TO: ADAM PIRRIE, CITY MANAGER
FROM: JEREMY STARKEY, FINANCE DIRECTOR
DATE: MAY 26, 2026
Reviewed by:
City Manager: AP
SUBJECT:
Title
2026-28 BUDGET PROCESS UPDATE
Body
SUMMARY
Staff is in the process of developing the City of Claremont's 2026-28 budget for adoption by the City Council in June. Beginning in late 2025, City staff conducted a public outreach process to solicit input from the community on priorities that could be addressed in the upcoming budget.
This report provides an update on the status of the preliminary budget and discusses how the budget for 2026-28 will address objectives provided by the City Council during their priorities setting process.
It is important to note that staff is still in the process of developing the City's budget for the next two years, and that projections for revenues and expenditures may change as the budget process progresses.
RECOMMENDATION
Recommended Action
Staff recommends the City Council receive and file the 2026-28 Budget Process Update and provide any additional direction to staff.
Body
ALTERNATIVE TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information.
FINANCIAL REVIEW
The staff cost to prepare this report and administer this project is estimated at $2,900 and is included in the operating budget of the Financial Services Department.
ANALYSIS
Background
As part of the City Council Priorities and Objectives process, the City engaged Jacob Green and Associates (JGA) to facilitate two community forums and a City Council Priorities Workshop. The City also opened a community survey on December 4, 2025, that asked participants for their opinions on City programs and services, priorities for the City Council, and suggestions for improvements. At the workshop, the City Council made slight modifications to the seven existing priorities, which were initially approved in April 2022. The City Council also provided direction to staff on work plan objectives that fall under the seven overarching priorities.
The City Council reaffirmed the following Priorities:
• Preserve Our Natural, Cultural and Historic Resources
• Strengthen Long-Term Fiscal and Organizational Health
• Invest in the Maintenance and Improvement of Our Infrastructure
• Ensure the Safety of Our Community through Community-Based Policing and Emergency Preparedness
• Increase Livability in Our Neighborhoods and Expand Opportunities for Our Businesses
• Promote Community Engagement through Transparency and Communication
• Develop Anti-Racist, Anti-Discrimination Policies and Plan to Achieve Community and Organizational Diversity, Equity, and Inclusion
At its meeting on March 10, 2026, the City Council approved the 2026-28 City Council Priorities and Objectives document, which informed the budget development process for 2026-28 (July 1, 2026 through June 30, 2028). The objectives include a variety of specific projects, program enhancements, and policy recommendations for staff to implement. This report will outline how the preliminary budget addresses the priorities and objectives recently adopted by the City Council.
2026-28 Preliminary Revenue Estimates
The process of developing revenue estimates includes reviewing current revenue trends, including cost of living factors in future revenues, and evaluating commercial and residential development activities that may be taking place over the course of the next two fiscal years. The process of gathering information to continue to refine revenue estimates will continue throughout the budget development process, and it is likely that the revenue estimates presented in this report will be refined as the adoption of the 2026-28 budget approaches.
The preliminary revenue estimates for 2026-27 and 2027-28 by fund type are summarized in the table below:
Total projected City revenues for 2026-27 amount to $68,470,248 representing an increase of 5.93 percent over the adopted budget for 2025-26. Total projected revenues for 2027-28 amount to $70,468,118 representing a decrease of 2.92 percent over preliminary estimates for 2026-27.
General Fund
General Fund revenues support many of the core services provided by the City of Claremont, including public safety, planning, community improvement, youth and senior program administration, street repair, building maintenance, and City administration. Accordingly, much of the discussion of projects and programs in this report will focus on the General Fund.
Preliminary estimates of revenues for the City's General Fund in 2026-27 amount to $41,276,472. This reflects an increase of 12.75 percent over the adopted budget for General Fund revenues for 2025-26 and is in line with actual revenues received in prior years. Projected General Fund revenues for 2027-28 amount to $43,129,470, an increase of 4.49 percent over the preliminary budget for 2026-27.
The table below shows preliminary General Fund revenues by category for 2026-27 and 2027-28:
General Fund revenues are derived largely from taxes. The most significant sources of tax revenue include Property Tax, Sales Tax, Transient Occupancy Tax (TOT), Business License Tax, and Utility User Tax (UUT). Together these taxes account for approximately 82 percent of total General Fund Revenues. These revenue sources are discussed in more detail below.
Other sources of General Fund revenue include licenses and permits, fines and forfeitures, use of money and property, revenue from other agencies, charges for services, and miscellaneous revenues.
Property Tax
Property tax is assessed at a rate of one percent on real property within the City of Claremont. The Los Angeles County Assessor's Office determines the value at which properties are assessed for the purpose of levying property tax. Property taxes collected by the County are distributed among several taxing entities, including the County, Claremont Unified School District (CUSD), the City of Claremont, and several small special districts. Claremont receives approximately 11.4 percent of this general sales tax levy.
