-I[ia'7►[:=1111
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
OFFICE OF THE CITY MANAGER
BY:
MARLON RAMIREZ, INTERIM ASSISTANT FINANCE DIRECTOR
DATE:
MARCH 24, 2026
SUBJECT:
MID -YEAR BUDGET REPORT
EXECUTIVE SUMMARY
The City Council will receive and file the Mid -Year Budget Performance Report ending December 31, 2025, which represents the balances and activity for the first and second quarters (July through December) of the 2025-2026 Fiscal Year (FY) Operating Budget.
IN=roli] TJIJ 14041 17-IN1[01!'.
That the City Council:
1. Receive and file the Mid -Year Budget Performance Report for the 6-month period ending December 31, 2025, which represents the balances and activity for the first and second quarters of FY 2025-2026;
2. Approve a revenue increase of $3,058,944 to the General Fund FY 2025-2026 budget; and,
3. Approve an appropriation increase of $2,646,889 to the General Fund FY 2025-2026 budget.
BACKGROUND
The City Council adopted a structurally balanced Fiscal Year (FY) 2025-2026 Annual Budget on June 25, 2025, that was developed with modest revenue growth consistent with the economic conditions at the time of budget development.
The Fiscal Year 2025-2026 Mid -Year Budget Performance Report is an important gauge of the City's economic vitality as it provides an in-depth assessment of the City's revenues and expenditures during the first half of the fiscal year and provides projections of the fiscal year end results. These projections serve as the starting point for the refinement of next year's budget.
This report summarizes the City of Downey's (City) overall financial position for the current fiscal year allowing the City to proactively respond to unanticipated changes and emerging trends. It also provides transparency and public reporting to the Community with an emphasis on the General Fund. By December 31 st, the expectation is that most budget categories will be at or below 50%, although this may fluctuate based on timing of certain receipts and expenditures/projects. After the end of the third-quarter (March 31 st), staff will again conduct another review of revenues and expenditures and provide updates.
ANALYSIS
General Fund
The following is an analysis of the General Fund.
Revenues
FY 2025
FY 2026
Year over Year
Variance Adjusted Budget & Projected
(July - Dec.) Year End Variance
Adjusted
July - Dec
Adjusted
July - Dec
Projected Year
($)
($)
(%)
Budget
Actual
Budget
Actual
End - June 30
PROPERTY TAXES
37,470,000
8,690,941
38,849,510
8,980,099
289,158
3%
38,902,502
52,993
0.1%
SALES AND USE
TAXES
27,905,000
8,916,578
29,009,796
9,624,919
708,341
8%
29,178,329
168,534
1%
HOTEL TAXES
2,360,000
934,844
2,500,840
904,410
(30,434)
-3%
2,387,458
(113,382)
-5%
UTILITY USERS TAX 8,602,000
4,085,433
8,750,000
3,988,374
(97,059)
-2%
8,727,417
(22,583)
0%
BUSINESS TAXES
1,889,500
730,156
2,165,000
598,157
(131,999)
-18%
2,449,697
284,697
13%
FRANCHISE TAXES
3,714,000
558,798
3,819,369
572,483
13,685
2%
3,979,074
159,705
4%
OTHER TAXES
295,000
119,848
290,000
66,601
(53,247)
-44%
300,130
10,130
3%
Total Taxes
$82,235,500
$24,036,599
$85,384,514
$24,735,044
$698,445
2.9%
85,924,606
540,093
0.6%
LICENSES, PERMTS
& FEES 12,405,400 5,010,931 12,634,100 6,253,641 1,242,710 25% 16,698,110 4,064,010 32%
REV FROM OTHER
AGENCIES 2,349,000 919,422 2,512,500 1,110,544 191,122 21% 2,838,919 326,419 13%
CHARGESFOR
SERVICES 968,050 452,254 959,613 82,591 (369,663) -82% 167,873 (791,740) -83%
FINES AND
FORFEITURES 1,490,900 606,260 1,631,500 571,797 (34,463) -6% 1,311,085 (320,415) -20%
USE OF MONEY &
PROPERTY 3,532,465 2,074,056 3,744,250 1,203,854 (870,201) -42% 3,489,496 (254,754) -7% OTHER REVENUE 1,566,250 800,852 2,299,926 337,678 (463,174) -58% 1,558,529 (741,397) -32%
INTERFUND
REVENUE 2,832,000 1,403,490 3,364,686 1,692,536 289,045 21% 3,386,091 21,405 1%
OPERATING
TRANSFERS 4,849,000 2,424,500 3,699,000 1,849,500 (575,000) -24% 3,914,322 215,322 6% Total Revenue 112,228,565 37,728,363 116,230,088 37,837,185 108,822 0.3% 119,289,032 3,058,944 2.6% Total General Fund Revenues are on course to exceed the Fiscal Year 2025-2026 Adjusted Budget projection of $116,230,088 by approximately $3.05 Million. This positive year-end projection is primarily due to an increase in development fees and ambulance fees that the City is projected to receive. The projection also includes both positive and negative trends in the economy, which will be described further in the below paragraphs.
