City Council - Special Meeting

Okay, everybody ready? Okay, this meeting is now called to order. So I will call this special joint meeting of the Milpita City Council, Housing Authority, and the Public Financing Authority of June 2nd, 2026. I will call this meeting to order now. And the city council meeting is available for instant translation in over 60 languages with Wordly, which is accessible via mobile phone, computer, and video displays. And you can do that by scanning the QR code listed on the title page of the agenda in the upper right-hand corner. So back to today's business. City Clerk Guzeta, please take the roll.

Vice Mayor Barbadio. Council Member Chua.

Here council member lamb who council member Leanne.

Here mayor montano here.

Thank you so before we adjourn to close session city attorney Curtis please note please brief the public on the closed session item for today.

Thank you mayor there's one item for on for closed session today and that is called conference with legal counsel pursuant to government code section 5 4 9 5 6.9 D 1 Existing litigation, Alexander Prince versus City of Milpitas, Workers' Comp Appeals Board, case number ADJ17651048, ADJ18892457, and ADJ17651067. Okay, thank you for that. And so now I will call for public comment on the closed session item.

And please note that tonight's public comment is limited to three minutes. Anyone from the public? Anyone? Any cards?

We have no public speaker cards, Mayor.

Okay. Well, we will adjourn to closed session. But before that, I want to welcome our new city manager, William.

Thank you. Thank you. All right.

Closed session. We're adjourning now. Is everybody here? Not yet. One more. Okay, we're waiting for one more council member. Okay, we're ready. All right, now it is now 5.48. We will come back to order and we will report out from closed session from city attorney.

Thank you, Mayor. There's no reportable action at this time.

Okay, thank you. So now let's rise for the Pledge of Allegiance.

Are you ready?

Is there someone that would like to lead?

I will do that.

Okay.

Ready? I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation, under God, indivisible, with liberty and justice for all.

Okay, thank you for that. Okay, so now we have the invocation, and this time it is Council Member Lam who will provide the invocation. Take it away.

Thank you, Mayor. As we begin this first City Council meeting of June, let us take a moment to reflect on the responsibility entrusted to us as public servants. We are grateful for the opportunity to serve our residents and help shape the future of our city. We recognize that the decision we make tonight, especially those relate to our budget and financial priorities, will have a lasting impact on our community, our employees, and future generations. May we be guided by wisdom as we reveal difficult choices and completing these. May we remain focused on serving the best interests of our residents, wisely manage the public resources, and trust to our care. And we engage in every discussion with respect integrity and a willingness to consider different perspectives. As we address budget challenges, may we seek solutions that are thoughtful, balanced, and suitable. I mean, sustainable. We also express our gratitude to our city staff whose hard work and help us navigate compressed financial issues and deliver essential service to our residents every day. Let us work together toward a future that reflects the values of financial responsibility, transparency, and opportunity for all. Thank you.

Thank you, Council Member Lam.

Okay, so now there are no presentations this evening, and so now we're moving on to the announcements of conflict of interest and campaign contributions for both meetings today. We have City Attorney Curtis.

Thank you, Mayor. At this time, I would ask the Mayor and each City Council member whether he or she has any financial or personal conflict of interest related to any of the items on tonight's agenda.

Vice Mayor Barbadio?

I have none.

Council Member Chua?

None.

none council member lamb none council member liam none mayor montano none i'd ask that the record reflect no reported conflict and now mayor i would also ask that you and the members of the milpita city council to please disclose any campaign contributions of a hundred dollars or more received within the last 12 months from any of the parties entering into contracts with the city on tonight's agenda or contributions received from the development project applicant for development projects on tonight's agenda.

Vice Mayor Barbadio?

None.

Council Member Chua? None. Council Member Lamb? None. Council Member Leigh-Anne? None. Mayor Montano? None.

I would again ask that the record reflect no reported conflicts.

Okay, thank you. Now we're moving on to the Milpitas Code of Conduct, if anyone would like to recite that. If not, I will go ahead and recite it. Okay, be respectful and courteous. Words, tone, and body language do matter. Model civility. Avoid surprises. Praise publicly and criticize privately. Focus on the issue, not the person. Use electronic devices appropriately while on the console dais. Disclose conflict of interest and affiliations related to agenda items. Separate governing from campaigning. The council speaks with one voice after making policy on issues. Respect the line between policy and administration. Council will hold one another accountable to comply with this code of conduct. Okay, so now we're moving on to the approval of the agenda. Is there anyone that would like to make any changes before making a motion?

If not, let's call for a motion.

We have Council Member Lien who made the motion, and we have Council Member Chua who seconded. So let's call for the vote. Vice Mayor Barbadio?

Aye.

Council Member Chua? Aye. Council Member Lam?

Aye.

Council Member Lien? Aye. Mayor Montano? Aye.

Thank you. So now we'll take into consideration the consent calendar. Staff, do you have any change, any comments?

Staff?

None? None? okay so um seeing none uh let's call for public comment on uh the consent calendar i have no public speaker cards mayor okay thank you and so now we will um have a motion make a motion in a second okay let me see

Yes, I would like to pull out item C-15 just for a brief discussion, please.

OK, C-15 is the adopt resolution approving the site development permit amendment. Is that the one? Yes. Single family residence, OK. So we will pull that one. Is there any other one? If not, go ahead, Council Member Chua.

Move to approve the consent calendar with C-15 being pulled.

Okay, let's call for the vote. Who was the second? Oh, second, I mean. It was Councilmember Lin. So Councilmember Chua made the motion with that item 15 being pulled out, and then Councilmember Lin seconded it and said now let's call for the vote.

Vice Mayor Barbadio.

Aye.

Council Member Chua.

Aye.

Council Member Lamb.

Aye.

Council Member Leigh Ann. Aye. Mayor Montano.

And I am an aye. Thank you. So now let's move on to public hearings. City Manager? Would you do the item 15 first?

Okay, let's do the item 15 first. Sometimes we used to do that at the end of the, but we'll do that.

Item 15. Go ahead, Councilmember, I mean, Vice Mayor Barbadio.

All right, so... Go ahead, turn it on. Not primarily for the approval or disapproval of this project, but I want to see the integrity of our rules with regards to changes over the years, right? So as I read the agenda, it says that it was formerly owned by a certain individual we did two approvals of the plans in 2023. And thereafter, it was bought by another owner who did ask some considerations again with regards to our standards. So the question is, on the first approval we did in 2023, were there already concessions or CUPs granted? And if there is, I know it's been a while, if there is, what was the basis, if we can remember the deviation from those standards? So in relation to that, now it's being presented to us again with some more deviation, right? Some exterior modification, expansion of the living area, and addition of some more structures. And I want us to remember that not so long time ago, we did a project like this, which is a residential project. structure in the hillside, you know, we denied that. So the question is, how were the deviations over the years and over ownership justify the recommendation of staff now to approve this project?

Who's going to respond to that? Is it Jay? Since you're the planner, I guess it would be Jay.

Good evening, council members. Good question. I can provide a little more context. So for this project in particular, it was part of a planned unit development. A planned unit development is like when there's a subdivision and the entire neighborhood is planned together. In this instance, the plan unit development is very old. So sometimes plan unit developments, they include a lot of detail with the design. Current practice today, you don't include as many details to provide some flexibility, but that original PUD actually included specific elevations for all the homes. So it was for a very specific development at that time. However, as some lots don't get developed or take longer to develop, standards and design practices change over time. So in this instance, since it's so much later, basically every home in the subdivision has required a planned unit development amendment unless it was originally developed with the PUD. So they needed a PUD amendment before and they need another one now just because they will always need it because it doesn't conform with the very original development. But it would be a little bit, I would say, challenging for homeowners if we were to stick to the very original designs from decades ago. And I would say also regarding the other project to kind of shed light on how why these are being treated differently. The big difference is the other one is within the crest line zone of protection. So once you're in that peak area, if you're If you're behind it, you're supposed to not be visible. If you're in front of the peak, facing the valley floor, we recognize that it's impossible to hide a house. So if you're behind the peak, the standard is that you have to hide it completely. That other home was in a very difficult situation because they were very close to the peak. very very close so it was very difficult for them to not be visible whereas this home is far enough from the peak where no matter what kind of a design they have they're going to be hidden so that's the real the main difference in why Our recommendation is different for a project like this, even if the square footage is quite large. But that's pretty common in the hillside area. The other one, because it was visible and it wasn't supposed to be visible, staff was a lot more careful in the design. And then the other applicant was not willing to kind of try to meet our design standards. Whereas in this instance, those issues don't apply the same way.

