FROM:
Finance
SUBJECT:
Title
Fiscal Year 2025-26 First Quarter Budget Status Report
End
RECOMMENDATION:
Recommendation
Approve the recommended Fiscal Year 2025-26 First Quarter Budget adjustments.
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 2025-26, covering the period through September 30, 2025.
The current citywide Fiscal Year 2025-26 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 2025-26 budget (excluding other agency funds) includes total uses (expenditures and transfers out) for all City funds of $388.6 million and total sources (revenues and transfers in) of $418.3 million. The Recommended Budget includes an increase in total sources of $177.4 million for a total of $595.7 million and an increase in total uses of $230.6 million for a total of $619.2 million.
2025-26 Budget
All City Funds
GENERAL FUND
The current Fiscal Year 2025-26 General Fund Operating Budget includes total uses of $210.2 million and total sources of $206.7 million. The Recommended Budget includes an increase in total sources of $137,368 for a total of $210.4 million and an increase in total uses of $4.3 million for a total of $211.0 million.
2025-26 Budget
General Fund (Fund 101)
Notable Changes
• Personnel Requests - net increase in appropriations of $3.2 million due to the following:
– Police Officers Association Contract Update: as a result of successful labor negotiations ($2.0 million).
– COPS Grant Completion: resulting in an increase/transfer of associated personnel expense ($1.2 million) from the Grants Fund 110 to the General Fund. This increase is offset by a decrease in transfers out ($1.2 million) thus no net impact to the General Fund.
– Elimination of a vacant Jr. Software Engineer (Position No. 26032): decrease in personnel expense to fund other operating expenses in the Innovation Technology Department budget ($99,064). This resulted in a decrease in personnel expense and an increase in transfers out thus no net impact to the General Fund.
• Offsetting Adjustments - an increase in revenues and appropriations of $119,334 primarily from an increase in interest revenue associated with cash flow analysis services, recycled water revenue agreements, reimbursements, and transfers-in from a grant cost allocation adjustment.
• One-time Requests - increase in appropriations of $857,050 in various operating accounts to fund one-time expenditures mainly due to one-time requests in the 2025-26 budget cycle that were not approved. Funding was approved by Council in the 2024-25 Fourth Quarter Budget Report. Notable adjustments include:
– City Clerk: increase in appropriations of $155,050 for Microfiche scanning services.
– Planning: increase in appropriations of $220,000 for scanning services.
– Public Works & Engineering: increase in appropriations of $350,000 for Traffic/Streets 12 months of full-time staff augmentation offset by forecasted salary savings of $145,000.
• Carryovers - increase in appropriations $1.3 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 2024-25 fiscal yearend and forecasted one-time requests in the 2025-26 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 City Administration ($69,776), Finance ($209,993), Development Services ($231,584), Public Works & Engineering ($163,285), and Police ($360,887).
Fund Balance Analysis
The recommended 2025-26 ending fund balance of $62.6 million reflects an increase of $5.2 million. Included in the fund balance of are total operating reserves of $39.8 million which includes a $1.4 million increase and represents 25% of recurring annual expenditures.
The recommended ending fund balance reserves and designations are revised as follows:
• Reserved - decrease in inventories of $172,501.
• Designated:
– PERS Rate Stability: increase of $2.7 million
– Contingencies: increase of $1.4 million
– Animal Shelter JPA: no change (reserved for required annual contributions)
– Operating Contingencies: no change
– Future Projects & Reserves: increase of $1.3 million
2025-26 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 2025-26 Other General Funds Operating Budget includes total uses of $34.8 million and total sources of $40.6 million. The Recommended Budget includes a decrease in total sources of $1.0 million for a total of $39.5 million and an increase in total uses of $6.1 million for a total of $41.0 million.
2025-26 Budget
Other General Funds
Notable Changes
• KFON - increase appropriations of $955,700 for FXN studio project.
• Self-Insurance (Litigation) - increase appropriations of $200,000 for Building & Safety Code Compliance legal services.
• Lease Fire - transfer-out of $5.7 million to Fund #601 for fund various downtown projects.
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 2025-26 Other City Funds Operating Budget includes total uses of $147.1 million and total sources of $167.5 million. The Recommended Budget includes an increase in total sources of $178.3 million for a total of $345.8 million and an increase in total uses of $220.2 million for a total of $376.3 million.
