San Leandro unveils proposed FY 2026–27 biannual budget with cuts, use of reserves and new funding for rent registry and alternative‑response unit

The City of San Leandro on Monday released a proposed FY 2026–27 biannual operating and capital budget that trims previously projected deficits but still relies on the city’s reserves to balance the two fiscal years.

Nicole Gonzales, the city’s finance director, told the council the revised forecast projects a use of general fund balance of $6.1 million in fiscal 2026 and $6.4 million in fiscal 2027 after department reductions and technical adjustments. Gonzales said the city’s adopted fund‑balance policy sets aside $5 million for major emergencies and a target reserve equal to 20% of regular operating costs; the proposed budget meets the council’s target for FY2026 but falls short of the council policy in FY2027 if current projections hold.

“We did meet the goal for fiscal year 2026,” Gonzales said, “and we were able to reduce the projected use of fund balance in FY 2027 from earlier projections, but additional work will be needed in subsequent years for long‑term sustainability.”

Major points in the staff presentation and committee discussions:

- Revenues and expenditures: The citywide operating budget projects roughly $225 million in total city revenues across all funds; the general fund revenue projection for FY2026 is about $149.9 million against expenditures near $156.1 million, producing the $6.1 million projected use of fund balance. FY2027 shows revenue near $154.5 million and expenditures near $160.8 million. (Staff presented the full line‑by‑line forecast to the finance committee.)

- Council policy and reserves: The finance director reminded council that the Government Finance Officers Association (GFOA) recommends an unrestricted reserve of approximately two months of operating costs (about 20%). The city’s policy also includes a $5 million emergency set‑aside; staff said the proposed budget preserves the $5 million emergency designation but that the amount available for “economic uncertainties” would drop from roughly 20% in FY2026 to about 15% in FY2027 unless more revenue cuts or increases are put in place.

- Department reductions and program changes: Departments identified program and staffing reductions that are concentrated in vacancies and part‑time positions but also include some ongoing service reductions. Examples highlighted in department presentations: - Library: proposed elimination of several part‑time positions (equivalent to about 5 FTE) and a reduction of weekend and evening hours at some branches; staff said school‑tour functions and the Mulford branch reopening currently planned for FY2027 remain funded. - Recreation & Parks: proposed net reduction of about 11 FTE (some seasonal positions and part‑time roles), reallocation of some hours to preserve key programs, and a plan to increase contract instructors for some classes. - Public Works: proposed elimination of 11 positions (reducing staffing from 82.5 to 71.5 FTE, about 13%), with explicit mention that paving, pothole repairs and sidewalk work will see longer lead times and reduced capacity. - Human Services: large reductions to professional‑services contract funding that go to community nonprofits; staff said it would frontload some contracts to reduce immediate community impact. - Fire and Police: both departments reported rising salary and benefit costs; fire proposed some non‑service reducing savings but eliminated two vacant plan‑check positions; police budget reductions focused on non‑recurring and discretionary items while acknowledging 21 officer vacancies.

- Funding priorities and ARPA transitions: The finance committee recommended continued general‑fund support (beyond expiring ARPA allocations) for the city’s Alternative Response Unit (ARU) and for encampment cleanup, and for implementation funding for the newly adopted rent registry program (staff proposed half‑year funding in FY2026 and full‑year funding in FY2027). The committee did not unanimously support a staff request to set aside $500,000 in the budget for an early campaign to place a revenue measure on a future ballot; the amount and timing remain under discussion.

Public comment at the meeting emphasized homelessness and encampment safety, library hours, pavement condition and other quality‑of‑life services. Several residents from Hesperian Gardens told the council they face fires, assaults and regular trash and human waste from nearby railroad encampments and asked for a coordinated county‑level response.

Council response and next steps: Finance staff said they will continue to seek reductions and identify potential new revenues during the mid‑cycle work over the next 12 months. The council set a public hearing and adoption date for June 16; staff warned the council that final adoption must occur no later than June 30 under the charter. Council members also asked staff to return with additional details on legal costs, outcomes from the new ERP financial system, and the cost/benefit of deferred maintenance versus immediate program cuts.

Ending: The council received the proposed budget and directed staff to bring it back for formal public hearing and adoption; members signaled support for pursuing additional revenue options while also asking for strict reporting on reserves and contingency use.