Is the PUD in 1992 our own rules?

yes because the council did approve those rules but a lot of times these puds are the designs and the rules are proposed by an applicant and the city has a discretion whether to accept that or work with them to get to a design that is that works for our community so aside from the pud of 1992 there's other uh regulations because they are located in the hillside Yes. So usually for citywide regulations, you rely on the zoning ordinance. But usually these PUDs, the reason why they're needed is because they're actually providing a different layer or a different set of standards for unique situations. And I think for this one, it's because it was in the hillside.

Right. Why not just then for policy consideration just change the PUD because every time there's going to be a development, you know, homeowners who want this particular kind and style of house, you know, we always come here to make an exemption of what we had established in 1992 in addition to the additional regulations of the hillside. So why not just change the PUD? Are we expecting more developments in that area?

I believe there are very, very few lots left. I don't think there are any left. Some might have not been built, but they've at least been entitled recently. So I don't even think there's a vacant lot left in this PUD. But it would have been a great thought if we thought of it like a while ago. Right.

Okay, yeah, so as I said, I pull this out for policy considerations. As you know me, Jay, I always say if we look at the big picture, I am sure when we developed that PUD of 92 as well as the general plan, we have been looking at a bigger picture and projecting visions at the time, right? And it's just every time I've noticed and we've noticed that when there is a new project, And it's either they abide of what we had envisioned a few years back when we adopted the plan, or they ask for concessions, applying for permits and CUPs. So just that thought. So we hope to preserve the vision, which we believe those think tanks during those time have visions 20, 30 years ago. And we are receptive with changes over time, but As I said, they've thought of that before, and let's be prudent in making exemptions. Thank you. That's a good comment. Thank you, Mayor.

We have Council Member Chua. I have an overall question about the consent. Can I ask that, City Attorney?

Certainly, if I can answer.

C10 Correct me if I'm wrong, if C10 was included in the briefing list?

Correct.

It was?

Yes.

Okay. Just want to make sure. Thank you. Thank you, City Attorney.

Thank you. Okay. All right. Thank you. All right. So now that, would you like to make a motion, Vice Mayor, to accept that?

Yes.

I move to consider the exemption in accordance with SICA and adopt a resolution approving site development permit amendment number S825-003 subject to the touch conditions of approval to develop a new single family residence on a vacant 1.1 acre lot located in the r1-h single family residence zoning district with a hillside combined district at 1321 terra vista court second

Okay, so it was motioned by Vice Mayor Barbadeo and seconded by Council Member Chua. So let's call for the vote. Vice Mayor Barbadeo.

Aye.

Council Member Chua. Aye. Council Member Lamb.

Aye.

Council Member Leon. Aye. Mayor Montano.

Yes. Okay, so now we're moving on to public hearings. City Manager?

Madam Mayor and Council, Item 16 is to adopt a resolution to approve the physical year 26-27 proposed operating budget for the City of Milpitas and the Milpitas Housing Authority, approve the physical year 26-27 GANs appropriation limit, authorize various financial actions, physical policy and budget guidelines, and amend the classification plan for the alignment with the FY26-27 proposed operating budget, the minimum wage increase, and salary schedule consistent with previous council actions. The staff contact on this is our finance director.

Finance director.

Good evening, Mayor Montano, Montano, Vice Mayor Barbadillo, council members. Please let my voice last. Council members Chua, Leigh Ann, and Lamb. Obviously, I'm Luz Cofresi. I'm joined this evening with Alice Burrick, who is our budget manager and our acting assistant city manager, Matt Kano, for his last meeting with us. A sad time. Tonight, we bring forward the FY26-27 proposed operating budget for the council's consideration and public hearing. This presentation covers three things, our five-year financial outlook, which is an update to our March 3rd discussion, the proposed budget itself, and staff's recommendation for adoption. This budget is the product of six months of community engagement, council direction, and disciplined staff work, and we're pleased to present a balanced general fund with a surplus of 1.3 million and a structurally sound financial position in FY2026-27, which is the action before you today. Next slide, please. Here is our roadmap for the evening. I'll walk through the budget process, the economic backdrop to our forecast, the five-year forecast, including how the forecast has been refined since our March study session and how we've narrowed the structural gap. We'll then turn to the proposed budget overview and the budget proposals, all of which carry a net zero general fund impact. We'll cover reserves and the Section 115 pension trust,

The capital program briefly one-time funded items for your consideration and close with staff recommendations.

Next slide, please. This budget didn't arrive overnight. It reflects a deliberate six month process. We began in December with a statistically valid community survey that established resident priorities. In February of 2026, the council provided direction on the capital program. And in March, we presented the preliminary general fund forecast, which at that point projected a roughly 2.1 million surplus for FY26-27. In April, we held the first public hearing on the five-year user and regulatory fee update. On May 5th, the council adopted the capital program with 33.8 million in year one projects, which is for FY2026-27. We also held community and town halls and employee town halls in May. Tonight is the culmination of all this hard work and discussion, the public hearing on the operating budget, along with the adoption of the subset of user and regulatory fees that you have already approved with consent item tonight. Next slide, please. These are the economic indicators that inform our revenue assumptions. Locally, conditions remain comparatively strong. Milpitas and employment was 3.7% in March. below both the state at 5.2% and the nation as a whole at 4.3%. Inflation has gotten a little bit better certainly in March. The national CPI was 2.4% in March, close to the Fed's 2% target. We watch this carefully as this is the basis for our calculations on the interest that we get on our cash accounts. Throughout the area, the Bay Area overall seems to run hotter than the national number. The median home price in Milpitas was just under $1.6 million. The median is if you line up all the houses that are on sale in a particular point in time from the lowest to the highest price. This is specific to Milpitas and is a local information from a local realtor. The median is that house that's in the middle, and that's at $1.585 million. The statewide sales tax outlook from our consultant points to modest growth overall of about 2.6%. Our Section 115 pension trust, which is a set-aside that was established by Council in 2021, Stood at 44.6 as of April, up substantially since its inception. That said, we are watching several uncertainties closely, and they are described at the bottom of the slide. The federal tariff policy and its effect on consumers. Ongoing ERAF litigation, which we've covered in briefings, but if you want some more information, our city attorney will be glad to provide that. The state's own structural deficit. which is important while Mopedas does not get an extraordinary amount of money from either the state or the feds. The people who are no longer getting certain services from the state or the feds may very well wind up coming to Mopedas for assistance through our programs. The transiency occupancy tax recovery and commercial real estate vacancy trends. And these are the headways that are shaping our conservative assumptions. We did go back to look at hotel tax starting from 2019. And starting from 2019, which is when the city started breaking it out separately from other taxes, the, hang on one second, as everywhere hotel tax collapsed during the pandemic, it has since pretty much fully recovered. So we actually were back at COVID numbers, prior to COVID numbers in 23, 24, And 2425, we're at 13.4 million. So the TOT is the city's most cyclical major revenue source. It rises and falls sharply with hotel demand, recovers strongly in good times, and it hits first decline in a downturn. So it's basically a canary in the cave. Next slide, please. This is the heart of our long-term, our long-range picture. Table 1 lays out revenues and expenditures across six fiscal years. For FY26-27, we project revenues and sources of $149.9 million against expenditures of $152.1 million with a modest planned and council-approved use of reserves, producing a balanced budget with a surplus, an annual surplus, of $1.3 million. More important than the single year number is a structural position. For FY26-27, we are predicting that structural deficit, meaning ongoing revenues, more than cover ongoing expenses. The forecast does show structural pressure returning in and out of years. However, we already have very good news from our sales tax consultant who has provided us information regarding our sales tax increasing roughly $3 million in this year through this final quarter. without including the fourth quarter, that we will see those revenues go up approximately 3 million, of which 2 million of those are forecast to be occurring, which means that our 1.6 negative in FY27 and 28 will effectively go away as well and be a balanced budget. The encouraging story is a trajectory of our structural deficit. We've reduced the FY28-29 structural gap by more than 62% from the February 2025 forecast. And the out-of-year figure is precisely why we continue the measured fiscal strategy that has served the city well to date. Slide six, please. Next slide, please. I want to be clear about what is changed since March because updating the forecast with the most current data is standard best practice budget development practice. These are refinements, not surprises. Since the March study session, the expenditure baseline moved from the adopted mid-year budget of 150.9 to the proposed budget of 152.1, an increase of 1.2 million, or about eight-tenths of 1%. Four things drive that. First, revenue refinements of 3.5 million in our favor, larger property tax and reimbursable income, reflecting the most current Santa Clara County data. Second, the budget proposals affecting service levels and equipment, about $2.5 million, and where there is a net zero general fund impact. Third, a CalPERS actuarial update of $1.5 million, reflecting the most recent valuation. This applies to existing positions with no staffing change. And fourth, a favorable offset of minus $8 million, which reduces the city manager's unanticipated expenditures. This is a City Council-approved action that took place in November 2024 to support the IAF contract. These refinements, these net results, keep us in a $1.3 million structural surplus in FY26-27, and these refinements simply continue the fiscal strategy and demonstrate how successful it's been since February 18, 2025. The Council has advanced this, and the staff has been implementing this from February 2025. Next slide, please. This slide tells the story visually. When we first modeled the first five-year outlook in February 2025, the baseline pointed to a $40.8 million structural deficit by FY 2030-31. The forecast we are presenting before you tonight brings that same out-of-year figure down to 19.6 million, a 52% reduction. Once again, that progress is the direct result of the incremental and measured strategies the council and staff have pursued to maximize the city resources and optimize programs and services. We are not declaring the problem solved, but the direction that we are taking and the trajectory we are taking is unmistakably positive. Next slide, please. Turning to the proposed budget itself, The total across all of our funds, including our enterprise funds and other funds, is $292.2 million, up 8.8% from the prior year's total adopted budget, with that growth concentrated in the capital and enterprise funds. The general fund, as we stated before, is $152.1 million, and we draw 2.7 in the council-approved reserves. The capital program adds $33.8 million in its first year, And we maintain 451 funded full-time positions. Actually, with some of the proposals that we have before you today, we are modifying some levels of service to better reflect what the community needs. By fund category, the general fund is just over half the total of 52%. Water and sewer enterprises are 25%. The capital program is 12%. Other operating runs are 10%. And the equipment maintenance fund rounds out the remainder. The all-funds growth, as I've said before, is driven mostly by the enterprise and capital sides, not by general funds operations. The next slide, please. This same budget view through the lens of the council's six priority areas show where each general fund dollar goes given $100. For every $100 spent, public safety receives just under $40, by far the largest share, which reflects the county. the council and the community's interest. Neighborhoods and housing receive about $23 and community wellness and open space about 18. Economic development, environment and transportation make up the balance and governance and administration supports all of the six priority areas. This allocation reflects the priorities that the council and the community has indicated in past years. Next slide, please. This slide gives you the budget proposals. This is an important point. In total, these 11 proposals carry a net zero general fund impact. 94% of the investment in these proposals, about $2.25 million, is funded entirely outside the general fund through the equipment maintenance fund and the water and sewer operating funds, which are restricted sources designated for exactly these purposes. The remaining piece touching the general fund is $131,369 in new spending, and every dollar of it is matched by an offsetting revenue or cost reduction. New spending of $131,369 offsets of $131,369 net impact of zero to the general fund. No proposal in this package, none, draws down the general fund on a net basis. Next slide, please. Here are the general fund proposals individually spanning recreation, the city manager's office, police and fire, the city attorney, information technology, public works and finance. They range from after school and summer programming to an injury navigation service for first responders. to a purchasing agent reclassification in finance. Each is modest and reflects the needs of levels of service for the community and collectively net to zero against the general fund. Once again, $131,369 in new expenditures match dollar for dollar by an offsetting revenue or cost reductions.

