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Home My WebLink AboutCC Resolution 26-13399 - Fiscal Year 2027 Budget and CIP AdoptionRESOLUTION NO. 26-13399 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CAMPBELL ADOPTING THE CITY'S OPERATING AND CAPITAL BUDGET FOR FISCAL YEAR 2027 WHEREAS, there has been submitted to the City Council a proposed budget for the operation of all departments and facilities of the City of Campbell for FY 2027, and there has been submitted to the City Council a proposed budget for the capital expenditures related to City projects, and WHEREAS, the City Council held meetings to review the proposed operating and capital budget; and the City Council took action to adopt the proposed budget; NOW, THEREFORE, BE IT RESOLVED, by the City Council that as of July 1, 2026 the amount of $93,229,659 be fixed as the amount necessary to meet all municipal operating requirements, and that the amount of $13,891,152 be fixed as the amount necessary to meet the capital requirements of the City and that the same is hereby approved, confirmed and adopted at the combined total of $107,120,811 (excluding any further changes resulting from this public hearing and/or any miscellaneous corrections); and BE IT FURTHER RESOLVED that the Finance Director is hereby authorized to make any changes resulting from the public hearing to adopt the FY 2027 operating and capital budget or any miscellaneous corrections due to more refined estimates and incorporate these changes into the final published FY 2027 operating and capital budget document. PASSED AND ADOPTED this day 16th of June, 2026, by the following roll call vote: AYES: Councilmembers: Lopez, Hines, Scozzola, Bybee, Furtado NOES: Councilmembers: None ABSENT: Councilmembers: None OVEEN 5' (N I V il Daniel E. Furtado, Mayor ATTEST: I "J�t &06,o Andrea Sanders, Oty Clerk of - Cam V r o 0 • �2CH AV,9 June 16, 2026 Honorable Mayor, Vice -Mayor, and City Councilmembers: I am pleased to present to you for formal consideration and adoption the Proposed Fiscal Year (FY) 2027 Operating Budget and 2027 - 2031 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 5 Special Meeting - Strategic Priorities Discussion • March 24 Regular Meeting - Strategic Priorities Adoption • May 5 Budget Study Session - Preliminary Workplans, Operating Budget, CIP, and Service Objectives • June 2 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 2027 Adopted City Council Priorities • Exhibit B — FY 2027 Proposed Workplans A — SIGNIFICANT CHANGES SINCE JUNE 2nd INTRODUCTION The following section details significant changes to the Proposed FY 2027 Operating Budget and 2027 — 2031 CIP since the June 2 Budget Introduction. All changes shown below are built into the proposed budget numbers and schedules before Council: • Addition of Climate Action Adaptation Plan (CAAP) to Strategic Objective of Environment and Council Priority of Sustainability in FY 2027. Based on Shared Feedback, staff added "Take steps to implement the Climate Action Adaption Plan (CAAP)" to these areas of the FY 2027 Adopted City Council Priorities. Please note that workplans to implement that CAAP were already included in both the Community Development and Public Works Departments FY 2027 Proposed Workplans; with much of the implementation work shifting to Public Works in FY 2027. • Removal of Unnecessary General Fund Transfer Out to the SLESF Fund — Based on further analysis of need, a $100,000 transfer out from the General Fund (#101) to the SLESF Fund (#210) was eliminated; thereby reducing the burden on the General Fund. • Reduced Utilization of Available General Fund Reserves — Given the elimination of the $100,000 transfer out from the General Fund to the SLESF Fund in FY 2027, the proposed utilization of the available General Fund reserves was reduced from $2.79 million to $2.69 million in,FY 2027. • Increasing Housing Assistance Fund (#233) Projected Revenues — Based on more current information, staff increase revenue estimates in the Housing Fund by $2.1 million in FY 2027 to include a $650,000 payment from Campbell Tech Park into the Housing Fund (initial payment at entitlement, 25% of total), $750,000 Pro -Housing Incentive Grant, and $685,000 more in In -Lieu Inclusionary Housing Fees based on modifications to in lieu fee payment structure and projected development activity. B - FINANCIAL SUMMARY General Fund — Financial Summary Table 1— General Fund Summary FUND BALANCE REPORT 101 FY 24 Actual FY 25 Actual FY 26 Est. FY 27 Prop. %Chg' Beginning Fund Balance July 1JAE S 15.429.468 S 14.250.619 S 19 669.961 S 18,470.961 - Total Unassrgned + PERS + Duplicates t, a6tlity Insurance + Unemployment Insurance + OPEBI Revenues Total Revenues S 64,774.966 S 74.642,446 $ 70.183.229 S 74.008.821 5.5% Expenditures FY 24 Actual FY 25 Actual FY 26 Est. FY 27 Prop. %Chg' Total Expenditures by Type S 65.953.816 $ 69,223.103 $ 70,183.228 S 74.008.821 5.5% Revenues vs Expenditures $ (1,178,850) $ 5,419.342 S - $ - Reserve Draw - - (1.199.000) (2.692,174) Ending Fund Balance June 30 S 14 250 619 S 19 669 961 S 18 470 961 S 15 778 787 *% Change from FY 2026 Estimated to FY 2027 Proposed Budget For a more detailed Fund Balance Report, please see the Fund Summaries section of the Budget book Currently Proposed FY 2027 Operating and Capital expenditures for the General Fund equal $74.0 million. This proposal results in General Fund expenditures being fully balanced against estimated General Fund revenues in FY 2027. The General Fund, expenditures for FY 2027 show a 5.5% increase when compared to FY 2026 Year -End Estimates of $70.2 million. General Fund revenues for FY 2027 also show a 5.5% increase when compared to FY 2026 Year -End Estimates of $70.2 million. Please note that a line has