Foster City sees unexpected surplus

Part of the increase is related to the new business tax, Measure V, which generated about $4 million, roughly $2 million more than projected.

“When we approved the budget, we didn’t know what the result of Measure V would be,” Finance Director Nate Cruz said.

The new structure, which taxes companies based on their revenue not employees, increased the rate for many businesses, ranging from 75 cents per $1,000 in gross receipts to $3 per $1,000 in gross receipts, depending on the firm’s revenue.

“We ended the year in a very strong position, compared to a budgeted deficit of $6.7 million,” Cruz said. “That also results in a fund balance of almost 110% of expenses.”

The favorable figures are also a result of $2 million more in permit revenue than expected, particularly from a Gilead project on Lakeside Drive, as well as higher interest income. On the expenses side, lower personnel costs due to position vacancies led to more than $4 million in savings. Cruz added that while the city ended up receiving some of its vehicle license fee revenue — a complicated reimbursement-based funding source — it was not initially included in budget projections due to state-level uncertainty.

“Fiscal year 24-25 was the first fiscal year we did not budget shortfall reimbursement from the state,” Cruz said. “It did come through, however, at the last minute.”

According to a staff report, however, the city is still facing financial headwinds, including dips in transient occupancy tax revenue, “which remain below pre-pandemic levels,” as well as “high office vacancy rates and economic uncertainty driven by rapid shifts in federal policy.”