Proposed 2025-26 Budget

2025-26 Capital Public Works Infrastructure Project list

Overall Budget Summary

The Proposed Budget recommends status quo staffing of 354.5 full-time equivalent (FTE) positions, including negotiated salary and benefit increases. Appropriations total $247,071,904, funded by revenues of $203,764,777 for both branches, a General Fund contribution of $6,528,146 largely for the Community Planning branch, a District Sales Tax contribution of $2,000,000 for the Community Planning branch, and Other Fund contributions of $34,778,981 for both branches.

Because the Public Works branch is not housed in the General Fund, revenues include a General Fund contribution transfer of $1,932,500 and District Sales Tax contribution (from Measure K) transfer of $2,100,000 for a total transfer of $4,032,500 from General County Revenues. Most of the General Fund investment, a total of $3,932,500, is for road and drainage infrastructure maintenance. This is a significant increase, recognizing the County’s deferred maintenance needs, deteriorating conditions, and aging infrastructure. The remaining District Sales Tax contribution of $100,000 is from District 3’s Measure K allocation for environmental and parks improvements.

The Budget includes a decrease in total revenues of $39,805,550 mainly due to completion of grant-funded projects in transportation, sanitation and housing and the delay of federal reimbursements for completed storm damage repair projects, which are offset by increases for resurfacing and flood control projects. Total expenditures decreased by $36,138,267 mainly due to completed grant-funded projects and slowing of storm damage repair projects, which are offset by increases for resurfacing and flood control projects.

Community Planning

The Proposed Budget recommends status quo staffing of 77.5 FTE positions, including negotiated salary and benefit increases. Appropriations total $28,889,264, funded by revenues of $12,268,163, a General Fund contribution of $6,478,146, a District Sales Tax contribution of $2,000,000, and Other Fund contributions of $8,142,955.

The Budget includes a decrease in total revenues of $2,767,198 due to a $703,640 decrease in construction permits, $1,663,664 decrease in State housing revenue, $830,306 decrease in federal housing revenue, and $350,000 decrease in the amount of land expected to be sold. The decrease was offset by an increase of $721,896 in expected loan repayments.

Total expenditures decreased by $1,515,032 due to a $1,497,313 decrease in planning professional services for planning and housing and a $2,059,130 decrease in net transfers for reductions in cost allocations and between departmental housing funds. These decreases were offset by a $1,267,952 increase in affordable housing contributions, $296,500 increase in software support services for permit submittals, reviews, and appointment scheduling $241,261 increase in office expenses, $454,130 increase from the change in facility charges to properly reflect the cost of facility services and utilities, and $218,257 increase in negotiated salaries and benefits.

Public Works

The Proposed Budget recommends status quo staffing of 277.0 FTE positions, including negotiated salary and benefit increases. Appropriations total $218,182,640, funded by revenues of $191,496,614, a General Fund contribution of $50,000, and Other Fund contributions of $26,636,026. Because the Public Works branch is housed outside of the General Fund, excluding one section related to survey work, revenues also include a General Fund contribution transfer of $1,932,500 and District Sales Tax contribution (from Measure K) transfer of $2,100,000 for a total transfer of $4,032,500 from General County Revenues.

The Budget includes a decrease in total revenues of $37,038,352 mainly due to the completion of grant funded projects in transportation and sanitation, including the Soquel Buffered Bike Lane, 2017 and 2023 storm damage repair, Highway 152/Holohan Road intersection improvement, Green Valley multi-use trail, Freedom Sewer Rehabilitation, and Davenport Water Storage Tanks projects. The decrease is offset by the $5,000,000 grant award for flood mitigation along the lower Watsonville slough and $4,082,500 contribution from General County Revenues for road and drainage infrastructure projects and maintenance, impacts related to Assembly Bill (AB) 1785, and District 3’s Measure K allocation for environmental and parks improvements.

Total expenditures decreased by $34,623,235 also due to the completion of the grant-funded projects and slowing of storm damage repair projects, which is offset by increased expenses for resurfacing Buena Vista Road and San Jose Road/Porter Street and an accounting change related to closure costs at the Buena Vista Landfill.

The General Fund contribution of $1,982,500 and District Sales Tax contribution of $2,000,000, resulting in an investment of $3,982,500 from General County Revenues, achieves prior year levels services in Road Operations, replaces a large failing culvert on Capitola Road at Leona Creek, matches grants received that focus on roadway resurfacing of critical corridors, addresses service impacts due to AB 1785, and increases signal repair and maintenance. An additional District Sales Tax contribution of $100,000 from District 3’s Measure K allocation for environmental and parks improvements supports the Davenport Sanitation District and Shark Fin Cove Parking Study.

