CITY OF MENIFEE
SUBJECT: Fiscal Year 2026/27 Mid-Cycle Budget Adjustments and Fund Balance Policy Update
MEETING DATE: June 3, 2026
TO: Mayor and City Council
PREPARED BY: Dominic Tartaglia, Principal Accountant
REVIEWED BY: Travis Hickey, Chief Financial Officer
APPROVED BY: Armando G. Villa, City Manager
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RECOMMENDED ACTION
1. Approve the revised Fund Balance Policy for the General Fund (Policy No. CC-07); and
2. Adopt a resolution amending the Fiscal Year 2026/27 adopted budget; and
3. Adopt a resolution approving the GANN appropriations limit; and
4. Adopt a resolution approving the City’s Authorized Position Listing & Salary Schedule for Fiscal Year 2026/2027; and
5. Adopt a resolution approving the revised 2025-2030 Five-Year Capital Improvement Program (CIP); and
6. Accept the Fiscal Year 2026/27 mid-cycle budget review and approve the additional budget revenue and appropriations as presented.
DISCUSSION
In June 2025, the City adopted the current biennial budget, incorporating Fiscal Year (FY) 2025/2026 and FY 2026/2027, as continued efforts to take a longer-range perspective on financial planning decisions as well as streamline and consolidate budget processes. As presented during the budget adoption process, the biennial budget incorporates both mid-year and mid-cycle reviews. The mid-year review focuses on the progress and recommended adjustments at the halfway point of each respective year. The Mid-cycle review addresses recommended adjustments in preparation for the beginning of second year of the two-year budget cycle.
The FY 2026/27 mid-cycle budget review is presented to the City Council as an opportunity for the City Manager and the Finance Department to:
1. Present any additional necessary budget adjustments identified during the mid-cycle review process for City Council’s consideration and approval.
2. Update the City Council on the Capital Improvement Program (CIP).
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
Executive Summary of 2026/2027 Mid-Cycle Review
The current Biennial Budget for FY 2025/2026 and 2026/2027 as adopted reflected a balanced financial plan aligned with strategic priorities and long-term fiscal sustainability. The budget incorporates revenue and expenditure projections reflective of generally slower economic growth, for the regional and local economy, while maintaining existing service levels, supporting the existing workforce, and addressing high priority operational needs.
Key highlights on proposed FY 2026/2027 mid-cycle revenue, Operating Budget and Capital Budget adjustments are briefly summarized below and are further detailed within the report. The recommended revenue, expenditure, and assigned reserves presented for Quality of Life funds included were also presented at the Quality of Life Committee meeting on May 7, 2026. The Committee reviewed the presented use of available funds and made a motion to recommend the use of funds as presented.
Revenue Adjustments (FY 2026/2027 Proposed Adjustments: $1,269,286) The City’s principal revenues are beginning to see the impact of broader economic challenges as sales tax, including Quality of Life, and development revenue have begun to level off. Stronger property tax collections, rising Vehicle License Fees (VLF in lieu), and interest increases from investments cushioned the impact of reduced sales tax receipts. However, the General Fund inclusive of Quality of Life has a projected decrease in revenue of $1,297,665.
The updated forecast of revenues for the mid-cycle budget review includes a net increase of $402,335 for the General Fund, a decrease of $1,700,000 for Quality of Life, an increase of $140,000 related to the Internal Service Funds (ISF), and Special Revenue & Other Funds with a total increase of $2,426,951.
Operating Budget (FY 2026/2027 Proposed Adjustments: ($136,959)) In an effort to recalibrate the budget in light of revenue adjustments, several reductions are recommended to ongoing expenditure budget accounts. This includes the annual PERS unfunded liability budget which has been eliminated while still maintaining the assigned fund balance with no required annual payment due at this time. In addition, the General Plan updates will be handled by more in-house personnel, helping to use restricted funding in a prudent manner, and several departments have elected to reduce professional service budgets. These reductions along with strategic use of restricted and assigned fund balances keep the City on track with a balanced budget plan.
Recommendations for increases to expenditures include but are not limited to; re-alignment of several existing personnel to address agency-wide operational needs and/or current assignments, funding approved as part of the mid-year FY 2025/26 process, several one-time capital outlays/studies, and City commitments like the animal sheltering debt service.
General Fund Operating Budget expenditure appropriations total $989,403 and Quality of Life recommendations total a reduction of $1,700,000 through a transfer out of the fire contract budget to the General Fund. The total net reduction to the General Fund expenditures inclusive of Quality of Life is $710,597. All other funds Operating Budget expenditure appropriations total $573,638.
A complete listing and detailed summary of these requests is included within the Operating Expenditure Analysis & Adjustments section of the report.
