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Belmont warns of growing budget gap after state pays only two‑thirds of VLF reimbursement
Summary
Finance Director Grace Castaneda told council the state returned roughly $1.2M of a $1.7M VLF reimbursement, leaving a shortfall that could grow to $2.6M–$6M annually in forecast scenarios; council adopted midyear budget amendments and an updated investment policy to help manage fiscal risk.
Belmont's finance director told the council the city faces an uncertain fiscal outlook after the state provided only two‑thirds of a vehicle license fee (VLF) reimbursement the city expected.
Finance Director Grace Castaneda said the city had budgeted conservatively but the partial VLF payback — roughly $1.2 million of an owed $1.7 million — leaves an estimated current‑year shortfall. Staff presented best‑ and worst‑case forecasts showing that, without a full state payback, annual shortfalls in later years could range from about $2.6 million to $6.0 million. Castaneda described the VLF issue as the product of changing revenue allocations tied to school district status and county apportionments.
"This year, for the first time, the state didn't fully reimburse us," Castaneda said, noting the city received two‑thirds of the VLF reimbursement. Council members and staff said they are coordinating with the county and legislative delegates and noted ongoing legal and legislative efforts to address the problem countywide.
The midyear financial presentation showed the general fund balance improved at midyear primarily because of the timing of property tax receipts and the partial VLF payment; however, several enterprise and restricted funds remain dependent on general fund transfers, and capital improvement funding pressures remain for streets and sewer projects.
Staff recommended budget adjustments (operating and capital), use of eligible sewer bond proceeds for the city's share of Silicon Valley Clean Water capital needs, and a minor investment policy clarification to allow diversification into LGIPs as an allowable investment pool. Council adopted the midyear amendments and approved the investment policy update in a 5‑0 vote.
A resident asked staff to include a more readable midyear summary in future staff reports so the community can more easily see the city's overall financial condition. Councilmembers said the VLF issue is a high priority for the city and will remain the subject of advocacy and monitoring.
