DAVIS, CA — The Davis City Council will continue its budget discussions this week on the proposed biennial budget for fiscal years 2025–26 and 2026–27, with city officials projecting $246.3 million and $253.2 million in total spending, respectively.
Of those totals, the General Fund—the city’s primary discretionary account—is expected to comprise $96.9 million in FY26 and $98.2 million in FY27.
At the heart of the previous discussion was the challenge of balancing immediate service needs with looming long-term fiscal shortfalls. City staff believe that while the proposed budget maintains current service levels, it also reveals structural gaps in future years that will need to be addressed to avoid depleting city reserves.
Interim City Manager Kelly Stachowicz and Finance Director Elena Adair, in a staff report to the Council, noted that General Fund reserves are projected to remain flat at around $10 million, or roughly 10% of expenditures, well below the city’s target of 15%.
While the budget avoids cuts in core services, staff warned that, without intervention, Davis would continue spending more than it brings in until at least 2035—when revenues are finally expected to outpace expenditures.
To counteract this unsustainable trajectory, consultants from Baker Tilly recommended the city find up to $3 million in ongoing savings or new revenue sources starting in FY27. City staff concurred, suggesting that the FY26 budget be approved as proposed, while the city embarks on a deeper restructuring effort in the coming year.
The largest budget increases across departments were largely attributed to structural cost drivers such as pension obligations, worker compensation premiums, and deferred maintenance needs.
Police and fire department budgets saw notable increases due to rising pension and benefits costs, fleet replacements, and efforts to close staffing gaps from prior years.
The Police Department alone is slated to rise from $26.6 million in FY25 to nearly $30 million by FY27.
The Urban Forestry program—bolstered in recent years to address tree maintenance and the Urban Forest Management Plan—nearly doubled in cost over four years. This includes new positions and expanded services, with further review expected after the Council’s summer recess.
With the sunset of many pandemic-era grants, the General Fund is now absorbing the full cost of homelessness programs, including the Respite Center and shelter operations.
The Social Services Department budget will grow to over $5.2 million in FY26. The proposed budget includes approximately $8.5 million in FY26 for pavement maintenance, using a mix of local and state funds.
Council members expressed interest in frontloading additional street maintenance dollars to improve long-term road conditions.
Beyond numbers, Council discussions spotlighted broader policy questions about service delivery and priorities.
The city plans to review the entire homelessness service ecosystem—including the Respite Center—later this year, potentially leading to shifts in structure or funding.
Similarly, a policy and programmatic review of the urban forestry program is expected in late summer or early fall. Both efforts may carry future fiscal implications and shape budget adjustments in FY27 and beyond.
To accommodate rising costs and new priorities, staff outlined a range of potential trade-offs.
The city still holds $930,000 in unspent Crisis Now funds and $350,000 reserved for Veterans Memorial Theater renovations.
While both projects have merit, councilmembers may choose to redirect some of these funds. The proposed budget adds several staff positions, including a new downtown police officer ($240,000), aquatics maintenance technician ($150,000), and two limited-term accountants.
Council may opt to defer or eliminate some of these hires to free up funding. Staff is also reviewing long-vacant roles for relevance, such as a second management analyst in Social Services and two planning positions in Community Development.
The city could also defer contributions to its vehicle and IT replacement funds for one year, potentially freeing $2.9 million in FY26, though at the cost of future maintenance needs.
Major infrastructure projects present another fiscal crossroads. Staff flagged several capital improvement projects that hinge on timely city matching funds to preserve state or federal grants.
Projects such as the I-80/Richards Interchange, 14th Street improvements, and Anderson Road/Chavez Elementary upgrades all require local funding commitments. Deferring these projects risks forfeiting millions in grant dollars or incurring reimbursement obligations.
For example, the Anderson Road project carries $3 million in grant funding and matching dollars from DJUSD. A delay could jeopardize both the project and future grant eligibility.
The City Council is expected to provide final direction to staff on June 17, when a finalized budget will return for adoption. In the meantime, the city’s Fiscal Commission has submitted preliminary recommendations and plans to meet again on June 4 for further input.
While the FY26 budget is on track for passage, the path forward beyond 2026 remains uncertain. With pension costs rising, infrastructure aging, and core services expanding, Davis faces the challenge of crafting a more sustainable fiscal future—without sacrificing the programs that define the city’s quality of life.
