Rob AriasThe City of Emeryville held a Special Study Session at the May 6 City Council meeting to review the city’s five-year general fund projections and kickoff adoption of the 2025–2027 biennial budget.
The session provided a sobering look at Emeryville’s financial outlook with shrinking revenues and growing structural deficits.
The most recent two-year budget, ending in June 2025, reflected these strains, with the 2024–2025 deficit increasing from a projected $2.7 million to $8.8 million.
The city’s structural budget challenges are not new. Since 2020, Emeryville has received repeated warnings in its budgets about persistent deficits, The gradually worsening deficits are forecast for an estimated $14.6 million by 2029–2030.
Plummeting Development Fees & Sales Tax, IRS Settlement Blamed
Revenue underperformance has exacerbated the situation according to the City’s Staff report. The primary sources of these include plummeting development fees from a lack of construction activity as well as a $1.3M drop in sales tax revenues.
These fluctuations are paired with higher than anticipated labor agreements. The city also absorbed an unanticipated $2.1 million settlement with the IRS that required the City’s integration into the Social Security system.
Sutter Health Transfer Tax Windfall
Despite the gloomy outlook, things could have been worse were it not for the city’s commercial property transfer tax.
A one-time windfall of $11.2 million generated by Sutter Health’s purchase of the BioMed Realty site—temporarily boosted Emeryville’s financial standing.
On the downside, as a healthcare nonprofit, Sutter will not be subject to property or business taxes moving forward, eliminating a potential ongoing revenue stream.
Consultant Warns of ‘Unsustainable Deficits’ and Reliance on Reserves
Finance Consultant Brian Moura was tasked with providing the city an objective outlook and detailing potential actions to mitigate these deficits.
“The budget was a little unusual in my experience,” Moura noted. “Rather than keeping the general fund at a sustainable level instead was focused on keeping the economic uncertainty reserve at a certain level, which seemed to me a little bit backwards.”
While current reserves allow the city to remain above its 20% reserve benchmark in the short term, Moura warned that continued reliance on reserves alone would significantly deplete those funds, leaving the city vulnerable in the long run.
Moura also cautioned that the GFOA (Government Finance Officers Association) national standard recommends that local governments maintain an unrestricted general fund balance of no less than two months worth of cash, equal to 16.7%. “What’s notable here is that the city’s current budget only met the standard in the first year, but did not meet that standard in years two through five.”
Moura commended the city for taking proactive actions at the recommendation of the budget committee to address the deficits. These included transferring $3.2M in residual property tax payments to the general fund, and transferring $7M from the economic uncertainty and general capital funds to bring the general fund up to the 20% goal.
Council Weighs In
Following Moura’s presentation, Emeryville’s five councilmembers weighed in with their perspectives and personal insights.
Councilmember Sukhdeep Kaur raised the idea of a PILOT agreement (payment-in-lieu-of-taxes) with Sutter Health, referencing similar arrangements in other Bay Area cities such as Palo Alto, Mountain View and San Carlos. Moura confirmed that cities have successfully negotiated either one-time or ongoing payments from tax-exempt organizations like Sutter to compensate for lost municipal revenue. However, he cautioned that such agreements require significant time and legal resources to develop. “In the San Carlos example, I think we spent about two or three years pulling all that together. So, it won’t happen overnight,” Moura cautioned.
Councilmember Kalimah Priforce inquired about Emeryville’s business license tax rate cap how the city stacked up to neighboring city’s. Moura explained that Emeryville’s current tax structure—unchanged since the 1990s—includes a high cap, currently affecting a single business paying $455,000 annually. He suggested that the city’s upcoming study with consultant HdL Companies could explore modernization options, such as reducing the number of business categories, raising or eliminating the cap, and benchmarking against neighboring cities.
Priforce also questioned whether the city might need to add staff or pay consultants to support grant-seeking or revenue strategy implementation. Moura warned that relying on grants or any one-time funds designated for specific projects would not adequately tackle the city’s large deficit.
Mayor David Mourra emphasized the importance of stimulating economic activity and attracting more business to improve tax revenues without necessarily increasing rates. “Hopefully we can change that flat-line economic forecast if things start to turn up for the city.”
New Revenue Measures or Budget Cuts to be Considered
To remedy these escalating deficits, it’s likely The City Council will consider placing one or more revenue measures on the November 2026 General Election ballot and/or future General Election ballots in 2028 and 2030 (measures can only appear on general election ballots).
The measures they are exploring and their potential general fund revenue include:
- Business License Tax Rate Increase ($3.9M -$9.7M/yr.)
- Parcel Tax or Community Facilities District ($3.5M – $5M/yr.)
- Quarter Cent Sales Tax Increase ($2.1M/yr.)
- Utility Users Tax increase by 2% & add video ($1.9 M/yr.)
- Transient (Hotel) Occupancy Tax increase by 2% ($900K/yr.)
These measures could collectively generate up to $20M in additional revenue per year.
Should these measures not be pursued or are unsuccessful, budget cuts and staff reductions are almost certain.
Maintaining the city’s typical 5% staff vacancy rate (roughly 19 employees) would typically save 1.4 to 1.6 million dollars a year.
Next Steps …
While no formal actions were taken at the May 6 meeting, the Council signaled strong interest in moving forward with feasibility studies and outreach for potential revenue measures, to be considered more seriously in the fall.
The next step in the budget process will be a review of the draft 2025–2027 budget by the city’s budget committees throughout May. Adoption by council is slated for the June 3 meeting.
A replay of this May 6 study session can be watched above at [4:55 – 46:45].
Is this an AI image? I do not recall this event.
It’s a real aerial photo of Emeryville composited with an AI rendered “storm” moving in. It’s suppose to be a metaphor.
All socialist organizations collapse.
Rob, every city in the US has these same issues and is looking to solve them. Here’s a link to an article that I have found useful to a deeper understanding of these various elements. ➡️ Why history shows these tariffs may be unsustainable
➡️ How fiscal and trade policy are colliding
➡️ What rising uncertainty means for growth, inflation, and markets
📘 Read the full article on our website → https://lnkd.in/gZWUTXAj
I want to point out that city committees that study these issues takes their work seriously. You can see these problems are complex and critical to our city’s efforts to try to stay ahead of the curve in very challenging times.
The homeless camps closures around the Bay, Oakland and Berkeley will soon start to affect Emeryville’s budget and public works as seen by the new campers at Emeryville.