Presentation Agenda Item 2b
STAFF REPORT
Presentation/Discussion Agenda Item
DATE: February 2, 2026
TO: Honorable Mayor and Council Members
FROM: Aaron Felmlee, Finance Director
THRU: Amy Nilsen, City Manager
SUBJECT: FY 2025-26 Mid-Year Budget Review
STAFF RECOMMENDATION:
1. Receive the FY 2025-26 Mid-Year Budget Report; and
2. Review any questions with staff.
EXECUTIVE SUMMARY:
The Finance Department has conducted a mid-year budget review for fiscal year (FY) 2025-26.
The intent of this report and discussion is to review activities for the first half of this fiscal year, in this case July 2025 through December 2025, and provide a revised projection of revenues and expenditures to fiscal year end. The formal submittal of a review during the fiscal year provides an opportunity to identify and present any fiscal problem areas to the City Council, and to recommend corrective action if required.
Mid-year is also a good time to review actual revenues and expenditures for the prior fiscal year.
The General Fund at present will end FY 24-25 with a net deficit of $180,743. The deficit was due to two rollover expenses that were budgeted in FY 23-24 but not spent until FY 24-25. The first was $37,558 for two new building division vehicles and the second was $91,243 for the Monday Club chimney repair project. Additionally, $112,808 for the City Hall Remodel project was approved by a supplemental budget request at the 8-5-24 Council Meeting to come from general fund reserves.
As part of our mid-year budget analysis, staff reviewed every line item of each activity for fiscal year 2025-26. Staff provided estimates within the attached document for where we expect expenditures to finish at June 30, 2026. Staff is estimating having an increase in department operating expenditures of $1.3 million in the General Fund for FY 2025-26. The increase is attributed to the supplemental budget requests that the City Council approved in the amount of $1.5 million for an additional discretionary payment to CalPERS. This payment will result in an estimated $1,247,313 in interest payment savings to the City.
On the revenue side of the mid-year analysis sales tax is estimated to be $10,000 below what was budgeted and come in over 6% below what the City received in fiscal year 2021-22. Investment Presentation Agenda Item 2b
revenue is exceeding expectations and historical trends, and we anticipate receiving an additional $50,000 in investment revenue. Staff were successful in obtaining increased reimbursement from the State for eligible SB90 costs, which are anticipated to come in $29,000 over what was budgeted. Staff will continue to monitor the City’s fiscal health and use these findings to assist in preparing the FY 26-27 budget.
As part of this discussion staff are not recommending making any budget adjustments to the current adopted budget. Any proposed supplemental budget adjustments by staff will come before Council as a separate item for Council consideration and approval.
RECOMMENDED COUNCIL ACTION:
Receive the FY 2025-26 Mid-Year Budget Review; and review questions with staff.
ATTACHMENTS:
A. FY 2025-26 Mid-Year Budget Review