Upland staff outline $5.7M–$6.1M structural deficit, propose dipping into reserves and targeted hires

Upland City staff on Thursday presented a proposed biennial budget for fiscal years 2026–27 and 2027–28 that shows a structural general-fund deficit of about $5.7 million in FY2027 and $6.1 million in FY2028 and recommends temporary use of one-time reserves and trust balances to bridge the gap.

Assistant City Manager Steven Parker told Mayor Pro Tem Most and the council the proposed budget is a "rollover" operations-and-maintenance request for departments but reflects growing cost pressures and a decline in sales tax. "We are proposing a structural deficit in what it is that we are proposing today," Parker said. Finance Manager Stacy Sullivan said updated sales-tax projections from HDL drop revenue by roughly $650,000 in FY2027 and about $750,000 in FY2028 compared with earlier estimates.

Sullivan and Parker described a package of short-term measures staff recommends to reduce the deficit. Those include (1) a combined $3.2 million draw from the city's economic uncertainty reserve in each of the next two fiscal years (the reserve currently holds about $16 million, approximately 25% of operating expenditures), (2) limited use of the pension stabilization trust to smooth CalPERS unfunded actuarial liability spikes, (3) a revised cost-allocation methodology that shifts internal-service costs to appropriate funds (estimated general-fund savings of roughly $1.5 million annually), and (4) targeted reductions such as a 16% cut to discretionary training and re-evaluating sales-tax sharing agreements.

Sullivan noted a one-time developer reimbursement of about $700,000 partially offset recent sales-tax declines. On the pension trust, staff said the pension stabilization balance is about $12 million and recommended a small, phased drawdown to flatten a projected CalPERS peak around FY2031. "The goal with that is to really try to flat line," Sullivan said.

The presentation also proposed programmatic and staffing changes. Assistant City Manager Damian Arula discussed eight utility positions and four engineering positions tied primarily to enterprise funds and to the recently completed water and sewer master plans. Arula said some requested positions are 100% enterprise-funded and argued they are needed to address maintenance backlogs, PFOS planning and potential treatment, and a low pavement-condition score: "You have a $210 million liability that's growing every day," he said, urging the council to weigh the long-term operational risks of deferring hires.

On fleet maintenance, staff recommended refilling three previously frozen fleet positions after an outsourcing pilot led to slower turnaround and operational problems; staff said police response units had been affected when many units were out of service. Sullivan estimated the net general-fund impact of restoring those positions is under $50,000.

Staff identified other budget risks, including insurance-cost increases driven by market-wide factors, and said the solid-waste enterprise fund may face a negative cash balance by June 30, 2027, unless rates are adjusted.

Council members pressed staff with several questions: how the economic reserve will be replenished (staff pointed to a five-year repayment expectation in policy and said year-end surpluses or one-time gains would be prioritized for replenishment); whether enterprise-funded hires will generate ongoing pension obligations for the general fund (staff said future pension liability associated with enterprise positions will be reflected in enterprise rates and rate studies); and whether alternative trust uses (for example, OPEB) might be appropriate (staff said those funds have designated purposes and any repurposing would require council action and further study).

Treasurer Greg Bradley, who later spoke from the audience, praised past pension-reduction steps but warned that the city will use reserves under the staff plan. "We solved that problem," he said of earlier pension efforts, but added that declining revenues mean the city will draw savings set aside for downturns.

Next steps: staff will return with a cost-allocation report before June 30, present a CIP workshop on June 1, and return with a budget adoption item on June 8. The workshop was informational only; no votes on the budget were taken.

Votes at a glance: The only formal vote recorded during the workshop was a procedural motion to excuse Mayor Belto from the meeting; Councilman Breitling moved and Councilmember Zuniga seconded, and the motion passed with Councilmembers Garcia, Zuniga, Breitling and Mayor Pro Tem Most voting to approve.

The council may revise staff recommendations before the June 8 adoption vote; staff told members they will be available to answer questions up to that date.