City Manager Jamie Dolcey told residents at a Nov. 20 town hall that Capitola faces a long‑term fiscal squeeze driven by reliance on volatile sales tax and growing pension obligations. “We’re at a $23,000,000 annual budget at this point,” Dolcey said, and added that sales tax — which the city depends on — can swing sharply: “We’ve had years where sales tax has gone down 20% a year.”

Dolcey said the city’s unfunded accrued liability with CalPERS has increased substantially, noting that a pension payment that was under $1 million about a decade ago is “north of $3,000,000” today. He described the UAL as a legacy obligation that does not change with current staffing choices: “If we were to lay off every city employee tomorrow, that’s still the payment.”

Staff presented a five‑year projection that shows potential deficits appearing in the fiscal‑year 2028–29 window, with Dolcey identifying two principal drivers: rising CalPERS costs and sales tax growth that has not kept up with inflation. To manage previous shortfalls, the city has used a mix of tools — voter‑approved tax measures, economic development projects such as the Fairfield Hotel and adjustments to parking rates — and Dolcey said similar options would be considered again if needed.

Dolcey also described the city’s reserve progress: after reserves fell near $500,000 during the 2011 downturn, he said reserves now approach $6 million. He urged residents to view municipal budgeting as different from business accounting: “Our goal isn’t to make money… the goal is who can use the money that you get to provide the best possible services.”

Officials emphasized tradeoffs ahead. Dolcey and staff said they would continue pursuing economic development, targeted fees and grant funding and, if necessary, consider service‑level changes to close future gaps. The presentation concluded with staff pointing to prior local measures and the city’s ongoing efforts to balance revenue and service demands without identifying any immediate new tax proposals.