Hesperia City Council
March 3, 2026

FISCAL YEAR 2025-26

MID-YEAR BUDGET REVIEW
March 3, 2026
Attachment 1
2025-26 MID-YEAR BUDGET REVIEW REPORT
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T A B L E O F C O N T E N T S

Page
Executive Summary ............................................................................................................................ 3 Status of FY 2025-26 Budget, Budget Amendments, and Reserves:

General Fund .......................................................................................................................... 5 Water Operations .................................................................................................................... 6 Sewer Operations .............................................................................................................. ..... 7 Streets Maintenance ............................................................................................................... 8 FY 2025-26 December 31, 2025 Year-To-Date Revenue Review:

Major Funds Revenue Summary ........................................................................................... . 9 General Fund Revenues ......................................................................................................... 10 Community Development Block Grant Revenue ..................................................................... 11 Community Development Commission Revenue .................................................................... 12 Hesperia Housing Authority Revenue ..................................................................................... 12 Street Related Funds Revenue ............................................................................................... 13 Other City Funds Revenue .................................................................................................... . 14 Water District Revenue ........................................................................................................... 16 Department FY 2025-26 Budget Expenditure Status Summary ........................................................... 18 Total Expenditures By Department and Program ................................................................................. 18 Proposed Budget Amendments – Summary ........................................................................................ 23 Proposed Budget Amendments – Narrative ......................................................................................... 23 2026-27 Tentative Budget Calendar ............................................................................................. ....... 24

2025-26 MID-YEAR BUDGET REVIEW REPORT
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EXECUTIVE SUMMARY
The following chart compares the FY 2025-26 Budget and December 2025 year-to-date (YTD) revenue and expenditure totals. The percentage comparisons for revenues and expenditures are based on comparing the December 2025 YTD to the FY 2025-26 Amended Budget. The Amended Budget is used to accurately reflect any changes to the adopted budget that occur from City Council approving budget amendments during the first six months of the fiscal year.

Status of Overall City Fiscal Year 2025-26 Budget

 Revenue: Based upon the analysis of the revenue performance through December 2025, the total revenue collected is $49.7 million, which is 35% of the budget, which is typical due to the timing of payments related to some larger revenue sources such as several tax-based revenues, Development Impact Fees, and Capital Improvement Projects. Additional details are provided in the report.

 Expenditures: As referenced in the chart above, expenditures are 37% of the amended budget through December 2025. Operating expenditures are 44% expended, which is typical for the first half of the fiscal year. Non-operating expenditures are 19% expended YTD, which is due to multiple capital improvement projects (CIP) funds that have minimal expenditures through the second quarter and will increase as projects move forward. It should be noted that there are three (3) budget amendments totaling $255,000 included in this report; much of the amendments is related to the allocation of American Rescue Plan Act (ARPA) funds.

 Reserves: The General Fund and Water District (operating and capital) exceed the City Council’s Reserve Policy which established that a minimum of two (2) months of the annual expenditures be held in cash. The following estimated reserve calculations are based on the June 30, 2025 ending cash balances included in the June 30, 2025 audited Annual Comprehensive Financial Report (ACFR). Using the ACFR audited data assures that the estimated reserves are based on actual information. In additi on, the three (3) Mid-Year Budget Amendments, totaling $255,000, are reflected below where appropriate:

*This total includes strategic reserves, such as permanent water rights purchases, as well as the operating funds, contamination mitigation funds, asset rehab funds, and capital funds.

2025-26 2025-26 December Revised %
Budget Revised 2025 YTD Received/Expended
Revenue 142,579,270$ 142,579,270 $ 49,690,263 $ 35% Use of Reserves 15,785,419 18,437,811
Total Resources 158,364,689 161,017,081
Expenditures 138,633,698 145,555,961 53,273,128 37% Difference 19,730,991$ 15,461,120 $
10% Cash Reserves (Council/Board Policy) 5,656,647$ 10% 3,505,455 $ 10% 990,948 $ 10% Cash Reserves Above 10% Reserve 27,178,159 48% 15,669,686 45% 4,404,986 44% Total Estimated Cash Reserves 32,834,806$ 58% 19,175,141 $ 55% 5,395,934 $ 54% Months of Cash 7.0 6.6 6.5
General Fund Water Operating Sewer Operating
2025-26 MID-YEAR BUDGET REVIEW REPORT
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EXECUTIVE SUMMARY (Continued)

Proposed Budget Amendments – 3 Budget Amendments are proposed for $255,000 The FY 2025-26 Mid-Year Budget Review includes three (3) items as proposed budget amendments totaling $255,000.

The proposed budget amendments are included in the fund balance analyses where appropriate:

Revenues and Expenditures through December 31, 2025, for the City’s main funds are summarized as follows:

General Other
Fund Funds Totals

1. 8-Yard Dump Truck-Replacement $ 0 180,000$ 180,000 $

2. Bear Valley Signal Replacement 0 30,000 30,000

3. Traffic Vehicle-Supervisor 0 45,000 45,000 Total Mid-Year Amendment Requests $ 0 $ 255,000 $ 255,000 FY 2025-26 Mid-Year Budget Requests
General Fund Revised Budget December
% of Revised
Received
Amended
Budget December
%
Expended
City Council 1,113,658$ 630,506 $ 57%
City Manager 1,848,405 934,545 51% Management Services 13,222,667 7,513,348 57% Economic Development 431,497 164,519 38% D.S.-Community Development 3,171,597 1,590,207 50% D.S.-Code Compliance 5,991,761 2,606,454 44% D.S.-Public Works (G.F.) 3,045,749 1,118,720 37% Police 24,326,290 9,741,221 40%
Total General Fund 54,428,116 $ 16,448,182 $ 30% 53,151,624 $ 24,299,520 $ 46% Community Development Block Grant 3,853,437 66,808 2% 144,883 31,099 21% Community Development Commission 150,000 34,247 23% 0 0 n/a Hesperia Housing Authority 383,201 74,693 19% 74,304 12,544 17% D.S.-Public Works 27,500 142,004 516% 4,382,518 1,793,058 41% Streets CIP Funds 32,756,543 6,562,634 20% 34,332,591 2,348,469 7% Other City Related Funds 10,322,934 1,989,289 19% 3,227,174 1,931,895 60% D.S.-Water Operating and Capital 33,148,609 20,776,821 63% 37,205,484 15,953,218 43% D.S.-Sewer Operating and Capital 7,418,930 3,474,944 47% 11,077,650 5,007,007 45% Fire District 90,000 120,641 134% 1,959,733 1,896,318 97% Total 142,579,270 $ 49,690,263 $ 35% 145,555,961 $ 53,273,128 $ 37% 2025-26 Revenue 2025-26 Expenditures
2025-26 MID-YEAR BUDGET REVIEW REPORT
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STATUS OF CITY GENERAL FUND 2025-26 BUDGET, BUDGET AMENDMENTS, AND RESERVES

2025-26 2025-26
Budget Revised Dollars Percent

RESOURCES
General Fund Operating Revenue 54,119,714 $ 54,119,714 $ 0 $ 0% ARPA Loss Revenue 308,402 308,402
Transfers In
Fund 255 - AB 3229 COPS Grant 200,000 200,000 Total Transfers In 200,000 200,000
Budgeted Reserves
Budgeted Reserves 350,000 $ 350,000 $
First Quarter Budget Amendment Reserves 0 1,588,352 Mid-Year Budget Amendment Reserves 0 0 Total Budgeted Reserves 350,000 $ 1,938,352 $
Total General Fund Resources 54,978,116 $ 56,566,468 $ 1,588,352 $ 3%

EXPENDITURES
Total General Fund Operating Expenses 51,550,188 $ 51,550,188 $ Transfers Out

