City of Fullerton, CAMay 13, 2025
Budget Study SessionFY 2025-26 Proposed Budget
Budget Study Session Agenda
Budget Process & Timeline
FY 2025-26 Proposed Budget Overview
Proposed General Fund Operating Budget
Proposed All Funds Operating Budget
Proposed Capital Improvement Program (CIP) Budget
Alternative Budget Options
5-Year General Fund Financial Forecast
2 Budget Process & Timeline
Collaborative Budget Process with all Departments
City Council Priorities: Public Safety, Infrastructure and Fiscal & Organizational Stability Cost Containment Strategies
Ad Hoc Fiscal Sustainability Committee
3 FY 2025-26 Proposed Budget Highlights
Proposed All Funds Budget ~ $270.9 million
General Funds, Enterprise Funds, Special Revenues Funds, Internal Services Funds, Capital Improvement Program (CIP) Fund & Successor Agency Proposed General Fund Budget ~ $137.8 million
Public Safety ~ Enhanced Service levels w/ new In-House Ambulance Program, Ambulance Cost Recovery in State (VRRP) Program and Homeless Encampment Safety Services Investment in the Labor Workforce
Continued Key Community Events ~ Fourth of July, First Night & Hunt Library 17% Contingency Reserves projected in FY 2025-26 for 1 additional year.
Proposed Capital Projects/CIP Budget ~ $32.2 million
Proposed All Other Funds Budget ~ $100.9 million
4 General Fund Operating Budget
5 FY 2025-26 Proposed Budget Highlights
Proposed General Fund Budget ~ $137.8 million
Public Safety ~ Enhanced Service levels w/ new In-House Ambulance Program, Ambulance Cost Recovery in State (VRRP) Program and Homeless Encampment Safety Services Investment in the Labor Workforce
Continued Key Community Events ~ Fourth of July, First Night & Hunt Library Continued investment in Community Preservation services levels, including trails, medians and ROW maintenance.
Proposed Budget - Balanced with Ongoing Revenues, Cost Reductions & Use of Reserves Budget reductions of ($7.2 million including holding positions open to achieve savings) Use of $3.95 million of reserves
6 Fiscal Challenges
Expenditures are Outpacing Revenue
Budget impacts from maintaining competitive salaries in region with approved labor agreements Even with Pension reform, Unfunded Actuarial Liability (UAL) remains high due to external factors (i.e., legislation, lowering the discount rate, investment returns, etc.) Uncertain business environment and growing cost of doing business Employee Retention & Service Level Demand
Revenues not growing in line with Expenditures
Aging City Infrastructure
Road Repairs & Street Rehabilitation, Facility Repairs & IT Infrastructure Potential Measure M2 shortfall due to insufficient General Fund MOE funding. 7 FY 2025-26 General Fund Revenues of $137.5 Million
8 $137.5 M
FY 2025-26 General Fund Revenues
General Fund Revenues $137.5 Million – $9.8 million (or 7.7%) increase Property Tax – $62.7 million; $4.6 million increase
Diverse & stable property tax base
Strong assessed valuations & increase in RDA residual property tax receipts Sales Tax – $31.1 million
Relatively Flat growth
Diverse economic sales tax base; but no major increase to keep up w/ expenditures.
TOT – $3.4 million
TOT rate at 10% compared to 10%-15% in surrounding Cities.
Charges for Services – $17.8 million; $2.4 million increase Ambulance Billing Revenue – $3.5 million ($1.8 million net cost increase); Participation in new State VRRP Program to recover unfunded ambulance transport costs.
Other Taxes and Revenues – $22.1 million
9 FY 2025-26 General Fund Expenditures of $137.8 Million 10 FY 2025-26 General Fund Expenditures
General Fund Expenditures $137.8 Million – Increase of $4.9 million (3.7%) from FY 2024-25.
Salaries & Benefits – $6.2 million increase
Salaries & Benefits – Approved Labor Agreements with all Labor Groups CalPERS Pension UAL – $1.9 million increase
Cost Containment Initiatives
With exception of approved agreements & contracts, no operating budget increases to department budgets.
Department 2.5% Vacancy Hold Factor & various operating savings across all Departments Reduced Department contributions’ to Liability and Workers Comp internal services funds.
