FROM:
Finance
SUBJECT:
Title
Proposed City’s Annual Operating Budget for Fiscal Years 2025/26 and 2026/27
End
RECOMMENDATION:
Recommendation
1. Adopt Resolution No. 2025- 035, of the City Council of the City of Fontana to approve and adopt the City's Annual Operating Budget for Fiscal Years 2025/2026 and 2026/2027 and authorize adjustments for final fund balance.
2. Authorize the carryforward of available one-time funding and capital improvement project budgets at 2024/25 fiscal yearend to the following fiscal year.
3. Adopt Resolution No. 2025- 036, of the City Council of the City of Fontana establishing a General Fund Appropriations limit of $ 397,779,254 pursuant to Article XIII (B) of the California Constitution for Fiscal Year 2025/2026.
4. Adopt Resolution No. 2025- 037, of the City Council of the City of Fontana, California, approving the updated salary tables for Executive employees, Fontana Police Benefit Association, Management/Confidential employees, Teamsters Local 1932 City Hall Unit, and Teamsters Local 1932 Public Works Unit.
5. Adopt Resolution No. 2025- 038, of the City Council of the City of Fontana, California, adopting the Fiscal Years 2025/26 - 2031/2032 Capital Improvement Program.
End
COUNCIL GOALS:
• Operate in a businesslike manner by ensuring that the public debate is based on accurate information.
• Operate in a businesslike manner by correcting problems immediately.
• Increase citizen involvement by seeking community input.
• Increase citizen involvement by informing the public about issues, program, and accomplishments.
• Practice sound fiscal management by producing timely and accurate financial information.
• Practice sound fiscal management by living within our means while investing in the future.
• Practice sound fiscal management by fully funding liabilities and reserves.
DISCUSSION:
The City’s budget is an important policy document, serving as the annual financial plan that identifies the spending priorities for the organization. The budget is used to balance available resources with community needs, as determined by the City Council. The City's fiscal priorities include keeping the City safe, clean, and well maintained, in addition to protecting the quality of life and property values. The budget also serves as a tool for communicating the City's financial strategies and for ensuring accountability.
The Proposed Two-Year Operating Budget is a flexible spending plan and is the legal authority for departments to commit financial resources to provide services within the City of Fontana. After adoption, the Operating Budget will be reviewed each quarter or sooner if necessary to allow the City Council to respond to changes in the economy and development community in a timely manner.
The Proposed Two-Year Operating Budget does not include carryover appropriations for capital projects. The appropriations as proposed are for new funding for current projects and new projects. The authorization to carryover available one-time funding and capital improvement project budgets at 2024/25 fiscal yearend to the next fiscal year is being requested in this item.
The City's Proposed Operating Budget for all City funds includes total uses and sources of $388.6 million and $418.3 million respectively in Fiscal Year 2025/26 and $396.0 million and $428.5 million respectively in Fiscal Year 2026/27 and adheres to the City Council's Goals and Objectives.
All City Funds
GENERAL FUND
As proposed, the Fiscal Year 2025/26 and 2026/27 General Fund Operating Budgets includes total uses of $206.7 million and $213.4 million respectively, and total sources of $210.2 million and $217.4 million respectively.
General Fund (Fund 101)
Assumptions
• Revenues as proposed are based upon historical actuals and current trends. Both sales and property taxes incorporate HdL’s most recent forecasts for the City.
• Expenditures as proposed include all MOU contractual increases for personnel expenses, known contractual increases for current City operating contracts, and moderate CPI increases for other non-contractual expenses.
Fund Balance Analysis
The General Fund beginning fund balance for Fiscal Year 2025/26 is estimated to be $51.6 million. As a result of operations, the ending fund balances for Fiscal Years 2025/26 and 2026/27 are proposed to be $57.3 million and $61.4 million respectively. For both Fiscal Years 2025/26 and 2026/27, on-going expenditures are fully funded by on-going sources that result in a net contribution to fund balance. General Fund Balance, including reserves, are detailed below.
General Fund Balance
The City’s General Fund Balance Reserve minimum threshold was 25% of on-going operating expenses and was increased to 40% per the General Fund Reserve Policy which was approved by Council February 25, 2025. Reserves are recorded in the Contingencies category above which currently only reflects a 25% reserve or $38.4 million for 2025/26. This funding level is $23.0 million under the 40% threshold approved by Council. Per the General Fund Reserve Policy, if the reserve level of 40% is not met due to the appropriation or use of reserve funds a replenishment schedule must be adopted, implemented within five years, and fully funded within 10 years. As the funding gap is not a result of use of reserves, the replenishment schedule is not required, however the City will continue to work towards funding the reserves moving forward.
