Financial Forecast
February 2, 2026
What is a Forecast?
A financial forecast is a management tool based
upon a snapshot of today that presents estimated
information based on past, current, and projected
financial conditions. It will help identify future
revenue and expenditure trends that may have an
immediate or long-term influence on government
policies, strategic goals, or community services.
That snapshot, however, will be adjusted and the
further into the future the forecast extends, the
more likely it is that the projections will deviate
from actual experience.
What Can a Forecast Do or
Not Do?
The forecast is not able to predict with certainty the City’s fiscal future, rather it will serve as a tool to highlight significant issues or problems that must be
addressed if the City’s goal of maintaining fiscal
sustainability over the long term is to be achieved.
It is important to note that a forecast is not a budget.
It doesn’t make expenditure decisions but does assess
the need to prioritize the allocation of City resources.
The Flow of
Money
City of Merced receives revenue from a variety of
sources.
Some revenues may be used for any purpose-They are
discretionary or unrestricted.
Examples
Property Tax Tax on Construction
Sales Tax Business License Tax
Franchise Tax Transient Occupancy Tax
Real Property Tax Vehicle in Lieu
Primary Areas
Discretionary
Funds Are
Used
Fund 1000-General
Police and Fire
Parks Maintenance
Economic Development
Administration
Fund 3000-Development Services
Fund 1018-Parks and Community Services
Fund 6003-Airport
Internal Service Funds to the extent they provide
support to the above.
The Flow of Money
Some revenues are limited as to their use,
they are non-discretionary or restricted.
Examples
Federal and State Grants
Gas Tax
Water, Refuse & Wastewater Monthly
Charges
Utility Connection Charges
Proceeds from Loans
Assessments-CFDs & Maintenance
Districts
The Flow of Money
Due to various types of revenues different funds are used to track revenues and expenditures.
The City of Merced currently uses 211 separate funds for budget purposes.
Following Government Accounting Standards Board (GASB) pronouncements they are categorized into three main categories- governmental funds, proprietary funds, and fiduciary funds.
Economic
Factors
Unemployment
• Inflation
• Tariffs
• Interest Rates
• Uncertainty
Impacts to local cost of living
• Single Family Housing
• Multi-Family Housing
• Commercial/Retail
• Industrial
Construction
5 Year
Forecast-
Revenue
Assumptions
Projections based upon historical actuals, sales tax consultant-HdL, and general economic forecasts from the State of California and Investment Advisor.
Most Revenues 1-3% increase
Sales Tax 3% increase
Property Tax 5-6% increase
RDA Residual 2% increase
No new grant funding
Stop Gap Agreement with County for Fire Service-Expires 12/31/26 ($82k per Qtr)
Merced College, High School District, and Middle School contracts included.
Community Facility Districts, Development Services, and Construction Tax include projected building growth.
Parks and Community Program increases based on council approved fees in December 2025.
Annual savings $1,500,000
5 Year
Forecast-
Expenditure
Assumptions
Fiscal Year 25-26 Approved Budgets used as a Base
Core Budgets
No additional positions or programs
Estimated labor increases- MOU’s expire 2026-27
Benefits Insurance 10-11% increase
Workers Compensation 8% increase
General Liability Insurance 10-12% increase
CalPERS 29.2% to 50.4% increase
5 Year
Forecast-
Expenditure
Assumptions
Most Non-Personnel 2% increase
No new grant funded expenditures
No one time expenses
General Fund transfers to Parks & Community
Services 4% increase
General Fund transfers to Airport 4% increase or less
25% General Fund Reserve set aside included
What is not included?
