San Juan Capistrano council reviews FY25–26 budget, eyes $5 million surplus for roads and projects

City Manager Ben Siegel and Chief Financial Officer Ken Nalimam told the San Juan Capistrano City Council on May 20 that the city’s proposed FY25–26 operating budget is balanced and that the council will be asked to adopt a final budget at its June 17 meeting. The proposed general fund shows $43.3 million in operating revenues and $40.0 million in operating expenditures, producing a projected surplus before reserve allocations of about $3.3 million.

Nalimam said approximately $700,000 of the surplus is already scheduled for arterial streets, leaving an estimated $2.6 million available to add to available fund balance. Combined with $2.4 million in higher-than-expected audited revenues from FY23–24, staff reported roughly $5 million above the council’s $20 million reserve target. "We continue to have a balanced budget and a very strong financial position," Nalimam said.

Why it matters: staff recommended the council adopt a 50% reserve policy (50% of the general fund operating budget, roughly $20 million) because San Juan Capistrano relies more heavily on sales tax than other nearby cities and is therefore more exposed in an economic downturn. Adopting the policy would keep the recommended reserve target while allowing the council to use the $5 million above that target for capital priorities.

Capital priorities presented included completion costs for the new City Hall and council chamber, enhancements at parks and community facilities, and a large arterial-streets package. Staff reported bids for the arterial-streets package (Rancho Viejo, Lanovia, San Juan Creek Road, Camino Del Avion, portions of Dela Vispo and several smaller add-ons) came in clustered and competitive and totaled about $12.4 million without Alapaz; with contingencies and the full scope staff estimated the program could reach $18 million. Staff proposed phasing the package over two years and using $3.5 million of the $5 million surplus plus $3.1 million in dedicated road funds to begin the first phase.

Council discussion and actions: councilmembers debated whether to reallocate part of the surplus to a separate traffic study. Mayor Pro Tem Campbell and Council member Hart pushed for funding a comprehensive traffic study and for city support of the SJC 250 celebration; Hart suggested reallocating a portion of gym renovation funds to study traffic. Mayor Bourne raised caution about the limits of a city-only traffic study and noted that many traffic drivers are regional in scope and already studied by OCTA. "Some of these problems are regional in nature…we’re paying for this now," the mayor said, urging staff to first gather existing regional studies.

A substitute motion to reallocate $80,000 (for a traffic study) and to authorize $20,000 from the historic depiction fund for SJC 250 fee waivers failed 2–3. The primary motion — to accept staff’s budget direction, allocate funds consistent with the staff proposal and to authorize up to $20,000 from the historic depiction fund to reimburse waived fees for SJC 250 events (while tabling staff-allocation questions for the event for a future nonfinancial discussion) — passed 3–2. The transcript records vote totals but does not include a roll-call with names tied to each vote.

Staff next steps: staff will return with a final budget for adoption on June 17 and will bring back contract award items for the street package (potentially as soon as the June 3 meeting) if the council endorses moving forward. Staff also said they will continue the parking study check-in in July and bring further details about monument signs, Lanovia Bridge design procurement, and other capital items.

Clarifying details: the proposed operating budget numbers reported by staff were $43,300,000 in revenues and $40,000,000 in expenditures; staff characterized the local roads project completed in the prior cycle as nearly $18,000,000; a Congress member’s office provided an $850,000 grant for Lanovia Bridge design/environmental work; staff recommended the 50% reserve target to align with the council’s $20,000,000 policy target.

What’s next: the council will revisit the budget on June 17 for formal adoption, and staff said they may bring a contract award for the arterial-streets package back as early as June 3 if council direction is to proceed. The council also directed staff to return at a future nonfinancial meeting to clarify how staff time will be allocated to SJC 250 event support.