All of these are included in the budget, the proposed budget that you have today.

Next slide, please. The larger investments are funded outside the general fund. The biggest is $2 million to replace 11 public works vehicles that have reached the end of their service lives and must meet new regulatory requirements. Pardon me. A further $281,000 from the same fund replaces four police vehicles that are at or beyond their mileage thresholds. And a small reclassification in utility engineering About $38,000 is funded by the water and sewer operating funds to deliver master plan projects. After other fund adjustments, the net is $2.25 million with zero draw on the general fund. Each investment is paid for by the restricted fund where the work occurs. Next slide, please. This is the reserves and Section 115 pension trust slide. Our balance sheet remains strong and well protected. As of the June 30, 2025 audit, total reserves stood at $134.1 million, $89.5 million in general fund reserves, plus $44.6 million in the Section 115 pension trust. Critically, our two key policy reserves, the contingency reserve and the budget stabilization reserve, each held at 16.67%. They remain fully intact and untouched by this budget. The Section 115 Trust has performed well, growing from 33.9 million at its June 2021 inception to 44.6 million, an increase of 10.7 million or nearly 32% over five years. We are making plans, council approved use of two dedicated reserves this year, which we've already talked about. The 1.9 million from the PERS rate stabilization and 800,000 from the Future Deficit Reserve, both authorized back in November 2024. And we continue to hold an 18% contingency against the ERAF litigation. In short, the reserves are doing their job. The next slide, please. This slide is somewhat different in character, and I will turn it over to Matt Cano to go through it with you.

Thank you, Luce. So back in November and December, we had a prioritization session with the Mayor and City Council And the Mayor and City Council voted to fund a number of priorities with one-time funding in early December, and that funding has been allocated. And a number of those items are on the left-hand side where it says already funded projects. And so there's a few other things that are funded as well, but they don't need any additional funding in the future. And so on the left-hand side are items that were funded on a one-time basis back in December, and the funding amount is listed there as well. After that effort, we had $937,169 remaining in one-time funding that we committed to returning to council at a future time to talk about how to allocate. You can choose to allocate Some, none, or all of that funding this evening, or you can save that decision for a future time. That's your policy choice as a mayor and city council. On the right-hand side of the screen are items that have a potential for one-time funding. These consist of four items. The first four on the list that were brought up on the May 5th budget study session by members of the Mayor and City Council. We wanted to make sure to list them here this evening for your consideration since they were raised at the budget study session. And the last two items are shown to you by staff just to ensure that you're aware and we have a discussion around these items as you're considering what to fund. I'll briefly walk through this list and we can come back to this later as well, obviously during discussion. The first item for potential one-time funding is expansion of Milpitas Youth Force. It is already funded to be expanded for two more summers, including this summer. This would have an expanded program for a third summer in addition to the base program, which is already funded on an ongoing basis. The second item is the Ring Doorbell Initiative. We've had an outpouring of interest in this initiative. And this would add additional funding in case there is a need that is larger than our currently available funding, which is currently expected. It was also a suggestion to possibly fund Care Solace. They are a company that links residents up with mental health services. We estimate that to be about $80,000 a year. If this were funded this evening, we would have to come back to council likely at a future time to talk about how to administer program like this however council could make a funding decision this evening the next item is choir and band support this would be the community choir received funding in the last budget cycle and is active now and this would help subsidize some of the fees for the community and and choir Again, those first four items were raised by the Mayor and City Council at the May 5th study session for potential funding. The next item is Milpitas Smart. We have a grant which funds us through approximately next spring. However, currently the Milpitas Smart service will end if we don't find additional funding to continue it. We've been looking and there's no viable grant opportunities that we're aware of right now. So we will continue to look, but if Milpitas Smart needs to be extended past next spring, it will need funding. The community center roof, which Public Works Director DiRenzo will And we'll likely return to you later on this year to talk more about this project. But it is an emerging urgent need to put funding towards the roof to finish the design so that we can keep the community center running for our residents. We had to put some initial capital funding towards this project in a past CIP. Public Works has done initial assessment work. and needs additional funding to continue the design of this project towards an eventual roof replacement or a much larger possible ticketed item to completely replace the community center again the items on the right hand side of this if you take no action this evening no funding will go no additional funding will go to these items and so for funding to go to these items on the right hand side of the screen this evening you would need to take an action during your vote this evening thank you next slide please

This brings us to staff recommendations. Staff recommends that the City Council hold the public hearing and by motion take the following actions. First, adopt the resolution approving the FY26-27 operating budget, proposed operating budget in the amount of $292 million. Second, approve the amendments to the proposed budget as presented. Third, amend Resolution 1626, the classification plan. to authorize the additional positions and amend allocated position. Fourth, amend that same resolution to adjust the hourly rates for the minimum wage increase, pursuant to Ordinance 292. And fifth, amend the resolution to align salary schedules with the current memoranda of outstanding. These salary actions implement agreements the Council has already approved. Last slide, please. Thank you. This proposed budget reflects community input council guidance, as I said at the beginning, and the disciplined work of city staff across every department. It delivers a balanced general fund in FY26-27, protects with a surplus of $1.3 million, protects our reserves, advances the capital program, and continues our measured multi-year fiscal strategy. Matt, I, and all our department colleagues are here to answer any questions at your pleasure. And with that, I give that presentation back to the council.

Okay, great. Thank you, Finance Director, for that presentation. So now I will open the public hearing on this item. Is there anyone from the public that would like to make any comments?

I have no public speaker cards, Mayor.

Okay, no public speaker cards. Anyone from the public? Okay. Seeing none, I will go to our colleagues. Any discussion?

Mayor, just procedurally, are you closing the public hearing at this time?

I am closing the public hearing. And then now I'm moving on to our council.

