FY 2025/26 Mid-Year Budget Report
March 3, 2026
Economic Update
FY 2025/26 Budget Update
Preliminary Forecast
Recommended Budget Actions
Summary and FY 2026/27 Budget Schedule
March 3, 2026FY 2025/26 Mid-Year Budget Report 2
National Economy
◦ Economy growing and relatively low unemployment
◦ Short-term interest rates have come down, but mortgage rates remain close to 6%
Local Revenue
◦ Continued high mortgage rates have discouraged property sales and slowed property tax growth
◦ Sales tax revenue is higher than anticipated at mid-year, but may reflect a 1st quarter spike due to tariffs/EV tax credit ◦ Business tax and hotel tax revenue performing well
◦ Charges for services and investment earnings are falling below their budget estimates
March 3, 2026FY 2025/26 Mid-Year Budget Report 3
March 3, 2026FY 2025/26 Mid-Year Budget Report 4
Revenue Category
Dollars in Millions
FY 2024/25
Actual
FY 2025/26
Adopted
FY 2025/26
Estimate
FY 2025/26
Estimate vs.
Prior Year
FY 2025/26
Estimate vs.
Adopted
Property Tax $145.5 $152.8 $ 152.5 4.8% $ -0.3
Sales Tax* 58.1 65.5 68.5 17.9% 3.0
Business Tax 13.1 13.4 14.8 13.0% 1.4
Franchise Fees 13.4 14.2 14.3 6.7% 0.1
Hotel Tax 6.2 6.1 6.5 4.8% 0.4
Charges for Services 8.1 8.2 7.3 -9.9% -0.9
Other 12.7 11.3 11.0 -13.4% -0.3
Revenue Subtotal 257.1 271.5 274.9 6.9% 3.4
Transfers In 6.3 6.8 6.8 7.9% 0.0
Total Resources $263.4 $278.3 $281.7 6.9% $ 3.4
* Sales tax in FY 2024/25 reflects the impact of the State’s recovery of FY 2022/23 overpayments – a reduction of approximately $11.9 million. The FY 2025/26 estimate includes a possible one-time spike of $3.0 million in the first quarter related to tariffs and the expiration of electric vehicle tax credits. Separately, FY 2024/25 and FY 2025/26 include misallocated revenue that could be recovered by the State during FY 2025/26.
Dollars in Millions
FY 2024/25
Actual
FY 2025/26
Adjusted
FY 2025/26
Estimate
Sources of funds
Encumbrance balance $ 1.5 $ 1.0 $ 1.0
Unreserved fund balance 0.0 0.0 0.0
Revenues and transfers in 263.4 278.3 281.7
Total sources of funds 264.9 279.3 282.7
Uses of funds
Expenditures and transfers out 280.7 278.8 281.8
Encumbrance balance 1.0 0.0 0.0
Total uses of funds 281.7 278.8 281.8
Addition to Reserves* -16.8 0.3 0.3
Unreserved fund balance $ 0.0 $ 0.2 $ 0.6
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FY 2025/26 Mid-Year Budget Report
* Addition to reserves in FY 2024/25 shows $19.9 million of the Budget Uncertainty Reserve applied to address the one-time revenue shortfall due to the State’s sales tax recovery (partially offset by a $3.1 million increase to the Contingency Reserve).
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FY 2025/26 Mid-Year Budget Report
General Fund Reserves
Actual
Funding
FY 2025/26
Contingency Reserve
(16.7%* of expenditures and transfers out - address unforeseen events) $46.4 Million Budget Uncertainty Reserve
(Financial risk in 3-year forecast - offset revenue/expenditure uncertainty) 4.3 Million Total Reserves $50.7 Million
Contingency Reserve fully funded for FY 2025/26
Budget Uncertainty Reserve funded at $4.3 million
*GFOA recommended level is no less than two months of regular operating expenditures (16.7%).
March 3, 2026FY 2025/26 Mid-Year Budget Report 7
Dollars in Millions
FY 2024/25
Actual
FY 2025/26
Estimate
FY 2026/27
Projected
FY 2027/28
Projected
FY 2028/29
Projected
Sources of funds
Encumbrance balance $ 1.5 $ 1.0 $ 0.0 $ 0.0 $ 0.0 Unreserved fund balance 0.0 0.0 0.0 0.0 0.0
Revenues and transfers in 263.4 281.7 287.3 298.0 309.8 Total sources of funds 264.9 282.7 287.3 298.0 309.8
Uses of funds
Expenditures and transfers out 280.7 281.8 284.0 286.8 290.7 Encumbrance balance 1.0 0.0 0.0 0.0 0.0
Total uses of funds 281.7 281.8 284.0 286.8 290.7
Addition to Reserves -16.8 0.3 1.0 0.5 0.7
Unreserved fund balance $ 0.0
Projected sources over uses $ 0.6 $ 2.3 $ 10.7 $ 18.4 * As the City’s labor agreements end on June 30, 2026, expenditure projections for FY 2026/27 through 2028/29 do not include employee compensation increases.
Approve adjustments to bring revenue and expenditure savings estimates in line with the current projections
◦ Decrease property tax by $0.3 million
◦ Increase sales tax by $3.0 million
◦ Increase business tax by $1.4 million
◦ Increase franchise fees by $0.1 million
◦ Increase hotel tax by $0.4 million
◦ Decrease charges for services by $0.9 million
◦ Decrease investment earnings by $0.3 million
◦ Decrease expenditure savings by $3.0 million
March 3, 2026 8
FY 2025/26 Mid-Year Budget Report
National economy growing, but continued high mortgage rates discourage property sales
◦ Sales tax, business tax, franchise fee, and hotel tax estimates increased ◦ Property tax, charges for services, and investment earnings estimates reduced
FY 2025/26 mid-year estimate remains balanced
◦ Net increase in revenue offsets lower expenditure savings estimate ◦ Budget Uncertainty Reserve projected to end FY 2025/26 at $4.3 million Preliminary Forecast reflects revenue growth of 2%-4% ◦ Assumes modest growth in economically-sensitive revenues ◦ Forecast does not include compensation increases
Recommendation
◦ Adjust revenue and expenditure savings estimates to reflect current projections
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FY 2025/26 Mid-Year Budget Report
May 12, 2026 Proposed Operating
Budget Presentation
June 2, 2026 First Public Hearing
June 9, 2026 Second Public Hearing
Budget Adoption
10 FY 2025/26 Mid-Year Budget Report March 3, 2026