Attachment 2Attachment 2Financial ReportThird Quarter of FY 2025-26Financial ReportThird Quarter of FY 2025-26 Attachment 2
Attachment 2
Financial Report
Third Quarter of FY 2025-26
Financial Report
Third Quarter of FY 2025-26
January-March 2026
Current Financial Condition
At the end of the third quarter, expenditures exceed revenues due to the timing of property tax receipts. High receipt months for Property taxes are December, January, April and May. Revenues and expenditures are within budgetary expectations for this time of the year.
General Fund
General Fund revenues through the third quarter total $56.7 million, or 62% of the $91.9 million annual budget. General Fund revenue is $2.4 million higher than the third quarter of the prior year. Increases were seen in property taxes, sales tax, other taxes, intergovernmental, service charges, fines, interest and rents, and interfund transfers; whereas decreases were seen in TOT taxes and permits and fees.
General Fund expenditures total $66.5 million for the third quarter, or 66% of the $101.1 million annual budget, as compared to $67.2 million at this time last year. In total, expenditures ended the quarter $661,695 less than the prior year due to decreases in capital outlay.
The current budget for General Fund expenditures is $101.1 million, which reflects an increase of $13.7 million from the adopted budget of $87.4 million. The increase is due to the carryovers from Fiscal Year 2024-25 and budget adjustments that were council approved within the prior fiscal year. It is important to keep in mind that Carryover amounts from the prior fiscal year have already been set aside within the fund balance. When those projects or purchases move forward into the current fiscal year, the spending will appear higher than the current year’s revenues. However, this does not mean that the City is overspending. The expenditures are funded by money that was previously reserved (in the prior fiscal year) and is already sitting the fund balance specifically for that purpose. A portion of the FY2024-25 carryovers are comprised of $3.5 million in General Fund expenditures for maintenance, contractual services, and the initial funding of the Section 115 Trust Fund. The remaining amount of $10.2 million was related to CIP projects including the ongoing Casa Romantica Stabilization, and various facility maintenance and improvement projects.
Additional information on General Fund revenues and expenditures are discussed further in this report.
General Fund Revenues
Revenues by Category
Budget
YTD Actual
%
Property Taxes
48,185,950
29,690,455
62%
Sales Tax
13,209,500
7,895,409
60%
Transient Occ. Tax
3,550,000
1,852,025
52%
Other Taxes
3,615,000
1,618,080
45%
Permits & Fees
1,466,870
1,207,978
82%
Intergovernmental
4,896,345
1,341,016
27%
Service Charges
7,573,880
6,702,967
89%
Fines
624,600
453,491
73%
Interest, Rents, Other
3,985,900
3,285,351
82%
Interfund Transfers
4,802,511
2,675,742
56%
91,910,556
56,722,514
62%
Property Taxes: Property tax revenue is distributed unevenly throughout the year, with 50% in Q2, 40% in Q4, and the remainder is spread across Q1 and Q3. Property taxes total $29.7 million, primarily from secured taxes. The amount is $930,468 higher than the prior year due to higher secured, unsecured, ERAF, and prior year tax receipts in this fiscal year as anticipated.
Sales Tax: Sales taxes are remitted to the City in arrears and third quarter totals includes sales taxes collected over the holidays. Sales tax receipts amount to $7.9 million, which is $366,834 higher than the third quarter of last fiscal year. Although discretionary spending is trending upwards, consumers are still very conservative about non-essential spending due to the uncertain economic conditions and inflation concerns.
Transient Occupancy Taxes (TOT): Transient occupancy taxes total $1.9 million, which is $52,623 less than FY 2025 at this time. The City is diligently working on getting all hotels and STLUs into compliance and current with remitting all TOT due to the City.
Other Taxes: Other taxes, consisting mostly of franchise fees and business licenses, total $1.6 million, which is $145,189 higher than last year. Although cable franchise fees have declined, overall Other Tax Revenues increased due to higher CR&R franchise fees collected with the implementation of a new agreement.
Permits & Fees: Permits and fees are at $1.2 million. This is $121,009 less than the prior year. The overall issuance of construction permits is lower this fiscal year mostly due to fewer building, mechanical, and plumbing permits. The decrease in building permits can be attributed to higher interest rates causing the costs of renovations to be financially unfavorable.
Intergovernmental: Intergovernmental revenue consists mainly of grant revenues totaling $1.3 million, which is $724,111 higher due the timing of a state coastal grant and motor vehicle tax revenue.
Service Charges: Service charges, from general government, public safety, parking meter and recreation amount to $6.7 million, which is $165,347 lower than the same time last year. Public Safety services charges primarily consist of ambulance service charges, which vary from year to year. This year, ambulance service charges are $142,035 lower than this time last year. Ambulance service charges fluctuate year over year, dependent upon the number of ambulance responses within the City.
