STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

City Manager and Financial Services Director recommend City Council:

1. Receive the FY2025/2026 Mid-Year Review

2. Adopt Resolution No. 4311 and authorize staff to process necessary budget adjustments identified in Exhibit G

The FY2025/26 budget was developed using a zero-based budgeting methodology, requiring departments to justify all expenditures from the ground up. This approach was implemented to increase transparency, improve financial accountability, and better align resources with the City’s operational priorities and the Envision Strategic Plan.

The adopted budget included one-time strategic investments and operational funding to support core City services including Police, Fire, Public Works, Airport operations, Community Development, and Administration.

The attached mid-year report provides an overview of revenue and expenditure activity through December 31, 2025, along with projections for the remainder of the fiscal year.

Executive Summary

This fiscal report provides an overview of the City’s financial status for the first half of the fiscal year 2025/2026, which includes the months of July 1, 2025 to December 31, 2025.  The City’s strong fiscal position was built on a conservative approach to financial management, ensuring long-term stability while adapting to economic challenges.  Staff recognize the rising cost of living and remain committed to responsible budgeting that balances essential investments with prudent spending. By prioritizing efficiency and the wellness of the residents, we continue to foster economic growth and resilience while maintaining fiscal soundness. To persist in this effort, Staff will present the budget augmentation recommendations based on the needs of operations and capital projects.

A. General Fund:

1. The General Fund Reserve will require a $21,400 transfer from the General Fund to comply with the General Fund Reserve Policy.  Depending on the prior Fiscal Year, the reserve shall be review on an annual basis.
2. The General Fund ended the first six months with less than 50% in both revenue and expenditure.  Overall, the General Fund received $5,134,600 or 35.7% of expected revenue, and resources used were $7,219,500 or 44%.
3. In addition, the ending cash balance for the General Fund was $10,069,858.

B. Enterprise Funds:

1. The Water Fund ended the first six months with $5,062,800 or 27.52% of expected revenue and resources used were $5,909,300 or 30.85%.
2. The Gas Fund ended the first six months with $1,143,200 or 35.96% of expected revenue and resources used were $1,006,000 or 26.55%.
3. The Sewer Fund ended the first six months with $939,600 or 26.27% of revenue budget and $904,000 or 20.98% of the expenditure budget. 
4. The Sanitation Fund ended the first six months with $1,537,400 or 57.26% and 1,277,600 or 47.74% of expenditure used.

C. Special Funds – Other funds include all special, grants, local match, CalTrans, Measure C, IGT and Street funds.

1. Majority of these special funds are on a reimbursement basis.  Due to this, projects are staggered, and revenue is received months or years out.  As of December 31, 2025, the revenue received was $1,783,700 or 10.0% and resources used were $7,475,100 or 36.8%.

  2. Debt Service - During FY 2025/26, the City maintained six bonds and three lease obligations with an original borrowing total of $41,154,515.  In September 2025, the 2018 Tax Allocation Refunding Bond was fully paid off.  As of December 31, 2025, the City’s remaining debt service obligation totaled $51,186,920, including principal and interest.

          D. Strategic Projects - In June 2025, the City Council approved 86 one-time projects aligned with the City’s Envision Strategic Plan totaling $30,946,200.

  1. As of December 31, 2025:

a.    23 projects (26.7%) have been completed

b.    42 projects (48.8%) are currently in progress

Overall, the General Fund and Enterprise Funds are trending well as expected.  These funds are structurally sound.  There are no fiscal concerns at this time.

• Do not receive the FY25/26 Mid-Year report and Reject the recommended budget adjustments.

In reference to Exhibit G, the revenue and expenditure budgets will be adjusted accordingly.

Expenditure Budget Adjustments Summary

Revenue Budget Adjustments Summary