Sales and Use Taxes are expected to align with the adopted budgets with a minimal increase of $168,534 or 1%.
Inflation has as shown continued, although uneven, progress in cooling down from its 2022 peak but remains above the Federal Reserve's 2% target, and overall consumer confidence has declined, impacting revenue funds for cities. However, Downey is in a unique position to have actually experienced some growth when other jurisdictions have not. This is attributed to the City's auto industry, which has outperformed other categories despite broader slowdowns in consumer confidence. Lower fuel prices and softer statewide demand created minor negative offsets, but they were not enough to outweigh the gains in auto sales.
Property Taxes
Property Taxes are projected to exceed budget projections by $52,993. Overall, property tax revenues reflect a modest 0.1 % increase over the prior fiscal year, with year-end estimates totaling approximately $38.9 million. This slight growth is supported in part by an increase in the City's Educational Revenue Augmentation Fund (ERAF) allocation, which is administered through the County property tax distribution process; based on updated assessed valuations and allocation adjustments, ERAF revenues are estimated to increase by approximately $470,000 compared to the prior year. As of the latest available data, the median sales price for a single-family home in Downey is approximately $900,000, reflecting a modest increase from $873,000 in the prior year (source:
Realtor.com, March 2026). While home values have increased slightly, the overall housing market continues to show signs of cooling, with slower growth in assessed values and steady consumer sentiment. The supply of homes for sale remains limited, and the rate of new listings has not significantly changed, suggesting that homeowner willingness to sell remains largely unchanged.
Hotel Taxes are projected to fall short of the adopted budget projections by $113,382 or 5%. This slight decrease reflects a modest decline in hotel taxes.
Business License Tax are projected to increase by $284,697. This is primarily due to a growing upward trend in license activity. Year -over -year results show new net businesses rising and closed accounts declining
Licenses, Permits, and Fees are projected to exceed the adopted budget projections by $4,064,010 or 32%.
Overall Plan Check Fees and Building Permit Fees are anticipated to grow by $327,000 and $267,000, respectively, above adopted budget as a result in a increase in development activity. This was complimented by a significant increase in the City's reimbursement of Paramedic Transportation costs. These fees are projected to realize nearly $2.05 million in additional revenues. A large portion of this is related to the City's participation in the California -Department of Health Care Services Public Provider Ground Emergency Medical Transport (PP-GEMT) Program, which the City joined in June 2023. PP-GEMT is a supplemental reimbursement program that applies to Medi-Cal patients who are transported by Public Providers, such as the Downey Fire Department. This program allows participating Public Providers, who transport Medi-Cal patients by ambulance, to recover additional costs associated with those patient transports.
Use of Money and Property_ is projected to fall below the adopted budget projections by $254,754 or 7%. This decrease is primarily driven by the effect of decreased interest rates on both the Local Agency Investment Fund (LAIF) pool and the City's overall investments portfolio.
