Petaluma FY2026–27 Proposed Budget

A structured analysis of the city's $400.4 million proposed budget, covering fiscal health, year-over-year trends, and claims in the public record.

Overall Fiscal Health

General Fund structural balance, reserves, pension obligations, and expenditure composition

On an operating basis (revenues vs. expenditures before transfers), the General Fund generated modest surpluses in FY24 and FY25 — $1.6M and $2.0M respectively per audited actuals. However the full net change in fund balance tells a more complex story: FY24 saw a $7.1M decline driven by planned transfers out, while FY25 saw a $7.3M increase because budgeted transfers out largely did not occur. The city's combined CalPERS unfunded pension liability stands at $131.2M as of FY2024.

FY22–FY27 — General Fund: Revenues, Expenditures, and Fund Balance

The table below shows audited actuals for FY22–FY25 from the city's ACFRs, adopted budget for FY26, and proposed budget for FY27. ACFR figures exclude inter-fund transfers from the revenue line; transfers appear separately as 'other financing sources.' | Year | Basis | Revenue | Expenditure | Operating Surplus/(Deficit) | GF Ending Balance | |------|-------|---------|-------------|----------------------------|-------------------| | FY22 | ACFR actual | $67.7M | $62.3M | +$5.4M | $17.7M | | FY23 | ACFR actual | $70.3M | $63.2M | +$7.1M | $18.7M | | FY24 | ACFR actual | $72.5M | $70.9M | +$1.6M | $11.5M | | FY25 | ACFR actual | $77.4M | $75.4M | +$2.0M | $18.8M | | FY26 | Adopted budget | $79.7M | $86.1M | ($6.4M projected) | — | | FY27 | Proposed budget | $84.5M | $91.1M | ($6.5M projected) | — | FY22 and FY23 show strong operating surpluses — driven in part by the Measure U sales tax taking full effect in FY2022, which caused a significant jump in tax revenues. The FY24 fund balance decline of $7.1M was driven by transfers out ($11.2M actual) exceeding transfers in ($2.4M actual) — a net outflow of $8.8M to other funds for planned projects including the General Plan and trestle rehabilitation. The FY25 fund balance increase of $7.3M reflects the opposite: budgeted transfers out of $17.6M were largely not executed (only $4.4M actual), while the operating surplus of $2.0M added to the base. The ending FY25 fund balance of $18.8M is the strongest in the 10-year record. The FY26 and FY27 figures are budget-basis (adopted/proposed appropriations) and will differ from audited actuals when available.

FY22–FY27 — General Fund Reserve Position

The city maintains a Council policy target of 15% of operating expenditures in emergency reserves. Audited fund balance components for the General Fund (from ACFR 10-year statistical table): | Year | Total | Assigned | Unassigned | |------|-------|----------|------------| | FY22 | $17.7M | $11.9M | $4.3M | | FY23 | $18.7M | $12.5M | $4.6M | | FY24 | $11.5M | $9.5M | $0 | | FY25 | $18.8M | $16.7M | $0 | The Finance Director confirmed to Council in March 2026 that as of end of FY25, total assigned reserves were $16M (~22% of operating expenditures), but the portion attributable to emergency reserves — after stripping out capital and debt service allocations — was approximately 13.5–14%, below the 15% Council policy target. As of the FY26 mid-year update (March 2026), the unassigned General Fund balance was reported as approximately $308,000 on an $82.6M operating budget — 0.3% of expenditures. The city's 15% reserve claim is based on assigned reserves, which include funds earmarked for specific purposes. GFOA guidance distinguishes assigned from unassigned balances and recommends the latter meet a two-month minimum (approximately 16.7% of operating expenditures). The proposed budget (page 28) projects that at June 30, 2026, the designated reserve will be approximately $11.9M — 15.8% of the General Fund operating budget. Of that, approximately $10.8M is reserved for emergencies, representing 14.3% of operating expenditures — below the Council's 15% policy minimum.

