In part due to an unexpected state reimbursement, Foster City now projects a $5.4 surplus this fiscal year — which ends in June — despite an expected deficit from earlier estimates.
Back in June, when the city adopted its initial 2025-26 budget, the city planned for a $3.8 million shortfall and a continued structural deficit over at least the next five years. Much of the shortfall was because the city opted not to include in its budget about $2 million worth of revenue that was supposed to be a state reimbursement.
The reimbursement owed to Foster City, in addition to most cities countywide, is related to vehicle license fees paid by residents, which are directed to the state and then subsequently reimbursed to cities, typically by the following fiscal year. But the payback process is not straightforward. Instead of simply giving cities and counties back the amount of fee revenue collected in their respective jurisdictions, the state uses a complicated reimbursement formula associated with the types and amount of school districts in its area. With the state facing its own budget challenges, the VLF inclusion for the county has remained in flux.
However, the city has received some of its payment from the state recently.
“We assumed there would be no shortfall reimbursement from the state. Ultimately, at the last minute there was a partial reimbursement of roughly two-thirds of the shortfall to the tune of $1.5 million,” Finance Director Nate Cruz said, adding that the state still owes the city $750,000 for the remainder.
Other revenue sources were on track, Cruz added, including the $42,000 worth of property tax received in this fiscal year’s first quarter.
“We only received $42,000 in the first three months, and that’s totally normal. Property tax only comes in the second and fourth quarter, so every city in California has very little property tax in the fourth quarter,” Cruz said.
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