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
To make up for the remainder of the revenue reduction, it is proposed to use an additional $397,068 of restricted funds from Technology Surcharge fees and American Medical Response (AMR) fees, as well as fund $190,000 of one-time studies related to economic development through the use of assigned fund balance instead of through ongoing revenue as included in the adopted budget.
Capital Budget (FY 2026/2027 Proposed Adjustments: $5,736,152) The City’s Capital Budget (CIP) continues to concentrate on moving the City’s infrastructure needs forward. In FY 2025/2026, the City officially began construction of the Paloma Wash Pedestrian Bridge, Bradley Bridge Project, and has issued several bids for projects. Proposed FY 2026/2027 mid-cycle adjustment requests of $5.7 million, including $1.4 million funded by Quality of Life, provide additional funding towards ongoing projects, except for funding for one new project connected to an ongoing project. Funding requests are focused on projects at or near construction, and pavement management program support. Details of the current CIP and requests are included within the CIP Review & Update of this report.
TABLE 1: FY 2026/2027 CITYWIDE (OPERATING & CAPITAL IMPROVEMENT (CIP))
EXPENDITURE BUDGET SUMMARY
Category
FY 2026/27
Adopted
Budget ($)
FY 2026/27
Mid-cycle
Appropriation
Recommendations
Total Proposed
FY 2026/27
Adjusted Budget
% of
Citywide
Budget
$103,150,233 Operating Budget:
(General Fund & Quality of Life)
$103,860,830 ($710,597)
66.92%
30,985,235Operating Budget:
(ISFs, Special Revenue & Other)
30,411,597 573,638
20.10%
Total Operating Budget: $134,272,427 ($136,959) $134,135,468 87.03% 14,262,204 5,736,152 19,998,356 12.97%CIP (1)
(Capital Project Fund)
Total CIP Budget: $14,262,204 $5,736,152 $19,998,356 12.97% TOTAL $148,534,631 $5,599,193 $154,133,824 100.00%
(1) Beginning FY2024/25 all CIP (Capital Projects) budget/expenses are consolidated/unified within the Capital Projects Fund (Fund 4320). Transfers between funds are requested as part of the overall appropriation.
In summary, for the Citywide Operating & CIP Budget (represented by the Operating and Capital budgets combined) the mid-cycle recommendations include a recommended increase in total revenue appropriations of $1,269,286 across all funds and an increase in total expenditure appropriations of $5,599,193. The Citywide Operating and CIP Budget, as adopted, does not include Bonded Community Facilities Districts (CFDs) for Infrastructure or the corresponding Fiduciary funds, as these funds are managed and used exclusively for the purpose of the CFD bond issuance, administration, reimbursements, and debt service payments. Mid-cycle budget adjustments for these funds are discussed in a separate section of the staff report.
Adopted Citywide Budget vs. Adjusted Citywide Budget (Summary of Adjustments) The adopted Citywide Operating & CIP Budget for Fiscal Year 2026/2027 totaled $152,908,114 in revenue and $148,534,631 in expenditures for all funds, excluding Bonded CFDs (Capital & Fiduciary Funds), and supported 336.5 (304 full-time and 32.5 part-time) positions. The City’s City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
General Fund total adopted budget, inclusive of Quality of Life Measure, totaled projected revenues of $103,712,959 and total projected operating expenditures of $103,860,830, resulting in a balanced operating budget (with $147,871 in restricted fund balance usage).
General Fund & Quality of Life Funds (Mid-Cycle Budget Adjustment Recommendations) The following tables (Table 2 and Table 3) depict the recommended revenue and expenditure adjustments by category within the General Fund and Quality of Life.
TABLE 2: FY 2026/2027 MID-CYCLE BUDGET ADJUSTMENT RECOMMENDATIONS (GENERAL FUND)
General Fund Operating & Capital Budget Adjustments & Fund Balance General Fund Adopted Budget
FY 2026/27
FY 2026/27
Mid-cycle
Adjustments
Recommended
Adjusted Budget
with FY 2026/27
Mid-cycle
Adjustments
Percentage
(%) Change
to Adopted
Budget
Revenue:
Sales Tax $13,999,791 ($680,000) $13,319,791 -4.86%
Property Tax 25,920,064 750,000 26,670,064 2.89%
Development Fees 12,945,000 (1,060,000) 11,885,000 -8.19% Vehicle License Fee 13,403,022 20,806 13,423,828 0.16% Franchise Fees 6,160,000 0 6,160,000 0.00%
Other 9,387,485 1,371,529 10,759,014 14.61%
Total Revenue $81,815,362 $402,335 $82,217,697 0.49%
Expenditures:
Personnel(1) $41,166,623 ($350,886) $40,815,737 -0.85%
Operating Expenses 29,772,998 1,340,289 31,113,287 4.50% Capital Outlays/1x Studies 215,000 0 215,000 0.00%
Transfers & Allocations 10,808,612 0 10,808,612 0.00%
Capital Projects (CIP) 0 0 0 0.00%
Total
Expenditures $81,963,233 $989,403 $82,952,636 1.21% (Deliberate Use of Fund
Balance)/ Estimated Surplus
($147,871) ($587,068) ($734,939)
(1) Personnel increases requested as part of reclassification efforts are offset by the decrease in the Annual PERS Unfunded budget, resulting in a net negative amount.
