FROM:
Finance
SUBJECT:
Title
Fiscal Year 2026-27 First Quarter Budget Status Report
End
RECOMMENDATION:
Recommendation
1. Approve the recommended Fiscal Year 2026-27 First Quarter Budget adjustments.
2. Approve the recommended Updated Fiscal Year 2026-27 Productive Hourly Rate Schedule and Fully Burdened Hourly Rate Schedule.
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.
• 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.
• Practice sound fiscal management by developing long-term funding and debt management plans.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by maintaining and improving the city's existing infrastructure.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by providing for the development of new infrastructure.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by utilizing Measure-I Funds wisely.
DISCUSSION:
The City’s budget is an important policy document, serving as the annual financial plan that identifies the spending priorities for the organization. Quarterly budget status reports are developed and presented to the City Council to provide the most current information on the financial activities of the City upon which to base decisions. Additionally, quarterly reports assist City departments in communicating their financial operations throughout the fiscal year including any program changes and significant impacts to their annual budgets, as well as gauging the City’s budget plan as compared to actual revenue and expenditures. This report includes requested departmental budget adjustments and preliminary year-to-date actuals through the First Quarter of Fiscal Year 2026-27, covering the period through September 30, 2026.
The current citywide Fiscal Year 2026-27 budget is comprised of a total of 200 funds including the General Fund, Other General Funds (10 funds), Special Revenue Funds (135 funds), Enterprise Funds (5 funds), Capital Project Funds (36 funds), a Debt Service Fund, an Internal Service Fund, and Other Agency Funds (11 funds). The current total citywide Fiscal Year 2026-27 budget (excluding other agency funds) includes total uses (expenditures and transfers out) for all City funds of $424.0 million and total sources (revenues and transfers in) of $440.4 million. The Recommended Budget includes an increase in total sources of $23.9 million for a total of $464.3 million and an increase in total uses of $60.7 million for a total of $484.7 million.
2026-27 Budget
All City Funds
GENERAL FUND
The current Fiscal Year 2026-27 General Fund Operating Budget includes total uses of $222.5 million and total sources of $223.3 million. The Recommended Budget includes a decrease in total sources of $18,490 for a total of $223.3 million and an increase in total uses of $3.9 million for a total of $226.3 million.
2026-27 Budget
General Fund (Fund 101)
Notable Changes
• Offsetting Adjustments - an increase in revenues and appropriations of $58,030 primarily for dispatch unit service agreement and battery backup.
• One-time Requests - increase in appropriations of $1.5 million in various operating accounts to fund one-time expenditures mainly due to one-time requests in the 2026-27 budget cycle that were not approved. Funding was approved by Council in the 2025-26 Fourth Quarter Budget Report. Notable adjustments include:
o Administrative Services: increase in appropriations of $500,000 for City Rose Parade float.
o Building & Safety: increase in appropriations of $400,000 for graffiti abatement.
o Public Works & Engineering: increase in appropriations of $290,761 for consultant fees.
• Recurring Requests - an increase in appropriations of $176,650 primarily for retail consulting services, Co-sponsorship program (File #21-1060), and new vehicle maintenance.
• Carryovers - increase in appropriations $2.1 million in various operating accounts which represents the carrying forward of prior year one-time budget for purchases and projects that were not completed by the 2025-26 fiscal yearend and appropriation for forecasted one-time requests in the 2026-27 budget cycle that were not funded with the budget adoption.
The carry forward requests of prior year one-time budget represents numerous requests across multiple departments including:
o City Admin ($16,662)
o City Clerk ($37,402)
o Community Services ($1,926)
o Finance ($1.9 million)
o Development Services ($368,485)
o Building & Safety ($94,510)
o Planning ($777,315)
o Public Works & Engineering ($127,859)
o Police ($271,530)
Fund Balance Analysis
The recommended 2026-27 ending fund balance of $59.5 million reflects a decrease of $3.9 million. Included in the fund balance of are total operating reserves of $52.9 million which includes a $9.4 million increase and represents 31% of recurring annual expenditures.
The recommended ending fund balance reserves and designations are revised as follows:
• Reserved - Increase in inventories of $197,042.
• Designated:
o PERS Rate Stability: decrease and move $14.4 million to Fund #109
o Contingencies: increase of $9.4 million to $52.9 million
o Animal Shelter JPA: no change and maintained at $582,570 (reserved for required annual contributions)
o Operating Contingencies: no change and maintained at $3.0 million
o Future Projects & Reserves: increase of $796,869 to $2,418,535
2026-27 Budget
General Fund Balance
OTHER GENERAL FUNDS
Other General Funds includes a total of 10 funds which are funded by the General Fund for services that support the City’s general operations. The most notable funds include City Technology, Facility Maintenance, Office of Emergency Services, KFON, Self-Insurance, Retiree Medical Benefits, and General Fund Operating Projects.
