Martinez Adopts Budget Despite $2.2M Deficit, Taps Retiree Trust for First Time

The Martinez City Council on June 24 unanimously adopted its fiscal year 2026-27 operating budget, bridging a $2.2 million structural gap by drawing down a retiree health trust for the first time in its 18-year history and dipping into general fund reserves. In a marathon session that also covered wildfire preparedness, water supply planning, and sewer rate increases, the council committed to an unusually fast 90-day budget review — signaling that the spending plan is more of a starting point than a final answer.

• Council adopts $40.7M budget with $2.2M structural deficit, using a first-ever $1.2M drawdown from the city's $19.56M retiree health trust and roughly $1M from reserves
• Staff must return by Sept. 30 with budget refinements, long-range financial forecast, and updated cost allocation plan — replacing the standard mid-year review with a 90-day check-in
• Stonehurst sewer rates jump 59% from $2,450 to $3,900 per unit after extended HOA outreach yields zero Prop 218 protests
• ConFire, CERT, and police detail wildfire readiness ahead of peak season, including a July 11 virtual evacuation drill and Measure X-funded mitigation projects
• Urban Water Management Plan adopted, confirming water supply through 2050 with up to 15% demand reduction needed in extended droughts
• Downtown entertainment zones and reusable foodware pilot previewed by council subcommittees

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Budget Adopted, but the Hard Choices Are Coming

Why it matters: The FY 2026-27 budget sets spending for 151 city employees and all municipal operations, but the $2.2 million gap between $38.5 million in revenue and $40.7 million in expenditures means Martinez is spending more than it takes in — a structural imbalance the council is counting on trust assets and reserves to cover for now.

Where things stand: The budget includes contractually obligated cost-of-living adjustments: 3.8% for Local 324 and non-sworn police employees starting July 1, 3% for police officers in January 2027, and 3% for management staff. Seven positions are being reclassified. Vacancy savings of $740,000 include delaying a police lieutenant hire for one year and a senior account technician for six months.

The deficit is offset by two mechanisms: a $1.2 million drawdown from the city's CERBT Section 115 Trust — a retiree health reserve that has grown to $19.56 million through investment returns despite no contributions since 2019 — and approximately $1 million from unassigned general fund reserves. The city remains above its 20% reserve policy threshold.

Capital improvement plan amendments include $150,000 for Hidden Valley sports courts, $100,000 for Mountain View park playground rehabilitation, $85,000 for a downtown restroom pilot, and a $250,000 swap from infrastructure reserves to cultural impact fees for the senior center. The council also approved a $420,000 loan to the Marina Enterprise Fund.

Councilmember Greg Young pressed on how the math works: "So essentially in this budget, after doing all of the various actions and using the OPEB trust, that leaves us approximately $1 million that would need to come out of the general fund unassigned reserves in order to make up the difference," he said.

Decisions: The budget passed 4-0 (Councilmember Debbie McKillop absent). Mayor Brianne Zorn said she was comfortable moving forward rather than adopting a continuing resolution: "There are a couple of those items that are still not quite perfect, but that does not negatively impact the rest of the budget. I was comfortable with this recommendation that we move forward with adopting the budget, but then coming back to us within 90 days to give us any additional refinements."

What's next: Staff will return by Sept. 30 with strategic plan priorities, an updated cost allocation plan, and a long-range financial forecast — a compressed timeline that replaces the usual mid-year review.

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First-Ever Drawdown From $19.56M Retiree Health Trust

The basics: The city joined the CalPERS CERBT Trust in 2008 to pre-fund OPEB (Other Post-Employment Benefits) liabilities — the cost of retiree medical coverage. The trust has grown to $19.56 million through investment returns, even though no contributions were made between 2019 and this fiscal year.

Why it matters: The $1.22 million drawdown to reimburse the General Fund for retiree medical costs already paid this year marks the first time the city has ever tapped this asset. It signals a strategic shift: using the trust's investment gains to ease annual budget pressure rather than letting the fund grow untouched.