The Quality of Life recommended Mid-cycle revenue decrease is $1,700,000 for a total revised revenue budget of $20,197,597 and a recommended $1,700,000 decrease in expenditure appropriations for a revised expenditure budget of $21,762,597 from the FY 2026/2027 Adopted Budget. Additionally, the FY 2026/2027 mid-cycle review includes recommendations to allocate Quality of Life Fund Balance towards the Pavement Management Program (PMP), see Fund Balance Reserves and Assigned Fund Balances for additional detail.
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
TABLE 3: FY 2026/2027 MID-CYCLE BUDGET ADJUSTMENT RECOMMENDATIONS (QUALITY OF LIFE)
Quality of Life Fund Operating & Capital Budget Adjustments & Fund Balance Quality of Life
Adopted Budget
FY 2026/27
FY 2026/27
Mid-cycle
Adjustments
Recommended
Adjusted Budget
with FY 2026/27
Mid-cycle
Adjustments
Percentage
(%) Change
to Adopted
Budget
Revenue:
Sales Tax $21,347,597 ($1,800,000) $19,547,597 -8.43%
Interest 550,000 100,000 650,000 18.18%
Total Revenue $21,897,597 ($1,700,000) $20,197,597 -7.76%
Expenditures:
Personnel $8,297,390 $0 $8,297,390 0.00%
Operating Expenses(1) 13,600,207 (1,700,000) 11,900,207 -12.50% Capital Projects (CIP) 125,000 1,440,000 1,565,000 1,152.00% Total
Expenditures
$22,022,597 ($260,000) $21,762,597 -1.18%
(Deliberate Use of Fund
Balance)/ Estimated Surplus ($125,000) ($1,440,000) ($1,565,000) (1) Reflects transfer out of Fire contract from QoL fund into General Fund.
Current Economic Outlook (National, State, Regional & Local) & Revenue Analysis Entering this mid-cycle review for FY 2026/2027, the second year of the biennial budget cycle reflects a tighter, more conservative fiscal outlook as core revenues experience a more pronounced slowdown against an uncertain economy. At the local level, while retaining its status as one of the fastest-growing communities in the state, the City of Menifee’s expansion has transitioned into a leveled pace. Reflecting the broader national financial background - including persistently high interest rates and the steady inflation - several of the City’s principal revenues, from development to sales activity, have experienced a distinct flattening in growth.
Nationally, through the first half of 2026, the economy has remained deeply divided; expansive artificial intelligence infrastructure investments and high-wealth income gains drive tech forward, while persistent 3% inflation and a cooling labor market contribute to an overall slow growth environment. Similarly, within California, the economic position is split. While the Governor’s May 2026 Budget Revision closed structural deficits through aggressive spending cuts and targeted corporate tax adjustments, this stabilization has not accelerated local retail activity. High productivity sectors expand, whereas construction, non-durable goods, and discretionary retail continue to struggle under high borrowing costs. State unemployment has stabilized at a higher
5.5%, keeping revenue projections conservative through the remainder of the fiscal year.
As the City implements this mid-cycle process for the second year of the budget, overall recommendations for adjustments are strictly risk-averse. While residential development activity has been notably slower in the first half of the cycle due to elevated interest rates, there are various industrial and commercial projects nearing final permitting in the upcoming months. Based City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
on internal review and close coordination with development departments, the City forecasts a modest, back-loaded stabilization of development activity during the balance of FY 2026/2027.
Economic conditions will continue to be closely monitored through the mid-year process of FY 2026/2027 to ensure targets are being met or adjusted as necessary. Each individual revenue source to the City has been carefully examined for trends and market conditions.
Proposed Mid-cycle Revenue Adjustments: $1,269,286
(($1,297,665) General Fund/Quality of Life)
The City’s top budgeted revenue sources for the General Fund, inclusive of Quality of Life (Measure DD), are listed in the table below.
