October 20, 2026
Department
DATE: October 20, 2026
TO: Mayor Martinez and Members of the City Council
FROM: Mark Scott, Interim City Manager
Nickie Mastay, Deputy City Manager, Internal Services
Emily Combs, Director of Finance
Mubeen Qader, Deputy Director of Finance
Subject: Update on City Financial Reporting and Polluters Pay Settlement Funds Community Engagement Process
FINANCIAL IMPACT: There is no fiscal impact associated with receiving this informational report.
PREVIOUS COUNCIL
ACTION:
September 24, 2024
January 27, 2026
April 28, 2026
September 22, 2026
October 6, 2026
STATEMENT OF THE
ISSUE:
At its September 22 and October 6, 2026 meetings, the
City Council requested additional information regarding the City's financial condition, including an independent financial review, and the status of the Polluters Pay
Settlement funds and community engagement process.
This report provides an update on these matters in
response to Council direction.
RECOMMENDED ACTION: RECEIVE an informational report providing an update on the City of Richmond’s financial condition, the status of the independent financial review, the balance of the
Polluters Pay Settlement funds received from Chevron
and maintained in the General Fund pending future
allocation, and the status of the proposed Dalberg
Advisors contract to facilitate community engagement
AGENDA
REPORT
October 20, 2026
regarding the framework for expenditure of the settlement funds – Finance Department (Emily Combs 510-620-
6790)
DISCUSSION:
1. City Financial Report
In response to the October 6, 2026 City Council direction, Finance staff compiled the requested financial information and provided it to the City's municipal advisor, NHA, for independent review.
City staff met with NHA on October 13, 2026, to discuss the financial information and its presentation to City Council. Based on NHA's recommendation, staff are presenting a summary of the City's three most recent years of audited financial results, including revenues, expenditures, annual surpluses or deficits, and General Fund reserves. This approach provides a consistent comparison of finalized financial results while additional review of the more detailed financial information continues.
Summary of Audited Financial Results
The following table summarizes the City's audited General Fund financial results for FY 2022-23 through FY 2024-25.
Fiscal Year Revenues
($M)
Expenditures
($M)
Surplus /
(Deficit) ($M)
General Fund
Reserves
FY 2022-23 Audited $226.15M $213.04M $13.11M $55.2M (25%) FY 2023-24 Audited $240.08M $231.43M $8.65M $65.3M (26%) FY 2024-25 Audited $277.66M $278.49M ($0.82M) $62.8M (24%) Reserve percentages are calculated as a percentage of budgeted General Fund appropriations.
The City's audited financial results reflect surpluses in FY 2022-23 and FY 2023-24, followed by a modest deficit in FY 2024-25. Despite fluctuations in annual operating results, the City has maintained General Fund reserves above the City Council-adopted target of 21% of budgeted appropriations throughout the three-year period. At the end of FY 2024-25, General Fund reserves totaled approximately $62.8 million, representing 24% of budgeted appropriations.
October 20, 2026
While preliminary FY 2025-26 year-end results were presented to the City Council as part of the September 15, 2026 Quarter 4 (Q4) Financial Report, City staff are continuing to work with the City's independent auditors to complete the FY 2025-26 annual audit and finalize the Annual Comprehensive Financial Report (ACFR). The audited financial statements, ACFR, and final General Fund year-end results are expected to be presented to the City Council in March 2027. FY 2026-27 was challenged throughout the municipal world by the impacts of worldwide inflation on goods and services and by higher expectations for labor agreements. The City was successful in reaching agreement with most of its labor groups. Labor agreements tend to affect the year of adoption due to unbudgeted costs but they establish a clear budget requirement for future budget allocations. As a result, City staff’s preliminary Q4 projection anticipates a year-end negative operating balance, but the adopted FY 2026- 27 budget was adjusted accordingly to maintain the City’s 21% Reserve target.
Understanding the City’s General Fund Financial Forecast In evaluating the City's overall financial condition, it is important to distinguish historical financial results from projections of future financial conditions. While audited financial statements report actual revenues, expenditures, and reserves, multi-year financial forecasts help the City evaluate potential future trends and the long-term impacts of current budget and policy decisions.
The City prepares multi-year General Fund financial forecasts as part of its financial planning process, consistent with recommended best practices of the Government Finance Officers Association (GFOA). These forecasts are based on reasonable assumptions using the best information available at the time, including historical revenue and expenditure trends, economic conditions, personnel costs, pension obligations, and existing financial commitments.
