FY 2025/26Quarter 1 Financial ReportFY 2025/26Quarter 1 Financial Report FY 2025/26
Quarter 1 Financial Report
FY 2025/26
Quarter 1 Financial Report
REPORT OVERVIEW
This report outlines the financial performance of the City for the initial quarter of Fiscal Year 2026, concluding on September 30, 2025. The financial analysis in this report pertains to the General Fund and the Water and Wastewater Enterprise Fund, utilizing a modified accrual basis. It is important to clarify that this document does not constitute an audited financial statement. The accuracy of revenue and expenditure data remains provisional until the City concludes its annual audit and finalizes the Annual Comprehensive Financial Report (ACFR).
GENERAL FUND
The General Fund is the general operating fund for the City and includes direct programs, activities, and services provided to the residents of Fort Bragg.
GENERAL FUND REVENUES
The original adopted revenue budget for the General Fund was $14.4 million, an increase of 16 percent from the prior fiscal year.
At the end of the first quarter, General Fund operating revenues totaled approximately $3.5 million, exceeding budget projections by $373,869. This positive variance is primarily driven by the timing of Transient Occupancy Tax receipts, with 44% of annual TOT revenues collected in Q1, which is historically the City’s strongest quarter due to seasonal visitor activity. This gain is partially offset by lower-than-expected reimbursements, particularly grant reimbursements that have not yet been received or recorded and are anticipated in subsequent quarters.
Transient Occupancy Tax remains one of the City’s most significant revenue sources, accounting for approximately 24% of General Fund revenues. After experiencing a $660,000 shortfall in the last quarter of FY 2019–20 due to COVID-related restrictions, TOT revenues rebounded strongly in FY 2020–21, reaching a record high of $3.3 million as travel restrictions eased and local tourism activity increased.
In the first quarter of FY 2025–26, TOT performance continued this positive trajectory. Revenues increased by 13% in July, 15% in August, and 23% in September, for an overall quarter-over-quarter increase of 16% compared to the same period in FY 2024–25. This growth reflects both the resilience of Fort Bragg’s tourism sector and the voter-approved increase in the TOT rate from 12% to 14%, effective April 1, 2025.
Detailed historical revenue data included in this report provides additional context for these trends.
Sales Tax Effective April 1, 2025, the local sales tax rate increased from 8.875% to 9.25%, following voter approval in November 2024. Of this rate, the City receives 1.35% through the Bradley-Burns Local Sales and Use Tax, the State receives 6.0%, 0.25% is allocated to the County, and 1.625% supports various special taxes.
Nationally, inflation has eased substantially from its 2022 peak but remains somewhat above the Federal Reserve’s 2% target. As of September 2025, the Consumer Price Index (CPI) was 3.0% higher than a year earlier, compared to the 9.1% peak in June 2022, reflecting the cumulative effect of interest-rate hikes in 2022–2024 and more moderate price growth across most categories. The Federal Reserve’s June 2025 Monetary Policy Report noted that inflation continued to move lower earlier in the year, though recent data show a “bumpy” path with some renewed pressure from tariffs and energy costs.
In this environment, the broader U.S. economy is still on a “soft-landing” trajectory: growth is slowing from 2024 levels, but consumer spending remains positive, supported by wage gains even as higher borrowing costs cool big-ticket purchases such as vehicles and home improvements. Recent national forecasts project real U.S. GDP growth around 2% in 2025, with spending expected to moderate further in 2026.
California’s economy is expanding more slowly than the nation overall. Statewide forecasts project real growth of roughly 1.4% in 2025, with softer job gains and several quarters of flat or negative employment growth in some regions. Tourism, however, remains a key bright spot: Visit California’s 2025 outlook anticipates modest increases in visitor spending and relatively stable visitation, even as a weaker national economy and higher travel costs temper growth compared to earlier post-pandemic years.
Against this backdrop, sales tax remains one of the City’s most important and economically sensitive revenue sources. In the first quarter of FY 2025–26 (July–September 2025), preliminary sales tax receipts continued to represent roughly one-quarter of General Fund revenues and remained well above pre-pandemic levels, underscoring ongoing resilience in local retail, hospitality, and construction activity. Growth continues across most major sales tax categories, with particular strength in Food Products, Construction, and Transportation, while the County Pool—which captures a substantial share of online transactions—remains a critical driver of local revenue following the South Dakota v. Wayfair, Inc. decision requiring many online retailers to collect and remit sales tax.
