City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2025-01884 11/18/2025
First Quarter Financial Report - Fiscal Year (FY) 2025/26 File ID: 2025-01884
Location: Citywide
Recommendation: Receive and file.
Contact: Mirthala Santizo, Budget Manager, (916) 808-5078, [email protected], Department of Finance
Presenter: None
Attachments:
1-Description/Analysis
2-First Quarter Financial Report
Description/Analysis
Issue Detail: The purpose of the quarterly report is to provide the City Council with timely information regarding the City’s current financial condition. The attached report provides an update on the City’s major revenues and department expenditures through the first quarter of FY2025/26 (Attachment 1).
Policy Considerations: The quarterly financial reporting to the City Council is intended to provide an overview of the City’s financial status consistent with Section 61 of the City Charter.
Economic Impacts: Not applicable.
Environmental Considerations:
California Environmental Quality Act (CEQA): This report concerns administrative activities and government fiscal activities that do not constitute a “project” as defined by the CEQA Guidelines Sections 15378(b)(2) and 15378(b)(4) and are not subject to the provisions of CEQA (CEQA Guidelines 15060(c)(3)). CEQA review for any project, which utilizes funds allocated in this report, has been or will be performed in conjunction with planning, design, and approval of each specific project as appropriate.
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: The City Manager is responsible for reporting in accordance with the authority granted by Section 61 of the City Charter.
File ID: 2025-01884 11/18/2025
Financial Considerations: The quarterly report reflects the City’s continuing need to actively monitor revenues and manage expenditures. Finance staff will continue to work with all department staff toward achieving budgetary goals over the remainder of the fiscal year.
Local Business Enterprise (LBE): No goods or services are being purchased under this report.
Exhibit A
Quarterly Financial Report Quarter Ended 09/30/2025
1 OVERVIEW
The Fiscal Year (FY) 2025/26 Approved Budget
(Budget) includes $1.7 billion and 4,984.83 authorized
full-time equivalent (FTE) positions from all funding
sources. The breakdown is as follows:
General Fund1 - $873 million and 3,735.06 FTE
Enterprise Funds2 - $460 million and 946.78 FTE
Internal Service Funds3 - $147 million and 118.00 FTE Other Governmental Funds4 - $195 million and 184.99
FTE
GENERAL FUND
The following graphs represent the City’s General Fund
approved revenue and expenditure budgets for
FY2025/26.
FY2025/26 General Fund Revenues
$838.7 Million
1 General Fund - the City’s principal operating fund s, including Measure U Fund, supported by taxes and fees.
2 Enterprise Funds - operations supported through user fees including the Community Center, Parking, Solid Waste, Storm Drainage, Wastewater, and Water Funds.
3 Internal Service Funds - internal operations, e.g., Fleet Management and Risk.
FY2025/26 General Fund Expenditures
$872.5 Million
Charter: City Attorney, Auditor, Clerk, Manager, and Treasurer Operations: Community Development , Community Response, Convention and Cultural Services, Public Works, Utilities, Youth, Parks & Community Enrichment
Support: Finance, Human Resources, and Information Technology Citywide: Debt, Property Taxes, and Insurance
General Fund Financial Condition
The follo wing chart reflects the Budget and actual
expenditures for all activities in the General Fund (e.g., department operations, debt service, capital projects)
through September 30, 2025.
The development of the Budget remained challenging
as the City continues to address a structural deficit
driven by rising labor costs, inflationary pressure s, and 4 Other Governmental Funds - activities associated with specific revenues and/or reimbursements that are restricted to expenditures for specific purposes, e.g., Gas Tax Fund, Operating Grant Fund, Library Parcel Tax Fund.
Budget
YTD
Actuals Percent
Balance, Beginning of FY2025/26 12 -
Other Sources and Uses 34,219
Revenues 838,742 89,223 11%
Expenditures 872,485 269,374 31%
Total General Fund: 488 (180,151)
GENERAL FUND ($ in '000s)
Exhibit A
Quarterly Financial Report Quarter Ended 09/30/2025
2 the expiration of one -time federal resources that had supported expanded service levels. The Budget reflects
a measured approach to closing the gap through a
combination of ongoing and one-time solutions, with an
emphasis on protecting core services and avoiding
layoffs. Departments implemented targeted reductions
that prioritized operational efficiencies and service
delivery, while Council made strategic adjustments to
sustain small business relief, youth and equity
programs, and community safety in itiatives. The City
remains focused on achieving long -term structural
balance through disciplined cost management,
proactive revenue strategies, and continued alignment
of resources with Council priorities.