FY2015–FY2024 — CalPERS Pension Obligations

Petaluma participates in two CalPERS defined benefit pension plans — miscellaneous (general employees) and safety (police and fire). Pension liability data lags one year in the ACFR; the most recent figures are as of FY2024. **Miscellaneous plan (FY2024)** | Metric | Value | |--------|-------| | Total pension liability | $157.2M | | Plan net position | $119.2M | | Net (unfunded) pension liability | $37.9M | | Funded ratio | 75.9% | **Safety plan (FY2024)** | Metric | Value | |--------|-------| | Total pension liability | $273.6M | | Plan net position | $180.4M | | Net (unfunded) pension liability | $93.3M | | Funded ratio | 65.9% | **Combined unfunded liability (FY2024): $131.2M** Ten-year trend — combined net pension liability: | Year | Combined NPL | Notes | |------|-------------|-------| | FY2015 | $75.4M | | | FY2017 | $99.1M | | | FY2019 | $97.9M | | | FY2021 | $73.2M | Strong investment returns | | FY2022 | $125.6M | Market downturn | | FY2023 | $135.7M | | | FY2024 | $131.2M | Modest improvement | The safety plan has maintained a funded ratio below 70% for most of the past decade. Every percentage point of funded ratio decline increases the city's required annual contribution, directly pressuring the General Fund salary and benefits line. The proposed FY27 budget does not discuss pension obligations. Pension liability data lags one year in the ACFR. FY2025 actuarial data will appear in the FY26 ACFR, expected December 2026.

FY2018–FY2025 — Government-Wide Net Position

The government-wide Statement of Net Position (full accrual basis, GASB 34) shows total assets minus all liabilities including long-term pension and OPEB obligations — the closest equivalent to a municipal balance sheet. Unlike the General Fund statements, this includes infrastructure assets and all long-term debt. | Year | Total Net Position | Unrestricted | Unrestricted % | |------|-------------------|--------------|----------------| | FY2018 | $242.3M | ($66.4M) | -27.4% | | FY2019 | $241.3M | ($71.6M) | -29.7% | | FY2020 | $236.9M | ($63.4M) | -26.7% | | FY2021 | $235.2M | ($68.5M) | -29.1% | | FY2022 | $247.4M | ($56.4M) | -22.8% | | FY2023 | $261.2M | ($50.7M) | -19.4% | | FY2024 | $256.3M | ($58.8M) | -23.0% | | FY2025 | $257.4M | ($44.3M) | -17.2% | Unrestricted net position strips out capital assets (infrastructure, buildings — not spendable) and restricted funds, leaving only the freely available residual. A negative unrestricted position means long-term obligations exceed unrestricted assets. Petaluma's unrestricted position has been negative in every year of this series, driven primarily by unfunded pension and OPEB liabilities. The FY2025 improvement to ($44.3M) is the strongest reading in the 8-year window and reflects both the modest operating surplus and a reduction in the government-wide net pension liability from $118.9M to $113.6M. **Note:** government-wide net pension liability ($113.6M in FY2025) differs from the plan-level figures in the Pension Obligations section ($131.2M combined) because the government-wide statements reflect Petaluma's proportionate share of the CalPERS risk pool.

FY22–FY27 — Expenditure Composition: Salaries & Benefits

Salaries and benefits as a share of General Fund expenditures (budget-basis): FY22: $49.4M / $10.5M services / $2.2M capital = 79.3% salaries FY24: $55.6M / $13.9M services / $2.3M capital = 78.8% salaries FY26: $64.2M / $14.4M services / $1.8M capital = 82.1% salaries FY27: $66.5M / $16.3M services / $2.6M capital = 80.3% salaries For comparison, FY25 ACFR actuals show total expenditures of $75.4M against an adopted budget of $71.0M — departments overspent their adopted budgets by approximately $4.4M in aggregate, driven primarily by Police ($570K over) and Fire ($3.1M over adopted, $1.3M over final amended budget).

FY27 (proposed) — Capital Improvement Program: Concentration

The $133.3M FY27 Capital Improvement Program is heavily concentrated in two projects: 1. PIPS Parallel Force Main (Wastewater): $45.3M 2. Fire Station No. 4 / Public Safety Building (Facilities): $33.4M These two projects account for $78.7M — 59% of the total CIP. The remaining $54.6M is distributed across roads, water systems, parks, airport, transit, and other facilities. The total proposed budget of $400.4M exceeds estimated revenues of $379.6M by $20.8M. A significant portion of CIP spending is funded through bond proceeds and grants recognized as revenues in the current fiscal year, which accounts for most of this difference.

