Exhibit A
CITY OF PATTERSON
Mid-year Budget Review Report
Fiscal Year 2024/25
OVERVIEW
The City Council approved the Fiscal Year 2024/25 Adopted Budget on August 20, 2024. The MidYear Budget Status Report provides a tool for the City of Patterson (City) to monitor its finances and to prepare for the upcoming fiscal year budget process. This report provides an update of the City’s budgetary position approximately midway through the fiscal year, with updates based on the requested amendments.
The major components to this report include the following:
I. Economic Update
An economic update on National, State, and local trends provides context to the Fiscal Year 2024/25 Mid-Year Budget Status Report.
II. Fiscal Year 2024/25 Mid-year Budget Status Summary
This section of the report provides estimated Fiscal Year 2024/25 operating results based on current revenue and expenditure trends for the fiscal year.
III. Proposed Mid-year Budget Amendments
This section of the report includes proposed mid-year budget amendments for Fiscal Year 2024/25.
BACKGROUND AND ANALYSIS
I. ECONOMIC UPDATE
The economic conditions discussed below help inform the Fiscal Year 2024/25 Mid-year Budget Status Report.
National
Inflation continues to be a driver in the economy over the past year, but numbers indicate it may be slowing. As the national economy continues to recover from the COVID-19 pandemic, the Federal Reserve’s primary focus has been to rein in inflation. There has been a major shift in employment and priorities leading to a strong jobs market. Job creation remains strong and the national unemployment rate at 4.1%, which is up from 3.5% from a year earlier per the US Bureau of Labor Statistics as of March 7, 2025.
According to the statistics for the San Francisco Area as of December 2024, over the last 12 months the CPI-U advanced 2.4 percent. (See Chart 1 and Table A.) Food prices decreased 0.4 percent.
Energy prices increased 0.4 percent, largely the result of an increase in the price of electricity. Table A shows that the index for all items less food and energy rose 2.5 percent over the year.
NOTE: Area indexes do not measure differences in the level of prices between cities; they only measure the average change in prices for each area since the base period.
State
In January 2025, Governor Gavin Newsom released his Fiscal Year 2025/26 Proposed Budget, which projects a balanced budget. However, The Legislative Analyst Office is showing a budget with a roughly $2 billion deficit, but affirms that the Governor’s Budget is “roughly” balanced.
The tables and related information below are directly from “The 2025-26 Budget: California’s Fiscal Outlook” as published by the California Legislative Analyst Office in November 2024:
Legislative Action Last Year Addressed Anticipated Budget Problem Proactively. On net, our assessment of the budget condition finds the state would have a small deficit of $2 billion. Given the size and unpredictability of the state budget, we view this to mean the budget is roughly balanced. If a budget problem of this magnitude were to materialize by the end of the budget process in June, relatively minor budget solutions would be needed.
State Faces Annual Multiyear Deficits of Around $20 Billion.
Figure 5 shows our forecast of the multiyear condition of the budget. While the budget is roughly balanced in the upcoming fiscal year, the state faces annual operating deficits beginning in 2026-27—growing from about $20 billion to about $30 billion. Although highly uncertain, these represent additional budget problems the Legislature would need to address in the coming years, for example by reducing spending, increasing taxes, shifting costs, or using more reserves. The magnitude of these deficits also indicates that, without other changes to spending or revenues, the state does not have capacity for new commitments.
Remaining Reserves Could Cover Much of Deficit in 2026-27.
The state has faced significant budget problems over the last two years—by our estimate, a $27 million deficit in 2023-23 and a $55 billion deficit in 2024-25 (excluding early action taken this year). Yet, over this time, the Legislature did not use much of the state’s reserves. Under our outlook, even assuming the state uses $7 billion in reserves in 2025-26, nearly $11 billion would remain in the BSA. Assuming the Legislature also suspended the otherwise required deposit in 2026-27, the state could cover about two-thirds of that year’s budget problem with reserves alone. However, in years thereafter, the state would need to make other changes to address the shortfalls. The State’s budget shortfalls could have potential impacts to city revenues, primarily in the form of grants and loans.