Department Projections
The following charts present the estimated variance of
budget to projected year -end results for the General
Fund Departments:
Departments projecting a net deficit (combined year -
end revenue and expenditure variances exceeding $1
million) have been highlighted in the chart s above and have provided the following summary explanations.
Fire. The projected net deficit of $1.2 million is driven by overtime expenses associated with the extended fire
season and ongoing staffing shortages, including 31
injury-on-duty cases that have increased backfill and
mandatory overtime requirements. These factors have
placed added pressure on labor costs during the first
quarter. The deficit is also due to overages in Services and Supplies related to ongoing annual cont racts and
mandated payments, including the Sacramento
Regional Fire/E mergency Management Services
Communication Center and Medic Ambulance Basic
Life Support services needed to sustain operations and
response capacity. While a projected revenue surplus is partially offsetting these overages, the department
anticipates additional revenue from Fees and Charges
to help further mitigate impacts by year-end.
Police. The projected net deficit of $2.3 million is
primarily due to expense overages driven by back fill
overtime related to staffing shortages in patrol and at the Communications Center. In addition, a revenue
shortage is anticipated with the upcoming termination of service contracts with Regional Transit and Natomas
Unified School District at midyear, which will further
impact overall funding levels. The department will
review forecasted reimbursements for possible
undercharging and continue to monitor overtime and
FY2025/26
Adopted
Budget
Projected
Year-End
Revenue
Projected
Year-End
Variance
City Attorney 52 225 173 2 City Clerk 42 42 -
City Manager 186 186 -
City Treasurer 5,400 5,725 325
Community Development 33,383 31,147 (2,236) 1 Convention and Cultural Services 810 860 50 2 Finance 4,929 4,377 (553) 1
Fire 72,741 79,651 6,911 2
Human Resources - - -
Information Technology 400 400 -
Police 9,205 7,417 (1,788)
Public Works 38,145 38,653 508 2
Youth, Parks & Community Enrichment 6,705 6,701 (4) 1 Total: 171,999 175,384 3,385
1Revenue shortfalls will be offset by expenditure savings. 2 Revenue surplus will entirely or partially offset expenditure overage.
GENERAL FUND DEPARTMENT REVENUES ($ in 000s)
FY2025/26
Adopted
Budget
Projected
Year-End
Expenditures
Projected
Year-End
Variance
Mayor/Council 6,015 6,015 -
City Attorney 9,281 9,471 (190) 1 City Auditor 1,313 1,128 185
City Clerk 2,871 2,625 246
City Manager 9,255 8,365 890
City Treasurer 1,592 1,588 5
Community Development 51,037 47,240 3,797 Community Response 5,909 5,518 391
Convention and Cultural Services 3,792 4,018 (226) 1 Finance 11,847 10,453 1,394
Fire 231,355 239,499 (8,144) 1
Human Resources 4,820 4,820 -
Information Technology 20,768 20,318 450 Police 243,915 244,457 (542)
Public Works 31,138 31,234 (97) 1 Youth, Parks & Community Enrichment 46,928 45,354 1,574 Subtotal General Fund: 681,835 682,102 (267) 1 Expenditure overage will be entirely or partially offset by revenue surplus.
GENERAL FUND DEPARTMENT EXPENDITURES ($ in 000s)
Exhibit A
Quarterly Financial Report Quarter Ended 09/30/2025
3 expenditures closely to mitigate further impacts through year-end.
Departments projecting a net surplus (combined year -
end revenue and expenditure variances exceeding $1
million) have been highlighted in the chart above and
have provided the following summary explanations.
Community Development . The projected net
surplus of $1.6 million is primarily due to labor savings from ongoing vacancies across several divisions. This
has contributed to reduced personnel costs, offsetting
lower revenues from building and development fees tied
to slower market activity and fewer large-scale projects.
The department continues to monitor both workload and
hiring to ensure that operational needs are met while
maintaining fiscal balance.
Youth, Parks & Community Enrichment. The
projected net surplus of approximat ely $1.5 million is largely driven by labor savings from vacancies and hard- to-fill positions. Seasonal staffing and position
reductions have contributed to salary savings, while
ongoing efforts to right -size services and supplies
budgets are helping to ma intain fiscal discipline.