been added to Table 1 above to accurately reflect draws from General Fund reserves in FY 2026 and FY 2027 that decrease overall reserve balances. The proposed budget includes the following items and assumptions: • All current City operations remain largely status quo, but FY 2027 budget requests account for inflation, contractually agreed to increases to vendors, and other costs to meet high priority Workplan objectives. • No inclusion as of yet of Cost -of -Living Adjustments (COLAs) for any bargaining unit or employee, with all Memorandums of Understanding (MOUs) expiring either June 30, 2026 (CMEA, CPCEA, CARP, Confidential, MGMT, UNREP) or December 307 2026 (CPOA). All MOUs are currently under negotiations. However, should Council have interest in providing salary adjustments, such adjustments may cost between $1 and $2 million depending on percentage (%) and effective dates. • No increases as of yet to City's Healthcare Contribution Levels for 2027 for any bargaining unit or employee, with all MOUs again expiring either June 30, 2026 or December 30, 2026. The City Council could direct staff to include some level of assumed calendar year 2027 City healthcare contribution increase for the June 2 Budget Introduction and/or June 16 Budget Adoption versions. Such adjustments may cost between $100,000 and $200,000 depending on percentage (%). • No permanent staffing additions and extensions. Given the City's fiscal constraints, the FY 2027 Proposed Budget does not include any permanent staffing additions or extensions. However, several low-cost position reclassifications and upgrades which make operational sense have been included in the FY 2027 Proposed Budget. These include the reclassification of a currently vacant 0.75 Part - Time Community Services Officers (CSO) to a 1.0 Full -Time CSO, the reclassification of a Museum Collections Coordinator to a Recreation Program Coordinator, the reclassification on a vacant Engineering Tech to a Jr. Engineer, the reclassification of a Streets Maintenance Supervisor to a Streets and Fleets Maintenance Supervisor with added supervisory duties, the reclassification of an Equipment Maintenance Supervisor to a Lead Mechanic, and upgrading the CSO salary rates and job specification to better align with current and future operational needs. Such reclassifications have an estimated cost impact of $90,000 in FY 2027. Additionally, the FY 2027 Proposed Budget removes the Limited -Term Environmental Programs Specialist in the Community Development Department effective June 30, 2026 at an estimated savings of $138,400 and transitions the Limited -Term Sr. Public Works Project Manager to a permanent position after December 30, 2026 to help with ongoing capital projects at an estimated annual cost of $233,500. • No Use of Measure K Sales Tax Revenues in FY 2027 unless litigation is resolved with a favorable, final, and non -appealable outcome to the City. As detailed in several public meetings and distributed material over 2024 as well as official ballot language, Measure K was estimated to generate $7 million annually in new general purpose sales tax revenue (starting April 1, 2025). Such additional revenue could potentially be used to stabilize and support ongoing City services and operational costs as well as address deferred maintenance, infrastructure, replenishment of reserves spent down during the pandemic, and unfunded liability needs so as to ensure long-term fiscal stability for the City. The 1/2 cent Measure K sales tax rate went into effect as approved April 1, 2025 and has generated $6.7 million through March 31, 2026 (representing one full year of receipts), plus an estimated $270,000 in interest earnings; bringing total funds close to initial estimates of $7 million annually. Nevertheless, all funds collected to date and any interest earned have been placed by government statute into an interest -bearing escrow account and remain untouched until a non -appealable decision is reached in the case. If the City receives a favorable final decision, it will have full access to use accumulated Measure K funds and interest placed into escrow as well as ongoing future Measure K revenues. If the City receives an unfavorable final decision, it will return all accumulated Measure K funds and interest to the California Department of Tax and Fee Administration (CDTFA). • Increased annual payment of approximately $630,000 to the CalPERS retirement system for the City's required contribution towards its unfunded actuarial liability (UAL). While normal retirement premium payments for current employees are expected to decrease over time as Classic Tier One employees are replaced by Classic Tier Two or PEPRA Tier Three employees, the City's UAL will continue to increase as CalPERS ramps up incorporation of large 20%+ investment losses by the retirement pool during the pandemic as well as a gradual lowering of the discount rate. Both of these items were expected and discussed during the November 21, 2023 Study Session. Thus, one of staff's FY 2027 Proposed Workplan items continues to be developing policies and plans to pay down the City's UAL and reduce overall pension costs over time. Such policies and plans will require adequate funding and until each are developed, funded, and implemented, the City will continue to be negatively impacted by unfunded pension liabilities. • $115,600 increase in annual General Liability and Property Insurance premiums charged by the City's risk sharing pool (PLAN JPA) due to continued, albeit diminishing cost increases in the insurance market nationwide. The City participates in PLAN JPA with 28 other municipalities located in the San Francisco Bay Area and this allows each jurisdiction to pool their risk and liability and develop