Beverly Hills City Council
March 4, 2026

STAFF REPORT
Meeting Date: March 4, 2026
To: Honorable Mayor & City Council
From: Jeff S. Muir, Director of Finance
Tatiana Szerwinski, Assistant Director of Finance
Brandy Gros, Budget Manager
Subject: Midyear Update on Fiscal Year 2025-26 General Fund and Enterprise Fund Financial Results, and General Fund Forecast

INTRODUCTION
This report presents a midyear update on the City’s financial performance for fiscal year 2025-26. It includes a comparative analysis of General Fund results for the same period in fiscal year 2024-25, a forecast for the remainder of the fiscal year and an updated tenyear outlook through fiscal year 2034-35. Additionally, it evaluates Enterprise Fund performance against the revised budget for 2025-26.

DISCUSSION
On November 12, 2025, Finance presented the unaudited financial results for the General Fund and Enterprise Funds for fiscal year 2024-25, as well as the first quarter General Fund results for fiscal year 2025-26. This report analyzes the interim General Fund performance through the second quarter of fiscal year 2025-26, comparing results to the same six-month period of the previous fiscal year, while assessing Enterprise Fund performance against the revised budget for 2025-26.

Fiscal Year 2025-26 General Fund Midyear Update
General Fund revenue for the first two quarters was $139.8 million, $0.8 million (0.6%) higher than the prior year’s results primarily due to one-time major projects revenue and property tax revenue increases offsetting decreases in Metro-related reimbursements and transfers from other funds in the prior year. Expenditures were $158.0 million, $2.1 million (1.3%) lower than prior year results predominantly due to decreases in various contractual services and internal service charges. Results through the second quarter depict the expected annual trend of expenditures exceeding revenues due to revenue timing, discussed and detailed further below.

Attachments: None
Meeting Date: March 4, 2026

Property Tax 44,134$ 46,339$ 2,205$ 5.0%
Sales Tax 22,595 23,461 866 3.8%
Transient Occupancy Tax 24,869 24,234 (635) -2.6%
Business Tax 2,689 1,873 (816) -30.3%
"Big Four" Tax Subtotal 94,286 95,906 1,621 1.7%
Other Taxes 773 1,038 265 34.2%
Intergovernmental Revenue 727 867 140 19.3%
Licenses and Permits 11,727 12,378 651 5.6%
One-Time Major Development Projects Revenue 6,553 9,042 2,489 38.0% Fines and Penalties 3,003 3,894 891 29.7%
Use of Money and Property 4,434 4,905 471 10.6%
Service Fees and Charges 7,637 7,213 (424) -5.6%
Miscellaneous Revenue 2,338 1,662 (676) -28.9%
Metro Reimbursement Revenue[2] 4,489 2,739 (1,750) -39.0% Transfers In 3,003 129 (2,874) -95.7%
Other Revenue Subtotal 44,682 43,866 (816) -1.8%
Total Revenue [3] 138,968 139,772 804 0.6%

EXPENDITURES
Salaries and Benefits 69,217 70,393 1,176 1.7%
Materials and Supplies 1,252 1,061 (191) -15.2%
Contractual Services 10,942 10,240 (702) -6.4%
Tourism and Marketing (from TOT) 5,230 4,174 (1,056) -20.2% BHUSD Joint Powers Agreement 7,050 7,250 200 2.8%
Private Security 2,918 2,823 (94) -3.2%
Supportive Housing / Unhoused Assistance 1,336 1,099 (237) -17.7% Metro Service Costs 3,079 2,641 (438) -14.2%
Internal Service Charges 40,160 38,690 (1,470) -3.7%
Other Charges 2,943 3,409 466 15.8%
Transfer to Pension Trust 5,000 5,000 0 0.0%
Transfers Out 10,946 11,193 247 2.3%
Total Expenditures 160,072 157,975 (2,097) -1.3%
Net Year-to-Date Variance (21,104)$ (18,203)$ 2,901$ -13.7% Public Benefit Contributions 12,500 10,000 (2,500) -20.0% Total Year-to-Date Results (8,604)$ (8,203)$ 401$ -4.7% [2] Includes reimbursable Metro-related personnel costs as well as service costs. [3] Total Revenue excludes one-time public benefit contributions, accounted for below the line. [1] Results differ from figures presented in the March 18, 2025 financial update report because journal entries continue to be recorded to prior periods after the Staff Report is prepared.

NOTE: Immaterial differences may exist when adding rounded figures above. The Section 115 Pension Trust is included in the General Fund for purposes of financial reporting in the Annual Comprehensive Financial Report. The results above exclude the Section 115 Pension Trust, as well as certain accounting/accrual entries in order to assist with comparison.

General Fund
($ Thousands)

REVENUE
FY 2025-26
July - Dec
Actuals
FY 2024-25
July - Dec
Actuals[1]
Variance
from Prior
Year
%
Variance
Meeting Date: March 4, 2026

High-level midyear revenue variances between fiscal year 2025-26 and fiscal year 2024- 25 are as follows:
 “Big Four” tax revenues are up $1.6 million (1.7%) in aggregate compared to the same period in the previous fiscal year. Property Tax inflows for the current year have exceeded the prior year’s six-month results by $2.2 million (5.0%), aligning with an increase in the City’s taxable assessed valuation. Sales Tax receipts have also seen a $0.9 million (3.8%) increase compared to the previous year, largely due to growth in the areas of auto sales and jewelry stores. Transient Occupancy Tax (TOT) slightly trailed the prior year’s results by $0.6 million (2.6%) and Business Tax receipts were down $0.8 million (30.3%) due to timing differences in the collection of remittances. It is important to note that Business Tax results through December are not a reliable predictor of year-end outcomes, as the vast majority of these taxes are collected when due in January.  Swings in Other Taxes are predominantly driven by the impact of changes in ownership of high-value property and housing market conditions on the realization of property transfer tax, which saw a $0.3 million (34.2%) gain over the prior year six-month period.
 Licenses and Permits revenue outperformed the prior year-to-date activity by $0.7 million (5.6%), reflecting continued growth in baseline routine development activity.  One-Time Major Development Projects Revenue generated $9.0 million in the first half of the current fiscal year, predominantly from building plan check revenue and plan review fees for mechanical, electrical, and plumbing (MEP) systems for the One Beverly Hills (One BH) development project.
 Fines and Penalties increased by $0.9 million (29.7%) primarily due to increased parking enforcement activity and operational enhancements.  Use of Money and Property outperformed the same six-month period in the prior year by $0.5 million (10.6%), largely due to growth in the City’s investment portfolio resulting in the continued realization of higher earnings.  The $0.4 million (5.6%) decline in Service Fees and Charges reflects the cessation of grant-funded afterschool programming provided by the City at Beverly Hills Unified School District elementary schools, partially offset by increased ambulance service fees.
 The $0.7 million (28.9%) decrease in Miscellaneous Revenue is predominantly attributable to a one-time transfer in the prior year of $0.4 million in accumulated donations from the Community Charitable Foundation to the City, as well as a small decline in municipal surcharge revenue.
 Metro Reimbursement Revenue decreased by $1.8 million (39.0%) compared to prior year. This revenue source is subject to timing differences related to invoicing and receipt of payment from Metro.
 The large disparity in Transfers In relates to a $3.0 million transfer from the Parking Enterprise Fund recognized in the first half of fiscal year 2024-25 that will not recur in the current year.

