Honorable Mayor and Councilmembers,

I am pleased to submit the proposed FY 2025/26 and FY 2026/27 Operating Budget for the City of Pleasanton in accordance with the City's Municipal Code. This budget represents the City's two-year financial plan for delivering City programs and services in a fiscally responsible manner, consistent with the priorities, goals, and objectives adopted by the City Council in the ONE Pleasanton Strategic Plan.

The FY 2025/26 and FY 2026/27 Proposed Operating Budget is balanced with significant considerations and thoughtful review of the City's revenues and increasing cost of services. In light of the City's financial challenges, the operating budgets reflect significant personnel and non-personnel reductions to ensure fiscal stability and address deferred maintenance needs while maintaining core services.

The Two-Year Operating Budget is projected to be $248.3 million in FY 2025/26, a 1.9 percent increase from the FY 2024/25 Modified Budget, and $257.7 million in FY 2026/27. General Fund operating revenues, including transfers, are projected to total $162.9 million in FY 2025/26 and $169.3 million in FY 2026/27, keeping the General Fund balanced in both years of the biennium.

Property tax remains the City's largest revenue source, projected to increase 4.1 percent in FY 2025/26 and 3.8 percent in FY 2026/27. Sales tax — the City's second largest source — reflects the first full year of revenue from the new Costco store, offset by the cost-sharing agreement for traffic and street improvements in the Johnson Drive Economic Development Zone.

I want to thank all City staff for their dedication and effort toward providing excellent services to the Pleasanton community and for making a commitment to accomplish the goals set out in this budget and the City's ONE Pleasanton Strategic Plan.

Respectfully submitted,

Gerry Beaudin, City Manager

Pleasanton is a community rich in heritage with a historic downtown, tree-lined streets, and outdoor amenities that provide a high quality of life for residents and businesses in the Tri-Valley region of Alameda County.

ONE Pleasanton — Five-Year Strategic Plan

In Fiscal Year 2023/24 the City transitioned to a 5-year strategic planning process. The ONE Pleasanton Strategic Plan defines the City's vision, mission, and values, and identifies citywide goals, strategies, and implementation actions from 2024 to 2028. The plan contains 47 strategies across five key goal areas: Funding our Future; Optimizing Our Organization; Investing in Our Environment; Safeguarding Our City; and Building a Community Where Everyone Belongs.

The Two-Year Operating Budget (Operating Budget) is projected to be $248.3 million in FY 2025/26, which represents a 1.9 percent increase from the FY 2024/25 Modified Budget, and $257.7 million in FY 2026/27. The only funds not included in the Operating Budget are the Capital Projects Funds.

General Fund

General Fund operating revenues, including transfers, are projected to total $162.9 million in FY 2025/26, a 2.6 percent increase over the FY 2024/25 Modified Budget, and $169.3 million in FY 2026/27. General Fund operating expenditures, including transfers, are projected to total $164.3 million in FY 2025/26 and $170.8 million in FY 2026/27. The General Fund budget is balanced in both fiscal years.

Tax revenues represent over 80.0 percent of the General Fund revenues. Property tax (60.0 percent) and sales tax (15.9 percent) revenues represent a majority (75.9 percent) of tax revenues.

Personnel

Personnel costs represent 68.2 percent of the FY 2025/26 General Fund Budget and 68.0 percent in FY 2026/27, including step and salary increases pursuant to existing labor contracts, increases in health and other benefit costs, increases in PERS contributions, and increases in annual funding to workers' compensation reserves.

Non-Personnel

Non-personnel costs, including transfers, are approximately 31.8 percent of the Operating Budget in FY 2025/26. Transfers to the Capital Improvements Fund are increasing for high-priority capital projects and deferred maintenance needs, alongside rising general liability insurance and utility costs.

Fund balances: projected FY 2025/26 operating fund balances total $168.1 million, and for FY 2026/27 this total is expected to decrease to $164.1 million. The General Fund's fund balance is projected to decrease by $1.3 million from FY 2024/25 to FY 2025/26 and by $1.5 million from FY 2025/26 to FY 2026/27.