Thank you for that. We have Council Member Chua. Slide five, please.

If you would, if we could get slide five, please up it, if you could, with all.

Yes, it will take just a moment. Thank you.

Thank you. I'm nudging. Okay.

It is, okay, thank you, Ms. Gossetta. It is understood that once in a while you have to make changes. On the original presentation of this slide, there was a surplus of $2.1 million from FY2026-27. And now it's got reduced to 1.3. I understand what the reductions were. My question is, have we implemented measures to ensure that, because this is like 40% of what was supposed to be a surplus. Have we implemented some measures to make sure that we're close to the projection?

If you're looking at the difference between that, the bulk of that can be explained by the 1.5 actuarial adjustment.

My concern is we're we're going into 2.1 and then now we're 1.3. What have we done to make sure that we're barely, I mean, I can understand it's still like a hundred thousand, but 40%, I mean, what have we done to make sure that this doesn't happen?

Yeah, we, we do look at our numbers closely and I will tell you that our forecast takes, it takes, is presented at a time where a lot of information, both on the revenue and the expense side, is not available to us. A really good example is a property tax, which was not available to us until a few weeks ago. And last week, the number that I mentioned, I believe earlier, of $3 million of sales tax, which is not represented here, came too late for us to include. Because at some point in time, we have to stop forecasting because we have to publish. We update our forecasts on a regular basis as we get information. So this is the latest information you have. So the biggest change I would attribute it to is the additional expense that we have of that $1.5 million that we got from the actuarial change. We have no control over that whatsoever. Those are numbers that come in much later. We are sitting and looking at, we still don't have, for example, fourth quarter sales numbers, sales tax numbers. So we're already ahead $3 million for this year. Is that correct?

We currently only need $3 million to meet our budget. We still have three months left, and we average about $2 to $3 million a month.

So we will need our numbers before this. Something I heard. OK. So effectively, the numbers come in, when we include the information, when we get it, you will always get the most recent information. You will always get the most conservative information. And so the way that we look at it is we're giving you the freshest, most important information now. So when you're actually taking action to adopt a budget, you've got the most information that we have. I'll also remind you that we come to you at mid-year. to make adjustments that happen after the adoption of the budget. Because even then, we still don't have some information. So we do expect to see that.

How can we make it in such a way it's not 40% difference? I mean, should we say plus or minus 40%?

I'm comfortable saying plus or minus.

This is, again... I don't need an answer now. I think we might need to rehash this and find a way to get closer to the figures that we realistically should have. I mean, I understand. I understand that it's a projection. But reduce the gap. That's what I'm asking for. Thank you, Director. Thank you.

Thank you, ma'am. Thank you. So do we have anyone else that would like to make any comments? We have Councilmember, Vice Mayor Barbadeo.

This is just a comment, not a question yet. All right. So, you know, I've been to several budget studies, right, have approved probably a few. And during this budget session, I always hear a few things from the staff. One is it's a moving target. We'll give you the newest forecast later on. And second is we'll give you the information next time. It's about the question of methodology, really. Is that really how we do budget? Or we stop at some point with available data, and because of the history of that data, we can project the budget going forward and recommend approval of a certain budget year?

We stop at some point and then give you the recommended, because once again, we have additional information.

Right. Yeah.

So there is nothing that I can only give you the information that we are certain of.

Right.

As you know, you've been I've been with the city for two years. I'm extraordinarily conservative CFO. Many comments have been made in other places that I've worked that are not may not be happy with me. You all know that there are revenue sources that we've already collected that are not in this budget. But I will not present them to you until we have certainty about what those trends are.

Right.

And that's an appropriate approach.

It is not you, right? It is the process that I'm trying to understand to see if we can have a good decision tonight to approve the budget. Here's what I've heard so far, right? When Council Member Chua question, and thanks for pointing that out, I didn't even realize that from the fastness it changed from the last briefing I had, right? 2.1 million to less than 40%, right? To reduce to about 40%. And you're telling us, and not that long ago, that 2.1 million was presented to us, right, as a surplus. Now you're telling us because of movements and some adjustments for a span of less than a month, you figured out that we need to recalculate and found out that it's 40% less of what was briefed to us then. And here's the answer to that. You said we will have the new projection later on. We expect this, right? As always we do. You know, they come and go in quarter, in yearly. We have those information. What I'm saying is why do we rely on a certain unknown at the future when if doing budget like this, we have to have a standard when to stop and make a projection out of that and make the decision to approve a certain buy-in at this time. So what I'm hearing is make the decision now, maybe in a few months it's going to change, it will be better. Would that be a prudent financial decision-making? That's a question.

Yeah, so here's the question. We cannot spend money that is not appropriated.

Right.

In the past, so that $1.5 million, We have to spend it. We have no choice about paying those retiree health benefits. Without having that money appropriated through the action taken at the dais by the council, I can't spend that money. I know those expenses are something we have to cover. And just as a point of information, I did some quick math, and you know I hate it, but I did some quick math, and I divided the $1.3 million over our $152.1 million budget And that is less, it is one-eighth of 1%. So it's not even a basis point. So it's less than 1%, that change. So that's a nominal change. But I still have to bring that to council because I need you to give me permission to spend that money. If I don't have that permission, I'll be bringing items to council on a monthly basis on new information. So we do look at it at a particular point in time. And we do stop because at some point in time, as my old boss used to say, you just have to stop because we have to stop. But the items that I bring to you are necessary for us to spend and to receive. So now I can receive those dollars and spend those dollars. But without action from this council, I cannot do so. So this is why we bring this change to you. And, you know, I pull that out in particular Because that's particularly important for us to pay that money out.

Right. So see, now you brought up the point that we need to have something to spend. That's why I'm presenting you the way we are presenting you, right? You know what I had envisioned about that? I'm not a mathematician nor a CFO understanding deeply financial affairs, but it's just logic, right? If you're telling us that the basis of you recommending approval of this budget tonight is based on this, some sort of uncertainties, wouldn't be prudent, we account, look at next year. the next five year projection. Wouldn't it be wise or at least give us information? Yes, we can do this today on the information that you have now that might change in three months, but wouldn't it be prudent to explain to us 27, 28, 29, 30, because it triples. So will we have the same sources of moving revenues to support the doubling structural deficiency in the next two, three years on our projection?

Yes, we will. I did some research on the background, and I will provide it to you in a separate information memorandum. And effectively, I went back to 26 years. And we looked at it from FY 2000. And the reason I went back 26 years, that we went back 26 years, is that we wanted to capture three seismic events in the nation, in the world, actually, many of them. The dot-com, the recession that came of the dot-com, the great recession, and also the recession that became of COVID. And looking at those expenditures in every single year, all 26 years, the city spent less than its original budget. So it spent less than its original budget. On the revenue side, the only time that we were below, that the original budget was not above what was raised, was because of those seismic events. And in each and every case, those seismic events were certainly out of the city of Milpitas' control. And certainly the feds also stepped in. in each and every case. The city is remarkably resilient. Remarkably.

When we did the mid-year budget last December, we added $3 million on the original budget that we have, more or less, right? Was it true? So how are we claiming now that historically, you know, we're spending less than what we are budgeting? We just added. And are we not going to adjust the budget again if we approve it this year, depending on what happened in the mid-year in December?

So thank you for the question and thank you for pulling out that particular example. In the mid-year, we got a $3 million grant. We can't accept that grant, nor can we provide the services that we have been asked to do as a grantee without your permission. So we have to do an appropriation. So when we change the budget, we have to bring it to you for your permission to spend. We can't write a check for a single penny without your permission. And so that's why you have seen probably more than you have seen before. In prior years, for a really good example, there was a not best practice of paying for those retiree dollars without asking for the appropriation action. It was done in good spirit. It was done legally. Well, not legally, but it was done in good spirit. It was done to meet our obligations, but we had not asked for that permission. That permission increases the general budget. So the general budget goes up, but revenues also go up. So when you see an appropriation action before you that we bring before you, it is permission to spend. The interest for you should always be, the question you should always be asking is where is that money coming from and how is it being spent? And what is the effect on the general fund at a net value? If the net value is zero, it's generally something like a grant. In the case of that $1.85 million, those expenses have gone up, but we're getting that money back from CalPERS. So the issue here is about understanding what the appropriation action does. I hope that answers your question.

