Staff Report
City Council
Item No. {{section.number}}.E
Meeting Date: May 14, 2025
From: Kevin Biersack, Financial Services Director
Title: Fiscal Year (FY) 2025/2026 and FY 2026/2027 Proposed Biennial Budget RECOMMENDATION:
Approve the FY 2025/2026 and FY 2026/2027 Proposed Biennial Budget.
BACKGROUND:
After five months of review and discussions, we are pleased to present the proposed biennial budget for Fiscal Years (FY) 2025/2026 and FY 2026/2027 for the City of Cathedral City, the Capital Improvement Project (CIP) Plan, the Parks Improvement Program Plan, the Housing Successor Agency (“Successor Agency”), the Successor Agency to the Redevelopment Agency and the Cathedral City Public Financing Authority.
This biennial budget is a spending plan for two separate years providing an overview and detailed information on each City department and describes the activities and programs included in the budget. This budget was developed to align with the goals and objectives outlined in the Five-Year Strategic Plan adopted by the City Council on April 12, 2023, and revised and updated in March 2025. The Strategic Plan was a comprehensive effort informed by input from city staff, the City Council, and the community to develop priorities.
In preparing the budget, departments reviewed their past accomplishments and developed strategies focusing on achieving the overarching Strategic Plan goals of:
•Serving the Community with Pride and Dedication
•Community Investment
•Fiscal Stability and Sustainability
•Innovation
•Safety
•Embracing, Inclusive City
Within each department budget there are accomplishments, goals, objectives, and performance measures focused on the continued growth for Cathedral City while creating a safe, inclusive and progressive community for our residents, businesses and constituents.
Over the past 15+ years, balancing the budget has been challenging for the city. From FY 2009/2010 through FY 2011/2012, the City adopted general fund budgets with structural deficits requiring City Management to make difficult employee-related decisions, including layoffs and employee salary concessions. In the next 12 successive years, FY 2012/2013 through FY 2023/2024, the City was able to stabilize and achieve not only balanced budgets, but was also able to grow the fund balance, or our savings account.
This proposed biennial budget uses fund balance to make significant one-time investments with improvements in not only roads, but also facilities; to maintain funding levels for Police and Fire; and to make additional investments in managing the City’s Other Post Employment Benefits (OPEB).
In addition, there is additional funding that will be derived from Measure W initiative passed by Cathedral City voters in November 2024. The five initiatives to be funded include:
•Ambulance Services
•Road Improvements
•Parks Operations
•Recreational Programs and Operations (Community Center in the future) •Community Center Debt Service (in the future)
DISCUSSION:
To achieve time and cost efficiencies over a traditional annual budget, the City of Cathedral City prepares and adopts two one-year budgets. Under this cycle, the second year does not require another formal adoption by City Council. Each year is separate and distinct.
Unencumbered funds from the first year do not automatically carry over into the second year.
The City’s six-month budget preparation cycle began in December 2024 as the Financial Services Department prepared a draft budget of operating expenditures for each of the six departments (City Management, Community and Economic Development, Financial Services, Fire, Police, and Public Works) based on historical data and trends. The Finance Division prepared the baseline budget infrastructure in December/January and then built and distributed the budget calendar and narrative forms to each department in January for their review and feedback. Each department was trained in using the city’s enterprise resource planning (ERP) financial backbone budgeting system to actively participate in preparing and reviewing their operational budgets. The departments determined and coordinated their departmental needs and requests (changes) with Financial Services and ultimately the City Manager approved/adjusted those needs/requests. Separately, Public Works/Engineering determined and coordinated with Financial Services on their Capital Improvement Project (CIP) and Parks improvement Program plans.
During this budget process, the City Manager held individual budget meetings for each Department to brief City Council on department/division(s) recent accomplishments, current staffing and operational profile, and any budget cutting measures and/or additional funding needs. Based on the results of those meetings, Financial Services continued to update the preliminary budget projections.
Financial Services distributed the budget workbook to City Council for review in mid-March.
During April, Financial Services reviewed and presented the proposed budget to City Council during two public study session meetings. The first session was dedicated to the General Fund and the five budgeted elements of the new Measure W fund. The second session addressed the special revenue funds with operating budgets, the proprietary funds and the 5-year Capital Improvement Project (CIP) Plan and Parks Improvement Program Plan.
Once the budget is adopted, staff will then promote the budgetary data in the city’s accounting system to an adopted status and publish the adopted budget document. Financial Services will then submit the adopted budget document to the GFOA budget awards program. The City has received the GFOA budget award for the last eight budget cycles.
FISCAL IMPACT:
The attached proposed biennial budget for FY 2025/2026 and FY 2026/2027 includes adjustments to the budget workbook reviewed by City Council in mid-March. The adjustments and corresponding explanations will be reviewed during the City Council meeting/presentation. With these adjustments included in the proposed budget:
•For FY 2025/2026, the City’s General Fund forecasted budget has $70,824,937 in revenues and $76,579,614 in expenditures. The net deficit is $5,754,677, which includes $4,728,854 in discretionary expenditures.
•For FY 2026/2027, the City’s General Fund forecasted budgeted has $73,534,760 in revenues and $78,061,701 in expenditures. The net deficit is $4,526,941, which includes $4,470,697 in discretionary expenditures, resulting in a structurally balanced budget.
Through this proposed budget, the City has prioritized essential services and continues to invest in our City while monitoring our discretionary expenditures. This budget ensures the City continues to proactively pay long-term liabilities and continue capital investments in our most critical infrastructure.
During this current period of economic uncertainty, any one-time (extraordinary) expenditures have been identified as expenditures utilizing fund balance savings and could be candidates for postponement in case of a downturn. As a result, it will be incumbent on Financial Services staff to actively monitor revenue and expenditure trends and keep City Management and City Council apprised of adverse conditions, especially when significant one-time expenditures are planned for and anticipated to be made.
FIVE-YEAR STRATEGIC PLAN:
Goal C – FISCAL STABILITY AND SUSTAINABILITY
Objective: Cathedral City has economically prospered by facilitating the investment of private dollars in high quality development which benefits the community. We remain financially solvent by instituting prudent fiscal policies and transparent financial practices.
ATTACHMENTS:
1. Proposed Budget Document FY26 & FY27