cost effective programs and coverage layers to mitigate and protect against those liabilities. Despite best efforts, costs have risen dramatically for the JPA the past several years and this is again indicative of the insurance market in general and not necessarily any Campbell related claims settled. It is unlikely that the City would be able to insure itself cheaper if it were to obtain insurance coverage on its own since the size of the JPA gives it significant purchasing power in the insurance market • Increased annual payment of $377,400 (3.23%) to Santa Clara County Fire District (SCCFD) to pay for contractual fire services. Such increases are set by contractual formula each year (established July 1, 2018 and effective until June 30, 2028) and factor in the change in the Consumer Price Index (CPI), change in Firefighter/Engineer compensation, and change in Assessed Property Valuations within Campbell. Each carries a weight of 50%, 25%, and 25%, respectively, and the total fire services contract shall increase by no less than 2% and no more than 5% annually. • $3.3 million in interfund operating transfers out to support operations in other funds; including $1.7 million to support the Lighting and Landscaping District Fund, $815,000 to support the IT Fund, and $767,000 to pay for 2016 Lease Revenue Bond (LRB) debt service. • $2.5 million in interfund capital transfers out to support Capital Improvement Plan Reserve (CIPR) projects; with $1.0 million set aside as the General Fund's annual CIPR contribution towards new projects and $1.5 million for carryover CIPR projects previously approved. • $75,000 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 $74.0 million and include: • $202,000 in interfund operating transfers in to support General Fund operations; including a normal $146,000 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. • $1.5 million draw from the accumulated CIPR funds to support $1.5 million in carryover CIPR projects previously approved. • $75,000 draw from Construction Tax reserve to support capital projects as previously discussed. Short -Term Corrective Budget Strategies Based on Council feedback at both the May 5 Budget Study Session and the June 2 Budget Introduction, all short-term corrective strategies detailed below are now included within the FY 2027 Proposed Budget for adoption June 16: • Temporary Hiring Freeze - Since salary and benefits costs are the City's largest expenditure category, similar to FY 2026, staff again proposes a temporary hiring freeze of various durations for 14 positions in FY 2027 as shown in Table 2 below. These are for certain vacant positions not currently under recruitment or pending a placement offer; subject to City Manager discretion on critical positions that may have highly adverse operational, safety, fiscal, or other impacts to the City if not filled. Some would be frozen until January 1 or July 1, 2027, but some are recommended to be filled sooner due to the nature of their role and the services they provide the City. Such a hiring freeze saves the City approximately $1.1 million (across all City funds); with such savings already incorporated into the FY 2027 Proposed Budget: Table 2 — Vacant Positions Department Job Title Full Year FY27 Cost Estimated Hire by Date Prorated FY27 Cost Savings FY27 City Manager HR ANALYST S 176.535 1/1/2027 S 79.573 S (96,963) City Manager IT MANAGER S 237,801 1/1/2027 $ 107,188 S (130.613) Comm Dev PERMIT TECH S 141.615 1/1/2027 S 63.832 S (77.782) Comm Dev PLAN CHECK EXAMINER $ 177.857 7/1/2027 S - S (177,857) Comm Dev PLANNING TECHNICIAN S 143.868 7/1/2027 S - S (143,868) Finance EXECUTIVE ASST S 144,148 1/1/2027 S 64,974 S (79.174) Public Safety COMM SERV OFFICER S 161,975 9/1/2026 S 131.998 S (29,978) Public Safety COMM SERV OFFICER S 161,975 9/1/2026 S 131,998 S (29.978) Public Safety EMERG SRVS COORD (PPT) S 111.849 1/1/2027 S 50.416 S (61.433) Public Works ADMIN ANALYST I S 176.758 1/1/2027 S 79.673 S (97.085) Public Works BLDG MNT WKR S 152.421 10/1/2026 S 110.562 S (41.859) Public Works JUNIOR ENGR $ 155.922 1/1/2027 S 75.648 S (80,275) Public Works LEAD MECHANIC S 159,305 8/1/2026 S 144.563 S (14.742) Rec & Comm REC SPECIALIST (PPT) S 78.455 7/1/2027 S - S i78.45- TOTALS S 2,180,484 S 1,040,424 $ (1,140,060) Totat n of Vacant Positions Fully or Partially Frozen 14 This action will slow some Workplan initiatives and reduce operational capacity, but it is a fiscally prudent measure given the financial challenges the City faces. Should additional funding be available within FY 2027, due to a positive and final non -appealable outcome on the Measure K litigation, unexpected increases in current City revenue sources, or unexpected decreases in planned City expenditures, the hiring freeze will be revisited. • Limited to No Use of Temporary Staffing in FY 2027 — Similar to FY 2026, staff is again proposing limited to no use of temporary staffing in FY 2027 and this is already incorporated into the FY 2027 Proposed Budget. Due to previous hiring freezes, delayed recruitments, operational needs, and high -priority Workplan items, the City previously utilized the services of temporary employees in various departments that come from staffing agencies and other professional services firms, but due to fiscal challenges, the City largely discontinued this practice in FY 2026 with exceptions being in some critical City service areas. In FY 2025 alone, these costs were estimated to reach $605,000. Given the potential of an ongoing temporary hiring freeze for permanent staffing and the City's ongoing fiscal constraints, limiting the use of temporary staffing in FY 2027 would again be a consistent and appropriate action. However, this action will also slow some Workplan initiatives and