Grand Jury: Pinole Faces Growing Fiscal Crisis From Structural Deficits, Unfunded Liabilities

The 2025-2026 Contra Costa County Civil Grand Jury released a report concluding that the small West County city of Pinole faces a growing financial crisis built on structural budget imbalances, rising long-term liabilities, and unfunded infrastructure needs.

Pinole, a city of approximately 19,500 residents on San Pablo Bay, is among the smallest of Contra Costa County's 19 cities. The grand jury's investigation drew on Pinole's audited annual financial statements, its adopted and projected budgets, minutes and agendas of city council meetings, and a 2024 consulting report the city commissioned on its own long-term finances.

Deficits Projected to Grow for Years

According to the report, Pinole's City Council reviewed a "Preliminary General Fund Long-Term Financial Forecast" in February 2026 prepared by city staff that projected annual operating fund deficits starting at $700,000 in Fiscal Year 2026/27. Those deficits are projected to grow to $5.6 million — in Fiscal Year 2030/31 per the report's summary, though a separate finding in the same report puts the same $5.6 million figure in Fiscal Year 2029/30 — around the point at which the report says Pinole's pension and retiree health care trust funds are projected to be exhausted.

The grand jury's own review of Pinole's General Fund results found that the city posted an operating deficit — before one-time fund transfers — in four of the five fiscal years from 2021/22 through 2025/26, for a cumulative five-year deficit of $8 million. A surplus recorded in Fiscal Year 2022/23 was the product of a one-time infusion of $4.1 million in federal American Rescue Plan Act funds tied to the pandemic, according to the report.

The report quotes the city manager's cover letter for Pinole's 2025/26 budget, which acknowledges that "the City's prior long-term financial forecast shows that ongoing City revenues are not expected to be sufficient to cover ongoing routine City services, and existing City revenue mechanisms are not going to be sufficient to address the City's two main unfunded liabilities, which are deferred capital maintenance and other post-employment benefits."

The council passed the Fiscal Year 2025/26 operating budget using a one-time reduction in the city's General Fund reserves — its rainy-day fund — to erase a projected $1.3 million gap between $31.5 million in total revenues and $32.8 million in total expenditures. The report states this approach "cannot be repeated every year under conditions of persistent structural deficits because the General Fund Reserves will eventually be exhausted."

Pension and Retiree Health Trusts Running Down

Pinole's unfunded pension liability, administered through CalPERS, has grown to approximately $45 million, and its unfunded retiree health care liability is approximately $35 million, the report found. As of June 30, 2024, the city's combined net pension unfunded liability across its miscellaneous and safety employee plans totaled $44.7 million, and its funding ratios — a measure of the assets on hand relative to promised benefits — stood at 70.3 percent for miscellaneous employees and 72.3 percent for safety employees, according to the report's tables. Pinole staff and the Council estimate total capital improvement needs over the next 10 years at a minimum of $120 million — $60 million for public road rehabilitation and another $60 million for other deteriorating infrastructure, the report found.

The report describes two trust funds Pinole set up to help cover these obligations. A pension benefit trust (the "115 Trust") established in 2018 to help mitigate rising pension costs is estimated by Pinole's finance staff and an outside consultant, the Baker Tilly Report, to be exhausted by Fiscal Year 2030/31 — at which point the city's forecasts show it will be forced to use its General Fund to cover its full CalPERS-mandated contributions. A separate trust to partially fund retiree health benefits was funded with $2.4 million realized in Fiscal Year 2024/25 by reducing Pinole's general reserves by half; Pinole staff forecast that this account, too, will be exhausted by Fiscal Year 2030/31.

The report also describes a Council Finance Subcommittee discussion on February 18, 2026 regarding the Fiscal Year 2026/27 operating budget, in which Pinole's finance staff presented a forecast showing an additional $45 million deficit over the following 10 years, driven by revenues increasing at roughly 2.7 percent a year against expenses increasing at roughly 5 percent.

Structurally Balanced on Paper, Not in Practice

Pinole's own financial policies direct the city to develop an annual budget that is "structurally balanced whereby the operating budget will be prepared with current year expenditures funded with current year revenue." and state that the "General Fund Budget will be structurally in balance without relying on one-time resources." The report found that Pinole has used one-time fund balance transfers to characterize its budgets as "structurally balanced" in three consecutive fiscal years — 2023/24, 2024/25, and 2025/26 — even though the underlying operating budgets, without those transfers, showed deficits each year.

In Fiscal Year 2025/26, the report found, the city's budget documents listed 16 items labeled "Council-directed special projects" — ranging from $2,000 for advertising to $10,000 for an executive retreat to $350,000 for road maintenance repairs — that required a $1.3 million transfer of unassigned fund balances to cover, despite the city's financial policies limiting the use of one-time resources to large, non-recurring, strategic expenditures rather than routine annual budget items.

A Bottom-Tier Fiscal Health Score

The grand jury also cross-checked its own analysis against a fiscal dashboard maintained by the California Policy Center, a nonprofit that scores California cities using ten standardized financial metrics drawn from each city's Annual Comprehensive Financial Report. Using the most recent 2024 data, the dashboard rated Pinole 47 out of 100 points — an F score that CPC defines as a "high risk of financial distress, including the ability of the city to pay its bills in the short and long term" — and the report found Pinole ranked in or near the bottom of all California cities whose financial data has been reported to the state in each of the last three years for which data is available.

Governance Structure

Pinole is governed by a five-person City Council whose members are elected at large to four-year, overlapping terms; the mayor is not an independently elected position, as the mayorship rotates among Council members. The report notes that the City Manager position, responsible for Pinole's day-to-day operations under Council direction, is currently filled by a part-time interim manager.

The grand jury's report directs six recommendations to the Pinole City Council: to comply with the city's own financial policies requiring a structurally balanced annual budget; to prepare future operating budgets with expenditure reductions so expenditures match revenues; to adopt a formal long-term financial plan by Fiscal Year 2027/28; to develop methods for engaging Pinole residents on the city's fiscal challenges by December 31, 2026; to develop a plan to fund and reconstruct the city's public roads by June 30, 2027; and to review funding options, including asset sales, to address the unfunded pension liability by March 31, 2027.

DFP's Coverage

Dismal Freedom Press covers Contra Costa County civil grand jury reports, city budgets, and public agency finances as part of its Investigations desk. We track county and municipal fiscal disclosures across our coverage area in San Joaquin, Stanislaus, and Merced counties and the East Bay.

If you have information about Pinole's budget process or municipal finances elsewhere in our coverage area, we want to hear from you.

Submit a tip confidentially →