CONSENT ITEM
E-5
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: SERGIO GONZALEZ, CITY MANAGER
VIA: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: AUGUST 17, 2026
SUBJECT: RECEIVE AND FILE FISCAL YEAR 2025/26 THIRD QUARTER FINANCIAL REPORT ENDING MARCH 31, 2026
BACKGROUND:
In an effort to enhance fiscal transparency and provide the City Council and the public with regular updates regarding the City's financial condition, the Administrative Services Department has prepared the Fiscal Year 2025/26 Third Quarter Financial Report. This report summarizes the third quarter budget-to-actual analysis for the City's General Fund, Gas Tax, Fire Safety Special Revenue Funds, the Sewer Enterprise Fund, and major Internal Services Funds including Risk Management/Liability and Information Technology. The proposed action is for the City Council to receive, review, and file the report.
RECOMMENDATION:
Staff recommends the City Council take the following action:
1) Receive, review, and file the Fiscal Year 2025/26 Third Quarter Financial Report, ending March 31, 2026.
ANALYSIS:
Attached is the Third Quarter Financial Report for the City's major non-utility funds to provide the City Council and public with an update on the City's financial position. Included in the report are the status of the General Fund, Gas Tax, Fire Safety Special Revenue Funds, Sewer Enterprise Fund, and Risk Management/Liability and Information Technology Internal Services Funds.
The report provides a budget-to-actual analysis through the third quarter of Fiscal Year 2025/26 and identifies significant revenue and expenditure trends, budget adjustments, and projected year-end impacts Quarterly Financial Report – Q3 FY 2025-26
August 17, 2026
for the City's major non-utility operating funds. Staff will continue to monitor revenues and expenditures throughout the remainder of the fiscal year and will recommend additional budget amendments, if necessary.
FISCAL IMPACT:
There is no direct fiscal impact associated with receiving and filing this report. The attached Third Quarter Financial Report provides an update on the City's fiscal position through March 31, 2026, including recommended revenue and expenditure budget adjustments. Staff will continue to monitor revenues and expenditures throughout the remainder of the fiscal year and will return to the City Council with additional budget recommendations, if necessary.
Prepared By: Reviewed by:
Richard Lam Talika M. Johnson
Budget & Revenue Administrator Director of Administrative Services Reviewed and Approved:
Sergio Gonzalez
City Manager
Attachment:
1) Quarterly Financial Report – 3rd Quarter, Ending March 31, 2026 Fiscal Year 2025/26 Quarterly Financial Report
3rd Quarter, Ending March 31, 2026
OVERVIEW
This financial report summarizes the City’s General Fund financial position for the third quarter of Fiscal Year 2025/26 (July 1, 2025 through March 31, 2026). Also included are the City's major Special Revenue Funds (Gas Tax and Fire Safety), the Sewer Enterprise Fund, and the major Internal Services Funds (Risk Management/Liability and Information Technology). The purpose of this report is to provide the City Council, City Management, and the Azusa community with an update on the City's fiscal status based on the most recent financial information available.
GENERAL FUND SUMMARY
Based on third quarter financial activity, total General Fund sources (revenues and transfers in) are projected to total approximately $72.62 million, slightly below the FY 2025/26 adopted budget primarily due to lower Sales Tax and Transaction and Use Tax revenues resulting from reduced consumer spending.
Total General Fund uses (expenditures and transfers out) are projected to total approximately $91.12 million, an increase of approximately $18.66 million over the adopted budget. The increase is primarily attributable to the carryforward of unspent Capital Improvement Program (CIP) appropriations and Other Operating budget appropriations from the prior fiscal year, including approximately $3.9 million for Senior Center renovations, $2.7 million for Memorial Park improvements, $2.43 million for Promenade tenant improvements, $1.3 million for the Dog Park, $2.37 million for Library improvements, and $437,900 for City Hall Phase IV improvements, among other carryforward projects.
A B C
Adopted
Budget
2025-26
Revised
Budget
2025-26
Variance
(B - A)
Beginning Estimated Fund Balance $ 64.47 $ 64.47 * $ -
Plus Revenues 69.99 69.83 ** (0.15)
Transfers In 2.79 2.79 -
Total 2025-26 Sources 72.78 72.62 (0.15)
Less Expenditures 64.51 79.12 ** 14.61
Extraaordinary Capital Projects 0.13 4.18 4.05
Transfers Out 7.83 7.83 -
Total FY 2025-26 Uses 72.47 91.12 18.66
Expenses in (excess)/below Exp-FY 2025-26 0.30 (18.50) (18.81) Estimated Unassigned Fund balance before reserves 64.77 45.97 (18.81) Less: Internally Restricted Reserves
Budget Stabilization & Catastrophic Reserve 29.00 29.00 *** - Capital & Infrastructure Replacement Reserve 3.00 3.00 *** - Insurance Reserve 3.50 3.50 *** -
Retiree Benefits Reserve 2.00 2.00 *** -
Available Fund Balance $ 27.27 $ 8.47 $ (18.81)
*Unaudited
**Financial Data as of 6-1-26 - Q3 FY2526
***Reserves approved by Council on 6/16/25
Table 1
Budget vs. Estimated Actual
(in millions)
Attachment 1
FY 2025-26 Quarterly Financial Report Attachment 1
3 rd Quarter, Ending March 31, 2026
The third quarter revenue collections totaled 64.1% of the adjusted annual budget. The tables and charts below provide a detailed summary of each major General Fund revenue category.
