FY 26 Mid-Year Budget Report — Special City Council, March 30, 2026

CITY OF FORT BRAGG
FY 2021/22 MID-YEAR REPORT
As of December 31, 2021

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FY 2025/26
Mid-Year Financial Report
City of Fort Bragg
Mid-Year Budget FY 2025/26

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TABLE OF CONTENTS
Introduction & Economic Outlook.................................................................................... 2-5 General Fund Financial Summary ............................................................................... 5-13 Water Enterprise Fund ................................................................................................. 13-14 Wastewater Enterprise Fund ....................................................................................... 15-16 CV Starr Enterprise Fund ........................................................................................... 17-19 Broadband Enterprise Fund ....................................................................................... 19-20 Internal Service Funds ................................................................................................. 14-17 Budget Adjustment Requests at Mid-Year ................................................................... 23-24 New Revenue Consideration ………………............................................................. 25-27 Fiscal Year 2026/27 Budget Preparation Schedule …………………………..…… ...... 27-29 Prioritized List of Financial Goals ……………………………………………………… ..... 29

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Mid-Year Budget FY 2026

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INTRODUCTION
The City operates on an annual budget cycle. Through the budget, the City Council approves revenue estimates and authorizes City staff to expend the City's limited financial resources. The City Council adopts an original budget prior to the start of each fiscal year, then makes adjustments to the budget throughout the year to reflect changes in expected revenues and to increase or decrease expenditures to address changes in policy or operational priorities.

As one of the many activities that the City undertakes to help ensure its financial soundness, Staff provides quarterly financial reports on the City's budget condition. Following the conclusion of the second quarter of the fiscal year (October through December), Staff conducts a second-quarter/mid-year budget review.

The City of Fort Bragg's mid-year performance Report addresses the financial activity during the first two quarters of FY 2025/26 (July through December). It helps determine whether the City is on track to meet the budget for the fiscal year or if adjustments are warranted. It also includes a projection of the fiscal year-end results, which serve as the starting point for the development of next year's budget and the long-term financial forecast.

The report focuses on the General Fund, Internal Service Funds, C.V Starr, Broadband Fund, Water and Wastewater Enterprise Funds. Special Revenue and Capital Project Funds are not included in the City's base operating budget and, therefore, are not detailed in the Mid-Year Performance Report.

In reviewing this report, the following information should be taken into consideration:
▪ Revenues and expenditures are recorded during the period received or paid. As of January 31, accrual entries were made to associate January receipts and expenditures to the second quarter as appropriate.

Year-end accruals use a 60-day window and therefore are more exhaustive. ▪ The schedule of revenues received varies according to the source of funding. As an example, property tax payments are received as follows: 55% in December, 38% in April, and 7% in August of the following fiscal year. The August payment is presented in the fiscal year to which it relates. ▪ Although most expenditures occur monthly, there are some quarterly, semi-annual, and even annual expenditures. Examples include debt service payments, liability insurance, and audit fees. ▪ This report is not meant to be inclusive of all finance and accounting transactions. It is intended only to provide the Council and the public with an overview of the State of the City's general fiscal condition. The report has been prepared by the City's finance department without audit and does not include many of the year-end adjustments required to bring the City's financial records into compliance with generally accepted accounting principles (i.e. accruals of sales and use tax revenues, payroll and other expenditures).

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ECONOMIC ANALYSIS
U.S. Economy Overview
As As of early 2026, the U.S. economy continues to demonstrate moderate and resilient growth. Real GDP expanded at an annualized rate of approximately 2.0%–2.2% in Q4 2025, driven primarily by sustained consumer spending, stabilization in manufacturing activity, and modest gains in business investment.

Inflationary pressures have continued to ease, with the Consumer Price Index (CPI) trending around 2.5%–

2.7% year-over-year, aligning more closely with the Federal Reserve’s long-term target. While inflation has cooled significantly from prior peaks, certain sectors—particularly housing, insurance, and energy—continue to experience persistent cost pressures.

California Economy
California’s economy in 2025–2026 continues to show resilience, particularly in sectors such as technology, health care, tourism, and clean energy. However, the state continues to face structural challenges, including high housing costs, affordability constraints, and ongoing migration shifts from higher-cost metropolitan areas to more affordable regions.

As of early 2026, California’s unemployment rate is approximately 4.8%, remaining above the national average but reflective of a large, diverse, and evolving labor market. Wage growth has moderated but remains steady in key sectors such as health care, government services, and logistics.

Inflationary pressures have re-emerged as a key concern entering 2026, driven in part by global economic uncertainty and rising energy costs. Ongoing geopolitical tensions—particularly the conflict involving Iran—have disrupted global oil supply chains, pushing oil prices above $100 per barrel and increasing fuel costs across the United States.

These impacts have been especially pronounced in California, where gasoline prices have exceeded $5.00 per gallon, placing additional pressure on households, businesses, and local government operations. Higher fuel and transportation costs are contributing to broader inflation, affecting goods, services, and construction costs statewide. As a result, inflation in the U.S. is now projected to rise to approximately 4.2% in 2026, reversing earlier expectations of stabilization and increasing the likelihood of sustained cost pressures.

The State’s fiscal outlook remains constrained, with continued pressure from lower-than-peak capital gains tax revenues and increased demand for public services. Despite these challenges, California continues to prioritize investments in climate resilience, infrastructure, and housing production— factors expected to support long-term economic stability and regional competitiveness.

Consumer spending has remained relatively stable, though rising fuel and living costs are beginning to impact household purchasing power. Tourism remains strong, particularly in coastal regions, supported by domestic travel. Water conditions have improved compared to prior drought years; however, long-term infrastructure and supply reliability remain key statewide concerns.

Local Economy – Fort Bragg & Mendocino County
Fort Bragg and the greater Mendocino County economy continue to stabilize and adapt following several years of disruption from the COVID-19 pandemic, labor shortages, and inflationary pressures. Entering 2026, rising City of Fort Bragg
Mid-Year Budget FY 2026

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fuel costs and renewed inflation—driven in part by global energy market disruptions—are placing additional strain on local businesses, increasing transportation costs, and impacting overall cost of living for residents.

Despite these challenges, local economic conditions reflect cautious optimism, supported by steady tourism activity and targeted economic development efforts.

Key local indicators:
• Tourism & Hospitality:

Tourism remains a primary economic driver for the region. Transient Occupancy Tax (TOT) revenues have shown strong performance in early FY 2025–2026, increasing approximately 16% year-over-year, supported by steady visitor demand and the voter-approved increase from 12% to 14% (Measure U). Seasonal declines during winter months remain typical, with strong recovery expected during peak seasons. • Housing & Real Estate:

The local housing market has moderated from peak pricing, consistent with statewide trends. Affordability remains a significant challenge, particularly for workforce and middle-income households. The City continues to advance pro-housing initiatives, including waiving minimum parking requirements, implementing ministerial review processes, and pursuing policies that support infill and multi-family development. In 2025, the City approved at 83-unit workforce housing project.
• Small Business & Economic Development:

Local business sentiment continues to improve, supported by City-led initiatives such as the Fort Bragg Business Boost Fund, façade improvement grants, streamlined permitting through Accela, and the establishment of the Economic Development Department. While these efforts are helping reduce barriers and stimulate activity, challenges related to access to capital and workforce availability persist. • Labor Market:

Workforce shortages remain a key constraint across multiple sectors, including health care, construction, hospitality, and public services. Recruitment and retention continue to be ongoing challenges for both public and private employers.
• Cannabis Sector:

The cannabis industry in Mendocino County continues to experience contraction due to sustained low wholesale prices, regulatory complexities, and market oversupply. This has had ripple effects on employment, supporting industries, and local tax revenues.
• Fisheries & Natural Resources:

Fishing remains an important cultural and economic contributor to the region. However, regulatory uncertainty, environmental variability, and changing ocean conditions continue to present long-term challenges to the industry.

Outlook & Considerations for Budget Planning
While economic indicators point to measured optimism, continued uncertainty—particularly related to inflation and rising operational costs—requires prudent fiscal planning. Strong performance in key revenues such as TOT provides positive momentum; however, cost pressures related to personnel, insurance, materials, fuel, and infrastructure remain elevated.

Key fiscal considerations for the upcoming budget cycle include:
• Sustaining investment in economic development, downtown revitalization, and business support programs;
• Advancing critical infrastructure projects, including streets, water, wastewater, and the municipal broadband utility;
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• Monitoring key revenue sources, particularly property tax, sales tax, and TOT trends; • Addressing long-term challenges in housing, workforce development, and service delivery; • Preparing for potential impacts from state budget constraints and evolving legislative policies; • Maintaining strong reserve levels to ensure long-term fiscal stability and resilience.

