Staff member outlines Pleasant Hill general fund outlook, warns of nine-year pension spike

At about 4:00 p.m., a city staff member presented the Pleasant Hill Budget Committee with a general fund update for FY 2025–26, reporting a projected fund-balance decline to roughly $14.5 million and noting revenue timing uncertainty driven by sales-tax reporting delays.

The staff member framed the immediate picture and long-term risk: the city is estimating a modest budget deficit for the current biennial budget but faces growing pension (pers) unfunded liability payments that will spike in the next nine years. The presentation reviewed revenue drivers, expenditure pressures, and next procedural steps ahead of a May preview and a formal budget adoption before June 30.

The presenter said sales-tax accounting complicates near-term forecasting because the state issues advances and later trues up quarterly receipts. "Sales tax is about three months behind," the staff member told the committee, adding the city will meet with HDL in the coming weeks to review updated mid-year estimates. Staff cited revised HDL estimates that place sales-tax receipts within about 1% of prior projections, but warned that sector shifts (retail gains vs. declines at service stations) and world events could alter the outlook.

On revenues, staff reported the general-fund mix is roughly 33% sales tax and 30% property tax. The presenter summarized recent trends: an approximately $1.9 million revenue increase in 2023–24 and fund-balance growth to about $15.7 million, then a rise to roughly $16.2 million in 2024–25. Based on nine months of activity and adjusted estimates, staff said the fund balance is now projected to end the year near $14.5 million, representing an estimated $1.7 million gap versus the originally adopted forecast.

Occupancy (hotel) tax, another material revenue line, remains below pre-pandemic levels: "It went from $2.5 million in 2019 down to $1.6 million the following fiscal year," the staff member said, noting the city has hovered near $2.2 million in recent years and is currently about 6% under budget on occupancy tax for the first two quarters.

On spending, staff said FY 25–26 expenditures are estimated at about $33.8 million, with roughly 75% of core costs tied to salary and benefits. The presenter noted the city is not realizing as much vacancy-related savings as in past years because many police vacancies have been filled; salary and benefit costs total about $22 million of the general fund.

Transfers and one-time needs were highlighted: staff described roughly $1.6 million in transfers out, including a $600,000 accounts-receivable backfill, about $500,000 planned for IT (computers/cell phones) and roughly $100,000 for facilities and emergency roof repairs.

Pension obligations were emphasized as the principal long-term pressure. The presenter said the unfunded liability payment is roughly $5 million today (about 14.9% of relevant costs) and clarified accounting: the current portion of pension payments is included in the salary-and-benefits line, while the unfunded liability payment is shown separately in the presentation. "That $5 million is literally equal to all general expenses, professional contracts, supplies, utilities, and maintenance," the staff member said, underscoring the size of the obligation.

Staff presented a multi-year pers forecast showing payments rising from about $5.2 million this fiscal year to $5.5 million next year and peaking near $6.5 million in 2028–29 before leveling and declining in the late 2030s. The presenter described this nine-year spike as the central fiscal challenge and said a long-term financial plan—including options for use of Measure K proceeds after existing debt service ends—will be part of the city's response.

Committee members discussed scheduling and public outreach: they asked staff to present the proposed general-fund budget and a CIP preview to the full City Council in May and to bring the budget back for adoption before June 30. Members also discussed whether Measure K’s post-debt proceeds (estimated at about $2.5 million after 2032) could be proposed to help address long-term pension pressure, with staff noting any change would require public engagement.

Procedural business was brief: the committee moved and seconded approval of the March 11 special budget-committee minutes (motion carried; no roll-call tally was spoken), and the public-comment call produced no speakers.

The committee set plans to reconvene for the combined general-fund and CIP preview in May, then to consider final adoption at the regular June meeting. The staff member said HDL’s next mid-year sales-tax review will inform any further revisions before council consideration.