Half Moon Bay strategizes for fiscal sustainability

“What we’re showing here right now — the fiscal cliff is two years away,” he said. “At that point, we’d either have to deplete our reserves, or in a few years, we'd still have to make those cuts and have no reserves.” 

The city — which is still struggling with a hotel occupancy tax that hasn’t fully rebounded from the pandemic — might have to make difficult choices to cut core services in the near future, Chidester said. 

For the upcoming fiscal year, however, Half Moon Bay has been able to stave off its true structural deficit, which should sit at around $3 million, by not putting the typical yearly payment of $562,000 into its risk management fund and accruing one-time revenue of $912,000. 

In addition, the city’s general revenue is projected to increase nearly $3 million for the 2025-26 fiscal year. That includes a $356,000 projected increase in hotel taxes and funding from recently-passed sales tax Measure M. 

But Krystlyn Giedt, the Half Moon Bay Chamber of Commerce CEO, warned councilmembers to take projected hotel tax increases with a large grain of salt given worrying statistics on international travel decreasing and global economic uncertainties. 

“Transient occupancy tax is still projected to go up, and I do not think that is a safe call [given the] turmoil going on federally, internationally,” she said.

And while revenue is projected to increase, expenditures are also on an upward trajectory with no end in sight unless cuts to core programs are made. That’s largely due to contractual obligations and debt and pension obligations. 

The city also has several fully-funded vacant positions, Chidester said, and noted that he would be looking into a city government restructuring that could potentially create efficiencies and save money. 

There’s several elements of the city’s budget woes — including an expiring golf facilities fee and transition into a more user-friendly interface for residents to peruse the budget — that could have been addressed earlier, councilmembers said. 

Currently, the city’s budget hearing to adopt the recommendations is set for June 17. 

“I think it would have been great if this process started earlier,” Vice Mayor Debbie Ruddock said. “The budget is our most important document, it’s our blueprint for operating. It just feels like we've been jamming it. I want us to slow things down next time.” 

City priorities

At a special City Council meeting held before budget discussions June 3, councilmembers made clear that Half Moon Bay’s fiscal health was paramount.

It’s important that Half Moon Bay get ahead of its looming structural deficit by setting plans for two or even four years into the future, Mayor Robert Brownstone said.  

“I like the idea of multiple-year budget planning with certain levers,” he said. “If we don't hit a certain goal, we have certain consequences that kick in. I don’t want to keep spending down our rainy day funds and our reserves.” 

Continuing to use economic uncertainty reserves and unassigned fund balances to balance the city’s budget can’t continue forever, Chidester said. 

“We’ve had several years coming out of a recession and economic challenges from the pandemic. Some of our revenues have not recovered the way we have hoped, and costs have obviously escalated,” he said. “We know this isn't a sustainable practice and steps need to be taken to make change.” 

The city also has other priorities for the next two years, however, including economic development, community health and safety — including evaluating its contract with the San Mateo County Sheriff’s Office — and continuing its mission of providing housing across the wealth spectrum. 

If the city is able to focus on its core mission of bolstering streets and infrastructure, it will in turn benefit local downtown businesses, Ruddock said. 

“We’re in a tough position right now. I think we need to zero in on those things [essential to] our core mission that we can do better,” she said. 

Stormwater drainage and watershed management repeatedly came up from councilmembers and community members alike as areas of focus for health and safety within the city. 

Also top of mind for residents is an upcoming Coastal Commission hearing on the Redondo Beach gate, with an upcoming appeal June 13 contending that the gate is unauthorized and blocks public beach access. 

“I think we need to get that delayed as soon as possible and use time to strategize about the impact to the city of not closing the gate,” Ruddock said. “What we want is probably some collaboration with other jurisdictions who are feeling the pain here and try to make a bigger case.” 

Councilmember Deborah Penrose, a stalwart advocate for affordable housing on the council, emphasized that the city should remain focussed on its housing element, building new housing and applying for the state and federal grants that would make that possible. 

“I don’t want us to forget about investing in getting more housing,” she said.