Los Altos proposes $71.8M FY27 budget; finance director cites surplus, reserves and pension paydown

The City of Los Altos presented its proposed fiscal year 2026–27 operating budget and five‑year capital and major maintenance program for council review on May 26.

Finance Director Jesse Kim outlined a $71.8 million general fund revenue estimate for FY27 (a 10.4% increase over FY26 adopted), with $63.0 million in proposed expenditures. Staff projects an operating surplus of $8.8 million and combined available reserves of $32.3 million — roughly 51% of annual operating expenditures — after planned transfers and reserves. Property tax remains the largest revenue source (about 57% of general fund revenue), and community development fees contributed meaningfully to revenue growth.

Kim highlighted major investments tied to council priorities: public safety (records/dispatch system, security camera upgrades, planning for a future police facility), circulation and street safety (San Antonio Road complete street and annual pavement programs), downtown revitalization (park space with parking, resurfacing), stormwater and sewer main replacement projects, and a comprehensive general plan update with housing components. The FY27 capital program totals about $28.66 million, including rolled‑over projects and new funding.

The budget package also reflected a one‑time, discretionary CalPERS payment of $7 million drawn from a designated pension reserve. Finance staff said that $7 million was applied to reduce the City’s unfunded pension liability and that the pension reserve used to make the payment currently shows a zero balance pending year‑end transfers. Staff reported the City’s unfunded liability stood at about $50.88 million as of the June 30, 2024 actuarial report (that figure precedes the $7 million payment), and recommended continuing additional discretionary payments (ADPs) until funded levels warrant a separate investment approach.

Assistant City Manager John outlined near‑term risks: state and federal actions that could affect revenue or require new unfunded mandates, softening utility and franchise fee bases (e.g., cable fees shifting to streaming), and rising construction costs for long‑term projects such as a new police station. Staff told council they are monitoring these variables and said synchronizing capital timing and reserves will be critical to preserve credit strength should borrowing be needed.

Council members asked detailed budget questions about CalPERS strategy, San Antonio Road cost estimates and grant timing, the potential financial commitment for proposed regional projects (homestead corridor), and structural pressures in the solid waste fund. Public Works said San Antonio Road reconstruction design and cost estimates are in progress and that the federal grant timeline allows for multi‑year delivery; finance staff said the solid waste enterprise will require rate adjustments or ongoing general fund support as state mandates and landfill changes increase costs.

Staff will return June 9 for budget adoption after incorporating council direction.

Outcome: Budget presented for review; final adoption scheduled for June 9.