Despite relatively stable inflation expectations and a still-growing economy, the City is maintaining a conservative outlook for sales tax in FY 2025–26. Budget projections assume only modest year-over-year growth to account for potential headwinds, including slower consumer spending, elevated interest rates, and the possibility of softer tourism and construction activity later in the fiscal year. This cautious approach is consistent with the City’s broader strategy of prioritizing fiscal sustainability while monitoring economic conditions closely.
Property Taxes are received primarily in three installments—December, April, and July—rather than evenly throughout the fiscal year, so first-quarter activity does not reflect a proportional share of annual revenue.
Nationally, housing costs have cooled from the sharp run-up seen in 2021–2023 but remain a key driver of inflation. As of September 2025, overall consumer prices were 3.0% higher than a year earlier, while the shelter index (which captures rents and owners’ equivalent rent) rose 3.6% over the same period, indicating that housing costs are still increasing faster than the overall CPI.
Locally, the Fort Bragg/95437 housing market has softened from its post-pandemic peak but remains elevated relative to pre-COVID levels. Recent estimates place the median home value in Fort Bragg at roughly $560,000–$565,000 as of September–October 2025, modestly lower than late-2024 levels but still reflecting several years of appreciation. Transaction data show a similar pattern: the median sale price in the 95437-zip code was about $550,000 in October 2025, down roughly 20% year-over-year but within the range of values seen since the pandemic period This combination of elevated but moderate housing values and still-high shelter inflation continues to support a stable property tax base for the City, even as affordability pressures remain a concern for local residents.
Other taxes include Franchise Fees and Business License taxes. Actuals totaled $184k, which is $40k over the quarterly Budget estimates. The revenues from solid waste removal have not been accounted for in the first quarter. Revenue from Cable television franchise fees have slowly declined as more customers move to satellite and internet-based services. Business License Tax is collected during the business license renewal season in February to March of each year.
Reimbursements include the annual Citizens’ Option for Public Safety (COPS) reimbursements for public safety, admin cost reimbursement from grants, Highway user tax, special sales tax allocation, developer deposit reimbursements, and cost allocations transfers (which are considered a cost to the Enterprise funds but revenue to the General Fund). This revenue category ended the quarter $119,000 below the quarterly budget, primarily due to the timing of several reimbursements. These revenues are expected to catch up over the remaining quarters as reimbursements are requested and received.
Intergovernmental revenues consist largely of reimbursements for staff time spent on grant-funded activities, including the School Resource Officer reimbursement, Social Services Liaison grant, Community Development Block Grant (CDBG) funding for the water meter project, and general grant administration. At the close of the quarter, this category was at 20% of the total adopted budget, reflecting the timing of grant billings rather than a shortfall in activity. As grant work continues and reimbursement claims are submitted, intergovernmental revenues are expected to align with budgeted projections over the course of the fiscal year.
GENERAL FUND EXPENDITURES
The General Fund’s adopted budget for FY 2025 was $14.3 million. The amended budget is $14.4 million, with Budget amendments of $133,388, excluding Purchase order rollovers from the prior fiscal year.
General Fund operating expenditure ended the quarter at $4.5 million, or 31 percent of the amended budget.
Administrative Services, which encompass the City Manager’s Office, City Clerk, and Human Resources, accounted for 25% of the total budget and are projected to remain within budget for the fiscal year.
City Attorney/Legal Costs This variance is primarily due to increased legal activity associated with the City’s ongoing litigation. This line item also includes costs related to the Mill Site planning process with Economic Planning Systems (EPS), for which the City is responsible for 50% of the shared costs. Staff are closely monitoring these expenditures and will bring forward a mid-year budget amendment, if necessary, to address any projected overrun.
Non-departmental is at 52% of the total budget attributed to the nature of California Intergovernmental Risk Authority (CIRA) liability and property premium payments, which are paid in the first quarter. Overall, property insurance has increased by 22%, and worker's compensation and general liability also recorded a cost increase of 12% year-over-year.
Additionally, $150k was budgeted to contribute to Section 115 Trust to diversify the City’s Investments to address the likelihood of increases to the California Public Employees’ Retirement System (CALPERS) unfunded liability.
The Police Department’s The Police Department, which represents 32% of the General Fund budget, is generally tracking in line with first-quarter projections. A 5% increase in dispatch costs is anticipated in 2025 under the operating agreement with the City of Ukiah. Temporary salary savings from vacant officer positions are expected to be fully offset once those positions are filled by the third quarter of the fiscal year.
