Larkspur makes mid-year budget adjustments

The Larkspur City Council unanimously approved changes to its fiscal year 2025-26 budget following a mid-year review.

The revised budget increases overall expenditures by $458,000 and decreases revenues by $795,000. Most of the revenue changes are on track with projections for sales, property, franchise and other taxes, according to city staff. The transient occupancy tax is coming in lower than expected.

“The Transient Occupancy Tax (TOT) continues to show signs of weakness due to the softening of the Marin economy,” city officials wrote in a staff report.

The city also had substantially higher revenue from increased demand for building services and permits, which the city attributes to the Magnolia Village redevelopment project.

Most of the city’s expenditures were in line with projections, apart from increased costs associated with the new library, as well as building inspection costs associated with more building services and permit applications. At the moment, the city is relying more on contractors rather than city workers for these services, which City Manager Dan Schwarz said increases expenditures.

The library, which is nearing completion, is expected to have higher one-time costs and operational costs. At the Feb. 4 council meeting, Councilmember Gabe Paulson asked about projected costs for the library.

“I know this is a mid-year report, but projecting forward, do you see that as something we’ll continue to need to fund at that level?” he said.

“It’s going to be at a higher level than that,” said Emilia Gabriele, administrative services director. “Definitely it’s going to go up.”

Schwarz said this is consistent with opening this type of building.

“When you open a new facility of the nature of a library, a caution for the council and the community is it’ll take a year to truly understand the cost of operating the facility,” he said. “To be conservative we will probably give ourselves some room to operate as we try to adjust to the new situation.”

Schwarz said it will be hard for the city to know at this time how energy-efficient upgrades and other technological improvements in the building will offset operating costs. He also said the city has yet to estimate the information technology or maintenance costs for the building.

In regards to looking ahead to future revenue sources, Schwarz said efforts to meet the city’s housing and property tax goals will be the best way to ensure more city funding.

“The best opportunity for ongoing revenue growth is to start to realize our housing elements and see more units come online with higher property taxes,” he said. “That’s probably our best long-term growth opportunity.”