Capitola City Manager Jamie Goldstein plays a major role in managing Capitola’s finances. (Marcello Hutchinson-Trujillo — Santa Cruz Local file)

The proposed $21 million General Fund budget for the fiscal year that starts July 1 is balanced, but by 2028, mounting pension costs could lead to deficits. Like many public agencies in Santa Cruz County and across the state, Capitola’s past investments have not covered the pensions it owes to retired city staff. The city must pay millions each year to cover the shortfall. 

Capitola is set to spend $2.6 million on pension debt for the fiscal year that ends June 30. By 2030, the annual cost could be $3.8 million, Capitola city staff wrote in the draft budget.

The pension debt is not set in stone: if the city’s investments make more money than is currently projected, the debt payments would decrease. The city has the equivalent of about 70 full-time employees this year. 

In November 2024, Capitola voters approved a quarter-cent sales tax hike with Measure Y, but the increase in revenue isn’t expected to cover the mounting pension shortfall. 

The Measure Y sales tax hike is estimated to take in $2.2 million annually, adding to the more than $8 million that the city’s General Fund receives from sales tax revenue each year.

The city council on Thursday is set to consider the budget’s plan for major capital projects such as:

• $475,000 towards a park on Jade Street accessible to children with disabilities. 
• $1.7 million for the renovation of the Capitola Community Center.
• $480,000 for development of Rispin Park.

City staff also aim to finish a master plan for future upgrades to the Capitola Wharf. An online survey on seven concepts for the wharf will close May 31. The concepts range from a $600,000 plan for a new bathroom to a $6.2 million plan with a new restaurant, lifeguard station, stage and boat storage.

The city is still seeking $831,500 in disaster reimbursements for wharf repair from the California Office of Emergency Services and the Federal Emergency Management Agency. Storms in January and December 2023 partially collapsed a bait shop and restaurant, and both buildings were demolished in February 2024. The wharf reopened in September 2024. 

In November 2024, Santa Cruz County voters approved Measure Q, which was a countywide parcel tax to raise about $7.5 million annually for land management, cleanup and conservation projects in forests, streams, beaches and other open spaces.

City staff have proposed using $150,000 of an anticipated $200,000 from Measure Q to pay for two new parks employees. 

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