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Agenda Report
October 13, 2026
I TO: Honorable Mayor and City Council
THROUGH: Finance/Audit Committee
FROM: Finance Department
SUBJECT: APPROVE FISCAL YEAR 2026 GENERAL FUND EMERGENCY CONTINGENCY COMMITMENT OF $54,737,400 AND UP TO$18,245,800 IN THE GENERAL FUND OPERATING RESERVECOMMITMENT RECOMMENDATION:
It is recommended that the City Council:1. Find that that the proposed action is not a "project" subject to the California Environmental Quality Act (CEQA) pursuant to Section 21065 of CEQA and State CEQA Guidelines Sections 15060 (c)(2), 15060 (c)(3), and 15378, and, as such, no environmental document pursuant to CEQA is required.
2. Adopt a resolution approving the City of Pasadena General Fund Emergency Contingency commitment of $54,737,400 and General Fund Operating Reservecommitment of up to $18,245,800 (with the final amount to be determined uponconclusion of Fiscal Year (FY) 2026 financial statement preparation based solely on General Fund sub-fund 101 (Fund 101)).
BACKGROUND:As recommended by the Government Finance Officers Association best practices andto meet City Council's strategic planning objective of fiscal responsibility and stability, the City has established fund reserve goals. Maintaining adequate and prudent levels offund reserves mitigates current and future risks by protecting against reducing service levels or raising taxes or fees, because of temporary revenue shortfalls, unexpectedone-time expenditures, or natural disaster costs. Appropriate reserve levels aremonitored by rating agencies and play an essential role in safeguarding the City's bondratings. =
MEETING OF. 10/13/2026 AGENDA ITEM NO.
7 General Fund Emergency Contingency and Operating Reserve Commitment FY 2025 October 13, 2026
In FY 2017 the overall commitment of 20% was split between the General Fund Emergency Contingency (15%) and a General Fund Operating Reserve (5%).
The City's Fund Balance Policy follows Governmental Accounting Standards Board (GASB) Statement No. 54, which defines how governments classify fund balance. Thisstandard classifies fund balance into five categories: non-spendable, restricted,committed, assigned, and unassigned. It also requires formal action by the City Council to commit a fund balance annually, prior to fiscal year end and before the financial statements are audited.This action formally commits the full 15% FY 2026 General Fund Emergency Contingency Committed fund balance for $54,737,400 and the 5% General FundOperating Reserve of up to $18,245,800 with a recognition that the actual amount of theOperating Reserve may be less, to account for previously approved unreimbursedactivities.
The table below provides a comparison of the General Fund balances and includes the Section 115 Trusts for both pension and other post-employment benefits.
General Fund - Fund Balance Summary
FY 2025 FY 2026
15% Emergency Reserve
5% Operating Reserve
Sub-Total
Section 115 Trust - Pension
Section 115 Trust - OPEBTotal
51,292,500
17,097,500
68,390,000
14,273,745
2,704,003
54,737,40018,245,80072,983,200
8,337,7952,950,023
Change
3,444,900
1,148,300
4,593,200
(5,935,950)
246,020
$85,367,748 $84,271,018 ($1,096,730)
The City used a portion of its Section 115 Pension Trust Fund to help manage rising pension costs. The Trust Fund had grown to about $14.9 million through investmentearnings, in December of 2025, City Council approved using $7 million from the trust tomake an additional discretionary payment to CalPERS As part of the budget adoption for FY 2026, the City Council determined that the General Fund Emergency Contingency Commitment and Operating ReserveCommitment Calculations should be based on the current year appropriations solelyfrom the General Fund 101 excluding sub funds 102-108, which are specialized funds ofthe General Fund.
In order to qualify as a committed fund balance, a stabilization commitment of fund balance must clarify the circumstances under which the funds may be utilized. Thesecircumstances cannot occur routinely. Hence, the terms "extreme operational budgetdeficits" and "to mitigate the effects of major economic uncertainties resulting from General Fund Emergency Contingency and Operating Reserve Commitment FY 2025 October 13, 2026
events uncontrollable by the City" are used in the resolution to enact the Operating Reserve.
COUNCIL POLICY CONSIDERATION:
The City Council's strategic planning goal of maintaining fiscal responsibility and stability will be advanced by the commitment of General Fund Balance for EmergencyContingency and commitment of General Fund Balance for Operating Reserve.
ENVIRONMENTAL ANALYSIS:
The proposed action is not a project subject to the California Environmental Quality Act(CEQA) in accordance with Section 21065 ofCEQA and State CEQA GuidelinesSections 15060(c)(2), 15060(c)(3), and 15378. The approval of the commitment ofgeneral fund emergency contingency and general fund operating reserves is agovernment fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
Therefore, the proposed action is not a "project" subject to CEQA, as defined in Section21065 of CEQA and Section 15378 of the State CEQA Guidelines. Since, the action is not a project subject to CEQA, no environmental document is required.
General Fund Emergency Contingency and Operating Reserve Commitment FY 2025 October 13, 2026
FISCAL IMPACT:
For many years the General Fund has had surplus unassigned fund balance beyond the reserve commitments. With the strategic use of fund balance to fund capitalimprovement projects, the surplus funds have been expended or committed. The reserve commitments in the General Fund have already been appropriated in FY 2027.
There is no fiscal impact as a result of this action; however, the individual componentsthat make up the total fund balance are changed.
Respectfully submitted,
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KARIN SCHNAIDER
Director of Finance
Prepared by:
Armine Trashian
Controller
Approved by:
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MATTHEW E'HAWKESWORTH 1ATThEWE/HAl
Interim City Manager