GENERAL FUND REVENUES
Table 2 summarizes actual collections for the City's major General Fund revenue sources and the percentage collected compared to the adjusted budget.
Table 3 compares third quarter revenues to the same period in the prior fiscal year. Overall, revenues increased by approximately $1.99 million compared to the third quarter of FY 2024/25. The increase is primarily attributable to Measure ZZ Transaction and Use Tax revenues, which the City did not begin collecting until April 1, 2025, as well as higher-than-anticipated fines and penalties resulting primarily from the timing of collections and receipts.
Revenue Collection by Source
As of March 31, 2026
Chart 1
Revenues Collected by Source
Quarter Ending March 31, 2025 vs. March 31, 2026
Adjusted Budget Actual % of
REVENUE FY2025-26 YTD 3/31/26 Adj. Budget
Property Tax $ 17,946,740 $ 10,217,416 56.9%
Sales Tax 7,362,145 4,271,506 58.0%
Transaction Use Tax Z 6,923,000 4,050,844 58.5%
Transaction Use Tax ZZ 2,235,000 1,322,823 59.2%
UUT Tax 3,700,000 2,611,084 70.6%
Other Taxes 12,756,211 7,500,571 58.8%
Charges for Services 8,846,165 6,552,691 74.1%
Cost Reimbursement 2,808,455 2,185,743 77.8%
Fines & Penalties 1,490,000 1,672,422 112.2%
License & Permits 3,327,130 2,641,000 79.4%
Miscellaneous 385,500 410,610 106.5%
Money & Property Use 4,842,275 3,107,501 64.2%
Total Revenues $ 72,622,621 $ 46,544,212 64.1%
Table 2: YTD % of Budget
Actual Actual Increase/
REVENUE YTD 3/31/26 YTD 3/31/25 (Decrease)
Property Tax $ 10,217,416 $ 9,968,667 $ 248,748
Sales Tax 4,271,506 4,210,394 61,112
Transaction Use Tax Z 4,050,844 3,784,911 265,933
Transaction Use Tax ZZ 1,322,823 - 1,322,823
Utility User Tax 2,611,084 2,971,326 (360,241)
Other Taxes 7,500,571 8,517,648 (1,017,077)
Charges for Services 6,552,691 5,785,885 766,806
Cost Reimb. 2,185,743 2,077,744 108,000
Fines & Penalties 1,672,422 1,162,012 510,410
License & Permits 2,641,000 2,556,972 84,028
Miscellaneous 410,610 387,348 23,262
Money & Property Use 3,107,501 3,128,514 (21,013)
Total Revenues $ 46,544,212 $ 44,551,422 $ 1,992,790
Table 3: Year-to-Year Comparison
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
Property Tax
Sales Tax
Transaction Use Tax Z
Transaction Use Tax ZZ
Utility User Tax
Other Taxes
Charges for Services
Cost Reimb.
Fines & Penalties
License & Permits
Miscellaneous
Money & Property Use
YTD 3/31/25
YTD 3/31/26
FY 2025-26 Quarterly Financial Report Attachment 1
3 rd Quarter, Ending March 31, 2026
Property Tax collections totaled 56.9% of the adjusted budget through the third quarter. This collection level is consistent with the County of Los Angeles property tax distribution schedule, under which the City receives the majority of its property tax revenues in December, January, April, and May. Staff expects property tax revenues to align with budget following the remaining scheduled distributions.
Sales Tax collections totaled 58.0% of the adjusted budget through the third quarter. Collections appear lower due to the normal reporting lag between taxable sales activity and the distribution of revenues by the California Department of Tax and Fee Administration (CDTFA). Revenue generated from February and March 2026 sales will not be received until April and May 2026 and is expected to improve the year-end collection rate.
Transaction Use Tax Measure Z (TUT-Z) collections totaled 58.5% of the adjusted budget through the third quarter.