Meeting Date: March 4, 2026

High-level midyear operating expenditure variances between fiscal year 2025-26 and fiscal year 2024-25 are as follows:
 Midyear Salaries and Benefits increased by $1.2 million (1.7%) compared to last year, largely related to contractual cost of living adjustments as stipulated in the memoranda of understanding with employee bargaining units.  Expenditures for Materials and Supplies decreased by $0.2 million (15.2%) compared to the prior year, reflecting modest reductions across various items in multiple departments.
 The $0.7 million (6.4%) decline in Contractual Services predominantly relates to reduced spending on afterschool vendor programming and savings from CAGF awards on hiatus.
 The most significant decreases in Tourism and Marketing costs are attributable to one-time costs incurred in the prior year for installation of the Rodeo Drive bollards, coupled with lower costs associated with the current year’s holiday lighting ceremony, resulting in a $1.1 million (20.2%) reduction from prior year.  The $0.4 million (14.2%) decline in Metro Service Costs is primarily due to reduced spending on independent compliance monitoring and, to a lesser extent, engineering services for the Metro project.
 Other Charges rose by $0.5 million (15.8%), primarily reflecting higher utility costs, with electricity and water being the main drivers.

Overall, variances between the first half of the current fiscal year compared to the prior year are explainable and generally within expectations. The fact that expenditures significantly outpace revenues through the second quarter is a typical pattern each fiscal year because Property Tax is primarily received from December through June and Business Tax is primarily received in January. However, the gap between expenditures and revenues over this period is $2.9 million (13.7%) less than the prior year, as detailed above.ff

Meeting Date: March 4, 2026

Fiscal Year 2025-26 General Fund Forecast
The table below summarizes the fiscal year 2025-26 General Fund adopted budget, revised budget, forecasted actuals, and percentage of revised budget.

REVENUE
Property Tax 114,063$ 114,343$ 112,218 $ (2,125) -1.9%
Sales Tax 45,551 45,551 46,336 785 1.7%
Transient Occupancy Tax (TOT) 46,364 46,364 46,000 (364) -0.8% Business Tax 64,165 64,165 64,165 0 0.0%
"Big Four" Tax Subtotal 270,143 270,423 268,719 (1,704) -0.6% Other Taxes 1,212 1,212 1,735 523 43.2%
Intergovernmental Revenue 438 495 867 372 75.1%
Licenses and Permits 18,556 18,556 20,809 2,254 12.1%
One-Time Major Development Projects Revenue 13,416 13,416 20,100 6,684 49.8% Fines and Penalties 5,242 5,242 6,720 1,478 28.2%
Use of Money and Property 10,687 10,509 11,028 520 4.9% Service Fees and Charges 11,926 11,926 13,108 1,182 9.9% Miscellaneous Revenue 2,516 2,608 2,972 364 13.9%
Metro Reimbursement Revenue[2] 6,845 6,845 7,698 853 12.5% Transfers In 6 132 132 0 0.0%
Other Revenue Subtotal 70,843 70,940 85,170 14,230 20.1% Total Revenue [3] 340,986 341,363 353,888 12,526 3.7%

EXPENDITURES
Salaries and Benefits 160,960 161,177 153,672 (7,505) -4.7% Materials and Supplies 2,838 2,889 2,736 (153) -5.3%
Contractual Services 24,145 27,686 25,203 (2,483) -9.0% Tourism and Marketing (from TOT) 6,623 8,979 8,979 0 0.0% BHUSD Joint Powers Agreement 14,500 14,500 14,500 0 0.0% Private Security 5,660 5,696 5,695 (1) 0.0%
Supportive Housing / Unhoused Assistance 1,664 1,664 1,438 (226) -13.6% Metro Service Costs 6,352 6,644 7,109 466 7.0%
Internal Service Fund Charges 77,380 77,380 77,380 0 0.0% Other Charges 7,523 7,560 7,930 370 4.9%
Transfer to Pension Trust 10,000 10,000 10,000 0 0.0%
Transfers Out 21,396 21,896 23,598 1,703 7.8%
Total Expenditures 339,041 346,071 338,242 (7,829) -2.3% Net Surplus/(Deficit) before Public Benefit
Contributions 1,945$ (4,708)$ 15,647$ 20,355$ -432.3%
Public Benefit Contributions 10,000 10,000 10,000 0 0.0% Total Surplus/(Deficit) 11,945$ 5,292$ 25,647$ 20,355$ 384.6% [2] Metro Reimbursement Revenue includes reimbursable Metro-related personnel costs as well as service costs. [3] Total Revenue excludes one-time public benefit contributions, accounted for below the line. [1] The difference between the revised and adopted expenditure budget is $6.2 million in carryovers from prior year and $0.9 million in midyear appropriations to-date.

NOTE: Immaterial differences may exist when adding rounded figures above. The Section 115 Pension Trust is included in the General Fund for purposes of financial reporting in the Annual Comprehensive Financial Report. The results above exclude the Section 115 Pension Trust, as well as certain accounting/accrual entries in order to assist with comparison.

General Fund
($ Thousands)
FY 2025-26
Adopted
Budget
FY 2025-26
Revised
Budget[1]
FY 2025-26
12-Month
Forecast
Variance
Revised
Budget vs.

