FAIRFAX TOWN COUNCIL MEETING
STAFF REPORT
MEETING DATE March 4, 2025
PREPARED FOR Mayor and Town Council
PREPARED BY Michael Vivrette, Finance Director
SUBJECT Receive 2025-26 Mid-Year Budget Review Report
RECOMMENDATION
Receive 2025-26 Mid-Year Budget Review Report for the current Fiscal Year (FY)
DISCUSSION
The attached Mid-Year Budget Report (Report) reviews key FY25-26 revenue and expenditure activities for the Town. The Report provides year-end budget estimates based on actual Town expenditures and revenues posted through January 31st and historical expenditure patterns.
The FY25-26 Adopted Budget projected that the Town planned to draw down $890,800 of its General Fund reserves to fund additional CIP. Based on projections using January 31st income statements and reasonable estimates of financial activity through June 30th, staff estimates revenues will exceed budget by $165,000 (1.2%) and expenditures will likely be under budget by $318,000 (-2.1%). The net effect is that the combined savings of $483,000 may bring the reduction of reserves at June 30 to $408,100.
Total projected revenues will exceed budget in part due to:
• Continued favorable real estate market activity impacting property tax revenue, • Inflation (increasing sales tax revenues due to higher prices and tariffs), • Additional LAIF Interest earned by the investment of county loan proceeds. • Increasing interest rates (due to Fed Funds & LAIF rate increases), In the following specific areas, revenue is projected to be below budget:
• Sales Tax – per projections by Avenu (the Town’s sales tax consultants) • Franchise Fees
• Revenues from Other Agencies
Variation from original budget expenditure estimates were due to key factors including:
• Inflation and tariffs, increasing costs for materials and services, • High legal costs for litigation and special services – some of which is reimbursable.
Expenditures in the General Fund are expected to be under budget overall. Staff recommend the budget adjustments for the listed departments come from expense savings in other General Fund departments and projected increased revenues at the discretion of the Town Manager.
ATTACHMENT
A. FY26 Midyear Summary
B. Midyear Budget Report for Fiscal 2025-26
Midyear Budget Report for Fiscal 2025-26
REVENUES
The General Funds are the seven discretionary funds including: General Fund (01), Dry Period Fund (02), Building & Planning Fund (04), Retirement Fund (06), and three equipment replacement funds: Field & Vehicle (03), Building (05), and Office (08).
Staff projects revenues in the General Fund (01) will exceed budget by $164,800 (1.2%) primarily due to higher-than-projected property tax revenues, as well as UUT, Wildfire tax, and Property tax-in-lieu of VLF. Revenues in the Building & Planning Fund (04) are projected to be in excess of budget by $300,000, and Retirement Fund (06) revenues from property taxes are projected to closely match the budgeted total.
Sales tax is projected to be short of budget according to Avenu, the town’s sales tax consultant.
Table A: Projected Year-End Revenue Variance – General Fund (01)
SOURCE PROJECTED VARIANCE
Taxes - $ 2,000
Franchise Fees - 24,000
Licenses + 15,000
Fines + 43,800
Interest & Rents + 30,000
Revenues from Other Agencies - 14,300
Charges for Current Services + 92,600
Other Fees + 23,700
Projected Additional Revenue +164,800
Property Taxes, Property tax in Lieu of VLF, & ERAF
Total property tax revenues are projected to be below budget by $4,000 (-0.1%). Unsecured Property Tax will exceed budget by $10,900 (14.5%).
Revenue projections are based on estimates provided by the County. They reflect a housing market which is cooling off from previous highs. We continue to monitor factors affecting future property tax revenue (such as mortgage rates, real estate prices and projected development) to accurately estimate future revenues.
Property Tax in Lieu of VLF (Vehicle License Fees) from the state is projected to exceed budget by $32,000. ERAF (Educational Revenue Augmentation Fund) Excess revenues will be $64,000 higher than the estimates made when the budget was adopted.