Community Planning

Evolving State Regulations: The State is expected to continue to legislate changes that significantly increase Unified Permit Center workloads, reduce revenue and require more investments in consulting and software solutions. AB 2234, signed into law in September 2022, mandates that all building permits for housing projects receive first-round review comments within 15 days of submittal and that final permit issuance occurs within 30 days of determining application completeness. This regulation significantly impacts Building Section operations, as permit submissions are not staggered, resulting in periodic surges in application volume, particularly for residential projects. Senate Bill (SB) 937, signed into law in September 2024, defers the payment of development impact fees from the time of building permit issuance to the issuance of a certificate of occupancy for most housing developments, unless the fee-charging agency qualifies for one of the exceptions outlined in the legislation. Additionally, it locks the fee rate at the level in effect at the time of permit issuance, regardless of when the fees are ultimately paid, which can be several years later.

Recovery Permit Center Transition: Effective January 1, 2025, the Board of Supervisors voted to conclude the 4-Leaf consulting contract for Recovery Permit Services, transferring all CZU Fire rebuild-related responsibilities back to the Unified Permit Center. This transition includes customer service, permit processing, and inspection services. Currently, 144 replacement dwellings are under construction, with an additional 21 permit applications under review. To support applicants, dedicated CZU rebuild counter appointments are available Monday through Thursday, along with email support.

Building Permit Organizational Assessment: In June 2024, the County Executive Office (CEO) engaged Baker Tilly to complete an organizational assessment of the County’s building permit process with the goal to gain an understanding of insights from internal and external sources and to develop recommendations for moving forward with improved processes and customer experience. Baker Tilly’s work included a review of current and past process improvement efforts, operational data, interviews with employees and customers, stakeholder meetings, and an employee survey. By June 2025, the CEO, in conjunction with Baker Tilly and CDI, will develop a workplan to implement near and longer-term improvements to the development and building permit approval process based on the assessment.

Slowing Development Amid Cost Concerns: While CDI is receiving a significant number of development review applications, several projects approved in recent years have not pulled building permits to start construction, with applicants often citing economic feasibility and cost concerns. This is a nationwide trend, to varying degrees, due to the recent increases in interest rates and general inflation. Affordable housing projects have been moving forward with construction due to the availability of subsidies; however, as very few market-rate projects have begun construction in recent years, overall demand for housing will remain unmet.

Reduced Housing Funding: Governmental funding for housing and community development has declined, with further reductions anticipated. Federal funding declines are expected for critical programs such as housing choice vouchers, project-based vouchers, Community Development Block Grant (CDBG), HOME Investment Partnership Program (HOME), disaster relief grants, and other U.S. Department of Housing and Urban Development (HUD) programs. Additionally, State funding for affordable housing and planning efforts has already been reduced in 2024-25 due to State budget shortfalls. Without adequate funding, our community will face worsening housing conditions, increased displacement, and fewer opportunities for stable, affordable housing.

Public Works

2023 Storms Damage Repair and Disaster Debt Service: In 2024, the County issued $80 million of debt to sustain cash flow in the Road Fund while it awaited reimbursements from the Federal Highway Administration (FHWA) and the Federal Emergency Management Agency (FEMA) for completed 2023 storms damage projects. The debt is to be repaid once federal reimbursements are received. While FHWA reimbursements have been timelier, FEMA reimbursements continue to be delayed resulting in high debt service payments after the first three years of the bond per the approved debt schedule. The new federal administration casts further uncertainty on the timing of reimbursements with many projects stuck in FEMA Public Assistance workflow steps for many months to almost a year, thus further delaying final "project” obligations and receipt of reimbursement funds. The 2025-26 budget includes an estimated $5.2 million of reimbursements (mostly FHWA) to retire debt and $1.4 million for debt service. This new debt obligation puts further pressure on discretionary transportation funds that would otherwise be leveraged with state and federal funding to complete critical infrastructure projects.

Remaining Storm Damage Projects: The County faces significant challenges in completing storm-related projects from the 2017 and 2023 storms, with 31 projects remaining from 2017 and 85 pending from 2023. The need for local matching funds (6.25% for FEMA, 11.47% for FHWA) is exacerbating the issue, placing pressure on the budget for the 2024-25 and 2025-26 fiscal years. Delays in securing these funds could impact critical infrastructure, including flood prevention and road repairs, limiting timely execution of essential projects. The remaining cost to complete these projects is approximately $25 million for the 2017 storm event and $60 million for the 2023 storm event.

Delayed Bridge Program: The County’s Highway Bridge Program includes 19 projects estimated at $35 million. Although fully funded through state and federal grants, delays have occurred due to staff being redirected to urgent public emergencies, such as storm related disaster events in 2017 and 2023 and the CZU fire. These delays could require the County to cover additional costs or lose grant funding, affecting other priorities.

Culvert Rehabilitation and Replacement Program: Through Public Work’s first comprehensive inventory of roadway culverts, hundreds of culverts have been assessed to be in poor condition and need of replacement. Current funding for culvert replacements is limited, with only $250,000 annually allocated for small culverts handled by Road Operations. Larger culverts, which carry creeks under roadways, pose a major concern, as failures can cause severe disruptions, such as the 2023 Main Street culvert failure that stranded 300 residences. Replacement costs range from tens of thousands to hundreds of thousands of dollars, with additional permitting and environmental restoration challenges. An estimated $1 million per year is needed to initiate a reliable rehabilitation program.