Other Revenue is projected to fall below budgetary estimates by $741,397 or 32%. One of the major drivers to the decrease, or a year -over -year decline, is that last year's revenues were elevated by approximately $600,000 in wildfire -related reimbursements that are not expected to recur this fiscal year, but rather the following year.
However, it should be noted that these monies offset the cost of staff/expenditures, and will ultimately result in a net $0 outcome in the long-term. Other revenues are contributing to the overall decline include lower MERF Tipping revenue, along with decreases in several other fee -based categories, including medical ambulance transportation reimbursements under the old program, reduced storage fees, and lower miscellaneous reimbursements.
Revenue from OtherAgencies is projected to exceed budgetary estimates by $326,419 or 13%. One of the major contributors is approximately $105,000 increase in the State Mandate reimbursement costs related to Police Department activities. These revenues are difficult to predict as not all submitted reimbursement requests are accepted by the State and the timing of receiving payment may not always fall in the same fiscal year that the expenditure was incurred. Nevertheless, it is contributing to a positive increase in the current year.
Fines and Forfeitures is projected to end the year $320,000 below budgetary estimates. The shortfall is primarily the result of a decrease in the assessment of less parking and vehicle code related citations.
Expenditures
General Fund expenditures are projected to exceed the 2025-2026 budget projection by $2,646,889. While the City strives to remain within its budget authority, some departments are experiencing higher -than -anticipated costs, while others are realizing savings. These projected overages are anticipated to be offset primarily by increased General Fund revenues and lower -than -expected expenditures in other departments.
The table below details General Fund expenditures by department for the first six months of the fiscal year and projections for the end of the fiscal year:
FY 2025
Adjusted July - Dec Adjusted July - Dec
Department Budget Actual Actual Budget Actual
FY 2026
Year over Year
Variance
(July - Dec.)
Projected Year
End - June 30
Adjusted Budget &
Projected Year End
Variance
($) (%)
City Attorney
367,941
92,833
229,380
229,487
87,844
-4,988
-5%a
234,096
4,609
2.0%
City Clerk
1,197,600
297,203
939,409
590,009
233,796
-63,407
-21%
561,550
(28,459)
-4.8%
City Council
348,326
131,273
329,281
436,319
232,323
101,050
77%
438,473
2,154
0.5%
City Manager
3,301,802
1,374,679
3,220,121
3,947,325
1,883,635
508,956
37%
3,817,191
(130,134)
-3.3%
Community Development
7,573,169
2,735,126
6,627,916
7,099,416
2,805,856
70,730
3%
7,421,542
322,126
4.5%
Finance
5,277,348
2,855,383
4,902,934
3,936,855
2,722,446
-132,936
-5%
4,524,731
587,876
14.9%
Fire
29,300,585
14,782,797
32,039,419
27,610,727
14,428,576
-354,221
-2%
28,916,632
1,305,905
4.7%
Human Resources
1,771,064
796,151
1,581,359
1,719,373
684,847
-111,304
-14%
1,637,426
(81,947)
-4.8%
Library
2,650,794
1,365,297
2,707,473
3,143,667
1,553,160
187,863
14%
3,151,634
7,967
0.3%
Non -departmental
1,545,583
847,533
1,577,216
11,578,563
5,789,282
4,941,749
583%
10,793,400
785,163)
-6.8%
Parks and Recreation
8,825,735
4,024,754
8,540,938
6,583,869
3,302,871
-721,882
-18%
6,230,581
(353,288)
-5.4%
Police
41,367,005
20,308,46744,083,732
39,185,872
19,460,332
-848,135
-4%
41,329,595
2,143,723
5.5%
Public Works
8,733,418
4,681,323
10,214,791
10,142,041
4,698,986
17,663
0%
9,793,562
(348,479)
-3.4%
Total Expenditures
112,260,370
54,292,818116,993,969
116,203,523
57,883,954
3,278,090
7%
118,850,412
2,646,889
2.3%
As the chart shows, Police, Fire, and Community Development are trending to be over budget for the fiscal year.