A forecast is not intended to predict a particular outcome. Rather, it illustrates what could occur if current assumptions and trends continue. Projected deficits in future years do not necessarily mean those deficits will occur. Instead, they identify potential financial challenges and provide an opportunity for the City Council to evaluate priorities and consider adjustments through future budget processes.
Forecast assumptions are updated as new information becomes available and do not represent commitments to future expenditures or compensation increases. The forecast is a planning tool, not an adopted budget, and helps the City evaluate the long-term affordability of programs and services while supporting informed financial decisions.
City staff will continue working with NHA to review the additional financial information requested by Council and determine the most appropriate format for presenting that information clearly and consistently.
2. Status of Polluters Pay Settlement Funds
October 20, 2026
The City is scheduled to receive $550 million over ten years through the Polluters Pay Settlement with Chevron. The settlement provides for annual payments of $50 million during the first five years and $60 million during the remaining five years.
The City received its first payment in July 2025 (FY 2025-26) and its second payment in July 2026 (FY 2026-27). Each payment totaled $50 million. After the required 3% allocation to the Kids First Fund, the net General Fund proceeds total $48.5 million annually.
Settlement Payments and Estimated Balances Through September 30, 2026 Description FY 2025-26 FY 2026-27 Total
Gross settlement payments received $50,000,000 $50,000,000 $100,000,00
0 Less: Kids First allocation (3%) ($1,500,000) ($1,500,000) ($3,000,000) Net settlement proceeds $48,500,000 $48,500,000 $97,000,000 Unaudited interest earnings on settlement
funds $1,850,000 $850,000 $2,700,000
Estimated settlement balance $50,350,000 $49,350,000 $99,700,000 FY 2025–26 figures remain preliminary pending completion of the City's year-end closing process. FY 2026-27 interest earnings reflect amounts earned through September 30, 2026.
FY 2025-26 Preliminary Year-End Position
As of September 30, 2026, the City has received $100 million in gross settlement payments. After the required 3% allocation to the Kids First Fund, net settlement proceeds total $97 million. Including approximately $2.7 million in unaudited interest earnings, the combined estimated settlement balance is $99.7 million.
Of this amount, approximately $50.35 million is attributable to FY 2025-26, and $49.35 million is attributable to FY 2026-27. These amounts remain preliminary, with FY 2025- 26 figures subject to final reconciliation as the City completes its year-end closing process. The settlement funds are being maintained pending the community engagement process and subsequent City Council direction regarding their allocation.
3. Polluters Pay Settlement Community Engagement Process On September 24, 2024, the City Council adopted Resolution No. 105-24, expressing its intention to use settlement funds in a manner that supports a resilient and just local economy while reducing dependence on Chevron-related tax revenues.
On January 27, 2026, the City Council directed City staff to engage a consultant to facilitate community input regarding the framework for expenditure of settlement revenues. A Request for Proposals was issued on February 11, 2026.
October 20, 2026
On April 28, 2026, the City Council authorized the City Manager and City Attorney to negotiate and execute a contract with Dalberg Advisors to conduct the community engagement process.
Status of Consultant Contract
City staff recently met with Dalberg Advisors and are finalizing the proposed agreement to incorporate City Council feedback provided at the April 28, 2026 meeting. City staff anticipate returning to City Council on November 10, 2026, for consideration of the proposed contract.
As part of the November 10 presentation, Dalberg will present its proposed community engagement plan, including the anticipated timeline, outreach activities, and deliverables. The engagement process will provide opportunities for Richmond residents, businesses, and community organizations to identify priorities for the future use of settlement funds. Decisions regarding the allocation and expenditure of settlement funds will remain with the City Council.
NEXT STEPS
Finance staff will continue working with NHA to complete the independent review of the financial information requested by City Council. Staff will also continue coordinating with the City's independent auditors to finalize the FY 2025-26 Annual Comprehensive Financial Report (ACFR), with audited financial results expected to be presented to City Council in March 2027.
City staff anticipate returning to City Council on November 10, 2026, for consideration of the proposed agreement with Dalberg Advisors, including a presentation of the community engagement plan and anticipated timeline.
DOCUMENTS ATTACHED:
Attachment 1 - Presentation