Forecast
%
Variance
Meeting Date: March 4, 2026

Forecast for the Remainder of Fiscal Year 2025-26
Before considering public benefit contributions, total revenue of $353.9 million is projected to surpass the budget by $12.5 million (3.7%). High-level revenue comparisons of the revised budget to forecasted actuals are as follows:
 Total “Big Four” tax revenues are forecasted to come in slightly below the budgeted amount by $1.7 million (0.6%), with some variation amongst the four. Property Tax is forecasted to fall short of initial expectations by $2.1 million (1.9%) primarily due to the fiscal year 2025-26 budget assumption of $1.3 million in deferred fiscal year 2024-25 receipts into the current year which ultimately did not materialize, and a slightly higher estimate for assessed valuation increase when the budget was originally developed than was ultimately realized. Sales Tax also reflects a modest forecasted increase of $0.8 million (1.7%) based on year-to-date results.

Projections for both Transient Occupancy Tax (TOT) and Business Tax have been forecasted to align closely with the revised budget at $46.0 million (0.8% decrease) and $64.2 million (no change), respectively, based on current year results to-date and historical trends.
 Initial projections for Other Taxes were conservative estimated due to their inherently volatile nature. Based on year-to-date actuals, we now anticipate property transfer tax revenue, a component of Other Taxes, to exceed the revised budget projections, resulting in the $0.5 million (43.2%) forecasted increase.  Intergovernmental Revenue is forecasted at $0.9 million, exceeding the revised budget by $0.4 million (75.1%), primarily due to higher-than-anticipated reimbursements from Los Angeles County for unhoused support services funded through regional homelessness initiatives, including allocations tied to the Measure A Local Solutions Fund administered via the Westside Cities Council of Governments, as well as Fire strike team deployment reimbursements that surpassed budgeted projections.
 Licenses and Permits revenue is projected to exceed budget by $2.3 million (12.1%) driven by sustained year-to-date demand and continued strength in permit application activity.
 The current forecast for One-Time Major Development Projects Revenue1 is $20.1
million, surpassing the budget by $6.7 million (49.8%). Collections to date, primarily from building and MEP plan check fees, have already exceeded budgeted levels, driving the notable increase in the forecasted revenue for the year. As a reminder, major development revenue is inherently volatile and unpredictable, as it depends on irregular project timelines, shifting market conditions, and financing availability all of which can fluctuate significantly from year to year.  Fines and Penalties are projected at $1.5 million (28.2%) above budget, reflecting a significant increase in parking ordinance violation revenue driven by increased parking enforcement activity and operational enhancements to improve both efficiency and compliance.
 Service Fees and Charges are forecasted to outperform budgeted projections by $1.2 million (9.9%), lead primarily by higher-than-anticipated Fire Department revenues, including ambulance, plan review, and inspection fees, followed by increased Community Development revenues such as environmental review and plan maintenance fees.
1One-Time Major Development Projects Revenue is derived by disaggregating it from various revenue categories including Licenses and Permits, Service Fees and Charges, and Miscellaneous Revenue. For the fiscal year 2025-26 forecast, the $20.1 million in forecasted revenue is comprised of $19.8 million in permit and plan check revenue (from Licenses and Permits) and $0.3 million in Environmental Mitigation and Sustainability (EMS) fees (from Miscellaneous Revenue), while the $13.4 million budgeted was projected to come from Licenses and Permits revenue of $10.7 million and EMS fees of $2.7 million.

Meeting Date: March 4, 2026

 Metro Reimbursement revenue is projected to exceed the revised budget by $0.9 million (12.5%). The adopted budget was intentionally conservative, primarily reflecting anticipated reimbursements for Metro-related contractual services and assuming a net-zero impact (service costs equal reimbursement revenue) excluding recoverable personnel costs. Because actual reimbursements are closely tied to the timing of billing and payment, as well as variable project activity, these revenues are inherently difficult to predict. Based on collections to date and anticipated year-end activity, Metro reimbursements are now expected to surpass original estimates.

Total expenditures for fiscal year 2025-26 are forecasted to be $338.2 million, which is

2.3% lower than the revised budget and results in an anticipated budgetary expenditure savings of $7.8 million overall. Forecasted expenditures presented include budgeted goods and services expected to be expended within the current fiscal year. However, it is important to note that an estimated $8.1 million of these funds may need to be carried over to the subsequent fiscal year when the actual spending is anticipated to occur. This annual carryover process ensures that resources are available when needed, even if project timelines or procurement processes extend beyond the current fiscal year.

Most expenditure categories are not expected to vary greatly from the revised budget.

High-level expenditure comparisons of the revised budget to forecasted actuals are as follows:
 Salaries and Benefits are forecasted to be $7.5 million (4.7%) below budget primarily due to salary savings from vacancies in authorized positions and more conservative assumptions regarding the outcomes of labor negotiations for safety groups than have materialized to date.
 When accounting for anticipated spending of carryover funds, an anticipated savings of $2.5 million (9.0%) is forecasted for Contractual Service costs relative to the revised budget. These overall savings are the cumulative result of small, estimated savings identified across a variety of programs and departments throughout the City.
 Forecasted Transfers Out include an additional $1.7 million (7.8%) in General Fund transfers approved by the City Council in January and February 2026, consisting of $1.5 million for video data storage and retention and $0.2 million to support municipal election costs.

Meeting Date: March 4, 2026

The originally adopted fiscal year 2025-26 budget projected an overall General Fund surplus of $1.9 million, before one-time public benefit contributions. Based on revenues now trending above projections and expenditure savings identified to-date, the financial outlook for the current year has improved considerably. The updated forecast increases the projected General Fund surplus to $15.6 million for fiscal year 2025-26. If realized, this improved year-end position would provide the City with greater flexibility to partially address projected out-year deficits using the current year surplus, subject to City Council review and direction. Accordingly, should year-end results align with the current forecast, staff anticipate recommending that available public benefit contributions of $10.0 million be reserved for future one-time purposes to support priority Council initiatives.

General Fund Reserves

Based on audited results, the City had total General Fund reserves of $275.1 million as of June 30, 2025, as detailed in the table above.

The economic/contingency reserve required by the City’s financial policies is comprised of at least 40% of General Fund operating expenditures and shall not decrease unless approved by the Council. Based on the current fiscal year 2025-26 forecast and increased operating expenditure budget, it is estimated that the economic/contingency reserve will need to be increased by $0.1 million to $115.0 million for fiscal year 2025-26 to meet policy requirements. Council has also previously established a $26.5 million budget stabilization reserve available for one-time uses as directed by City Council. $6.2 million was set aside at the end of fiscal year 2024-25 to cover then-existing encumbrances and carryovers into the current year, which have been forecasted to be expended in the current fiscal year.