For the Police and Fire Departments, the primary driver for the $2,143,723 and $1,205,905 projected variances are overtime costs, minimum manning (Fire) and accumulated paid time to retirees and separated employees.
Overtime budgeting for public safety continues to be a challenge for Downey as well as many other cities. There are a number of contributing factors to overtime costs including vacancies and training time for new officers.
Another significant contributing factor for both departments is the increased cost of materials, supplies, and services as a result of the inflation experienced over the last couple of years. Additionally, Fire plan check has increased in the department due to the increase in plan check activity and request for additional funding for plan check consultant service was requested, which is partially offset by the additional plan check fees collected.
For the Community Development Department, the overall increase of $322,126 is primarily driven by increases in Temporary Personnel in Building and Safety and Planning, with some cost offset by salary savings from vacancies.
Additionally, there is an increase in professional services for plan check services due to increase development activity which are partially offset by a projected increase in plan check and building permit fees.
For the Finance Department, end of year projection reflects an increase of $587,876, largely due to anticipated citywide salary savings that did not materialize. It is important to note that the Finance Department's budget also includes several citywide costs that are not part of the Department's operational expenditures. When isolating true departmental operations, the Finance Department itself is projected to be under budget by approximately $77,000, primarily due to salary savings.
The Library, City Attorney, and City Council departments are each expected to exceed their budgets by $7,967, $4,609, and $2,154, respectively. All three departments will self -adjust their operations to cover these shortfalls and ensure expenditures remain within budget.
While staff is monitoring these expenses and working to bring these areas back in line with the annual spending plan, there will be a need to increase appropriations by $2,646,889,403.
Measure S Fund
Revenues
Revenues are projected to come in lower than projected at an expected final value of $13,071,700, which is 1 % less than budgeted. While overall Sales Tax saw an increase, Measure S is a Transactions and Use Tax and does not always mirror the same changes as the City's Sales Tax revenues. An example of this in action is with the Auto and Transportation industry. The City is currently seeing an increase in overall auto purchases, which is contributing to the City's overall sales tax revenues increase. Unfortunately, those purchases were not from Downey residents, and since a Transactions and Use Tax, such as Measure S, only goes to where the vehicles are registered, the City will not see a similar increase in Measure S revenues.
Expenditures
Expenditures are coming in less than anticipated primarily due to staffing vacancies and associated salary savings.
Additionally, there is $484,000 in unspent minimum manning funds and $1 million of unspent funds allocated for a heavy duty fire rescue truck, which is now expected to be delivered next year and will be reappropriated .
FY 2025 FY 2026
Year over Year
Variance (July -
Dec.)
Adjusted July - Dec Adjusted July - Dec Projected Year
Budget Actual Actual Budget Actual End - June 30
Adjusted Budget &
Projected Year End
Variance
($) (%)
Revenues 13,356,000 4,411,641 13,524,844 13,230,135 4,368,728-42,913 -1% $ 13,071,700 $ (158,435) -1% Expenditures 13,750,145 6,726,149 13,042,276 15,863,188 7,318,585 592,435 9% $ 13,485,702 $ (2,377,486) -15% Measure D Fund
Revenues
For the Measure D Fund, revenues for the period are closely aligned with the adjusted budget, coming in at just $18,920 above expectations.
Expenditures
Expenditures were notably lower than projected, primarily due to staffing vacancies during the fiscal year. It is anticipated that these vacancies will be addressed, with more positions expected to be filled in the coming months, which may lead to expenditures returning to budgeted levels as staffing continues to increase.
FY 2025 FY 2026
Year over Year Adjusted Budget &
Variance (July - Projected Year End
Dec.) Variance
July -
Adjusted Dec Adjusted July - Dec ($) (%) Projected Year ($) (%) Budget Actual Actual Budget Actual End - June 30
Revenues 0 0 1,532,843 6,448,087 2,135,117 2,135,117 0% 6,467,007.00 $ 18,920 0% Expenditures114,575 154,664169,265 5,320,796 1,107,718 953,055 616% 2,383,649.00 $ (2,937,147) -55% Water Fund
Revenues
Revenues are projected to come in at $1.39 million or 6.9%, higher than adopted. This is primarily due to the water rate increases that took effect on January 13, 2026.