Faster Than Normal Spending Growth Contributing to Deficits. One reason the state faces operating deficits is growth in spending. Our estimate of annual total spending growth across the forecast period—from 2025-26 to 2028-29—is 5.8 percent (6.3 percent excluding K-14 education).
By historical standards, this is high. For example, in our last five Fiscal Outlooks, the total annual spending growth rate was 3.5 percent and only 3 percent for spending excluding K-14 education.
While there are always idiosyncrasies in spending patterns that can influence these growth rates—for example, the timing of one-time spending reductions or anomalies in federal funding— the increase in this growth is contributing to the state’s multiyear deficits.
Revenues Are Unlikely to Grow Fast Enough to Catch Up to Spending. The state typically faces a deficit when spending exceeds revenues in the budget window and an operating deficit when spending exceeds revenue in future years. An operating deficit—like the ones we currently anticipate—can arise either because of a difference in the levels of revenues and spending (a stable gap over time) or a difference in growth rates (a gap that grows over time). Both are an issue currently, as seen in Figure 7. Our forecasted spending growth is about 6 percent over the forecast period—a growth rate that is high by historical outlook standards and slightly above what we consider to be long-term revenue growth. Meanwhile, revenue growth over the outlook window is just above 4 percent— this is lower than its historical average largely due to policy choices, namely the limitations on deductions and credits that end during the forecast window. Taken together, we view it as unlikely that revenue growth will be fast enough to catch up to ongoing spending. This means that although the state does not face much of a budget problem this year, in the coming years, legislative action could be necessary to close this gap.
Oversight Key to Budget Management. Understanding which programs are working well and those which are in need of adjustment is a key starting place for considering future budget solutions. As we anticipate future budget problems are more likely than not, we recommend the Legislature conduct robust oversight of programs this budget season. Doing so can provide the Legislature necessary insight for whether the administration is implementing programs according to legislative intent as well as whether programs are achieving the desired outcomes.
Particularly given the significant program expansions in recent years and the state’s constrained fiscal capacity, the Legislature now has a key opportunity—if not a necessity—to assess the efficiency, effectiveness, equity, and priority of some of its recent augmentations and longerstanding programs.
Local
The City continues to see strong economic growth over the last several years. The City of Patterson remains focused on new business opportunities and residential growth, including amenities for our residents. Factors that will impact our economic strength are the online sales which, in some instances, do not provide the city with a “point-of-sale” taxable nexus. The city has a diverse revenue structure and can continue to benefit from Measure L, SB1 revenue, new businesses such as the Loves Travel Center, Valero Gas Station, Grocery Outlet, Popeyes Chicken, and other interested businesses.
The City’s water, sewer, and garbage rates were approved in the last few years and will provide stable enterprise funding to provide a high level of infrastructure maintenance in these areas. An update to the City’s garbage rates is underway, and sewer rates are slated to be updated next.
Our budget provides for a continuation of high levels of service, capital improvement projects provided by grants and Capital Facility fees, and continued funds to further improve the City and maintain public safety staffing, and new programs to enhance community quality of life for our city’s residents.
Several new businesses are coming to Patterson include one new industrial Warehouse (1,000,000 sf), a 120,000 sf furniture manufacturing company, Old Water Office Restaurant, just to name a few. A new Javi’s restaurant was also recently opened in the Historic downtown core and is currently open for business.
The city is fortunate that sales tax remains consistent in FY2025, but projections are showing a decrease from the adopted budget by $70 thousand. The major contributing factors for the consistent sales tax revenues is primarily due to ongoing on-line sales, agricultural products sales, and a diverse business portfolio.
II. FISCAL YEAR 2024-25 MID-YEAR BUDGET STATUS SUMMARY
The Mid-Year Budget Status Report represents staff’s best estimate of the City’s budgetary position at approximately midway through the fiscal year, based on activity to date, and making certain adjustments for revenues and expenditures as requested for the remainder of the fiscal year.