GENERAL FUND
The General Fund supports many of the City’s core, day-to-day operations, including police and fire protection, street and park maintenance, community development, and general administrative functions. It serves as the primary funding source for all City programs not covered by dedicated taxes, user fees, impact fees, or grant funding.

Unlike the Enterprise Funds, which receive revenue on a consistent monthly basis, General Fund revenues come from a broader variety of sources—many of which are cyclical in nature. This variability can impact the timing of revenue collection and requires careful planning to ensure consistent service delivery throughout the fiscal year.

The General Fund remains vital to sustaining essential municipal services and plays a central role in advancing the City’s strategic priorities.

FISCAL YEAR 2025 RECAP
For the fiscal year ending June 30, 2025, the General Fund closed with an operating surplus of $580,499. After accounting for net transfers out of $(928,080), the overall fund balance decreased from $9.2 million to $8.8 million.

Total expenditures reached $13.1 million, representing a 27% increase over the prior year, largely driven by personnel costs returning to pre-pandemic levels.

Despite this increase in expenditures, the City maintained strong reserve levels, including $1.6 million in operating reserves, $200,000 in litigation reserves, $1.2 million in recession reserves, and $1.4 million in unassigned reserves.

GENERAL FUND REVENUES OVERVIEW
As of the second quarter, General Fund revenues total $6. million, representing approximately 42% of the amended budget. While this reflects solid performance, it is slightly below the $6.3 million reported at the same point in the prior fiscal year.

Current projections estimate year-end General Fund revenues at approximately $14.3 million, coming in about $56,980 under budget. This variance is primarily attributed to timing fluctuations in grant reimbursements, particularly related to Blue Economy and CDBG funding.

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Mid-Year Budget FY 2026

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The Fiscal Year 2025–2026 Budget was developed with the expectation of moderate growth in General Fund revenues, while maintaining conservative budgeting practices and a measured approach amid evolving economic conditions.

A comprehensive review of all General Fund revenue accounts has been completed based on the first six months of activity. Through December, General Fund tax revenues are performing strongly and are projected to meet budgeted expectations, reaching approximately $8.7 million by year-end. This performance is further supported by Measures T and U, which are generating an estimated $1.4 million annually for the General Fund.

Partially offsetting this strength is lower-than-anticipated Intergovernmental and Operating Grant revenue, primarily related to timing of reimbursements for staff time administering grant-funded programs. These include Community Development Block Grant (CDBG) activities such as business loans, the water meter replacement program, and general administration. Consistent with prior years, unspent grant funds will be carried forward into the next fiscal year.

Currently, no revenue adjustments are recommended as part of the Mid-Year Budget Review.

Notable variances in Revenues are listed below.

▪ Transient Occupancy Tax (TOT)
Tourism plays a vital role in Fort Bragg's economy, accounting for 23% of the General Fund revenue. In FY 2026, the Transient Occupancy Tax (TOT) experienced an 2% growth compared to the prior year. However, actual TOT revenues for FY 2023/24 showed a slight decline from FY 2022/23, primarily due to a significant drop during the winter months.

Starting April 1, 2025, the TOT rate will increase to 14%, following the approval of Measure U by Fort Bragg voters in November 2024. This increase—from 12% to 14%—applies to short-term lodging accommodations, including hotels, motels, and vacation rentals within city limits. The General Fund anticipates an additional $100,000 in revenue as a result of the new rate, contributing to a projected TOT revenue total of $3.3 million by the end of FY 2024/25.
▪ Sales Tax:

The Sales Tax category includes General Sales Tax, Local Sales Tax, and Proposition 172 Public Safety Sales Tax. During the latter half of 2025, California experienced mixed sales tax performance driven by City of Fort Bragg
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economic uncertainty, inflationary pressures, and fluctuating consumer confidence. Despite these broader trends, Fort Bragg’s sales tax revenues have shown consistent growth across all six months, with November reflecting the most significant increase at approximately 55%.

As of the second quarter, sales tax revenues total $382,630, representing approximately 46% of the annual budget and tracking in line with budget projections.

Measure T, approved by Fort Bragg voters in November 2024, became effective April 1, 2025, increasing the local sales tax rate from 8.875% to 9.25%. This voter-approved measure is providing a meaningful and ongoing increase in General Fund revenues, supporting the City’s ability to address financial challenges and invest in essential service
▪ Reimbursements
Reimbursements to the City include the annual COPS grant supporting Community Service Officer (CSO) positions totaling $170,000, developer deposit reimbursements for staff time, General Plan-related reimbursements, and cost allocation transfers of approximately $2.3 million. Cost allocation transfers are recorded as expenditures within Enterprise Funds and as revenues to the General Fund.

In Fiscal Year 2025–2026, the City expanded its enterprise structure to include the Broadband Enterprise and the CV Starr Enterprise, both of which are now incorporated into the Cost Allocation Plan. These allocations reflect the recovery of costs for support services provided by departments such as Human Resources, Information Technology, Facilities, Finance, and the City Manager’s Office.

As of mid-year, total reimbursements are $1.4 million, representing approximately 42% of the annual budget.

Year-end projections indicate reimbursements will exceed budget by approximately $9,000. This variance is primarily attributed to the timing of reimbursements, newly approved indirect cost recoveries from eligible grants, and updated staff time allocations in alignment with the City’s Cost Allocation Plan prepared by Matrix Consulting. ▪ Intergovernmental & Operating Grant Revenues

Intergovernmental and Operating Grant revenues are currently at approximately 6% of the annual budget at mid-year and are projected to finish the fiscal year $149,000 below budget.

This revenue category primarily reflects reimbursements for staff time associated with administering the City’s grant programs and implementing grant-funded activities. A significant portion of these reimbursements is tied to the BHJIS Grant supporting Social Liaison Officers, as well as Community Development Block Grant (CDBG) programs, including business loans, the water meter replacement project, and general administration. The year-end shortfall is largely attributable to the timing of reimbursements and the pace of grant activity, with unspent or unreimbursed funds expected to carry forward into the next fiscal year.
▪ Other taxes
Other tax revenues primarily include Franchise Fees and Business License Taxes. Franchise Fees are collected from cable television, solid waste, and PG&E electric services. As of December 2025, Franchise Fee revenues total approximately $262,000, tracking in line with the mid-year budget and consistent with prior year collections. Based on historical trends, Franchise Fee revenues are projected to meet or slightly exceed budgeted levels by year-end. Business License Tax revenues have shown positive growth, with collections through December 2025 increasing by approximately $36,000 compared to the same period in the prior year.

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This increase is notable, as the majority of Business License revenues are typically realized during the annual renewal cycle in February and March, indicating continued strength in local business activity.

Looking ahead, the City is advancing a targeted fee relief strategy aimed at supporting small businesses and activating vacant downtown spaces. This includes the potential waiver of business license fees and select permit fees to encourage entrepreneurship, reduce barriers to entry, and further stimulate local economic activity.

STATUS OF GENERAL FUND EXPENDITURES
General Fund expenditures totaled $8.6 million during the first half of FY 2025/26, accounting for 59% of the amended annual budget. Initially, appropriations of $14.3 million were adopted; however, budgeted appropriations have been adjusted upward by $435k over the course of the year, resulting in an amended budget of $14.7 million. The chart below illustrates year-to-date expenditures in comparison with prior years.

Some of the notable variances in expenditures include:

Non-Departmental
▪ The Non-Departmental category captures expenditures not directly attributed to a specific City department. These include retiree medical costs, insurance premiums, utilities, and OPEB contributions, among others. As of mid-year, expenditures in this category are at approximately 68% of the annual budget and are projected to come in slightly under budget by fiscal year-end.

Liability and property insurance premiums paid in the first quarter were higher than anticipated, creating upward pressure in this category. However, these increases are being partially offset by savings in other areas, including professional services, unemployment insurance, and administrative costs, resulting in a modest net savings of approximately $13,957.

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Administrative Department
▪ The Administrative Department, which includes the City Manager’s Office, City Clerk, and Human Resources, operates with a total budget of $451,000. In FY 2025–2026, the Department expanded its service capacity with the addition of a Public Experience Liaison position, aimed at enhancing customer service at City Hall and fostering a more welcoming and accessible environment for residents and businesses.

During the first two quarters of the fiscal year, recruitment efforts for key leadership positions— including the Police Chief and Community Development Director—resulted in higher-than-anticipated costs. Engagement of Bob Hall and Associates for executive recruitment services, along with associated outreach and candidate processes, exceeded the adopted recruitment budget. As a result, a budget amendment of $36,000 is requested to cover these additional expenses.

City Attorney/Legal Costs
The adopted budget for City Attorney and legal services in FY 2025–2026 is $296,380, a reduction from FY 2024–2025 actual expenditures of approximately $448,000, reflecting an initial expectation of lower legal activity.

However, during the first two quarters of the fiscal year, legal costs have exceeded projections due to a higher-than-anticipated volume and complexity of ongoing matters. Key cost drivers include litigation related to Mendocino Railway, increased activity in code enforcement cases, and legal support associated with housing and development projects.

