CC Resolution 13306 - Approving Proposed FY 2026-2030 5-Year Capital Improvement PlanRESOLUTION NO. 13306
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CAMPBELL
APPROVING THE PROPOSED FISCAL YEARS 2026-2030 5-YEAR CAPITAL
IMPROVEMENT PLAN (CIP) AND FINDING THE CIP TO BE CONSISTENT WITH
THE CAMPBELL GENERAL PLAN PURSUANT TO § 65103(c) and § 65403(c) OF
THE STATE OF CALIFORNIA GOVERNMENT CODE AND EXEMPT FROM REVIEW
UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)
WHEREAS, after due consideration of all evidence presented, the City Council does find
as follows with respect to the FY 2026-2030 CIP.-
1 . The proposed CIP is consistent with the Campbell General Plan, pursuant to §
65103(c) and § 65403(c) of the State of California Government Code;
2. The proposed CIP is exempt from review under the California Environmental
Quality Act (CEQA) in that it is not a "project" as defined by Public Resources Code
§ 21065 being an administrative activity of the City that will not result in direct or
indirect physical changes to the environment pursuant to CEQA Guidelines §
15378.
WHEREAS, based upon the foregoing findings of fact, the City Council further finds and
concludes that:
1. The CIP is consistent with the Campbell General Plan; and
2. No substantial evidence has been presented from which a reasonable argument
could be made that the CIP projects would have a significant adverse impact on
the environment.
NOW, THEREFORE, BE IT RESOLVED that the City Council finds the proposed CIP to
be consistent with the Campbell General Plan pursuant to 65103(c) and § 65403(c) of the
State of California Government Code and exempt from review under the California
Environmental Quality Act (CEQA); and,
BE IT FURTHER RESOLVED that the City Council approves the Fiscal Year 2026-
2030 Capital Improvement Plan with projects totaling $102,762,970; including new capital
projects of $17,594,000 and $9,295,031 as the amount necessary to meet the capital
requirements of the City in FY 2025.
PASSED AND ADOPTED this day 17th of June, 2025, by the following roll call vote:
AYES: Councilmembers- Bybee, Hines, Scozzola, Furtado, Lopez
NOES: Councilmembers: None
ABSENT- Councilmembers- None
APPROVED:
Sergio Lopez, Mayor
ATTEST:,
Andrea Sanders, Uty Clerk
June 17, 2025
Honorable Mayor, Vice -Mayor, and City Councilmembers:
I am pleased to present to you for formal consideration and adoption the Proposed Fiscal
Year (FY) 2026 Operating Budget and 2026 - 2030 Five -Year Capital Improvement Plan
(CIP). The Operating Budget and CIP serve as a policy document, a financial plan, a
communication's device, and an operation's guide; reflecting the policies, goals, programs,
and service priorities and values of the City Council and the Campbell community.
Specifically, the current budget and CIP process continues to emphasize a Priority -Based
Budgeting approach to link City resources with the strategic priorities of the City Council and
community, while also seeking to maintain fiscal prudence. To accomplish this, several
meetings with the City Council and the community were held on the following dates:
• March 6 Special Meeting — Strategic Priorities Discussion
• March 13 ReQular Meeting — Strategic Priorities Adoption
• May 6 Budget Study Session — Preliminary Workplans, Operating Budget, and CIP
• June 3 Regular Meeting — Introduction of Budget and CIP
The budget development process though continues to be an iterative process and there will
be additional opportunities for Council feedback as well as community input on June 17
(Budget Adoption). Any further Council feedback that reaches majority consensus at the
June 17 Budget Adoption will be incorporated into the final Adopted Budget and CIP if it is
fiscally feasible. In preparation for those meetings and so as to provide a high-level overview
of the proposed budget and CIP, this transmittal letter will address the following items:
• A — Significant Changes since June 3 Introduction
• B — Financial Summary
• C — Economic Update and Outlook
• D — Long -Range Forecast
• E — Budget Awards
• F — Conclusions and Acknowledgments
• Exhibit A - FY 2026 Adopted City Council Priorities
• Exhibit B — FY 2026 Proposed Workplans
A — SIGNIFICANT CHANGES SINCE JUNE 3rd INTRODUCTION
The following section details significant changes to the Proposed FY 2026 Operating Budget
and 2026 — 2030 CIP since the June 3 Budget Introduction. All changes shown below are
built into the proposed budget numbers and schedules before Council:
Publication of Legal Notices (Community Development Department Acct #
101.550.7422) — Based on further analysis of need, this expenditure account has been
increased by $2,500 in the FY 2026 Proposed Budget.
Cities Association Planning Collaborative (Community Development Department
Acct # 101.550.7427) — Based on further analysis of need, this expenditure account
has been decreased by $2,500 in the FY 2026 Proposed Budget.
The revisions proposed above offset each other fully and there have been no other changes
made to the Proposed Budget or CIP since the June 3 Introduction.
B - FINANCIAL SUMMARY
General Fund — Financial Summary
Table 1— General Fund Summary
FUND BALANCE REPORT
101
FY 23 Actual
FY 24 Actual
FY 25 Est.
FY 26 Prop.
%Chg*
Beginning Fund Balance July1(A)
$ 16,907,710
$ 17,124,190
$ 15,945,340
$ 15,945,340
(A) - Econ Fluctuations + Emergency+ Unassigned
+ PERS
Revenues
Total Revenues
$ 63,029,077
$ 64,774,966
$ 70,581,193
$ 69,023,160
-2.2%
Expenditures
FY 23 Actual
FY 24 Actual
FY 25 Est.
FY 26 Prop.
%Chg*
Total Expenditures by Type
$ 62,812,598
$ 65,953,816
$ 70,581,192
$ 69,023,160
-2.2%
Revenues vs Expenditures
$ 216,479
$ (1,178,850)
$ -
$ -
Ending Fund Balance June 30
$ 17,124,190
$ 15,945,340
$ 15,945,340
$ 15,945,340
*% Change from FY 2025 Estimated to FY 2026 Proposed Budget
For a more detailed Fund Balance Report, please see the Fund Summaries section of the Budget book
Currently Proposed FY 2026 Operating and Capital expenditures for the General Fund equal
$69.0 million. This proposal results in General Fund expenditures being fully balanced
against estimated General Fund revenues in FY 2026. The General Fund, expenditures for
FY 2026 show a 2.2% decrease when compared to FY 2025 Year -End Estimates of $70.6
million. General Fund revenues for FY 2026 also show a 2.2% decrease when compared to
FY 2025 Year -End Estimates of $70.6 million. The proposed budget includes:
All current City operations remain largely status quo, but FY 2026 budget requests
account for inflation, contractually agreed to increases to vendors, and other costs to
meet high priority Workplan objectives,
No Cost of Living Adjustments (COLAs) for any bargaining unit or employee, with all
Memorandums of Understanding (MOUs) expiring either June 30, 2025 (CMEA,
CPCEA, CARP, Confidential, MGMT, UNREP) or December 30, 2025 (CPOA).
