Item 21 - Early Direction for the Fiscal Year 2026-27 Budget

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Early Direction for the Fiscal Year 2026-27 Budget April 7, 2026 Page 9 5 6 9 0 Based on estimated revenues and contract costs, existing revenues are not sufficient to fully support current service levels on an ongoing basis. Staff is evaluating a range of options to address this gap, including potential adjustments to service frequency, operational efficiencies, and the feasibility of providing some services in-house. This includes exploring whether a portion of non-residential sweeping activities could be brought in-house, subject to operational feasibility, equipment needs, and staffing considerations. Staff is also reviewing whether eligible sweeping costs may, where allowable, be offset in part by restricted transportation-related funding sources, such as gas tax revenues. To maintain current service levels in the near term while these options are further evaluated, staff proposes utilizing approximately $0.9 million in one-time funding to offset the projected shortfall for FY 2026-27. This approach provides additional time to develop and implement a long-term strategy without impacting current service or fee rates. Recurring General Fund Spending As reported in the Mid-Year Update on March 3, 2026, the net recurring amount available to the General Fund was $3,070. Based on updated information, the City now estimates a deficit for FY 2026-27. Staff seeks City Council direction on the following recurring items. City Events The City Events budget for FY 2025-26 includes a recurring allocation of $983,000. This amount excludes Public Safety support costs, which are currently absorbed within existing department operating budgets. As part of the FY 2026-27 budget development process, staff proposes reducing the net General Fund cost of the City Events program. Staff is evaluating a combination of strategies to achieve this reduction, including securing increased sponsorship revenue, implementing or expanding participant and vendor fees where appropriate, and reviewing event scale and cost structures. The intent is to continue hosting key community events while increasing sponsorships and fees to reduce the amount of General Fund support required. A summary of the current FY 2025-26 events and associated budget allocations is provided in the table below. Event FY25-26 Budget Fiestas Patrias $498,000 Chicano Heritage $127,000 Tet/Lunar Festival $80,000 July 4 Celebration $115,000 5K/10K Event $93,000