Sales Taxes
Sales tax revenues are expected to be below budget by about $44,000 (-2.1%). The base 1% sales tax (Bradley Burns) is estimated to be $41,000 below budget. The ¾ cent District Tax (Measure C) is estimated to be $2,900 under original projections.
Factors affecting sales tax revenues include a sluggish economy, businesses closing, higher prices due to inflation and tariffs which helps by creating higher product costs (thus higher tax revenue) offset by potentially fewer sales – lowering sales tax collections.
User Taxes
Utility User Tax (UUT) revenues from Energy & Telecom are collected on telecom, gas and electric utility bills. Staff projects that the revenues will be $112,700 below budget reflecting that although the rate increased from 4% to 5% there is an offset by rate changes paid by customers. The UUT rate change may also have been slow in being implemented by utilities since there was little advance notice of the change during the budget process.
Hotel User Tax (HUT) is at 96.4% at January 31st and will likely be $25,000 over the current budget of $30,000 by fiscal year end. This is in large part due to the work of the planning department management of short-term rentals (STR) through the internet.
Franchise Fees
Franchise fees are collected from Garbage, Gas & Electric and Cable. Gas & Electric fees are all paid in April and are projected to be close to budget, though higher rates may result in higher revenues for the Town.
Fines, Licenses, Revenues from Other Agencies & Grants
Revenues from fines such as vehicle code fines and parking tickets are projected to be $26,200 below budget projections.
Business license revenues have increased with the implementation of online registration for businesses. In addition, we are conducting an audit of prior year licenses revenue which should result in an increase of revenues this year. Staff estimates license revenues will exceed budget by $15,000.
Interest & Rent Revenues
LAIF interest and rends are projected to exceed budget by $30,000.
Projected interest from LAIF will be more than budgeted this year. Although interest rates have been declining, the Town has the benefit of funds ($1.6M) borrowed from the County earning interest that offsets the cost of the loan in part. The funds in LAIF also include the ARPA funds balance ($1.7M) which will be expensed this year for the Park Rd Storm Drain project.
Expenditures
The General Fund is projected to end the year with expenses under the original budget by approximately $408,000 (- 2.1%). The projections through June 30th are based primarily on spending for February to June 30 2026, with adjustments for known differences and slight increases for inflation. General Fund (GF) expenditures as of January 2025 were $8,231,300 (54.6%) of budgeted expenditures for the fiscal year. The seven-month GF total also does not include any actual transfers which will be posted in June.
Personnel Costs
Personnel costs, the largest component of expenditures, are tracking below budget as of January 31, 2026. The Police Officer position funded by an increase in the Utility User Tax (UUT) is filled, but still in training. CalPERS Health insurance costs increased this year by an average of 5.1%.
We budgeted for an overall increase of 6.0% in January, which should result in budget savings in health costs.
Departmental Expenditures
The year-end projection anticipates most departments will be within budget overall, though there are some notable exceptions including:
• Town Attorney (121) – Expenses are projected to be over budget by $ 28,000 (9.2%) This department no longer includes the “special services (litigation)” line item which is now in the non-departmental budget (715) with other contingency reserves (I.E. claims.) • Personnel (231) – Expenses are projected to be over budget by $4,800 (3.3%). It should be noted there were additional hiring costs this year that contributed to the overage. • Disaster Prep (418) – At January 31st, this department was overspent. The projection is this department will be overspent by $4,700 (52.8%). Staff recommends that the budget be increased in the future, as this topic is a Council priority. • Non Departmental (715) - The projected cost of litigation special services are projected to be $431,200 by June 30 based on analysis of cases in progress. Expenditures will be $331,200 over the budgeted line of $100,000. In total, non-departmental expenses are projected to be over budget by $299,100 (26.2%). Staff recommend we consider deleting the current year budget for CERBT contribution of $100,000. As previously reported, the Town has fully funded its OPEB liability and the contribution is not necessary.
Expenses in the General Fund are expected to be under budget overall for all departments. Staff recommends the budget adjustments for the listed departments come from expense savings in other General Fund departments and projected increased revenues at the discretion of the Town Manager.
