DATE: June 1, 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
Marlene Subhashini, Assistant City/District Manager
FROM: Nate Cruz, Finance Director
SUBJECT: FY 2025-26 THIRD QUARTER FINANCIAL UPDATE
RECOMMENDATION
It is recommended that the City Council, by Minute Order, receive and accept the report on the FY 2025-26 Third Quarter Financial Update.
EXECUTIVE SUMMARY
The third quarter of the year ended with normal results, with revenues and expenses at levels typical to the end of March. As described in more detail below, staff projects a year-end surplus of $7.6 million. This is an increase to the $5.0 million surplus forecast provided in the Second Quarter Financial Update, driven by improvements in the Property Tax, Interest Income, and Permits offset by declines in Sales Tax and Business License Tax.
BACKGROUND & ANALYSIS
The table below summarizes1 General Fund (Funds 001-003) operating results through the third quarter and projected year end results.
1 The table format has changed from the Second Quarter Financial Update to provide more detail on what was previously in the “Other” category, as well as actuals as of the same date the prior year.
Since the second quarter financial update on March 16, 2026, projections were adjusted as follows:
1. Property Tax was increased to align to actuals.
2. Sales and Use taxes were reduced to reflect the most updated projections provided by our tax consultants, primarily driven by reductions in the business-to- business sector.
3. Business License tax is down to align to actuals received during the third quarter (the annual BLT tax is due Jan 1). While the BLT amnesty program has increased revenues in FY25-26, the underlying revenue from prior payers has reduced due to (a) the loss of a single maximum rate taxpayer and (b) reductions in the gross sales reported by several larger payers resulting in lower taxes due.
4. Permit revenue was increased to reflect actuals which have surpassed budget expectations, driven by the Chess/Hatch project.
5. Interest earnings were increased to account for market rates which remain higher than budget assumptions.
Ref
Category Amended
Budget
Actual as of
3/31/26
Actual as of
3/31/25
Projected
Year End $ %
1 Property Tax (incl. ERAF) 39,956,666$ 25,521,448$ 24,617,602$ 41,660,786$ 1,704,120$ 4% Prop. Taxes in Lieu of VLF 2,680,715 2,851,149 3,042,855 4,866,165 2,185,450 82% 2 Sales Tax 3,992,179 2,289,824 2,438,976 3,750,000 (242,179) -6% Transient Occupancy Tax 4,600,000 2,850,666 2,764,407 3,900,000 (700,000) -15% 3 Business License Tax 4,100,000 3,612,101 4,010,827 3,900,000 (200,000) -5% Other Tax (Franchise, RPTT) 1,682,600 837,386 937,279 1,646,690 (35,910) -2% 4 Permits 2,721,093 3,249,871 2,489,750 3,690,000 968,907 36% Charges for Services 2,348,170 1,392,320 1,819,183 2,066,739 (281,431) -12% Rentals 1,579,807 1,095,819 1,215,116 1,579,807 - 0% 5 Interest 1,713,900 1,973,146 1,815,393 2,478,959 765,059 45% Other 724,035 484,544 432,365 629,835 (94,200) -13% Total Revenues 66,099,165 46,158,274 45,583,753 70,168,981 4,069,816 6% 6 Personnel Cost 40,444,777 27,425,099 25,972,879 36,666,799 (3,777,978) -9% Supplies & Other 25,939,916 19,790,832 18,131,049 25,939,916 - 0% Total Expenditures 66,384,693 47,215,931 44,103,928 62,606,715 (3,777,978) -6% Net Revenues (285,528) 7,562,266 7,847,794 * 7 Net Transfers In (Out) (18,844,250) (18,844,250) - 0% Change to Fund Balance (19,129,778) (11,281,984) 7,847,794 * Beginning Fund Balance 71,304,469 71,304,469
Ending Fund Balance 52,174,691 60,022,485
% of Next Year's Expenses 77.4% 89.0%
Minimum Reserve of 50% 33,707,254 33,707,254
Excess (Deficient) Fund Balance 18,467,438 26,315,232 *Indicates variance percentage is not mathmatically meaningful due to the numerator being negative.
FY 2025-26 Variance
6. Personnel Cost is projected using a straight-line methodology, such that the year-end estimate assumes staffing levels through the third quarter remain consistent until the end of the year.
7. Transfers out were reduced to reflect the reduction in the Unfunded Accrued Liability payment to CalPERS from $18.5 million to $13.8.
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