City Manager Michael Chandler told the council: "We've never used this before. It's never been drawn down. The current balance of this trust, 19.56 million." He noted the trust is 67% funded against total OPEB liabilities: "The 67% is the balance against your overall liability of all of the OPEB costs. So the 18.2 million was a value to be 67% of the pre-funding of the expense. So that's very strong."

Councilmember Young raised a pointed question about institutional awareness, asking why the city had approved a $150,000 contribution to the trust this year without fully understanding how much was in it. Chandler explained that awareness of the fund existed, but not detailed knowledge of its growth. Young confirmed the distinction: "So for clarity, there was an awareness of the fund, just not how much was in the fund."

A separate $130,000 contribution from assigned OPEB reserves will still be made. Staff will present long-term scenarios this fall showing the impact of continued drawdowns versus contributions.

Decisions: Passed 4-0 (McKillop absent).

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Wildfire Season Readiness: Virtual Drill, Helicopters, and 20 Years of CERT

Why it matters: Martinez's eucalyptus-lined corridors and 720 acres of open space face growing wildfire risk. A multi-agency presentation detailed how ConFire, the county, CERT volunteers, and police are preparing before peak fire season.

Where things stand: Deputy Chief Charles Stark of Contra Costa County Fire Protection District reported the district manages approximately 6 miles of fire trails in Martinez's rural areas and deploys a wildland crew — half stationed at the old Fire Station 12 in Martinez — a contracted Type 2 helicopter capable of dropping 350 gallons of water, and a dozer program for rapid fire line cutting.

Michelle Reinhart, the county's Wildfire Mitigation Coordinator funded through Measure X (a 20-year half-cent sales tax passed in 2020), presented a new GIS-based Wildfire Mitigation Project Hub mapping all county projects.

Brian Lindbloom of Martinez CERT reported the program is in its 20th year, with two basic classes offered in 2026 — nine spring graduates and 17 signed up for fall. CERT provided crowd and traffic control at city events and delivered bilingual emergency preparedness training at Las Juntas Elementary. "We really are grateful for the support we get from the city," Lindbloom said. "We know a lot of CERT programs around the county are struggling. They come, they go. But Martinez has always been 100% behind the CERT program."

Captain Aldret of the Martinez Police Department announced a July 11 virtual evacuation drill — a tabletop exercise simulating a fire between Cummings Skyway and Martinez, testing unified command and community notification through Martinez Alerts and the County Community Warning System. "You may ask, why a virtual evacuation drill? As you know, in 2024, we did a live one. Those are very costly, very labor intensive," Captain Aldret explained.

Vice Mayor Satinder Malhi flagged specific concerns: "That stretch of road there is of concern to me. There's a large number of eucalyptus trees and some dry brush along that way," she said, referencing Vine Hill Way and the area near Hidden Lakes Park. The city's public works crew invests approximately $100,000 annually on outside vegetation management vendors.

What's next: Residents should sign up for Martinez Alerts and the Community Warning System before the July 11 virtual drill.

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Water Plan Confirms Supply Through 2050, but Droughts Could Force 15% Cuts

Why it matters: The state-mandated Urban Water Management Plan, due to the Department of Water Resources by July 1, establishes Martinez's water supply reliability framework for the next five years.

Where things stand: Kim Alexander, a water resources engineer with SOMAS, presented the plan covering a service area that extends beyond city limits to portions of unincorporated Contra Costa County and Pleasant Hill. All water comes from Contra Costa Water District via the Central Valley Project. The Martinez Reservoir holds approximately 79 million gallons, and population growth is projected at 9% over 20 years.

Contra Costa Water District provides 100% supply reliability in normal and single dry years, with at least 85% in extended droughts — meaning up to 15% demand reduction could be needed. The city meets its 20% water conservation target under state law (SBX7.7), with per-capita use dropping from 163 gallons per person per day in 2020 to about 140 in 2025. A $2 million annual pipeline replacement program and meter replacement program are addressing water system losses.

Mayor Zorn raised a governance question about serving Pleasant Hill customers: "The nuance here is that I thought that serving water required per LAFCO annexation, or at least a conversation of annexation. And I think that it's very odd that we're providing water to people within incorporated Pleasant Hill." Staff clarified that extraterritorial service requires LAFCO approval but not annexation, and that some service areas predate LAFCO.