1. Fund 210 - HFPD CalPERS 1,959,733 1,959,733

2. Fund 241 - CFD 2021-1 Residential Maint. & Service 2,610 2,610

3. Fund 242 - CFD 2022-1 Non-Residential Maint. & Service 2,610 2,610

4. Fund 242 - CFD 2023-1 Silverwood Maintenance 3,360 3,360 1,446,531 1,446,531
Total Transfers Out 3,414,844 3,414,844
Approved Adjustments to Expenditure Budget
First Quarter Budget Amendments - Approved 0 1,601,436 Total Approved Amendments 0 $ 1,601,436$ Total General Fund Expenditures & Transfers Out 54,965,032 $ 56,566,468 $ Total Recommended Expenditure Budget 54,965,032$ 56,566,468 $ 1,601,436 $ 3% DIFFERENCE TOTAL RESOURCES/TOTAL EXPENDITURES 13,084 $ 0 $ (13,084)$ -100% Fund Balance
July 1 Beginning Balance 48,597,516 $ 55,020,778 $
Total Budgeted Reserves (350,000) (1,938,352) Difference Total Resources/Total Expenditures 13,084 0 Estimated June 30 Ending Fund Balance 48,260,600 $ 53,082,426 $ Months of Cash to Pay Expenditures and Transfers Out
Beginning Cash July 01, 28,509,903 $ 34,773,158 $
Estimated Resources Less Budgeted Reserves 54,628,116 54,628,116 Estimated Expenditures (54,965,032) (56,566,468)
28,172,987$ 32,834,806 $
Months of Cash to Pay Expenditures and Transfers Out 6.2 7.0 Estimated Cash Reserves Percentage 51% 58%
Estimated Ending Cash June 30,
Change

5. Fund 402 - 2012 Water Rights Acquisition Debt Service 2025-26 MID-YEAR BUDGET REVIEW REPORT
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STATUS OF WATER OPERATIONS 2025-26 BUDGET, BUDGET AMENDMENTS, AND RESERVES

2025-26 2025-26
Resources Budget Revised Dollars Percent
Revenue
Water Operations Revenue 29,182,786 $ 29,182,786 $
ARPA 1,833,374 1,833,374
ARPA Carryover Into First Quarter 0 3,760,771 Total Water Operations Revenue 31,016,160$ 34,776,931 $ 3,760,771 $ 12% Reserves
Budgeted Reserves 350,000 $ 350,000 $
First Quarter Budget Amendment Reserves 0 113,040 Mid-Year Budget Amendment Reserves 0 0 Total Budgeted Reserves 350,000 $ 463,040 $
Total Water Operations & Reserves Resources 31,366,160 $ 35,239,971 $ 3,873,811 $ 12% Expenditures by Program
700 4010 Source of Supply 5,068,641 $ 5,068,641 $ 700 4020 Production 5,778,128 5,778,128
700 4030 Water Distribution 1,757,302 1,788,302 700 4035 Water Line Replacement 1,302,323 1,302,323 700 4040 Engineering 1,860,489 1,858,289
700 4050 Customer Service 2,457,742 2,432,742 700 4060 Utility Billing 1,521,567 1,521,567
700 4070 Administration 8,831,812 8,831,812
700 4080 Property Management 510,056 506,256 700 4160 Streets Repair 1,237,564 1,237,564
Capital Maintenance 855,114 855,114
Total Water Operations Expenditures 31,180,738 $ 31,180,738 $ Approved Adjustments to Expenditure Budget

1. First Quarter Budget Amendments - Approved 0 $ 3,873,811$ Total Approved Amendments 0 3,873,811 Total Expenditures and Amendments 31,180,738 $ 35,054,549 $ 3,873,811 $ 12% Difference Total Resources / Total Expenditures 185,422 $ 185,422 $ Fund Balance
July 1 Beginning Balance 85,604,770 $ 97,146,501 $
Budgeted Reserves (350,000) (463,040)
Difference Resources/Expenditures 185,422 185,422 Estimated June 30 Ending Fund Balance 85,440,192 $ 96,868,883 $ 11,428,691 $ 13% Months of Cash to Pay Expenditures and Transfers Out
Beginning Cash July 01, 8,675,859 $ 19,452,759 $
Estimated Resources Less Budgeted Reserves 31,016,160 34,776,931 Estimated Expenditures (31,180,738) (35,054,549) Estimated Ending Cash June 30, 8,511,281 $ 19,175,141 $ 10,663,860 $ 125% Months of Cash to Pay Expenditures and Reserve Balances 3.3 6.6 Total Estimated Cash Reserves Percentage 27% 55%
Change
2025-26 MID-YEAR BUDGET REVIEW REPORT
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STATUS OF SEWER OPERATIONS 2025-26 BUDGET, BUDGET AMENDMENTS, AND RESERVES

2025-26 2025-26
Resources Budget Revised Dollars Percent
Revenue
Sewer Operations Revenue 6,729,977 $ 6,729,977 $
ARPA 114,953 114,953
ARPA Carryover Into First Quarter 0 381,250 Total Sewer Operations Revenue 6,844,930$ 7,226,180 $ 381,250 $ 6% Reserves
Budgeted Reserves 2,683,300 2,683,300
First Quarter Budget Amendment Reserves 0 0 Mid-Year Budget Amendment Reserves 0 0 Total Budgeted Reserves 2,683,300 2,683,300
Total Sewer Operations & Reserves Resources 9,528,230 $ 9,909,480 $ 381,250 $ 4% Expenditures and Transfers
710 4200 Sewer Distribution 6,564,502 $ 6,564,502 $ 710 4240 Sewer Engineering 277,360 277,360
710 4260 Sewer Utility Billing 312,753 312,753 710 4270 Sewer Administration 1,763,615 1,763,615 Fund 711 - Sewer Capital Fund 610,000 610,000 Total Sewer Operations Expenditures 9,528,230 $ 9,528,230 $ 0 $ 0% Approved Adjustments to Expenditure Budget

1. First Quarter Budget Amendments - Approved 0 $ 381,250$ Total Approved Amendments 0 381,250 Total Expenditures and Amendments 9,528,230 $ 9,909,480 $ 381,250 $ 4% Difference Total Resources / Total Expenditures 0 $ 0 $ Fund Balance
July 1 Beginning Balance 14,587,755 $ 21,312,841 $
Budgeted Reserves (2,683,300) (2,683,300)
Difference Resources/Expenditures 0 0 Estimated June 30 Ending Fund Balance 11,904,455 $ 18,629,541 $ 6,725,086 $ 56% Months of Cash to Pay Expenditures and Transfers Out
Beginning Cash July 01, 12,528,184 $ 12,437,816 $
Estimated Resources Less Budgeted Reserves 6,844,930 7,226,180 Estimated Expenditures (9,528,230) (9,909,480) VVWRA Cash Retention - Zone V (3,400,000) (4,358,582) Estimated Ending Cash June 30, 6,444,884 $ 5,395,934 $ (1,048,950) $ -16% Months of Cash to Pay Expenditures and Reserve Balances 8.1 6.5 Total Estimated Cash Reserves Percenta
ge 68% 54%
Change
2025-26 MID-YEAR BUDGET REVIEW REPORT
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STATUS OF STREETS MAINTENANCE FUND 2025-26 BUDGET, FUND BALANCE, AND RESERVES

2025-26 2025-26
RESOURCES Budget Revised Dollars Percent
Street Maintenance Operating Revenue 27,500 $ 27,500 $ Transfers In
Fund 100 - General Fund 0 $ 0 $
Fund 204 - Measure I - Renewal 1,750,000 1,750,000
Fund 205 - Gas Tax Fund 1,400,000 1,400,000
Fund 206 - Gas Tax Swap 669,000 669,000
Fund 207 - Local Transportation Fund 226,883 226,883 Fund 207 - LTF (Vision Zero Sudy) 394,000 394,000 Total Transfers In 4,439,883 4,439,883
Total Revenues 4,467,383 4,467,383
Budgeted Reserves 104,420 104,420
Total Street Maintenance Resources 4,571,803 $ 4,571,803 $ EXPENDITURES 4,382,518 $ 4,382,518 $ 0 $ 0% Mid-Year Budget Amendments - Requested

1. 8-Yard Dump Truck-Replacement 0 $ 180,000$

2. Bear Valley Signal Replacement 0 30,000

3. Traffic Vehicle-Supervisor 0 45,000 Total Mid-Year Budget Amendments - Requested 0 255,000 Total Recommended Expenditure Budget 4,382,518 $ 4,637,518 $ 255,000 $ 6% DIFFERENCE RESOURCES/EXPENDITURES 189,285 $ (65,715) $ Fund Balance
July 1 Beginning Balance 670,162 $ 1,018,185 $
Total Budgeted Reserves (104,420) (104,420)
Difference Resources/Expenditures 189,285 (65,715) Estimated June 30 Ending Balance 755,027 $ 848,050 $ Change
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW

Overall – Through December 2025, total revenue is $49.7 million, or 35% of the total budgeted revenue of $142.6 million. It should be noted that changes in the local, st ate, and national economic environments can impact each of these revenue sources and trends going forward. In this section, discussions will focus on revenue activity through the 2nd quarter of FY 2025-26.