Claims and Data

Comparing specific figures in the city's public communications to budget data and audited actuals

Several figures in the city's May 8 community update and May 4 budget presentation can be cross-referenced against structured budget data and ACFR actuals. The Measure U figure, staffing count, and road investment number each warrant additional context.

FY22–FY27 — Measure U Revenue

The city's May 8 community update states Measure U is expected to generate approximately $16.7M in FY2026–27. The budget tables record the Measure U Sales Tax fund appropriation at $18.88M. Historical Measure U revenues from the budget: FY22: $12.5M FY25: $15.7M FY26: $15.7M FY27 (proposed): $18.9M The $16.7M figure in the community update and the $18.88M in the budget tables likely reflect different scopes: the former may represent the direct transfer to General Fund operations, while the latter includes CIP-directed Measure U spending. The budget document does not reconcile these figures in a single table. For context, Measure U revenues represent approximately 20% of proposed FY27 General Fund revenues of $84.5M. The community update characterizes Measure U as representing approximately 4% of the total $400.4M budget. Note: the FY25 ACFR shows transfers in to the General Fund of only $9.8M actual against $16.1M budgeted — a $6.3M shortfall from budget. This suggests Measure U transfers to the General Fund are not always executed at budgeted levels.

FY22–FY27 — Staffing Levels

The community update states the FY27 proposed budget includes 419 full-time positions citywide. The budget's position tables show 416.6 authorized positions and 423.0 funded positions — FY27 is the first year in the data series where funded positions exceed authorized. ACFR actuals for FY25 show Police actual expenditures exceeded adopted budget by $570K and Fire exceeded adopted budget by $3.1M, consistent with positions being filled beyond planned levels mid-year. At 423 funded positions and a population of approximately 62,000, the employee-to-resident ratio is 1:146.6, consistent with the stated range of 1:140–150. The budget document does not include the peer city data underlying the comparative staffing claim.

FY27 (proposed) — Road Restoration Investment

The community update references $7.8M in road restoration projects. Pavement-specific CIP line items for FY27 total $7.68M: — Pavement Restoration – Caulfield Lane: $4,214,000 — Pavement Restoration – Howard Street: $1,670,000 — FY26/27 Pavement Preventative Maintenance: $799,000 — Pavement Restoration – Rainier Avenue: $674,000 — Pavement Restoration – D Street: $323,000 Additional street-related CIP projects not included in the pavement subtotal: — Crosswalk and Signal Improvements: $1,740,000 — Safe Streets Quick Builds: $1,707,000 — Downtown Pedestrian ADA Improvements: $700,000 — Pedestrian Improvements Citywide: $635,000 Total street-related CIP investment in FY27, including pedestrian and safety improvements, is approximately $12.5M. The $100M deferred roadway repair figure cited in the community update does not appear as a current estimate in the FY27 budget document. The most recent Pavement Condition Index (PCI) assessment date is not identified in the budget.

FY24–FY27 — Fire Department: Cost vs. Headcount

The Fire department proposed budget increases from $26.5M in FY26 to $28.8M in FY27 — a $2.3M increase — while Fire FTE decreases from 67.3 to 65.0. Audited actuals from the ACFRs show Fire has consistently exceeded its adopted budget: FY24: Adopted $21.0M / Final amended $23.2M / Actual $24.2M (+$3.2M over adopted) FY25: Adopted $23.8M / Final amended $25.6M / Actual $26.9M (+$3.1M over adopted) Fire has overspent its adopted budget by $3M+ in each of the past two audited years. The FY27 adopted budget of $28.8M may follow the same pattern. Cost per FTE in Fire based on actual spending: FY24 ~$365K, FY25 ~$400K, with the gap between adopted budget and actual driven primarily by overtime and CalPERS contribution increases.

Year-Over-Year Trends

Five-year trends in departmental spending, revenue mix, fund balances, and staffing

Police and Fire together represent 70.7% of proposed FY27 General Fund appropriations, up from 65.4% in FY22. The General Fund's 10-year fund balance trend shows a significant decline in FY24 (to $11.5M) followed by a strong recovery in FY25 (to $18.8M), driven primarily by transfer timing rather than operating performance. The combined CalPERS unfunded pension liability has grown from $75.4M in FY2015 to $131.2M in FY2024.