TABLE 4: TOP PRINCIPAL CITY REVENUES PROPOSED MID-CYCLE ADJUSTMENTS Revenue Description
Proposed FY
2026/27 Mid-
Cycle
Adjustments
Mid-Cycle Review/Analysis
1 Sales Tax ($680,000) The City has received revenue for the July 2025 to March 2026 period through the Mid-cycle review. Based on the current year- to-date (YTD) actuals and performance of Sales Tax, excluding 1x time sales tax proceeds, in FY 2025/26 this revenue is generally trending in line within the adopted budget. However, other notable external factors impacting sales activities into the future include continued tariffs, inflation, and consumer response to these. Therefore, the City’s sales tax consultant HdL projections received in March 2026 indicate sales tax revenue is expected to flatten. Recommended adjustment
decrease of $680K.
2 Quality of Life
(Measure DD)
(1,800,000) Based on the current YTD actuals and performance of Sales Tax, excluding 1x time sales tax proceeds, in FY 2025/26, this revenue is generally trending below the adopted budget. HdL projections received in March 2026 indicate sales tax revenue is expected to flatten further. Recommended adjustment
decrease of $1.8MM.
3 Property Tax 750,000 HdL projections received in March 2026 indicate property tax revenue is expected to meet adopted budget numbers.
Compared to FY 2025/26, the taxable assessed value has
increased moderately and YTD actuals are trending with
adopted budget which incorporated anticipated growth in this revenue category. In addition, for the last two (2) years in a row, the RDA Passthrough has received strong revenue over $1MM.
Recommended adjustment increase of $750K.
4 Development Fees
(Building, Planning,
Engineering, Fire)
(1,060,000) The first half of FY 2025/2026 has been marked by a notable leveling/slowing in development activity, particularly in building and safety. However, there are several industrial projects anticipated to begin building activity in the 2 nd fiscal year of the budget cycle that may offset some of the slowing.
Recommended adjustment decreases of $1.1MM.
5 Vehicle License Fee
(VLF)
20,806 Revised HdL projections reflect VLF revenue expected to meet the original adopted FY 2026/2027 budget based on updated Assessed Valuation numbers. Recommended adjustment
increase of $21K.
6 Franchise Fees 0 Franchise fees across the agency, including electric, natural gas, cable TV, and solid waste are generally trending in line with the current year adopted budget. No Mid-cycle adjustments.
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
3 3
6 3
Revenue Description
Proposed FY
2026/27 Mid-
Cycle
Adjustments
Mid-Cycle Review/Analysis
7 Investment Income 1,000,000 Investment income continues to perform strong through FY 2025/2026 as interest rates have remained elevated and the City maintains healthy reserves. Recommended adjustment increase of $1.0MM (900K for General Fund and 100K for
QoL).
8 Other Revenue 471,529 Other revenue includes an increase in recreation fees ($67K), increasing recognition of the two (2) School Resource Officer (SRO) reimbursements for officers that the City receives from school districts ($180K), and elimination of a tax incentive for a hotel that reached its end of contract ($225K). Recommended adjustment increase of $472K.
TOTAL ($1,297,665)
Proposed revenue adjustments for other funds include the following:
TABLE 5: FY 2026/2027 MID-CYCLE INTERNAL SERVICE & OTHER FUNDS REVENUE
PROPOSED REVENUE AND OTHER ADJUSTMENTS
Operating Expenditure Analysis & Adjustments: ($136,959) (($710,597) General Fund/Quality of Life)
General Fund expenditure appropriation requests total $989,403 representing various personnel adjustments, operating costs, and capital/one-time studies. Quality of Life includes an operating appropriation request of ($1,700,000) related to transferring of the Fire contract out to the General Fund to offset the reduction of sales tax.
No. Fund Description FY 2026/27
Mid-cycle
Revenue
Adjustments
Justification
1 Internal
Services
Funds (ISFs)
Investment
Income $140,000
Higher interest revenue receipts based on YTD actuals.
2 Gas Tax and
SB 1
Gas Tax
Revenue 229,313 Increased estimates from state of California regarding gas tax income.
4 Measure A Transportation
Revenue 176,000 Increased estimates from Riverside County regarding sales tax generated from Measure A.
5 Special
Districts
Special
Assessments 268,087 Increases to special assessments across various special districts per consultant.
6 CDBG Grant
Revenue 110,960 Increase for the CDBG allocation per HUD. 7 Gas Tax &
Other Special
Revenue
Funds
Investment
Income 1,645,300
Higher interest revenue receipts based on YTD actuals.
8 Maintenance
CFD (2622)
Transfer In (2,709) Transfer in reduction for maintenance resources in special districts.
TOTAL: $2,566,951
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
Overall, budgetary expenditures within the General Fund, including Quality of Life, are being reduced in an effort to match reductions in revenue where possible. Mid-cycle appropriation requests are focused on immediate needs necessary to complete the balance of the biennial cycle and address current operational challenges.