Similar to Sales Tax, collections reflect the normal reporting and distribution lag from the CDTFA, with February and March 2026 receipts expected during the fourth quarter. Staff anticipates collections will continue to track with budget by fiscal year-end.
Transaction Use Tax Measure ZZ (TUT-ZZ) Measure ZZ Transaction and Use Tax collections totaled 59.2% of the adjusted budget through the third quarter. As with Sales Tax and Measure Z revenues, collections reflect the normal timing of CDTFA distributions, with February and March 2026 revenues to be received during the fourth quarter.
Compared to the same period last fiscal year, collections are significantly higher because Measure ZZ became effective on April 1, 2025, resulting in only partial-year collections during the prior year.
Utility User’s Tax collections totaled 70.6% of the adjusted budget through the third quarter. Revenues are generated from the consumption of gas, electric, and water services and are trending lower than the prior year due to reduced utility usage and legislative changes affecting the City's ability to collect Utility Users Tax. Staff will continue to monitor collections through year-end.
Other Taxes Other Taxes collections totaled 58.8% of the adjusted budget through the third quarter. This category includes Transient Occupancy Tax (TOT), franchise and landfill-related revenues, land excavation fees, material recovery facility fees, other franchise fees, and hazardous waste fees. Collections are below the prior year primarily due to the termination of the APU TEFRA Agreement and reduced landfill processing activity associated with slower business activity.
Charges for Services collections totaled 74.1% of the adjusted budget through the third quarter and are generally tracking with expectations. Revenues exceed the same period last fiscal year due to the timing of development activity, the recalibration of certain service fees, and continued demand for City services.
Cost reimbursement revenues totaled 77.8% of the adjusted budget through the third quarter. Collections are dependent upon the timing of reimbursement requests and payments under various agreements and are generally consistent with the same period last fiscal year.
Fines and Penalties collections totaled 112.2% of the adjusted budget through the third quarter, exceeding annual budget projections. The higher collections are primarily attributable to the timing of citations, collections, and the distribution of revenues, resulting in receipts being recognized earlier than anticipated. Collections also exceed the same period last fiscal year for the same reason.
License and Permits collections totaled 79.4% of the adjusted budget through the third quarter and are exceeding the pace anticipated for this point in the fiscal year. Revenues are higher than the same period last fiscal year due to increased development activity, the timing of permit issuance, and improved collection of commercial business license fees.
Miscellaneous revenues totaled 106.5% of the adjusted budget through the third quarter, exceeding the annual budget.
This category consists primarily of one-time or nonrecurring revenues that can fluctuate from year to year. Although collections are slightly higher than the prior year, this category represents a relatively small portion of overall General Fund revenues.
FY 2025-26 Quarterly Financial Report Attachment 1
3 rd Quarter, Ending March 31, 2026
Money and Property Use revenues totaled 64.2% of the adjusted budget through the third quarter. Collections are below the same period last fiscal year, primarily due to market variations affecting investment earnings on the City's cash balances.
GENERAL FUND EXPENDITURES
Expenditures by Category
As of March 31, 2026
General Fund expenditures totaled 64.4% of the adjusted budget through the third quarter. As shown in Table 4, Personnel expenditures totaled 79.1% of the revised budget, reflecting negotiated cost-of-living adjustments (COLAs), increased employee benefit costs, and higher-than-anticipated overtime in certain departments. Compared to the same period last fiscal year, personnel expenditures increased primarily due to these salary and benefit adjustments.
Operating expenditures totaled 54.7% of the revised budget through the third quarter. The lower expenditure rate is primarily attributable to the timing of Capital Improvement Program (CIP) projects and other operating expenditures that were carried forward from the prior fiscal year. As shown in Table 5, operating expenditures exceed the prior year's third quarter primarily because of these budget carryforwards, which provide funding for the completion of ongoing General Fund capital improvement projects.
DEPARTMENT EXPENDITURES
At the end of the third quarter, most departments are tracking at or below 75.0% of their adjusted budgets, which is generally consistent with expectations. Departments with significant CIP projects are pacing lower due to the timing of project expenditures, including the Senior Center Renovation, Library Improvements, and Promenade Tenant Improvement projects. Citywide expenditures are pacing higher than other departments primarily due to annual insurance premium allocations and scheduled debt service interest payments that occur earlier in the fiscal year.