reduce operational capacity. • Utilization of Available General Fund Reserves - At the June 2 Budget Introduction Session staff presented Council with an estimated $2.79 million structural operating deficit within the FY 2027 Preliminary General Fund Operating Budget. However, based on further analysis and as detailed in a previous section, the FY 2027 General Fund operating deficit was reduced to $2.69 million, and this is the amount staff proposes to draw from available General Fund reserves in FY 2027. As shown in staff report presenting the FY 2025 ACFR, The General Fund's fund balance at fiscal year-end was $26.4 million. Nonspendable fund balance at year end was $0.2 million, reserved for leases and prepaid costs. Restricted fund balance at year end was $1.7 million, comprised solely of Measure K sales tax receipts and accrued interest. Committed and Assigned fund balances at year end were $3.6 million and $2.9 million, respectively. These balances are utilized to fund operational costs such as capital projects, compensated absences, and to maintain a reserve for PERS and OPEB related costs. An Unassigned fund balance of $18.0 million serves as an additional reserve for unanticipated needs that may arise including a $9.5 million reserve for economic fluctuations and $3.2 million for emergencies. For Fiscal Year 2025, the City did not need to draw upon its economic fluctuation or emergency reserve. Although both the economic fluctuation and emergency reserves are below targeted levels, the City continues to maintain strong General Fund reserve balances. The GFOA recommends, at a minimum, a General Fund unrestricted fund balance of no less than two months (or 16.67%) of General Fund operating expenditures. At the end of FY 2025, the City maintained an unassigned reserve ratio of 26.65% in the General Fund. Thus, given reserves above GFOA best practice levels, staff again recommends using up to $2.69 million to balance the remaining deficit in General Fund for FY 2027. If used at this level, the unassigned reserve ratio could drop to 22.67% but still be above GFOA best practice of 16.67%. Further uses for bargaining unit adjustments could lower this further, but staff only recommends doing so to a point that does not go below GFOA best practice. Additionally, should the City receive a favorable final outcome on Measure K, staff recommends using accumulated Measure K funds in escrow to pay back General Fund reserves used in FY 2027 in full. All City Funds — Financial Summary Table 3 — All Funds Summary FUND BALANCE REPORT ALL FUNDS SUMMARY FY 24 Actual FY 25 Actual FY 26 Est. FY 27 Adop. %Chg' Beginning Fund Balance July 1 S 91,114 503 S 80 489 374 S 63,312.252 S 26,940,476 Revenues Total Revenues $ 97.340.557 S 111,500.285 $ 110,699,811 $ 105.585,042 -4.6% Ex enditures FY 24 Actual FY 25 Actual FY 26 Est. FY 27 Adop. %Chg` Total Expenditures by Type S 107.965.686 S 128,677.407 S 145,872.587 S 107,120,811 -26.6% Revenues vs Expenditures S (10.625,129) S (17.177.122) $ (35.172.776) S (1,535.769) Reserve Draws S - $ - $ (1.199,000) S (2.692.174) Ending Fund Balance June 30 S 80,489.374 S 63 312252 S 26.940 476 S 22 712.533 *% Change from FY 2026 Est,mated to FY 2027 Proposed Budget For a more detailed Fund Balance Report, please see the Fund Summaries section of the Budget book Currently Proposed FY 2027 Operating and Capital expenditures across all City funds equal 107.1 million and include: • $3.5 million in interfund operating transfers out to support operations, • $7.9 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 $105.6 million and include: • $3.5 million in interfund operating transfers in to support operations, • $7.9 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 $1.5 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 2027 show a 26.6% decrease when compared to FY 2026 Year -End Estimates of $145.9 million. This decrease is largely due to most Measure O bond proceeds being spent in FY 2025 and FY 2026 to complete the associated Library and Police building projects. Operating Expenses though only show a 3.8% decrease when compared to FY 2026 Year -End Estimates of $96.9 million. Conversely, across all City funds, revenues for FY 2027 show a 4.6% decrease when compared to FY 2026 Year -End Estimates of $110.7 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 and FY 2026. 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 National Economy The U.S. economy continues to expand at a moderate pace despite ongoing inflationary pressures and elevated interest rates. According to the U.S. Bureau of Economic Analysis, real Gross Domestic Product (GDP) increased at an annual rate of 1.6% in the first quarter of 2026, reflecting continued strength in consumer spending, business investment, and exports. While economic growth has slowed compared to prior years, the economy remains resilient and continues to avoid recessionary conditions. Inflation remains above the Federal Reserve's long-term target. Recent data indicate that consumer prices increased approximately 3.8% year -over -year, driven by persistent service - sector inflation, energy costs, and continued supply -chain adjustments. In response, the Federal Reserve has maintained a cautious stance regarding interest rate reductions. Labor market conditions remain generally healthy, with the national unemployment rate holding near 4.3% and job growth continuing at a modest pace. Recent payroll gains have been concentrated in healthcare, education, government services, and selected technology -related occupations. Manufacturing activity has stabilized following periods of volatility, with purchasing manager surveys indicating modest expansion. Housing markets have shown gradual improvement as mortgage rates have