The projection for property tax revenue for 2026-27 is $15,257,500. This figure reflects an increase of approximately 12.71 percent over the prior year's budget of $13,537,252 and is consistent with growth experienced and recent projections. In 2027-28, property tax revenues are expected to grow by an additional 4.31 percent to $15,915,000. The projected increases in property tax revenue are the result of several factors. First, Proposition 13 provides for the annual increase in the assessed value of taxable property by the Consumer Price Index (CPI), capped at an increase of two percent. Staff estimates that the CPI increases for 2026-27 and 2027-28 will be approximately 2.0 percent.
Proposition 13 also permits the reassessment of property at market value when it is sold or transferred to a new owner, or to account for new construction or the reassessment of properties that had their assessed values reduced in the past due to appeals. These factors account for the additional projected increases in property tax revenue in 2026-27 and 2027-28.
Sales Tax
Sales Tax is collected by retail establishments in Claremont at a rate of 9.75 percent and remitted to California Department of Tax and Fee Administration (CDTFA). CDTFA then distributes one percent of the sales tax to the City. The projection for sales tax revenue for 2026-27 is $9,514,000, an increase of 8.89 percent over the adopted budget for 2025-26. The estimate for sales tax revenues in 2026-27 reflects current trend information and is consistent with current levels of revenue being received by the City. Staff expects sales tax revenues to grow by a further 4.07 percent to $9,901,000 in 2027-28.
Increased revenue projections from the 2025-26 budget are the result of several factors. Strengthening auto sales combined with increasing new and used car prices have resulted in actual receipts that have exceeded budgetary estimates in the current year, and staff expects this increase in revenues to remain over the next two years. Additionally, the impact of the allocation of taxable online sales to the City via the County pool from sales by online retailers such as Amazon has resulted in additional revenue growth. This increase in revenues from online sales is the result of changes in State law that require online retailers to collect and remit sales tax for purchases shipped to California. As staff receives more data about sales tax receipts in the current year, the revenue budget for sales tax may be amended to account for these factors more effectively.
Utility User Tax (UUT)
The Utility User Tax is collected at rate of 5.5 percent on fees for utility services such as electricity, water, gas, cable television and telephone. The projected UUT revenues for 2026-27 amount to $5,880,000, an increase of 11.53 percent from 2025-26. UUT revenues are expected to grow by a further 6.34 percent in 2026-27 to $6,253,000.
Accounting for most of the increases in UUT revenues are those related to the electricity, gas and water utilities. Increasing electricity, gas and water rates are the cause of the increase in the UUT on these utilities.
Transient Occupancy Tax (TOT)
The City's Transient Occupancy Tax is collected at a rate of ten percent on the room rate for hotel stays of thirty days or fewer.
The projection for TOT revenue in 2026-27 is $2,020,000, an increase of 12.28 percent over the prior year's adopted budget. The revenue estimates also include estimates of additional TOT collected with the opening of the Residence Inn by Marriott. Staff has included an increase of 3.96 percent to $2,100,000 for TOT in 2027-28.
Business License Tax
The Business License Tax is assessed on the gross receipts of businesses operating in the City of Claremont. Projected revenues for 2026-27 from this tax are estimated at $1,250,000, an increase of 7.02 percent over the budget for 2025-26. The budget for 2027-28 projects revenues of $1,290,000, an increase of 3.20 percent. The preliminary budget for 2026-27 is in line with actual receipts for Business License Tax receipts in the current fiscal year.
Licenses and Permits
Licenses and Permit fees are collected on public works, grading and building permits within the City of Claremont. Projected revenues for 2026-27 from these revenues are estimated at $2,040,800, an increase of 38.78 percent over the budget for 2025-26. This increase is attributed to continued growth in residential and College development and fee increases that went into effect in 2025-26 for building and grading permits issued by the City. The budget for 2027-28 projects revenues of $2,090,800, an increase of 2.45 percent.
The remaining General Fund revenue sources comprise a smaller portion of overall revenues, and the preliminary estimates for the next two years show slight overall increases in 2026-27 and 2027-28. Staff will also continue to monitor these revenues as the adoption of the budget approaches to determine whether some may be adjusted.
2026-28 Preliminary Expenditure Estimates
Prior to the beginning of the budget development process, Department Heads received general direction from the City Manager to prepare a budget that captured costs and projected increases for existing levels of service without adding costs for new or expanded programs. The exception to this direction was the consideration of the allocation of resources to achieve the objectives identified by the City Council during their priorities setting process.
Over the last two years, the City has faced significant increases in costs for contract services, utilities, and insurance.
The preliminary expenditure estimates for 2026-27 and 2027-28 by fund type are summarized in the chart below.
Total preliminary expenditures and transfers out to other funds across all the City's funds amount to $78,222,996 in 2026-27. This represents an increase of approximately 5.24 percent from the 2025-26 adopted budget of $74,326,140. Drivers of increases include one-time purchases of vehicles and equipment, rising costs for goods and services, utilities, and insurance, and scheduled staffing cost changes from employee contracts. Preliminary expenditures for 2027-28 total $77,324,512, a decrease of 1.15 percent over preliminary expenditures for 2026-27.