Additionally, this line item includes costs associated with planning and economic analysis work conducted by EPS, including Phase 2 efforts and Memorandum of Understanding (MOU) development related to the Mill Site and broader economic development strategy.

As a result of these factors, legal expenditures are projected to exceed the adopted budget. A budget amendment of $100,620 is requested to cover these overages and ensure adequate funding through the remainder of the fiscal year. Moving forward, legal costs will continue to be closely monitored, with an emphasis on managing litigation exposure and aligning legal resources with the City’s strategic priorities.

Police Department
• The Police Department has undergone significant organizational transition over the past six months, including the appointment of a new Police Chief and a restructuring of command staff. A new Commander position was established to oversee patrol operations, while the Captain role has been refocused on emergency preparedness, the CARE Response Unit, and special projects. These changes were implemented alongside cost-control measures, including the freezing of a fourth Sergeant position and, previously, a Community Service Officer position in FY 2023–2024. The adopted budget also includes a Transport Officer, School Resource Officer (paid 70% by the School District) and a Task Force Officer and a new part-time front office position to support operations.

Despite these efforts, the Police Department continues to face greater cost pressures than any other City department, driven by staffing shortages, operational demands, and rising personnel-related costs.The Department is actively working to fill vacancies in sworn positions. As of Quarter Two, one authorized Sergeant position remains vacant, with recruitment underway and anticipated to be filled by March 2026. Additionally, the Department plans to send two recruits to the police academy in the coming months.

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Due to ongoing vacancies, the Department has realized approximately $121,000 in salary savings; however, these savings are more than offset by increased overtime and comp time costs required to maintain minimum staffing levels. As a result, the Department is projected to end the fiscal year over budget by approximately $164,801. A budget amendment is requested to reallocate salary savings to offset these overtime and comp time expenditures. Overtime costs have significantly exceeded projections, with actuals reaching $120,144 at mid-year—effectively exhausting the full annual budget of $120,000 and exceeding projections by approximately 100%. An additional appropriation of $65,000 is requested to address this shortfall.

Additional cost pressures include a one-time severance payout of approximately $100,000 in Quarter One, which increased “Other Pay” expenditures, as well as rising utility costs—particularly propane and electricity—during the first half of the fiscal year. A budget amendment of $12,500 is requested to address increased utility expenses. The Department outsourced Internal Affairs investigation in the last two quarters which also increased costs by $20k.

Furthermore, ongoing operational costs for equipment and technology continue to rise. The Small Tools and Equipment budget, adopted at $20,000, does not fully reflect recurring annual costs, including approximately $50,000 for Axon body-worn cameras, $25,000 for Tasers, and $5,000 for Flock safety cameras. While some of these expenses were initially funded through asset forfeiture, they now represent ongoing operational costs that must be supported by the General Fund.

Looking ahead to the next fiscal year, the Police Chief is currently evaluating operational needs and has identified the potential need to fill a Community Service Officer position and unfreeze the fourth Sergeant position to strengthen leadership capacity and support ongoing service demands within the Department. These adjustments are intended to reduce reliance on overtime and provide additional resources to meet operational needs more effectively.

Moving forward, the Police Department budget will undergo further review to identify operational efficiencies, including an evaluation of Asset Forfeiture funding to support eligible expenditures and reduce pressure on the General Fund. Additionally, the budget will incorporate the terms of the approved Memorandum of Understanding, which includes a 3% cost-of-living adjustment (COLA) for sworn officers.
▪ The CARE Response Unit, operating within the Public Safety Department, is fully grant-funded. The program has secured funding through 2025 as part of an expansion of the California Department of Health Care Services (DHCS) grant originally awarded in 2022.

The CARE Response Unit continues to demonstrate strong outcomes, effectively delivering services and connecting individuals to resources to address homelessness and mental health needs within the community. The program currently supports five staff positions.In the current fiscal year, the program expanded to include an additional full-time position and a part-time Officer Assistant, funded through Measure B resources, further enhancing the City’s capacity to respond to community needs.

Community Development Department
At mid-year, the Community Development Department has expended approximately 38% of its amended budget and is projected to end the fiscal year under budget by approximately $134,000, primarily due to personnel savings from the ongoing vacancy in the Community Development Director position and reduced reliance on professional services. The Department currently consists of an Assistant Planner, Associate Planner, Administrative Assistant, and a part-time Permit Technician, with plans to convert the Permit Technician position to full-time in the coming months to meet service demands.

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While the Director role has remained largely vacant since 2019—with only a short-term placement in 2024—the Department has maintained operations and service delivery under the City Manager serving as Acting Director. Recruitment efforts for a Director or Senior Planner remain ongoing.

Despite staffing constraints, the Department has undergone a significant operational transformation focused on efficiency, service delivery, and modernization. Key improvements include the implementation of Accela permitting software and strategic partnerships with 4LEAF and consulting support from Marie Jones Consulting to provide plan check, inspection, and planning services. These changes have streamlined processes, reduced turnaround times, and enhanced the customer experience.

The Department is also advancing modernization efforts through the implementation of a new Code Enforcement software system. Code enforcement remains primarily complaint-driven and is being supported by the Assistant Planner, with supplemental support from 4LEAF.

Looking ahead, the Department will play a key role in implementing the City’s Vacant Registry program in coordination with the City Manager’s Office, supporting downtown activation and economic revitalization.

Visit Fort Bragg (Tourism & Marketing Investment)
The City has made a strategic investment of $350,500 in Visit Fort Bragg (VFB) for FY 2025–2026 to strengthen tourism, enhance destination marketing, and support local economic activity. Of this amount, $180,000 is allocated to the City’s Destination Marketing Organization (DMO), Idea Cooperative, to deliver targeted marketing campaigns, brand development, and visitor outreach.

This increased investment reflects the City’s commitment to reinvesting Measure U (TOT) revenues back into tourism promotion and economic development. Funding for marketing and promotions has increased from $236,514 to $350,500, allowing the City to expand its reach and elevate Fort Bragg as a premier coastal destination.

Signature events continue to play a critical role in driving visitation and economic activity. These include established events such as the Whale Festival, Blues Festival, and Magic Market, which attract both regional and out-of-area visitors. Looking ahead, the City is actively developing new, high-impact events, including a premier coastal trail music festival and a mountain bike tournament planned for Fall 2026, further diversifying tourism offerings and extending the visitor season.

As part of its ongoing efforts to maximize return on investment, the City will be evaluating opportunities to bring select DMO services in-house to improve efficiency, increase accountability, and better align marketing efforts with City priorities. Additionally, the City will explore opportunities to strategically allocate a portion of these funds toward enhancing the overall visitor experience—such as placemaking, wayfinding, and event activation—as well as potential partnerships with Visit Mendocino to further amplify regional marketing efforts and expand reach.

The City Manager will initiate discussions on these future strategies at the upcoming Visit Fort Bragg meeting scheduled for April/May.

Corporation Yard- Public Works
The Corporation Yard Division within Public Works is comprised of a team of 10 staff, including a Maintenance Division Supervisor, one Maintenance IV, four Maintenance II positions, and four Maintenance I positions. The Division is responsible for maintaining critical City infrastructure and supporting day-to-day operations across multiple service areas.

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During the first two quarters of the fiscal year, the Division has remained highly active, supporting Broadband USA construction efforts through utility marking and coordination, responding to emergency maintenance needs, and continuing to perform routine and preventative maintenance throughout the City. These responsibilities include street maintenance, storm drain management, signage, and general infrastructure upkeep.

Looking ahead, the City is making strategic investments to strengthen in-house maintenance capacity and address deferred infrastructure needs. A budget adjustment includes the addition of one Maintenance II position to support the development of an in-house street maintenance crew. To support this effort, the City has already invested approximately $351,000 in street maintenance equipment, with an additional $212,000 requested to fully fund the necessary equipment purchases.

In parallel, the Department has transitioned landscaping services to external contractors and is in the process of outsourcing janitorial services. These changes are intended to free up internal staff capacity, allowing the Division to focus on higher-priority maintenance work and address deferred maintenance across City facilities and infrastructure.

To further improve operational efficiency, the City is implementing maintenance and task-tracking software to better organize work orders, track recurring maintenance needs, and identify opportunities for improved service delivery. A budget amendment of $11,000 is requested to support this initiative.

Collectively, these actions represent a strategic shift toward building internal operational capacity, prioritizing core infrastructure services, and modernizing maintenance practices to deliver more efficient, responsive, and sustainable public works operations

GENERAL FUND NET RESULT AND FUND BALANCE
With projected revenues totaling $14.3 million and total expenditures of $14.9 million, the General Fund is expected to conclude FY 2025–2026 with a deficit of approximately
$366,916. This planned drawdown will reduce the unassigned fund balance to approximately $4.9 million.

