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Menlo Park projects $2.6 million mid-year deficit; council adopts amendments
Summary
City staff presented mid-year FY2025-26 amendments that increase appropriations by $5.2 million and revenues by $3.4 million, leaving a projected $2.6 million general-fund deficit; Council unanimously adopted the amendments and directed staff to return with detailed options.
Menlo Park city staff told the City Council on Feb. 24 that mid-year refinements to the fiscal year 2025-26 budget would increase appropriations and leave the general fund with a projected $2.6 million deficit.
Assistant Administrative Services Director Fenny Lay said the proposed expenditure amendments net to $5.2 million, while recommended revenue adjustments total about $3.4 million, producing the additional deficit. "With $82 million in revenue and $84.6 million in expenditures, we're projecting a deficit of $2.6 million," Lay said, noting the projection reflects updated staffing assumptions, higher permit and business-license activity and technical accounting adjustments.
Lay told the council the staff package includes steps to partially offset the gap, such as pausing one year of vehicle internal service fund charges and transferring accumulated IT internal-service fund balances to the general fund. She also highlighted a pending utility-user-tax (UUT) court case that could change the city's liability and affect the projection. "One significant factor is the ongoing UUT court case," she said. "Portions of that liability may be reduced pending final judgment."
Councilmembers asked for additional detail on the timeline for legal developments, grant exposure and a clearer running total of prior appropriations. Councilmember Jeff Schmidt asked when the UUT ruling might be expected; staff said final rulings and any appeals could take months but hoped for greater clarity in coming months. Councilmember Drew Combs and others requested staff present scenarios and contextual totals for appropriations at upcoming budget workshops.
After discussion, the council voted unanimously to adopt the resolution approving the mid-year appropriations and amendments. Councilmember Drew Combs moved the motion; Vice Mayor Jennifer Wise seconded.
The council directed staff to return with more detailed analyses at the March 21 priority-setting workshop and to continue monitoring revenues, grants and litigation that could alter the fiscal outlook.