The amount to cover estimated encumbrances and carryovers from the current fiscal year to fiscal year 2026-27 is $8.1 million.

General Fund Reserves (Fund Balance)
($ Millions)
FY 2024-25
Audited Actuals
with Approved
FY 2025-26
Allocations
FY 2025-26
Unaudited
Forecasted
Actuals
Change from
Prior Year
Economic/Contingency Reserve (minimum 40%)
Contingency Reserve (minimum 25%) 71.8$ 71.9$ 0.1$
Economic Reserve (minimum 15%) 43.1 43.1 -
Total Economic/Contingency Reserve 114.9 115.0 0.1
Budget Stabilization Reserve 26.5 26.5 -
Committed Fund Balance (Council earmarks)
Street Tree Removal & Replacement 1.1 1.1 -
One-time Public Benefit Contributions 119.0 23.1 4.1
One-time Capital Improvement Plan Contributions 26.1 26.1 - October 7th Memorial Funding 0.5 0.5 -
Committed Fund Balance Total 46.7 50.8 4.1
Nonspendable (long-term receivables/advances to other funds) 2.2 2.2 - Restricted (Pension trust) 30.4 30.4 -
Restricted (Metro Projects) 6.1 6.7 0.6
Encumbrances/Carryovers 6.2 8.1 1.9
Total Other Reserves 44.9 47.4 2.5
Unassigned 42.1 55.1 13.0
Total Fund Balance 275.1$ 294.8 $ 19.7$
NOTE: Immaterial differences may exist due to rounding. 1 The reflected $4.1 million increase in reserves represents the net of staff's anticipated recommendation to earmark the current year's $10.0 million public benefit contribution to Committed fund balance, offset by the proposed use of $5.9 million in existing reserves to fund the property acquisition on tonight's agenda, subject to Council approval.

Meeting Date: March 4, 2026

Additional elements of total reserves include amounts committed by City Council for specified purposes or other restricted funds, including public benefit contributions designated to support future Council-prioritized initiatives for the Beverly Hills community.

If final year-end financial results align with current projections, staff anticipates recommending that the current year's $10.0 million public benefit contribution be allocated to Committed fund balance for Council consideration. The projected increase of $4.1 million in Committed reserves reflected above is net of a $5.9 million reduction for the proposed property acquisition at 401 South Robertson Blvd. on tonight’s agenda to be funded from General Fund reserves, subject to Council approval.

Unassigned fund balance (the amount above current restrictions and Council earmarks, contingency, and stabilization reserves) is projected to increase by $13.0 million to $55.1 million, primarily as a result of the forecasted surplus in the current fiscal year. Unassigned reserves can be available for one-time uses at the direction of the City Council. The City’s General Fund reserves continue to exceed the baseline amount required by its adopted financial policies and are a significant contributing factor to the City’s underlying AAA credit rating, as they are demonstrative of the City’s financial flexibility, resilience, and prudent financial management.

Public Benefit Contribution Tracking
To provide a running history of public benefit contributions received and anticipated, a summary is provided below. This overview will help transparently illustrate how these funds have been utilized and what future resources are forthcoming to support key community priorities and enhance the City's financial resilience.

FY 2020-21 -$ 1,000,000$ -$ (1,000,000)$
FY 2021-22 5,000,000 - 5,000,000 -
FY 2022-23 - 1,500,000 1,500,000 -
FY 2023-24 10,000,000 - - (10,000,000)
FY 2024-25 10,000,000 2,500,000 12,500,000 -
FY 2025-261
10,000,000 - 10,000,000 (5,925,000)
FY 2026-27 15,000,000 - - -
FY 2027-28 15,000,000 - - -
FY 2028-29 15,000,000 - - -
FY 2029-30 20,000,000 - - -
Total 100,000,000$ 5,000,000$ 29,000,000$ (16,925,000)$ [1] Pending City Council aproval

PUBLIC BENEFIT CONTRIBUTIONS
Fiscal Year One BH Rosewood
Residences
Committed
Fund Balance
Utilized for
Expenditures
Meeting Date: March 4, 2026

Ten-Year General Fund Forecast through Fiscal Year 2034-35 In keeping with the City’s commitment to long-term financial planning and transparency, staff has prepared an updated ten-year General Fund forecast reflecting the revised fiscal year 2025-26 forecasted results and updated assumptions for select revenue and expenditures categories. This forecast builds upon the version presented in November 2025 and continues to project revenues and expenditures through fiscal year 2034-35.

Overall, the forecast remains materially consistent with the November forecast. While revenues in fiscal year 2026-27 reflect modest adjustments, the net impact to revenues is limited. On the expenditure side, updated estimates contribute to a somewhat larger projected deficit in fiscal year 2026-27 than previously forecast. While some expenditure refinements partially offset these increases, the cumulative three-year projected deficit for fiscal years 2026-27 through 2028-29 has grown slightly since November, while the outer years of the forecast show slight improvement. The overall percentage variation from the prior forecast remains within a narrow range, generally within one to two percent of previously projected revenues and expenditures.

Consistent with prior discussions, recent and projected surpluses are expected to provide capacity to absorb near-term deficits. However, the forecast continues to reflect structural imbalances, as the City continues to rely in part on economically sensitive developmentrelated revenues, which can fluctuate based on timing and market conditions. To preserve the long-term financial health of the City, it is critical that current operations be supported by ongoing revenues, and that one-time revenue (like that of major development projects) be relied upon to fund one-time costs.

As the City advances its zero-based budgeting efforts for capital projects, under the direction of the Ad Hoc Committee, adjustments to capital planning and project prioritization may reduce expenditures and help mitigate projected gaps. Continued monitoring and prudent fiscal management will be necessary to address projected deficits, ensure longer-term structural balance, and maintain long-term financial sustainability.

Should current trends generally hold, staff anticipates returning with policy options to address the fiscal years 2026-27 through 2028-29 projected deficits, while maintaining fiscal stability.

