DATE: March 16, 2026
TO: Mayor and Members of the City Council
President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Nate Cruz, Finance Director
SUBJECT: FY 2025-26 SECOND QUARTER FINANCIAL UPDATE
RECOMMENDATION
It is recommended that the City Council, by Minute Order, receive and accept the report on the FY 2025-26 Second Quarter Financial Update.
EXECUTIVE SUMMARY
The second quarter of the year ended with normal results, with revenues and expenses at levels typical to the end of December. As described in more detail below, staff projects a year-end surplus of $5.0 million, driven by improvements in the Property Tax In-Lieu of VLF and unspent staffing resources, offset by declines in Transient Occupancy Tax.
BACKGROUND & ANALYSIS
The table below summarizes General Fund (Funds 001-003) operating results through the second quarter.
Since the first quarter financial update on January 20, 2026, projections were adjusted as follows:
1. Property Tax In-Lieu of VLF was increased to reflect updated payment calculations received by the County. This is in addition to a $1.5M increase included in the prior quarter to reflect unbudgeted shortfall reimbursement received.
2. Sales and Use taxes were slightly adjusted to reflect the most updated projections provided by our tax consultants.
3. Transient Occupancy Tax was significantly reduced to align to the trend in actual receipts, which is 7% under the prior year (which itself was constrained by one hotel that underwent renovations). Staff is currently researching what is driving this trend.
4. Interest earnings were increased to account for market rates which remain higher than budget assumptions.
5. Personnel Cost is projected using a straight-line methodology, such that the year-end estimate assumes second quarter staffing costs remain consistent through the end of the year.
Ref
Category Amended
Budget
Actual as of
12/31/25
Projected
Year End $ %
Property Tax (incl. ERAF) 39,956,666 $ 21,224,451 $ 39,956,666 $ - $ 0% 1 Prop. Taxes in Lieu of VLF 2,680,715 2,851,149 4,866,165 2,185,450 82% 2 Sales Tax 3,992,179 1,929,459 4,008,179 16,000 0%
3 Transient Occupancy Tax 4,600,000 2,074,683 3,900,000 (700,000) -15% Business License Tax 4,100,000 464,868 4,300,000 200,000 5% Permits 2,721,093 2,609,048 2,721,093 - 0%
4 Interest 1,713,900 1,320,137 2,230,562 516,662 30%
Other 6,334,612 2,820,682 6,334,612 - 0%
Total Revenues 66,099,165 35,294,477 68,317,277 2,218,1123% 5 Personnel Cost 40,482,777 18,714,792 37,429,585 (3,053,192) -8% Supplies & Other 25,901,916 14,721,798 25,901,916 - 0%
Total Expenditures 66,384,693 33,436,590 63,331,501 (3,053,192) -5% Net Revenues (285,528) 4,985,776 5,271,304 *
6 Net Transfers In (Out) (5,000,000) (23,500,000) (18,500,000) 370% Change to Fund Balance (5,285,528) (18,514,224) (13,228,696) * Beginning Fund Balance 71,304,469 71,304,469
Ending Fund Balance66,018,941 52,790,245
% of Next Year's Expenses 97.9% 78.3%
VarianceFY 2025-26
6. Transfers out were increased to include the proposed $18.5 million Unfunded Accrued Liability payment to CalPERS currently being considered by Council.
This report is intended to provide high level financial information for the City Council, City Departments, and the public. See the attachments for more General Fund details and information on other funds.
FISCAL IMPACT
There is no fiscal impact associated with the acceptance of this report.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1 - Changes in Fund Balances
Attachment 2 - Budget vs. Actual and Prior Year’s Revenues Attachment 3 - Budget vs. Actual and Prior Year’s Expenditures