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Albany midyear budget review: city projects smaller deficit after one-time costs
Summary
Finance Director Raina Schwartz told the Albany City Council during a Feb. 18 presentation that revenues are roughly on track for FY2025 but one‑time costs — including a $1.5 million settlement in litigation with the Lions Club and large pension and insurance payments due early in the year — have pushed first‑half spending higher.
Finance Director Raina Schwartz presented the city’s FY2025 midyear budget review on Feb. 18, telling the Albany City Council the city is in “cautiously optimistic” shape but has seen a handful of early, large payments that make the first half of the fiscal year look heavier than usual.
“The good news, bottom line is that things are going fine. We’re in slightly better shape than we thought we would be when the budget was adopted,” Schwartz said, summarizing the midyear analysis.
The midyear review matters because the council adopted a two-year budgeting process this year and the city has a 25% general-fund reserve policy. Schwartz told the council that while ongoing revenues and expenses are broadly tracking to plan, several timed, large payments — principally CalPERS pension unfunded actuarial liability (UAL) payments and annual insurance premiums due early in the fiscal year — make first‑half spending appear elevated. The city also recorded a one-time increase tied to a lawsuit settlement with the Lions Club.
Among key figures presented by finance staff: revenues are tracking near the midyear expectation and projected year‑end revenues are roughly $32.4 million, while projected year‑end expenses are about $33.7 million. When the FY2025 budget was adopted the city estimated a potential deficit near $2.2 million; based on midyear results Schwartz said that gap could shrink by roughly $1 million if current trends continue. The presentation noted revenues and expenses are influenced by timing and a typically large first‑quarter outlay for pension and insurance costs.
Schwartz also told council members the city recorded a one‑time settlement payment tied to litigation with the Lions Club. The total settlement was $1,500,000; the city had previously set aside $500,000, creating roughly a $1.0 million net increase in expenditures tied to that case.
Council members pressed staff on grant and targeted funding risks. Vice Mayor McQuay and others asked about federal grants, and Schwartz said the city continues to monitor Community Development Block Grant (CDBG) funds and other federal pass‑through transportation funds and is coordinating with department directors to understand potential impacts. She also said the city expects to continue watching sales tax receipts, which are a more volatile revenue stream and were softer in recent months.
Schwartz and councilmembers discussed a notable drop in revenue from the city’s sugar‑sweetened beverage (SSB) tax. Schwartz said the city is following up with local businesses and vendors to ensure collections are complete and to understand whether the decline reflects business changes or reporting differences; initial projections expect SSB receipts to land between roughly $200,000 and $300,000 for FY2025, below earlier recent years’ levels but above the low figure posted in one interim report.
Members of the public asked for more detail on specific items, including the Lions Club settlement and the fiscal effect of the Golden Gate Fields closure; staff pointed to detailed information already posted on the city website and said more detail could be provided in follow‑up reports. Schwartz reiterated the city will return with updated, third‑quarter numbers and that staff are preparing a proposed two‑year budget for FY2026–27.
Council members responded to the midyear review by stressing caution. Councilmember McQuaid summed up the tone of the discussion: amid continued economic uncertainty the council should “proceed cautiously in our budgeting,” noting that revenue softening or rising pension costs could change the picture.
The council did not take a formal budget action at the meeting; staff will present a third‑quarter update and proposed FY2026–27 budget materials in the coming months.
Ending: The city will watch sales tax and federal grant developments closely and return to the council with third‑quarter projections and a proposed two‑year budget for FY2026–27. If trends hold, the projected FY2025 shortfall could be substantially smaller than the figure used when the budget was adopted.