In August 2024, the City Council approved compensation updates through Ordinance 672 and extended the Police Association Memorandum of Understanding (MOU) through 2028, including Cost of Living Adjustment (COLA) increases. To help fund these increases, the department reallocated resources by freezing two Community Service Officer (CSO) positions and utilizing a part-time transportation officer, and in the current budget, freezing the fourth Sergeant position and transitioning to a Commander position.
First-quarter expenditure also includes a one-time separation payout for the former Chief of Police, which contributes to higher personnel costs in Q1 and will not recur later in the fiscal year. Overtime costs are currently at 49% of the annual budget, and staff will continue to monitor this trend closely through mid-year.
Community Contributions include the budget for Noyo Center, Special projects from Measure AB, the Sister City Program, and the Economic Development & Financing Corporation (EDFC). Only one payment to Noyo Center has been made in the first quarter.
Community Development finished the first quarter $47,000 under budget, primarily due to the vacant Director position. The City Manager is currently serving as Acting Community Development Director, with high-level planning work contracted to Marie Jones Consulting. The department has also engaged 4Leaf to provide building inspection and plan check services, ensuring continuity of operations while leadership and staffing needs are evaluated.
Fort Bragg's Marketing The City’s marketing budget includes expenditures for professional marketing services, community events, and public relations activities. First-quarter spending is at 23% of the annual budget. The marketing allocation was increased this fiscal year to support an expanded calendar of events and community-building initiatives, including signature programs such as the “Longest Table.” Debt Payments A significant accomplishment for the City in FY 2020/21 was developing and adopting a Pension funding policy. These included issuing Lease Revenue Bonds to reduce the City’s Unfunded pension Liability by $7.5 million in November 2021 to achieve a 90-100 percent funding status with CALPERS. FY 2026 Budget includes the City’s annual debt payment for these bonds, in which interest is paid in quarter one, and the principal is to be paid in the fourth quarter.
Overall, most of the general fund expenditures are in line with or below quarterly budget projections.
GENERAL FUND NET RESULTS
The General Fund is the chief operating fund for the City and relies on TOT and Sales Tax revenues. Both revenue categories recorded the best years to date in FY 20/21 and continued the strong performance into FY 21/22 with a slight decline in the Q1 of FY 22/23 & FY 23/24.
First-quarter General Fund revenues totaled $3.5 million (25% of the annual budget), while expenditures were $4.5 million (31% of the annual budget), outpacing revenues by $998,420.
As the fiscal year progresses, staff will continue to closely monitor revenue performance to ensure it keeps pace with expenditure levels. The Mid-Term Budget Workshop scheduled for March 2026 will provide an important opportunity to assess the impacts of any State or federal budget cuts, as well as ongoing inflationary pressures, on the City’s revenues and expenditures and to make any necessary adjustments.
WATER ENTERPRISE FUND
Water Enterprise's revenue ended the quarter at $843k or 28 percent of the total budget, and expenditures ended the quarter at $678k or 30 percent of the total budget.
Charges for Services fully support the revenues for the Water Enterprise Fund. Quarter-one revenues performed consistently to the prior fiscal year and are typically higher in the first quarter due to seasonality. The City of Fort Bragg declared a Stage 2 water warning and implemented mandatory Stage 2 water conservation measures to reduce water consumption by 10-20% in quarter one. In the prior fiscal year, ratepayers took proactive steps in the Summer to conserve water as the City of Fort Bragg has experienced significantly less rainfall over the past several years, causing the City’s three raw water sources to continue a downward trend. Due to these, water consumption has decreased compared to the last prior fiscal years as customers have adapted to conserving water during the summer months. Additionally, the City undertook steps to detect leaks and notify customers accordingly. New Water Meters funded by CDBG Grant are being installed, which will better detect leaks in real-time, and the improvements to the customer portal through Water Smart will provide customers with analytics on their usage and other helpful information to address leaks and high water usage.
Debt Service the Water Enterprise Fund currently carries no outstanding debt. The $476,000 loan from the State of California Department of Water Resources, which was budgeted for payoff in the prior fiscal year, has been fully retired. In addition, the 2014 Water Revenue Refunding Bond, with a remaining balance of $672,135, also matured and was paid off last fiscal year, further strengthening the Fund’s debt-free status. The enterprise is currently undertaking a comprehensive rate study to ensure that future rates are aligned with long-term operating, capital, and reinvestment needs.
