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San Bruno warns $3 million VLF backfill at risk; council briefed on midyear budget pressures
Summary
City CFO told the council that the FY25–26 adopted general fund budget is $68.9 million but that county reports indicate the Vehicle License Fee (VLF) backfill is "unlikely to materialize" this year, placing an estimated $3 million of San Bruno revenue at risk and forcing staff to consider Measure G and other options to balance future budgets.
San Bruno — The city’s chief financial officer told the City Council on Feb. 24 that the adopted FY25–26 general fund budget of $68,900,000 remains balanced but faces significant revenue uncertainty after county staff reported the Vehicle License Fee (VLF) in‑lieu backfill is unlikely to materialize this year.
"There is a high high degree of of certainty that the VLF in lieu backfill amount to this the county and the cities in the county ... is unlikely to materialize this year," CFO and Administrative Services Director Nick Pegueros told the council during a midyear budget update. He said the county advised the city that the amount at risk for San Bruno this year is $3,000,000 and that the loss could grow in future years, possibly up to $7,000,000 depending on state formulas.
Why it matters: the VLF backfill has been used in recent years to support general fund operations. Pegueros said the city adopted a balanced budget on the assumption of those revenues, and without the revenue‑sharing agreement the city would have ended the prior fiscal year with an approximately $3 million deficit. He added that property tax growth (about 4% at midyear) and revenue from a tax‑sharing agreement with an online retailer have helped stabilize receipts, but other categories — including cannabis taxes — are underperforming.
What the city plans: staff previewed the FY26–27 budget schedule and said they plan to issue the budget book by May 7, bring midyear adjustment items in the next meeting and seek final adoption by June 23. Pegueros said staff’s current recommendation is to use Measure G funds to help bridge the gap between projected salary/benefit growth and available revenue, while also emphasizing the need for a longer‑term approach.
Council reaction and next steps: council members called the VLF news "very serious," asked for more detail about the size of the cannabis shortfall (Pegueros said business‑license figures are confidential and could not be publicly broken down), and raised the prospect of cuts if revenue losses persist. Council asked staff to return with options, and staff said the budget will be brought forward for study and formal adjustments as needed in upcoming meetings.
The council took no immediate spending action at the meeting; staff said the report was for the council to "receive an update" and to prepare options for the budget process.