Meeting Date: March 4, 2026

Some noteworthy adjustments factored into the current forecast include (but are not limited to):
 Transient Occupancy Tax (TOT): Since the November forecast, monthly TOT collections have shown improvement following the temporary decline experienced in the months immediately preceding that update. As a result, the fiscal year 2025- 26 TOT projection has been revised upward relative to the November forecast, reflecting more recent stabilization in hotel activity. While the near-term outlook has improved, assumptions remain measured given the continued sensitivity of this revenue source to economic conditions, travel patterns, and visitor demand.

The adjustment improves the near-term trajectory; however, projected growth rates remain conservative in the outer years compared to historical peaks.  Licenses and Permits / One-Time Major Development Revenue: The fiscal year 2025-26 and fiscal year 2026-27 projections for Licenses and Permits and OneTime Major Development Revenue have been reduced relative to the November forecast to reflect growing uncertainty in development timing, economic conditions, and potential refinements to project-related assumptions. Given the inherent volatility of development activity, the sensitivity to market conditions, and the evolving nature of large-scale projects, staff has adopted a more conservative near-term outlook. Assumptions in the outer years of the forecast remain largely unchanged, as long-term development expectations and baseline growth trends have not materially shifted.
 Fines and Penalties: The forecast has been updated to reflect a sustained return toward historical averages for parking ordinance violation revenue, consistent with increased parking enforcement activity and operational enhancements. Recent increases in collections indicate that revenues have normalized at levels more consistent with prior long-term trends. Accordingly, the updated forecast assumes stabilized performance in the near term.
 Service Fees and Charges: Based on year-to-date performance, Service Fees and Charges are trending approximately 10% above prior projections. The increase is distributed across several departments, including the Fire Department and Community Services, both of which historically take a conservative approach when estimating revenues, as well as Community Development, reflecting continued strength in development-related activity. The revised base has been incorporated into the ten-year forecast, with future years adjusted accordingly using standard inflationary growth assumptions.
 Miscellaneous Revenue: The increase in Miscellaneous Revenue is primarily attributable to higher projected municipal surcharge receipts, which track closely with transient occupancy tax performance. Accordingly, the upward revision to TOT assumptions has been reflected in a corresponding increase to municipal surcharge revenue in the forecast.
 Metro Service Costs and Reimbursement Revenue: Ongoing construction activity on the LA Metro D Line Extension through Beverly Hills is extending into fiscal year 2026-27, with significant work including station construction and associated systems expected to continue through Spring 2027 under the most recently published schedules. As a result, the forecast has been revised to include an additional $5.1 million in Metro Service Costs in fiscal year 2026-27, with a corresponding increase in projected Metro Reimbursement Revenue. This adjustment is not expected to affect the General Fund bottom line, as the incremental costs are offset by recoverable reimbursements tied to the project.

Meeting Date: March 4, 2026

 Salaries and Benefits: Beginning with fiscal year 2026-27, the forecast for Salaries and Benefits has been revised upward compared to the November projection. The updated outlook incorporates refined labor cost projections based on current agreements and known commitments, primarily reflecting compensation adjustments to safety groups exceeding prior assumptions.. In addition, preliminary assumptions regarding potential fiscal year 2026-27 budget enhancements have been incorporated, most notably Police staffing to support Metro Station 2. The forecast assumes onboarding beginning in January 2027, resulting in recognition of approximately 50% of the annualized personnel cost in fiscal year 2026-27 and full staffing by fiscal year 2027-28. Beyond these adjustments, long-term growth assumptions remain generally consistent with the prior forecast.
 Contractual Services: The forecast for Contractual Services has been adjusted in the near term to reflect updated cost estimates and preliminary planning assumptions for potential fiscal year 2026-27 budget enhancements. At this time, anticipated enhancements are generally assumed to align with standard inflationary growth factors embedded in the forecast. The most significant anticipated enhancement request is for plan review consulting services related to large-scale or complex development projects. Because this item is one-time in nature, the projection reflects a corresponding reduction in fiscal year 2027-28.

These assumptions are incorporated solely for long-range financial planning purposes. Formal authorization of any fiscal year 2026-27 enhancements remains subject to City Council review and approval as part of the annual budget process.  BHUSD Joint Powers Agreement: The City and the Beverly Hills Unified School District are currently in negotiations regarding the Joint Powers Agreement.

Pending the outcome of those discussions, the forecast holds funding at the status quo level, maintaining current contribution amounts until updated agreement terms are finalized.

Meeting Date: March 4, 2026

Forecast Assumptions
The ten-year forecast uses inflationary assumptions for revenue and expenditure growth based on historical data, economic indicators, and expert projections. While these percentages provide a baseline, actual year-to-year changes may differ due to adjustments for known and unknown anomalies or unique factors affecting specific line items. The chart below illustrates the base inflationary assumptions applied to various revenue and expenditure categories in the current forecast.

Category FY 2026-27
Forecast
FY 2027-28
Forecast
FY 2028-29
Forecast
FY 2029-30
through
FY 2034-35
Forecast
Revenue
Property Tax (Assessed Value) 3.2% 3.6% 3.6% 3.6%
Sales Tax 2.5% 2.5% 2.5% 2.5%
Transient Occupancy Tax (TOT) 3.0% 3.0% 3.0% 3.0%
Business Tax 2.0% 2.0% 2.0% 2.0%
Other Taxes 2.0% 2.0% 2.0% 2.0%
Intergovernmental Revenue 2.0% 2.0% 2.0% 2.0%
Licenses and Permits 2.0% 2.0% 2.0% 2.0%
Fines and Penalties 1.0% 1.0% 1.0% 1.0%
Use of Money and Property 0.0% 0.0% 0.0% 0.0%
Service Fees and Charges 2.0% 2.0% 2.0% 2.0%
Miscellaneous Revenue 0.0% 0.0% 0.0% 0.0%
Expenditures
Salaries and Benefits 4.3% 4.0% 4.3% 3.0%
Materials and Supplies 3.0% 2.0% 2.0% 2.0%
Contractual Services 2.0% 2.0% 2.0% 2.0%
Other Charges 2.0% 2.0% 2.0% 2.0%
Transfer to Pension Trust 0.0% 0.0% 0.0% 0.0%
Meeting Date: March 4, 2026