Community Centers and Camp operations are exploring
additional revenue opportunities to support
programmatic needs. Park Maintenance continues to
project a surplus, supported by reduced use of rental
vehicles. Measure U funds remain available for strategic reinvestment in capital improvements or future budget
reserves as authorized by the City Manager.
City’s Major Revenue Sources
Top General Fund Revenues ($ in 000s)
1Includes Measure U Transactions and Use Tax
2Businesses have 30 days to remit UUT, BOT, and TOT revenue to the City after the end of the month. After the 30-day remittance period, the City processes/reconciles the transactions over the following 10 days. Monthly reporting data is available by the 15 th of the following month (45 days after the reporting period ends).
Property Tax. Property taxes account for
approximately 2 9% of all General Fund revenues.
Revenues related to property taxes are affected by
fluctuations in the real estate market, levels o f new
construction activity, and the corresponding changes to the tax roll. Most of the City’s current secured property tax revenues are received in mid -December and mid -
April. The balance of the current secured property taxes as well as the current unsecu red, supplemental, and
miscellaneous property tax revenues are received in
late January and late May. The first apportionment of the City’s FY202 5/26 property taxes will be received in
December 202 5. All property tax revenues are being
monitored and will b e reassessed as part of the
FY2026/27 budget development process.
Sales Tax. Sales Taxes make up approximately 28%
of General Fund revenues. Sales tax includes Sales and
Use Tax and the Measure U Transactions and Use Tax.
Sales tax is imposed on all retailers for the privilege of selling tangible personal property in the state, whereas the use tax is imposed on the purchase for storage, use, or other consumption of tangible personal property
purchased from any retailer. The Measure U
Transactions and Use Tax is a destination -based tax,
meaning it is applied to transactions based on the
buyer’s location rather than the seller’s location. In
November 2018, a voter approved ballot measure
increased the Measure U Transactions an d Use Tax
from 8.25% to 8.75% effective April 1, 2019 . The City
receives monthly apportioned payments and a true -up
payment for the prior period at the end of each quarter.
The first true -up payment for this fiscal year will be received in late November 2025. Sales tax revenues will be monitored closely with regard to consumer
confidence and inflation, and budget adjustments may
be necessary if consumer and business spending
decline.
Utility User Tax (UUT). UUT is the City’s third largest source of General Fund revenue at 8%. Measure O
approved by the voters in November 2008, reduced the
7.5% tax rate to 7.0% on telecommunication services,
but was expanded to include Voice over Internet
Protocol (VoIP), text messaging, and many other
previously excluded technologies. The 7.5% tax rate
continues to be in effect for gas, electric, and cable
services. The gas and electric components of UUT
comprise approximately 70% of the revenue. As PG&E
and SMUD continue to i ncrease rates, the energy
components of UUT will continue to grow and increase
the overall UUT base. UUT revenues will continue to be
Revenue Type
Approved
Budget YTD Actuals
Property Tax 247,327 285
Sales and Use Tax1 236,843 19,512
Utility User Tax2(UUT) 70,444 18,284
Business Operations Tax2(BOT) 32,185 7,988
Public Safety Sales Tax 9,412 1,324
Transient Occupancy Tax2(TOT) 6,932 987
Total General Fund Revenues: 603,143 48,379
Exhibit A
Quarterly Financial Report Quarter Ended 09/30/2025
4 monitored, and adjustments may be considered later in the fiscal year if necessary.
Other City Revenue Sources
Business Operations Tax (BOT). BOT is remitted
annually by individuals and businesses that commence,
transact, engage in, or carry on any business, trade,
profession, calling, occupation, or gainful activity in the city. BOT (including cannabis) makes up approximately
5% of General Fund revenues. BOT revenues will
continue to be monitored, and adjustments may be
considered later in the fiscal year if necessary.
Public Safety Sales Tax. On November 2, 1993,
California voters enacted Proposition 172 which
established a permanent statewide half -cent sales tax
for support of local public safety functions in cities and counties. This tax represents approximately 1% of
General Fund revenue. This revenue will be monitored,
and budget adjustments may be considered later in the
fiscal year if necessary.
Transient Occupancy Tax (TOT). The current rate
of 12% is charged to all guests of hotels, motels, inns, and bed and breakfasts within city limits. The General
Fund portion of TOT revenues is equal to two
percentage points of the 12% rate. The remaining TOT
revenues collected are directed to the Community
Center Fund. TOT revenue will continue to be
monitored and may be adjusted later in the fiscal year.