PC Replacement
Costs
Fleet Replacement
Costs
On-going Economic
Development
Opportunity set aside
On-going Trust 115 set
aside
On-going Affordable
Housing Fund set
aside
Sales Tax
Steady
Fiscal
Year
General
Fund
Percent
Change
Measure
C
Percent
Change
2019-20 $12.9 1.4% $6.8 0.0%
2020-21 $15.3 18.2% $8.3 21.0%
2021-22 $17.1 11.5% $9.2 11.2%
2022-23 $16.7 (2.2%) $9.1 (0.7%)
2023-24 $16.6 (0.6%) $9.0 (0.9%)
2024-25 $16.8 0.8% $9.0 (0.6%)
2025-26B $17.0 (HdL) 1.4% $9.1 (Hybrid) 1.2%
*In Millions
Operating
Concerns
Fund 1000-General Fund
•Safer Grant-Expires FY March 12, 2027
•Approx. $3-4 million annually (24 FTE)
•County Fire Agreement expires FY 25-26
•CP42
•Maintenance Costs
•Expenditures outpacing Revenue (need additional revenue sources) Fund 1018-Parks and Recreation
•CalVIP Grant-Expired December 2025
•>$300k annually (1 FTE)
•Daniel Martin Foundation Contribution Expired 24-25
•$40k annually (.50 FTE)
•Measure Y Cannabis Tax continuing to decrease
•Will require additional General Fund support
Fund 6003 Airport Operations
•Expenditures outpacing Revenue-will require additional General Fund support
Fund 2500 Housing Administration
•Will require Affordable Housing Fund support for administrative costs
Cannabis Tax By Fiscal Year
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
2019/20A
2020/21A
2021/22A
2022/23A
2023/24A
2024/25A
2025/26B
Measure Y – Quarter over Prior Year Quarter – Net
Cannabis Tax To The City
4th Qtr 2020 to 3rd Qtr 2025 (net change)
-$400,000
-$300,000
-$200,000
-$100,000
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
4th
2020
1st
2021
2nd
2021
3rd
2021
4th
2021
1st
2022
2nd
2022
3rd
2022
4th
2022
1st
2023
2nd
2023
3rd
2023
4th
2023
1st
2024
2nd
2024
3rd
2024
4th
2024
1st
2025
2nd
2025
3rd
2025
Fund 1018 Parks and Community Services–Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
GF Transfer $ 1.78 $ 1.84 $ 1.92 $ 2.00 $ 2.08
Measure Y Transfer $0.75 $0.75 $0.75 $0.75 $0.75
Other Revenue $0.77 $0.83 $0.89 $1.01 $1.07
Total Revenue $3.30 $3.42 $3.56 $3.76 $3.90
% of Change from
Prior Year 1.56% 3.73% 4.10% 5.59% 3.66%
Expenditures $3.35 $3.43 $3.54 $3.64 $3.76
% of Change from
Prior Year 2.56% 2.49% 3.20% 2.93% 3.05%
Receipts over
Expense ($0.05) ($0.01) $0.02 $0.12 $ 0.14
Fund Balance ($0.04) ($0.05) ($0.03) $0.09 $0.23
*In Millions
Fund 3000 Development Services–Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
GF Transfer $ 0 $ 0 $ 0 $ 0 $ 0
Other Revenue $7.3 $7.7 $8.0 $8.4 $8.9
% of Change
from Prior Year 5.3% 4.8% 5.0% 5.2% 5.4%
Expenditures $8.8 $9.2 $9.5 $9.9 $10.3
% of Change
from Prior Year 6.6% 4.0% 4.4% 3.9% 4.0%
Receipts over
Expense ($1.5) ($1.5) ($1.5) ($1.5) ($1.4)
Fund Balance ($.07) ($1.5) ($3.0) ($4.5) ($5.9)
*In Millions
Fund 2001/2030 Measure C – Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Revenue $8.95 $9.13 $9.32 $9.52 $9.72
% of Change
from Prior Year (0.52%) 2.1% 2.1% 2.1% 2.1%
Expenditures $10.1 $10.5 $10.9 $11.3 $11.7
% of Change
from Prior Year (15.6%) 3.7% 4.6% 3.5% 3.6%
Receipts over
Expense ($1.1) ($1.3) ($1.6) ($1.8) ($1.9)
Fund Balance $1.22 ($0.09) ($1.7) ($3.5) ($5.4)
GFOA
Recommended $1.58 $1.63 $1.68 $1.73 $1.78
Difference
($0.36) ($1.73) ($3.37) ($5.19) ($7.23)
*In Millions
FTE = 34.79 Fire-11.3 Police-23.49
Fund 4502 CFD Fire – Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Revenue $1,426,384 $1,531,155 $1,641,106 $1,756,450 $1,877,415 % of Change from