FY 2025-26 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Adopted Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Revenue
Property Tax 114,063$ 112,218$ 115,456$ 119,441$ 123,594$ 131,328$ 139,244$ 143,503$ 147,915$ 152,486$ 157,221$ Sales Tax 45,551 46,336 47,249 48,903 50,126 51,379 52,663 53,980 55,330 56,713 58,131Transient Occupancy Tax (TOT)1 46,364 46,000 46,719 48,801 52,424 58,482 60,236 62,043 63,904 65,821 67,796 Business Tax 64,165 64,165 65,448 66,757 68,092 69,454 70,843 72,260 73,705 75,179 76,683Other Taxes 1,212 1,735 1,770 1,805 1,841 1,878 1,916 1,954 1,993 2,033 2,074Intergovernmental Revenue 438 867 457 466 475 485 495 505 515 525 536Licenses and Permits2 18,556 20,809 21,226 21,651 22,084 22,526 22,977 23,437 23,906 24,384 24,872One-Time Major Development Projects Revenue 13,416 20,100 9,524 4,772 9,691 9,691 9,691 9,691 9,691 9,691 9,691Fines and Penalties 5,242 6,720 6,787 6,855 6,924 6,993 7,063 7,134 7,205 7,277 7,350Use of Money and Property 10,687 11,028 11,028 11,028 11,028 11,028 11,028 11,028 11,028 11,028 11,028Service Fees and Charges 11,926 13,108 13,370 13,637 13,910 14,188 14,472 14,761 15,056 15,357 15,664Miscellaneous Revenue3 3,016 2,972 3,036 3,102 3,383 4,707 6,032 6,107 6,184 6,263 6,344 Metro Reimbursement Revenue4 6,345 7,698 5,116 258 0 0 0 0 0 0 0 Transfers In 6 132 6 6 6 6 6 6 6 6 6
Total Revenue 340,987 353,888 347,192 347,483 363,578 382,145 396,667 406,409 416,438 426,763 437,396Expenditures Salaries and Benefits 160,960 153,672 170,921 179,103 186,962 191,650 196,403 200,035 204,879 208,433 213,180Materials and Supplies 2,838 2,736 2,787 2,843 2,900 2,958 3,017 3,077 3,139 3,202 3,266Contractual Services 24,152 25,203 28,128 26,141 26,664 27,197 27,741 28,296 28,862 29,439 30,028Tourism and Marketing (from TOT) 6,623 8,979 6,674 6,972 7,489 8,355 8,605 8,863 9,129 9,403 9,685BHUSD Joint Powers Agreement 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500Private Security 5,660 5,695 5,309 5,415 5,523 5,633 5,746 5,861 5,978 6,098 6,220 Supportive Housing / Unhoused Assistance 1,664 1,438 1,467 1,496 1,526 1,557 1,588 1,619 1,652 1,685 1,719Metro Service Costs 6,345 7,109 5,116 258 0 0 0 0 0 0 0Internal Service Fund Charges 77,380 77,380 82,078 85,021 86,362 89,142 92,321 95,828 99,488 103,308 107,460Other Charges5 7,523 7,930 6,633 6,766 6,901 7,039 7,180 7,324 7,470 7,619 7,771 Transfer to Pension Trust 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000Transfers Out 21,396 23,598 21,392 20,396 17,895 19,187 19,689 20,188 21,188 21,189 21,547 Total Expenditures 339,041 338,242 355,005 358,910 366,723 377,217 386,791 395,592 406,284 414,876 425,375 Net Surplus / (Deficit) 1,946 15,647 (7,813) (11,427) (3,145) 4,928 9,876 10,817 10,154 11,887 12,021 Public Benefit Contribution Utilization6 0 0 0 0 0 0 0 0 0 0 0 Total Surplus / (Deficit) 1,946$ 15,647$ (7,813)$ (11,427)$ (3,145)$ 4,928$ 9,876$ 10,817$ 10,154$ 11,887$ 12,021$ 1TOT assumptions include an estimated two-year partial closure period for the Beverly Hilton Hotel for refurbishment from January 2026 through December 2027. 2Licenses and Permits excludes one-time revenue from major development projects.4Metro Reimbursement Revenue includes reimbursable Metro-related personnel costs as well as service costs.5The volatility in Other Charges reflects the erratic nature of required debt service payments.

General Fund
($ Thousands)
Category
3The FY 2028-29 through FY 2030-31 increases in Miscellaneous Revenue reflect increased municipal surcharge revenue related to the anticipated opening of the One BH development.6Reflects only those public benefit contributions that are recommended to be applied against current expenditures and excludes public benefit contributions expected to be earmarked for future public benefit over fiscal years 2025-26 through 2029-30. Does not include the $5.9 million proposed for the 401 S. Robertson Blvd. property acquisition in FY 2025-26, which would be funded from existing reserves rather than current-year public benefit contributions.

Meeting Date: March 4, 2026

Other Considerations
As part of the formation of Community Facilities District No. 2025-1 (One Beverly Hills), the City has executed a funding agreement with the project's developers, BH Luxury Residences LLC and OWR Hotel Owner LLC. This agreement secures a one-time payment of $15 million to the City, which is contingent upon the future issuance and sale of bonds by the District. Upon the successful sale of the bonds, the first $15 million in proceeds, after deducting formation and issuance costs, will be deposited into a "City Only Facilities Account". These one-time funds will be available exclusively to the City for any lawful capital expenditure permitted under state law. They are not restricted for use within the project area and are excluded from the baseline forecast.

Additionally, the developer agreed to a 1% increase to the Environmental Mitigation and Sustainability (EMS) fees assessed on the second and subsequent sales of future condominium unit sales on the development site that will create an additional long-term revenue stream, which will be memorialized in an upcoming amendment to the development agreement. These additional one-time EMS fees are not expected to begin within the timeframe of the current ten year forecast.

Caution Regarding Forecast Volatility
While the current revenue forecast is based on the best available information, staff strongly cautions that actual outcomes, particularly those related to major development projects, could vary significantly. The updated projections rely heavily on the developer’s self-reported timeline, which may change due to external or internal factors, including construction delays, market conditions, or changes to project scope.

Additionally, major development revenue forecasts are inherently subject to high variability, with wide potential ranges in actual revenues depending on when and how projects proceed. Given the size and complexity of the One BH project in particular, small changes to the construction schedule, permitting process, or development agreement could result in significant revenue shifts between fiscal years, or lower actual revenue than currently forecasted.