This section of the report includes a discussion of Fiscal Year 2024/25 revenue and expenditure estimates compared to budget for the General Fund and Enterprise Utility Funds.
A comparison of mid-year estimated amounts to budget for the General Fund follows:
General Fund (Funds 100, 101, 102, 103, 105, 111)
Adopted Budget
Prior Budget
Adjustments and
Budget Rollovers Adjusted Budget
Six Months of Salary
Savings / Salary
Adjustments CAP Implementation Mid-Year Requests FY25 Budget Estimate Revenues
Recreation Programs (228,390.00) - (228,390.00) - - - (228,390.00) Taxes (21,390,297.16) - (21,390,297.16) - - 70,000.00 (21,320,297.16) Licenses & Permits (1,796,132.96) - (1,796,132.96) - - - (1,796,132.96) Intergovernmental (1,287,882.60) - (1,287,882.60) - - - (1,287,882.60) Charges for Services (154,780.00) - (154,780.00) - - - (154,780.00) Fines & Forfeitures (96,000.00) - (96,000.00) - - - (96,000.00) Investment Earnings (744,576.62) - (744,576.62) - - - (744,576.62) Reimbursement - - - - - (528,040.01) (528,040.01)
Other Revenues (158,600.00) - (158,600.00) - - - (158,600.00) Transfers In (15,263,313.87) - (15,263,313.87) - 674,896.65 (190,528.53) (14,778,945.75) Revenue Total $ (41,119,973.21) $ - $ (41,119,973.21) $ - $ 674,896.65 $ (648,568.54) $ (41,093,645.10) Expenses
Salaries & Wages 10,545,293.26 (5,000.00) 10,540,293.26 (394,371.68) 506,686.13 - 10,652,607.71 Benefits 5,047,928.57 - 5,047,928.57 - 220,113.33 - 5,268,041.90 Professional & Contracted Serv 10,992,345.39 (168,047.31) 10,824,298.08 - - 85,772.50 10,910,070.58 Repair & Maintenance 333,526.00 24,799.25 358,325.25 - - 10,000.00 368,325.25 Materials & Supplies 605,563.00 209,975.04 815,538.04 - - - 815,538.04 Other Services & Charges 1,955,733.96 233,214.69 2,188,948.65 - - - 2,188,948.65 Recreation Programs 137,600.00 - 137,600.00 - - - 137,600.00 Capital Outlay 644,389.00 5,000,110.16 5,644,499.16 - - 40,000.00 5,684,499.16 Debt Service 453,792.09 - 453,792.09 - - - 453,792.09
Rentals 251,214.51 1,500.00 252,714.51 - - - 252,714.51 Transfers Out 17,615,352.31 - 17,615,352.31 - 27,066.00 (438,995.00) 17,203,423.31 Expense Total $ 48,582,738.09 $ 5,296,551.83 $ 53,879,289.92 $ (394,371.68) $ 753,865.47 $ (303,222.50) $ 53,935,561.21 Grand Total $ 7,462,764.88 $ 5,296,551.83 $ 12,759,316.71 $ (394,371.68) $ 1,428,762.12 $ (951,791.04) $ 12,841,916.11 Projected Available Fund Balance at 6/30/2025 at Budget Adoption $ 1,516,543.00 Increase/(Decrease) in FY25 Projected Fund Balance based on Actual FY24 Results $ 987,730.87 Projected Available Fund Balance at 6/30/2025 with updated FY2024 Actuals $ 2,504,273.87 Total Proceeds/(Cost) of Proposed FY2025 Approved Budget Actions $ (64,440.56) Total Proceeds/(Cost) of Proposed FY2025 Mid-Year Actions $ (82,599.40) Projected Available Fund Balance at 6/30/2025 with FY25 Mid-Year Actions $ 2,357,233.91 Purchase Order Rollovers already accounted for in Fund Balance $ 1,722,861.60 CIP Rollovers Already accounted for in Fund Balance $ 3,509,249.67 • The FY 24/25 expenditure budget includes expenditures related to Capital Projects approved in the prior fiscal year and transfers out to other funds to cover deficits. These factors combined explain are the major contributions to the expenditure budget exceeding revenues. • Adjusted Budget includes staff Mid-year Budget recommendations previously approved by the City Manager or through prior Council action, and rollover of budgets from purchase orders and capital projects.
