Encinitas council approves midyear budget amendments, adds funds for storm drain repairs

At a special meeting Feb. 26, 2025, the Encinitas City Council reviewed and filed the fiscal year 2024–25 midyear budget status report and adopted two resolutions to implement midyear budget amendments, including $450,000 in supplemental capital appropriations for storm drain work.

The action, described in staff presentations by Interim Finance Director Tom Gallup and Finance Manager Kelly Sanderson, aligns the city’s budget with six months of actual activity and makes several revenue and transfer adjustments to reflect receipts and project closures. "The purpose of this report is to provide an update on the current fiscal year operating budget and submit recommendations for additional budget amendments," Gallup told the council during the presentation.

The midyear package increases estimated revenues citywide by $2,700,000, raises budgeted expenditures by $900,000 and records changes to interfund transfers tied to project closures and new appropriations. In the general fund, staff proposed a $200,000 increase in estimated revenue, a $400,000 increase in budgeted expenditures and a $300,000 increase in net transfers (including $120,000 of transfers in from closed projects and $450,000 of capital transfers out to the Capital Improvement Fund for storm drain work). Staff said the net effect on the general fund would be a $500,000 decrease in the unassigned fund balance while maintaining a balanced budget overall.

Two capital appropriations were specifically requested by public works: $250,000 for the annual storm drain repairs project (CD25A) and $200,000 to replenish contingency on the North Highway 101 Drainage Project (CD23A). Public Works Director Sylvester Mabry said the contingency for CD23A is intended to cover unexpected conditions encountered during the contractor’s work on a 60-inch drainage pipe; unused funds would return to the general fund if not spent. Council members discussed the history of annual storm drain funding, noting the city has averaged about $250,000 per year for these repairs but that some council members have argued for a larger, multi‑year investment to reduce future emergency sinkhole repair costs.

Staff reported other notable midyear adjustments: general fund revenues were $40.6 million at Dec. 31 (about 38% of the annual estimate, consistent with historical midyear timing), and general fund expenditures were $46.5 million (about 46% of appropriations). New revenue sources and specific adjustments included a proposed increase to align cannabis excise tax receipts (midyear actuals were about $400,000, representing roughly 60% of the current estimate) and a $209,000 increase in licenses and permits to account for a newly approved outdoor dining right‑of‑way fee. Sales tax projections were reduced to reflect statewide weakness in 2024, and staff said recent reductions to the federal funds rate are not expected to affect investment income until later in 2025.

The midyear package also included three position reclassifications that staff said can be absorbed in the current fiscal year; staff estimated the classification changes would increase FY26 personnel costs by about $18,000 while leaving total FTE unchanged at 250.4. Public Works described two reclassifications: a facilities maintenance supervisor whose duties include managing multiple city facilities and staff, and a fleet maintenance manager overseeing more than 120 vehicles and two heavy equipment mechanics. An HR position was proposed to be reclassified from analyst to specialist to better reflect assigned duties. Acting Deputy City Manager Jay Schwarm said these are not new positions but alignments of current staff to more accurate classifications.

Staff also proposed closing several legacy technology and capital work projects and returning balances to their originating funds. As an example, staff noted an $850,000 return related to government/education access equipment and described creation of a dedicated technology fund so future technology refreshes (including public‑access broadcast equipment) can be planned and funded from the appropriate sources, including cable franchise fees. Staff said interest income is returned to the fund that earned it and that the city’s reserve policy target is about $20 million.

Council members asked for updates on a pending FEMA disaster reimbursement the fire department submitted; staff said the request remains under FEMA review and environmental review, and that it could amount to several million dollars if approved. Council members asked staff to prepare a more detailed presentation for budget workshops showing reserves, encumbered funds and other large balances so the council can evaluate options for using one‑time revenues to address deferred maintenance such as storm drains.

Following discussion, a council member moved to approve the staff recommendation to review and file the midyear budget status report and adopt resolutions implementing the proposed amendments; another council member seconded. The motion carried unanimously. Staff recommended and the council adopted resolutions 2025‑519 and 2025‑528 to implement the amendments.

Votes at a glance The council voted to review and file the fiscal year 2024–25 midyear budget status report and adopt the related budget amendment resolutions; the motion passed unanimously (5–0).

Why this matters The midyear adjustments update revenue and expenditure expectations and authorize supplemental appropriations that affect the city’s unassigned fund balance and capital program. The council’s action restores funding for recurring storm drain repairs and replenishes contingency on a major Highway 101 drainage project, both of which staff said reduce the risk of emergency sinkhole repairs. The item also advances a clearer accounting approach for legacy technology projects by returning funds to the appropriate franchise and capital accounts and establishing a dedicated technology fund.

Meeting context This was a special meeting called to consider agenda item 8H from a later regular meeting so council could address the midyear budget earlier in the evening. All five council members were present; there were no public speakers for this item. Department directors and finance staff were available for questions.