stabilized, though affordability remains a challenge in many regions. Investment in artificial intelligence (AI), cloud computing, semiconductor manufacturing, and digital infrastructure continue to serve as a significant driver of economic activity and business investment nationwide. California Economy California's economy remains among the largest and most dynamic in the world, supported by strengths in technology, biotechnology, entertainment, clean energy, and international trade. Economic growth has moderated but remains positive as businesses adapt to higher operating costs and evolving labor market conditions. As of April 2026, California's unemployment rate was 5.3%, remaining above the national average but showing signs of stabilization. Employment gains have been strongest in healthcare, education, leisure and hospitality, and selected technology sectors. While some industries continue to experience workforce adjustments, overall labor market conditions have improved relative to late 2025. Housing affordability continues to be one of the stateeis most significant economic challenges. Home prices remain elevated despite slower appreciation rates, while limited housing supply continues to constrain affordability for many households. Construction activity remains steady, supported by state and local efforts to expand housing production. California also continues to benefit from substantial investment in artificial intelligence, semiconductor research and development, clean technology, and advanced manufacturing, helping offset softness in certain traditional office -based employment sectors. Santa Clara County Economy Santa Clara County continues to outperform both California and national economic averages due to its concentration of technology, innovation, and venture capital activity. The County remains a global center for artificial intelligence, semiconductor development, software engineering, and advanced research. The unemployment rate in Santa Clara County was approximately 3.8% during spring 2026, significantly below the statewide average and among the lowest rates in California. Employment growth has been led by technology services, healthcare, professional services, and research -related industries. While some large technology firms continue workforce realignments, demand remains strong for highly skilled workers in Al, cybersecurity, cloud computing, and semiconductor engineering. The County's housing market remains constrained by limited supply and strong demand, resulting in some of the highest home values in the nation. Commercial office markets continue to adjust to hybrid work patterns, although demand for research, laboratories, and advanced manufacturing space remains healthy. Continued investment in artificial intelligence and emerging technologies is expected to support moderate economic growth through 2026 and beyond. City of Campbell Economy The City of Campbell continues to benefit from its strategic location within Silicon Valley and the broader strength of the Santa Clara County economy. Campbell's economic base remains diversified across technology -related employment, professional services, retail, restaurants, healthcare, and small businesses. The City's housing market remains relatively strong despite some year -over -year fluctuations in pricing. Recent market data indicate that median home values remain near historic highs, reflecting continued demand for housing in Campbell's highly desirable location. Housing inventory remains limited, contributing to ongoing affordability challenges while supporting long-term property values. Campbell's unemployment rate was approximately 3.8% in spring 2026, consistent with the broader Santa Clara County labor market and significantly below statewide levels. Employment conditions remain favorable, particularly among residents working in technology, professional services, healthcare, and related industries. The City's downtown district continues to attract investment and maintain strong consumer activity, while ongoing mixed - use development and infrastructure improvements support long-term economic vitality. Looking forward, Campbell's economic outlook remains positive. Continued regional investment in artificial intelligence, software development, semiconductor technology, and innovation -driven industries is expected to support employment growth and local business activity. Key challenges include housing affordability, rising construction costs, and broader economic uncertainty associated with inflation and interest rate policies. Nevertheless, Campbell remains well -positioned to benefit from the continued strength and innovation of the Silicon Valley economy. 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 "Lon_g-Range Financial Forecast". The forecast is meant to assist Council and staff in determining whether current expenditure decisions made in FY 2027 can be supported long-term over through FY 2033. While all budgetary requests can be supported by the General Fund and short-term corrective actions in FY 2027, 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 33rd consecutive year, the City's FY 2026 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 2027 budget conforms to GFOA program requirements. Additionally, FY 2026 is the 28th 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) 2027 Operating Budget and 2027 - 2031 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, X Brian Loventhal City Manager Exhibit A FY 2027 Adopted City Council Priorities Strategic Objectives Council Priorities Comments by Council Members Long -Term Land Use Vice -Mayor Anne Bybee Planning and Public hearing noticing should be done Housing with discretion when exceeding legal requirements on larger projects