Contractual Services budget covers Utility Billing costs for printing, mailing, and compliance with Senate Bill 998. These costs have come in below budget in the first quarter. Additionally, $30k was budgeted for water rate study.
Utilities are 28% of the total Budget. Energy costs for Electric have risen by 15% per month compared to last year due to rate increases with a slight increase in consumption.
Insurance costs, including Property & ADP Contributions, DIC Earthquake, and flood deductible buy- down, are paid in the first quarter annually. As mentioned earlier, CIRA insurance costs have recorded year-over-year increases. Property Insurance increased by 83% and DIC by 43% overall. Currently, the Insurance costs are over budget by $53k. Staff is working with CIRA to confirm the allocation of property insurance before the mid-term budget.
Overall, most expenditures are in line with quarterly budget projections, and staff anticipates that revenues will outpace expenditure estimates come year-end.
WASTEWATER ENTERPRISE FUNDWASTEWATER ENTERPRISE FUND
WASTEWATER ENTERPRISE FUND
WASTEWATER ENTERPRISE FUND
Wastewater Enterprise's revenue ended the quarter at $935k, which is 26% of the total budget, and expenditures ended the first quarter at $921k, in line with overall quarter one budget projections.
Encouragingly, in the current fiscal year, revenues continue to trend upward and are currently at 26% of the total annual budget. This trajectory reflects resilient financial performance and suggests a sustained recovery from the impacts of the pandemic. Ongoing monitoring of these revenue trends will be critical to maintaining the long-term fiscal health of the enterprise operations. The rate study is currently underway, with results anticipated in the third quarter of FY 2025–26.
Utilities are up $95k or 29% of the total Budget. Energy costs for electricity have risen by $12k/month compared to the last year due to rate increases.
Insurance costs, including Property & ADP Contributions, DIC Earthquake, and flood deductible buy- down, are paid in the first quarter annually. As mentioned earlier, CIRA insurance costs have recorded year-over-year increases. The new Wastewater Treatment Plant has certainly increased the Property Insurance for the fund in the last couple of years. Property Insurance increased by 102% and DIC by 10% overall. Currently, the Insurance costs are over budget by $118k. Staff is working with CIRA to confirm the allocation of property insurance before the mid-term budget to determine if a Budget Amendment is needed.
Overall, most expenditures are in line with quarterly budget projections, and staff anticipates that revenues will outpace expenditure estimates come year-end.
CV STARR ENTERPRISE
The City-owned C.V. Starr Community Center and Sigrid & Harry Spath Aquatic Facility, encompassing 43,000 square feet, offer a wide range of amenities, including an indoor water park, fitness and exercise rooms, weight rooms, and community meeting spaces. The surrounding grounds further enhance the facility with a dog park, Skateboard Park, and petanque courts.
Operational, maintenance, and capital improvement costs for the Center are partially offset by restricted sales tax and property tax revenues. These dedicated funds are allocated to the C.V. Starr Enterprise Fund, providing a financial framework that supports the ongoing success of the facility.
In February 2024, the City assumed direct operations of the Center after the Mendocino Coast Recreation and Park District (MCRPD) terminated the operating agreement in 2023. This transition places the full financial responsibility for operations and maintenance on the City of Fort Bragg.
The revenue generated from general admissions encompasses user fees obtained from drop-in visits, membership sales, and other admissions.
Despite the challenges, since re-opening, membership revenue and general admissions have rebounded at the end of quarter one at $273k beating quarterly projections by $93k increasing from 1,694 in memberships to 2,267 in 2024 Q1. The City Council approved rate, which take effect in January 2024, generating an estimated $90k in additional revenue.
It's encouraging to report that our sales tax figures align with our quarterly budget projections, and we are on track to meet our overall budget expectations of $1.2 million. This positive trajectory reflects our effective strategies and market responsiveness.
On the property tax front, funds are received in the third quarter of the fiscal year. This timing aligns with our budget planning, contributing to the overall financial health of the Center.
Regarding personnel costs, we are currently at 20% of the Budget, effectively meeting our quarterly expectations. However, recognizing the dynamic nature of our operations, we are actively evaluating and planning to restructure staffing to ensure optimal efficiency and resource utilization.
Shifting our focus to administration costs, which encompass legal, travel, and training expenses, it's noteworthy that a substantial portion of these expenditures is expected to be incurred in the second and third quarters. As we progress through the fiscal year, we remain committed to prudent financial management, ensuring that our budget allocations align with our operational needs and strategic goals.
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