As of December 31, 2025, the General Fund received revenue s of $16.4 million which is 30% of the annual budget.

This is typical as several major revenue sources such as Vehicle License Fees, Franchise Fees, and remaining Sales Tax are received in the second half of the Fiscal Year. Development Related Revenue is trending better than expected as 62% of the FY 2025-26 Budget has been collected as of December 2025 due to an increase in building permit fees.

Besides the General Fund revenue sources just mentioned, the rest of the General Fund revenue sources are currently performing as expected. Development related revenues are at 64%, which is primarily due to the collection of Building Permit Fees for large industrial projects as anticipated for the FY 2025-26 Budget.

Street-related funds revenue is $6.7 mi llion, or 20% of th e $32.8 million budgeted. This grouping of funds includes Street and Storm Drain Development Impact Fees (DIF) and Ci ty Street CIP reimbursements. The collections on these revenue sources can vary depending on the timing of project completion.

The Water District revenue is performing as expected thro ugh December 2025, with 60% of budgeted revenue received to date.

The following pages will detail the current revenue collections for each fund.

December Change From
2025-26 2025-26 Percent 2025-26 Budget To
Budget Actual Received Revised Revised
General Fund 54,428,116 $ 16,448,182 $ 30% 54,428,116 $ 0 $ Community Development Block Grant 3,853,437 66,808 2% 3,853,437 0 Community Development Commission 150,000 34,247 23% 150,000 0 Hesperia Housing Authority 383,201 74,693 19% 383,201 0 Street Related Funds 32,784,043 6,704,638 20% 32,784,043 0 Other City Related Funds 10,412,934 2,109,930 20% 10,412,934 0 Water Operating 31,016,160 15,484,145 50% 31,016,160 0 Water Capital 1,446,860 4,890,293 338% 1,446,860 0 Water Reserves 220,000 189,573 86% 220,000 0 Reclaimed Water 465,589 212,810 46% 465,589 0 Total Water Operating & Capital 33,148,609 20,776,821 63% 33,148,609 0 Sewer Operating 6,844,930 3,139,510 46% 6,844,930 0 Sewer Capital 564,000 332,342 59% 564,000 0 Sewer Reserves 10,000 3,092 31% 10,000 0 Total Sewer Operating & Capital 7,418,930 3,474,944 47% 7,418,930 0 Water District 40,567,539 24,251,765 60% 40,567,539 0 Total All Funds 142,579,270 $ 49,690,263 $ 35% 142,579,270 $ 0 $

MAJOR FUNDS REVENUE SUMMARY
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

General Fund Revenue Comments:

General Fund Revenue – Through December 2025, revenues totaled $16.4 million, or 30% of the budgeted estimate.

Sales and Use Tax – Through December 2025, the City has received $4.8 million, or 35% of the $13.9 million FY 2025-26 Budget. Due to the timing of receiving revenue, the State has remitted tax payments through October 2025.

Tax payments received from this revenue source are trending as expected and will continue to be monitored.

Vehicle License Fee (VLF) – This revenue is based on the City’s assessed valuation of the properties within the City.

As the assessed valuation changes from the prior year, this revenue changes by the same percentage. No revenue was reported through December 2025, as the first installment of the VLF of $7.2 million, or 52% of the budget, was received in January 2026. The second installment is expected to be received in May 2026.

Franchise Fees – Franchise fees for Cable TV, Advance Disposal, Southwest Gas, Southern California Edison, Water, and Article 19 Landfill Fee for December 2025 YTD total $783 ,231, which is a slight decrease from the December 2024 of $800,350 YTD. Franchise Fees received through Decem ber 2025 total 17% of the budgeted amount. Due to the timing of payments received, most franchise fees are received in the second half of the fiscal year.

Transient Occupancy Tax (TOT) – Through December 2025, revenue is $1,040,890, or 69% of the budgeted amount, which is largely due to a payment received from one hotel for delinquent payments. While 33% of the revenue has been collected, there are delays in the timing of monthly receipts. TOT will continue to be monitored as FY 2025-26 progresses.

Secured Property Tax – Through December 2025, YTD revenue is $694,299. This revenue is on track through December 2025, with 53% of the budgeted amount received.

Business License – The City taxes businesses for conducting business within the City. YTD December 2025 collections of $522,815, or 48% of the FY 2025-26 budgeted amount, as collections on new business licenses and license renewals are trending as expected.

December Change From
2025-26 2025-26 Percent 2025-26 B udget To
Budget Actual Received Revised Revised
Sales and Use Tax 13,901,174 $ 4,813,966 $ 35% 13,901,174 $ 0 $ Vehicle License Fee (VLF) 13,829,850 0 0% 13,829,850 0 Franchise Fees 4,607,921 783,231 17% 4,607,921 0 Sub-Total Top Three Revenues 32,338,945 5,597,197 17% 32,338,945 0 General & Administrative Recovery 5,302,870 2,651,435 50% 5,302,870 0 Transient Occupancy Tax 1,517,200 1,040,890 69% 1,517,200 0 Secured Property Tax 1,308,124 694,299 53% 1,308,124 0 Business License 1,094,000 522,815 48% 1,094,000 0 Community Facilities District 2005-1 409,995 0 0% 409,995 0 Leased Water Rights 1,946,255 0 0% 1,946,255 0 Development Related Revenues
Planning 603,595 347,718 58% 603,595 0 Building & Safety 3,014,164 2,373,097 79% 3,014,164 0 Engineering 1,760,460 704,868 40% 1,760,460 0 Sub-Total Development Related Revenues 5,378,219 3,425,682 64% 5,378,219 0 Sub-Total Top 10 Revenue Sources 49,295,608 13,932,318 28% 49,295,608 0 All Other General Fund Revenues 5,132,508 2,515,864 49% 5,132,508 0 Total General Fund Revenues 54, 428,116$ 16,448,182 $ 30% 54,428,116 $ 0 $

GENERAL FUND REVENUES
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

General Fund Revenue Comments (Continued):

Community Facilities District 2005-1 – This special assessment district (generally west of Maple Avenue and south of Main Street) was formed to refinance the bonds of CFD 91-3 and assess the properties within the district to repay the bonds. The annual assessment includes a public safety po rtion to offset some of the residential development costs for the City’s public safety providers. Under the refinance agr eement, the revenue will be received at fiscal year-end and recorded in June 2026.

Leased Water Rights – The permanent water rights owned by the General Fund can be leased annually and the lease revenue is used to pay for the 2012 Bonds, which financed the purchase of the water rights. The leasing of water rights revenue is collected at the end of the year and will be recorded in June 2026.

Development Related Revenue – This revenue source accounts primarily for one-time development-related fees such as Planning, Building and Safety, and Engineering. Over all, the FY 2025-26 revenue through December 2025 of $3.4 million represents 64% of the budget. Planning revenues are 58% collected through December 2025, mainly due to fees collected from a new 1,061,780 square foot warehouse. Building & Safety revenues collected are currently at 79% of the budget, primarily due to the collection of Building Pe rmit Fees from the 642,839 square foot Shell Warehouse, Kiss Logistics, and other single-family residential, multi-family residential, commercial, and industrial projects.

Engineering revenue is at 40% collected through December 2025, which is trending as expected.