8% increase to City's Healthcare Contribution Levels (effective January 1, 2026) for
all bargaining unit and employees at a cost of $120,000 in FY 2026. This increase
was not previously included in the preliminary budget presented at the May 6 Budget
Study Session,
• Reclassifications of several positions due to evolving operational needs including the
upgrade of one (1) IT Administrator to Sr. IT Administrator at a cost of $14,800, the
upgrade of one (1) Environmental Programs Specialist (Public Works) to
Environmental Programs Coordinator (Public Works) at a cost of $29,900, the upgrade
of one (1) Police Records Specialist to Crime Analyst at a cost of $10,300, the upgrade
of one (1) Executive Assistant (Police) to Executive Assistant to the Police Chief at a
cost of $6,800, the downgrade of one (1) Sr. Building Inspector to Building Inspector
at a savings of $13,500, and the downgrade of one (1) Principal Planner to Sr. Planner
at a savings of $13,500. All reclassifications are newly added items since the May 6
Budget Study Session,
• Extension of a Limited -Term Environmental Program Specialist in Community
Development for six (6) months through June 30, 2026 at a cost of $69,400,
• $2.4 million in interfund operating transfers out to support operations in other funds;
including $1.1 million to support the Lighting and Landscaping District Fund, $561,006
to support the IT Fund, and $766,000 to pay for 2016 Lease Revenue Bond (LRB)
debt service,
• $1.3 million in interfund capital transfers out to support Capital Improvement Plan
Reserve (CI PR) projects; with $550,000 set aside as the General Fund's annual Cl PR
contribution towards new projects and $697,245 for carryover CIPR projects
previously approved
• $25,000 in interfund capital transfers out to support Construction Tax projects; with
the entire amount proposed to be offset by a drawdown of Construction Tax reserves,
• Incorporation of several short-term corrective budget strategies on the expenditure
side which will be discussed below.
Related General Fund revenue sources also total $69.0 million and include:
• $581,000 million in interfund operating transfers in to support General Fund
operations; including an approximately $377,000 proposed transfer from ARPA fund
excess accumulated interest earnings to support various General Fund operations
and extension of the Limited -Term Environmental Programs Specialist in Community
Development through at least June 30, 2026, a normal $148,000 transfer from the
Community Facilities District (CFD) #1 fund to support Police and Fire services,
$6,000 from the CFD #2 fund to support Land Development, and $50,000 from the
Motor Vehicle Pool fund to support Administrative and Fiscal Oversight of the division,
• $697,245 draw from the accumulated CIPR funds to support $697,245 in carryover
CIPR projects previously approved,
• $25,000 draw from Construction Tax reserve to support capital projects as previously
discussed,
• $229,000 downward revision of Sales and Use Tax revenue estimates from the May
6 Budget Study Session based on further analysis of the impact of a large sales tax
generator leaving Campbell in October 2026 as well as updated forecasts for all sales
tax generators within Campbell,
• Incorporation of short-term corrective budget strategies on the revenue side which will
be discussed below.
Short -Term Corrective Budget Strategies
Based on City Council feedback at the May 6 Budget Study Session staff incorporated several
short-term budget corrections strategies to fully close the budget gap in FY 2026. At the May
6 Budget Study Session, staff presented Council with an estimated $3.17 million structural
operating deficit within the FY 2026 Preliminary General Fund Operating Budget. Without
further corrective action, the Geneal Fund operating deficit would have increased to $3.75
million in FY 2026. However, the following corrective measures have been proposed that
result in a balanced budget proposal. Based on Council feedback received at the June 3
Budget Introduction, these measures have not changed and are summarized in Table 2
below and detailed further immediately following the table:
Table 2 — FY 2026 General Fund Budget Correction Strategies Incorporated
Correction Strategy
FY 2026 Impact
Temporary Hiring Freeze
$1,242,599
Limited to No Use of Temporary Staffing in FY 2026
$284,750
Misc. Expend. Reductions or Revenue Enhancements
$530,000
Utilization of Unexpected FEMA Reimbursement for COVID Expenses
$259,000
Utilization of All Realized and Estimated Excess ARPA Interest Earnings
$229,730
Utilization of a portion of the Cit 's CalPERS Pension Reserve
$558,000
Liquidating Duplicative General Fund Reserves
$641,000
TOTAL
$3,745,079
Temporary Hiring Freeze (Estimated Savings of $1.77 million across all City Funds
and $1.24 million within the General Fund) — At the May 6 Budget Study Session,
staff identified 23 vacant positions equaling $4.17 million in FY 2026 and proposed
that some be frozen for all or part of FY 2026; resulting in potential savings of $1.67
million across all City Funds and $1.19 million within the General Fund in FY 2026.
