Milpitas staff say structural deficit narrowed; council demands data on overtime, workers’ comp and Main Street spending
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Summary
City staff told the council a five‑year forecast reduced a previously projected $28.5M structural deficit through a mix of one‑time actions, recurring savings and interest income; council members pressed for memos and datasets on vacancy savings, overtime costs and workers’‑comp administration ahead of June budget adoption.
Milpitas city staff told the City Council on March 3 that a combination of one‑time savings, recurring reductions and stronger interest income has cut a February 2025 structural deficit projection of about $28.5 million by roughly 59% in the five‑year forecast.
The finance director presented the FY2027–FY2031 general fund financial forecast and reserve balances, saying the city is projecting a $2.1 million surplus in FY2627 after a council‑approved $2.7 million use of reserves. The director said one‑time savings and recurring personnel and operational efficiencies were the principal drivers of the improvement and that audited reserve balances as of 6/30/2025 remain healthy.
Council members responded with a series of requests for data and scrutiny. Vice Mayor raised the timing and asked for a single tracking list of all information requests so council can review answers before budget adoption in June. Multiple council members requested a memo that itemizes the midyear council actions that produced the $6 million‑plus change in adopted/amended amounts; a three‑year comparison of interest earnings; the total annual overtime dollars (and by department); and an aggregate, non‑identifying accounting of uninsured claims payable (workers’ compensation reserve).
On workers’ compensation, the council pressed HR and finance staff about the city’s third‑party administrator (TPA). HR Director Kelly Parmley described the TPA’s role as an administrator of claims and said the city recently commissioned an outside audit and launched a pilot program called Ready Rebound to speed injured employees’ return to work. “They are actually the folks who administer the program on our behalf,” she said. Council members said Sedgwick’s timeliness could be contributing to overtime, particularly in the fire department, and asked staff to report back with performance metrics.
Council also sought further detail on Main Street revitalization funding. Staff said the city holds a flexible one‑time general‑fund allocation of $100,000 and separately has $750,000 in federal funds obtained through Rep. Ro Khanna’s office (a prior $500,000 and a recent $250,000) that are targeted for capital pedestrian/signal improvements and will require Caltrans coordination for capital use. The assistant city manager said staff will return with a recommended spending plan for both sources.
Staff committed to providing the requested materials on an accelerated schedule: an information memo listing the council actions that changed the amended FY2526 numbers, a three‑year interest‑earnings comparison, department‑level overtime dollars, an aggregate account of uninsured claims payable, and an analysis of vacancy savings. The finance director emphasized conservative forecasting assumptions and highlighted external risks — the pending ERAF litigation (estimated 18–20% exposure) and federal tariff/policy uncertainty — that could affect sales‑tax and property‑tax receipts.
The council took no formal budget action at the meeting; staff said it will return with the requested documentation and recommended language as the council moves toward budget study sessions in April and a June adoption.
The presentation and Q&A drew sustained participation from five council members, the acting city manager, the finance director and department leads from HR and budgeting. Staff said the next forecast update and a budget calendar will be presented to council in April.