Mayor for a Day Lydia Whitwill — a student proclaimed honorary mayor earlier in the meeting — asked how selling water to Pleasant Hill helps Martinez. Staff explained the revenue funds operations, maintenance, and facility improvements.

Decisions: Passed 4-0 (McKillop absent).

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Stonehurst Sewer Rates Rise 59% After Zero Protests

Why it matters: After multiple prior years in which majority protests under Prop 218 blocked rate increases, extended outreach to the Stonehurst HOA succeeded in getting community buy-in for multi-year rate increases needed to fund operations and capital needs.

Where things stand: Sanitation District No. 6 serves the 47-lot Stonehurst subdivision, approved by the county in 1992 and annexed to Martinez in 2012. Annual sewer service charges will increase from $2,450 to $3,900 in FY 2026-27, $4,200 in FY 2027-28, and $4,500 in FY 2028-29. Under Prop 218, a majority protest of 24 or more parcels would have blocked the increase. No written or oral protests were received. Staff noted extended outreach with HOA senior members and a public meeting at which residents generally spoke in favor.

Mayor Zorn noted that in past years the council had received protests that prevented adoption of higher amounts.

Decisions: Passed 4-0 (McKillop absent).

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Downtown Entertainment Zones and Sesquicentennial Plans Take Shape

Subcommittee and outside agency reports offered a preview of policy directions coming this fall.

Councilmember Jay Howard reported the Economic Development subcommittee discussed creating entertainment zones in downtown Martinez — along Green Street north, from Barlessa to Court Street — that would allow public consumption of alcohol purchased from permitted businesses during activated special events. "What we talked about was creating entertainment zones. And so what that is, is public alcohol consumption in the streets in downtown Martinez," Howard said. Mayor Zorn clarified this is not open container: only licensed restaurants within the zone could sell, and only during designated events.

The Sustainability subcommittee is piloting reusable to-go foodware in partnership with Downtown Martinez, with costs reduced to zero or near-zero for participating businesses. The subcommittee also discussed a new state law on non-functional turf and the city's outreach campaign.

Mayor Zorn detailed the city's sesquicentennial festival, set for Aug. 29 from 11 a.m. to 7 p.m. at the waterfront, partnering with the Bay Area Craft Beer Festival. The event will feature a kid zone, foam party, kayak tours, kite giveaways, rowboat races with Sea Scouts, live music, food trucks, and a community stage.

Vice Mayor Malhi reported on the ABAG General Assembly, including a preview of Arena Cycle 7. Howard also noted TransPAC's Youth Ride Free Summer program: "Youth ages 18 and under can ride County Connection, Tri Delta Transit and Westcat buses free all summer long." Mayor Zorn reported the MCE board approved a governance assessment, the first in 16 years.

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Minor Items

• Consent calendar (items 5-19) approved 4-0, including Ordinance No. 1488 updating SB 9 subdivision and zoning rules, a $46,525 inclusionary housing in-lieu fee nexus study with EPS, police recruitment incentives, and classification plan updates creating new CIO and CHRO positions.
• Sewer System Management Plan for Sanitation District No. 6 updated and approved on a separate consent vote (4-0).
• Landscaping and lighting assessments confirmed for eight districts totaling over $128,000 across 298 parcels (4-0).
• Year-end budget amendments rescinded an $88,000 MIS fund transfer (existing systems can be optimized instead of replaced), removed a $150,000 OPEB trust contribution, and transferred $14,701 to the Water Enterprise Fund for the growing Lifeline water assistance program (4-0).
• PDQ Printing recognized as Business of the Month for 50 years of service to downtown Martinez.
• Kaylee Wright, Miss Contra Costa 2026 first runner up, honored with a proclamation.
• July proclaimed National Parks and Recreation Month.
• Public commenter Richard Anderson reiterated an ongoing request for the city to identify structures in his rear yard requiring permits, saying he had been unable to get a response.
• Closed session held before the regular meeting regarding real property negotiations over the Martinez Marina and Waterfront with Tucker Sadler Architects; no reportable action was announced.