More broadly, the ten year forecast should be viewed as a planning tool rather than a precise prediction of future outcomes. Given the magnitude of the City’s budget, even small percentage variances in revenue or expenditure growth can translate into multimillion dollar impacts over the forecast horizon. Although the City’s near-term outlook has improved, these figures are sensitive to modest deviations in underlying assumptions, including changes in the local and national economy, the real estate market, inflation trends, and labor costs.

In particular, future labor agreements could result in cost-of-living adjustments (COLAs) that differ from current projections, and long-term salary and benefit costs may vary from existing assumptions based on market conditions and inflationary trends. In addition, external economic and policy factors, such as shifts in federal fiscal or monetary policy, may influence the broader economic environment in ways that are difficult to anticipate.

The City also faces several potential financial contingencies that could materially affect future projections, including the outcome of pending litigation, the cost of potential land acquisitions, and other significant capital or operational needs that may arise. While these matters are not quantified in the forecast due to their uncertainty, they represent important considerations as the City plans for future fiscal sustainability.

Meeting Date: March 4, 2026

Fiscal Year 2025-26 Enterprise Funds Midyear Update
The City's Enterprise Funds represent self-supporting business-type activities, operating much like private sector entities. These funds, which include utilities as well as parking operations, are designed to be financially independent, with revenues generated from user fees intended to cover their operational costs and capital investments.

At the midpoint of the fiscal year, all Enterprise Funds are performing within expectations, with total revenue exceeding the 50% target level for all funds. Operating expenses (excluding CIP) across all Enterprise Funds are tracking within the 50% prorated budget.

It is important to note that Salaries and Benefits should be evaluated against an adjusted target of 46.2% based on the number of pay periods in the first six months of the year, and all are currently at or within the prorated budgeted expectation.

Some spending categories may show variability due to their sporadic nature, which is normal and expected. Regarding capital projects, the revised budget includes substantial carryover funds from previous fiscal years to build up resources for future major investments. This strategic practice ensures that adequate reserves are in place to fund significant capital investment projects, providing financial flexibility for multi-year infrastructure initiatives. While this approach may result in an apparent large deficit in the bottom line budget, it is a normal and prudent financial management strategy. The deficit primarily reflects previously allocated funds for ongoing and future capital projects, rather than operational overspending. This method allows for smoother execution of large-scale improvements and better long-term financial planning. As a result, capital improvement program (CIP) spending may significantly exceed or fall short of the budget in any given year, which is a typical occurrence given the long-term nature of these projects. Overall, these interim results are within expectations and align with financial projections.

The charts below provide the financial results for the first six months of fiscal year 2025- 26 relative to the revised budget for the year, along with additional explanations for any unique circumstances or notable variances in specific areas.

Meeting Date: March 4, 2026

Water Funds
The Water Funds include the Water Enterprise Fund, the Water Capacity Fee Fund, and the Water Supply Fee Fund. Overall, the Water Funds realized 52.2% ($24.8 million) of budgeted revenue for the first half of the year, driven by solid results from Water Service Charges. The negative balance in Other Revenue for fiscal year 2024-25 is attributable to an accounting entry to return $141,000 to the State for excess grant revenue received in fiscal year 2023-24 from the California Water and Wastewater Arrearage Payment Program.

Operating expenses amounted to $15.5 million in the first half of the year, or 44.1% of the revised budget. Water purchases exceeded the 50% target at 53.6% ($6.6 million) of budget, which is a typical pattern due to higher consumption in the summer months. After consideration of $4.9 million in capital project costs, the net result for the first six months of fiscal year 2025-26 reflects a $4.4 million surplus in current year-to-date resources which accumulate in fund balance as an investment in substantial planned and ongoing capital spending.

Water Service Charges 40,252 20,792 51.7%
Lease Revenue 2,943 1,472 50.0%
Use of Money and Property 2,791 1,571 56.3%
Other Revenue 398 421 105.9%
Transfers In 1,158 579 50.0%
Total Revenue 47,542 24,835 52.2%

EXPENSES
Salaries and Benefits 7,664 3,519 45.9%
Water Purchases 12,297 6,596 53.6%
Materials and Supplies 2,155 690 32.0%
Contractual Services 1,672 508 30.4%
Internal Service Fund Charges 6,721 3,360 50.0%
Other Charges 4,706 857 18.2%
Total Operating Expenses 35,214 15,530 44.1%
Capital Projects1
73,837 4,944 6.7%
Total Year-to-Date Results (61,509) 4,361
NOTE: Immaterial differences may exist when adding rounded figures above.

REVENUE
FY 2025-26
July - Dec
Actuals
% Realized /
Expended
Water Funds
($ Thousands)
FY 2025-26
Revised
Budget
[1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for long-term financial planning.

Meeting Date: March 4, 2026

Parking Funds
The Parking Funds include the Parking Enterprise Fund and the Parking Authority Fund.

Revenue projections were 51.8% realized at the six-month mark, yielding $20.1 million in total revenue. Lease Revenue landed just below the prorated target at 49.4% and Other Revenue fell short of the 50% mid-year benchmark at 42.4%, primarily due to the write-off of outstanding valet parking receivables.

Operating expenses are within the prorated budget for the year at 39.5% expended ($11.6 million), yielding a $7.8 million surplus thus far, after consideration of $0.7 million in capital costs. The Parking Funds also require significant investment in capital spending and current year resources will be applied towards those costs as capital projects progress.

Parking Revenue 15,152 8,189 54.0%
Lease Revenue 19,421 9,589 49.4%
Use of Money and Property 2,399 1,534 63.9%
Other Revenue 1,809 767 42.4%
Total Revenue 38,781 20,079 51.8%

EXPENSES
Salaries and Benefits 6,217 2,056 33.1%
Materials and Supplies 325 23 7.1%
Contractual Services 5,540 2,400 43.3%
Internal Service Fund Charges 8,627 4,314 50.0%
Other Charges 8,563 2,768 32.3%
Total Operating Expenses 29,272 11,560 39.5%
Capital Projects1
41,520 744 1.8%
Transfers Out 0 0 0.0%
Total Year-to-Date Results (32,011) 7,775
NOTE: Immaterial differences may exist when adding rounded figures above.

Parking Funds
($ Thousands)

REVENUE
FY 2025-26
July - Dec
Actuals
% Realized /
Expended
FY 2025-26
Revised
Budget
[1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for long-term financial planning.

