Saratoga staff say cautious optimism at midyear gives way to a $1M preliminary shortfall for 2027

City finance staff presented a midyear financial update at the January retreat showing that fiscal year revenues finished steady, expenses were under control and reserve policies had been met — but a looming increase in the sheriff contract and other cost pressures mean city leaders face choices for next year.

Ryan, presenting the forecast, said ‘‘the vast majority of our revenues are derived directly from property tax — about 60 percent’’ and that charges for services have risen (now about 20 percent of general fund receipts, roughly $4,000,000). He described the presentation's key takeaway: baseline revenue growth of roughly 3 percent is being outpaced in some categories by larger expense growth.

Staff noted $2,000,000 in remaining ARPA funds targeted to a village stormwater project that must be spent by December 2026, and that total city reserves are about $20,000,000 — approximately eight months of operating expense under current budget assumptions. Ryan cautioned reserves are a short‑term tool: "Those are a short term solution a year tops," he said, noting they cannot be relied on for long‑term balancing.

Projected gap and levers: using current assumptions (including the county's sheriff proposal), staff's roll‑up of available information shows an estimated $1,000,000 preliminary deficit for fiscal 2027. Staff offered an initial menu of levers: reduce capital transfers (constrain CIP), use reserves to smooth one year, implement service reductions, tighten discretionary spending, reallocate or identify additional one‑time revenues, or pursue new revenue measures. Estimates discussed in the retreat included possible one‑time savings of roughly $1,500,000 from combined measures and roughly $1,000,000 of potential savings tied to adjustments in supplemental sheriff staffing — figures staff called preliminary.

Next steps: council asked staff to revisit service‑level cut exercises done previously, produce a five‑year balanced budget scenario for comparison, and return with refined reserve and scenario analysis during the spring budget refinement process. There were public calls to be transparent about unallocated reserve amounts and to consider voter‑backed measures for specific priorities such as public safety.