While the deficit reflects increased expenditures—particularly in personnel costs that have returned to and exceeded pre-COVID levels—it also represents a deliberate investment in staffing and service delivery across City departments. Most key leadership positions have been filled to strengthen operations, with the exception of the Community Development and Finance Director roles. These vacancies have generated one-time salary savings in the current fiscal year, with responsibilities absorbed by the City Manager; however, once filled, these positions will add ongoing cost pressures to the General Fund.

The City’s financial position has been significantly strengthened by the voter approval of Measures T and U, which increased local sales tax and Transient Occupancy Tax (TOT) revenues. These measures provide critical, ongoing funding to support core services and stabilize the City’s financial foundation.

Despite the projected deficit, the City’s overall fiscal position remains strong. General Fund reserves are projected to remain at approximately 33% of annual expenditures, well above recommended best practices. In addition, the City has proactively set aside $3.5 million in a Section 115 Trust to address long-term pension liabilities and help absorb volatility associated with CalPERS costs.

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At the same time, the City is intentionally prioritizing investments that grow and diversify the local tax base to sustain increasing costs of government services. This includes reinvesting TOT revenues into tourism promotion, events, and destination enhancements to strengthen visitation year-round—particularly during shoulder seasons—as well as advancing economic development initiatives that support business growth, reduce vacancies, and attract new investment.

Looking ahead, maintaining long-term fiscal sustainability will depend on balancing disciplined cost management with continued efforts to expand revenue-generating activity. Key revenue sources—particularly Transient Occupancy Tax and Sales Tax—will play a critical role in keeping pace with rising personnel, infrastructure, and service delivery costs.

Overall, the City remains in a stable and resilient financial position, with a clear strategy focused on strengthening its tax base, maintaining strong reserves, and aligning investments with long-term economic growth and service sustainability.

WATER ENTERPRISE FUND
The Water Enterprise is responsible for providing safe, clean, and reliable water at adequate pressures and volumes to serve residents, businesses, and public facilities throughout the City of Fort Bragg. The Water Department’s core services include raw water collection, water treatment, and the distribution of treated water for domestic and commercial use.

The current Water Enterprise rate structure continues to function as intended, fully supporting operational needs, maintaining the required operating reserve, and generating modest funding for infrastructure upgrades, replacements, and ongoing maintenance. To ensure long‑term financial sustainability and to provide more than modest funding for future operational and capital needs, a new rate structure is scheduled to take effect on July 1, 2026.

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Fund reserves remain strong, totaling $3.82 million at the beginning of fiscal year 2026. These reserves provide stability for operations, support planned capital improvements, and help safeguard the system against unforeseen events.

While the Water Enterprise rate structure is operating as intended, supporting all operational needs, maintaining the operating reserve, and accumulating modest funds for infrastructure upgrades, replacements, and maintenance, a new rate structure will be implemented effective July 1, 2026 to ensure that adequate and not just modest funds are available for operations and infrastructure. Fund reserves remain strong at $3.82 million at the beginning of fiscal year 2026.

FY 2023/24
Actuals
FY 2024/25
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2025
YTD Actual
12/31/2025
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated Year
End
Forecast
Surplus/
(Shortfall)
Charges for services $ 2,950,767 $ 2,953,561 $ 2,959,574 $ 2,959,574 $ 1,479,787 $ 1,773,551 60% $ 293,763 $ 2,975,074 $ 15,500 Capacity Fees 20,600 28,261 20,000 20,000 10,000 11,101 56% 1,101 20,000 - Investment Interest 235,410 140,057 111,891 111,891 55,946 - 0% (55,946) 111,891 - Other revenue 85,096 68,610 41,000 41,000 20,500 18,318 45% (2,182) 41,000 - Total Revenue 3,291,872 3,190,488 3,132,465 - 3,132,465 1,566,233 1,802,970 58% 236,737 3,147,965 15,500 Personnel services $ 633,921 747,905 774,484 774,484 387,242 409,175 53% 21,933 776,628 (2,144) Operations 1,873,531 1,209,141 1,447,341 209,469 1,656,809 828,405 239,128 14% (589,277) 1,707,321 (50,512) Utilities 192,471 199,288 200,000 200,000 100,000 105,862 53% 5,862 192,000 8,000 Capital outlay 45,978 5,531 250,000 8,225 258,225 129,113 - 0% (129,113) 258,225 - Repairs & maintenance 45,584 74,557 67,000 - 67,000 33,500 23,007 34% (10,493) 57,000 10,000 Insurance 53,392 68,287 72,384 72,384 36,192 74,193 102% 38,001 72,384 - Interest/Debt service * 25,370 - - - - - - - -
Depreciation ** 353,968 338,922 - - - - - - -
Total Expenditures 3,224,216 2,643,630 2,811,209 217,694 3,028,903 1,514,452 851,366 28% (663,086) 3,063,559 (34,656) Net Revenue/(Expense) $ 67,656 $ 546,858 $ 321,256 $ (217,694) $ 103,562 $ 51,781 $ 951,604 $ 899,823 $ 84,406 (19,156) * Audited results do not include payment of principal which is not an expense in full accrual accounting $ 2,304,708 $ 576,177.03 ** Depreciation Expense is not budgeted and therefore not included in calculation of budget variance

WATER ENTERPRISE
At mid‑year, the Water Enterprise Fund is performing in line with expectations and is projected to finish the fiscal year with a slight surplus. The fund is fully supported by user fees, with total revenues through December reaching $1.80 million, or 58% of the prorated budget. Revenues are generally tracking as anticipated, and total year‑end revenues are estimated at $3,147,965.

Expenditures remain well below prorated levels at mid-year, with year‑to‑date spending of $851,366, or 28% of the prorated budget. Personnel services and utilities are tracking close to expectations, while underspending in operations, capital outlay, and repairs & maintenance reflects project timing and delayed procurement. Total expenditures are projected to end the year at $3,063,559.

Overall, the Water Enterprise Fund is expected to close the fiscal year with a modest surplus of approximately $84,406, effectively maintaining a near break‑even position. While this surplus supports ongoing operational needs, it is not sufficient to materially increase reserves, which remain stable but unchanged.

WASTEWATER ENTERPRISE FUND
The Wastewater Enterprise, operated by Municipal Improvement District No. 1, is responsible for providing a safe and reliable sanitary sewer system to serve residents, businesses, and public facilities throughout the City of Fort Bragg. The Enterprise also operates the City’s wastewater treatment facility in full compliance with state and federal regulatory requirements. Core services include coordinating operations, monitoring, maintenance, and related activities for the wastewater treatment plant and sanitary pumping stations. The Enterprise provides both primary and secondary treatment of wastewater, as well as treatment and conditioning of solids, resulting in a high‑quality effluent suitable for ocean discharge.

The current Wastewater Enterprise rate structure continues to function as intended, fully funding core operations, maintaining required reserves, supporting debt obligations, and building resources for future City of Fort Bragg
Mid-Year Budget FY 2025/26

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infrastructure upgrades, replacements, and maintenance. To ensure long‑term financial sustainability and to provide more than modest funding for future operational and capital needs, a new rate structure will take effect on July 1, 2026.

Fund reserves remain strong, totaling $1.72 million at the beginning of fiscal year 2026. These reserves provide stability for operations, support planned capital improvements, and help safeguard the system against unforeseen events.

FY 2023/24
Actuals
FY 2024/25
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2025
YTD Actual
12/31/2025
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated Year
End
Forecast
Surplus/
(Shortfall)
Charges for services $ 3,416,929 $ 3,391,326 $ 3,411,845 $ 3,411,845 $ 1,705,922 $ 1,948,219 57% $ 242,297 $ 3,464,528 $ 52,683 Capacity Fees 18,928 21,487 53,395 53,395 26,698 4,837 0 (21,860) 10,000 (43,395) Investment Interest 164,443 95,696 51,000 51,000 25,500 - - (25,500) 60,000 9,000 Other revenue 190,782 146,336 193,610 193,610 96,805 78,109 40% (18,696) 218,610 25,000 Total Revenue 3,791,082 3,654,846 3,709,850 - 3,709,850 1,854,925 2,031,165 55% 176,240 3,753,138 43,288 Personnel services $ 821,413 1,470,930 1,044,127 1,044,127 522,064 614,784 59% 92,721 1,073,032 (28,904) Operations 2,049,989 1,682,155 1,123,553 143,750 1,267,302 633,651 333,827 26% (299,825) 1,192,363 74,940 Utilities 351,532 355,612 325,000 325,000 162,500 170,385 52% 7,885 315,000 10,000 Capital outlay 215,871 198,544 215,871 - 215,871 107,936 - 0% (107,936) 116,994 98,877 Repairs & maintenance 89,434 118,284 159,000 6,857 165,857 82,928 79,385 48% (3,543) 159,000 6,857 Insurance 113,349 150,154 152,814 152,814 76,407 156,529 102% 80,123 157,100 (4,286) Interest/Debt service * 92,010 90,130 185,675 185,675 92,838 - (92,838) 312,996 (127,321) Depreciation ** 816,971 814,971 - - - - - - -
Total Expenditures 4,550,568 4,880,781 3,206,040 150,606 3,356,646 1,678,323 1,354,910 40% (323,413) 3,326,484 30,162 Net Revenue/(Expense) $ (759,486) $ (1,225,935) $ 503,810 $ (150,606) $ 353,204 $ 176,602 $ 676,255 $ 499,653 $ 426,654 73,450 * Audited results do not include payment of principal which is not an expense in full accrual accounting ** Depreciation Expense is not budgeted and therefore not included in calculation of budget variance

WASTEWATER ENTERPRISE
At mid‑year, the Wastewater Enterprise Fund is performing steadily, with both revenues and expenditures trending toward a stable year‑end position. Total revenues through December reached $2.03 million, or 55% of the prorated budget, driven primarily by consistent Charges for Services. Year‑end revenues are projected at $3,753,138, slightly above the adopted budget.