Personnel Mid-Cycle Requests
The FY 2026/2027 Adopted Budget includes a total of 336.5 full-time equivalent (FTE) personnel, represented by 304 full-time and 32.5 part-time FTEs. As part of the mid-cycle process, departments reviewed organizational structure and operations to identify critical staffing needs. Staff is requesting approval of the following: reclassification of six FTE positions to align with current operations/function, and a reclassification of two part time (PT) personnel within the Community Services Department from unbenefited to three-quarters time benefited. The proposed mid-cycle recommendations do not result in total FTE increases, as all proposals impact reclassification of existing positions. In addition, mid-year FY 2025/2026 increases that were approved in February 2026 have also been incorporated into the adjusted FY 2026/2027 budget with an adjustment of $188,878.
TABLE 6: FY 2026/2027 MID-CYCLE PERSONNEL REQUESTS (ALL FUNDS) # Department
(Division)
Position Title New
FTE
FY 2026/27
Salary &
Benefits
Funding
Source
Justification
1 Public Works
(Traffic Engineering)
City Traffic Engineer
(reclassification of
Principal Engineer)
0 $15,599 General
Fund
Justification:
Operational Need –
Based on operational/
functional assignment
and needs
2 Human Resources
(Risk Management)
Sr. Management
Analyst
(reclassification of
Management Analyst II)
0 14,856 General
Fund
Justification:
Operational Need –
Based on operational/
functional assignment
and needs
3 Community
Development
(Building & Safety)
Management Analyst II
(reclassification of
Management Analyst I)
0 12,861 General
Fund
Justification:
Operational Need –
Based on operational/
functional assignment
and needs
4 Community
Development
(Building & Safety)
Building Inspector II
(3 positions)
(reclassification of
Building Inspector I)
0 21,518 General
Fund
Justification: Operational
Need – Based on
operational/ functional
assignment and needs
5 Community
Services
Community Services
Specialist
(2 positions at ¾ time)
(reclassification of PT
staff to PT with Benefits)
1.5 18,000 General
Fund
Justification: Operational
Need – Based on
operational/ functional
assignment and needs
6 Community
Services
Part Time Leader II
(reclassification of PT
staff to PT with Benefits)
(1.5) (18,000) General
Fund
Justification:
Operational Need –
Based on operational/
functional assignment
and needs
$64,834
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
# Department
(Division)
Position Title New
FTE
FY 2026/27
Salary &
Benefits
Funding
Source
Justification
7 Mid-year Pre-
approved personnel
actions
Various 0 188,878 General
Fund
Pre-approved during
the Mid-year process
for FY 2025/26.
TOTAL 0 $253,712
One update since the budget workshop on May 20, 2026, includes the addition of the classification of the part-time Media Production Assistant to the Salary Schedule and Authorized Position listing.
The existing budget for this part-time position is already included as part of the adopted FY 2026/2027 budget, and will not be increased with this addition, but instead takes previous paid intern classifications and unifies them with the City's Salary Schedule and Authorized Listing. The part-time position will not receive any benefits, and the proposed pay range is kept similar to the previous paid interns. This change results in an increase of 0.1 FTE, for a new total of 336.6 FTE.
Operating Expenses Mid-Cycle Requests
The primary adjustments to the operating budget are reductions to ongoing expenditure budget accounts. These include the annual PERS unfunded liability budget, the General Plan update to be handled by more in-house personnel, and several department reductions to professional service budgets. Due to the reduction of revenue within the Quality of Life Fund, $1.7 million of the fire contract would be transferred from Quality of Life to the General Fund.
Recommendations for increases to expenditures include funding approved as part of the mid-year FY 2025/26 process and City commitments for the streetlight debt and animal sheltering debt service that can no longer be supported by the Animal Shelter DIF Fund. Mid-cycle adjustments will also be made to various special districts in alignment with recommendations by the City’s consultant based on incoming districts and increased areas of coverage.
TABLE 7: FY 2026/2027 MID-CYCLE OPERATIONS & MAINTENANCE REQUESTS # Department Description
Increase/
(Decrease) Justification
GENERAL FUND
1 Menifee Police
Department
Pre-approved FY 2025/26 Mid-
year appropriations (Dispatch
APIs)
$28,360 Pre-approved during the Mid-
year process for FY 2025/26.
2 Menifee Police
Department
Animal sheltering 150,000 Transfer of animal sheltering debt out of DIF which lacks fund
balance.
3 Various Professional services budget
reductions
(342,669) Several departments reducing
professional services.
4 General Services Eliminate FY 2026/27 Annual
PERS Unfunded liability line
item
(550,000) No annual payment due but
maintaining assigned fund
balance to handle future
charges.
