Audit shows city revenue $6.26 million over budget last year, as a forecast warns reserves could run dry in about four years

Saratoga closed the 2025-26 fiscal year with more money in its general fund than it started with, but the same audited report warns that the next few years look tighter.

The city's draft Annual Comprehensive Financial Report goes to the City Council Finance Advisory Committee at 4 p.m. Monday, Nov. 9, in the Linda Callon Conference Room at City Hall, 13777 Fruitvale Ave. The agenda, posted Thursday, also offers a Zoom option. The committee is being asked to recommend that the full council receive and file the report on Dec. 16.

Last year's numbers

Moss, Levy & Hartzheim, the city's outside auditor, gave the statements an unmodified opinion, the cleanest result an audit can produce, according to a staff memo from Administrative Services Director Ryan Hinchman.

The general fund ended the year at $23.47 million, up $2.75 million, and that was after the city moved $3.60 million into its capital improvement fund for council-approved projects. General fund revenue reached $38.82 million, a 10.8% increase, while spending reached $32.47 million, up 11.4%.

Revenue came in $6.26 million above the final budget. The biggest piece, about $2.69 million, was planning, building and engineering fees, which the report ties to large projects including the Saratoga Retirement Community and work connected to the state-mandated Housing Element.

Another $1.14 million came from intergovernmental money, mostly Federal Emergency Management Agency reimbursements the city had not budgeted; the report puts the FEMA payment for 2023 storm damage at $735,352. Property taxes beat the budget by $0.89 million.

The city's net pension liability fell $2.94 million to $7.23 million, which the report attributes mainly to CalPERS investment returns.

What comes next

The report's outlook section is less upbeat. Saratoga contracts with the Santa Clara County Sheriff's Office for police service, and that contract rose $2.6 million on July 1. The report names it the biggest factor in the general fund outlook and says the city is looking at reducing service levels and at regional partnership options.

According to the report, the city's five-year forecast has expenses growing faster than revenue, and unassigned reserves would be used up in about four years unless the city takes corrective action.

To balance the current 2026-27 budget, the council cut general fund capital spending by $2 million, skipped a $500,000 optional extra payment toward pension debt and made $400,000 in net operating reductions. Even so, the budget plans to draw $1.15 million from unassigned fund balance.

Other items flagged in the report:

• The last $820,000 in federal pandemic recovery money must be spent by Dec. 31 or returned to the U.S. Treasury. The city has earmarked it for the storm drain master plan and the water quality project in Saratoga Village.
• The city budgeted $1.1 million in excess state school-fund (ERAF) property tax, below the county's $1.4 million estimate, because the state could reduce or claw back those payments.
• The city's pavement target is a condition score of 70 or better. The last full assessment, from 2023, put the network at 69, and a 2026 assessment is waiting on delayed federal funding.

The committee will also hear an update from the city's property tax consultant, HdL Coren & Cone, at the same meeting.

Sources

saratoga.ca.us

saratoga.granicus.com

saratoga.granicus.com