Expenditures total $1,354,910 at mid‑year, or 40% of the prorated budget. Personnel costs are running higher than planned, while operations, capital outlay, and repairs & maintenance are underspent due to project timing and delayed procurement. Utilities are tracking close to budget, and Insurance is slightly above the prorated amount but expected to remain within the annual allocation. Total expenditures are projected to end the year at $3,326,484.

Overall, the fund is expected to close the fiscal year with a surplus of approximately $426,654, supported by strong charges for services revenue.

CV STARR & PARKS & RECREATION DEPARTMENT
The C.V. Starr Community Center and Sigrid & Harry Spath Aquatic Facility (C.V. Starr Center) is a 43,000-square-foot, multi-use facility that serves as a vital recreational and wellness hub for the community. The Center offers an array of amenities, including an indoor water park, fitness and exercise rooms, weight rooms, and community meeting spaces. The surrounding grounds further enhance the facility’s offerings with a dog park, skateboard park, and petanque courts.

The City of Fort Bragg owns the C.V. Starr Center. Operational, maintenance, and capital improvement costs are partially offset by restricted sales and property tax revenues, which are City of Fort Bragg
Mid-Year Budget FY 2026

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specifically allocated to the C.V. Starr Enterprise Fund. This dedicated funding structure supports the long-term sustainability of the facility.

Historically, the City contracted with the Mendocino Coast Recreation and Parks District (MCRPD) for day-to-day operations and maintenance. However, in August 2023, the MCRPD Board issued formal notice to terminate the operating agreement, initiating a six-month transition period to allow for an orderly change in operations.

In response, the C.V. Starr Ad-Hoc Committee, in close coordination with City staff, developed a comprehensive transition plan to ensure continuity of services. As of February 2024, the C.V. Starr Center has officially transitioned to City operation. This strategic move ensures the uninterrupted delivery of high-quality recreational services and facilities, reinforcing the City’s commitment to promoting community well-being and quality of life.

FY 2023/24
Actuals
FY 2024/25
Actuals Adopted Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2025
YTD Actual
12/31/2025
Mid-Year
Variance %
Variance Budget
vs. Actual
Estimated Year
End
Forecast
Surplus/
(Shortfall)
Charges for services $ 680,071 $ 911,110 $ 873,021 $ 873,021 $ 436,510 $ 442,353 51% $ 5,842 $ 743,500 $ (129,521) Sales tax 1,169,582 1,350,872 1,230,000 1,230,000 615,000 415,052 34% (199,948) 1,230,000 - Property tax 309,827 326,804 311,647 311,647 155,823 186,552 60% 30,729 311,647 - Investment Interest 95,242 113,035 30,000 30,000 15,000 - 0% (15,000) 42,000 12,000 Other revenue (114,738) 13,592 20,771 20,771 10,386 32,501 156% 22,115 35,295 14,524 Total Revenue 2,139,985 2,715,413 2,465,439 - 2,465,439 1,232,719 1,076,457 44% (156,262) 2,362,442 (102,997) Personnel services $ 1,091,157 1,305,340 1,079,985 1,079,985 539,993 702,734 65% 162,741 1,120,975 (40,990) Operations 266,512 969,354 492,094 41,970 534,064 267,032 259,391 49% (7,641) 530,100 3,964 Utilities 354,859 410,100 420,000 420,000 210,000 205,155 49% (4,845) 385,000 35,000 Capital outlay 24,547 93,099 - 9,725 9,725 4,862 2,835 29% (2,027) - 9,725 Repairs & maintenance 56,270 94,114 40,000 26,795 66,795 33,398 5,666 8% (27,731) 66,795 - Insurance 211,248 - - - - - - 15,000 (15,000)
Interest/Debt service * - - - - - - - 144,842 (144,842) Depreciation ** 675,919 700,585 - - - - - - -
Total Expenditures 2,680,511 3,572,592 2,032,080 78,490 2,110,570 1,055,285 1,175,782 56% 120,497 2,262,713 (152,143) Net Revenue/(Expense) $ (540,527) $ (857,179) $ 433,359 $ (78,490) $ 354,869 $ 177,434 $ (99,324) $ (276,759) $ 99,729 (255,140) * Audited results do not include payment of principal which is not an expense in full accrual accounting ** Depreciation Expense is not budgeted and therefore not included in calculation of budget variance

CV STARR ENTERPRISE
The C.V. Starr Center and Parks and Recreation programs continue to demonstrate steady recovery and growth, despite operational challenges experienced during the fiscal year.

In FY 2024–2025 and continuing into the first half of FY 2025–2026, the City made significant investments to address deferred maintenance at the C.V. Starr Center. These improvements included critical upgrades to the HVAC system, skylight repairs, water slide repairs, leisure pool boiler, Ultra violet disinfection system and other facility maintenance projects necessary to ensure long-term functionality and user experience. As part of this work, the pool was closed for more than two months during January and February, which had a direct impact on revenue performance during that period.

Despite these temporary disruptions, the Center has reported strong gains in membership growth. While revenues were partially offset by facility closures, the underlying trend reflects increased community engagement and demand for services. The Center is projected to end the year at $2.3 million, $102k under budget.

City of Fort Bragg
Mid-Year Budget FY 2025/26

Page 17 ends

The City Manager and C.V. Starr Center
staff have made a concerted effort to
increase memberships through enhanced
marketing initiatives, community outreach,
and improved programming. As a result,
both membership revenues and general
admissions have shown a strong
recovery, reaching approximately 61% of
budgeted revenue by the end of the
second quarter.

Additionally, rate adjustments approved by the City Council in the second quarter—effective January 2025— are projected to generate approximately $90,000 in additional revenue for the remainder of the fiscal year, further strengthening the Center’s financial position.

Moving forward, with major maintenance projects largely completed and full facility access restored, the Center is well-positioned to continue rebuilding its membership base, increase program participation, and improve overall cost recovery. Parks and Recreation programming will also play a key role in expanding community engagement and maximizing use of City facilities.

Sales tax revenues allocated to the C.V. Starr Center are performing in line with quarterly budget projections, indicating the Center remains on track to achieve its overall FY 2025–2026 revenue target of approximately $1.2 million.

In addition, property tax allocations are projected to increase by approximately 6% and will be realized in the third quarter, consistent with typical timing. These revenues will provide an important boost to the Center’s financial position and support overall budget stability. Together, these revenue streams reinforce the Center’s improving financial outlook and align with the City’s broader strategy to ensure long-term operational sustainability.

EXPENDITURES
The City has implemented a series of strategic initiatives to enhance operational efficiency and drive membership growth at the C.V. Starr Center. A key step included consolidating fitness class offerings from 70 to 27 classes and temporarily closing the Center on Sundays to improve cost recovery and align programming with demand. Additionally, fitness instructors (excluding those participating in the Silver Sneakers program) have transitioned from employee status to independent contractors, maintaining service quality while improving cost-effectiveness. The City plans to expand class offerings under this revised model in the coming months.

Despite these efforts, the Center continues to face operational challenges, particularly in recruiting qualified lifeguards, with at least four part-time and two full-time positions remaining vacant. These positions are critical to maintaining full operational hours, including weekends and holidays, and ensuring safety standards are met.