Councilmember Terry Hines • Support discussions on Housing Commission and the role of Planning Commission and Civic Improvement Commission Councilmember Sergio Lopez • Be strategic about resources needed to meet State mandates i.e. zoning, permit Land Use processing, storm water and ADA requirements Mayor Dan Furtado • Support WV homeless efforts Shared Feedback • Support for receiving more information on responsible construction ordinance City Infrastructure Councilmember Terry Hines • Consider traffic calming policy • Consider sidewalk improvements on Bascom and Curtner Financial Stability Vice -Mayor Anne Bybee • Successfully navigate Measure K litigation Councilmember Terry Hines • Consider Community Facility District #1 Financial Health assessments • Continue to look for grants to support existing City projects Councilmember Elliot Scozzola • Support investment policy to prohibit war related investments Councilmember Sergio Lopez Strategic Council Priorities Comments by Council Members Objectives • Support implementation of Econ. Dev. Plan and consider appropriate funding Mayor Dan Furtado • Support the vacation of the percolation pond by SCVWD at the Sunnyoaks Fire Station Shared Feedback • Work with All labor groups on new MOU's and ensure adequate funding is available • Econ. Dev. Initiatives are important to economic vitality Sustainability Shared Feedback Environment Take steps to implement the Climate Action Adaptation Plan (CRAP) Community Health Vice -Mayor Anne Bybee and Safety Consider consistency of Commission/Committee livestreaming Councilmember Terry Hines • Support the Veterans Memorial foundation efforts to celebrate 250 years Councilmember Elliot Scozzola • Consider policies related to immigration • Support rent control policy • Support policy related to lobbyists Councilmember Sergio Lopez Community Noted Council previously by majority vote agreed to agendize Immigration policy discussion later this fiscal year Mayor Dan Furtado • Support Emergency Operations Planning • Consider website improvements to ease navigation • Consider ebike/scooter policies • Support expanded public outreach and communication Exhibit B FY 2027 Proposed Workplans City Manaqer's Office 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 and CARP for bargaining agreements expiring at end of FY 2026 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] • In coordination with Legal Services, Finance and outside counsel, provide guidance in the representation of the City in the Measure K litigation LEAD DEPARTMENT — CITY MANAGER'S OFFICE [Council Priority - Financial Stability] • Lead the recruitment effort to hire and onboard an in-house City Attorney [Operational Need] 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 • Continue recruitment and retention efforts to attract and retain City staff in budgeted positions [Operational Need] • Work with Liebert Cassidy Whitmore on meet and confer items with CMEA, CPCEA, CPOA, Confidential, MGMT, and CARP [Operational Need] • Coordinate and implement City training for employee development to strengthen both technical and soft skills and encourage continued growth of staff. [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] • Replace 25% of antiquated desktop computers. [Operational Need] • Continue public meeting recording and management [Operational Need] • Upgrades related to DOJ mandates in Police (NIBRS) [Operational Need] • Collaborate with Public Works to replace the Water Tower lights and system. [Operational Need] • Refresh the technology -specific components of our disaster recovery strategy to address recent architectural changes and mitigate emerging technical risks. [Operational Need] • Implementation of a comprehensive Mobile Device Management (MDM) framework across the City's remote hardware inventory to ensure centralized oversight and security. [Operational Need] • Formulate standardized Al usage guidelines and architect data -driven workflows to streamline internal operations. [Operational Need] Economic Development • Advance implementation of the City is 2024 Economic Development Plan through targeted business outreach, retention visits, broker engagement, new marketing materials, and better internal coordination. [Council Priority - Financial Stability] • Strengthen/position the Dell/McGlincy area as a key employment and industrial district via business engagement, addressing barriers, and increasing the visibility of its assets and benefits to the community. [Council Priority- Financial Stability] • Facilitate small business support and connection through technical assistance, workshops, and occasional networking opportunities. [Council Priority- Financial Stability] • Enhance Downtown Campbell's weekday and overall vibrancy by supporting office - leasing efforts, addressing high -visibility vacancies, working with the Downtown Campbell Business Association, and continued stakeholder discussions around a Business Improvement District. [Council Priority- Financial Stability] • Advance commercial permit streamlining efforts by identifying and addressing barriers that impact leasing and reinvestment. [Council Priority- Financial Stability] City Clerk's Office • Continue a comprehensive evaluation of current records management practices and develop updated Records Retention Schedules, policies, and procedures for managing physical and electronic documents. Provide recommendations to improve efficiency, compliance, and lifecycle management, ensuring effective organization, access, and timely disposal of City records. [Operational Need] • Administer the 2026 General Municipal Election for three City Council seats in Districts 3, 4, and 5 by coordinating candidate nomination processes, ensuring compliance with all legal