FY22–FY27 — General Fund Expenditures by Department

Note: FY22–FY25 figures are ACFR actuals; FY26 is adopted budget; FY27 is proposed budget. | Department | FY22 | FY23 | FY24 | FY25 | FY26 | FY27 | |-----------|------|------|------|------|------|------| | Police | $24.4M | $26.2M | $29.0M | $30.2M | $30.1M | $31.7M | | Fire | $21.1M | $21.8M | $24.2M | $26.9M | $26.5M | $28.8M | | Public Works | $4.6M | $5.9M | $7.1M | $7.6M | $7.4M | $8.1M | | City Admin | — | $5.7M | $5.4M | $5.4M | $9.2M | $10.1M | | Parks & Rec | $3.3M | $2.4M | $2.8M | $3.3M | $3.6M | $4.5M | | Community Dev | — | $1.6M | $1.8M | $1.7M | $3.6M | $2.3M | Police and Fire combined as share of GF actuals: FY22 **69.8%** → FY23 **68.3%** → FY24 **75.0%** → FY25 **76.2%** → FY27 proposed **70.7%** (budget basis). Note: the Police + Fire share of 65.4% cited in earlier versions of this analysis used budget-basis figures for FY22. Audited actuals show the combined share was already 69.8% in FY22 and has reached 76.2% of actual GF spending in FY25. Fire was the exception to the overspend pattern in FY22 — actual spending of $21.1M came in below the adopted budget. This is the only year in the audited series where Fire did not exceed its adopted budget.

FY2015–FY2025 — General Fund Balance: 10-Year Trend

Audited General Fund total balance by year (from ACFR 10-year statistical table): FY2015: $6.5M FY2016: $10.2M FY2017: $11.5M FY2018: $13.1M FY2019: $15.5M FY2020: $14.1M FY2021: $13.0M FY2022: $17.7M FY2023: $18.7M FY2024: $11.5M FY2025: $18.8M The FY24 decline from $18.7M to $11.5M was not an operating deterioration — it reflected planned transfers out for capital projects (General Plan, trestle rehabilitation). The FY25 recovery to $18.8M reflects those same budgeted transfers not being executed, with $4.4M transferred out against $17.6M budgeted. Unassigned fund balance has been $0 in both FY24 and FY25 — the entire fund balance is classified as nonspendable or assigned to specific purposes. GFOA guidance recommends maintaining unassigned reserves sufficient for two months of operating expenditures.

FY2015–FY2024 — CalPERS Pension Liability: 10-Year Trend

Combined net pension liability (miscellaneous + safety plans), from ACFR pension schedules: FY2015: $75.4M (misc $21.7M + safety $53.7M) — combined funded ratio ~72% FY2016: $87.8M — combined funded ratio ~70% FY2017: $99.1M — combined funded ratio ~69% FY2018: $91.0M — combined funded ratio ~73% (market recovery) FY2019: $97.9M — combined funded ratio ~72% FY2020: $106.3M — combined funded ratio ~71% FY2021: $73.2M — combined funded ratio ~82% (exceptional investment returns) FY2022: $125.6M — combined funded ratio ~70% (market decline) FY2023: $135.7M — combined funded ratio ~69% FY2024: $131.2M — combined funded ratio ~69% (modest improvement) The safety plan (police and fire) accounts for 71% of the total unfunded liability and has been below 70% funded for most of the decade. Every increase in the unfunded liability results in higher required annual employer contributions, which flow directly into the salary and benefits line of the General Fund. Pension liability data lags one year in the ACFR. FY2025 actuarial data will appear in the FY26 ACFR, expected December 2026.

FY22–FY27 — General Fund Revenue by Category

Note: FY24 and FY25 figures are ACFR actuals (excluding transfers). FY26 and FY27 are budget-basis and include transfers as revenue. **FY24 actuals (ACFR) — Total: $72.5M** | Category | Amount | |----------|--------| | Taxes | $51.0M | | Charges for services | $8.9M | | Intergovernmental | $8.8M | | Licenses, permits, fees | $1.5M | | Use of money/property | $1.5M | | Fines/penalties | $0.4M | | Other | $0.4M | | Transfers in (other financing) | $2.4M | **FY25 actuals (ACFR) — Total: $77.4M** | Category | Amount | |----------|--------| | Taxes | $53.2M | | Charges for services | $10.5M | | Intergovernmental | $9.8M | | Use of money/property | $2.0M | | Licenses, permits, fees | $1.2M | | Other | $0.5M | | Fines/penalties | $0.3M | | Transfers in (other financing) | $9.8M | FY26 adopted budget (budget basis, includes transfers): $79.7M FY27 proposed budget (budget basis, includes transfers): $84.5M The large variance in transfers in between FY24 ($2.4M actual) and FY25 ($9.8M actual) vs. budgeted levels ($16.1M and $16.4M respectively) indicates Measure U and other inter-fund transfers are executed selectively depending on cash position.

