Seaside's draft FY 2026 27 budget shows $1.5M operating shortfall, 22 frozen positions and push for revenue-driven recovery

Seaside city leaders framed the draft fiscal year 2026 27 budget on May 26 as a stabilization-and-recovery plan that preserves essential services and workforce capacity while acknowledging a structural deficit that requires disciplined management and new recurring revenue.

City Manager told the council the recommended budget protects core municipal services and prioritizes workforce retention amid reduced recurring revenue growth, continued pension and benefit cost escalations and exposure to sales-tax volatility tied to automobile-related activity. He listed major capital projects (Broadway Avenue complete streets, Laguna Grande Recreation Trail, San Pablo pedestrian bridge and pavement rehabilitation) that continue largely through grants and restricted funds.

Finance Director Riley gave the detailed financial picture: general fund operating revenues are projected at approximately $51.3 million with operating expenditures of about $52.8 to $52.9 million, producing an operating deficit of roughly $1.5 million. The proposed budget includes $819,000 of new general-fund-supported capital projects and roughly $2.4 million proposed for street maintenance and repair. After those uses, staff projects unassigned fund balance movement that could produce a negative unassigned balance in the near term unless recovery actions are implemented.

Key numbers and structural choices

- Operating revenues (General Fund): ~$51.3 million
- Operating expenditures: ~$52.8 52.9 million
- Projected operating deficit: ~ $1.5 million
- Proposed general-fund CIP: $819,000
- Proposed street maintenance transfer: ~$2.4 million
- Positions frozen as a cost-control measure: 22
- Registered voters (context for election costs stated earlier): 15,249 (May 15 count cited in presentation)

Riley said the budget assumes modest revenue growth (property tax +2%, sales and use tax roughly flat to +1%) and noted that one-time previous revenues (ARPA, land sale proceeds) had produced temporary gains that are no longer durable sources of recurring operating revenue. The city's multi-year forecast projects a decline in overall fund balance from prior-year levels absent new recurring revenue or structural reductions in spending.

Options and strategies discussed

Staff presented a menu of options to strengthen the near-term position: further reductions in discretionary spending, deferring or rescoping general-fund-funded capital projects, reducing general-fund transfers to street operations, limited use of Section 115 pension-trust resources (staff warned that tapping the trust's roughly $5.2 million balance would reduce future investment earnings and weaken long-term pension strategy), and, as a last resort, workforce realignment or labor-related measures. Staff emphasized preference for operational efficiencies and revenue strategies over actions that would immediately reduce core service capacity.

Council members asked for more detail on certain items (e.g., the mechanics and annual returns on the Section 115 trust, whether TOT increases would require voter approval, and what constitutes a low- versus high-cost county-run election). Staff answered that a TOT (transient occupancy tax) rate change would require voter approval and that more detailed revenue-generation proposals will be brought forward during the quarter-by-quarter monitoring process beginning October 2026.

Long-term context and development

Staff cautioned that large development projects (the Grand Hyatt Seaside hotel/resort, Campus Town Main Gate, West Broadway urban village) could materially improve recurring revenues but that timing is uncertain and cannot be assumed as an immediate balancing strategy.

Next steps

Council will continue the budget study sessions over the next days; staff proposed quarterly fiscal updates beginning October 2026 to track performance and recommended actions. Staff also invited council direction on the set of potential recovery strategies before final adoption at the scheduled June 18 meeting.

Quotes

"This is best described as a stabilization recovery budget," the City Manager said, urging conservative planning while the city pursues development and revenue diversification. Finance Director Riley said, "We are using reserve capacity as a limited bridge to maintain essential services while preserving organizational capacity."