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San Clemente staff propose two‑year budget with small surpluses, shifts capital projects to new CIP fund
Summary
City staff presented a proposed FY2026–27 and FY2027–28 two‑year budget that budgets modest surpluses, shifts capital projects into a new capital improvement fund and flags a growing storm‑drain subsidy and potential Army Corps sand project as fiscal pressures. A public hearing on adoption is set for June 2.
City staff on May 26 presented a two‑year proposed budget that projects modest operating surpluses while moving capital work out of the general fund and into a new capital improvement fund.
"The city is generally financially healthy," City Manager Andy said in opening remarks, adding the city is improving its operating position by roughly $500,000 in each of the two fiscal years. Assistant City Manager Brian Brower told council staff had reviewed the budget "line by line" and described a conservative revenue forecast that relies heavily on property taxes.
Brower said the all‑funds budget approaches $200 million and that the general fund is supported by strong property‑tax growth—property tax is listed as the dominant revenue source, accounting for about half of general fund revenues. The budget shows a first‑year surplus of $471,000 and a second‑year surplus closer to $500,000, with emergency reserves funded and projected to total $16.3 million at the end of the two‑year cycle.
Staff proposed structural changes to how the city handles one‑time fund balances. Brian Brower described a plan to seed a new capital improvement fund with a $5,000,000 transfer and to routinely set aside a target percentage of operating costs (staff proposed 22%) at fiscal year‑end as part of a revised fiscal policy.
The presentation flagged several liabilities and areas requiring attention: a growing subsidy to the storm drainage/"clean ocean" fund of about $1,000,000 a year, potential additional city set‑aside or federal aid for an Army Corps sand protection project, and personnel cost increases tied to recent classification and compensation studies and existing MOUs. Brower said staff proposes 26 staffing modifications, elimination of funding for four long‑vacant positions and the addition of a full‑time park ranger, yielding a net reduction of three funded positions in the proposed budget.
The council asked multiple clarifying questions about transfers, the Section 115 trust (staff said it holds about $1,200,000), and whether routine transfers to the trust should be automated; staff confirmed no automatic percentage is currently set aside for the trust. Brower said the budget notice includes a public hearing for adoption on June 2 and that staff will return with any adjustments after this workshop.
Next steps: staff will publish a revised packet in the coming days for the June 2 public hearing; nothing in the workshop packet is final and can be amended during adoption or later supplemental appropriations.