All Other General Fund Revenue – All other general fund revenue accounts are $2.5 million or 45% collected through December 2025. This source of revenue is primarily made up of Administrative Fines, Motor Vehicle In-Lieu Tax, and Interest Income.

Community Development Block Grant Revenue Comments:

These revenues are grant reimbursements that promote econom ic and housing development and rehabilitation projects, emphasizing activities that create jobs, build or enhance infrastructure, and provide affordable housing to Hesperia residents. This grant must be spent before submitting for reimbursement. The FY 2025-26 Budget revenue estimates the anticipated reimbursements that are primarily expected to be received during the third and fourth quarters of the fiscal year.

All Other CDBG Revenues – This revenue includes CDBG program income and interest revenue for the HOME Grant fund and the CDBG Revolving Loan fund. These revenues are more one-time in nature and are not received on a schedule as other revenue typically is. December 2025 YTD revenue of $11,495 consists of loan repayments related to the 1999 HOME repayment program and interest income.

December Change From
2025-26 2025-26 Percent 2025-26 Budget To
Budget Actual Received Revised Revised
CDBG Administration Reimbursement 3,749,606 $ 55,313 $ 1% 3,749,606 $ 0 $ All Other CDBG Revenues 103,831 11,495 11% 103,831 0 Total CDBG Revenues 3,853,437 $ 66,808 $ 2% 3,853,437 $ 0 $

COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) REVENUE
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

Community Development Commission (CDC) Revenue Comments:

The Community Development Commission revenue reflects the interest income earned through December 2025.

Hesperia Housing Authority (HHA) Revenue Comments:

This program was developed to promote projects that improve the City’s housing stock and provide affordable housing opportunities. The budgeted revenues primarily consist of loan repayments and interest income. Loan repayments are typically received in the fourth quarter of the fiscal year.

December Change From
2025-26 2025-26 Percent 2025-26 Budget To
Budget Actual Received Revised Revised
Interest Income 150,000 $ 34,247 $ 23% 150,000 $ 0 $ Total CDC Revenues 150,000 $ 34,247 $ 23% 150,000 $ 0 $

COMMUNITY DEVELOPMENT COMMISSION (CDC) REVENUE
December Change From
2025-26 2025-26 Percent 2025-26 Budget To
Budget Actual Received Revised Revised
Interest Income 200,000 $ 55,739 $ 28% 200,000 $ 0 $ Loan Repayments 93,701 0 0% 93,701 0 Miscellaneous Income 1,500 0 0% 1,500 0 Sub-Total HHA Revenue 295,201 55,739 19% 295,201 0 VVEDA Housing Authority Revenue 88,000 18,954 22% 88,000 0 Total HHA Revenues 383,201 $ 74,693 $ 19% 383,201 $ 0 $

HESPERIA HOUSING AUTHORITY ( HHA) REVENUE
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

Street Related Funds Revenue Comments:

Measure I - Renewal – This fund accounts for the renewed Measure I sales tax based on revenue generated from the ½ cent added tax on sales tax and interest received on cash balances. Measure I Renewal is obtained from the San Bernardino County Transportation Authority (SBCTA). Thro ugh December 2025, a total of $1,197,725 from three (3) monthly payments has been collected, which is $139,334 or 13% more than the December 2024 total of $1,058,391. As of now, there are no revisions to this revenue source.

Gas Tax – Monthly apportionments are received throughout the fiscal year and can vary yearly due to timing differences in the State schedule of monthly apportionments. The City’s apportionments through December 2025 total $656,507 from four (4) monthly apportionments. FY 2025-26 revenue is at 33% obtained, with remittances trending as initially budgeted.

Gas Tax Swap – Through December 2025, revenue of $384,121 from four (4) apportionments has been collected.

Interest revenue is also received on cash balances. This budgeted revenue source is 40%, with apportionments being received as expected.

Local Transportation – The County ¼ cent sales tax has funded this revenue source, and the primary use of this revenue is transportation-related, including supporting operati ons of the Victor Valley Transit Authority (VVTA). This revenue source is no longer expected to be received due to the allocation being fully utilized by VVTA for transit purposes, as decided by VVTA in April 2022. The $13,328, or 18% budgeted for FY 2025-26 in revenue reflects the interest income received through December 2025.

Gas Tax RMRA – This source of revenue, which is mainly State-funded and took effect in November 2017, can be used for street and road-related maintenance and rehabilitation projects. SB 1, the Road Repair and Accountability Act of 2017, increased the gas tax by 12 cents and 20 cents for diesel . The vehicle registration fee also increased depending on the value of the vehicle. As of December 2025, reve nue received from the State is $1,033,483 or 38% of the budgeted amount, an increase of $41,481 or 4% compared to t he December 2024 total of $992,002. Interest revenue is also received on cash balances. This increase was anticipated and is reflected in the FY 2025-26 Budget.

December Change From
2025-26 2025-26 Percent 2025-26 Budget To
Budget Actual Received Revised Revised
204 Measure I - Renewal 4,095,000 $ 1,197,725 $ 29% 4,095,000 $ 0 $ 205 Gas Tax Fund 1,964,229 656,507 33% 1,964,229 0 206 Gas Tax Swap Fund 960,824 384,121 40% 960,824 0 207 Local Transportation Fund 72,951 13,328 18% 72,951 0 209 Gas Tax - RMRA 2,745,961 1,033,483 38% 2,745,961 0 254 AQMD Fund 900 235 26% 900 0 263 Public Works Street Maintenance Fund 27,500 142,004 516% 27,500 0 Sub-Total 9,867,365 3,427,403 35% 9,867,365 0 DIF Streets & Storm Drain
300 Development Impact Fee-Streets 17,000 26,223 154% 17,000 0 301 Development Impact Fee-Storm Drain 76,590 28,548 37% 76,590 0 306 Development Impact Fee 2018-Streets 14,513,817 2,717,691 19% 14,513,817 0 307 Development Impact Fee 2018-Drainage Facilities 3,511,023 491,453 14% 3,511,023 0 313 Development Impact Fee-A-04 Drainage 50,000 5,352 11% 50,000 0 Sub-Total DIF Streets & Storm Drain 18,168,430 3,269,267 18% 18,168,430 0 504 City Streets CIP 4,748,248 7,968 0% 4,748,248 0 Total Street Related Funds 32,784,043 $ 6,704,638 $ 20% 32,784,043 $ 0 $

STREET RELATED FUNDS REVENUE
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

Streets Related Funds Revenue Comments (Continued):

AQMD (AB2766 Transit) – The revenue in this fund is interest earnings from retained cash.

Public Works-Street Maintenance – The FY 2025-26 budgeted revenues are primarily interest earnings. This fund will occasionally receive miscellaneous reimbursements on an inconsistent basis. The revenue received YTD of $142,004 primarily consists of $128,506 in reimbursements from the Federal Emergency Management Agency (FEMA) for the 2023 Winter Storm Event for labor and equipment costs associated with the debris removal throughout the City. Other revenue collected includes interest earnings and proceeds from the sale of equipment.

Development Impact Fees for Streets and Storm Drain – Through December 2025 YTD, the combined revenue of $3.3 million is 18% of the annual budget of $18.2 million. T he FY 2025-26 Budget of $18.2 million consists of several industrial projects such as Pixior Wa rehouse, Hesperia Commerce Center II, and the New Castle Warehouse. The collection on this revenue source can vary depending on the timing of the completion of projects and will continue to be monitored as projects near completion.

City Streets CIP – This fund tracks grant and developer-funded projec ts such as the Ranchero Road Improvements, a Traffic Signal at Main Street and Sultana Street/Timberlane Avenue, Walnut Street H-01 Retention Basin, and the Maple Ave Street Improvement project. Reimbursements from the San Bernardino County Transit Authority (SBCTA) and other related grants are anticipated to be received by the end of FY 2025-26.

Other City Funds Revenue Comments: Many of these funds only receive interest income during the fiscal year.

Pension Obligation Trust and OPEB Trust – These Section 115 Trust funds were established to manage and mitigate the liabilities resulting from other post-employment benefits and unfunded pension liability. The revenue in these funds reflects greater than anticipated investment interest income and gain/losses from investments.