General Fund
Total requested budget adjustments for mid-year include a decrease in revenue estimates in the amount of $26 thousand due to a combination of factors including the implementation of the Cost Allocation Plan which shows a decrease in transfers in from the Utility Funds, the correction of transfers in from CFD Maintenance Funds for the reimbursement of salaries, and an adjustment to show reimbursements from developers on associated costs. The total offsetting expenditure requests are $82 thousand.
Revenues
Estimated results of the major revenue categories, Property Taxes and Sales Tax are trending slightly lower than budget, but not materially. Taxes represent the major sources of revenue for the City including property taxes, sales taxes and other local taxes.
A detailed discussion of major revenue categories is as follows:
Property Taxes are the second largest single source of revenue for the General Fund. Property tax revenue is based on the assessed valuation of property in the City. Current fiscal year projections are expected to not change from the original budget. As a result, no amendment is proposed for FY 2024/25.
Sales Tax revenues are the largest source of revenue for the General Fund. Despite the slowing economy, consumer spending has remained relatively steady, although slightly below the pace forecast in the original budget. As a result, our sales tax projections are coming in approximately $70 thousand less than originally predicted.
Below are HdL reports showing the Sales Tax by Major Industry Group as well as the trends for the past few years:
Reimbursements are estimated at $528 thousand higher than the adopted budget, primarily due carried forward expenses from the prior year. The increase in reimbursements is needed as only the cost portion was carried over to FY25.
Transfers In are estimated to decrease in total by $484 thousand. The Mid-year budget contains two separate items that are affecting the Transfers into the General Fund. First, the General Fund is anticipating to lose $674 thousand in transfers from the Utility Funds as the Cost Allocation Plan is implemented. Secondly, Transfers into the General Fund are increasing by the amount of $190 thousand from CFD Maintenance funds to reimburse for Salaries and Benefits.
In addition, the current predictions about the falling interest rate environment for the remainder of the fiscal year indicate that the city will experience large end of year fair market value adjustment gains in the investment portfolio that will positively impact the surplus at the end of the fiscal year. While this amount is not factored into the Mid-Year Budget adjustments, the result will positively contribute to this year’s final ending balances that will be made available for future budget needs.
Expenditures
The underspending of expenditures, or budget savings, are expected each fiscal year due to vacant positions and other budgeted expenditures not incurred during the fiscal year. Total estimated expenditures are $53.9 million, approximately $56 thousand more than the Adjusted Budget.
A brief explanation of the assumptions and major changes in expenditures follows:
Salaries and Benefits expenditures are estimated at $15.92 million, approximately $332 thousand higher than the adjusted budget. Savings in Salaries & Wages are expected at the end of the year as not all positions are filled for the entire fiscal year, but due to Council direction, certain positions were held vacant to give the City more time to determine available fund balance. We are currently estimating the aggregate savings from freezing vacant positions amounts to approximately $394 thousand dollars for the six months ending December 31, 2024. Additionally, it is the intention of staff to implement the completed Cost Allocation Plan. In order to fully implement, certain positions that were directly charged to other funds are now being reallocated to the General Fund for a total estimated cost of $726 thousand.
Professional & Contracted Services are estimated at approximately $85 thousand higher than the adjusted budget, due to the increase in cost to complete the update of the City’s Housing Element .
Repairs and Maintenance expenditures are estimated at $368 thousand, $10 thousand more than the adjusted budget. The increase in repairs and maintenance is for work that needs to be completed and Fire Station #51.