Looking ahead, the City is building on its Strategic Plan by formally establishing a dedicated Parks and Recreation Department in July 2025. This effort is intended to bolster and complement the programs offered by the Mendocino Coast Recreation and Park District (MCRPD), while expanding City-led recreation opportunities across Fort Bragg. Key focus areas include activating the new Bainbridge Park, maximizing utilization of the C.V. Starr Center, and expanding youth programs and community events in partnership with the Police Department. As part of this expansion, expenditure increases include the addition of a full-time Parks and 0 1000
2000
3000
Active CVSCC Memberships
Jun-25 Jul-25 Aug-25 Sep-25 Oct-25
Nov-25 Dec-25 Jan-26 Feb-26
City of Fort Bragg
Mid-Year Budget FY 2026

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Recreation Coordinator position to support programming, event activation, and ongoing operations— particularly at Bainbridge Park. A budget amendment of $144,842 is been requested to account for 2025 solar equipment interest that wasn’t included in the current budget.

The C.V. Starr Center delivered a strong financial performance in FY 2024–2025, generating a surplus of approximately $1.2 million and increasing reserves to nearly $2.9 million.

For FY 2025–2026, the Center is projected to end the year with a more modest surplus of approximately $99,000, reflecting ongoing investments in facility improvements, programming, and operations.

The Center has identified approximately $1.6 million in Capital Improvement Program (CIP) needs over the next four years, which is expected to draw down these reserves. In response, the City is actively pursuing grant funding opportunities to offset capital costs and reduce reliance on reserve funds.

Collectively, these efforts reflect a strategic shift toward expanding recreation services, improving cost efficiency, and maximizing the use of City facilities to enhance community quality of life while maintaining longterm financial sustainability.

BROADBAND ENTERPRISE FUND
City of Fort Bragg
Mid-Year Budget FY 2025/26

Page 19 ends

FY 2023/24
Actuals
FY 2024/25
Actuals
Adopted
Budget
Approved Net
Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2025
YTD Actual
12/31/2025
Mid-Year
Variance %
Variance
Budget vs.

Actual
Estimated
Year End
Forecast
Surplus/
(Shortfall)
Charges for services $ - $ - $ 2,317,605 $ 2,317,605 $ 1,158,803 $ 1,333,394 58% $ 174,591 $ 2,256,567 $ (61,038) Other revenue - - - - - 12 12 - -
Total Revenue - - 2,317,605 - 2,317,605 1,158,803 1,333,405 58% 174,603 2,256,567 (61,038) Personnel services - - 988,663 988,663 494,332 475,300 48% (19,032) 872,857 115,806 Operations - - 1,212,402 1,212,402 606,201 565,409 47% (40,792) 1,506,343 (293,941) Utilities - - 116,540 116,540 58,270 6,148 5% (52,122) 12,000 104,540 Repairs & maintenance - - - - - 6,398 6,398 6,400 (6,400) Insurance - - - - - - - - -
Other operating - - - - - 17,838 17,838 30,046 (30,046) Interest/debt Service * - - - - - - - - -
Depreciation ** - - - - - - - - -
Total Expenditures - - 2,317,605 - 2,317,605 1,158,803 1,071,092 46% (87,711) 2,427,646 (110,041) Net Revenue/(Expense) $ - $ - $ - $ - $ - $ 262,313 $ 262,313 $ (171,079) (171,079) * Audited results do not include payment of principal which is not an expense in full accrual accounting ** Depreciation Expense is not budgeted and therefore not included in calculation of budget variance

BROADBAND ENTERPRISE
The City’s Broadband Enterprise represents a major strategic investment aligned with the City Council’s longterm vision to enhance economic development, improve service delivery, and build critical infrastructure for the future. The City is currently constructing a municipally owned fiber-optic network with a total investment of approximately $17.6 million. This initiative supports the City’s Strategic Plan by expanding access to highspeed, reliable internet, fostering business growth, enabling remote work opportunities, and strengthening overall economic competitiveness.

In FY 2024–2025, the City acquired Mendocino Community Network (MCN), with full integration into City operations effective July 1, 2025. To lead this effort, the City Manager appointed a Broadband Director in September 2025, establishing dedicated leadership to guide the transition and long-term success of the utility.

Due to construction delays, the initial rollout of fiber service within City limits is now anticipated in
Summer 2026. In the interim, the Broadband
Enterprise has focused on maintaining and
stabilizing existing MCN services while developing
a comprehensive transition plan for future fiber
customers. The City has also taken key steps to
position the Enterprise for long-term success,
including securing a lease on Elm Street for a new
broadband office, advancing rebranding efforts,
and developing a marketing strategy to support
customer acquisition upon service launch.

During the first two quarters of the fiscal year, the Enterprise has delivered steady and reliable revenue performance while identifying cost-saving opportunities across operations. The largest operational expense remains the resale utility agreement with Sonic. A budget amendment of $362,552 is requested to account for higher-than-anticipated costs associated with maintaining existing service levels. The original budget of $714,000 assumed a phased transition of customers to the City’s fiber network; however, due to construction delays, this transition has not yet occurred, requiring continued reliance on resale services and adjustments to both expenditure and revenue projections.

City of Fort Bragg
Mid-Year Budget FY 2026

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Personnel costs, including salaries and benefits, are currently projected to come in under budget. To support ongoing operations and prepare for future service expansion, the Enterprise is proposing to convert an existing part-time position to full-time.

Looking ahead, Broadband Enterprise is focused on completing construction, launching fiber service, and executing a successful customer transition strategy. This initiative represents a transformative investment in the City’s infrastructure, with long-term benefits including increased local control, improved service reliability, competitive pricing, and enhanced economic development opportunities.

INTERNAL SERVICE: FACILITIES REPAIR & MAINTENANCE
Internal Service Funds-Facilities fund accounts for the maintenance of all City-owned buildings.

City of Fort Bragg
Mid-Year Budget FY 2025/26

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ISF-FACILITIES
The Facilities Internal Service Fund (ISF) is performing in line with budget projections, with both revenues and expenditures tracking as expected through the fiscal year.

Over the past year, the Fund has supported several key facility improvement projects, including the City Hall flooring project, the Town Hall remodel, and improvements to the Police Department lobby, which were co-funded with asset forfeiture funds. These investments have enhanced the functionality, safety, and overall customer experience of key City facilities.

The Facilities ISF continues to play a critical role in maintaining and upgrading City-owned assets by providing a stable and centralized funding mechanism for ongoing maintenance and capital improvements.

INTERNAL SERVICE: INFORMATION TECHNOLOGY
INTERNAL SERVICE: INFORMATION TECHNOLOGY (IT)
Information technology accounts for all activities of the City's computer networks, the costs of which are distributed among user departments using equitable formulas.

FY 2023/24
Actuals
FY 2024/25
Actuals
FY 25/26
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2025
YTD Actual
12/31/2025
Estimated Year
End
Forecast
Surplus/
(Shortfall)
Operating Revenue $ 225 $ 113 $ - $ - $ - $ - $ - $ - $ - Interdepartmental Charges 645,745 530,997 924,371 - 924,371 462,186 - 831,371 (93,000) TOTAL REVENUES 645,970 531,109 924,371 - 924,371 462,186 - 831,371 - Personnel Services 225,196 360,893 328,082 328,082 164,041 174,634 406,995 (78,914) Repairs & Maintenance 1,834 5,357 4,450 4,450 2,225 491 4,450 - Materials & Supplies 340,534 415,582 586,119 755,866 377,933 357,953 818,136 (62,270) Contractual Services 54,526 17,577 55,000 55,000 27,500 - 55,000 - Allocated Overhead - 11,217 - - - - - -
Depreciation 36,015 41,844 - - - - -
TOTAL EXPENDITURES 658,105 852,471 973,651 - 1,143,397 571,699 533,078 1,284,581 (141,184) Net Revenue/(Expense) $ (12,135) $ (321,361) $ (49,280) $ - $ (219,026) $ (109,513) $ (533,078) $ (453,210) (234,184) ISF-IT
INTERNAL SERVICE: FLEET
RNAL SERVICE: FLEET
Fleet and Equipment services account for all activities of the City's central garage operations, the costs of which are distributed among designated user departments using equitable formulas.

City of Fort Bragg
Mid-Year Budget FY 2026

Page 22 ends

The FY 2025 budget includes $133,000 for Police vehicle replacements and $285,000 for Public Works vehicles, consistent with the City’s long-term Vehicle Replacement Plan. Fuel and lubricant costs are projected at $141,000, remaining consistent with the prior year, while a new allocation of $6,000 has been included to support electric vehicle charging infrastructure as part of the City’s gradual transition toward fleet electrification.

Looking ahead, the addition of new street maintenance equipment in FY 2026 may result in increased maintenance and repair costs, and a future budget adjustment may be necessary to account for these operational impacts.