CAPITAL IMPROVEMENT PROGRAM (CIP)
Through January 2026, the Town has spent approximately $332,250 (6.2%) of CIP projects. The adopted FY24-25 CIP budget has approximately $5.3 million for Funds 51, 52 and 53.
Several projects have been delayed which will reduce budgeted expenditures for the current fiscal year. These include:
53-829 Station 21 Tenant Improvements
$1,500,000 budgeted is now expected to be $100,000. As of January 31st The Town has spent $63,400 (of the total expected cost of $1,500,000) in Fund 53 this year. Work is progressing on converting the community center building for temporary firefighter housing while the fire station is remodeled.
51-521 Pavilion Kitchen
$200,000 budgeted is now expected to be $20,000
51-841 Misc Park & Trail
$50,000 budgeted is now expected to be $10,000
53-887 Pavement Management Street & Sidewalk R&R
$225,000 budgeted is now expected to be $-0-
53-6 Wall Property Rehab
$500,000 budgeted is now expected to be $20,000
No mid-year budget adjustments are required or the Capital Improvement Program (CIP). Budget adjustments to specific projects will be presented to council on a specific project basis. CIP projects that are not completed in FY25-26 can be carried over and re-budgeted in the following fiscal year.
Projected FY26 Income Statement
at January 31, 2026
55.3% 350,000 196,800 2,733,400 281,600 461,400 4,023,200 9,006,366 9,008,245 (1,879) 0.0% short
36.4% 25,500 57,970 141,790 71,720 12,870 309,850 500,973 525,000 (24,027) -4.6% short
56.8% 23,000 30,000 10,000 4,000 2,000 69,000 140,001 125,000 15,001 12.0% ☺ 179.0% 1,000 2,500 2,073 2,833 3,743 12,150 83,769 40,000 43,769 109.4% ☺
65.3% 1,000 7,192 2,224 49,938 39,353 99,707 231,003 201,000 30,003 14.9% ☺
38.4% - 3,482 - 7,580 40,000 51,062 91,825 106,100 (14,275) -13.5% short
6.7% 0 - - 28,000 28,000 30,000 30,000 0 0.0% ☺
117.5% 1,534 49,600 - 8,942 3,000 63,076 261,582 169,000 92,582 54.8% ☺
89.4% 5,917 6,266 8,636 6,731 5,132 32,682 108,750 85,100 23,650 27.8% ☺
0.0% - - - - 3,900,000 3,900,000 3,900,000 3,900,000 - 0.0% short
40.6% 407,951 353,810 2,898,123 433,344 4,495,498 8,588,727 14,354,269 14,189,445 164,824 1.2% ☺ - - -
54.7% 2,254 1,776 1,911 1,776 3,308 11,026 25,280 26,038 (758) -2.9% ☺
40.6% 329 329 329 329 329 1,645 3,900 5,560 (1,660) -29.9% ☺
53.9% 21,700 4,400 - 26,100 57,818 58,800 (982) -1.7% ☺
62.2% 21,021 30,000 30,000 30,000 30,000 141,021 327,690 300,000 27,690 9.2% over
57.6% 22,776 22,800 22,800 22,800 22,800 113,976 271,465 273,591 (2,126) -0.8% ☺
51.8% 28,036 28,036 28,036 28,036 28,036 140,180 323,269 353,595 (30,326) -8.6% ☺
5.2% 45,330 - - - - 45,330 51,716 123,400 (71,684) -58.1% ☺
63.5% 11,600 11,600 11,600 11,600 11,600 58,000 150,548 145,779 4,769 3.3% over
55.3% 31,800 33,200 33,200 33,200 33,200 164,600 407,792 439,805 (32,013) -7.3% ☺