FY24–FY25 (audited) — Budget vs. Actual: Revenues and Expenditures

Comparing adopted budget figures to ACFR actuals reveals consistent patterns across both audited years. Revenues beat adopted budget both years: FY24: actual $72.5M vs. adopted $66.2M — variance +$6.3M (+9.6%) FY25: actual $77.4M vs. adopted $71.5M — variance +$5.9M (+8.2%) Operating revenues are systematically underbudgeted. Charges for services and intergovernmental revenues are the main sources of positive variance. Expenditures also beat adopted budget both years: FY24: actual $70.9M vs. adopted $65.3M — variance +$5.6M (+8.6%) FY25: actual $75.4M vs. adopted $71.0M — variance +$4.4M (+6.1%) Departments consistently overspend adopted budgets in aggregate. The two effects largely offset each other on the operating line. Note on longer-term context: the 8-year audited record (FY2018–FY2025) shows that structural surpluses are a recent phenomenon. FY2019 ran a structural deficit of ($4.6M), FY2020 ($11.4M) during COVID, and FY2021 ($6.0M). The return to surplus in FY2022 and FY2023 was driven primarily by the Measure U sales tax taking full effect, which added approximately $17M in annual tax revenue above the pre-FY2022 baseline. The current structural surplus is therefore Measure U-dependent — without it, the recurring revenue base would be closer to the FY2019–FY2021 level where structural deficits were the norm.

FY24–FY25 (audited) — Budget vs. Actual: Department Patterns

Department-level variance (actual vs. adopted budget) shows consistent over- and under-spenders across both years. Over budget: Fire: FY24 +$3.2M (+15.5%), FY25 +$3.1M (+13.0%) — the single largest and most consistent source of overspend Police: FY24 +$1.9M (+6.9%), FY25 +$0.6M (+1.9%) Public Works: FY24 +$0.6M (+9.3%), FY25 +$0.6M (+8.9%) Parks & Recreation: FY24 +$0.2M (+6.5%), FY25 +$0.3M (+11.7%) City Manager: FY24 +$0.4M (+16.6%), FY25 +$0.2M (+8.2%) Under budget: Admin Services: FY24 -$1.2M (-37.0%), FY25 -$0.5M (-25.1%) City Attorney: FY24 -$0.1M (-15.2%), FY25 -$0.1M (-13.5%) City Clerk: FY24 -$0.2M (-31.5%), FY25 -$0.04M (-7.7%) Fire's overspend is driven primarily by overtime and CalPERS contribution increases that are not fully captured in the adopted budget. The FY27 Fire adopted budget of $28.8M may follow the same pattern.

FY24–FY25 (audited) — Budget vs. Actual: Transfer Unpredictability

Inter-fund transfers show two distinct patterns across the 8-year audited record. **FY2018–FY2022: small and stable** | Year | Transfers In | Transfers Out | Net | |------|-------------|---------------|-----| | FY18 | $1.7M | ($1.4M) | +$0.3M | | FY19 | $2.0M | ($1.2M) | +$0.8M | | FY20 | $2.6M | ($1.4M) | +$1.3M | | FY21 | $2.5M | ($7.8M) | ($5.3M) | | FY22 | $2.7M | ($7.1M) | ($4.4M) | **FY2023–FY2025: large and unpredictable** | Year | Transfers In | Adopted | Variance | Transfers Out | Adopted | Variance | |------|-------------|---------|----------|---------------|---------|----------| | FY23 | $12.1M | $13.2M | -8% | ($18.2M) | ($17.5M) | +4% | | FY24 | $2.4M | $16.3M | **-85%** | ($11.2M) | ($22.4M) | -50% | | FY25 | $9.8M | $16.1M | **-39%** | ($4.4M) | ($17.6M) | -75% | The transfer volatility seen in FY2024–FY2025 is not a long-standing structural pattern — it emerged when Measure U transfer volumes increased and capital project timing became a significant factor. In FY2018–FY2022, actual transfers closely tracked or fell below $3M annually. Budgeted transfer figures for FY27 ($18.7M transfers in) should be read in this context: execution at that level would be above the historical norm outside of FY2023.