Expenditures
Projected spending is $15.5 million, which is 46% less than budgeted because several water improvement projects have been defferred to next year. Many projects are still in the design phase and will start construction in the next fiscal year once the new rates are established.
FY 2025 FY 2026
Year over Year Adjusted Budget &
Variance (July - Projected Year End
Dec.) Variance
Adjusted July - Dec Adjusted July - Dec ($) Projected Year ($) N Budget Actual Actual Budget Actual End - June 30
Revenues 17,712,000 7,864,821 25,188,481 20,077,219 9,070,493 1,205,671 0% 21,471,814.00 $ 1,394,595 6.9% Expenditures 31,515,137 9,578,686 33,578,144 7,837,490-1,741,196 -18% 18,040,673.00 $ (15,537,471) -46% Sewer Fund
Revenues
Revenues are projected to be slightly above adjusted budget at $45,506, or 2.15%, higher than adjusted.
Expenditures
Expenditures have decreased by $1,576,443, reflecting a 44% reduction relative to the original budget. This decrease is mainly attributable to sewer repair costs being lower than anticipated. The majority of related charges and projects were finalized during the previous fiscal year.
FY 2025 FY 2026
Adjusted July - Dec Adjusted July - Dec
Budget Actual Actual Budget Actual
Year over Year
Variance (July -
Dec.)
Projected
($) N Year
End -June
30 Adjusted Budget &
Projected Year End
Variance
($) (%)
Revenues 1,745,000 804,383 2,016,326 1,805,000 741,907-62,475 0% $1,849,506 $ 44,506 2.5% Expenditures 3,462,379 638,040 2,966,773 3,583,546 1,010,078 372,038 58% $2,007,103 $ (1,576,443) -44% Golf Fund
Revenues
Revenues are projected to be above the adjusted budget at $1,072067 or 23.9%, higher than adjusted. This is attributed to an increase in usage green ($467,038) and cart ($304,672) fees, due to an increase in activity.
Additionally, the fund saw an increase in investment returns ($138,976). This increase is primarily driven by the effect of increased interest rates on both the Local Agency Investment Fund (LAIF) pool and the City's overall investments portfolio.
Expenditures
Expenditures are expected to aligned with adjusted budget, with anticipated expenses coming in $36,840, or 1 % below budgeted.
FY 2025 FY 2026
Year over Year
Variance (July -
Dec.)
Adjusted Budget &
Projected Year End
Variance
Projected
Adjusted July - Dec Adjusted July - Dec ($) (%) Year
Budget Actual Actual Budget Actual End - June 30
Revenues 5,080,000 2,676,154 5,660,714 4,477,222 2,617,450-58,704 0% $5,549,289 $ 1,072,067 23.9% Expenditures 4,413,586 1,814,111 3,859,765 4,929,419 2,731,550 917,438 51% $4,892,579 $ (36,840) -1%
CITY COUNCIL PRIORITIES
Fiscal Responsibility
Public Engagement
BOARD/COMMISSION/SUBCOMMITTEE ACTION
The Mid -Year Budget Report was presented to the City Council Budget Subcommittee on March 13,2026.
FISCAL IMPACT
Approval of the recommended action will result in an increase in General Fund revenue of $3,058,944 in the General Fund FY 2025-2026 Budget. Additionally, the recommended action will result in an appropriation of $2,646,889 to the FY 2025-2026 Expenditure Budget in the following General Fund accounts:
Department Appropriation Account No.
Community Development 195,574.43 10-4-5210
Fire 792,862.11 10-2-2620, 10-4-2650
Police 1,301,531.84 10-4-2110, 10-4-2130, 10-4-2120
Finance 356,920.81 10-4-1355
Total 2,646,889.19