Since that time, in a strategic and targeted manner and taking into account
operational, Workplan, and service needs, the Executive Team further reviewed the
vacancy list and established recommended hire by dates for each currently vacant
position shown in Table 3 below. Adjustments to any dates shown could have
additional savings or costs depending on whether hired later or sooner:
Table 3 — Vacant Positions
Department
JobTitleI
Full Year
FY26Cost
iHireByDatel
Prorated
Y26Cost
�SavingsFY26
City Manager HR ANALYST
$
190,164
7/1/2026
$
-
$
(190,164)
City Manager HR REP
$
160,371
6/1/2025
$
160,371
$
-
City Manager IT MANAGER
$
260,971
9/1/2025
$
216,642
$
(44,329)
Comm Dev BLDG INSPECTOR
$
198,069
7/1/2026
$
-
$
(198,069)
Finance EXECUTIVE ASST (FN)
$
154,764
7/1/2026
$
$
(154,764)
Police COMM SERV OFFICER
$
162,709
7/1/2026
$
$
(162,709)
Police EM ERG SVCS COORD
$
119,865
7/1/2026
$
$
(119,865)
Police PS DISPATCHER
$
192,305
7/1/2025
$
192,305
$
Police PS DISPATCHER
$
192,305
7/1/2025
$
192,305
$
Public Works BLDG MNT WKR
$
165,112
7/1/2026
$
-
$
(165,112)
Public Works ENGR TECH I
$
167,629
7/1/2026
$
-
$
(167,629)
Public Works ENVIRO PRGMS SPEC
$
151,534
10/1/2025
$
113,339
$
(38,195)
Public Works EQUIP MNT SPVSR
$
188,573
7/1/2026
$
-
$
(188,573)
Public Works LGT/TRF SIG SPVSR
$
213,546
7/1/2025
$
213,546
$
Public Works MAINT WORKER I (Parks)
$
132,992
7/1/2025
$
132,992
$
Public Works MAINT WORKER I (Parks)
$
132,992
7/1/2025
$
132,992
$
Public Works PARK MNT SPVSR
$
219,482
7/1/2026
$
-
$
(219,482)
Public Works PUBLIC WORK DIR
$
338,522
7/1/2025
$
338,522
$
Public Works SR CIVIL ENGR
$
247,042
7/1/2025
$
247,042
$
Public Works STR MNT LEAD WKR
$
155,670
7/1/2025
$
155,670
$
Public Works STREET MNT SUPERVISOR
$
211,720
9/1/2025
$
175,757
$
(35,963)
Rec & Comm REC SPECIALIST (PPT)
$
84,287
7/1/2026
$
-
$
(84,287)
Rec&Comm REC SPEC FACI LITI ES
$
126,624
6/1/2025
$
126,624
$
-
TOTALS
$ 4,167,248
$ 2,398,106
$(1,769,142)
Fund
Full Year
FY26 Cost
Prorated
FY26 Cost
I Savings FY26
101-General Fund
$ 2,499,768
$ 1,257,169
$(1,242,599)
204-Gas Tax
$ 367,390
$ 331,427
$ (35,963)
207-Lightingand Landscape
$ 699,012
$ 479,530
$ (219,482)
209-Environmental
$ 151,534
$ 113,339
$ (38,195)
641-Motor Vehicle Pool
$ 188,573
$ -
$ (188,573)
647-MIS Pool
$ 260,971
$ 216,642
$ (44,329)
Fund Totals
$ 4,167,248
$ 2,398,106
$(1,769,142)
• Limited to No Use of Temporary Staffing in FY 2026 (285 000) - Due to previous
hiring freezes, delayed recruitments, operational needs, and high -priority Workplan
items, the City has utilized the services of temporary employees in various
departments (Community Development, HR, and IT) that come from staffing agencies
and other professional services firms. In FY 2025 alone, these costs are estimated to
reach $605,000. Given the potential of a temporary hiring freeze for permanent
staffing and the City's ongoing fiscal constraints, limiting the use of temporary staffing
in FY 2026 would be a consistent and appropriate action.
• Misc. Expenditure Reductions or Revenue Enhancements (Estimated
Expenditure Savings or Revenue Enhancements of $597,000 across all City Funds
and $530,000 within the General Fund) - Since the May 6 Budget Study Session, the
Executive Team has re-examined FY 2026 Budget Requests within their departments
and reduced costs or enhanced revenues in the following areas:
Table 4 — Misc. Expenditure Reductions or Revenue Enhancements
By Object
SAVINGS
ADULT SERVICES- CLASSES (Revenue)*
$
(7,716)
RENTS/LEASES (REAL& PER) (Revenue)*
$
(26,000)
PERSONNEL -OVERTIME
$
(102,000)
ADVERTISING
$
(13,800)
OFFICE EXPENSE
$
(36,500)
SPECIAL DEPARTMENTAL
$
(33,000)
MAINT-BLDGS/STRUC/GROUNDS
$
(23,000)
MAINT & OPER OF EQUIP
$
(7,550)
PROF & SPECIAL SERVICES
$
(116,713)
OTHER CONTRACTUAL SERVICE
$
(70,570)
MEMBERSHIPS/DUES/BOOKS
$
(1,800)
PROF DEVELOPMENT & MTGS
$
(40,900)
STAFF DEVELOPMENT
$
(3,000)
SPECCOMMUNITY SERVICES
$
(2,000)
MACHINERY& EQUIPMENT
$
(112,500)
TOTAL COST REDUCT OR REV ENHANCEMENT
$
597,049
*Negative revenue amounts are actually increases to revenue
estimates, butshown as negative to represent their impact on
any budgetary deficits.
By Fund
SAVINGS
101-General Fund
$
(530,151)
204-Gas Tax Fund
$
(34,000)
207- Lighting and Landscape Fund
$
(8,900)
209- Environmental Services Fund
$
24,402
641- Motor Vehicle Pool Fund
$
(31,500)
647-MIS Pool Fund
$
(16,900)
TOTAL COST REDUCT OR REV ENHANCEMENT
$
(597,049)
Utilization of Unexpected FEMA Reimbursement for COVID Expenses ( 259 000)
— Since the May 6 Budget Study Session, the City has received $246,000 from the
Federal Emergency Management Agency (FEMA) for COVID-19 expense
reimbursements submitted several years ago; with a final $13,000 expected shortly.
Staff was cautiously optimistic that the City would receive these funds at some point,
but had not placed them in any budgets or revenue estimates as of yet since the FEMA
reimbursement process can be lengthy. Now that the City is finally seeing these funds,
staff recommends utilizing them in full to offset the budgetary deficit in FY 2026.
Utilization of All Realized and Estimated Excess ARPA Interest Earnings
($229,730) - As of the ARPA Utilization U date provided to City Council on October
15, 2024, the City had earned $383,767 in interest from its ARPA funds and
appropriated all of it towards operational expenses such as the Limited -Term
Environmental Programs Specialist. And as of March 31, 2025, the City has earned
an additional $172,073 in interest from its ARPA funds and is expected to earn a total
of $229,730 additional through the end of FY 2025. Thus, staff recommends using
this full amount to both extend a Limited -Term Environmental Programs Specialist in
Community Development six (6) months through at least June 30, 2026 and support
broad General Fund personnel expenses in FY 2026.