2025-26 Budget
Other City Funds
Of the increase in uses, $145.0 million was to account for the 2025A Lease Revenue Bonds (LRB) bond proceeds and program the associated projects, $47.3 million for various capital projects, and $7.2 million was to account for the carrying forward of prior year one-time budget for purchases and projects that were not completed by the 2024-25 fiscal yearend. Notable adjustments include:
• Special Revenue Funds - increase in fund balance of $8.2 million primarily due to:
– Federal Asset Seizure (Fund 223) - decrease in fund balance of $2.2 million primarily due to:
• Increase appropriations of $872,830 for airship engine replacement.
• Increase appropriations of $516,562 for armored vehicle purchase.
• Increase appropriations of $490,000 for airship mapping system.
– Grants (Fund 301) net decrease in fund balance of $24,370 which includes the reprogramming of existing resources and the addition of the following grants:
• HHIP Grant: increase revenue and appropriations of $848,755.
• ProHousing Grant: increase revenues and appropriations of $1.1 million.
• OTS Grant: increase in revenues and appropriations of $335,000.
– ARPA - City (Fund 302) - increase in revenues of $11.6 million to recognize earned grant revenue.
• Debt Service Funds - increase in revenues and appropriations of $25.0 million to pay off/refund the 2014A LRB’s with 2025 LRB bond proceeds.
• Capital Project Funds - decrease in fund balance of $43.4 million primarily due to:
– Capital Reinvestment (Fund 601): net decrease in fund balance of $8.1 million primarily due to:
• Increase bond proceeds revenues and appropriations of $120 million for the City Hall renovation Phase II, Downtown West Parking Structure, Seville Park Bicycle pump track, and other future projects.
• Transfer-in of $18.7 million from Funds #115 and #603 for various downtown projects.
• Defund the $15.5 million of the Downtown West Parking Structure project (now funded by bond proceeds) and move appropriations for the Aldea Apartments purchase.
• Increase appropriations of $2.8 million for Courtplace construction.
• Increase appropriations of $1.2 million for 8572 Sierra restaurant warm shell and renovations.
• Increase appropriations of $7.5 million for Navigation Center construction and design.
• Increase appropriations of $11.4 million for Transitional Housing purchase, escrow, and renovation (16390 Foothill).
• Increase appropriations of $3.0 million for Public Works Storage purchase 16565 Orange Way.
– Capital Improvement (Fund 602): net decrease in fund balance of $6.4 million due to the carry forward of prior year projects including a land purchase/demolition and other special projects org funding.
– Future Capital Projects (Fund 603): net decrease in fund balance of $13.0 million to fund the transfer-out of $13.0 million to Fund #601 for various downtown projects.
– Capital Project - TUT (Fund 604): net decrease in fund balance of $271,045 including the following adjustments:
• Defund $7.7 million of the Pavement Rehab project and move appropriations to Aldea Apartments.
• Increase appropriations of $143,000 for replastering Village of Heritage pools
• Increase appropriations of $105,795 for PD Motorola Dispatch radios.
– General Government (Fund 632): decrease in fund balance of $500,000 for the Public Works Storage purchase at 16565 Orange Way. Also included is the reprogramming of Downtown West Parking Structure project funding ($11.0 million) now funded by bond proceeds and to the Public Works Storage purchase 16641 and 16643 Orange Way.
– CFD #100 Victoria (Fund 673): decrease in fund balance of $1.5 million to increase appropriations to fund developer reimbursements.
– CFD #112 The Gardens Phase One (Fund 677): decrease in fund balance of $13.7 million to increase appropriations to fund developer reimbursements.
• Enterprise Funds - decrease in fund balance of $2.9 million primarily due to:
– Sewer Maintenance & Operations (Fund 701): increase in appropriations of $1.2 million primarily due to sewer rate study and carryover purchase orders.
– Sewer Capital Projects (Fund 702): increase appropriations of $1.0 million primarily due to Alder Ave sewer main project.
– Stage Red (Fund 720): carryover of $563,874 for 23-24 Stage Red ASM Global operating agreement.
• Internal Service Fund - Increase appropriations of $3.7 million for carryover purchase orders.
ORGANIZATIONAL CHANGES
Included in the 2025-26 First Quarter Budget Status Report are organizational changes that are summarized at the departmental level below. The net impact of all requests is a decrease of $99,064 to the General Fund.
Innovation & Tech - General Fund decrease of $99,604
• Eliminate (1) Jr. Software Engineer Position PC #26032
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 increase of $5.2 million to a total of $62.5 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.