December Change From
2025-26 2025-26 Percent 2025-26 Budget To
Budget Actual Received Revised Revised
105 Pension Obligation Trust 50,000 $ 362,751 $ 726% 50,000 $ 0 $ 106 OPEB Trust 0 70,332 n/a 0 0 110 Silverwood 495,400 92,369 19% 495,400 0 210 HFPD (PERS) Interest Income 90,000 120,641 134% 90,000 0 230 Public Art 9,056 2,397 26% 9,056 0 241 CFD 2021-1 Resid Maint. & Serv 0 28 n/a 0 0 242 CFD 2022-1 Non-Resd Maint & Serv 0 439,785 n/a 0 0 243 CFD 2023-1 Silverwood Maint 0 30,752 n/a 0 0 255 AB3229 Supplemental Law Fund 315,500 225,601 72% 315,500 0 256 Environmental Programs Grant 95,710 34,416 36% 95,710 0 260 Disaster Preparedness Grant 1,500 569 38% 1,500 0 261 American Rescue Plan Act Grant 2,256,728 60,806 3% 2,256,728 0 262 SB 1383 Local Assistance Grant 117,734 2,188 2% 117,734 0 DIFs 302, 303, 308-312
302 Development Impact Fee-Fire 50,000 14,372 29% 50,000 0 303 Development Impact Fee-Police 250 64 25% 250 0 308 Development Impact Fee 2018-Fire Suppression 3,413,891 283,580 8% 3,413,891 0 309 Development Impact Fee 2018-City Hall Facilities 3,090,332 211,983 7% 3,090,332 0 310 Development Impact Fee 2018-Animal Control 84,278 83,853 99% 84,278 0 311 Development Impact Fee 2018-Records Storage 153,408 11,642 8% 153,408 0 312 Development Impact Fee 2018-Police Facilities 59,147 4,381 7% 59,147 0 Sub-Total DIFs 302-304, 308-312 6,851,306 609,875 9% 6,851,306 0 402 2012 Water Rights Debt Service 80,000 40,146 50% 80,000 0 404 2023 Refunding Lease Revenue Bonds 50,000 17,274 35% 50,000 0 Total Other City Funds 10,412,934 $ 2,109,930 $ 20% 10,412,934 $ 0 $

OTHER CITY FUNDS REVENUE
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

Other City Funds Revenue Comments (Continued):

Silverwood – The revenue received in this fund is from reimbursements received for City costs incurred related to the Silverwood project. Through December 2025, $92,369 has been received.

HFPD (PERS) Interest Income – This revenue is comprised of investment income and fair market value adjustments related to funds held for the CalPERS obligations of the former Hesperia Fire Protection District personnel.

Public Art – This fund is to manage revenue received by the City to be utilized towards public art displays. The revenue received as of December 2025 consists of interest income.

Community Facilities District (CFD) Funds – As development occurs and parcels annex into these districts, the primary source of revenue will come from special taxes, whic h will fund district expenditures. Through December 2025, revenue encompasses minor investment ea rnings on initial deposits made by the General Fund to begin district operations and special property taxes to fund for the City’s services in these newly constructed industrial and residential areas. This revenue source is trending higher than expected due to the City receiving the first remittance from the collection of the CFD 2022-1 and CFD 2023-1 Special Property Taxes.

AB3229 Supplemental Law Fund – The passage of Senate Bill (SB) 89 allo wed for the continued funding of the Supplemental Law Enforcement Fund (SLESF). Through Dece mber 2025, $225,601, or 72% of the budgeted revenue, has been received as expected.

Environmental Programs Grant – This fund tracks grant reimbursements fo r various environmental events. Through December 2025 YTD, $34,416, or 36% has been received. Reimbursements are received mainly later in the fiscal year.

Disaster Preparedness Grant – The revenue in this fund is interest earnings from retained cash.

American Rescue Plan Act (ARPA) Grant – Coronavirus State and Local Fiscal Recovery Funds – This revenue is the Coronavirus State and Local Fiscal Recovery Funds related to the American Rescue Plan Act of 2022 that was established to provide Federal funding to support public health expenditures, invest in infrastructure, provide premium pay for essential workers, and address negative financial im pacts caused by the COVID-19 public health emergency.

The revenue received through December 2025 of $60,806 consists of interest income.

SB 1383 Local Assistance Grant – This fund tracks the grant funds related to Senate Bill 1383 to reduce organic waste. The revenue from this fund consists of investment income.

Development Impact Fees-Fire, Police, Public Services , City Hall, Animal Control, and Records Storage – At the halfway mark of the fiscal year, a tota l of $609,875, or 9% of budgeted reve nue, has been received for this revenue group due to the timing of when projects are completed. The revenue received through December 2025 is primarily due to collections from single-family residential projects from K Hovnanian, Richmond American and the Silverwood Development Project, which were anticipated in the FY 2025-26 Budget. Development Impact Fees as a whole are trending lower than expected due to the timing of completion of several industrial projects. This revenue source will continue to be monitored as ongoing development projects are near completion.

2012 Water Rights and 2013 Refunding Debt Servi ce, and 2023 Refunding L ease Revenue Bonds – The revenue in these funds is interest earnings from cash held with the fiscal agent.

2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

Water District Revenue Comments:

Effective August 1, 2022, the Hesperia Water District beg an applying liens to properties with outstanding water bills.

Failure to pay within 60 days from the original bill due date results in the Water District mailing the tenant and property owner a notice of lien. If the bill remains outstanding after an additional 10 days, the Water District will apply a lien on the property. During May of each year, all outstanding property liens will be converted to property tax liens. By doing so, the County will collect outstanding balances as part of property tax collections during the following year. For FY 2025-26 as of December 31, 2025, the Water District collected $227,697 of the $468,225 placed on the tax roll this Fiscal Year, representing collections from the first of two- property tax installment due dates. The Water District is utilizing such liens in lieu of water disconnections and traditional collection services as the primary mechanism for collections.

Overall Water District Revenue – Revenue through December 2025 is $24.3 million. Water District revenue is progressing slightly better than anticipated, with 60% of the budgeted amount received. This is primarily attributed to a lump sum payment of nearly $3.5 million for water connection fees received for the Silverwood Development Project.

Water Sales – Water sales through the second quarter of FY 2025-26 are $13.8 million and primarily consist of a slight decrease in water consumption from the same period in FY 2024-25. Through December 2025, Water Sales Residential of $4,105,261 is $257,619 less than the $4,362,880 collected through December 2024. In addition, Water Sales Construction of $222,458 through December 2025, is $79,548 less than the $302,006 collected through December 2024, which is mostly due to the timing of industrial projects. Water sales have been collected at 54% of the budget and is currently slightly below expectations through December 2025 but will continue to be monitored as the Fiscal Year progresses.

