CITY OF GROVER BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 4
Placement: Consent
Meeting Date: December 8, 2025
TO: Honorable Mayor and City Council
FROM: Matthew Bronson, City Manager
PREPARED BY: Nick Szamet, Administrative Services Director SUBJECT: FY 2025-26 First Quarter Financial Review
RECOMMENDATION
Receive and file the FY 2025-26 First Quarter Financial Review.
BACKGROUND
The City Council adopted the budget for FY 2025-26 on June 23, 2025, which includes a General Fund budget of $21.3 million. The adopted General Fund budget assumes revenues and transfers-in of approximately $21.4 million leading to a projected surplus of $61,000 with ending reserves equivalent to 31% of operating expenditures consistent with the Council policy of maintaining at least 25% of operating expenses in reserves. This first quarter report covers revenue and expenditure activity in the beginning of FY 2025-26 from July to September 2025 for both the General Fund and the two Enterprise Funds (Water and Wastewater). This report is provided for financial transparency though staff would note that broader trends are difficult to determine from only the first quarter of the fiscal year.
General Fund
Overall, over the first quarter General Fund revenues are aligned with expectations. The first quarter of the fiscal year is slow to recognize revenues as payments for taxes typically occur at later periods in the fiscal year. Table 1 shows the total revenue for City’s top five General Fund revenue sources compared to first quarter FY 2024-25 (prior year).
Table 1
FY 2025-26 FY 2024-25
Q1 Total Budget Q1 Total Budget
Property Tax 246,127 6,459,000 137,238 5,949,000
Sales Tax 464,006 5,863,000 445,202 6,170,000
Cannabis Tax 122,272 1,070,000 164,342 1,224,000
Transient Occupancy Tax 202,324 1,331,000 323,674 1,186,000 Franchise Fees 88,393 965,000 74,127 947,000
Grand Total 1,123,122 15,688,000 1,144,583 15,476,000
Staff Report: FY 2025-26 First Quarter Financial Review Page 2 December 8, 2025
Property Tax- Property taxes are due November 1 and February 1, therefore property tax revenue collected in the first quarter is minimal. However, property tax revenue overall is approximately $108,000 higher than the first quarter of the prior year given increased property values in the city.
Sales Tax – Sales tax reported in the first quarter is approximately $18,000 higher when compared to the first quarter in the prior year. Sales tax revenue for the first quarter represents revenue collected for one month only (July 2025) as there is a two-month delay in receipt of sales tax.
Cannabis Tax – Cannabis tax collected in the first quarter is slightly lower than last fiscal year by approximately $42,000. However, this is likely due to additional late payments by cannabis retailers or pending accruals of anticipated payments.
Transient Occupancy Tax (TOT) – TOT revenue collected for the first quarter is approximately $121,000 lower than the first quarter of the prior year. However, staff anticipate this gap to be eliminated once pending receipts from hotel operators or STRs are collected and accrued to appropriate accounting period.
Franchise Fees – Franchise fees for the first quarter are $14,266 higher than first quarter in the prior year.
A more detailed estimate of City revenues will be presented with the mid-year budget review and included in the updated five-year financial forecast presented to the Council in February 2026.
Turning to expenditures, departments are on track with an average expenditure of less than 25% by department in the first quarter of the fiscal year. However, the Police Department’s overall rate of expenditure is roughly 30% primarily due to spending nearly 50% of its overtime budget thus far given the level of workload from investigative cases and community activities along with staffing shortages. Staff is working on efforts to manage and minimize overtime expenditures to the degree possible for the remainder of the fiscal year. First quarter expenditures by department are outlined in Table 2 below.
Table 2
Department Expended
Q1
Budget
FY 2025-26 Remaining Percent Remaining
Non-Departmental 1,356,285 8,373,538 7,017,253 84%
City Manager's Office 425,451 1,914,718 1,489,268 78%
Administrative Services Department 126,319 654,826 528,507 81% Community Development Department 230,694 1,322,890 1,092,196 83% Public Works 369,954 1,882,569 1,512,616 80%
Police Department 2,178,707 7,218,564 5,039,857 70%
Total 4,687,409 21,367,105 16,679,697 78%
Water Fund
Water Fund revenues were $575,368 for the first quarter which is in line with expectations for the first quarter. Operating expenditures for the Water Fund are also aligned with expectations with 72% of budget remaining. This funding includes an annual payment for insurance, a semi-annual payment made to the County for the Lopez Lake water contract, and debt service payment for the water revenue bonds. Staff anticipates unbudgeted costs for the City’s share of Lopez Lake litigation costs to be due in the second quarter of the fiscal year. These are passthrough costs for repayment to the County for their legal defense in this federal court case and do not include litigant expenses which are forthcoming and will further strain the Water Fund’s financial position. Staff Staff Report: FY2025-26 First Quarter Financial Page 3
December 8, 2025
Multi-Year Goals
☐ Public Safety and Community Services ☐ Economic Development and Housing ☐ Community Infrastructure ☒ Financial and Organization Sustainability Council Priorities
☐ Water & Wastewater Infrastructure ☐ Community Engagement will provide further information at the midyear budget update along with any recommended actions to preserve the short-term financial position of the Water Fund.
Wastewater Fund
Wastewater Fund revenues for the first quarter are on track as compared with FY 2024-25. Total fund expenditures are within expected range for the first quarter with only 5% expended as of the end of the first quarter. This is most due to major capital projects for the fund which are commencing in the second quarter and will paid for with bond proceeds as approved by Council in September. Operating expenditures, which includes salaries and benefits as well as supplies and services, are on track with 72% of budget remaining as of the end of the first quarter.
FISCAL IMPACT
There are no funding impacts to this staff report.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Receive and file the FY 2025-26 First Quarter Financial Review; or
2. Provide alternative direction to staff
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.