Finance director lays out FY26–27 biannual budget; council hears cuts, reserve risks and request for $500,000 for revenue campaign

Finance Director Nicole Gonzales presented the proposed fiscal‑year 2026–27 biannual budget to the City Council on June 2, laying out a multi‑year forecast, department‑level reductions and reserve targets.

Gonzales told the council the citywide operating budget across all funds projects revenues just under $225 million and higher expenditures in the near term; the city’s general fund forecast shows a projected use of fund balance of roughly $6.1 million in FY26 and $6.4 million in FY27 after staff reductions and technical adjustments. Gonzales reviewed fund balance policy and noted the Government Finance Officers Association recommends maintaining unrestricted reserves at roughly two months of operating costs (about 20%). She said the city’s policy also includes a $5 million emergency set‑aside above that 20% target: “The city of San Leandro's policy is, much more robust. It does has a a designation of $5,000,000 set aside for major emergencies,” she said.

Finance staff told the council the finance committee reviewed an initial forecast and directed deeper reductions; staff returned with a package that met the committee’s instruction for FY26 but not fully for FY27, and the committee offered the city additional time to seek further reductions and refinements prior to adoption. The proposed package includes personnel adjustments, vacant position eliminations, cuts to services and supplies and program reductions across departments. Staff said the package preserves basic operations while reducing programmatic spending and that the largest drivers of cost increases remain pension and benefit obligations, fleet and capital needs, and rising insurance and internal service charges.

Department highlights during the meeting included proposed reductions and changes that will affect service levels: library staffing reductions that eliminate certain weekend and evening hours at branch locations; a reduction of about 11 full‑time equivalents across Recreation and Parks, with some programmatic changes and greater reliance on contracted instructors; Public Works proposed a 13% reduction in staffing (roughly 11 positions) that will reduce maintenance capacity for pavement, potholes, sidewalk work and some facility response times; Human Services proposed program funding reductions in some grant‑funded contracts and reallocation of one‑time balances for interim housing operations; and the Police Department anticipated vacancy‑driven salary savings while warning of recruitment challenges (about 21 officer vacancies at the time of the presentation).

Gonzales said under the proposed plan the city would meet its fund‑balance policy in FY26 but would fall short of the policy’s 20% economic uncertainty target in FY27 (although the $5 million emergency designation would remain). The finance director also summarized ARPA‑funded initiatives that will require ongoing funding if continued (for example, the alternative response unit and encampment cleanup) and said the finance committee had placed two items — the ARU and encampment cleanup — on the list for continued funding consideration.

During the meeting staff requested direction on whether to set aside funds to support a public outreach campaign for a proposed revenue measure; the finance committee had proposed $500,000 for campaign work but did not support that figure unanimously. Several council members indicated interest in pursuing a revenue measure but also asked for follow‑up on where campaign funds would come from (for example, reserve drawdowns or year‑end vacancies). The council did not decide on a revenue‑campaign appropriation at the June 2 meeting; staff were directed to continue analysis and return with options.

The council set the public hearing and adoption timeline: a public hearing and potential adoption is scheduled in mid‑June and the charter requires adoption by June 30; staff asked for council guidance quickly so final materials can be prepared for the scheduled adoption date.

Council members asked for further detail on a number of items, including legal and liability costs, the treatment of encampment cleanup funding, and how the city will maintain basic services while pursuing efficiencies and system improvements (including an ERP financial system implementation staff said will improve back‑office efficiency over time). Gonzales said staff will return with additional detail and projections before the adoption deadline.