December Change From
2025-26 2025-26 Percent 2025-26 B udget To
Budget Actual Received Revised Revised
Water Operating Revenue
Water Sales 25,550,247 $ 13,843,894 $ 54% 25,550,247 $ 0 $ Interest Income 600,000 131,282 22% 600,000 0 Property Taxes 793,820 405,142 51% 793,820 0 Sub-Total 26,944,067 14,380,318 53% 26,944,067 0 All Other Water Operating Revenues 4,072,093 1,103,827 27% 4,072,093 0 Total Water Operating Revenues 31,016,160 $ 15,484,145 $ 50% 31,016,160 $ 0 $ Capital Facilities Charges 1,396,860 4,805,122 344% 1,396,860 0 All Other Capital Facilities Revenues 50,000 85,171 170% 50,000 0 Total Water Capital Revenues 1,446,860 4,890,293 338% 1,446,860 0 Reclaimed Water 465,589 212,810 46% 465,589 0 All Other Water Reserves Revenues 220,000 189,573 86% 220,000 0 Total Water Operating & Capital Revenues 33,148,609$ 20,776,821 $ 63% 33,148,609 $ 0 $ Sewer Operating Revenue
Sewer Billing 5,868,527 $ 2,961,286 $ 50% 5,868,527 $ 0 $ All Other Sewer Operating Revenues 976,403 178,225 18% 976,403 0 Total Sewer Operating Revenue 6,844,930 3,139,510 46% 6,844,930 0 Sewer Connections 500,000 318,293 64% 500,000 0 All Other Sewer Capital Revenues 64,000 14,049 22% 64,000 0 Total Sewer Capital Revenue 564,000 332,342 59% 564,000 0 All Other Sewer Reserves Revenues 10,000 3,092 31% 10,000 0 Total Sewer Operating & Capital Revenues 7,418,930$ 3,474,944 $ 47% 7,418,930 $ 0 $ Total Hesperia Water District Revenue 40,567,539 $ 24,251,765 $ 60% 40,567,539 $ 0 $

WATER DISTRICT REVENUE
2025-26 MID-YEAR BUDGET REVIEW REPORT
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FISCAL YEAR 2025-26 DECEMBER 31, 2025 YEAR-TO-DATE REVENUE REVIEW (Continued)

Water District Revenue Comments (Continued):

Property Taxes – Property tax revenue is typically received from November 2025 through July 2026. Through December 2025, the YTD of $405,142 is $7,058 or 1.7% less than the December 2024 YTD of $412,200. Overall, Property tax revenue is on track at mid-year, with 51% of the budgeted amount received.

All Other Water Operating Revenue – Through December 2025, total revenue collected is $1,103,827, 17.8% less than December 2024 YTD of $1,344,088. This decrease is primarily due to a decrease of $172,816 in revenue collected from the County of San Bernardino for delinquent accounts that were placed on the tax roll. Revenue through December 2025 is 27% of the original budget.

Capital Facilities Surcharge – Revenue through December 2025 YTD is $4,805,122, 344% of the budgeted amount to date. The revenue received through the second quarter of 2025 primarily included a substantial one-time payment of $3.5 million for water connection fees of 625 homes as part of the Silverwood Development Project.

Reclaimed Water – Current Reclaimed Water customers are the Golf Course, Hesperia Township (NW corner of 5 th & Smoke Tree) and Hesperia Community Park. As of December 31, 2025, the Water District has collected $212,810, or 46% of budget.

Sewer Billing – Revenue through December 2025 is $3.0 million and is associated with sewer residential and commercial customers connected to the sewer system. Revenue received through December 2025 is 50% of the budgeted amount and is trending as expected.

Sewer Connections – Revenue through the second quarter of FY 2025-26 is $318,293, or 64% of the budget. This revenue is driven by the completion of development projects in areas served by Sewer. This budget revenue will continue to be monitored in the second half of the Fiscal Year as ongoing development projects progress. The revenue is trending higher than predicted as of December 2025 bec ause of the development of many Single-Family Residential homes by Lennar and K Hovnanian requiring sewer connections to the City.

Investment Income – This revenue source reflects the activity of the cash investments of the City for the various funds.

The cash investments are held with the Local Agency Investment Fund (LAIF), which regularly earns interest income based on the LAIF interest rates. The FY 2025-26 Budget estimated an interest rate of 4.0%. The interest income received through December 2025 reflected a slightly higher interest rate of 4.1%. Additionally, valuation adjustments are recorded based on the market value of the City’s investments at the end of the Fiscal Year. The investment income revenue of the various City funds is anticipated to comfor tably meet the FY 2025-26 Budget once the market valuation adjustments are completed at the end of the Fiscal Year as the fair market value of the securities have been appreciating more than anticipated throughout FY 2025-26 thus far.

2025-26 2025-26 Percent
Budget December Received
General Fund 1,090,632 $ 350,512 $ 32%
Community Development Block Grant 93,831 7,595 8% Community Development Commissio n 150,000 34,247 23% Hesperia Housing Authority 288,000 74,693 26% Street Related Funds 1,352,441 580,300 43% Other City Related Funds 566,806 760,677 134% Water District 944,000 362,527 38% Total 4,485,710 $ 2,170,551 $ 48%
Investment Income
2025-26 MID-YEAR BUDGET REVIEW REPORT
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DEPARTMENT FY 2025-26 BUDGET EXPENDITURE STATUS SUMMARY

Total City Expenditures – With the exception of the three (3) mid-year budget amendments totaling $255,000 the overall assessment of the City’s expenditures through mid-year of the fiscal year is that expenditures are expected to stay within the FY 2025-26 Amended Budget.

TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS

The City Council Department is 57% expended through Decem ber 2025. The City Council Division has expended 41% due to budgeted items typically expended later during the fiscal year, such as annual memberships, conferences, seminars, community outreach programs, and events. The City Attorney Division has expended 66% due to ongoing legal fees pertaining to litigation matters.

The City Manager Department expenditures are on track, staying within the 2025-26 Budget at 51% expended.

December Amended
2025-26 2025-26 2025 YTD Percent
Expenditure Summary Budget Amended Expenditures Expended City Council 1,113,658 $ 1,113,658 $ 630,506 $ 57% City Manager 1,834,107 1,848,405 934,545 51% Management Services 13,017,822 13,222,667 7,513,348 57% Development Services - Community Development 3,169,097 3,171,597 1,590,207 50% Development Services - Code Compliance 5,993,461 5,991,761 2,606,454 44% Development Services - Public Works 7,483,674 7,428,267 2,911,778 39% Development Services - Water 30,619,559 34,477,987 15,020,471 44% Development Services - Sewer 8,918,230 9,299,480 3,899,241 42% Police 22,889,390 24,326,290 9,741,221 40% Sub-Total Operating 95,038,998 100,880,112 44,847,772 44% Economic Development 650,684 650,684 208,162 32% Streets Capital Improvement Project (CIP) Funds 34,238,591 34,332,591 2,348,469 7% Water Capital 1,855,114 2,727,497 932,747 34% Sewer Capital 1,778,170 1,778,170 1,107,766 62% Other City Related Funds 3,112,408 3,227,174 1,931,895 60% Fire District 1,959,733 1,959,733 1,896,318 97% Sub-Total Others 43,594,700 44,675,849 8,425,356 19% TOTAL CITY EXPENDITURES 138,633,698 $ 145,555,961 $ 53,273,128 $ 37% December Amended
2025-26 2025-26 2025 YTD Percent
City Council Budget Amended Expenditures Expended
100 100 City Council 413,658 $ 413,658 $ 168,234 $ 41% 100 102 City Attorney 700,000 700,000 462,272 66% Total City Council 1,113,658 $ 1,113,658 $ 630,506 $ 57% December Amended
2025-26 2025-26 2025 YTD Percent
Budget Amended Expenditures Expended
City Manager 1,834,107 $ 1,848,405 $ 934,545 $ 51% 2025-26 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

The Management Services Department is currently at 57% expended. Finance is 51% expended, while Information Technology is 44% expended, and both are proceeding as planned. During the November 18, 2025 First Quarter Budget Review, the budget was amended to include $164,356 for software licensing and support renewal. The Human Resources Division is 74% expended due to the lump sum payment to CalPERS for the unfunded accrued liability and annual insurance premiums paid at the beginning of the fiscal year. Non-Departmental expenses are at 35% and reflect lower-than-anticipated payments for ongoing operational costs at the Hesperia Golf Course.

The Economic Development Department expended 32% through the Second Quarter. This department is made up of three (3) Divisions: Economic Development, Community Development Block Grant (CDBG), and Hesperia Housing Authority (HHA) funds.

The Economic Development Division performs the economic development functions for the City. Funded by the General Fund, Economic Development is 38% expended through December 2025. Expenditures are expected to increase in the second part of the fiscal year as invoices are received for contractual services, including the Annual Action Plan.

Community Development Block Grant (CDBG) administers the City’s CDBG program and related activities and is 21% expended. Expenditures are expected to increase in the second part of the fiscal year as invoices are received to complete the Annual Action Plan and consultant administration fees.

The Hesperia Housing Authority (HHA) funds oversee the Ci ty’s affordable housing. Through the end of December 2025, the HHA funds were 17% expended. Expenditures are expe cted to increase in the second part of the fiscal year as invoices are received for consultant administration fees and software licensing.