Utilization of the City's CalPERS Pension Reserve ( 558 000) — As discussed at
the May 6 Budget Study Session, the City wisely established a CalPERS Pension
Reserve with an initial deposit of $2.252 million. Given a significant spike in the
required UAL payment to CalPERS in FY 2025, Council approved utilizing $1.252
million of the City's Pension Reserve to offset these costs; thereby leaving a balance
of $1.0 million. Consistent with last fiscal year's actions and to offset a $558,000
increase in required UAL payment for FY 2026, staff recommends utilizing only
558 000 of the reserve in FY 2026; down from a proposed draw of $1.0 million at the
May 6 Study Session. While the draw down of any reserve is never ideal, staff
recommends building up this reserve in the future should the City's financial condition
allow it (e.g., receiving a positive outcome on Measure K litigation). As such, one of
staff's proposed FY 2026 Workplan items is to continue developing plans to pay down
the City's UAL and reduce overall pension costs over time. Part of that plan will include
the development of a Council policy regarding the acceptable use of the City's
CalPERS Pension Reserve and how to build it up to an adequate level over time.
Liquidating Duplicative General Fund Reserves (641 000) — Within the City's
General Fund there are reserves for Liability Insurance ($158,000), Unemployment
Insurance ($90,000), and Other Post Employment Benefits (OPEB) ($393,000).
However, while these reserves have been in place for many years, the purposes for
which they support are also budgeted for annually within the operating budget and
having an additional reserve for each is unnecessary and duplicative. There is also
no fiscal policy describing their establishment, purpose, use, or replenishment. Thus,
staff recommends liquidating them in FY 2026 and using their balances to bridge the
General Fund budget deficit. These items are again already included within the
operating budget and have their utilization does not negatively impact the City's fiscal
stability.
All City Funds — Financial Summary
Table 5 — All Funds Summary
ALL FUNDS SUMMARY
Beginning Fund Balance July 1
Revenues
FUND BALANCE REPORT
FY 23 Actual FY 24 Actual FY 25 Est.
$ 96,862,053 $ 100,898,194 $ 86,522,095
FY 26 Prop.
$ 28,764,930
%Chg*
Total Revenues
$ 94,060,104
$ 95,685,217
$ 108,369,674
$ 100,472,721
-7.3%
Expenditures
FY 23 Actual
FY 24 Actual
FY 25 Est.
FY 26 Prop.
%Chg*
Total Expenditures by Type
$ 90,023,963
$ 110,061,315
$ 166,126,839
$ 106,743,724
-35.7%
Revenues vs Expenditures
$ 4,036,141
$ (14,376,099)
$ (57,757,165)
$ (6,271,003)
Ending Fund Balance June 30 $ 100,898,194 $ 86,522,095
*% Change from FY 2025 Estimated to FY 2026 Proposed Budget
$ 28,764,930
$ 22,493,927
For a more detailed Fund Balance Report, please see the Fund Summaries section of the Budget book
Currently Proposed FY 2026 Operating and Capital expenditures across all City funds equal
$106.7 million and include:
• $3.3 million in interfund operating transfers out to support operations,
• $9.6 million in interfund capital transfers out to support capital projects,
• $2.6 million in scheduled Measure O debt service payments, and
• All items referenced within the General Fund section of this report.
Related revenue sources total $100.5 million and include:
• $3.3 million in interfund operating transfers in to support operations,
• $9.6 million in interfund capital transfers in to support capital projects, and
• All items referenced within the General Fund section of this report.
This results in an annual deficit of approximately $6.3 million across all City funds. However,
this deficit is largely due to grant funded projects which receive reimbursement after
expenditures have been incurred, further spend down of Measure O bond proceeds as both
the Public Safety building and Library projects near completion.
In summary, across all City funds, expenditures for FY 2025 show a 35.7% decrease when
compared to FY 2025 Year -End Estimates of $166.1 million. This decrease is largely due to
most Measure O bond proceeds being spent in FY 2025 to complete the associated Library
and Police building projects. Operating Expenses though only show a 7.4% decrease when
compared to FY 2025 Year -End Estimates of $97.4 million. Conversely, across all City funds,
revenues for FY 2025 show a 7.3% decrease when compared to FY 2025 Year -End
Estimates of $108.4 million. This decrease is largely due to slowed growth in several revenue
categories and the full recognizing of grant and other misc. one-time revenue related to
Measure O projects in FY 2025.
General Fund and Citywide revenue estimates and proposed expenditures by type and
department are shown in the Fund Summaries and Departments sections of the Budget Book.
And for more information on the assumptions used to estimate key revenues and other
significant items of note, please see the Funding Sources sections of the Budget Book.
C - ECONOMIC UPDATE AND OUTLOOK
With the ever -constant tariff policy news as a backdrop, investors turned their attention to a
robust amount of employment data released the week ending June 6. Job growth moderated
in May with nonfarm payrolls increasing 139,000, above the consensus estimate of 126,000,
however, the prior two months were revised down by a combined 95,000. The US
unemployment rate was unchanged at 4.2%, the underemployment remained at 7.8%, and
the labor force participation rate declined to a three month low of 62.4%. Earlier in the week,
the Job Openings and Labor Turnover Survey (JOLTS) unexpectantly rose in April to 7.39
million but the details of the report reflected underlying labor -market weakness. Layoffs
increased and the quits rate dropped, indicating workers found it harder to get new jobs. The
ratio of vacancies to unemployed workers moved up slightly to 1.03, from 1.01 in March. The
ADP National Employment Report released on Wednesday showed hiring decelerating to the
slowest pace in two years. Private -sector payrolls increased by only 37,000 vs. survey
expectations of 114,000. Despite the slowdown, pay gains remained strong, with workers
who changed jobs seeing a 7% pay increase and individuals who remained with their current
employer seeing a 4.5% gain. Initial jobless claims rose to the highest level since October,
increasing to 247,000, and pushed the four -week moving average up to 235,000. Continuing
claims declined slightly to 1.9 million in the week ending May 24.
Other economic indicators the week ending June 6 reflected contraction in both the services
and manufacturing sectors. The Institute of Supply Management (ISM) index of services
dropped 1.7 points in May to 49.9, a reading below 50 indicates contraction. The drop was
primarily due to lower business demand and a significant drop in new orders. The ISM
Manufacturing index contracted for the third consecutive month, dropping to 48.5. Notably,
the report reflected a 16-year low in imports and the gauge of exports fell to the lowest level
in 5 years.