Partly. Because not all what we have adjusted as part of what you claim to be a grant in mid-year of December, last December, is not all from a grant. And there is always the flip side of the appropriation spending, right? I mean, the appropriation funds available to be spent. As you claim, you come to us and have that approved. But look at our expenditures. If the adjustments, even if you call it you come for permission to spend additional three million, if those adjustments that we spent, the adjustment, the three million, we have to look at it if they are recurring or one-time expenditures, then we have to compare whatever source of revenues to cover them, whether it's a regular budget cycle or a mid-year, you have to see if they match. I have looked extensively at the table. If you look at our sources of revenue, and I believe that you would disagree with me, the only way to support our expenditures is based on the revenues, right? So if you look at the revenues, most are sales. there are some increases and the most increases I could point out to you are increases because of one-time grants and some decline on the revenue sources. It's on page, the first few pages of the book, right? So what I can understand is how could we support an additional what 8 million is it, the difference from the last budget to this budget being approved on the same expenditures and then I saw that there was a decrease of services expenditures about 2.9% and most of the increases comes from expenditures on either personnel or any other expenses. Even if I believe the theory of a balanced budget, I cannot reconcile when you show me the sources of revenues that are not substantially increasing, they're staling, right? And then show me the other side of the equation, expenditures, which have increased, right, either by a recurring increase or one-time increase. I cannot reconcile them. I think your table would reconcile them because, as I said during my briefing, it seems that this city is going paycheck to paycheck. Why? Because we try to balance the existing year Let's see later on if we can do the same on the next years. Look, on the next projected five years, four of them are red and one we are proving tonight is barely making it to the red mark. So how could we sustain it? Forget about the balance, but how could we sustain, right, if the surplus that we're having and being presented now is being spent just to balance this year, and let's see what happens next year. And we have that 1.9 million of deficiency, and the next year it's gonna double. How could that be prudent? We're saying we're balanced now, we barely have enough, but next year there's going to be a red, it's okay to approve it today.

So when you look at that slide, The slide that says revenues, those are recurring revenues. Those are revenues that will continue to recur. Those are from our property tax, our sales tax, TOT, license permit fees, and everything else. So if you look at that slide, in future years, you don't see us using one-time reserves. which is why there is a negative, because we're not using one-time reserves. So this is the very clear representation that we are not using one-time reserves. But we do expect to be able to cover that 1.6 with some revenues that we already know that are coming, that are deliberately not in this because we stopped at a particular point. Because if we kept updating on a daily basis, we'd never get to this point.

What I'm saying is if we continue that route, you know, hey, we cannot, but we're sure we're going to cover that on a future one, then I don't know if that's prudent. I will go by your statement. Look at the revenue by fund. Property taxes, 53 million last year, 54.661 this year, right? That's barely an increase. You look at sales taxes, 35 million last year, 35.4, 37.372 as of this year. And they're not always recurring and they are contingent to the economy. There are the franchise taxes, you know, there's no increase. The TOTs, it really declined, not increased. And these are all data provided to us. Look at transit occupancy tax total. It's just stagnant. 13 million last year, 13 million this year. You look at licenses and permits, 1.1 million last year. a million this year. So what I'm saying is the simple math of it for people to understand is we have enough money to spend on the proposed expenditures. To me, that's the budget, balanced budget, to the very least. But what probably we need is, yes, this is our revenues. This is our expenditures. We're making it. But looking at next year, we're also going to make it based on the data that we have. But how? How could you justify that there's going to be a 1.6 next year? I know that you will say, we'll know it in a few months. And then it five times. In the next year, in 28, for $6.2 million. And then again in 2029, the following year, it becomes $12 million. And in the following year, it becomes $19.6 million. Do we believe that the expenditures, the revenues, as they are growing at this rate, will be able to catch up with the red marks in the next five years?

I believe that we'll be able to catch up certainly in 2016. 27, we have a surplus. I also believe that we'll be able to catch up in 27, 28, and we will have a better idea where we are 28, 29. Again, with revenues that we know are coming in that we don't talk about. And I'll say it, we have Rivian revenues that we know are coming in. So the other thing that I'm going to say is that the vote that we're asking you for today is for the 26, 27 budget. That's all that you're appropriating. You appropriate year by year. We don't ask you for appropriations of future years because we can't. And so this is the best information we have. And I appreciate that you're reading from a book, but the book, that book adds up to these numbers. So, and we are demonstrating once again that we are not using reserves. We could conceivably, that has to be blunt and frank, has been done in the past, plug in each and every one of those numbers and have a balanced budget for the rest of the year. You have $46 million in contingency and budgetary reserves. The budgetary reserves takes care of that.

Reserves is not part of the equation. Reserves are drawn when really needed. My point is, if you're telling us, what's in front of you is this year, are you telling us not to consider the next years in approving this year?

For the action that's asked tonight is simply an appropriation action for today.

How about, to be fair, you said it will be contingent, and you're positive about the contingencies in the future, that we can cover them. How about give this council some buffer, too? Give us contingencies. Have us hold the vacancies, and we will release it as a buffer. Or have an across-the-board cut. in each and every department, 5% if you may, and hold that as a buffer, and then we can compromise, hey, we assure you next few years we're gonna do that, but we have, this council will have some buffer just in case things go south. Would that be something?

Yeah, we have had a significant reduction in the structural deficit since February of 2025. We have done that in one, essentially, 15 months, 16 months. That's through an effort. We are still using that same fiscal strategy to continue to do the work. But you're not going to be able to capture everything in one or two years. This is the same conversation that we had on February 18th, 2025. The expectation is that we've provided you a balanced budget for this year with a surplus. We also expect, with good faith, to have enough money in our waterfall. And the reason to use those reserves is if we need that. But if you look at the reserves, we have sufficient money to cover, plus other dollars that are available to us. We will be bringing some additional efforts to you regarding paying down our retirement debt, which is also a recurring debt, and bringing that down. And we're not bringing that down, bringing that to you until we fully flush that concept out. But we also expect that to result in some significant savings. But this is work that takes time. And this is work that takes deliberation. The action that we're asking you for today and tonight is an understanding of FY26-27. But the challenge that we have is bringing you work that's well thought out, that has a level of certainty about it. This is a certain that we're going to get about the outlook. And once again, I'm gonna point to very healthy reserves that do not exist in many of our colleagues cities that are able to cover a five year deficit. And remember, we have more reserves than is recommended, and we have sufficient reserves in other areas. We have a $44 million plus $51 million reserve just for our retirement, which is absolutely outstanding. Applying that to a well-considered plan to reduce our retirement liability will result in long-term recurring savings. But I'm not going to bring you a half-baked idea. That's not what I do.

All right, I'll give chance. Thank you. One question though, right? Of course. You said we have a good reserves, right? Yes. Let's assume, let's put a stop on... Thank you. on projections right now, right? Let's go to the last assessment that you have, the growth of the revenues, right? What happens, hypothetically, if revenues does not increase that would cover our deficiencies? My question is how many years Would our good reserves, as you describe, would cover the deficiency, the structural deficiency on the projection that you have? Until what year will our reserves cover that without changes?

Our reserves for budget stabilization alone, not the contingency. The budget stabilization loan is $23.1 million. That covers our $19 million. It's done. But we don't want to do that.

We don't want to do that. I just want to be really sure you understand that I don't want to do that. Because you were saying that we can cover them with other sources. I said when God forbids, we cannot cover them with other sources. I just want to know how much of this good reserves would cover us, and you said until 2030.

Until the five-year program. But we don't want to do that because we know we have other monies coming in. And we know that with the economic work that's being done and started, that we can continue to grow the city's revenues. But all of this takes some consideration. It takes some time. We want to build it so it has strength and sustainability. Let's have some feedback from other council members. We have a council member. I'm sorry. Thank you.

Thank you, Mayor. In my briefing, I asked the question, our reserve, how many months, and I know the standard, the standard, the reserve is to have two months. When I asked the question, with our reserve, how many months can we cover? And you said four months, which is double what is required. Is that correct?

That was in reference to shutting down the city. If we effectively had to go to no business, zero revenues whatsoever. So it's a different question. The question that we have if we were an operating.

The answer to me was the reserve is good for two months as a standard. But we're in good shape because we have four months. Is that correct, my understanding from my briefing?

Yes, that is correct. But we're looking at two different things. The presumption is the negative numbers reflect the revenue. The negative numbers that you see on slide five, the slide that we had before, is a forecast, a conservative forecast, if our revenues remain where we think they're going to be and probably a little lower. The number that I gave to you, so if you could pull that up, please. Okay, so it's a slide with the reserves. Okay, so we're looking at a deficit of $19.6 million. Let's say this revenues and other sources is right on the money. Let's say the expenditures right on the money. I'm right on the money. Nothing more. You know, the gods and goddesses have merged and all said, yay, this is good. She's really good at this. My deficit at the end of the day will be $19.6 million. Correct. Slide 18, please. Okay. One back, please. Okay. The budget stabilization reserve, that $23.4 million. Remember the premise that I have here. The premise that I have here is that I am the best, we are the best forecasters in the world. And the forecast you have on slide five is truth and etched in stone. We have $23.4 million. to cover that 19.6 million. The question that you asked in briefing was, is how many months do we have? We have four months. We have the two months of the budget stabilization, which cover that five-year gap, once again, if the forecast is absolutely perfect and on the money. The four months is if we've to shut down services, similar to what Stockton did. So that's the difference. And forgive me, council member, I was not clear in that message. Those are two different premises that we're thinking about. But if this is, we're forecasting here revenues that are fairly steady. They're fairly stable. Our property tax is the most stable. Sales tax.

