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San Mateo finance director warns of multi‑year shortfalls; VLF backfill and transfer‑tax threats could deepen deficit
Summary
Finance Director Abby Viser presented a FY2026–27 general fund preview showing a projected structural shortfall and four scenarios that illustrate risks from Vehicle License Fee (VLF) backfill uncertainty and a proposed state measure to eliminate local real property transfer tax.
City Finance Director Abby Viser presented the FY2026–27 general fund operating preview on April 20, outlining conservative revenue estimates, expenditure assumptions, and multi‑year forecasts that illustrate a possible structural shortfall under several plausible scenarios.
Viser told the council that the general fund is heavily dependent on tax revenues (about 79% of the revenue base), with three sources—property tax, real property transfer tax, and sales tax—making up roughly 90% of tax receipts. Given national and state economic uncertainty and recent events, staff used conservative revenue assumptions (a 3.17% property‑tax growth assumption for 2026–27, flat-to-modest sales‑tax growth, and a baseline real property transfer tax estimate of $9 million for the forecast horizon).
Viser presented four scenarios to show sensitivity to key risks: an optimistic case (100% VLF backfill after two years), a practical case (67% VLF backfill), a grave case (no VLF backfill), and a dire case (no VLF backfill plus elimination of the local real property transfer tax under a proposed statewide ballot initiative). Under current conservative assumptions the FY2026–27 picture shows a projected deficit (staff cited an illustrative $16 million exposure under the baseline scenario). The dire scenario accelerates deficits and would exhaust general‑fund reserves in out years absent corrective action.
Council members and staff discussed advocacy and legal strategies around VLF shortfalls (the city participates in a multi‑city lawsuit and county advocacy), the fiscal role of one‑time measures (Measure CC), and the impacts of rising insurance and utility costs. Viser outlined expenditure controls, a reduction in capital transfers for the coming year, and ongoing fiscal‑sustainability activities (expenditure controls, revenue enhancements, pursuit of grants, and cost‑recovery work).
Council members asked for continued monitoring and for staff to continue pursuing federal and state engagements and local options; the city manager confirmed the administration is actively advocating on VLF and monitoring the proposed transfer‑tax measure. No formal action was taken; the presentation is the precursor to a June budget adoption schedule.