5 Community
Development
Reduce General Plan line item (250,000) Moving half of the work for the General Plan update in-house.
6 Fire Contract budget transfer from
QoL
1,700,000 Transfer of Fire contract into GF
from QoL due to sales tax
reduction.
City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
# Department Description
Increase/
(Decrease) Justification
GENERAL FUND SUBTOTAL $735,691
QUALITY OF LIFE
7 Fire Contract budget transfer to GF ($1,700,000) Transfer of Fire contract into GF from QoL due to sales tax
reduction.
QUALITY OF LIFE SUBTOTAL ($1,700,000)
ISFs, GAS TAX & OTHER SPECIAL REVENUES FUNDS
8 IT Department Pre-approved FY 2025/26 Mid-
year appropriations (various
software from IT Fund 1110)
177,072 Pre-approved during the Mid-
year process for FY 2025/26.
9 Menifee Police
Department
Animal sheltering (DIF Fund
2528)
(150,000) Transfer of animal sheltering
debt out of DIF which lacks fund
balance.
10 Finance Adjustment to cover streetlight
Debt Service admin. costs.
(Debt Fund 3590)
37,500 Needed to cover projected
admin. costs for streetlight debt
service.
11 Community
Development
CDBG allocation increase for
services (CDBG Fund 2481)
110,960 Increase for the CDBG allocation
per HUD.
12 Various Special districts expenditures
(LLMDs, CSAs, CFDs
(Maintenance))
268,106 Services to special districts
throughout the city, including
maintenance of streets and
parks. Maintained through
separate tax collections.
ISFs, GAS TAX & OTHER SPECIAL REVENUES FUNDS
SUBTOTAL
$443,638
TOTAL ($520,671)
Capital Outlay & One-Time Studies Mid-Cycle Requests
The various capital outlays and one-time studies requested as part of this mid-cycle review are summarized in the following table. Both requests are from restricted funding sources that have limited uses.
TABLE 8: FY 2026/2027 MID-CYCLE CAPITAL OUTLAYS/1X STUDIES REQUESTS # Department Description
Increase/
(Decrease) Justification
ISFs, GAS TAX & OTHER SPECIAL REVENUES FUNDS
1 Public Works
(Traffic Engineering)
Traffic Signalization Project
(AQMD Fund 2280)
$100,000 Plan to work on traffic light
synchronization to reduce
overall traffic.
2 Communications Purchase of new Council
Chambers cameras, wireless
equipment, and cabling (PEG
Fund 2340)
30,000 Upgrade infrastructure to
handle new ADA requirements
and less frequent mobile
technology disruptions
ISFs, GAS TAX & OTHER SPECIAL REVENUES FUNDS
SUBTOTAL
$130,000
TOTAL $130,000
Other Administrative Adjustments
Previously, funds were allocated for the State Bill (SB) 1383 Business Assistance program, however, program use and interest has been low over several years. Community Services is requesting the remaining funding be repurposed and carried over to support state-mandated City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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6 3
requirements for purchases of recycled/recovered organic materials. This action is for administrative purposes and does not require any new budget requests.
Capital Improvement Program (CIP) Review & Update
At budget adoption in June 2025, the FY 2026/2027 CIP included new funding totaling $14,262,204 for nine (9) ongoing and/or new projects. As many of the CIP projects are complex multi-year projects spanning across fiscal years, each year’s remaining funding of previously approved CIP projects is carried forward into subsequent years until project completion. All expenditure appropriations, including carryovers and respective funding source transfers are consolidated within Fund 4320 (Capital Projects) beginning in FY 2024/25. The Adjusted CIP budget reflects the combined adopted budget, carried over project budgets and any additional appropriation/changes activity. The FY 2025/2026 Adjusted CIP budget as of 5/1/2026 represents approximately 69 active and funded projects and totals $99,744,584.
FY 2026/2027 Mid-Cycle CIP Requests
New Appropriation requests of $5,736,152 are as follows:
-$1,440,000 from Quality of Life funds and $60,000 from Measure A to supplement existing funding for PMP 27-01: FY 2026/27 Slurry Seal Program.
-$1,000,000 from Gas Tax, State Bill (SB) 1, Measure A funds to supplement existing funding for CIP 27-02: FY 2026/27 AC Resurfacing.
-$86,152 from DIF Parks – Citywide and DIF 17 - Parks to fund CIP 24-09 Gale Webb Restroom
-$2,000,000 from Quimby – Local Parks to fund CIP 24-16 Quail Valley Nature Park -$1,000,000 from DIF Parks – Citywide to fund CIP 24-11 Sun City Greenspace -$150,000 from Quimby – Local Parks to fund CIP 27-05 Central Park Lawn Seating and Landscape Improvements
A summary of the adopted and adjusted CIP budget, including mid-cycle requests, can be found within Table 9 below.
