Solvang adopts biennial budget with caution about long-term general-fund pressure

The Solvang City Council adopted a biennial budget June 22 that covers fiscal years 2026-27 and 2027-28, after staff reviewed revenues, projected expenses and the city's capital plan.

Staff presented the final draft and noted a single change since the June 8 draft: a janitorial contract renewal that increased janitorial expenses by $20,282. For all funds in 2026-27, staff reported revenues of $31,417,000 and expenses of $30,818,000, leaving a $598,340 surplus. In the General Fund, revenues were projected at $13.9 million and expenses at $13.6 million, producing a $320,304 surplus in 2026-27; 2027-28 shows larger pressures due in part to enterprise-fund and Measure U timing.

Staff emphasized the city's reliance on tourism-related taxes: transient occupancy tax (TOT), sales tax and property tax make up roughly 77.8% of General Fund revenue, with TOT accounting for about 64% of that total. The budget also assumes Measure U will continue to play a major role in supplementing services such as law enforcement and public-safety projects.

Council members pressed staff on long-term forecasts. The staff presentation noted that, if capital projects proceed as planned and no additional revenue sources are obtained, the General Fund balance could trend to a negative $16 million by 2036. Staff said corrective actions, grant-seeking and timing adjustments would be necessary to avoid that outcome.

After discussion, council adopted Resolution 26 13 23 approving the biennial budget on a 5-0 roll call. Staff said it will continue to monitor major revenue sources, capital timing, and potential grant opportunities and report back as needed.