Fines: Revenues from fines total $453,491, which is slightly higher than the prior year by $23,597. This is due to a higher number of parking and administrative citations that have been paid.
Interest, Rents & Other: Interest, rents and other reimbursements total $3.3 million, which is an increase of $176,537 from the prior year due to an increase in rents for City owned property and interest earnings.
Interfund transfers: Interfund transfers-in to the General fund, which includes overhead charges, remained relatively flat from last year at this time.
General Fund Expenditures
Expenditure by Type
Budget
YTD Actual
%
Salaries
16,448,710
10,816,413
66%
Benefits
7,505,310
5,871,255
78%
Supplies
1,629,132
927,355
57%
Contractual Services
54,496,276
38,520,112
71%
Other Charges
1,568,640
1,090,344
70%
Capital Outlay
9,160,550
794,085
9%
Interdepartmental
5,937,560
4,468,920
75%
Transfers & Debt
4,341,170
4,027,887
93%
Total
101,087,348
66,516,371
66%
Expenditure by Dept
Budget
YTD Actual
%
General Government
6,594,930
4,577,551
69%
City General
7,108,020
5,749,332
81%
Police
23,857,478
18,380,455
77%
Fire
15,330,720
11,590,707
76%
Marine Safety
2,344,190
1,688,167
72%
Comm. Development
10,429,020
5,756,280
55%
Public Works
28,648,330
14,034,179
49%
Beaches, Parks & Rec
6,774,660
4,739,700
70%
Total
101,087,348
66,516,371
66%
Expenditures for the third quarter of FY 2025-26 are $66.5 million compared to prior year’s $67.2 million. This is a decrease of $661,695 from the prior year. Salaries and benefits increase by $814,624 due fewer staffing vacancies and a COLA increase. Contractual services increase $2.5 million mainly due to increases in public safety contracts ($1.2 million), maintenance of trees ($333,834), and other contractual services ($197,838). Other charges which include special event and contract class instructor costs increased by $42,762 from the prior year. This is due to an increase in July 4th celebration and contract instructor costs. These increases were slightly offset by the decrease in election expenses in the current year. Capital Outlay decreased by $5.4 million, which is due to the timing of project costs including the sand replenishment and shoreline feasibility study projects in FY 2025. Transfers and Debt Service increase from the prior year by $1.2 million, due to the establishment of the Section 115 Trust.
By Department, police and fire increase a total of $1.2 million. Other department changes are as follows: 1) Public works costs decreased by $4.5 million due to the completion of the first phase of sand replenishment and the shoreline feasibility study in the prior year. 2) Community Development increased by $835,187 from the prior year due to increased spending for professional studies on offshore sand source investigation, transportation data collection and geotechnical analysis for the local coastal program. 3) City General increased by $1.2 million related to the establishment of the Section 115 Trust. 4) General Government remained similar to this time last year. 5) Beaches, Parks and Recreation and Marine Safety are higher compared to prior year due increases in salary and benefit costs and increased activity levels.
In total, costs are currently within anticipated results at this time of the year based on the budget.
Enterprise Funds
The following tables summarize the operating revenues, operating expenses, and changes in operating fund working capital for enterprise funds including Water, Sewer, Golf, and Storm Drain funds.
Revenues
Revenue
Budget
YTD Actual
%
Water Fund
31,604,600
17,267,552
55%
Sewer Fund
13,264,161
8,453,008
64%
Golf Fund
3,637,370
3,259,405
90%
Storm Drain Fund
1,633,347
1,077,624
66%
Water commodity revenues are higher than last year by $466,891 due to other agency reimbursements. Sewer revenues are higher by $449,149 due to increases in sewer commodity and base fees.
Golf Course is higher by $294,749 compared to the prior year due to increases to green fee revenues.
Storm drain revenues are lower by $449,834 due to a $400,000 insurance reimbursement that was received in the prior fiscal year.
Expenses
Expenses
Budget
YTD Actual
%
Water Fund
30,391,420
20,019,732
66%
Sewer Fund
13,338,440
9,138,561
69%
Golf Fund
3,499,695
2,321,148
66%
Storm Drain Fund
1,753,160
1,087,329
62%
Water expenses increased by $771,145 when compared to the prior year mainly due to higher purchased water costs.
Sewer expenses increased by $491,771 due to increases in supplies and contractual services.
Golf Course operations were $8,438 more than the same period last year due to increased contractual service costs.
Storm drain operating expenses decreased by $13,035 due to lower contractual service costs.
Working Capital
Working Capital
Budget
YTD Actual
Water Fund
3,956,293
(9,067)
Sewer Fund
(842,125)
(1,453,489)
Golf Fund
2,489,830
3,290,412
Storm Drain Fund
554,473
664,581
Financial Report Third Quarter of FY 2025-26
Financial Report Third Quarter of FY 2025-26