requirements, managing election logistics in partnership with the Santa Clara County Registrar of Voters, and conducting post -election certification and reporting. [Operational Need] • Begin process improvements and Escribe System implementation for Boards and Commissions [Operational Need] Community Development Administration • Implement upgrades to the permit tracking system to create better reporting for tracking performance metrics. [Operational Need] • Explore and pilot Artificial Intelligence (AI) Tools to support Department operations and improve Customer Service. [Operational Need] Policy Development • Finalize Citywide Climate Action Plan [Council Priority — Sustainability] • In coordination with the Public Works Department, continue preparation of Hamilton Avenue Precise Plan [Council Priority — Long -Term Land Use Planning and Housing] • Support the Public Works Department in continued preparation of a Citywide Multimodal plan with bicycle and pedestrian improvements [Council Priority — Long - Term Land Use Planning and Housing] • Potential preparation of a Transit Oriented Alternative Plan for Implementation of SB 79 with related updates to City ordinances and policies. [Council Priority — Long - Term Land Use Planning and Housing] Current Planning • Implement annual code updates to comply with new state laws, address community issues (tobacco, wireless), and implement permit streamlining to meet the city's economic development goals. [Council Priority — Long Term Land Use Planning and Housing] • Pursuant to Council Direction, pursue development of a Demolition Control Ordinance and options on implementing Starter Home Projects. [Council Priority — Long Term Land Use Planning and Housing] 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 • Implement BMR Housing program improvements as identified in Housing Program audit in association with Housing Element implementation [Council Priority — Long - Term Land Use Planning and Housing] • Develop policies and procedures for the use of Housing Trust Fund to support housing development and programs [Council Priority — Long -Term Land Use Planning and Housing] • Conduct outreach to increase community awareness of housing assistance programs available in Campbell [Council Priority — Long -Term Land Use Planning and Housing] • Pursue State and Federal funding to support affordable housing development and growth of the City 's Housing Trust Fund [Council Priority — Long -Term Land Use Planning and Housing] • Pursue programs and actions that preserve existing affordable housing units that will convert to market rate housing by 2027 [Council Priority — Long -Term Land Use Planning and Housing] • Pursue creation of a Task Force in partnership with other West Valley Cities to develop an implementation plan for the West Valley Homeless Services Feasibility Study [Council Priority — Long -Term Land Use Planning and Housing] • Continue to implement Unhoused support programs including the hotel voucher program [Council Priority — Long -Term Land Use Planning and Housing] • Develop procedures for implementing tenant protection requirements associated with housing demolition in conformance with State Law. [Council Priority — Long -Term Land Use Planning and Housing] • Continue work on establishing a potential Housing Commission [Council Priority — Long -Term Land Use Planning and Housing] Code Enforcement • Evaluate and present to Council alternative options for implementation of the weed abatement program [Operational Need] 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] • Collaborate with City Council and City staff to craft spending plans if Measure K funds become available, and develop contingency plans in case the legal process is delayed or results in an unfavorable judgment. LEAD DEPARTMENTS — City Manager's Office and Finance Department [Council Priority — Financial Stability] • In partnership with an outside consultant, perform a comprehensive cost allocation plan and user fee update. [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] • Prepare balanced budgets that offer options for meeting Council priorities, sustaining services, and managing employee compensation through reserves, targeted cuts, vacancy freezes, and other strategies. [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 — Financial Stability] • Continue to develop strategies to systematically address Unfunded Pension Liabilities in the short- and long-term [Council Priority — Financial Stability] • Conduct a needs assessment for a modern Enterprise Resources Planning (ERP) system with input from all departments, laying the groundwork for an RFP in FY 2028 and potential selection and implementation in FY 2029, pending funding. [Operational Need] Legal Services • Coordinate Measure K litigation with outside counsel [Council Priority — Financial Stability] • Assist with City Attorney Transition [Operational Need] • Litigate Code Enforcement Receivership Case for 620 Harriet [Operational Need] • Litigate Drug Abatement Case for 1368 Theresa [Operational Need] • Review Community Development Department's updates to the City's Multifamily Residential Development and Design Standards (MFDDS) — [Council Priority — Long Term Land Use Planning and Housing] • Review Community Development Department's updates to the City's Historic Preservation Ordinance and Mills Act Program [Council Priority — Long Term Land Use Planning and Housing] • Work with Community Development and Public Works to finish update of Subdivision Ordinance [Council Priority - Long -Term Land Use Planning and Housing] • 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 - Long -Term Land Use Planning and Housing] • Review Community Development Department's annual code updates to comply with