I understand that. Yeah. That's what sustained us during the COVID era.

Yeah.

Anyway, okay. Thank you. Thank you for the question. That's all for now.

Thank you. Okay. Thank you for that. Is there anyone else that would like to make any comments? Council Member Lam.

Council Member Lam. And I forgot to thank you for your questions. And I'm not losing my, if I lose my voice, Council Member Lam, thank you.

Good evening, Luz. Good evening. I have a number of questions and they are all related to the budget book. Oh, dear.

If there are specific questions, or are they pertinent to the adoption of the budget today?

It's specific questions.

All right. We are at your service.

And some of the questions I already point out at the briefing, but I just want to point this out So the council member would be aware of this. On page 12 on the pie chart, this is related to the race and ethnicity populations. As I point out, when you add up the percentage, it's 113.8% and not 100%. And also, That's a part for the Asian population. When you add those up, it's 64.6% and not 67.5% as indicated on the book. We have discussed this during the briefing. I simply want to bring this to the city council attention and ensure that Everyone is aware of this concern. I know you guys are going to fix this.

What page was that?

Oh, this is page number 12.

Page 12, so that way I can refer to it when I get my... Council Member, if I may, Alice Virch, the Budget Manager. The reason that it is more than 100% is because when the survey is given, they can check more than one box. And so there's no way for us to determine if they've checked one or more than one.

We have to fix that.

We will do our best to fix that for the adopted budget.

Okay. I'm sorry. You have a follow-up question. I just have a follow-up question, Council Member Lam. What is the discrepancy again?

Oh, when you look at the pie chart, it's supposed to be 100% when you add up all the numbers.

It's more than 100. More than 100. Okay. Thank you. 114%. Thank you.

Thank you, ma'am. And also the semi-pie chart on the side, when you add up all the numbers, it's not the same number as they indicated.

Oh, okay. Thank you, Council Member.

Thank you, Council Member, for pointing that out. Okay. Your next question, I want to remind the Council, if they want to discuss anything about the $937,000 that you have space to allocate, this would also be the time to do that? I just want to be conscious and respectful of everybody's time. Council Member Lam, your next question, please.

Yes. This will go back to the slide number five again.

Is it slide five or page five?

I do believe that we're on the presentation, Councilmember. Are you referring to slide five in the presentation?

Yes. Either presentation slide five or page 14 on the book. It's the same chart. Okay. When I reviewed the May 5th presentation, The revenue and other sources, it was 146. Oh, I'm talking about the column for 2026 and 2027. That was $146.4 million three weeks ago. And right now it's $149.9 million. It went up $3.5 million. And the expenditure was $147.1 million a few weeks ago. And right now it's $152.1 million. I asked you during the briefing, and I appreciate the explanation you provided at the time. Would you mind sharing your explanation again to the rest of the council members and to the public so everyone has a better understanding of this matter?

If you could put up the next slide, please, slide six, please. That effectively provides you the information what the revenue refinements are and what the expenditure refinements are and what's within our control and is not within our control. So that effectively provides the information to the public. And that summarizes what we talked about in the briefing.

Mayor, a follow-up question comes from . So the 26-27 revenue went up 3.5 million, right? Yes. The expenditure, as you said, right now is 152. And what happened to 146? 147. 147?

Yeah, a few weeks ago.

It was 147 for the expenditure. So it went up 5 million in expenditure.

Yes. Can we explain that, please? The revenues match the expenditure. The revenues will always match the expenditures in general. We have a balanced budget. And so part of it is the CalPERS actuarial update. Part of it is the proposals. And so we've talked about this before. Part of this is additional temporary staffing. We talked about this before as well. $5 million is a lot of jump from two weeks ago. Understandably so. But again, we need, yeah, understandably so. I'm not being flip about this, but we do correct the budget. It's a refinement of the numbers that we had in March. And once again, we cannot spend it unless we appropriate it.

Yeah, it just seems to me there has to be some kind of cost control. But keep going, Council Member.

$2 million of it is the one-time fundings with vehicles. Thank you.

Okay. Let's keep going. Did I answer your question, Council Member? Not really.

Okay. Let's not leave that alone. Then that $3.5 million is the revenue refinements, and then $1.5 million on the expense side is the actuarial information, $2 million of that. is the additional vehicles that are in the capital outlay. So we have to, once again, increase. If we're spending, we have to increase, match with revenues. I feel like I'm not getting this across. I'll need to do this in information.

Do you have one? Let's do one at a time, please.

Okay, so let me move on. I have a number of questions. Maybe I'll catch up with you. I still couldn't understand why.

I'll go back and look at the notes because this was meant to, the presentation was meant to reflect the briefings to be blunt. And so I captured the notes from all our briefings and it was meant to reflect the highlights. So obviously I've not done a good job of that.

This is on page 18. of the book. I don't know whether you can bring that up.

No.

It will take us just a minute for me to bring it up. Thank you.

OK. And what is your question? In the meantime, I might be able to address it with that.

I want to know, the first two row shows salary and benefits. Are this the total salary and benefit of all employees?

This is not the total compensation package for salaries and benefits. It does not reflect the dollars that were transferred through some of our other activities. A really good example is there is salary and benefits for a water utility worker who works 100% in a different fund.

Okay.

So this reflects just the general fund. So the water fund is not here. Money spent compensation is not here. So we have an entire cohort of people who work specifically on the utility side.

OK. No. That's a slide you present to us a while ago. Can you put that up, that page 18?

You want the same page that I had up, stay up? OK.

The budget page. Just stay up. OK. I have a number of questions on that. Do you have recollection of what's the total amount of salary? So you're saying salary is 2026, 2027 proposed budget is 72.4 million, but you are saying part of it charged to other funds.

On page.

And then do you have a recollection of what's the total compensation, including overtime? on salary.

So council member, if I may, um, on page 39 in the financial information section of the budget book, you'll have, um, the total personnel is 139.6 million, and then it breaks it out by the various funds. So it's about halfway through that page. You know, there we are. So about halfway down, right there. So at the top of this slide, you've got abridged appropriations. You have personnel services, non-personnel expenditures. Do you see that, Councilmember?

So total is 139.

139. 139 million includes overtime, salaries, and benefits. And then next to that are the various funds. Each column is general fund. water funds, sewer fund, capital funds, housing fund, and then other funds.

OK. And that was page?

39. Page 39.

39. Page 39 in the budget book. OK. Got it. OK. Now next question. Go back to page 18. If I go through the years 26-27 to 2027-28 the difference in salary went up by 2.2 million and then the next column went up by 2.3 and 2.3 and 2.3 for the next two column. Why is it a constant number?

It's actually a percentage, council member. It just happens to round to those numbers.

Yeah, I thought it's a percentage. If it is percentage, then why would it be about 2.3 million? It's not percentage of the previous salary?

It's a percentage of the previous budget, yes. So right now, our 2627 is off of any MOUs that we have or a prediction or what we've factored in as a contingency for MOUs that we may go into with our bargaining units that are currently in negotiations. And then we carry... in COLA, if you would, the cost of living increase in the out years as well, to be a conservative budget estimate to allow for that space for council to make those decisions, those policy choices.

That's what I understand. But the number doesn't make sense to me. Because the number is 2.3 increase each year, it doesn't click as a percentage increase.

It comes back to rounding on that one. I can get you exact numbers on that, council member. But it really does come back to a rounding.

Really?

for those percentages?

Well, let's say if you have $100, 3% increase is $103. And then 3% of 103 is a little bit more. And then let's say 106 or 107 of 3% is a little bit more. But you're saying the round off increasing, and then you don't see that. Yes.

I'd be happy to provide that to you, Council Member, and give you those details that we include in the forecast to give you a little bit more closer to those numbers if you'd like.

Okay. Now on the benefits, from 526 to 2627 is about $700,000 increase. But from 26, 27 to 27, 28, a jump of 2.4 million. And the next few years, it's also a significant increase, 2.6 million, 2.7 and 2.8 million increase each year. And it seems like this rate of increase is more than the salary rate. And I don't understand that.

It's going to vary because of the various pension and benefits that we have. Those are not necessarily at the same rate as salary. Your salary is going to increase, but there is still assumptions that are made on each and every one of those benefit factors.