After the release of the better than expected employment report on Friday June 6, treasury
yields moved higher. As of June 6, the 2-year note was trading at 4.04%, the 5-year note at
4.12%, and the 10-year yield at 4.49%. Although the staff does not expect the Fed to lower
rates at their upcoming meeting on June 18th, staff does believe the Fed will move forward
with rate reductions later this year.
The week ending May 30 featured a variety of key data points measuring the health of the
US economy along with some tariff -related headlines. The market responded positively after
a 50% tariff on EU goods was delayed until July 9 and faced legal challenges. In the wake of
the temporary reduction of tariffs on Chinese goods, consumer confidence rebounded to 98.0
as of mid -May, above the previous reading of 85.7 and the long -run average of 96. Survey
participants' overall economic outlook improved along with increases in plans to purchase
appliances, cars, homes, travel, dining and entertainment.
Meanwhile, personal income rose 0.8% in April while personal spending slowed to 0.2% as
consumers pulled back on purchases, causing the US savings rate to rise to 4.9% last month.
The Fed's preferred inflation gauge, personal consumption expenditures (PCE), was subdued
in the month of April, increasing by only 0.1 % month -over -month. Headline PCE decelerated
to 2.1 % and core PCE was up 2.5% versus the previous year but are still hovering above the
Fed's 2% target.
The second estimate of first quarter GDP improved slightly to -0.2% as businesses pulled
forward investments in inventory and equipment. Second quarter GDP is expected to improve
as import activity is anticipated to slow; Imports of goods in April plummeted by a record 20%
due to tariffs. Durable goods declined -6.3% in April on a steep drop in aircraft orders and a
pullback in business investment after a surge in the first quarter of the year. The Atlanta Fed
GDP Now is calling for 3.8% growth in Q2, while the Bloomberg consensus estimate is
projecting growth of 1.4% for both the second quarter and the full year 2025.
The Federal Open Market Committee (FOMC) minutes from their May meeting indicate that
the Fed is willing to be patient with future rate cuts as the implications of US trade policies
unfold later this year. The federal funds futures market is currently pricing in two 0.25%
interest rate cuts in the latter half of 2025, which is consistent with staff's view. The US
Treasury yield curve steepened in the month of May, with the 2-year note trading at 3.91 %,
the 5-year at 3.97%, and the 10-year yield at 4.41 % as of this writing.
Economic data releases were sparse the week ending May 23, but that did not impede the
fixed income markets from remaining volatile on a week -over -week basis. The benchmark
ten-year Treasury note traded in a 19-basis point range week over week (4.43% to 4.62%)
with the peak in yields occurring after the passage of US House of Representative Budget
Bill in a narrow 215 to 214 votes. Although there are some provisions in the House version of
the bill to mitigate the rate of growth of the US deficit, the US Senate still needs to weigh in,
and overall, the US deficit outlook is forecasted to remain onerous.
And on Friday, May 16th, after the market close, Moody's lowered the US credit rating to Aa1
from AAA primarily related to the fiscal outlook, the last of the three major national recognized
statistical rating organizations to downgrade the US debt below the AAA tier. The
deteriorating fiscal outlook is one of the catalysts for staff's core view that investors will seek
additional yield compensation to invest in longer maturity Treasury securities. In our team's
view, the Treasury curve shape will continue to normalize and steepen, with the two-year /
ten-year Treasury curve spread moving higher from the current 54 basis points (two-year
3.98%, ten-year 4.52% as of the time of this writing) towards the long-term average of 100
basis points over the course of 2025.
The outcome of negotiations between the U.S. and China in Geneva, Switzerland,
established the tone for markets the week of May 16. The progress made by the two largest
economies was a pleasant surprise for market participants with more negotiations planned in
the coming weeks. Each country will cut tariffs by 115%, with the U.S. cutting imports from
145% to 30%, and China cutting tariffs on U.S. imports from 125% to 10% for a period of 90
days.
In other news for the week of May 16, U.S. inflation rose less than forecasted in April with the
consumer price index increasing 0.2% month -over -month and 2.3% year -over -year. The
headline inflation rate of 2.3% is the lowest since the spring of 2021. Core CPI, excluding
food and energy, rose 0.2% month -over -month and 2.8% year -over -year. Consistent with
recent reports, shelter costs accounted for more than half of the overall monthly gain. U.S.
producer prices unexpectantly fell in April by 0.5% but on a year -over -year basis were up
2.4%. April final demand prices excluding food and energy were down 0.4% month -over -
month and up 3.1 % year -over -year. Although the inflation data this week was constructive,
Walmart warned Thursday that price increases look certain, and it remains likely that prices
for consumers and businesses will move higher in the coming months.
U.S. Retail Sales slowed in April, with a 0.1 % increase in retail purchases, with seven of the
thirteen report categories posting decreases. Consumers cut back spending on cars, sporting
goods, and other imported goods. Control -group sales, which feed into gross domestic
product, declined by 0.2% month -over -month, missing expectations of a 0.34% increase. The
surprise decline in the control group suggests a cautious consumer influenced by concerns
over tariffs leading to inflation. While overall consumption remains strong, the slowdown could
indicate challenges ahead.
The preliminary University of Michigan Sentiment Index fell in May to 50.8 down from a final
reading of 52.2 in April. The May number is the second lowest reading on record with U.S.
consumers becoming increasingly worried that tariffs will lead to higher inflation. Consumers
expect inflation to rise 7.3% over the next year, the highest since 1981 and 4.6% over the
next five to ten years. Of note, the survey was conducted between Aprill 22 and May 13, a
period that ended just after the U.S. and China agreed to temporarily reduce tariffs while they
attempt to negotiate a long-term trade deal.
Despite concerns generated by the weak consumer sentiment report, the overall market tone
remained positive the week of May 16, with Treasury yields moving slightly higher and
equities as represented by the S&P 500 now in positive territory for the year. In this uncertain
economic and market environment, we still expect the Fed to engage in a modest amount of
easing this year which should support front end rates and a steeper yield curve.
On the trade front, the first deal was announced with the United Kingdom on the 80th
anniversary of Victory in Europe Day. The UK will lower tariff and non -tariff barriers on US
products, most notably beef and ethanol, and buy more airplanes from Boeing, while the US
will lower tariffs on autos and steel while keeping a 10% baseline rate on UK imports. The
deal is more symbolic for the US as the UK accounts for just 4% of exports, but a positive
development, nonetheless.
