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Guadalupe staff warn of roughly $3 million deficit; city weighs freezes, cuts and new taxes
Summary
City staff told the council at a June 9 workshop that Guadalupe faces about a $3 million structural deficit for FY 2026–27, presenting immediate options — hiring freezes, delayed capital projects, service restructuring — and longer-term revenue proposals including a cannabis business tax and a higher transient occupancy tax.
Mr. Martinez opened a June 9 budget workshop by telling the City Council that the preliminary fiscal 2026–27 forecast shows the city is “approaching a $3 million deficit,” urging immediate steps to prevent insolvency.
The short-term package staff proposed included a hiring freeze for noncritical positions, postponing capital expenditures where possible, reducing nonessential consulting, and tighter purchase approvals. Mr. Martinez said those actions could reduce cash outflow in the near term while staff pursue revenue options.
Why it matters: staff presented a simultaneous cash- and budget-level problem. Capital projects total roughly $15.9 million while the city has about $11.2 million in cash on hand, creating a near-term funding gap the presentation put at about $4.65 million. Separately, the operating budget shows the structural deficit that must be addressed to prevent ongoing shortfalls.
Public safety spending is the single largest cost driver, the presentation said, and staff discussed options ranging from operational efficiencies to reorganization. Chief Cash emphasized the operational impact, noting public-safety accounts represent roughly 63% of the budget and that any reductions must consider service continuity.
Staff also outlined immediate revenue levers: converting the city’s negotiated cannabis community benefit fee into a voter-approved business tax (the proposed ordinance allows up to an 8% retail tax, with 6% discussed as a commonly suggested rate); increasing the city’s transient occupancy tax (TOT), with staff recommending a 12% rate to align the city with neighboring jurisdictions; initiating a new utility rate study; and adjusting the master fee schedule to better reflect current costs.
On capital projects, staff said one large item — the Royal Theater restoration — cannot be halted because of contract and completion deadlines; most other projects can be delayed to preserve cash. Staff recommended prioritizing projects with quick invoicing and reimbursement to ease cash flow.
Council members and public speakers repeatedly urged staff to pursue nonprofit partnerships and local volunteer support to preserve recreation programs and other community services where possible. Community members warned that cutting parks and recreation staff could have long-term social and economic costs for youth programming and community cohesion.
Next steps: staff requested the council’s direction to proceed with stabilizing measures and committed to monthly budget updates; several council members asked for user-friendly public reports that show progress on deficit reduction and cash position. The council moved supportively to allow staff to begin implementing stabilization actions, while reserving decisions that would require formal council approval.
The budget workshop produced no final votes on the draft budget; staff said proposed ordinances and any personnel changes requiring council action will come back in future meetings.