Road Operations Funding Gap: Road Operations expenditures for maintaining the County Road Network total approximately $11 million annually, while revenues supporting this service remain at approximately $9 million and have remained relatively flat over the past five fiscal years. To help bridge this gap, the General Fund, including District Sales Tax from Measure K, proposes to contribute $2.25 million to Road Operations in 2025-26. However, without the development of new and consistent revenue sources, this structural deficit is expected to persist in future fiscal years, impacting the County’s ability to sustain road and drainage infrastructure maintenance.

AB 1785 Impact on Map Access: As of January 1, 2025, AB 1785 restricts state and local agencies from posting elected or appointed officials’ home addresses or phone numbers online without written consent. This has led to the removal of all recorded maps from the County’s GIS system, as they display Assessor’s Parcel Numbers (APNs). The change has significantly disrupted surveying and engineering professionals who previously relied on online access for research and project planning. The public must now visit the County building in person to access these maps, increasing demand at the Public Works service counter window and shifting inquiries to Public Works from the Assessor’s and Recorder’s offices.

Fleet Electrification and Infrastructure Challenges: New California Advanced Clean Fleet regulations require 50% of heavy-duty vehicle purchases to be electric by 2027, increasing to 100% thereafter. This transition raises fleet replacement costs and necessitates upgrades to charging infrastructure. The County's current facilities lack the electrical capacity to support large-scale charging, requiring a phased approach. Phase 1 in 2025-26 will introduce Level 2 chargers, while future phases will assess large-scale infrastructure needs across six maintenance yards. Fleet electrification introduces financial and operational challenges, including higher vehicle costs, additional infrastructure expenses, reduced payload capacity, and limited range.

Deteriorating Pavement Condition: The County manages approximately 600 centerline miles of roadway, with a 2018 Pavement Condition Index (PCI) of 48 out of 100. Maintaining this condition would have required $24 million annually, while restoring roads to a ‘good’ condition over 10 years would have required $49 million per year, per the latest pavement survey. However, actual annual resurfacing expenditures have averaged only $5.1 million, primarily from Measure D (50%), grants (33%), and local sources (17%). A new pavement survey is expected in 2025.

Freedom County Sanitation District (FCSD): The most recent LAFCO Sanitation Service and Sphere Review for FCSD (2019) encourages regional collaboration in transferring sewer responsibilities to other agencies in the interest of long-term planning and economies of scale. FCSD and the City of Watsonville are in communication regarding a potential transfer of sewer responsibilities from FCSD to the City, which manages the adjacent Watsonville Municipal Sewer System and the Beach Street Wastewater Treatment Plant that receives and treats FCSD wastewater.

Vulnerable Davenport Sanitation District Infrastructure: Much of Davenport Sanitation District water facilities are located above-ground and are subject to impacts from natural disasters such as during the CZU fires when the supply line was burned. One project to rehabilitate an above-ground water tank has been completed, but additional needs related to remote monitoring equipment and additional tank upgrades are. Service charges will continue to increase in coming years to address unforeseen expenses, such as the impacts of natural disasters exacerbated by climate change.

Next Generation Landfill Gas to Energy: The current gas to energy contract with Ameresco is set to expire in 2026. Ameresco currently operates the Cogen facility at the Buena Vista Landfill which uses landfill gas to power generators, supplying electricity to up to 3,000 homes daily. The County will evaluate emerging landfill gas to energy technologies to determine highest and best use of landfill gas.

SB 1383 Edible Food Recovery Grant Funding: Grant funding to implement SB 1383 ends June 30, 2026. Revenue will be needed to further implement the edible food recovery requirement, which diverts edible food from the landfill.

Aging Drainage Infrastructure: Much of the County’s storm drain infrastructure is more than 50 years old and needs significant repair or replacement. Recent years have seen an increase in the intensity and duration of rain events, which stresses fragile infrastructure and overwhelms the capacity of existing systems. This circumstance is especially critical in dense urban areas, such as Zone 5 (which includes Live Oak, Capitola, and portions of Soquel), as localized flooding and pipe failures can have serious impacts on private property and the motoring public. Funding is needed for repairs and projects to increase drainage system capacity.

Storm Damage in County Service Areas (CSAs): Many road CSAs, which are typically small areas of private roads, face multiple storm damage sites due to the recent 2017 and 2023 storm events like the rest of the County. Cash flow shortages have been created due to delayed federal reimbursements for completed projects. Additionally, some projects have faced denials of federal reimbursements because of the previous poor condition of storm damage repair sites. Some CSAs have elected to increase rates to improve the condition of their roads and prepare for future storm events.

Buena Vista Landfill Fleet Operations: The Buena Vista Landfill plans to transition to a Transfer Station in 2029, and at that time, Fleet Operations for the landfill vehicle and equipment maintenance and repairs will be performed out of the Brommer Yard. Public Works is budgeting planning costs in 2025-26 so the Fleet Shop transition and expansion can occur in the same time frame that the Transfer Station is being developed.