San Mateo projects $17 million deficit


The city’s overall revenue is projected to decrease for the 2026-27 fiscal year, which starts next month, in large part due to vehicle license fee revenue. The removed funding source is technically a reimbursement the state gives the county and is based on a complicated formula that takes into account vehicle license fee revenue and school districts in each county. The funds are at the center of a lawsuit against the state, as it hasn’t been reimbursing San Mateo County jurisdictions. 

Other income sources, however, are doing well. 

“In general most of our revenues are growing,” Finance Director Abby Veeser said during the City Council meeting, citing steady property tax growth. Sales tax revenue is seeing slower growth but is increasing nonetheless, she added. 

The projected deficit is higher than the anticipated shortfall for the current fiscal year. Revenue is expected to decrease by about $2 million next fiscal year, or 1%. The bulk of the city’s income  comes from property and sales tax, with property transfer tax estimated to be $9 million. 

Expenses are expected to increase by about 1.7%, according to the presentation. Most of the increases come from rising insurance premiums, contracted services and a $14 million payment toward the city’s unfunded pension liability, the staff report said. 

The city plans to use its reserve fund and freeze hiring for 10 vacant positions to help narrow the financial gap. The council has also been considering adding a local quarter-cent sales tax to the November ballot.

"I do support exploring a quarter-cent sales tax just because I believe in protecting public safety and maintaining our parks and preserving our libraries and continuing to invest in the infrastructure and the core services," Councilmember Danielle Cwirko-Godycki said during the meeting. 

The city’s 2026-27 capital budget is $66.3 million and nearly $350 million for the five-year plan. The plan lays out some of the city’s largest near-term infrastructure projects, including the King Recreation and Swim Center design, stormwater improvements and Fire Station 27 pre-construction work.