Capital Outlay expenditures are estimated at $5.6 million, $40 thousand more than the adjusted budget. The increase in capital outlay is to replace the perimeter fencing at the current site of the Police Department.
Transfers Out The projected decrease in transfer out of the General Fund of $438 thousand is directly attributed to how Fund 190 (CFD2003-1 Fire Station #2) performed in FY24. The fund’s deficit was as large as originally projected, so the subsidy from the General Fund is able to be reduced.
Total combined General Fund budget amendments result in a net negative Mid-Year change of approximately $82 thousand.
Overall, the General Fund’s projected available balance at June 30, 2025 is predicted to be $2.3 million. This is $840 thousand more than projected at the time of the FY2024/25 budget adoption.
The General Fund out performed initial projections, but it is critical that the budget is actively managed to ensure that gains to available fund balance are not lost.
Enterprise Utility Funds
The City’s three enterprise utility funds (Garbage, Sewer and Water) are funded by the rates charged to customers. A rate study for each of the utilities is performed every 5 years, with rates modifications developed for the 5-year period. The rates are designed to comply with Article 13D of the California Constitution and to a) recover the City’s cost of providing water, sewer or garbage services, and b) allocate costs in proportion to the cost for serving each customer class.
Garbage Fund
This fund accounts for all financial transactions relating to the City’s garbage services. Services are on a user charge basis to residents and business owners located in Patterson. The city operates and maintains a solid waste system that serves approximately 7,000 customers, primarily residential. The City contracts with a third party to collect and dispose of its solid waste and has a contract with the County of Stanislaus to use its solid waste disposal sites.
A comparison of mid-year estimated amounts to budget for the Garbage Fund:
• Adjusted Budget includes staff Mid-year Budget recommendations previously approved by the City Manager or through prior Council action and any approved carryovers from prior fiscal years.
The last Solid Waste Rate study was done in 2019 and proposed rate increases of 4.9% each fiscal year from FY 2019/20 through FY 2023/24. Staff is currently working on updating the Solid Waste rates through the update of the Solid Waste Rate Study.
Estimated expenditures of $4.9 million are about $552 thousand less than the adopted budget primarily due to estimated six months of salary savings ($90 thousand) and the implementation of the Cost Allocation Plan ($ 488 thousand).
The Solid Waste Fund’s projected available working capital at June 30, 2025 is estimated to be negative $285 thousand. For the Solid Waste Fund, the negative working capital amount means reserves are being used in the current fiscal year to fund operations by $285 thousand. Once the Solid Waste Fund (Fund 600)
Adopted Budget
Prior Budget
Adjustments and
Budget Rollovers Adjusted Budget
Six Months of Salary
Savings / Salary
Adjustments CAP Implementation Mid-Year Requests FY25 Budget Estimate Revenues
Taxes (44,530.00) - (44,530.00) - - - (44,530.00)
Intergovernmental (4,320.00) - (4,320.00) - - - (4,320.00) Charges for Services (4,401,882.14) - (4,401,882.14) - - - (4,401,882.14) Investment Earnings (32,082.58) - (32,082.58) - - - (32,082.58) Other Revenues (120,402.00) - (120,402.00) - - - (120,402.00) Transfers In - - - - - - -
Revenue Total $ (4,603,216.72) $ - $ (4,603,216.72) $ - $ - $ - $ (4,603,216.72) Expenses
Salaries & Wages 1,063,604.45 - 1,063,604.45 (90,760.86) (56,504.90) - 916,338.69 Benefits 470,460.03 - 470,460.03 - (28,146.70) - 442,313.33 Professional & Contracted Serv 3,193,422.00 24,287.55 3,217,709.55 - - - 3,217,709.55 Repair & Maintenance 13,400.00 62.77 13,462.77 - - - 13,462.77 Materials & Supplies 42,517.00 1,762.71 44,279.71 - - - 44,279.71 Other Services & Charges 19,800.00 - 19,800.00 - - - 19,800.00 Capital Outlay 5,000.00 - 5,000.00 - - - 5,000.00