new state laws [Operational Need] • Review Community Development Department ordinances to implement State Laws (SB 10 & 684) addressing missing middle housing [Council Priority - Long -Term Land Use Planning and Housing] Police • Recruit, hire, and retain high -quality personnel across all classifications, with a focused strategy on long-term retention, succession planning, and maintaining full staffing levels to meet service demands and future vacancies [Council Priority - Community Health and Safety] • Advance public safety technology to enhance operational effectiveness and community safety, including continued expansion and integration of real-time capabilities, public safety camera systems, ALPR, AI -assisted tools, and ongoing optimization of CAD and Next Generation 911 systems [Council Priority - Community Health and Safety] • Assist with Phase 2 implementation of the Measure O Project, including planning, coordination, and execution to ensure timely completion and alignment with operational needs [Council Priority - City Infrastructure / Community Health and Safety] Public Works Administration • Manage construction closeout of the Measure O capital projects specifically the Police Operations Building; overseeing construction contracts and associated project budgets [Council Priority - City Infrastructure] • Represent Campbell in long range regional transportation planning efforts - Envision Silicon Valley and Plan Bay Area 2050 process [Council Priority - Long -Term Land Use Planning and Housing] • Administer grant funds and associated reporting requirements [Council Priority - Financial Stability] • Manage the preparation of the Citywide Multi -modal Transportation Plan [Council Priority - Community Health and Safety] Transportation Engineering • Review and consider revisions to the City's Traffic Calming Policy [Council Priority - Community Health and Safety] • Manage, design, and implement traffic calming improvements [Council Priority - Community Health and Safety] • Manage, design, and implement bicycle and pedestrian enhancements and safety improvements [Council Priority - Long -Term Land Use Planning and Housing] • Manage Hamilton Avenue/State Route 17 Bicycle Overcrossing project initiation phase (design) Feasibility Study [Council Priority - Long -Term Land Use Planning and Housing] • Manage Comprehensive Traffic Safety Action Plan Project [Council Priority — Community Health and Safety] • Support the preparation of the Citywide Multi -Modal Plan [Operational Need] • 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] • 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] Land Development • Review development proposals for compliance with the reissued Storm Water Municipal Regional Permit (MRP 3.0), including necessary updates to the Green Infrastructure Plan [Council Priority — Long -Term Land Use Planning and Housing] • 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] (Resources — Internal Staff Time) • Support SCVURPP in the negotiations for the issuance of the updated Storm Water Municipal Regional Permit (MRP 4.0) [Council Priority — Long -Term Land Use Planning and Housing] Maintenance • Complete all approved Capital Improvement Projects for City facilities improvements including installation of new boiler for the Campbell Community Center Building A [Council Priority — Sustainability] • Complete preventative maintenance work in Maintenance Zones 9&12, including the removal and replacement of displaced sidewalks, curb and gutter and structural tree trimming in the public right-of-way [Council Priority — Community Health and Safety] • Complete installation of 4 new Tesco Battery Backup Systems to have all 43 signalized intersections in the City to have battery backups [Council Priority — Community Health and Safety] • 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 Annual Crack Seal Project [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] • Coordinate the implementation of the Climate Action Plan [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 • Complete the relocation of the Adult Center and launch operations in the new facility with a seamless transition for participants and staff. Develop a centralized repository of local events and volunteer -based recreational opportunities in collaboration with [Council Priority — City Infrastructure] • Support community engagement throughout the aquatics facility design process to ensure the final project reflects community needs, promotes accessibility and inclusivity, and builds strong public awareness and support in advance of construction. [Council Priority — City Infrastructure] • Evaluate the feasibility and requirements of licensing the preschool program and identify the resources needed to support a high quality, compliant, and sustainable licensed program. [Operational Need] • Expand adaptive and therapeutic recreation programming by assessing community needs, increasing inclusive offerings, strengthening partnerships, and enhancing staff capacity to ensure equitable access for individuals of all abilities. [Operational Need] • Identify abilities. potential partnerships to expand and diversify program offerings, enhance resources and better meet the evolving recreational and wellness needs of the community. [Operational Need] • Develop content for a historical reference exhibit for the new Campbell Library. [Operational Need] • Partner with the community to re-establish the Parks and Recreation Foundation as a sustainable fundraising entity that generates resources to support programs, services and capital improvements across the parks and recreation system. [Council Priority — Financial Stability] Museum • Increase accessible searchable Museum collection records by 5% [Operational Need]