But it seems like the benefit increase It's much more than salary increase.

I don't get that. It's not unusual for health care benefits to increase at a higher rate. So our health plan increased, I believe, is it 12%? For example, our health care plan from year over year was a 12% increase. projected. But once again, we get projections. So the balance, again, it is a forecast. It's not a commitment. It is on the best information that we have on the day that we publish. So the fact that it's up 12%, that's the best estimate that we get from folks that are estimating work.

Okay. Now, if I... Look at the total increase in expenditure. I notice from last year to this year, it's about $4 million increase. And then the next year, it's going to be $5 million and $6 million. And then it's kind of saturated in the next, on the 2029, 2030, and 2030 And 31 is a 6.2 and 6.4 increase in the expenditure. So it seems like for the past years, it's about a million dollar increase in expenditure. And then it's somehow saturated. It's no longer increased by a million dollars a year.

You're looking at a portfolio that each of those lines increases at a separate rate or a separate absolute cost. So our capital outlay fluctuates from year to year as we give money to the capital improvement program for particular initiatives that the council has approved. Debt services change from year to year because we have different services. Services implies when the contracts that we know that we have at a 3% rate year over year that our procurement department has negotiated, we have certainty about that. Some other contracts increase 5% year over year because that's what they negotiated and that's what they stood for. So what you're seeing is an amalgam of all the different things that we do, the services, the salaries, the benefits, the debt, capital outlay and all those operating transfers that come in and out at different rates. You're never going to see a concerted single rate because every rate has different information and factors. So that's what you use to inform this. This is a complicated process to sort of boil it down to a single percent year over year. You can't do that. We can't give you that would give you inaccurate numbers. I gave you a number that had a three percent increase of health care year over year. I would be sadly underestimating our increases for healthcare, which would be not great.

Okay.

So William, are you satisfied with some of the responses?

I understand, but I'm not sure. If you're not satisfied, then... Let's move on. I have some other questions I want to ask. Last year to this year, the full-time employees The FTE is about the same. The budget include approximately 50 vacancy positions. What was the total budget amount associated with these vacancies? And what happened to those funds? Was the unused funding transferred to the city reserve or used?

Any monies that are left over in the general fund go through the waterfall that the council approves on an annual basis. So the activities that we have for a waterfall are in our budget book, and it demonstrates how the first and foremost buckets that are filled are the budget stabilization, the contingency fund, then it goes to our PERS, and then it goes to additional things that the city has put on their list of interest for us to fund from any leftover money. A good example is in December of 2025, we represented to you a $6.2 million wind waterfall amount that was left over from the FY 2024-2025 audited. I focus on the word audited. Our final, absolute final numbers from the prior fiscal year. So we give those to you in December. And those numbers were basically refilled the buckets of the budget, of the budget stabilization fund, the contingency reserve fund. Once again, fulfilling the council's desire to keep a 16.67% of operating dollars in those two reserves. And then the balance went towards PERS. We didn't have anything to go anywhere else. So any dollars that are left over always go at council direction.

Do you have recollection of what was the total budget amount associated with those vacancies?

Pardon me?

Do you have any recollection what was the total budget amount associated with those vacancies, which we didn't fill?

We do not have that number offhand, but we can get that information to you. But to be very straightforward, while those particular positions are filled, we backfill because we still have to deliver levels of service. We still have, either we have something that's called a senior, we have project associates come in, we have retirees that come in. A very good example is the fact that my current procurement person is a part-time person who works 30 hours a week. So I personally pick up the other 10 hours of our work. Actually, it's another 20, but let's not go there. So essentially, while the work, while the FTE is not being filled, there is a certain amount of those dollars that are being spent to ensure that the levels of service are maintained. So what you're not seeing is that. So we have retirees stepping in in particular places. You've even talked to some of them. They presented here at council.

But we have 50 vacancy, which we budget for. And then we didn't fill those 50. So how much would that equivalent to?

I do not know what that number is. That number is currently actually 46. That 50 was, once again, a point in time. And so we don't have that number. But at the end of the day, anything that's left over, council member, follows the direction of council.

So, you know, this is, I really appreciate your inquisitiveness, and I really appreciate that you're the numbers guy, and I really appreciate that. But, you know, we have another phase to this. We have to do the other city council meeting. So is there a recommendation?

Yeah. I haven't finished my I know you have a lot. Yeah, I have a recommendation. First of all, I appreciate the significant amount of work the staff has invested in developing this budget proposal. However, the council only received the budget document a few days ago. There are still many details that require careful review and consideration. We need accurate time to fully analyze the information and evaluate priorities and understand the implication of the proposed budget. In addition, our new city manager just joined us yesterday, given the importance of this budget and its impact on the city future, it would be beneficial to provide him with significant time to familiarize himself with the proposed and offer his perspective. Therefore, I would like to propose a postponing the adoption of this fiscal year 2026-2027 proposed operating budget for two weeks to allow the council staff and our new city manager additional time for review and discuss before making a final decision.

So we have that proposal. So we have we have

No, I'd like to put my comment in. Oops, wrong way. You guys have your chance.

I'm sorry, I didn't hear you, Council Member Lea. I need your mic. Let me look for you. Okay, go ahead. Go ahead and press your.

Yes, it's yours.

Yeah. Thank you. I appreciate the detailed report, and I think that we, the Council, look at it in a different lens. You're satisfied with all the answers to your questions, and you tried to postpone this in another two weeks. I think it's ridiculous. Number two, in 2027, we have a deficit of 1.6. Director Luz?

We have a surplus of 1.6. 26-27. Oh, 2027-28, we have a deficit of 1.6, which we believe at this point is going to be covered.

Okay. So last meeting, the council successfully negotiated $700,000 cash from Lions Living. We didn't count that, right? Yes. Okay. So that reduced it down to, what, $900,000 deficit. We have Amazon distributions. We have Rivian. We have California Circles. Two projects. We have Lions Living. We have Toe Brothers on Main Street that we just did a ribbon cutting. And we have $134 million in reserve. I understand that the council is worried about looking at a 19.6. We are here asking you a lot of questions. I suggest next time when you bring back the budget, maybe leave a little note right next to the numbers where you remember clearly. And we can look at the notes as well. And each one of us had our chance and our opportunities in one-on-one briefing And I don't know why we spend, what, 30 minutes? Each one of us asked the same question, so that's my comment. Thank you for the report.

Thank you.

It's 292 million. It's worth all the time to consider every issues each representative of the community, each one of us, is worth the question, right? So let's take it as that. It's that so simple. 292 million, right, for a city like us. And if you look at the pie graph or when or how much of it is being spent for the community as to services, You can see it's very less than I had expected before I even became a council member in this city council. So let's respect that. Each and every one of us represents a portion of the community and is deserving of the answer to pass a 292 million budget. Councilmember Lam asked for two weeks. I asked for three weeks. I will not be here in two weeks, exactly two weeks, and I want to participate and share the voice of the people who voted for me in questioning this budget. That's an amendment to the motion, if I may.

What day would that be, Pauline? That's outside of our scheduled period of City Council meetings. Our last scheduled City Council meeting is for June, two weeks from now, June

16th so can we have a special meeting 22 is tuesday 23 uh the 16th possible we could have a special meeting yeah just to cover the budget so uh uh council member lamb would you uh if you're making a motion to you can would you amend that motion yes um when are you available how about this uh a motion that uh a special meeting be set on the week of the 22 let's pull the council

I'm sorry, Councilmember, we already have a motion on the table for two weeks. He would have to amend the motion, and then the seconder would have to accept that amendment to the motion. He'll make the motion, and you amend it.

I don't know if my comment was an amendment, but I did try to amend that that would be, instead of two weeks, three weeks. Three weeks continuance. And just to be fair with everyone, instead of setting it now, we can... set a date, the week of 22, so that everybody will be available on a certain date, whether it's 22, 23, 24, so that we just don't lock ourselves at this time. So the week of 22.

If I may, Mayor, I have had situations where councils have wanted to set a meeting on a week, and then it turns out there isn't an overlap in the schedule. I know it'll take a little bit more time, but I would recommend trying to get the date set now because if there's any reason you wouldn't be able to all be available at the same time, you'd probably want to give alternate direction at this point.

Is it okay for the motion? Tuesday, Tuesday the 23rd, is that it?

The thing is if my airplane crashes then I may not be here.

23rd? No, Ella.

23rd.

How about the 25th, just to be safe? That is the date for the State of the City Address, correct?

Can you speak up my...

Yes, sorry, on Thursday the 25th is our State of the City Address that is currently scheduled.

Monday, Tuesday.

How about the Friday, the 26th?

I will not be available that day.

The Monday, the 29th?

