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Eureka adopts FY 2026–27 budget amid reserve shortfall; council asks for multi-year projections
Summary
The City Council adopted the FY 2026–27 budget after staff reported the city's beginning general-fund balance would be about $8.7 million (roughly 17.8% of expenditures), below the 25% reserve policy; council asked staff for five-year projections and options to constrain spending and explore revenue measures.
The Eureka City Council adopted the fiscal year 2026–27 budget on June 16, after receiving a staff presentation showing a lower-than-target reserve level and a plan to rebuild reserves over time.
Finance Director Malar reported that midyear adjustments had expanded the current-year deficit to nearly $4 million, producing a projected beginning fund balance for FY 2026–27 of about $8.7 million, or roughly 17.8% of budgeted general-fund expenditures—more than 7 percentage points below the council's policy target of 25% (three months of expenditures). Malar described a reserve-replenishment approach that would limit annual expenditure growth to about 1% and aim for gradual improvement in fund balance over a multi-year horizon, noting the approach assumes modest revenue growth and that significant uncontrolled costs (health-insurance spikes, unanticipated liabilities) could alter the plan.
Councilmembers asked for more scenario work. Several members suggested staff present a five-year outlook with different scenarios, and one councilmember proposed considering a ballot measure this year to increase the transient-occupancy tax by 2 percentage points (a future agenda item was scheduled). Council also discussed revenue options, overhead, and whether to preserve the three-month policy or accept a lower floor temporarily; staff said midyear and audit reports would provide additional verification of fund balances.
In public comment, Deborah Dukes thanked council for setting aside $30,000 for a regional climate-action administrator but asked that the amount be shown as a distinct line item rather than buried in miscellaneous professional/technical funds. Staff said the $30,000 is in the proposed general-fund budget and that agency managers would meet with regional partners in July to finalize details and return to council.
The council adopted the budget by a 5'''' vote and directed staff to develop multi-year financial projections, explore revenue options, and report back with midyear results and the auditor's verified financial statements.