The S&P Case-Shiller 20-City Home Price Index showed house price inflation eased slightly
to 4.5% in February on an annual basis, down from 4.7% in January. Limited inventory,
elevated mortgage rates, and lack of affordability continue to weigh on the housing
market. The ISM Manufacturing Index fell to 48.7 in April from 49.0 in March, indicating a
continuation of slow contraction in the sector.
In California, total nonfarm employment in the state increased by 17,700 jobs over the month
of April 2025. Additionally, statewide unemployment equaled 5.3% in April 2025; unchanged
from March 2025 and up slightly from a rate of 5.2% in April 2024. In Santa Clara County, the
rate decreased to 3.8% in April 2025; down from 4.0% in March 2025, but up from 3.7% in
April 2024. And in Campbell, the rate decreased to 3.8% in April 2025; down from 4.0% in
March 2025 and from 3.9% in April 2024. Thus, the County and City have seen some impacts
due to recent layoffs in the technology sector, but it has not had a significant impact to
unemployment numbers. At its pandemic high point in April 2020, the Campbell
unemployment rate reached 11.7%.
D - LONG-RANGE FORECAST
The Second Update of the Seven -Year Financial Forecast is shown and discussed in more
detail in a separate section of this Budget book called "'Long -Ran a Financial Forecast".
The forecast is meant to assist Council and staff in determining whether current expenditure
decisions made in FY 2026 can be supported over the long-term over through FY 2032. While
all budgetary requests can be supported by the General Fund and short-term corrective
actions in FY 2026, based on staff's initial analysis and reasonable growth projections in
expenditure and revenues, the out years could be a challenge given the City's structural
deficit issues absent significant ongoing expenditure and service reductions, new revenue
sources, and/or a positive legal outcome on the Measure K Sales Tax measure.
E - BUDGET AND FINANCIAL AWARDS
For the 32nd consecutive year, the City's FY 2025 budget received national recognition by earning
the Government Finance Officers Association (GFOA) "Distinguished Budget Award." To receive
the Distinguished Budget Presentation Award, a city must publish a budget document that serves
as a policy document, a financial plan, a communications device, and an operations guide. We
believe the FY 2026 budget conforms to GFOA program requirements. Additionally, FY 2025 is
the 27t" year an award of "Excellence in Budgeting" has been received from the California Society
of Municipal Finance Officers (CSMFO). Copies of both awards appear in the Budget "'Reference
Materials" section of this document. It also should be noted that the City's Annual Financial Report
has also been an award -winning document for excellence in financial reporting at both the State
and national levels for many years.
F - CONCLUSION AND ACKNOWLEDGMENTS
The development of the Proposed Fiscal Year (FY) 2026 Operating Budget and 2026 - 2030 Five -
Year Capital Improvement Plan (CIP) was made possible through the knowledge and contribution
of the City's employees, input and support from our community, and direction of the City Council.
Despite the economic pressures of the past few years, the City has done well to preserve core
services, but as the budget and CIP before you demonstrate, the City continues to face significant
fiscal challenges in the short- and long-term and remains cautious, conservative, and strategic in
our operational growth to ensure long-term fiscal resilience.
I wish to thank everyone who participated in the budget process this year including the City Council
and members of the Executive Team. Finally, I would like to recognize the staff within the Finance
Department for their dedication and hard work that went into coordinating, developing, and
publishing this budget document.
Respectfully submitted,
Brian Loventhal, City Manager
Exhibit A
FY 2026 Adopted City Council Priorities
5trategiC
Objectives
Council Priorities
Comments b c'unil Members
Long -Term Land
Councilmember Terry Hines
Use Planning and
• Housing development assistance
Housing
• City Hall improvements
Councilmember Elliot Scozzola
• Tenant rights informational survey
• Housing commission
• Community Center Master Plan
• Responsible Construction Ordinance
Vice -Mayor Dan Furtado
• Hamilton Ave Precise Plan
• Preservation of City history, such as
Mills Act
Mayor Sergio Lopez
• Streamlining of CEQA
• Hamilton Avenue Precise Plan
• Transit Signal Priority
Shared Feedback
Land Use
• Review of existing ordinances and
creation of new ordinances, such as
Beekeeping.
• Preparation for 2026 Mega Events,
such as World Cup, Super Bowl etc.
City Infrastructure
Vice -Mayor Dan Furtado
• Supported removing Measure O
priority
• Increased focus on City infrastructure
needs such as the Community Center
Councilmember Elliot Scozzola
• Replacement of Measure O priority
due to near completion of project(s)
and adding priority of "City
Infrastructure/Resiliency
Councilmember Terry Hines
• Leave Measure O priority for one more
year until projects are fully completed
Councilmember Anne Bybee
Strategic
Council Priorities
Comments b Council Members
Obje+tiue
• Replace "Measure O priority" with
broader "City Infrastructure" priority
Shared Feedback
• Revise title from previous Council
priority of "Measure O" so as to
more fully address citywide
infrastructure needs such as
street maintenance, Community
Center regularly scheduled
maintenance, and City Hall
maintenance
Financial Stability
Councilmember Terry Hines
• Economic Development opportunities
for 2026 Mega Events such as World
Cup, Super Bowl, etc.