The Community Development Division is 50% expended overall through the Second Quarter. Planning is 44% expended, and Building & Safety is 54% expended; both are proceeding as expected.

December Amended
2025-26 2025-26 2025 YTD Percent
Management Services Budget Amended Expenditures Expended 100 220 Finance 2,629,454 $ 2,629,454 $ 1,341,959 $ 51% 100 225 Human Resources/ Risk Mgmt. 5,290,831 5,268,033 3,919,880 74% 100 228 Information Technology 3,842,045 4,068,488 1,805,598 44% 100 229 Non-Departmental 1,255,492 1,256,692 445,911 35% Total Management Services 13,017,822 $ 13,222,667 $ 7,513,348 $ 57% December Amended
2025-26 2025-26 2025 YTD Percent
Economic Development Budget Amended Expenditures Expended 100 Economic Development 431,497 $ 431,497 $ 164,519 $ 38% 251 Community Development Block Grant (CDBG) 144,883 144,883 31,099 21% 370 Hesperia Housing Authority 74,304 74,304 12,544 17% Total Economic Development 650,684 $ 650,684 $ 208,162 $ 32% December Amended
2025-26 2025-26 2025 YTD Percent
D. S. - Community Development Budget Amended Expenditures Expended 100 3000 Planning 1,330,418 $ 1,335,918 $ 592,496 $ 44% 100 3020 Building & Safety 1,838,679 1,835,679 997,711 54% Total D. S. - Community Development 3,169,097 $ 3,171,597 $ 1,590,207 $ 50% 2025-26 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

The Code Compliance Division expendi tures are trending as expected at 44% through mid-year. The table above shows that Code Enforcement is 53% expended, while Animal Control is 38% expended. Animal Control expenditures are expected to increase in the second part of the fiscal year as invoices are received for contractual services.

Through the end of December, the Public Works Division is 39% spent. While Engineering, Street Maintenance, and Street Repair are trending as expected, Building Maintenanc e and Traffic are contributing factors to the Public Works Division’s lower-than-expected expenditures, at 38% and 37%, respectively. Large projects, such as Council Chamber upgrades, the replacement of evaporative coolers at the Animal Shelter, and County Library pendant lighting, continue with expenditures occurring as progress is made. Capital Improvement Program expenses are expected to increase later in the fiscal year as the Golf Course Trails project advances.

Streets Capital Improvement Project (CIP) related expenditures are 7% expended through December 2025.

Expenditures will increase as progress continues on several key projects, including the Ranchero Aqueduct Crossing, Maple Avenue Street Improvement, FY 2025–26 Street Improv ement Projects, and other street-related improvements.

Please note that at the October 7, 2025 City Council me eting, the budget was amended to appropriate $94,000 in Measure I Funds to the FY 2023-24 CDBG Street Improvement Project C.O. 7172.

This classification comprises the principal and interest payments for the 2012 Water Rights Acquisition and 2023 Refunding Lease Revenue Bonds and reimbursable expenditures related to the Silverwood Project. Principal payments for both bonds occur in the fall of each fiscal year, explaining the 60% expended percentage through December 2025.

During the November 18, 2025 First Quarter Budget Review, the budget was amended to include $114,786 of additional funding to complete the Waste Characterization Study.

December Amended
2025-26 2025-26 2025 YTD Percent
D. S. - Code Compliance Budget Amended Expenditures Expended 100 3010 Code Enforcement 2,237,546 $ 2,235,846 $ 1,184,144 $ 53% 100 5000 Animal Control 3,755,915 3,755,915 1,422,310 38% Total D. S. - Code Compliance 5,993,461 $ 5,991,761 $ 2,606,454 $ 44% December Amended
2025-26 2025-26 2025 YTD Percent
D. S. - Public Works Budget Amended Expenditures Expended 100 3100 Engineering 900,419 $ 898,419 $ 440,601 $ 49% 100 3110 Building Maintenance 1,850,737 1,797,330 678,119 38% 100 Capital Improvement Program 350,000 350,000 0 0% 263 3150 Street Maintenance 2,779,598 2,788,491 1,193,778 43% 263 3160 Street Repair 180,508 183,615 77,627 42% 263 3170 Traffic 1,422,412 1,410,412 521,653 37% Total D.S. Public Works 7,483,674 $ 7,428,267 $ 2,911,778 $ 39% December Amended
2025-26 2025-26 2025 YTD Percent
Budget Amended Expenditures Expended
Streets Capital Improvement Project (CIP) Funds 34,238,591$ 34,332,591 $ 2,348,469 $ 7% December Amended
2025-26 2025-26 2025 YTD Percent
Budget Amended Expenditures Expended
Other City Related Funds 3,112,408 $ 3,227,174 $ 1,931,895 $ 60% 2025-26 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

Overall, the Water Operating and Capital funds are 44% expe nded through December 31, 2025. The following narrative details the progression of each program.
 The primary responsibility of Source of Supply is to secu re make-up water lease rights to remedy overproduction.

At Mid-Year, Source of Supply is only 1% expended. Expenditures are expected to significantly increase later in the fiscal year due to the recording of leased water rights to offset the Alto and Centro Subarea replacement obligation.  Production is responsible for drawing groundwater, has expended 45% of the budget by the end of the Second Quarter, and is proceeding as expected.
 Distribution has utilized 62% of its allocated budget and is pr oceeding slightly higher than expected. This is mainly due to expenses associated with installing new water services, meters and maintaining the water system.  Through December 31, 2025, Pipeline Maintenance has expended 45% of the budget and is proceeding as expected.
 Engineering is currently 24% expended, primarily due to the timing of invoices. Expenditures are expected to increase in the second part of the fiscal year as invoices are received for contractual services, including the Reclaimed Water Master Plan.
 Customer Service is 45% expended and proceeding as planned, with the Advanced Metering Infrastructure (AMI) programs progressing on schedule (86.62% of City on AMI).  Utility Billing is 81% expended. The in creased percentage is due to the $0.4 million in write-offs of delinquent customer accounts and the document recording costs relat ed to placing those delinquent accounts onto the County Property Tax Roll for collection. It should be noted that the subsequent collection of the tax liens will be reflected as revenue. Through December 2025, the District has received $0.2 million through the County Property Tax Roll collections process, representing collections from the first of two property tax installments due dates. Additional collections will be received through the fiscal year-end.  Administration is 57% expended and proceeding as planned. During the November 18, 2025 First Quarter Budget Review, the budget was amended to include $3,858,428 for Well Rehabilitation, Water Service Line Replacements and a Water Rate Study.
 Property Management is 40% expended at mid-year and will increase as maintenance projects are completed throughout the fiscal year.

December Amended
2025-26 2025-26 2025 YTD Percent
D.S. Water Operating & Capital Budget Amended Expenditures Expended 4010 Source of Supply 5,068,641 $ 5,068,641 $ 74,565 $ 1% 4020 Production 5,778,128 5,778,128 2,585,716 45% 4030 Distribution 1,757,302 1,788,302 1,114,459 62% 4035 Pipeline Maintenance 1,302,323 1,302,323 592,076 45% 4040 Engineering 1,860,489 1,858,289 448,370 24% 4050 Customer Service 2,457,742 2,432,742 1,088,942 45% 4060 Utility Billing 1,521,567 1,521,567 1,236,608 81% 4070 Administration 8,831,812 12,690,240 7,187,759 57% 4080 Property Management 510,056 504,756 203,897 40% 4160 Street Repair 1,237,564 1,239,064 468,745 38% 720 Reclaimed Water Operations 293,935 293,935 19,334 7% Total Water Operations 30,619,559 $ 34,477,987 $ 15,020,471 $ 44% 701 Water Capital 1,855,114 2,120,497 391,351 18% 703 Water Capital Rehab and Replace 0 607,000 541,396 89% 711 Sewer Capital Projects 1,778,170 1,778,170 1,107,766 62% Total D.S. Water Operating & Capital 34,252,843 $ 38,983,654 $ 17,060,983 $ 44% 2025-26 MID-YEAR BUDGET REVIEW REPORT
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TOTAL EXPENDITURES BY DEPARTMENT AND PROGRAMS (Continued)

D.S. Water Operating and Capital (Continued):

 Street Repair is 38% expended through December 31, 2025, and will increase as material and equipment are purchased for the street repair program, including the purchase of a Chassis and Hook-Lift System.  Reclaimed Water Operations are 7% ex pended. Expenditures will increase later in the fiscal year when Debt Service payment is due.
 Projects in Water and Sewer Capital have $4.5 million allocated in capital funds and are 45% expended overall.