Debt Service - - - - - - -
Rentals 11,450.00 - 11,450.00 - - - 11,450.00
Transfers Out 689,205.66 - 689,205.66 - (403,487.66) - 285,718.00 Expense Total $ 5,508,859.14 $ 26,113.03 $ 5,534,972.17 $ (90,760.86) $ (488,139.26) $ - $ 4,956,072.05 Grand Total $ 905,642.42 $ 26,113.03 $ 931,755.45 $ (90,760.86) $ (488,139.26) $ - $ 352,855.33 Projected Available Working Capital at 6/30/2025 at Budget Adoption $ (1,005,840.09) Increase/(Decrease) in FY25 Projected Available Working Capital based on Actual FY24 Results $ 141,906.61 Projected Available Working Capital at 6/30/2025 with updated FY2024 Actuals $ (863,933.48) Total Proceeds/(Cost) of Proposed FY2025 Approved Budget Actions $ - Total Proceeds/(Cost) of Proposed FY2025 Mid-Year Actions $ 578,900.12 Projected Available Working Capital at 6/30/2025 with FY25 Mid-Year Actions $ (285,033.36) Purchase Order Rollovers already accounted for in Working Capital $ 26,113.03 CIP Rollovers Already accounted for in Working Capital $ - Projected Reserve Balance at 6/30/2025 $ 1,694,396.04
Projected Available Working Capital without Reserve at 6/30/2025 with FY25 Mid-Year Actions $ 1,409,362.68 new rates are passed, the Solid Waste Fund should be able to fund its operations going forward and will be able to replenish the reserve amount.
Sewer Fund
This fund accounts for all financial transactions relating to the City’s wastewater collection and treatment. The city provides wastewater service to approximately 7,000 customers, on a user charge basis. The majority are single family residents, and approximately 595 customers in Diablo Grande. The city owns, operates, and maintains its own wastewater system which includes a treatment plant, three lift stations, and a collection system.
A comparison of mid-year estimated amounts to budget for the Sewer Fund follows:
• Adjusted Budget includes staff Mid-year Budget recommendations previously approved by the City Manager or through prior Council action and any approved carryovers from prior fiscal years.
The 2020 Sewer Rate study proposed rate increases of 6% each year. The first increase was effective January 1, 2022, subsequent rates are effective each July 1 through July 1, 2025. Total revenues are estimated to only slightly change from the originally adopted budget of $10.1 million, and estimated expenditures of $11.9 million are approximately $269 thousdand less than the Sewer Fund (Funds 605, 606, 607)
Adopted Budget
Prior Budget
Adjustments and
Budget Rollovers Adjusted Budget
Six Months of Salary Savings /
Salary Adjustments CAP Implementation Mid-Year Requests FY25 Budget Estimate Revenues
Licenses & Permits - - - - - - -
Intergovernmental - - - - - - -
Charges for Services (6,021,043.45) - (6,021,043.45) - - - (6,021,043.45) Fines & Forfeitures - - - - - - -
Investment Earnings (17,495.46) - (17,495.46) - - - (17,495.46) Other Revenues (155,114.00) - (155,114.00) - - (1,600.00) (156,714.00) Transfers In (3,601,434.02) (359,793.00) (3,961,227.02) - - - (3,961,227.02) Revenue Total $ (9,795,086.93) $ (359,793.00) $ (10,154,879.93) $ - $ - $ (1,600.00) $ (10,156,479.93) Expenses
Salaries & Wages 2,407,006.65 - 2,407,006.65 (58,389.25) (230,560.02) 7,150.00 2,125,207.38 Benefits 1,250,196.37 - 1,250,196.37 - (98,570.01) - 1,151,626.36 Professional & Contracted Serv 1,144,886.00 28,223.15 1,173,109.15 - - - 1,173,109.15 Repair & Maintenance 240,200.00 34,736.54 274,936.54 - - - 274,936.54 Materials & Supplies 275,350.00 7,185.25 282,535.25 - - - 282,535.25 Other Services & Charges 238,968.00 1,600.00 240,568.00 - - - 240,568.00 Capital Outlay 744,850.00 456,269.31 1,201,119.31 - - 196,000.00 1,397,119.31 Debt Service 832,682.21 - 832,682.21 - - - 832,682.21
Rentals 110,300.00 - 110,300.00 - - - 110,300.00
