positions (after previously approved items) and that year‑two position counts change modestly because of the expiration of a federal SAFER fire grant.

Council members questioned revenue assumptions, the timing and use of potential year‑end surpluses, transient occupancy tax (TOT) estimates, contingency planning for events in 2026 (Super Bowl/FIFA), the library materials deficit (an unfunded need of $145,000 per year in each budget year), and how major events’ overtime and outside‑agency costs would be reimbursed. Lee said the FY25–26 TOT estimate of $27.5 million reflects a higher current‑year starting point and a full year of the increased TOT rate; staff expects year‑end surpluses to be reported in December and recommended using one‑time surpluses to fill reserves and one‑time needs. He also noted the budget restores capital reserve contributions in a modest way and funds a fiscal sustainability RFP to begin next fiscal year.

Council members pressed for additional detail on staffing and workload impacts from major events, methods for tracking reimbursement of event costs, park‑in‑lieu funds and acquisition feasibility, homelessness program funding and service levels, and options to address the city’s unfunded pension liability. Lee said staff will return with a more detailed homelessness study session in July, will include required budget appropriation schedules and capital carryovers in the June 10 adoption package, and that the fiscal sustainability project will analyze long‑term options for pension prefunding and structural budget adjustments. Several councilmembers urged a public information push on potential year‑end allocations and a targeted review of recurring one‑time funded positions.

The study session closed with public comment from a resident asking where budget transaction detail can be found; city staff pointed to the published proposed budget, the monthly financial report, and the bills and claims reports that list payments and vendor transactions. The council will hold a final public hearing and adoption on June 10, 2025.