2024-26 General Fund Expenditures
The City's General Fund supports many of the core functions of the City, including public safety; planning, building, engineering, and community improvement; youth, senior and recreation programs; street repair; landscape, right-of-way and park maintenance; building maintenance and City administration.
Preliminary estimates of General Fund expenditures for 2026-27, including transfers out to other funds of $2,822,461, amount to $41,004,916. This represents an increase over the adopted 2025-26 General Fund budget of 12.0 percent. The preliminary estimates of General Fund expenditures for 2027-28 amount to $42,867,062, including transfers out to other funds of $2,484,777. This represents an increase of 4.54 percent over the preliminary expenditure estimates for 2026-27.
The chart below shows total General Fund preliminary expenditures for 2026-27 and 2027-28 by department:
The budget development process uses information on the increases in many of the major costs of General Fund to project expenditures for the next two fiscal years.
Cost increases, specifically those related to personnel, insurance and utilities, are the most significant factors in the General Fund's growing projections for expenditures.
As a service organization, the City's personnel costs represent a significant portion of the City's General Fund, accounting for approximately 65 percent of total General Fund expenditures in 2026-28.
Base salary costs are expected to increase due to negotiated salary increases and employee merit increases based on annual evaluations. These merit increases are available to employees who are not yet at the top step in the twenty-step pay range for their positions. Approximately half of the City's employees are not at the top of their salary range, and therefore eligible to receive a merit increase.
The City provides retirement benefits to its employees through the California Public Employees' Retirement System (CalPERS). CalPERS establishes its employer contribution rates annually, based on the cost of the current year of service, as well as the amortization of any unfunded liability that exists.
Other benefit costs also increase as a result of the fact that they are calculated on a percentage of base salary. The preliminary budget also proposes the addition of a number of new positions, resulting in additional personnel costs in 2026-28. In total, employee salary and benefit costs are expected to increase by approximately $1.31 million or 4.97 percent in 2026-27, and approximately $1.48 million or 5.64 percent in 2027-28.
Additional discretionary PERS payments of $500,000 each year are also included in the 2026-28 budget to reduce the City's pension liabilities.
The City of Claremont obtains general liability, workers' compensation and property insurance coverage through the California Joint Powers Insurance Authority (CJPIA). The CJPIA determines the amounts of the premiums for this insurance coverage based on the City's claims history and the funded status of the insurance pool to which the City belongs. Over the last several years, the City's insurance costs have risen steadily, with 2026-27 insurance costs expected to increase by approximately $903,238 or 20.2 percent over the adopted budget for 2025-26. Insurance costs for 2026-27 are expected to increase by an additional $959,842 or 17.88 percent over estimates for 2026-27.
Administrative Services Department cost increases of approximately $300,000 are related to legal services and election expenses in 2026-27.
Community Development Department cost increases of approximately $570,000 are primarily the result of consultant services required for various studies and contract support to implement City Priorities and Objectives during the next two fiscal years.
Community Services Department cost increases of approximately $600,000 are primarily due to increased contract services costs for janitorial services and increased utility costs for City facilities. The 2026-27 Community Services Department budget includes $260,000 for street and roadway sign replacements.
Financial Services Department costs increases of approximately $160,000 are due to expected cost increases for annual audit services expected and an additional $88,000 in 2027-28 for the completion of user fee study and software enhancements to our business licensing software.
Recreation and Human Services Department costs increased by approximately $500,000 due to additional part-time staff added to enhance staffing and to expand hours at the YAC, TAC, Camp Claremont and the Hughes Center. Additional contractor costs are also budgeted for contract classes.
Current Status of the General Fund Budget
Total projected revenues for 2026-27 are $41,276,472, against preliminary expenditures and transfers out of $41,004,916, resulting in a surplus of $271,556 in the first year of the budget. Preliminary General Fund revenues for 2027-28 are $43,129,470, with projected expenditures and transfers out of $42,867,062, resulting in a surplus of $262,408 in the second year of the budget. Staff has developed a budget that provides these surplus funds which will allow for additional increases to the City’s reserves.
The current estimates for revenues and expenditures for 2026-27 and 2027-28 are shown in the table below.
It is important to note that the City is still in the process of making estimates in the preparation of the 2026-28 General Fund budget. Accordingly, the projections for revenues and expenditures could change, as well as the projection for any surplus that may result.
2026-28 City Council Priorities and Objectives
City Council Priorities and Objectives
During the recently concluded City Council priorities setting process, the City Council provided direction to staff on objectives to be included in the City's work plan for the next two years. The objectives include a variety of specific projects, program enhancements, and policy recommendations for staff to implement. The attached table of City Council Priorities and Objectives shows how staff proposes to address each of the objectives in the budget for the next two years. In many cases, projects or programs will only require the allocation of staff time to complete objectives, however, other projects or programs may require the identification and allocation of funding for consultants or other project costs.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City's strategic and visioning documents and finds that it applies to the following: Council Priorities, General Plan, and the 2024-26 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by:
Jeremy Starkey
Finance Director
Attachment:
City Council Priorities and Objectives