Transfers Out 4,209,864.26 937.00 4,210,801.26 - (83,764.18) - 4,127,037.08 Expense Total $ 11,454,303.49 $ 528,951.25 $ 11,983,254.74 $ (58,389.25) $ (412,894.21) $ 203,150.00 $ 11,715,121.28 Grand Total $ 1,659,216.56 $ 169,158.25 $ 1,828,374.81 $ (58,389.25) $ (412,894.21) $ 201,550.00 $ 1,558,641.35 Projected Available Working Capital at 6/30/2025 at Budget Adoption $ (3,358,689.91) Increase/(Decrease) in FY25 Projected Available Working Capital based on Actual FY24 Results $ 377,854.95 Projected Available Working Capital at 6/30/2025 with updated FY2024 Actuals $ (2,980,834.96) Total Proceeds/(Cost) of Proposed FY2025 Approved Budget Actions $ - Total Proceeds/(Cost) of Proposed FY2025 Mid-Year Actions $ 269,733.46 Projected Available Working Capital at 6/30/2025 with FY25 Mid-Year Actions $ (2,711,101.50) Purchase Order Rollovers already accounted for in Working Capital $ 168,221.25 CIP Rollovers Already accounted for in Working Capital $ 937.00 Projected Reserve Balance at 6/30/2025 $ 1,950,072.11
Projected Available Working Capital without Reserve at 6/30/2025 with FY25 Mid-Year Actions $ (761,029.39) originally adopted budget. The three main factors contributing to the reduction in budget are six months worth of salary savings (savings of $58 thousand), the implementation of the Cost Allocation Plan (savings of $412 thousand) and new requests in the amount of $203 thousand.
The Sewer Fund’s projected available working capital at June 30, 2025 is estimated to be negative $2.7 million. The reserve for the Sewer Fund is currently sitting at $1.9 million. Once the reserves are added back to the deficit, the Sewer Fund has a negative working capital of $761 thousand.
The main factor causing the Sewer Fund’s deficit are delinquent amounts owed for services provided. Currently the amount owed to the Sewer Fund is approximately $3.1 million, and staff is working with legal counsel to resolve this matter. Due to the critical need for the infrastructure of this fund, operations must continue. In 2024, City Council adopted a resolution that allows the Utility Funds to borrow against the General Funds reserve in times of needs. A separate report and resolution will be brought to Council if it is determined that the Sewer Fund is in need of such a loan to continue operations.
Water Fund
This fund accounts for all financial transactions relating to the City’s water service. Services are on a user charge basis to residents and business owners in Patterson. The city owns and operates its own water system and provides service to approximately 7,400 customers. Groundwater wells are the City’s sole source of water supply. The city operates nine wells and three water storage facilities. The city continues to invest in expanding its water infrastructure to meet the demands of rapid population growth.
Comparison of mid-year estimated amounts to budget for the Water Fund can be found on the next page:
• Adjusted Budget includes staff Mid-year Budget recommendations previously approved by the City Manager or through prior Council action and any approved carryovers from prior fiscal years.
Total revenues are estimated at $19.7 million, slightly higher than originally budgeted due to an increase for Transfers in. The latest water rate study was completed in 2022 and recommended overall rate increases of 2.0% each year over the next five years. Rate increases are proposed to be effective January 1 of each year. In the rate study, a survey was conducted comparing the typical water bills of regional agencies. Based on the survey performed, Patterson’s typical monthly residential water bill is in the middle range in the region.
Total expenditures are estimated at $25.3 million, $761 thousand less than the Adjusted Budget primarily due to six months worth of salary savings ($182 thousand), implementation of the Cost Allocation Plan ($585 thousand), and one Mid-year request of $7,150.