TABLE 9: FY 2026/2027 ADOPTED vs. FY 2026/2027 ADJUSTED BUDGET (CIP) UPDATE (Including FY 2026/2027 Mid-cycle Requests, $1,440,000 Funded by Quality of Life) FY 2026/2027
PROJECT CATEGORY
# OF
PROJECTS
Adopted
Budget
Mid-cycle
Requests
FY 2026/27
Adjusted Budget
(with Mid-cycle)
Transportation 1 $400,000 $0 $400,000
Traffic Signal 0 0 0 0
Street Improvement 1 849,825 0 849,825
Pavement Management (PMP) 2 3,500,000 2,500,000 6,000,000 Drainage 3 1,625,000 0 1,625,000
Streetlight 0 0 0 0
Public Facility 1 7,500,000 0 7,500,000
Park, Recreation, and Trails(1) 5 387,379 3,236,152 3,623,531 Technology Infrastructure 0 0 0 0
Studies 0 0 0 0
TOTAL 13 $14,262,204 $5,736,152 $19,998,356
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June 3, 2026
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In total, the FY 2026/2027 CIP Budget, inclusive of: (1) the current year adopted budget funding, (2) Fiscal Year 2026/2027 mid-cycle requests discussed above, (3) and prior year budget and encumbrance carryovers for ongoing projects will be $119,742,940.
Fund Balance Reserves and Assigned Fund Balances
General Fund
In accordance with the City Council approved Fund Balance Policy and, recognizing the one-time nature of the revenue and operational savings sources, the following Assigned Fund Balance categories have been requested for use as follows:
-Other Post Employment Benefits (OPEB), $190,000. Use assigned fund balance to help cover upcoming one-time studies included in the adopted budget. -Restricted Fund Balances, $397,068. Restricted funds collected for specific purposes, including technology surcharges and AMR fees have been expanded for use in covering additional qualified expenditures included in the adopted budget.
Quality of Life
With respect to the existing Quality of Life Fund Balance, as part of the FY 2026/2027 mid-cycle requests presented and recommended by Quality of Life Committee on May 7, 2026, the estimated remaining unassigned fund balance of $1.4 million is recommended for PMP 27-01, FY 2026/2027 Slurry Seal Program.
Bonded CFDs: (Infrastructure) Funds and Fiduciary Funds Through its established Community Facilities Districts (CFD) policy, the City works with developers on the formation and bond issuance of infrastructure CFDs used to finance eligible public improvements and/or fees. It is important to note that the related debt is not an obligation of the City, but of the CFD and respective properties. The following adjustments for the bonded CFDs are requested:
TABLE 10: BONDED CFDs FY 2026/2027 MID-CYCLE APPROPRIATION REQUESTS Fund Category Type
Revenue
Adjustment ($)
Expenditure
Adjustment ($) Justification/Explanation
CFD Funds (Infrastructure) ($110,855) ($8,033,314) Revised infrastructure build-out timing and interest projections
based on YTD actuals and fund
balances.
CFD Funds (Fiduciary) 1,503,037 1,490,003 Revised bond issuance timings.
Expenditure adjustment for admin.
expenses.
TOTAL $1,392,182 ($6,543,311)
FY 2026/2027 Adjusted Budget Reserve Requirement
Table 11 on the following page reflects the proposed revised Reserve Requirement of 40% based on the proposed additional expenditure adjustments in comparison to the prior year FY 2025/2026.
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June 3, 2026
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TABLE 11: FY 2026/2027 ADJUSTED BUDGET RESERVE REQUIREMENT SUMMARY FY 2025/26 Adopted Budget
(40% Reserve)
FY 2026/27 Proposed Adjusted Budget
(40% Reserve)
Operating Stabilization Reserve (15%)
$14,873,571
Operating Stabilization Reserve (15%)
$15,440,285
Operating Stabilization Reserve (15%)
$14,873,571
Operating Stabilization Reserve (15%)
$15,440,285
Unassigned Fund Balance (10%)
$9,915,714
Unassigned Fund Balance (10%)
$10,293,523
Total: $39,662,856 Total: $41,174,093
*Calculated based on Operating Expenditures.