Economic Indicators
The following chart reflects key economi c indicators
utilized in projecting General Fund revenues.
ENTERPRISE FUNDS
The Departments of Convention and Cultural Services,
Public Works, and Utilities have prepared projections for the City’s enterprise funds as follows:
Community Center
Parking
Solid Waste
Storm Drainage and Drainage Property Fee
Wastewater
Water
The following Fund is projecting a net deficit exceeding $1 million and h as provided the following summary
explanation.
Community Center Fund. The projected net deficit
of $2.3 million is primarily due to higher than anticipated spending on services and supplies, including on -call
contracts, citywide contract adjustments, and Crocker - related expenses. However, these costs largely reflect
administrative timing and purchase order practices
rather than actual spending overages. The department
is refining its process for opening purchase orders to
better align projected expenditures with expected
activity and evaluating opportunities to shift eligible work Key Economic Indicators 9/2024 9/2025
City Unemployment Rate (UR) 5.1% 5.6%
County UR 4.9% 5.5%
State UR 5.3% 5.8%
National UR 4.1% 4.3%
CPI (7/2024-9/2024 vs. 7/2025-9/2025) 2.62% 2.87%
30-Year Fixed Mortgage Rate 6.08% 6.30%
Fund Name
FY2025/26
Adopted
Budget
Projected
Year-End
Revenues
Projected
Year-End
Variance
Community Center 50,669 50,669 -
Drainage Property Fee 20,307 20,560 253 Parking 20,314 21,731 1,417
Solid Waste 97,935 101,141 3,206
Storm Drainage 44,966 46,500 1,534
Wastewater 46,174 48,814 2,641
Water 139,643 138,708 (935)
Total Enterprise Funds: 420,007 428,123 8,116 ENTERPRISE FUND REVENUES ($ in '000s)
Fund Name
FY2025/26
Adopted
Budget
Projected
Year-End
Expenditures
Projected
Year-End
Variance
Community Center 53,193 55,451 (2,259) Drainage Property Fee 5,180 4,994 186 Parking 18,998 19,157 (159) 1 Solid Waste 84,243 82,786 1,457
Storm Drainage 43,744 42,628 1,115
Wastewater 39,130 38,209 921
Water 130,395 124,586 5,809
Total Enterprise Funds: 374,882 367,812 7,070 1 Expenditure overage will entirely or partially be offset by revenue surplus.
ENTERPRISE FUND EXPENDITURES ($ in '000s)
Exhibit A
Quarterly Financial Report Quarter Ended 09/30/2025
5 to existing capital improvement projects. Actual
collections for transient occupancy tax (TOT), user fees, and commissions are forecasted at the budgeted level.
The department continues to monitor expenditures
closely and anticipates being on budget at year-end.
The following Funds are projecting a net surplus
exceeding $1 million and have provided the following
summary explanations.
Parking Fund. The projected net surplus of $1.3
million is primarily due to revenues trending above
budget, driven by fee increases and steady demand.
Expenditures are projected to slightly exceed budget
due to higher costs for security, repairs, and utilities, largely offset by labor savings from vacant positions.
Solid Waste Fund. The projected net surplus of $4.7
million reflects higher user fee collections, late payment penalties that began in November 2023, and increased
recycling rebate revenues due to lower residue
percentages. Expenditures are projected below budget
due to reduced disposal costs across c ommodities,
lower vehicle operations and maintenance costs, and
savings from greater use of compressed natural gas
stations and vacant positions. The prior-year settlement payment included in the current budget will be removed
in FY2026/27.
Storm Drainag e. The projected net surplus of $2.6
million is due to higher revenues from additional service accounts, increased investment returns, and proceeds
from the sale of the Fong Ranch property. Expenditure
savings are attributed to vacancies and related
reductions in services and supplies.
Wastewater. The projected net surplus of $3.6 million
is primarily driven by higher than anticipated revenues from additional service accounts and strong investment
earnings.
Water Fund. The projected net surplus of $4.9 million
is primarily due to expenditure savings resulting from 44 vacant positions within the department. Revenues are
slightly below budget due to a $1.4 million settlement
that was budgeted in the FY2025/26 budget but was
accrued back to FY2024/25.