OTHER GENERAL FUNDS
Other General Funds includes a total of 10 funds which are primarily funded by the General Fund for services that support the City’s general operations. The most notable funds include City Technology, Facility Maintenance, Self-Insurance, Retiree Medical Benefits, and General fund Operating Projects. In Fiscal Year 2022/23, the Lease-Fire fund was added to set aside on-going lease payments from the Fontana Fire Protection District.
As proposed, the Fiscal Year 2025/26 and 2026/27 Other General Funds Operating Budgets include total uses of $34.8 million and $34.4 million respectively, and total sources of $40.6 million and $40.4 million respectively.
Other General Funds
OTHER CITY FUNDS
Other City Funds includes a total of 195 funds which consists of Special Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, and Internal Service Funds. As proposed, the Fiscal Year 2023/24 and 2024/25 Other City Funds Operating Budgets include total uses of $147.1 million and $148.2 million respectively, total sources of $167.5 million and $170.6 million respectively, and an increase to total fund balance of $20.4 million and $22.4 million respectively.
Other City Funds
ORGANIZATIONAL CHANGES
Included in the Fiscal Year 2025/26 Proposed Budget are organizational changes that are summarized at the departmental level below. The net impact of all requests is an increase of $3.6 million (a $3.0 million General Fund increase and a $646,060 Other Funds increase).
City Administration - General Fund increase of $481,930
• Add one (1) Marketing Specialist
• Add one (1) Public Information Coordinator
• Add one (1) Production Editor
• Add one (1) Multimedia Production Specialist II
• Reclass AV Production Supervisor to Senior Production Coordinator
• Reclass AV Production Specialist to Multimedia Production Specialist I
Administrative Services - General Fund increase of $123,740
• Add two (2) Administrative Clerk I
Community Services - General Fund increase of $199,790; Other Funds increase of $69,800
• Add one (1) CSD Superintendent
• Add one (1) Community Services Coordinator
Innovation & Technology - General Fund increase of $202,480
• Add one (1) Senior IT Technician
• Add one (1) Junior Software Engineer
Building & Safety - Other Funds (Fontana Fire District) increase of $218,060
• Add two (2) Code Compliance Inspector
Public Works & Engineering - General Fund increase of $762,870; Other Funds increase of $358,200
• Add one (1) Administrative Clerk II
• Add one (1) Traffic Signal Maintenance Technician II
• Add one (1) Senior Civil Engineer
• Add one (1) Public Works Inspector
• Add one (1) Irrigation Technician
• Add one (1) Public Works Maintenance Worker II
• Add one (1) Environmental Compliance Manager
• Add one (1) Deputy Director of Public Works
Police - General Fund increase of $1,181,500
• Add one (1) Police Officer
• Add two (2) Corporal/Advanced
• Add two (2) Sergeant/Advanced
• Reclass Animal Services Officer I to Animal Services Officer II
CAPITAL PROJECT CARRYFORWARD PROVISIONS
Capital project budgets may span multiple fiscal years thus requiring the annual funding to be a combination of current year requests and the carryforward of prior year unspent or available budget on June 30th of each fiscal year. As such, staff requests the authority to carryforward the available budget for all capital projects at fiscal yearend. All carryforward budget items will be included in the first quarter budget report of the new fiscal year for full accounting and transparency.
CONSTITUTIONAL SPENDING LIMIT
The voters of California, during a special election in 1979, approved Article XIII(B) of the California State Constitution which provides that the City’s annual appropriations be subject to certain state limitations. This appropriations limit is often referred to as the GANN Limit.
The City’s limitation is calculated each year and established by a resolution of the City Council as part of the annual Operating Budget process.
Using the population and per capita personal income data provided by the California Department of Finance, the City’s appropriation limit for Fiscal Year 2025/26 is $397,779,254. Tax revenue budgeted for Fiscal Year 2025/26 that is subject to the appropriations limit totals $182,838,020, which includes $42.7 million in new revenue from the voter-approved Local Transactions and Use Tax (Measure T) passed in November 2024. Even with the inclusion of these additional proceeds of taxes, the City’s budget remains $214,941,234 or 54% below the computed allowable limit. The difference represents the amount of tax revenue the city could appropriate if additional revenue becomes available, ensuring compliance with constitutional spending constraints.
FISCAL IMPACT:
The fiscal impact associated with this item is summarized below and details are provided in the Fiscal Year 2025/26 and 2026/27 Proposed Budget Book.
The General Fund proposed ending fund balances for Fiscal Year 2025/26 and 2026/27 are $57.3 million and $61.4 million respectively which reflects a net increase of $5.7 million and a net increase of $4.0 million respectively because of operations and the net impact of the requested one-time expenditures.
To view the Proposed Operating Budget for Fiscal Years 2025/26 and 2026/27 in its whole entirety please visit <https://www.fontanaca.gov/263/Budget>
MOTION:
Approve staff recommendation.