The current 2026-27 Other General Funds Operating Budget includes total uses of $43.7 million and total sources of $43.0 million. The Recommended Budget includes no change in total sources for a total of $43.7 million and an increase in total uses of $4.0 million for a total of $47.7 million.
2026-27 Budget
Other General Funds
Notable Changes
• City Technology - increase appropriations of $253,000 for 6-months of Fontana 311 subscription increases, Splunk licenses, Microsoft SQL server licenses, Wasabi cloud storage subscriptions, and fire/intrusion alarm services.
• Facility Maintenance - increase appropriations of $143,000 for Civic Center Phase I, File #26-1138
• Self-Insurance (Litigation) - increase appropriations of $3.4 million for estimated risk settlements.
OTHER CITY FUNDS
Other City Funds includes a total of 178 funds which Special Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, and Internal Service Funds.
The current 2026-27 Other City Funds Operating Budget includes total uses of $157.8 million and total sources of $174.1 million. The Recommended Budget includes an increase in total sources of $23.9 million for a total of $198.0 million and an increase in total uses of $40.9 million for a total of $198.7 million.
2026-27 Budget
Other City Funds
Notable adjustments include:
• Special Revenue Funds - decrease in fund balance of $11.0 million primarily due to:
o Municipal Services Fiscal Impact - increase in appropriations of $12.0 million for the Water of Life acquisition reserve.
o Federal Asset Seizure (Fund 223) - decrease in fund balance of $2.2 million primarily due to:
• Increase appropriations of $1.0 million for CellXion - Triggerfish subscription, vehicles, and outfitting.
• Increase appropriations of $490,000 for airship mapping system carryover.
• Increase appropriations of $375,000 for CLOSURE AI subscription (File #26-1239).
o PD Traffic Safety - increase in appropriations of $505,000 for new street improvement federal grant.
o Grants (Fund 301) no change in fund balance which includes the reprogramming of existing resources and the addition of the following grants:
• Economic Development Incentive Program: increase revenue and appropriations of $500,000.
• Cypress Grove Apartments: increase revenues and appropriations of $2.0 million.
• OTS Grant: increase in revenues and appropriations of $305,800.
o ARPA - City (Fund 302) - increase in revenues of $5.7 million to recognize earned grant revenue.
• Capital Project Funds - decrease in fund balance of $15.7 million primarily due to:
o Capital Reinvestment (Fund 601): net decrease in fund balance of $224,609 primarily due to:
• Defund $10.0 million of the Lease Revenue Bond Series 2025A project and move appropriations for the Westgate at Cherry and Victoria Ave project.
• Defund $2.2 million of the Economic Development Incentive Prog project and the 8491 Sierra Ave Shops project for the FY26/27 Pavement Rehab project.
• Increase appropriations of $209,300 for 8464 Nuevo Ave warm shell improvements project.
o Capital Improvement (Fund 602): net decrease in fund balance of $3.9 million due to the carry forward of prior year projects including a land purchase/demolition and other special projects org funding.
o Capital Project - TUT (Fund 604): net decrease in fund balance of $4.5 million including the following adjustments:
• Defund $8.0 million from TUT admin and Pavement Rehab project and move appropriations to the Westgate at Cherry and Victoria Ave project.
• Defund $4.2 million from TUT admin, Pavement Rehab, and Fernandes Park Fiber Optic projects for the Westgate at Cherry and Victoria Ave project.
• Defund $3.0 million of the Cypress Grove Apartments project and move to the Pavement Rehab project.
• Carryover $4.6 million in prior year operating budget and purchase orders for various TUT projects.
o Circulation Mitigation (Fund 630): decrease in fund balance of $7.1 million for the City match portion of the Westgate at Cherry and Victoria Ave project.
• Enterprise Funds - decrease in fund balance of $1.5 million primarily due to:
o Stage Red (Fund 720): Increase revenues of $790,288 for Stage Red ASM. Carryover of $2.0 million for Stage Red grant and city match, ASM expenses, and purchase orders.
o Fleet Operations (Fund 751): Carryover of $761,750 for outstanding FY25/26 purchase orders.
• Internal Service Fund - Increase appropriations of $3.7 million for carryover purchase orders.
ORGANIZATIONAL CHANGES
There are no organizational changes included in the 2026-27 First Quarter Budget Status Report. However, included in the report are updated fully burdened hourly rate and productive hourly rate schedules that were updated to correct duplicate positions and reflect current year costs.
FISCAL IMPACT:
The fiscal impact associated with this item is summarized below and details are provided in the First Quarter Budget Status Report.
The General Fund projected ending fund balance reflects a net decrease of $3.9 million to a total of $59.5 million. The net increase is due to the results of prior year operations and the net impact of the recommended budget adjustments.
MOTION:
Approve staff recommendation.