FY 2023/24
Actuals
FY 2024/25
Actuals
FY 25/26
Adopted
Budget
Approved
Net Budget
Amendments
Amended
Budget
Pro Rated
Budget as of
12/31/2025
YTD Actual
12/31/2025
Estimated Year
End
Forecast
Surplus/
(Shortfall)
Interdepartmental Charges $ 642,265 $ 729,116 $ 773,541 $ - $ 773,541 $ 386,771 $ - $ 773,541 $ - Grant Reimbursements - - 500 500 - 500
TOTAL REVENUES 642,265 729,116 773,541 - 773,541 386,771 - 774,041 (500) -
Personnel Services 126,097 398,910 126,716 126,716 63,358 69,768 133,750 (7,034) Repairs & Maintenance 86,716 58,979 59,000 59,000 29,500 43,835 77,000 (18,000) Materials & Supplies 116,854 95,951 124,000 124,000 62,000 35,169 118,000 6,000 Vehicles 8,457 2,873 418,000 348,423 174,211 73,002 358,000 (9,577) Contractual Services 428 1,451 1,400 1,400 700 140 500 900 Allocated Overhead - - - - - - - -
Depreciation 164,086 197,633 - - - -
TOTAL EXPENDITURES 502,640 755,796 729,116 - 659,538 329,769 221,915 687,250 (27,711) Net Revenue/(Expense) $ 139,625 $ (26,681) $ 44,425 $ - $ 114,003 $ 57,001 $ (221,915) $ 86,791 (27,211)

ISF-FLEET
In the third quarter, the City completed the purchase of a dump truck at a total cost of approximately $225,000 and acquired two Ford Mavericks to replace an existing F-150, improving fuel efficiency and operational flexibility.

For Police Department fleet replacements, the City is deferring the purchase of two vehicles originally budgeted in FY 2025. The City is currently evaluating participation in the Enterprise Fleet Management Program, which would transition the City from a traditional purchase model to a leasing-based approach. This strategy is intended to provide greater financial flexibility, stabilize replacement cycles, and reduce large upfront capital expenditures.

City of Fort Bragg
Mid-Year Budget FY 2025/26

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Nationwide, vehicle costs have increased significantly since the COVID-19 pandemic due to ongoing supply chain disruptions, including semiconductor shortages. As a result, vehicle pricing remains elevated, with the average cost of a new vehicle reaching approximately $47,000. These conditions continue to impact fleet replacement planning and procurement strategies.

In alignment with the City’s Fund Balance and Reserve Policy, unrestricted fund balances are utilized to prefund major fleet purchases and repairs. This approach helps smooth capital expenditures over time, reduce volatility in annual budgets, and ensure the City maintains a sustainable and proactive fleet replacement program

BUDGET ADJUSTMENT REQUESTS AT MID-YEAR
Staff is requesting the following budget adjustments at mid-year. Today, the Council will not be asked to take official action on these requests. However, if the Council agrees, Staff will bring the adjustments back at a future Council meeting, where they will be included on the consent calendar for approval.

City of Fort Bragg
Mid-Year Budget FY 2026

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Account
Number Account Description Department
Current
Budget
Budget
Amendment
Request
Adjusted
Budget Justification
Funding
Source

EXPENDITURES
City Council
110-4130-0311 Legal Costs/City Attorney Administration $ 296,380 $ 100,620 $ 397,000 Legal costs GF 110-4130-0317 Recruitment Costs Administration $ 10,000 $ 38,800 $ 48,800 Chief of Police Recruitment, CDD Director GF Finance
110-4150-0101 Salaries & Wages, Benefits Finance $ 412,642 $ (40,101) $ 372,541 Finance Director Vacancy- Professional Services Cost savingsGF Community Development
110-4320-0101 Salaries & Wages, Benefits CDD $ 405,754 $ (122,553) $ 283,201 CDD Director Vacancy Cost savings, offset by Planning Tech transistioning to full-time GF
110-4320-0319 Professional Services CDD $ 130,000 $ (40,000) $ 90,000 4Leaf & Marie Jones Consulting cost savings. GF City Council
110-4110-0315 Election Costs City Council $ 5,000 $ 30,000 $ 35,000 Ballot Measure consideration/polling GF Police Department
110-4200-0101 Salaries & Wages PD $ 2,071,753 $ (121,642) $ 1,950,111 Budget Savings from Unfilled Positions GF 110-4200-0102 Overtime PD 120,000 65,000 $ 185,000 Increase in Overtime Costs, staffing shortages GF 110-4200-0109 Other Pay PD 159,367 99,712 $ 259,079 Severance Payout GF 110-4200-0381 Small Tools & Equipment PD 20,000 80,000 $ 100,000 Annual cost of: 50,000 for Axon (BWC, Taser)
25,000 for Axon ALPR
5,000 for Flock GF
110-4200-0319 Professional Services PD 87,000 20,000 $ 107,000 Outside Investigator (IA) costs GF 110-4200-0383 Utilities PD 7,500 12,500 $ 20,000 Increase in Electric & Propane costs GF Corporation Yard
110-4570-0101 Salaries & Wages, Benefits Corp Yard 396,918 68,213 $ 465,131 New FT Position: Maintenance II, overages from fiscal year. GF
110-4570-0220 Pers Corp Yard 50,739 25,923 $ 76,662 New FT Position: Maintenance II, overages from fiscal year. GF
521-4394-0384 Software Costs Corp Yard/IT 527,052 11,000 $ 538,052 Maintenance Software tracking/tasks recuring for GF Streets Maintenance
110-4520-0381 Streets Equipment Streets 354,023 217,822 $ 571,845 Road Crew Equipment Purchase (Track Loader,
Insulated Asphalt Truck, Equipment Trailer, and Skid
Steer Attachments)
GF
110-4522-0319 Professional Services 86,617 (33,617) $ 53,000 Budget Reduction: Reduction in Professional services. GF 429-7999-0799 Transfer - from Stop Gap Streets CIP-Streets 800,000 (298,162) $ 501,838 Transfer remaining funds from stop gap project back to GF GF 110-7999-7999 Transfer- to the General Fund GF - 298,162 $ 298,162 Transfer remaining funds from stop gap project back to GF GF Non-Department GF
110-4190-0358 Liability Insurance Non-Dept 455,017 14,983 $ 470,000 Increase in Liability Premiums GF 110-4916-0912 Interest Non-Dept 240,555 91,500 $ 332,055 Share of interest - 2025 Solar Equipment Lease / Debt GF Public Works Engineering $ -
110-4330-0310 Engineering PW 96,612 (54,500) $ 42,112 Budget Reduction: Savings in Engineering costs GF $ -
Total General Fund Expenditures $ 6,732,929 $ 463,660 $ 7,196,589 GF Net: $ (463,660)
FY 2025/26 Requested Mid-Year Budget Adjustments

GENERAL FUND
City of Fort Bragg
Mid-Year Budget FY 2025/26

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Account
Number Account Description Department
Current
Budget
Budget
Amendment
Request
Adjusted
Budget Justification
Funding
Source
610-4612-0751 Infrastructure Water Enterprise $ 60,000 $ 35,000 $ 95,000 Raw Water Line piping from pond to wetwell. Operating Appropriation
610-4612-0752 Infrastructure Water Enterprise $ 60,000 $ 30,000 $ 90,000 Rust Repair for Filter Treatment unit #2 Operating Appropriation
651-6006-0731 Water Treatment Plant Water- CIP $ 5,290,344 $ 200,000 $ 5,490,344 Replacing the damaged asphalt around the water plant and corpyard Capital Improvement
610-4612-0381 Equipment Water Enterprise 7,000 175,000 182,000 Sodium hypochlrorite generator that has close to 37,000 hours on it Operating Appropriation
$ 5,417,344 $ 440,000 $ 5,857,344
710-4712-0912 Interest Waste Water $ 185,675 $ 127,321 $ 312,996 Share of interest - 2025 Solar Equipment Lease/ Debt $ 185,675 $ 127,321 $ 312,996
510-5001-0385 Resale Services - Utilities Broadband $ 714,000 333,663 $ 1,047,663 Original budget had fusion declining due to new fiber customers. Since fiber is not yet being installed cost
of existing service to fiber is still high. As fiber rolls out this number will drop. Sonic bills are roughly
70K/Month.
510-5001-0357 Lease Broadband 54,000 34,661 $ 88,661 Lease for new Elm Street Office + Rent MUSD 510-5001-6136 Legacy Fusion (Blended View)
Broadband
$ 851,844 333,663 $ 1,185,507
Increase in Budget Revenue, Broadband is not
going to be Live till the summer
510-5001-6131 BB Internet Serv Rev 1-10 Gbps Broadband 635,340 (635,340) $ - Fiber project delayed- live in summer 2026 510-5001-6132 BB Voice Services (w/911) Broadband 10,397 (10,397) $ - Fiber project delayed- live in summer 2027 510-5001-6133 BB Low Inc Serv Offer 500 Mbps Broadband 38,316 (38,316) $ - Fiber project delayed- live in summer 2028 510-5001-6138 Legacy Open Air Broadband 287,532 104,304 $ 391,836 Fiber project delayed- live in summer 2029 510-5001-6139 Legacy Digital Voice Broadband 194,827 110,671 $ 305,498 Fiber project delayed- live in summer 2030 $ 2,786,256 $ 232,909 $ 3,019,165