FY24–FY25 (audited) — Budget vs. Actual: Fund Balance Outcomes

The net change in fund balance — the bottom line of the budget — has differed substantially from projections in both audited years. FY24: adopted projected ($5.2M), actual was ($7.1M) — $1.9M worse than projected FY25: adopted projected ($1.1M), actual was +$7.3M — $8.4M better than projected The FY25 swing of $8.4M was driven almost entirely by transfers out coming in at $4.4M against $17.6M budgeted — not by stronger operating performance. The fund balance outcome is dominated by transfer execution, not operating performance. The adopted budget's projected ending fund balance is an unreliable predictor of the actual result.

FY27 (proposed) — Total Budget by Fund Type

FY27 appropriations by fund: Capital Project Funds: $133,315,591 General Fund: $85,351,379 Utility Funds: $75,340,971 Special Revenue, Trust & Debt Service: $45,499,303 Measure U Sales Tax: $18,880,000 Enterprise Funds: $16,403,234 Internal Service Funds: $14,887,596 Measure H Sales Tax: $6,585,513 Successor Agency Funds: $4,095,883 Total: $400,359,470

Questions for the Record

Questions arising directly from the data that remain unanswered in the proposed budget document

Six questions arise from the budget data and ACFR actuals that are not addressed in the proposed budget document or public communications. These are factual questions appropriate for the May 11 workshop or public comment to cityclerk@cityofpetaluma.org.

May 11, 2026 Workshop — Q1: Unassigned Reserve Balance

The FY24 and FY25 ACFRs show unassigned General Fund balances of $0 in both years. The city's 15% reserve claim is based on assigned reserves, which include funds earmarked for specific purposes. What is the projected unassigned General Fund balance after FY27, and how does the city reconcile its 15% reserve claim with GFOA guidance on unassigned vs. assigned fund balance?

May 11, 2026 Workshop — Q2: Transfer Execution Rate

In both FY24 and FY25, actual transfers in to the General Fund were dramatically lower than budgeted: $2.4M vs. $16.6M budgeted in FY24, and $9.8M vs. $16.4M budgeted in FY25. The FY27 budget includes $18.7M in transfers as General Fund revenue. What determines whether budgeted transfers are executed, and what is the plan if FY27 transfers again come in below budget?

May 11, 2026 Workshop — Q3: Authorized vs. Funded Positions

FY27 shows funded positions (423.0) exceeding authorized positions (416.6) — the first year in the data series where this occurs. In prior years funded was equal to or lower than authorized. The budget document does not address this, and ACFR actuals show both Police and Fire exceeded their adopted staffing budgets in FY24 and FY25.

May 11, 2026 Workshop — Q4: Fire Department Cost Escalation

Fire has exceeded its adopted budget by $3M+ in each of the past two audited years (FY24: +$3.2M, FY25: +$3.1M). FTE is declining while costs rise. The FY27 adopted budget of $28.8M may follow the same pattern. What specific cost drivers — overtime, CalPERS contributions, step increases — account for the persistent overage, and what controls are in place for FY27?

May 11, 2026 Workshop — Q5: Pavement Condition and Backlog

The $100M deferred roadway repair figure cited in the community update does not appear as a current estimate in the FY27 budget document, and its assessment date is not identified. When was the most recent Pavement Condition Index (PCI) assessment conducted, what is the current score, and what is the updated cost estimate for the deferred backlog?

May 11, 2026 Workshop — Q6: Measure U Sunset and Forecast

Measure U represents approximately 20% of General Fund revenues and $18.9M of the total FY27 budget. Actual transfer execution has been inconsistent — $2.4M in FY24 and $9.8M in FY25 against budgeted levels of $16M+. What is the Measure U sunset date, what revenue assumptions does the five-year forecast use post-expiration, and what is the contingency plan if the measure is not renewed?