Prior Year 10.70% 7.35% 7.18% 7.03% 6.89%
Expenditures $1,390,784 $1,425,785 $1,503,641 $1,575,301 $1,651,480 % of Change from Prior
Year 0.79% 2.52% 5.46% 4.77% 4.84%
Receipts over Expense $35,600 $105,370 $137,465 $181,149 $225,935 Fund Balance $233,667 $339,037 $476,502 $657,651 $883,586 Additional Permits
Estimated
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
Add/Absorb Positions
Current FTE=5.52 1
Fund 4503 CFD Police – Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Revenue $2,892,550 $3,105,160 $3,328,285 $3,562,358 $3,807,837 % of Change from Prior
Year 10.71% 7.35% 7.19% 7.03% 6.89%
Expenditures $2,658,841 $2,745,876 $2,856,160 $2,946,157 $3,042,750 % of Change from Prior
Year (19.93%) 3.27% 4.02% 3.15% 3.28%
Receipts over Expense
$233,709 $359,284 $472,125 $616,201 $765,087
Fund Balance $673,788 $1,033,072 $1,505,198 $2,121,399 $2,886,486 Additional Permits
Estimated
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
Add/Absorb Positions
Current FTE=10.21 1 1 1
Fund 4504 CFD Parks – Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Revenue $424,940 $434,517 $447,026 $455,083 $437,049
% of Change from Prior
Year (22.27%) 2.25% 2.88% 1.80% (3.96%)
Expenditures $654,301 $668,630 $690,416 $710,788 $732,063 % of Change from Prior
Year 3.56% 2.19% 3.26% 2.95% 2.99%
Receipts over Expense ($229,361) ($234,113) ($243,390) ($255,705) ($295,014) Fund Balance ($185,001) ($419,114) ($662,504) ($918,209) ($1,213,223) Additional Permits
Estimated
Current FTE= 2.25
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
SF 200
MF 150
Fund 6003 Airport – Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
GF Transfer $269,791 $404,605 $411,608 $411,499 $407,118 Other Revenue $592,229 $618,142 $648,589 $683,703 $725,549 Total Revenue $862,020 $1,022,748 $1,060,197 $1,095,202 $1,132,667 % of Change
from Prior Year (15.24%) 18.65% 3.66% 3.30% 3.42%
Expenditures $1,001,531 $1,022,748 $1,060,197 $1,095,202 $1,132,667 % of Change
from Prior Year (4.93%) 2.12% 3.66% 3.30% 3.42%
Receipts over
Expense ($139,511) $0 $0 $0 $0
Fund Balance $0 $0 $0 $0 $0
General Fund 1000 –Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Revenue $66.1 $66.5 $69.4 $72.3 $75.5
% of Change
from Prior Year (0.79%) .56% 4.25% 4.32% 4.41%
Expenditures $70.9 $72.9 $75.3 $77.3 $78.9
% of Change
from Prior Year 5.20% 2.76% 3.34% 2.65% 2.12%
Receipts over
Expense ($4.8) ($6.4) ($5.9) ($4.9) ($3.4)
25% Reserve Set
Aside $0 $0.35 $0.60 $ 0.50 $ 0.41
Estimated
Ending Balance $6.5 $1.2 ($3.8) ($ 7.8) ($10.1)
5% Reserve
Contingency $ 3.5 $ 3.6 $ 3.8 $3.9 $3.9
Fund Balance $ 3.0 ($2.4) ($7.6) ($11.7)
($14.0)
*In Millions
General
Fund
Average
Expenses
by
Percentage
Personnel
75%
Supplies &
Services
22%
Admin/DSC
0%
Debt
0%
Transfers
3%
General Fund Reserve1001 –Core
FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Transfer from the
General Fund $0 $0.35 $0.60 $ 0.50 $ 0.41
25% Reserve Set
Aside Total $17.9 $18.2 $18.8 $19.3 $19.7
*In Millions
Mitigation Options-2025
Option
Keep 3 Police Officers Vacant
Eliminate CalVIP Program
Increase Development Services Fees
No increase to Maintenance, Supplies, and
Services
No additions to Fleet only replacements
Evaluate the use of RDA and Trust 115
Revise the GF Reserve Policy
Outcome
FY 25-26 Budget added funding for the 3 Police Officers to Measure C.