Meeting Date: March 4, 2026

Solid Waste Fund
The Solid Waste Fund netted a $2.3 million surplus to-date with total revenue of $13.7 million, or 52.0% of the projected amount for the year. Total operating expenses of $11.3 million were within budget at 42.6% expended. Contractual service costs for commercial solid waste collection and residential solid waste processing services have risen sharply in recent years and a cost of service study for solid waste rates is underway to ensure rates support cost recovery for the anticipated future needs of the Solid Waste Enterprise to comply with several refuse and recycling laws.

Solid Waste Service Charges 26,030 13,585 52.2%
Use of Money and Property 372 127 34.1%
Other Revenue 1 8 1654.4%
Total Revenue 26,402 13,720 52.0%

EXPENSES
Salaries and Benefits 4,085 1,886 46.2%
Materials and Supplies 270 12 4.6%
Contractual Services 15,356 6,006 39.1%
Internal Service Fund Charges 6,549 3,275 50.0%
Other Charges 217 105 48.1%
Transfers Out 60 30 50.0%
Total Operating Expenses 26,537 11,314 42.6%
Capital Projects1
2,669 76 2.9%
Total Year-to-Date Results (2,804) 2,330
NOTE: Immaterial differences may exist when adding rounded figures above.

FY 2025-26
July - Dec
Actuals
% Realized /
Expended
Solid Waste Fund
($ Thousands)

REVENUE
FY 2025-26
Revised
Budget
[1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for long-term financial planning.

Meeting Date: March 4, 2026

Wastewater Funds
The Wastewater Funds include the Wastewater Enterprise Fund and the Wastewater Capacity Fee Fund. Wastewater Service Charges totaled $6.8 million, representing 56.2% of the annual budget, while Use of Money and Property reached 59.1% of budget due to higher investment earnings associated with growth in the portfolio balance. Overall, total revenue amounted to $8.2 million by midyear, realizing 56.6% of projected annual revenue.

Through two quarters, operating expenses totaled $3.9 million (38.5% of budget), with all expense categories at or below the 50% benchmark, and year-to-date results reflect a $2.9 million surplus, with significant funding available for planned capital projects. The Wastewater Funds remain financially healthy at mid-year, fueled by stable revenue performance.

Wastewater Service Charges 12,129 6,811 56.2%
Use of Money and Property 2,335 1,380 59.1%
Other Revenue 3 1 26.5%
Total Revenue 14,467 8,192 56.6%

EXPENSES
Salaries and Benefits 2,130 889 41.7%
Materials and Supplies 130 10 7.9%
Contractual Services 4,511 1,818 40.3%
Internal Service Fund Charges 2,210 1,105 50.0%
Other Charges 1,123 68 6.0%
Total Operating Expenses 10,104 3,890 38.5%
Capital Projects1
33,329 1,393 4.2%
Total Year-to-Date Results (28,966) 2,908
NOTE: Immaterial differences may exist when adding rounded figures above. % Realized /
Expended

REVENUE
FY 2025-26
July - Dec
Actuals
Wastewater Funds
($ Thousands)
FY 2025-26
Revised
Budget
[1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for long-term financial planning.

Meeting Date: March 4, 2026

Stormwater Funds
The Stormwater Funds include the Stormwater Enterprise Fund, the Stormwater Measure W – Regional Program Fund, and the Stormwater Department of Water Resources Prop 1 Fund. Unlike other enterprise funds, the Stormwater Funds cannot achieve full cost recovery through user fees due to regulatory constraints, necessitating significant ongoing support from the General Fund to maintain stormwater management services. With Stormwater Service Charges generating only $0.9 million in revenue through the halfway mark of the year, this operation is highly dependent on perpetual infusions from the General Fund as its main funding source, reflected in $2.8 million of Transfers In to-date.

Stormwater expenses totaled $2.4 million, within 44.7% of budget, as funds are accumulated for planned capital projects. Year-to-date results reflect a $0.9 million surplus at the midpoint of the fiscal year.

Stormwater Service Charges 1,774 898 50.6%
Use of Money and Property 202 166 82.5%
Other Revenue 17 12 72.9%
Transfers In 5,560 2,780 50.0%
Total Revenue 7,553 3,857 51.1%

EXPENSES
Salaries and Benefits 2,205 947 42.9%
Materials and Supplies 35 3 7.2%
Contractual Services 389 119 30.5%
Internal Service Fund Charges 2,584 1,292 50.0%
Other Charges 137 33 23.9%
Total Operating Expenses 5,350 2,393 44.7%
Capital Projects1
4,265 556 13.0%
Total Year-to-Date Results (2,062) 907
NOTE: Immaterial differences may exist when adding rounded figures above.

REVENUE
FY 2025-26
July - Dec
Actuals
Stormwater Funds
($ Thousands)
% Realized /
Expended
FY 2025-26
Revised
Budget
[1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for long-term financial planning.

Meeting Date: March 4, 2026

FISCAL IMPACT
This financial update to the City Council is informational and has no specific fiscal impact.

Based on the forecast presented above, the current anticipated General Fund surplus and existing reserves are projected to be sufficient to offset the aggregate General Fund deficit forecasted in the three subsequent fiscal years. Additionally, as the City advances its zerobased budgeting efforts for capital projects, under the direction of the Ad Hoc Committee, adjustments to capital planning and project prioritization may reduce expenditures and help mitigate projected budget deficits.

While this outlook is encouraging, staff strongly cautions that a substantial portion of the forecasted revenue is based on volatile and difficult-to-predict factors, including developerprovided construction timelines, assumptions about permit submittals, and current project valuations. Any shifts in development activity, delays in application timing, or potential changes to the development agreement that may be subject to future discussions could materially impact the actual revenue ultimately collected. Furthermore, the forecast’s longterm stability is sensitive to other significant factors, including the results of future labor negotiations, persistent inflationary pressures, and unquantified financial contingencies.

These contingencies include, but are not limited to, the outcome of pending litigation, the cost of potential land acquisitions, and other significant capital or operational needs that may arise.

Accordingly, although the improved forecast reduces the urgency of immediate fiscal mitigation measures, the City must continue to exercise restraint, maintain prudent reserve policies, and avoid making ongoing spending commitments based on one-time revenues that may not materialize as projected. Staff will continue to monitor these developments closely and will return to Council with updated information as warranted.

RECOMMENDATION
It is recommended that City Council provide direction as needed regarding this financial report.

Tatiana Szerwinski
Assistant Director of Finance
Jeff S. Muir
Director of Finance
Approved By Approved By