Newark staff outline 2026–28 budget and five‑year forecast, warn of gap when 3.25% utility tax sunsets

At a March work session, Mayor Michael Hand and city staff presented the City of Newark’s 2026–28 operating budget framework and a five‑year financial forecast that remains balanced through the next biennium but shows a structural gap beginning in fiscal 2029–30 after the city’s 3.25% utility users tax (UUT) is scheduled to sunset.

“Personnel costs are our largest cost — about 53% of the operating budget — and pension obligations are legally required and can be volatile,” Finance Director Kristen Lee told the council during the presentation. Lee said the city’s combined pension liability stands at roughly $387 million, with a funded status near 69% and an unfunded accrued liability of about $121 million.

Lee described the city’s tools for smoothing pension costs, including a Section 115 trust. “We contributed $12 million in January 2025; today the balance is about $13.9 million net of fees, roughly $1.8 million in earnings,” she said, adding that staff recommends continuing measured contributions to reduce future volatility.

On revenues, Lee reported estimated general fund receipts of about $92.4 million, with property tax projected at roughly $34.8 million and the city’s combined sales tax (Bradley Burns plus Measure GG) at about $25.1 million. The city’s transient occupancy tax (TOT) is projected at about $7.3 million after a voter‑approved rate increase; the UUT is projected at about $4.7 million and is scheduled to sunset in 2029.

Under conservative assumptions (no new ongoing revenues and existing labor agreements), staff said the five‑year forecast remains slightly positive through FY2028–29 but shows a roughly $300,000 shortfall in FY2029–30 that grows to about $1.8 million by FY2030–31 unless policy changes are adopted. Lee said the forecast assumes the city will not automatically count any extension of the UUT until the council initiates that process.

Councilmembers questioned assumptions and options. Councilmember Bridal urged a stronger push on economic development to expand the tax base, and Vice Mayor Jorgens asked whether staff is counting new development conservatively or assuming projects will materialize; Lee said the city uses historical transaction patterns and a conservative percentage of projects in the queue. On the Alameda County Fire Department contract — which Lee showed at about $14.7 million and rising largely because of labor agreements — staff said increased ACFD costs are mostly passed through under the contract but that staff coordinates with ACFD finance staff to incorporate changes.

Staff highlighted near‑term reserve actions including setting aside Measure GG excess funds and a $2.23 million contribution to the emergency fiscal uncertainty reserve to maintain a 30% target. Lee also said staff recommends a $1 million contribution in the coming year to the Section 115 trust to manage pension costs.

No formal votes were taken at the informational work session. City Manager Benoon said staff will return with a draft biennial budget and a capital improvement plan for council review in April or May, with a goal of adopting the biennial budget and five‑year CIP in June before the July 1 fiscal year start.

The presentation and council Q&A are expected to inform subsequent hearings and any policy decisions about revenues, staffing and reserve use.