Budget Recommendations – Continued Service Levels to Community Enhancements to Public Safety ~ New In-House Ambulance Program, improved Ambulance Cost Recovery in State (VRRP) Program and renewal of Operation Clean Streets Continued Investment in Streets Infrastructure and IT Infrastructure 11 FY 2025-26 General Fund Expenditures
General Fund Transfers Out (Non-Operating) $4.5 Million Infrastructure Fund ~ $2.6 million to Infrastructure Fund/Projects $2 million for Streets
$0.6 million for City Facilities and ADA improvements
Streets Improvements ~ $0.5 million additional General Fund contribution IT Infrastructure ~ $1.4 million for critical IT replacement and upgrade projects 12 FY 2025-26 Proposed Budget Additions & Reductions(included in Proposed Budget) 13 FY 2025-26 Proposed Budget Additions & Reductions(included in Proposed Budget) 14 FY 2025-26 Proposed Budget Additions & Reductions(included in Proposed Budget) 15 FY 2025-26 General Fund Financial Position
16 Proposed FY 2025-26 Budget Recap
Proposed FY 25-26 Budget maintains current service levels from prior year, with proposed Budget Recommendations (additions and reductions).
FY 2025-26 Proposed Budget will be balanced with use of ongoing revenues, cost containment efforts & $3.95 million of General Fund reserves Like the State of California and many cities within the State, Fullerton is facing an operating deficit in their General Fund.
Rising expenditure costs (i.e. competitive salaries and UAL pension costs), revenue growth challenges, uncertain business environment & growing cost of doing business Alternative Budget Options for consideration to reduce operating deficit / assist in balancing the operating budget. 17 Alternative Budget Options
18 Alternative Budget Option #1 – Option to Achieve a Balanced Budget (Not included in Proposed Budget) 19 Alternative Budget Option #2 – Re-Instate Fire Engine 6 (Not included in Proposed Budget) 20 Redeploy Fire Engine 6 Plan – Add 12 new FTE Firefighters SAFER Grant – Fire will apply for $5.1 million SAFER grant to support Firefighter personnel costs for 3 years.
If City does not secure SAFER Grant, there will be a $1.7 million cost to the General Fund.
General Fund 5-Year Forecast
21 5-Year General Fund Financial Forecast
22 Fiscal Sustainability Ad Hoc Committee
23 Ad Hoc Committee Recommendations
Minimal Service Level Impact Options:
Issue Pension Obligation Bonds (POBs) – To pay down the City’s UAL obligation and finance debt service.
Issue POBs only if annual savings of $2-$3 million are achieved.
Committee Vote: “No” 4-1 on this option.
Suspend Infrastructure Fund Ordinance – Temporarily suspend Infrastructure Fund No. 3284 / General Fund Allocation earmarked for infrastructure for 1 year or multiple years.
Savings of approximately $2.5 ~ $3.0 million per year
Committee Vote: “No” 5-0 on this option.
24 Ad Hoc Committee Recommendations
Service Level Impacts Option:
Expenditure Reductions – Pursue expenditure reductions by either service areas (i.e. public safety, community services) or across-the-board fixed rate reduction.
Any reductions taken would lead to service level impacts & potential downsizing of organization.
Committee Vote: No formal vote was taken on this option, but Committee agreed to continue exploring expenditure reductions.
Revenue Enhancement Options:
Increase Transient Occupancy Tax (TOT) Rate – Consider Ballot Measure to increase TOT Rate from 10% to 12% or higher.
Additional $400,000 - $600,000 in annual revenue.
Committee Vote: “Yes” 5-0 on this option. And to consider how this impacts other potential ballot measures. 25 Ad Hoc Committee Recommendations
Revenue Enhancement Options:
Add-On Sales Tax Measure Options – Pursue a ‘Dedicated’ or ‘General’ Add-On Sales Tax Ballot Measure at 0.5% or 1% to generate $15 million ~ $30 million in annual revenue.
0.5% Dedicated “Streets/Infrastructure” Add-On Sales Tax Measure: 66.7% or 2/3 Voter Approval Committee Vote: There was no vote taken on this option. 2 Add-On Sales Tax Measures – 0.5% Dedicated for “Streets/Infrastructure” and 0.5% Add-On for Public Safety: 66.7% or 2/3 Voter Approval for each Committee Vote: “Split” 2-2 on this option.