FY 2026/2027 Gann Initiative Appropriation Limit and Appropriations Subject to Limit:
The City is required by state law to establish an appropriation limit each fiscal year. The appropriations limitation imposed by the state, otherwise known as the Gann Limit, creates a restriction on the amount of revenue that can be appropriated. Only those revenues received from proceeds of taxes are subject to this limit. Assessment on real property or persons, such as special district assessments etc., for special benefit conferred are not considered “proceeds of taxes” for purposes of the Gann Limit calculation. This means that only certain revenues from funds such as the General Fund, Quality of Life Measure, etc. are subject to the appropriation limit. Certain items, such as certain types of debt service costs, and qualified outlays are excluded from the Appropriations Subject to Limitation.
Utilizing the most current price factor and population data provided by the State of California, the City’s FY 2026/2027 appropriation limit is estimated to be $74,559,078 (see Gann Limit attachment). The actual amount of appropriations subject to the limit is $73,489,345. The difference between the City’s appropriation limit and the amount proposed to be appropriated that is subject to the limit is $1,069,732. As a result, the City, in accordance with State law, is below its appropriation limit.
Pursuant to state law the following actions must be completed with respect to the Gann Limit:
TABLE 12: GANN LIMIT ADOPTION PROCEDURES & ANNUAL REVIEW Category Description Status
1. 15 days prior to establishing the Appropriations
Limit, make available to public, documentation used in
the determination of the Appropriation Limit.
Completed. Appropriations Limit for FY
2026/2027 made available May 2026.
2. By resolution of the governing board at a regularly
scheduled meeting, establish its Appropriations Limit
Included as part of recommended actions
to Mid-cycle Budget Adoption (FY
2026/2027).
Adoption
Procedures
3. Publish the Appropriations Limit and the
Appropriations Subject to Limitation in the annual
budget of the government entity.
Included as part of FY 2026/2027
Proposed Adjusted Budget (staff report &
budget).
Annual
Review
4. Provide the Appropriations Limit and Appropriations
Subject to Limitation to the State Controller’s Office, included with filing of the Annual Statement of Financial Transactions.
To be completed with corresponding year-
end/ACFR/State Controller’s Reports.
Fund Balance Policy for the General Fund (No. CC-07) Update Updates to Policy No. CC-07 (Fund Balance Policy for the General Fund) were presented to the Finance Committee at the May 12, 2026 meeting. The proposed modifications included expanding City of Menifee Staff Report
FY 2026/27 Mid-Cycle Budget Adjustments and Review
June 3, 2026
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the categories of Surplus Fund Balance Assigned and/or Committed categories, to allow for more dedicated reserves to support operating and capital priorities, as well as providing more flexibility in the order and amount of Assigned/Committed Fund reserves. The proposed changes do not modify the existing 40% reserve requirement as adopted in 2024. The Finance Committee made a recommendation to present the updated policy for Council consideration.
STRATEGIC PLAN OBJECTIVE
Regular City Business
FISCAL IMPACT
Summary of Revenue & Expenditures Adjustments by Fund Type Table 13 below provides an overall summary of all revenue and expenditure mid-cycle adjustment requests by fund type and amount.
TABLE 13: FY 2026/2027 MID-CYCLE ADJUSTMENT RECOMMENDATIONS Fund Category
Proposed FY 2026/27
Revenue Adjustments
Proposed FY 2026/27
Expenditure Adjustments
General Fund $402,335 $989,403
Quality of Life Fund (1,700,000) (1,700,000) Internal Service Funds (ISF) 140,000 177,072 Gas Tax & Other Special Revenue Funds 601,273 240,960 LLMD Funds 69,141 167,610 CFD Funds (Maintenance) 531,601 87,180
CSA Funds 26,636 13,316 DIF/Quimby/RBBD Funds 1,148,300 (150,000) Debt Service 50,000 37,500
Capital Projects Fund 0 5,736,152
Total Revenue/Expenditures $1,269,286 $5,599,193
Fund Category FY 2026/27 Transfers In
Adjustments
FY 2026/27 Transfers Out
Adjustments
Quality of Life Fund $0 $1,440,000
Gas Tax & Other Special Revenue Funds 0 4,296,152 Capital Projects Fund 5,736,152 0
Total Transfers In/Transfers Out $5,736,152 $5,736,152
Fund Category FY 2026/27 Revenue
Adjustments
FY 2026/27 Expenditure
Adjustments
CFD Funds
(Infrastructure & Fiduciary Funds) $1,392,182 ($6,543,311) TOTAL ALL FUNDS $8,397,620 $4,792,034
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ATTACHMENTS
1. Fund Balance Policy Revised (Redline)
2.Fund Balance Policy Revised (Clean)
3. Resolution - Revised Budget Adoption
4. Resolution - Gann Limit FY 2026/2027
5. Exhibit A - Gann Limit Calculation
6. Resolution - Authorized Position Listing & Salary Schedule
7. Exhibit A - Authorized Position Listing & Salary Schedule
8. Resolution - Revised CIP Budget Adoption