At June 30, 2025 the Water fund has an estimated available working capital in the amount of $7.1 million.
Water Fund (Funds 610, 611, 612)
Adopted Budget
Prior Budget
Adjustments and
Budget Rollovers Adjusted Budget
Six Months of Salary Savings /
Salary Adjustments CAP Implementation Mid-Year Requests FY25 Budget Estimate Revenues
Intergovernmental - - - - - - -
Charges for Services (7,477,298.03) - (7,477,298.03) - - - (7,477,298.03) Fines & Forfeitures - - - - - - -
Investment Earnings (276,262.71) - (276,262.71) - - - (276,262.71) Reimbursement - - - - - - -
Other Revenues (2,341,497.71) - (2,341,497.71) - - - (2,341,497.71) Transfers In (9,178,533.04) (431,000.00) (9,609,533.04) - - - (9,609,533.04) Revenue Total $ (19,273,591.49) $ (431,000.00) $ (19,704,591.49) $ - $ - $ - $ (19,704,591.49) Expenses
Salaries & Wages 2,533,874.86 - 2,533,874.86 (182,937.62) (219,621.22) 7,150.00 2,138,466.03 Benefits 1,386,884.99 - 1,386,884.99 - (93,396.63) - 1,293,488.36 Professional & Contracted Serv 836,020.00 20,109.82 856,129.82 - - - 856,129.82 Repair & Maintenance 210,150.00 2,510.77 212,660.77 - - - 212,660.77 Materials & Supplies 418,467.00 29,935.12 448,402.12 - - - 448,402.12 Other Services & Charges 1,022,615.00 - 1,022,615.00 - - - 1,022,615.00 Capital Outlay 1,421,050.00 6,538,906.97 7,959,956.97 - - - 7,959,956.97 Debt Service 1,202,517.86 - 1,202,517.86 - - - 1,202,517.86 Rentals 28,150.00 - 28,150.00 - - - 28,150.00
Transfers Out 9,985,028.75 431,000.00 10,416,028.75 - (272,235.71) - 10,143,793.04 Expense Total $ 19,044,758.46 $ 7,022,462.68 $ 26,067,221.14 $ (182,937.62) $ (585,253.56) $ 7,150.00 $ 25,306,179.97 Grand Total $ (228,833.03) $ 6,591,462.68 $ 6,362,629.65 $ (182,937.62) $ (585,253.56) $ 7,150.00 $ 5,601,588.48 Projected Available Working Capital at 6/30/2025 at Budget Adoption $ 8,223,276.77 Increase/(Decrease) in FY25 Projected Available Working Capital based on Actual FY24 Results $ 1,573,296.95 Projected Available Working Capital at 6/30/2025 with updated FY2024 Actuals $ 9,796,573.71 Total Proceeds/(Cost) of Proposed FY2025 Approved Budget Actions $ (3,363,281.95) Total Proceeds/(Cost) of Proposed FY2025 Mid-Year Actions $ 761,041.17 Projected Available Working Capital at 6/30/2025 with FY25 Mid-Year Actions $ 7,194,332.93 Purchase Order Rollovers already accounted for in Working Capital $ 2,812,125.91 CIP Rollovers Already accounted for in Working Capital $ 416,054.82 Projected Reserve Balance at 6/30/2025 $ 2,158,348.56
Projected Available Working Capital without Reserve at 6/30/2025 with FY25 Mid-Year Actions $ 9,352,681.49 III. RECOMMENDED MID-YEAR BUDGET ADJUSTMENTS
The mid-year budget review provides an opportunity for the city to adjust the budget to recognize unanticipated revenues and costs and to propose expenditures to address high-priority community and operational needs. Any proposed adjustments are made with consideration of the resources needed to provide services to the public and the fiscal capacity to fund this level of resources. Each department continuously reviews its programs and operations, as well as changing economic conditions and emerging community needs.
A complete listing of all recommended increases is included as an attachment.