Working Budget Actual % of
EXPENDITURE FY 2025-26 YTD 3/31/26 Adopted
Personnel $ 36,385,045 $ 28,794,599 79.1%
Operating 54,739,087 29,932,120 54.7%
Total Expenditures $ 91,124,132 $ 58,726,719 64.4%
Table 4: YTD % of Budget
Actual Actual Increase/
EXPENDITURE YTD 3/31/26 YTD 3/31/25 (Decrease)
Personnel 28,794,599$ $ 25,186,680 $ 3,607,919
Operating 29,932,120 24,946,073 4,986,047
Total Expenditures 58,726,719$ $ 50,132,753 $ 8,593,966 Table 5: Year-to-Year Comparison
2025-26 Actual
EXPENDITURE Adj. Budget YTD 3/31/26 % of Budget
Council $ 260,745 $ 196,988 75.5%
City Clerk 847,315 483,164 57.0%
City Attorney 365,000 187,951 51.5%
City Treasurer 249,750 191,504 76.7%
Administration 2,277,872 1,306,526 57.4%
Finance 2,607,685 1,846,617 70.8%
Economic & Comm Dev 8,351,085 4,072,929 48.8%
Human Resources 991,645 556,104 56.1%
Library 5,009,229 1,506,123 30.1%
Public Safety 27,003,248 20,828,837 77.1%
Public Works 8,495,045 4,087,298 48.1%
Community Resources 15,666,888 7,414,495 47.3%
City-Wide 18,998,625 16,048,183 84.5%
Total Expenditure $ 91,124,132 $ 58,726,719 64.4%
Table 6: Expenditures by Department
FY 2025-26 Quarterly Financial Report Attachment 1
3 rd Quarter, Ending March 31, 2026
MAJOR SPECIAL REVENUE, SEWER, AND INTERNAL SERVICES FUNDS
SUMMARY
In addition to the General Fund, the City monitors the financial performance of its major Special Revenue Funds (Gas Tax and Fire Safety), the Sewer Enterprise Fund, and the major Internal Service Funds (Risk Management/Liability and Information Technology). These funds support specific programs and operations and are accounted for separately from the General Fund.
Tables 7 and 8 summarize third quarter revenues and expenditures for these major funds, while Charts 3 and 4 illustrate each fund's revenue collections and expenditure activity as of March 31, 2026.
Gas Tax Fund
Gas Tax Fund revenues totaled 65.7% of the adjusted FY 2025/26 budget through the third quarter, while expenditures totaled 83.3% of the adjusted budget. The higher expenditure rate is primarily attributable to the timing of capital improvement and street maintenance projects, with expenditures occurring in advance of certain remaining revenue receipts.
Fire Safety Fund
Fire Safety Fund revenues totaled 75.0% of the adjusted budget through the third quarter, while expenditures totaled 80.2% of the adjusted budget. The fund is currently operating within expectations, and expenditures are anticipated to normalize over the remainder of the fiscal year and remain within the adopted budget.
Adjusted Budget Actual % of
REVENUE FY 2025-26 YTD 03/31/26 Adj. Budget
Gas Tax Fund $ 1,404,935 $ 922,695 65.7%
Fire Safety Fund 7,330,995 5,498,246 75.0%
Sewer Fund 3,639,495 2,626,551 72.2%
Risk Mgmt/Liab Fund 5,490,440 5,060,319 92.2%
IT Fund 4,357,180 2,671,329 61.3%
Total Revenues $ 22,223,045 $ 16,779,140 75.5%
Table 7: YTD % of Budget
Adjusted Budget Actual % of
EXPENDITURE FY 2025-26 YTD 3/31/26 Adj. Budget
Gas Tax Fund $ 1,006,680 $ 838,992 83.3%
Fire Safety Fund 7,330,995 5,881,114 80.2%
Sewer Fund 5,348,510 2,965,535 55.4%
Risk Mgmt/Liab Fund 6,679,950 5,436,743 81.4%
IT Fund 5,486,088 2,671,329 48.7%
Total Expenditures $ 25,852,223 $ 17,793,713 68.8%
Table 8: YTD % of Budget
FY 2025-26 Quarterly Financial Report Attachment 1
3 rd Quarter, Ending March 31, 2026
Sewer Fund
Sewer Enterprise Fund revenues totaled 72.2% of the adjusted budget through the third quarter, while expenditures totaled
55.4% of the adjusted budget. The lower expenditure rate primarily reflects the timing of planned capital and maintenance projects that are expected to continue through the remainder of the fiscal year.
Risk Management Fund
Risk Management/Liability Fund revenues totaled 92.2% of the adjusted budget through the third quarter, primarily reflecting the timing of internal cost allocations. Expenditures totaled 81.4% of the adjusted budget and are primarily driven by the timing of claim payments and related liability costs.
Information Technology Fund
Information Technology Fund revenues totaled 61.3% of the adjusted budget through the third quarter. Internal service allocations are recorded quarterly. Expenditures totaled 48.7% of the adjusted budget, primarily reflecting the timing of annual software licenses and subscriptions, as well as the scheduling of planned technology projects, equipment installations, and system improvements.