Councilmember Elliot Scozzola
• Investment policy review
Financial Health
Mayor Sergio Lopez
• Measure K funding
Vice -Mayor Dan Furtado
• Prioritize Economic Development and
supporting small businesses
Shared Feedback
• Review of City finances
Sustainability
Vice -Mayor Dan Furtado
Environment
• Climate Action Plan
Community Health
Councilmember Terry Hines
and Safety
• Road conditions
Councilmember Elliot Scozzola
• Pedestrian crossings — Campbell
Technology Park
Community
Vice -Mayor Dan Furtado
• Fire station maintenance
• Weed abatement
• Increased, focus on public relations
Mayor Sergio Lopez
* Deferred maintenance progress
• Traffic safety
Exhibit B
FY 2026 Proposed Workplans
City Manager
CM Administration
• Provide staff support for all City Council members [Operational Need]
• Provide staff support for Legislative Subcommittee to coordinate tracking of state
legislation (that may impact City) with Legislative Subcommittee [Operational Need]
• Provide staff support to the Civic Improvement Commission [Operational Need]
• Coordinate, plan, and provide staff support for the State of the City event, All Hands
Meetings, Volunteers' Luncheon, Employee Holiday Luncheon [Operational Need]
• Lead labor negotiations with CMEA, CPCEA, CPOA, Confidential, MGMT, and CARP
for bargaining agreements expiring at end of FY 2025 and continue to provide
guidance and support for other labor related issues arising outside of labor
negotiations [Council Priority - Financial Stability]
• Work with Liebert Cassidy Whitmore and RTGR Law to provide guidance and support
for complex employee related claims [Operational Need]
• Staff CALGOVEBA Board of Trustee meetings with Wagner Law Groups, NWPS, and
Bernstein Financial Group [Operational Need]
• Support City Council initiatives through new and updated City Council Policies
• Promote City Council initiatives through various forms of media [Operational Need]
• Develop and publish a Request for Qualifications to support Temporary Staffing needs
for City Departments [Operational Need]
• In coordination with Legal Services, Finance and outside counsel, provide overall
guidance in the representation of the City in the Measure K litigation LEAD
DEPARTMENT — CITY MANAGER'S OFFICE [Council Priority - Financial
Stability]
Measure O
• Provide overall coordination of Measure O Police, Library, and related projects in
collaboration with Public Works Department LEAD DEPARTMENTS — City
Manager's Office [Council Priority — City Infrastructure]
• Provide support to the Measure O Citizens' Oversight Committee [Council Priority —
City Infrastructure]
Human Resources
In collaboration with the Finance Department and Information Technology (IT) Division
as well as other key stakeholders, complete the implementation, testing, and training
for a new Human Resources Information and Payroll System LEAD DEPARTMENTS
— HR and Finance [Council Priority — Financial Stability]
Continue recruitment and retention efforts to attract and retain City staff in budgeted
positions [Operational Need]
Coordinate and plan Benefits Fair and Volunteer Program for City staff [Operational
Need]
• Work with Liebert Cassidy Whitmore on meet and confer items with CMEA, CPCEA,
CPOA, Confidential, MGMT, and CARP [Operational Need]
• Open and continue negotiations with CMEA, CPCEA, CPOA, Confidential, MGMT,
and CARP for bargaining agreements expiring at the end of FY 2025 or the middle of
FY 2026 [Council Priority — Financial Stability]
• Coordinate and implement City training for employee development to strengthen both
technical and soft skills and encourage continued growth of staff [Operational Need]
• Launch citywide mandatory training to cover essential topics such as Harassment
Prevention, Ethics, Anti -bias, Workplace Violence, and Active Shooter Training
[Operational Need]
• Review, update, and recommend personnel policies, practices, and forms to ensure
they meet the needs of the City and are compliant with current legislation [Operational
Need]
• Plan and implement an internal communications strategy for employee -related topics
to create a consistent and helpful resource for staff to refer to [Operational Need]
• In coordination with Community Development, establish a technical training plan for
permit center and building inspection staff as required by state law LEAD
DEPARTMENT — City Manager's Office/HR [Operational Need]
Information Technology
• In collaboration with the Finance Department and Human Resources (HR) Division as
well as other key stakeholders, complete the implementation, testing, and training for
a new Human Resources Information and Payroll System LEAD DEPARTMENTS —
HR and Finance [Council Priority — Financial Stability]
• Provide IT consultation regarding Measure O projects [Council Priority — City
Infrastructure]
• Camera Deployments throughout the City in collaboration with the Police Department
and Public Works [Operational Need]
• Work with the City Clerks Department to replace the Agenda Management Software
and integrate with live streaming and TV broadcasting [Operational Need]
• Setup Security Operation Center for the City to improve and strengthen security
measures. [Operational Need]
• Replace 25% of antiquated desktop computers [Operational Need]
• Upgrade the City's data repository (Laserfiche) [Operational Need]
• Continue public meeting recording and management [Operational Need]
• Replace public meeting video and recording systems [Operational Need]
• PD - Upgrades related to DOJ mandates (NIBRS) [Operational Need]
Economic Development
Begin Implementation of the City's 2024 Economic Development Plan, including
website improvements, creating a business guide, conducting outreach with brokers,
and collaborating with the business stakeholders on upcoming events [Council
Priority - Financial Stability]
Begin work on potential branding and promotion of Dell / McGlincy area, including
outreach and survey of existing businesses [Council Priority- Financial Stability]
• Work to leverage regional "mega events" such as the Super Bowl and World Cup for
the benefit of Campbell business community [Council Priority- Financial Stability]
City Clerk's Office
• Carry -forward from prior years - Comprehensive review of citywide records;
coordinating and implementing a revised records retention schedule and procedures
[Operational Need]
• Implement, test, and train departments for new agenda management software
[Operational Need]
Community Development
Administration
• Upgrade permit tracking system to create greater efficiencies and increase
performance in permit processing including establishing and tracking metrics for
permit processing and inspections [Operational Need]
• Complete scanning, indexing, and migration of all Department documents and records
into Laserfiche [Operational Need]
• Explore and pilot Artificial Intelligence (AI) Tools to support Department operations
and improve Customer Service [Operational Need]
Policy Development
• Continue preparation of a Citywide Climate Action Plan [Council Priority —
Current Planning
Building
• In coordination with HR, establish a technical training plan for permit center and
building inspection staff as required by state law LEAD DEPARTMENT — City
Manager's Office/HR [Operational Need]
• Complete integration of Code Enforcement with the Building Division processes to
address violations [Operational Need]
Housing Assistance
Finance
• In coordination with Legal Services, City Manager's Office and outside counsel,
provide support in the representation of the City in the Measure K litigation LEAD
DEPARTMENT — CITY MANAGER'S OFFICE [Council Priority - Financial
Stability]
• In partnership with the City Council and all City departments, develop and implement
plans on how to most effectively and efficiently utilize Measure K funding should the
City receive a favorable outcome on recent litigation challenging the measure LEAD