52.3% 52,048 56,000 56,000 56,000 56,000 276,048 759,275 923,491 (164,216) -17.8% ☺
55.6% 25,080 25,080 25,080 25,080 25,080 125,400 312,796 336,764 (23,968) -7.1% ☺
46.0% 450,000 500,000 500,000 500,000 559,000 2,509,000 4,894,192 5,182,771 (288,579) -5.6% ☺ 128.2% 646 392 70 617 449 2,174 13,501 8,838 4,663 52.8% over
56.8% 296,696 296,696 296,696 296,696 390,000 1,576,783 3,653,653 3,656,907 (3,254) -0.1% ☺
60.9% 19,094 28,409 23,089 23,089 31,449 125,129 323,992 326,422 (2,430) -0.7% ☺
53.8% 53,000 73,900 51,300 38,800 43,000 260,000 562,778 563,130 (352) -0.1% ☺
56.1% 13,300 16,900 24,140 3,200 12,500 70,040 159,874 160,000 (126) -0.1% ☺
47.9% 11,228 11,228 11,228 11,228 2,228 47,140 90,867 91,217 (350) -0.4% ☺
66.8% 20,900 10,700 27,800 22,600 14,500 96,500 290,691 290,750 (59) 0.0% ☺
54.6% 13,700 10,100 13,600 11,400 14,000 62,800 156,492 171,701 (15,209) -8.9% ☺
55.5% 8,120 8,120 8,120 8,120 8,120 40,600 112,686 129,796 (17,110) -13.2% ☺ 101.4% 744 - - - - 744 31,578 30,417 1,161 3.8% over
67.9% 3,300 3,566 2,858 3,320 13,700 26,744 83,398 83,394 4 0.0% over
91.4% 81,292 14,100 84,400 12,550 204,300 396,642 1,439,499 1,140,403 299,096 26.2% over
0.0% 257,658 257,658 257,658 257,658 - 0.0% over
(44,220) - - - (44,220) (1) - (1) ☺
54.6% 1,189,774 1,187,332 1,252,257 1,140,441 1,761,257 6,531,060 14,762,407 15,080,227 (317,820) -2.1% ☺ (781,823) (833,522) 1,645,867 (707,097) 2,734,242 2,057,667 (408,138) (890,782) 482,644 Expense Total: 8,231,347
Fund: 01 - GENERAL FUND: (2,465,805)
725 - TRANSFERS OUT -
911 - BUILDING MAINTANANCE 44,219
625 - RENTAL FACILITIES 56,654
715 - NON DEPARTMENTAL 1,042,857
621 - FAIRFAX RECREATION 72,086
622 - SUMMER CAMPS 30,834
611 - PARK MAINTENANCE 194,191
617 - RECREATION 93,692
512 - STREET LGHT & TRAF SIGNALS 89,834
514 - CLIMATE & ENVIRON 43,727
510 - PUBLIC WORKS ADMIN 198,863
511 - STREET MAINTENANCE 302,778
418 - DISASTER PREP 11,327
421 - ROSS VALLEY FIRE SERVICE 2,076,870
321 - BLDG INSP & PERMITS 187,396
411 - POLICE 2,385,192
241 - FINANCE 243,192
311 - PLANNING 483,227
222 - ELECTIONS 6,386
231 - PERSONNEL 92,548
211 - TOWN MANAGER 157,489
221 - TOWN CLERK 183,089
116 - INDEPENDENT AUDITOR 31,718
121 - TOWN ATTORNEY 186,669
111 - TOWN COUNCIL 14,254
112 - TOWN TREASURER 2,255
Revenue Total: 5,765,542
Expense
090 - OTHER FEES 76,068
100 - TRANSFERS IN -
070 - GRANTS FROM OTHER AGENCIES 2,000
080 - CHARGES FOR CURRENT SERVICES 198,506
050 - INTEREST & RENTS 131,296
060 - REVENUES FROM OTHER AGENCIES 40,763
030 - LICENSES 71,001
040 - FINES 71,619
PROJECTED
FEB-JUN 26
PROJECTED
FY26
CURRENT
BUDGET ▲ $ ▲ % FEB 26 MAR 26 APR 26 MAY 26 JUN 26 +
Town of Fairfax, CA
JULY - JAN
4,983,166
020 - FRANCHISE FEES 191,123
Fund: 01 - GENERAL FUND
Revenue
010 - TAXES
ATTACHMENT B