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Hayward outlines $30 million structural gap, pushes business license tax and one‑time transfers to balance FY27 budget
Summary
City staff told the council a $30 million structural deficit remains for FY2026–27 and recommended a balanced $249 million general fund by relying on one‑time transfers, vacancy management and a business license tax (BLT) modernization measure on the November ballot; unions urged a steeper top bracket, saying staff’s proposal may leave millions uncollected.
Hayward City officials told the City Council on May 12 that a structural shortfall of roughly $30 million threatens the city’s operating budget and depleted reserves in FY2024–25.
City Manager Ott and finance staff presented a proposed $249 million general fund budget for FY2026–27 that they said is balanced on paper but depends heavily on one‑time transfers and short‑term measures. The staff package would use up to $10 million from the Measure C capital fund, approximately $5.5 million from grant balances and roughly $4.9 million from the workers’ compensation fund to plug immediate gaps, while continuing vacancy management and concessions negotiated with labor groups.
The plan excludes anticipated revenue from a proposed business license tax modernization measure unless voters approve it. Staff’s forecast included a separate scenario that counts $11 million a year from modernization once fully implemented, but presenters emphasized the near‑term budget cannot depend on that revenue.
“We are facing a structural mismatch: revenue is largely stagnant while salary and benefit costs have risen significantly,” the city manager said, summarizing staff analysis that showed modest property tax growth and volatile sales tax receipts as the principal revenue drivers. Revenue manager Michael Barnes pointed to regional swings — including a spike tied to large public purchases at the Hayward maintenance facility — that make sales tax difficult to budget reliably.
Labor representatives and public commenters who addressed the council during the reserved budget public‑comment period supported modernizing the BLT but urged a different rate design. SEIU representatives Nora Hovny and David Padilla said their analysis shows the city’s current proposal could leave roughly $7 million in annual revenue “on the table” unless the measure adds a top bracket for very large firms.
City staff said they will analyze the union proposal but cautioned about the political and economic trade‑offs of raising top rates. “We have zero interest in leaving money on the table,” the city manager said, “but there is a risk that raising rates too much could drive businesses away or generate opposition that reduces the chance the measure passes.” Staff plans to return to council with a formal recommendation at the June 2 meeting, including whether to call the November election for the BLT measure.
Finance presenters also outlined multi‑year modeling that relies in part on temporary fund transfers and ongoing vacancy savings; they warned those steps do not cure the recurring structural gap. Council members repeatedly asked staff for more detailed fund balance information and cautioned the city should not over‑rely on Measure C transfers or other one‑time sources.
Next steps: staff will review the union proposal and consultant analysis, return with refined recommendations for council action on June 2 and present adopted budget documents and any BLT ballot language to the public if the council directs.