REVENUES
810-0000-6125 Facility Passes CV Starr Center $ 747,521 $ (117,521) $ 630,000 Pool facility shutdown for two (2) months Total CV Starr Revenues $ 747,521 $ (117,521) $ 630,000

EXPENDITURES
810-4812-0912 Interest CV Starr Center $ - $ 144,842 $ 144,842 Share of interest - 2025 Solar Equipment Lease / Debt Total CV Starr Expenditures $ - $ 144,842 $ 144,842
336-5507-0731 ARPA Housing Intiatives $ - $ 786,043 $ 786,043 Roll-forward balance to current fiscal year. Encumbered in 24-25 336-5508-0731 ARPA Business Assistance $ 525,480 $ 525,480 Roll-forward balance to current fiscal year. Encumbered in 24-25 336-5509-0731 Technology Upgrades $ 42,098 $ 42,098 Roll-forward balance to current fiscal year. Encumbered in 24-25 336-5510-0731 Public Safety $ 40,000 $ 40,000 Roll-forward balance to current fiscal year. Encumbered in 24-25 $ 1,393,621 $ 1,393,621
521-4394-0384 Licensing, Software & Maint ISF-IT $ 527,052 $ 57,270 $ 584,322 Accela software & consultant cost , Springbrook AI,
Server Maint Subscr
Operating
Appropriation
$ 527,052 $ 57,270 $ 584,322
AMERICA RESCUE ACT FUNDS (336)

WASTEWATER ENTERPRISE
FY 2025/26 Requested Mid-Year Budget Adjustments

WATER ENTERPRISE
INFORMATION TECHNOLOGY - ISF (521)

BROADBAND ENTERPRISE
City of Fort Bragg
Mid-Year Budget FY 2026

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NEW REVENUES

1. FIRE SERVICES FUNDING – PARCEL TAX
Issue
The City currently lacks a dedicated, sustainable funding source for long-term fire apparatus and equipment replacement, creating future risk to service reliability and emergency response capacity.

Background
Fire protection services within Fort Bragg are provided through the Fort Bragg Fire Protection Authority (FBFPA), a Joint Powers Authority between the City of Fort Bragg and the Fort Bragg Rural Fire Protection District, established in FY 1989/90. The FBFPA operates as a separate public entity responsible for fire suppression, prevention, and emergency response services. Funding for FBFPA operations is shared between the City and the Rural Fire District based on a three-year average call ratio, with the City typically bearing a larger share of costs due to higher service demand. The FBFPA is staffed by a Fire Chief, Fire Prevention Officer, Maintenance Engineer, Office Manager, and approximately 29 volunteer firefighters.

A prior $35 per parcel tax, which generated approximately $53,000 annually, expired on December 31, 2024. These funds were historically used to support fire engine and equipment replacement, a critical component of maintaining operational readiness
Option: Reinstatement of Fire Parcel Tax
The City, in coordination with the Rural Fire District, may consider placing a fire parcel tax measure on the November 2026 ballot to reestablish a dedicated funding source.

Key Features:
• Flat parcel tax (e.g., ~$35/parcel or adjusted based on updated needs) • Requires 2/3 voter approval
• Revenues dedicated to:
o Fire engine and apparatus replacement
o Equipment upgrades
o Long-term capital replacement planning
The Fire Chief and City Manager are currently working on an updated 10-year fire apparatus and equipment replacement plan to better define funding needs and inform a potential ballot measure.

Council Direction Requested
Staff is seeking direction on whether to:

1. Proceed with developing a fire parcel tax measure for the November 2026 ballot;

2. Refine funding scenarios based on updated replacement costs; or

3. Explore alternative funding strategies for fire capital needs.

If directed, staff will return with:
• Updated revenue projections and parcel tax options
• Draft expenditure plan tied to apparatus replacement
• Outreach and ballot measure timeline
City of Fort Bragg
Mid-Year Budget FY 2025/26

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Reestablishing a fire parcel tax would provide a stable and dedicated funding source to maintain critical emergency response infrastructure.

2. STORM DRAIN FUNDING CONSIDERATION
Issue
The City lacks a dedicated, sustainable funding source to address aging storm drain infrastructure, ongoing maintenance needs, and state and federal regulatory requirements.

Background
Fort Bragg’s stormwater system has documented deficiencies dating back to the 2004 Master Plan, which identified 55 undersized drainage structures that remain unresolved. These deficiencies, combined with coastal conditions and multiple discharge points, increase the risk of localized flooding, infrastructure failure, and costly emergency repairs.

In addition to infrastructure needs, the City must comply with unfunded MS4/NPDES mandates, which require ongoing activities such as water quality monitoring, system maintenance, and public outreach.

These represent recurring operational costs without a dedicated funding source.

Current Funding Limitations
The City currently relies on a Storm Drain Impact Fee adopted in 2024, which generated approximately $8,276 in FY 2025. These funds are restricted to new development impacts and cannot be used for system-wide maintenance or compliance, creating a structural funding gap.

What Other California Cities Have Done
Cities across California have addressed similar challenges by implementing stormwater utility fees or “clean water” fees:
• City of Palo Alto established a storm drainage enterprise fund and voter-approved monthly fee (approximately $13/month per household) to fund ongoing maintenance, compliance, and capital improvements.
• City of San Leandro updated its stormwater fee to generate approximately $2 million annually for infrastructure upgrades and regulatory compliance, with relatively modest monthly increases to residents.
• City of Berkeley implemented a “Clean Stormwater Fee” through a Proposition 218 process with annual CPI adjustments to ensure long-term sustainability.

City of Fort Bragg
Mid-Year Budget FY 2026

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• City of Davis utilizes a stormwater utility model based on parcel characteristics and impervious surface area to equitably distribute costs.

These examples demonstrate that stormwater utility funding is a widely adopted and legally established model in California to address aging infrastructure and regulatory obligations.

Work Underway
The City is currently developing a Stormwater Asset Management Plan (AMP) to inventory infrastructure, prioritize repairs, and forecast long-term costs. The project is underway, with an estimated cost of $82,566 and anticipated completion in Winter 2026.

Proposed Funding Strategy
Staff is evaluating the creation of a Stormwater Enterprise Utility Fund to provide a dedicated funding source for:
• Regulatory compliance (MS4/NPDES)
• Ongoing operations and maintenance
• Capital improvements and system upgrades
Implementation would require compliance with Proposition 218, including a property owner ballot process and fee structure based on runoff impact. The estimated timeline for development and implementation is 12–18 months.

Council Direction Requested
Staff is seeking City Council direction on whether to:

1. Proceed with development of a Stormwater Utility Funding Strategy (Prop 218 process);

2. Explore a storm drain parcel tax measure (2/3 approval) for a future ballot (e.g., November 2026);

3. Accelerate efforts to advance a funding measure; or

4. Explore alternative funding mechanisms (e.g., bonds).

If directed, staff will return with:
• Detailed infrastructure and cost analysis
• Proposed rate structure options
• Public outreach strategy
• Implementation timeline
Conclusion
A dedicated storm drain funding source is essential to address long-standing infrastructure deficiencies, meet regulatory obligations, and protect public safety. Delaying action will continue to increase financial risk, while peer cities across California have demonstrated that proactive, voter-approved stormwater utilities provide a sustainable path forward.

City of Fort Bragg
Mid-Year Budget FY 2025/26

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The FISCAL YEAR 2026/27 BUDGET PREPARATION
A. BUDGET PREPARATION SCHEDULE
Initial activities related to preparing the Fiscal Year 2026/27 budget are underway. The direction provided today by the Council will be incorporated into the budget draft. Staff will present a draft budget to the Council and the public at a budget workshop in June. The further direction provided at the workshop will be incorporated into a "Final" budget that will be presented to the Council for consideration of adoption in June.

The complete budget calendar is provided below:

B. PRIORITIZED LIST OF FINANCIAL GOALS FOR FY 2026/27 BUDGET DEVELOPMENT Staff used the prioritized list as guidance in preparing the FY2026 budget and will again use the list in preparing the FY 2027 budget unless the Council directs otherwise:
1) Adopt a balanced budget (ongoing revenues should support expenditures. Accordingly, one-time revenues/grants should not be used for ongoing expenditures continuously) 2) Provide additional contributions to the Section 115 Trust to help pay the unfunded liability 3) Maintain operating reserve (20% of operating Exp) and litigation reserve ($200k) 4) Provide additional funding for emergency reserves (10% of Operating Expenditures) 5) Maintain current level of service (no staff layoffs, no program cuts) 6) Provide cost of living adjustments for Staff in years to come 7) Infrastructure Improvements: Streets & Alleys
8) Code Enforcement Policy
9) Department Staffing Needs

Special City CouncilMarch 30, 2026

Special City Council
March 30, 2026