Half Moon Bay budget faces $2.1 million structural deficit

Still, however, its outlook for the 2026-27 fiscal year puts the combination of operating and capital expenditures at around $25.7 million and its revenue at approximately $24.2 million, creating an operating deficit of $1.5 million and a structural deficit of $2.1 million. 

Some of the increasing expenditures come from fully funding the chief building official staff position, and a drop in revenue can be attributed in part to no longer receiving $380,000 in golf facility fees, as well as the ongoing battle for in-lieu vehicle license fee money. The state’s failure to relinquish that money to San Mateo County due to the bureaucratic mechanisms that deploy it has hit local cities hard. 

And as always, Half Moon Bay continues to struggle with its reliance on hospitality and its subsequent transient occupancy tax as a major funding mechanism. That is predicted to stay largely flat for the upcoming year, at $9.9 million. 

“Because it’s structural, because we’re a visitor-serving community, that’s the structure imposed on us, so therefore, we’re pretty limited in any steps we can take to keep ourselves afloat,” Mayor Debbie Ruddock said. 

The city is leaving itself open to future possibilities for revenue-enhancing measures to mitigate that volatility — “generally that means a tax; the T word,” City Manager Matthew Chidester said. 

It’s not all bad news for the city, however — its reserves will be fully funded at $12.5 million, or roughly half its expenditures, and the unassigned fund balance is expected to be $2.4 million by the end of the upcoming fiscal year. 

Half Moon Bay also has a dedicated plan to alleviate its structural deficit, which is projected to stretch into the 2027-28 fiscal year. At its most severe, that could include cuts to city services, but Half Moon Bay isn’t there yet, staff assured councilmembers. The city is continuing to use its reserves and maximize revenue collections in the meantime. 

“I’m happy to see this budget this year and be able to explain, not only are reserves back at 50%, we have a plan to keep our money in check,” Councilmember Paul Nagengast said.