In addition, moved 4 Public Safety positions from GF to Measure C.
Expired 12/31/25 and eliminated in budget and Forecast
In progress-to be presented to Council soon
Mostly no increases and some additional reductions.
Some additions were allowed
Added $1M in RDA residual
Reduced GF Reserve Policy from 35% to 30%-helped balance FY 25-26 budget
Mitigation Options-2026
Increase Development Services Fees
Increase Airport Fees
Form new CFD with revised Special Tax Rate
Manage increase to Maintenance Supplies and Services
Business License Audit and Tax Structure
Manage Fleet Additions
Continue to evaluate the use of additional RDA Residual and Trust 115 Evaluate Feasibility of a Ballot Measure
CalPERS Update
CalPERS-
Historical
Dec. 2016
Reduced Discount
Rate from 7.5% to 7%
•Three-year phase in (18-
21)
•Five Year Ramp Up (FY
18/19-22/23)
Dec. 2017
Reduce
Amortization from 30
years to 20 years
•Impact begins in FY 20-
21 (based on 6/30/19)
•Removes ramp down
2021
FY 20-21 21.3%
investment earnings
Reduced Discount
Rate from 7% to 6.8%
New Actuarial
Assumptions
2022
FY 21-22 (6.1%)
investment earnings
2023
FY 22-23 5.8%
investment earnings
2024
FY 23-24 9.3%
investment earnings
Reduction in
discount rate
triggered!
(Remained at 6.8%)
2025
FY 24-25 11.6%
(preliminary)
Investment earnings
New “Total Portfolio
Approach” adopted
CalPERS Update-Unfunded Liability
CalPERS Plan Miscellaneous Public Safety Total Percentage Accrued Liability $206,259,660 $224,631,262 $430,890,922 Market Value of Assets $141,832,630 $164,934,410 $306,767,040 71.19% Unfunded Accrued
Liability (UAL) $64,427,030 $59,696,852 $124,123,882 28.81% Based on CalPERS Annual Valuation Report as of June 30, 2024.
Trust 115 $8,173,949 1.9%
Balance as of June 30, 2025.
Unfunded Accrued Liability by Fund
Fund UAL % of UAL Trust 115
General Fund $63, 016,114 50.77% $4,330,353
Development Services * 7,373,497 5.94%
Parks and Recreation* 1,776,668 1.43%
Measure C* 9,741,286 7.85%
CFD-Fire 1,346,456 1.08%
CFD-Police 2,898,431 2.34%
CFD-Parks 309,363 0.25%
Airport* 654,496 0.53%
All Other Funds* 37,007,571 28.30% $3,843,596
Total $124,123,882 100% $8,173,949
*Likely to have additional General Fund liability.
CalPERS-Current Forecast Estimate
based on latest actuarial
Fiscal Year Citywide Cost General Fund Cost
2016/17 – Actual $6.4 Million $3.6 Million
2018/19Actual -
First Year of Impact
$8.3 Million $4.4 Million
2022-23 Actual-Last year of
5 Year Ramp Up
$12.7 Million (98%) $6.5 Million (84%)
2030/31-Forecast $21.3 Million $11.3 Million
% Increase 16/17 to 29/30 232% 216%
CalPERS-Current Forecast Estimate
based on latest actuarial
-
$3.7 $4.5 $5.5 $6.2 $7.2 $8.2 $8.2 $9.6 $10.7
$11.5
$12.4
$13.8
$14.1
$14.4
$6.4
$3.4
$3.8
$4.1 $4.3
$4.3
$4.5 $5.2
$6.0
$6.9
$6.9
$6.9
$6.9 $6.9 $16.9
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
16-17A 17-18A 18-19A 19-20A 20-21A 21-22A 22-23A 23-24A 24-25A 25-26P 26-27P 27-28P 28-29P 29-30P 30-31P Unfunded Accrued Liability Employer Normal Costs
Historical
CalPERS
Unfunded
Liability
-
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Based on CalPERS Annual Valuation Reports.
Questions?