There you go. Council member for told you his face man with all due respect we're getting perilously close to the June 30th date, which is the absolute date that we need to adopt. So I'm getting more than a little bit concerned because we again can spend any money without an action. So if we're going to move we need to move this way versus out.

It would be about next week. Let's do it next week, next week.

We already have a meeting on the books, I believe.

We have a meeting scheduled for June 9th. It is currently scheduled to start at 5.30.

Let's do that, June 9th. Will the new city manager be able to at least browse educatedly?

That's a better question for the city manager to answer. So I'll leave it to them. But with all due respect, if I could ask, please. to provide us your questions in advance so we can research them. You all know that I hate to pull numbers out of my head because I'm not good at it. So I'd rather give you accurate numbers. So I am pleading, and you don't often hear me say pleading. I am pleading to get questions in advance so we can be fully prepared for any questions that you have, either on the dais or during briefings. We are always open. You all know I'm in my office and you can visit at any time to ask me any questions. And sometimes you may not like the answers, but you'll get a straight up answer from me. But if we have the questions in hand, if there's additional information that we can provide or color to that information or context to that information, we need time.

We always ask what we need during our briefing, and we're always promised, you know, actually you promised me four things today during my briefing. You said I will bring that to you on June 2nd, I will bring that to you on June 2nd. To my notes, it's always like that every briefing that I have, that staff will need to come back with that information next time. And that's why it's always a salutary to me saying, hey, I forget things. Can we make notes so that, you know, it comes back next time?

I will go back and look at my notes from your briefings. That's from everybody. And I will go make sure that I have them. And I will have responses for all your questions. But I've been putting together memo responses today. So...

So my recommendation, William, is go ahead and make the motion, unless you want to rescind it and have Vice Mayor go ahead and make the motion.

Are you OK with June 9? But the city staff has scheduled us a special meeting.

We already have a special meeting scheduled for next Tuesday, June 9.

I believe the proposal is to add this item to that special meeting.

So we have enough time? Yeah.

We can probably start it earlier.

It is a very full meeting, but this budget has to, obviously, you know, it's important.

Yeah.

We're just doing our due diligence. Start early. Start early. We can start at 3 p.m. to give them enough time to ask questions.

That's certainly within the council's discretion.

We can poll the council right now for consensus if you have a three, if you have three o'clock available for a start.

Let's do that.

I'll go with Vice Mayor Barbadio.

It's too early. How about 5?

It's already scheduled for a 5.30 start time. It's already a very heavy agenda.

All right. For the budget, I'm fine with 3 o'clock.

Can I give one last comment, Lynn?

We have Council Member Lynn.

I'd like to hear from Chief right now, but he was in the role of a city manager while we were working on this budget. And also our new city manager, when you had the opportunity to review the budget yesterday, would you please share your comments with us?

Thank you, Council, for inviting me to the microphone. Jared Hernandez serving as your police chief. My comments would be that this is not a budget that was formed overnight. There's been budget study sessions and Council briefings along the way. I think that I heard some questions today and some responses today. that may not have been in alignment. And had they been in alignment, we might be in a different position right now. I'm comfortable with the work that I've seen being done while I spent the time in the city manager's office. They've been working on the budget since I started there June, January 20th. And this has been an ongoing task. And I understand, as I learned in that role, that things do change. But there is a point in time where we have to hit the stop button. And the information that the finance director presented tonight with the $1.3 million surplus, yes, it's different than the previous number. But this is that point in time where the pause button needs to be hit. The way that budgets are amended for good or bad need to be adjusted is at the mid-year. And we're having a discussion about a budget where there's a surplus, which we're in a much better position than many other cities. Council has to be comfortable with that budget. To the Vice Mayor's comments, he has constituents that he needs to answer to, and I respect the Council's position in adopting something like this.

Thank you.

Madam Mayor and Council, My comments would be, honestly, I fell asleep last night going through the budget book after sitting through a series of presentations from staff on yesterday and spending time even with the finance director on today. My position is I find it just in my review to be a very solid document, and I see that staff has put a significant amount of time in it. In conjunction with that, as stated by the police chief, you have mid-year review that can address anything that we may encounter a few months down the road. But also as a finance director stated, and we did discuss this in a series of meetings on yesterday, there is a series of revenues that are not included. And you have to always remember a critical thing about a budget is that it is a living document, which means it is going to change. At this juncture with my precursor review, I see what staff has placed before you as a solid document. And do I see opportunities as we engage this budget year that there will be things that we can do that kind of pulls us more in line with looking at those out years? I do. But from what I see, as I sit here now, I will tell you, you have a solid document in front of you. And I would highly recommend you go forward as quickly as possible.

Okay. Thank you. So we have customer. Sure.

I, I think we have several meetings on this, but the, I think what was missed is there's always, uh, a focus, I think from the majority of the council to address the deficit. not just being balanced one year. When we do our own household budget, we don't look at one year. We look at, do I have enough for the next few years? I mean, for the next five years, 10 years. We're not even asking for 10 years. But what we're saying here is, I think, I mean, I should speak for myself, but what we see is one, continuously I think from the feedback from the council is address the deficit for the next at least two, three years, not just one year. Address the issue of giving more services. Because when we look at the budget, it always goes back and we allocate for the FTEs, for the needs, for vehicles, for everything else. But I think what the council is looking is, give us a bucket that we can do something for the residents. That's my take on that. And also, these questions are legit. numbers you know council member lamb is very technical he looks at every numbers as you can see even added all the the numbers on the graph having 100 or more than 100 percent we put a lot of hours too as an elected officials we just don't pass things like council member i mean vice mayor said 200 almost 300 million dollars We need to be accountable for those. That's our role, is to make sure that are we spending the right things for the right services for our community. We're not here to just pass the budget. We're here to scrutinize it, evaluate, and then make our decisions. And we can only make decisions based on data that is that is semi-accurate. I mean, I don't want to say the word accurate, but semi... Please, I'm talking.

I totally agree with you.

What I'm saying is, look at those gaps. Why are there gaps? That's my concern.

So that's all I want to say so I wanted there was a motion as I mentioned Customer lamb if you want to rescind your take back your motion and have customer I mean vice mayor Barbara deal make the motion or if you want to continue and he'll make an amendment to that motion Yeah, I can we we stick to a motion.

Okay, and then so um less less of him special meeting next week for the budget I Sounds like everyone is available on the 9th.

Okay, why don't we take a...

Yes, we still needed to get consensus of everybody could be here at 3 p.m. on the 9th.

Okay. So, yeah, let's have a special meeting just on the budget on the 9th.

All right.

Council Member Chiu, do you accept that amendment to the motion as the seconder?

I do, and I second that amendment. Just to be clear, added to the existing... agenda on June 9.

I'm sorry, I'm not clear. Are we taking back the motion and bringing a new motion, or is Councilmember Lam revising his motion?

I'm revising my motion.

Okay, then Councilmember Chua was the seconder.

Okay.

I was?

Yes. Can I make a quick comment? Sorry. Councilmember lamb statement was to come back only for the budget, but there's an existing agenda. So I think what the vice mayor was trying to say is that we want to keep the existing agenda, we just want to add budget to it. I just want to make sure the motions recorded correctly. So we don't.

If I may, as I understood the motion, the intent was to have the entirety of next week's special meeting begin at 3pm. And to add this budget item to that agenda. That's correct.

Okay, so thank you. And then I just wanted to confirm consensus. Vice Mayor Barbadio said you could do 3pm.

Yes. Yes.

Councilmember Chua.

Yes.

Councilmember lamb. All right. Councilmember Leanne.

Sure, I'll be here at 3.

And Mayor Montano? Yes. Thank you. Everybody has a 3 p.m. availability. And now we'll call for the vote on this motion if Mayor is so included.

Okay, so let's, so William made the motion and Council Member Chua seconded it, so now let's call for a vote.

Vice Mayor Bardew?

Aye.

Council Member Chua? Aye. Council Member Lamb?

Aye.

Council Member Leanne? Aye. Mayor Montano? And I am at aye. Thank you.

Thank you.

right so now we're moving on to announcements and future agenda items city manager do you have any announcements uh madam mayor i believe this is the end of the special meeting i might uh suggest that we do that step as part of the regular meeting which will be next so if you want to adjourn the special meeting and then take a few minutes break then we can uh do whatever we need to do on the technological side

need about five minutes in between the end of this meeting announcements combined yeah that's what i'd recommend all right so we'll just adjourn this meeting and then we will start back up with the next meeting okay let's start the next meeting and this meeting so i will call this regular meeting of the milpita city council of june 2nd 2026 to order so we'll need about five minutes before we call the regular meeting to order mayor okay we'll give a little break thank you I wanna hurry up and get out of here.