DEPARTMENTS — City Manager's Office and Finance Department [Council
Priority — Financial Stability]
• Analyze and update current Reserve Policies and develop new Reserve Policies (e.g.,
Infrastructure/Deferred Maintenance Reserve, Technology Reserve, Equipment and
Vehicle Reserve, etc.) where necessary to ensure long-term fiscal stability; discussing
with and receiving input from the Finance Subcommittee and the City Council as
appropriate over the course of the development process [Council Priority — Financial
Stability]
• Continue to develop strategies to systematically address Unfunded Pension Liabilities
in the short- and long-term [Council Priority — Financial Stability]
• Using results of completed facilities condition assessment, continue to collaborate with
the Public Works and Recreation and Community Services Departments to prepare
capital projects to address Citywide deferred maintenance issues in future Capital
Improvement Plans (CIP) LEAD DEPARTMENT - Public Works [Council Priority —
• Given Government Finance Officer Association (GFOA) best practices, develop and
publish a Request for Proposal (RFP) for external audit services; recommending a
preferred firm for Finance Subcommittee and Council consideration and then
onboarding the chosen firm [Operational Need]
• In collaboration with the Human Resources and IT Departments, work to stabilize the
NEOGOV HR and Payroll system to ensure that all installed modules are functioning
properly and provide accurate and timely employee and City vendors payments. Also
implement any remaining modules as needed and as staff bandwidth allows LEAD
DEPARTMENT - Finance [Operational Need]
Legal Services
• Coordinate Measure K litigation with outside counsel [Council Priority — Financial
• Provide support on implementation of Measure O [Council Priority — City
Infrastructure]
• Assist City Clerk with revised records retention schedule and procedures
[Operational Need]
• Assist Community Development with/review Citywide Climate Action Plan [Council
Priority — Sustainability]
• Review Hamilton Avenue Precise Plan [Council Priority — Luna -Term Land Use
• Review Community Development Department's annual code updates to comply with
new state laws and implement streamlining to meet the city's economic development
Police
Coordinate with Public Works on the completion and occupancy of the new police
building, including decisions related to FF&E, public safety technology and IT
infrastructure, and department -wide move -in planning to ensure operational readiness
[Council Priority — City Infrastructure]
Public Works
Administration
• Manage Measure O capital projects in collaboration with City Manager's Office;
overseeing construction contracts and associated project budgets LEAD
DEPARTMENTS — City Manager's Office [Council Priority — City Infrastructure]
• RenresentCarnnhell in Iona range ranional tranSDortation nlannino efforts- Fnvision
• Administer grant funds and associated reporting requirements [Council Priority —
Transportation Engineering
• Support the Community Development Department in the preparation of the Campbell
Climate Action and Adaptation Plan by providing transportation expertise [Council
Priority — Sustainability]
• Apply for and manage grant funds as provided through VTA and other granting
agencies [Council Priority — Financial Stability]
Engineering
• Implement the Annual Street Maintenance Program [Council Priority — Financial
Stability]
• Manage construction of the Hamilton Avenue Resurfacing project [Operational Need]
• Manage and implement all other approved Capital Improvement Projects
[Operational Need]
• Continue update of City Standard Details and Technical Specifications for Public
Works Construction [Operational Need]
• Review applications and issue permits for wireless facilities/small-cell wireless
projects in the public right-of-way [Operational Need]
• Review encroachment permit applications and issue permits for construction within
the public right-of-way [Operational Need]
• Perform field inspections of construction operations within the public right-of-way
[Operational Need]
• Maintain streetlight inventory and assist with street lighting needs for projects [CIP
Land Development
Review and approve land development projects for compliance with City policies
adopted plans, and City standard plans and details, and identify associated
improvements on public rights -of -way [Operational Need]
Support the Community Development Department in the preparation of the Hamilton
Avenue Precise Plan / Public Improvement Plan [Operational Need]
Manage East Campbell Avenue Plan Line project [Operational Need]
Maintenance
• Complete all approved Capital Improvement Projects for City facilities improvements
including installation of new boiler for the Campbell Community Center Building A
• Implement water conservation strategies including turf and irrigation controller
upgrades for the Community Center and sports fields [Council Priority —
Sustainability]
• Support volunteer events such as Keep America Beautiful and Campbell Garage Sale
[Operational Need]
• Manage vehicle and equipment purchases and leasing agreements [Operational
Need]
• Complete replacement of one diesel -powered heavy-duty trucks with gasoline
powered vehicles to meet EPA Tier 4 motor requirements [Operational Need]
• Complete asphalt repairs, seal coating, and striping for the Campbell Community
Center Parking Lot [Operational Need]
• Complete Annual Crack Seal Project [Operational Need]
• Complete installation of Calsense Irrigation Controllers for John D Morgan Park and
Jack Fischer Park [Operational Need]
• Create a proposed schedule of repairs and replacements for City -owned assets as
outlined in the City's Asset Inventory Report [Council Priority — Financial Stability]
Environmental
• Support the Community Development Department in the preparation of the Campbell
Climate Action and Adaptation Plan by providing solid waste, stormwater, and water
conservation expertise [Council Priority - Sustainability]
• Coordinate and support efforts to implement the requirements of SB 1383 [Council
Priority - Sustainability]
• Provide support to the Solid Waste Management Authority when implementing the
new solid waste hauler agreement and associated requirements [Council Priority -
Sustainability]
• Coordinate and support the Planning and Building Divisions with trash enclosure plan
reviews, project waste management plans, and the implementation of the newly
updated construction and demolition program [Council Priority - Sustainability]
Provide support to the West Valley Clean Water Authority when implementing the
regional stormwater MRP 3.0 [Council Priority - Sustainability]
Coordinate and support the West Valley Clean Water Authority and Campbell Street
Division with the installation of full trash capture devices for State Water Board
compliance [Council Priority - Sustainability]
Measure O — City Manager's Office
• Complete construction phase for both Police and Library buildings [Council Priority
— City Infrastructure]
• Manage the construction contracts for both the Library and Police Building projects,
including change order management and contract administration [Council Priority —
City Infrastructure]
• Implement Civic Center site staging plan to accommodate City Hall customers and
employee parking [Council Priority — City Infrastructure]
• Provide support to the Citizens' Oversight Committee [Council Priority — City
Infrastructure]
• Provide Civic Center off -site improvements such as the gravel lot and surrounding
sidewalks, pending available funding [Council Priority — City Infrastructure]
Recreation and Community Services
Administration
• Develop content for a historical reference exhibit for the new Campbell Library
[Operational Need]
Museum
• Increase accessible searchable Museum collection records by 5% [Operational
Need]