Expenditures will increase as projects such as t he I-15 Corridor water and sewe r, Maple Avenue sewer line replacement, and Recoating the exterior of the water tank at Plant 21, 22 & 23, progress. During the October 21, 2025 Council Meeting, the budget was amended to include $607,000 for maintenance and repair services to Well 14A and 5A. During the December 2, 2025 Council Meeting, the budget was amended to include $250,000 for the Highway 395 Waterline Relocation Project.

The Sewer Operating Funds overall are 42% expended overall.  Sewer Operations expenditures are 45% expended, primarily due to receiving invoices for Victor Valley Wastewater Reclamation Authority (VVWRA) sewer treatment fees through November 2025.  Sewer Engineering is currently 34% expended and expected to increase in the second part of the fiscal year as invoices are received for contractual professional engineering services related to sewer projects.  Sewer Utility Billing is 53% expended, which is expected for the first half of the fiscal year.  Sewer Administration is proceeding as planned, with 33% expended, mainly due to the monthly general and administrative re-payment for the annual indirect cost alloca tion. During the first quarter budget review the budget was amended by $381,250 for the completion of American Rescue Plan Act (ARPA) related projects.

The Police Department budget is 40% expended, which is expect ed for the first half of the fiscal year with the County contract invoices paid through November 2025. Factoring in December 2025 payment that was paid in early January 2026, the Police fund is 50% expended. Please note that during the November 18, 2025, Council Meeting, the budget was amended by $1,436,900 (County contract increase and Audio/Video System carryover project).

During FY 2018-19, the City transferred all Hesperia Fire Prot ection District (Fire District) assets and liabilities to San Bernardino County Fire, except for the former personnel obligations, for which the Fire District will continue to function with dedicated funding. The Fire District is 97% expended due to paying the annual contractual retirement obligations related to the former Fire District employees at the beginning of the fiscal year versus paying monthly. The $63,415 savings will be placed in the District’s Section 115 trust to pay former Fire District personnel obligations.

December Amended
2025-26 2025-26 2025 YTD Percent
D. S. - Sewer Operating Budget Amended Expenditures Expended 4200 Operations 6,564,502 $ 6,564,502 $ 2,927,185 $ 45% 4240 Engineering 277,360 277,360 94,094 34% 4260 Utility Billing 312,753 312,753 164,384 53% 4270 Administration 1,763,615 2,144,865 713,578 33% Total D.S. Sewer Operating 8,918,230 $ 9,299,480 $ 3,899,241 $ 42% December Amended
2025-26 2025-26 2025 YTD Percent
Budget Amended Expenditures Expended
Police 22,889,390 $ 24,326,290 $ 9,741,221 $ 40% December Amended
2025-26 2025-26 2025 YTD Percent
Budget Amended Expenditures Expended
Fire District 1,959,733 $ 1,959,733 $ 1,896,318 $ 97% 2025-26 MID-YEAR BUDGET REVIEW REPORT
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PROPOSED BUDGET AMENDMENTS – SUMMARY

The FY 2025-26 Mid-Year Budget Review includes three (3) budget amendments totaling $255,000. The following listing categorizes the proposed budget amendments, with the following pages providing details on each request:

The following amendments are new amendments that were unforeseen or unplanned during the development of the FY 2025-26 Budget.
 8-Yard Dump Truck Replacement – Public Works-Street Maintenance $180,000 (263-29-310-3150) This request is for the purchase of an 8-yard dump truck to replace a 2007 Sterling dump truck that has become inoperable. The truck is 19 years old, with over 68,000 mi les, and recently suffered a catastrophic engine failure.

After inspection, it was determined that the engine is dama ged, and a new engine is required. If the engine were to be replaced, the unit would soon fall out of California compli ance, making further investment impractical. A budget amendment to purchase a replacement is requested.
 Bear Valley Signal Replacement – Public Works-Street Maintenance $30,000 (263-29-310-3150) During December 2025, a traffic signal pole located on the southeast corner of I Avenue and Bear Valley Road was struck by a high-wide oversize load vehicle and sustained structural damage beyond repair to both the pole and foundation. The city maintains a joint agreement with the City of Victorville for the maintenance and repair of the signalized system along Bear Valley Road. Under this ag reement both cities share the costs of maintenance and capital repairs on a 50/50 basis. Replacement of the damaged signal equipment falls under this cost-sharing arrangement. Therefore, staff is requesting a budget amendment for the City’s portion of $30,000.  Traffic Vehicle-Supervisor – Public Works-Traffic $45,000 (263-29-310-3170) During FY 2024-25 a full-time Maintenance Supervisor position was filled, and the assigned vehicle at that time had been taken out of service due to age and repair costs. Since then, the Supervisor has been utilizing a service vehicle that is intended for staff use to respond to requests and manage day-to-day operations, and recently another vehicle was removed from service, further limiting vehicles available to staff. Staff is requesting approval to purchase a new vehicle to be used by the supervisor.

General Other
Fund Funds Totals

1. 8-Yard Dump Truck-Replacement $ 0 180,000$ 180,000 $

2. Bear Valley Signal Replacement 0 30,000 30,000

3. T raffic Vehicle-Supervisor 0 45,000 45,000 Total Mid-Year Amendment Requests $ 0 $ 255,000 $ 255,000 Source of Funds:

Public Works Street Maintenance - 263 255,000 $
Total Source of Funds 255,000 $
FY 2025-26 Mid-Year Budget Requests
2025-26 MID-YEAR BUDGET REVIEW REPORT
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2026-27 Tentative Budget Calendar

While the Mid-Year report gauges the current year’s activity, it does serve as the official start for planning the next year’s budget. Below is the tentative calendar for the FY 2026-27 Budget.

2026-27 Budget Instructions (SharePoint) February 26, 2026 Council FY 2025-26 Mid-Year Budget Review March 3, 2026 2026-27 Draft Division and/or Program Narratives March 5, 2026 FY 2025-26 Revised Revenue and 2026-27 Proposed Budget Revenue Estimates to Departments for Review (07/01/2025 thru 02/28/2026)
March 12, 2026 (Review)
March 23, 2026 (Due)
FY 2025-26 Revised Expenditure Estimates, 2026-27 Current Level Proposed Budget Expenditures
March 25, 2026
2026-27 Budget Increments - “Requested Expenditures Above Current Level” March 30, 2026 Budget Review with Departments/Divisions (Finance) Mid-April 2026-27 Final Proposed Budget Division and/or Program Narratives completed End of April Capital Improvement Program (CIP) Due from Department to Finance April 9, 2026 Workshop #1 – Current Level Budget to Council (Operating) May 5, 2026 City Positions – Department Directors notify staff May 7, 2026 Internal Review May 12, 2026
2026-27 Proposed Budget completed (To Council) May 18, 2026 Workshop #2 – Above Current Levels to Council and AB 2561 – Vacancy Presentation May 19, 2026 Council Budget Workshop June 2, 2026
Council Adopts Operating Budget June 2, 2026
Council Adopts CIP Budget June 16, 2026

With this calendar, there are two planned budget workshops before requesting the City Council to adopt the Operating Budget on June 2, 2026, and the CIP Budget on June 16, 2026.  Budget Workshop #1 will highlight the current-level operating budget.  Budget Workshop #2 will highlight using reserves for significant purchases and the capital improvement program budget. Additionally, Workshop #2 will requir e a public hearing to ensure compliance with AB 2561, which requires a vacancy position presentation.