1% Add-On General Sales Tax Measure: 50% +1 Voter Approval Committee Vote: “Split” 2-2 on this option.
26 Ad Hoc Committee Recommendations
Other Budget Consideration Options:
Street Financing Option – Bond Issue that would generate approx. $35 million to invest in Streets’ improvements over 4 years.
Potential loss of Measure M2 funding beginning in FY 28-29.
Committee Vote: “No” 5-0 on this option.
Establish a Business Improvement District (BID) – Establish a BID in Downtown Fullerton Committee Vote: “Yes” 4-0 on this option but option would need to be explored further.
Enhanced Infrastructure Financing District (EIFD) – Establish an EIFD within a specified city boundary to develop and spur economic development.
Committee Vote: “Yes” 4-1 on this option to as a future economic mechanism and not a budget balancing tool. 27 Recommendation
Provide direction on the FY 2025-26 Proposed General Fund Budget.
Provide direction on Budget Alternative Options.
Provide direction on Ad Hoc Fiscal Sustainability Recommendations, including agendizing a future discussion on Revenue Enhancement Options. 28 All Funds Proposed Budget
29 Proposed All Funds Budget ~ $270.9 Million
30 All Funds by Fund Type
FY 25-26
Proposed
General Fund
$137,781,505
Special Revenue Funds
36,542,965
Water Fund (Operating Only)
43,303,509
Other Enterprise Funds (Operating Only)
12,059,701
CIP Program
32,163,535
Successor Agency
9,047,795
All Funds Expenditures Total
$270,899,010
Citywide All Funds Budget - $270.9 Million
General Fund, Enterprise Funds, Special Revenues Funds, Successor Agency & Capital Improvement Program (CIP).
Supported by ongoing revenues, available fund balances and interfund transfers (funds set aside for capital).
Key Enterprise Funds Budget Overview
31 Enterprise Funds
Enterprise Funds are self-sustaining funds that support its ongoing business activities & capital needs with rates or fees.
Major Enterprise Funds including Water Enterprise, Sewer Fund & Airport Funds.
Maintain sufficient Fund Balance to support utility and/or facility infrastructure improvements.
Key Special Revenue Funds Budget Overview
32 Special Revenue Funds
Special Revenue Funds are funds received from imposed fees, legislation or governmental authority earmarked for a special purpose (i.e. street maintenance or repair).
Key Special Revenue Funds: Sanitation Fund, Gas Tax Funds & Measure M2 Fund.
Review of Sanitation Fund.
CIP / Infrastructure Projects
33 FY 2025-26 Proposed CIP Budget
34 CIP Project Category
FY 25-26
Proposed
Street Rehabilitation
$8,150,000
Utility – Water System
16,100,000
Utility - Sewer and Storm Drain Systems
1,450,000
Traffic Systems
4,763,535
City Facilities (Buildings, Accessibility, etc.)
1,150,000
Parks
250,000
Misc. Projects (Sidewalk, PMP, etc.)
300,000
Total Proposed CIP Budget
$32,163,535
CIP / Infrastructure Projects
Street Rehabilitation Planned Projects:
Arterial Projects: Raymond Ave & State College Blvd
Residential: Sunny Hills-Twilight Area, Candlewood Area, Cannon-Shepard Area, Pacific-Wanda-Louise-Walnut Area.
Slurry Seal/Pavement Treatment: Various Streets.
Water Infrastructure Planned Projects:
Water Main Replacement
PFAS, SCADA upgrades, Generators, Advanced Metering
Sewer & Storm Drain Planned Projects:
Miscellaneous Storm Drain Repair and Rehabilitation
Sewer Main Replacements
35 CIP / Infrastructure Projects
Traffic Systems Planned Projects:
Traffic systems upgrades and repairs
Traffic signal synchronization
Street Light conversion
Miscellaneous Infrastructure Projects:
Curb, Gutter and Sidewalk Reconstruction
Pavement Management Plan (PMP) Update
City Facilities Projects:
Various City facilities repairs and renovations
ADA improvements
Bastanchury Greenbelt and Hillcrest Park Valley View Area (Design) 36 Recommendation
Provide direction on FY 2025-26 Proposed Capital Improvements Program Budget & Projects Plan. 37