Half Moon Bay’s money picture just got a little less scary. A mid-year budget checkup shows the city pulling in more revenue than expected and trimming what had been a looming shortfall, largely on the back of stronger hotel-tax receipts and rosier property and sales-tax projections. City leaders, however, did not celebrate by opening the purse strings. Instead, they opted to stash most of the windfall in reserves and keep a tight grip on spending heading into the next budget cycle.
Interim Administrative Services Director Kenneth Stiles told the City Council that the structural deficit for fiscal year 2026–27 is now pegged at about $1.8 million, down from a roughly $4.5 million gap projected in 2024, according to the San Mateo Daily Journal. Updated mid-year figures put transient-occupancy (hotel) tax for 2025–26 at about $9.9 million, roughly $1.2 million above earlier estimates, and staff now expect about $1.5 million more in total revenues after raising property-tax and sales-and-use forecasts. The update went before the council at its Feb. 3 meeting, per the City of Half Moon Bay. With that upside in hand, councilmembers signed off on replenishing the city’s economic-uncertainty reserve to about $12.1 million and boosting unassigned funds to roughly $1.68 million, the report shows.
City Manager Matthew Chidester credited staff and previous councils for having the discipline to build those cushions in the first place. The foresight there was really incredible, he told council, while urging caution so that temporary gains are not locked into ongoing spending. Stiles called the revised outlook cautiously optimistic and reminded officials that a deficit is still on the horizon, just a smaller one than feared. The situation, he said, is not as bad as it could have been, according to the San Mateo Daily Journal.
Where the gains came from
The rebound is a mix of returning visitors and new local revenue approved at the ballot box. City financial tables show that transient-occupancy tax revenue fell from about $6.8 million in 2018–19 to roughly $2.3 million in 2020–21 as the pandemic gutted travel, then slowly climbed back in the years since, according to the City of Half Moon Bay. Voters also signed off on Measure R, a half-cent local sales tax passed in November 2024 that is expected to bring in about $2 million annually, which staff folded into the revised forecasts, per San Mateo County Elections and the city’s financial report.
What to watch next
Even with fresh cash in the door, staff still have to tackle the underlying structural gap once one-time or timing-related revenues fade out. Councilmembers and staff said budget work will stay front and center as they weigh longer-term moves - including potential service cuts, fee changes or one-time patches - before the next fiscal year begins. The mid-year bump does not solve the long-term squeeze, but it gives Half Moon Bay some breathing room and a little more time to make those tougher calls.
