Finance and Management Services
www.santa-ana.org/finance
Item # 10
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
December 2, 2025
TOPIC: Fiscal Year 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments
AGENDA TITLE
Fiscal Year 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments
RECOMMENDED ACTION
1. Receive and file the First Quarter Budget Update.
2. Approve General Fund appropriation adjustments for the Ayuda Sin Fronteras program that have a net zero impact as detailed in the body of this report. (Requires five affirmative votes.)
3. Approve $1.2 million in Non-General Fund appropriation adjustments as detailed in the body of this report. (Requires five affirmative votes.) GOVERNMENT CODE §84308 APPLIES: No
DISCUSSION
The FY2025-26 First Quarter Budget Update provides a summary of the City’s General Fund revenues and expenditures for the first quarter of the fiscal year, covering the period from July through September. Revenue data for the first quarter is still very limited, and there is not enough information at this time to recommend any adjustments. Staff expects to have more complete data by the time the Mid-Year Budget Update is presented to the City Council on February 17, 2026. A brief overview of the early revenue trends is included later in this Staff Report under the General Fund Revenue section.
On the General Fund expenditure side, spending through the first quarter remains aligned with previous-year trends and meets budget expectations. The only proposed change at this point is a minor reallocation of funds, utilizing departmental vacancy savings, to support the Ayuda Sin Fronteras Program, which helps City residents affected by U.S.
Immigration and Customs Enforcement (ICE) operations. This adjustment is cost-neutral for the General Fund and maintains support for a City Council initiative.
FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025
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A General Fund summary as of September 30 follows.
The audit for FY2024-25 (FY24-25) is currently in progress, and the final carryover amounts based on remaining budget availability are still being finalized, which is why they are not reflected in the First Quarter analysis. Preliminary FY24-25 results indicate that the City met and exceeded revenue estimates and spent less than appropriations. Staff anticipates sharing the final figures with the City Council at the January 20, 2026 meeting.
A summary of General Fund revenues through September 30 follows.
As of September 30, the City generated $40.5 million, or 10%, of all General Fund revenue, consistent with prior fiscal years. This performance reflects typical first-quarter collection patterns, as the City’s most significant revenue sources are received later in the fiscal year. Sales tax receipts lag approximately two (2) months behind the FY2025-26 1st Quarter Budget Update
FY2025-26 General Fund Summary
FY25-26 Original
Budget
General Fund
Adjustments
Approved by City
Council through
09/30/2025
Updated Estimates
Estimated Beginning Balance at July 1, 2025 87,381,099 - 87,381,099 Revenue Estimate 413,790,950 - 413,790,950
Appropriated Spending (424,230,150) - (424,230,150)
FY25-26 Contribution to Pension Stabilization
Trust (1,000,000) - (1,000,000)
Estimated Ending Balance at June 30, 2026 75,941,899 - 75,941,899 Less: 18% Reserve¹ 74,482,371 - 74,482,371
Estimated Spendable Balance 1,459,528 - 1,459,528
¹The City's 18% reserve policy applies to annual recurring revenue.
Revenue Source
FY25-26 Original
Budget
Received as of
09/30/2025 % Received
Property Tax/ Property Tax In-Lieu of VLF 95,877,210 844,038 0.9% Sales Tax (Measure X) 83,953,880 6,849,697 8.2%
Sales Tax (Bradley Burns) 59,908,190 4,704,533 7.9%
Other General Fund Revenue 49,431,060 8,876,078 18.0%
Charges for Service 31,265,650 8,065,787 25.8%
Utility Users Tax 29,250,000 5,370,042 18.4%
Business License 17,500,000 1,200,399 6.9%
Franchise Fees 13,600,000 947,981 7.0%
Cannabis Revenue 12,651,460 1,485,309 11.7%
Jail Revenue 10,853,500 209,785 1.9%
Hotel Visitor's Tax 9,500,000 1,968,835 20.7%
Total General Fund Revenue 413,790,950 40,522,484 9.8%
FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025
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corresponding period, and the first installment of property tax payments is not received until late November and December.
Early sales tax receipts indicate a modest 2.4% decline from general consumer retailers, including family apparel, specialty, and discount department stores, which were responsible for nearly half of all taxable sales. Continued sluggishness among used auto dealers also contributed to the decline. However, solid growth from business-industrial vendors and higher allocations from the countywide use tax pool partially offset these impacts. Looking ahead, while consumer spending on taxable goods remains relatively stable, recent declines in consumer confidence, driven by inflationary pressures, tariff concerns, and rising unemployment, pose risks to any future revenue growth. Any modest increases are expected to primarily offset statewide sales tax declines experienced over the past two fiscal years. The FY25-26 sales tax budget is $2.7 million more than the actual revenue received in FY24-25. Considering the declines in general retail activity and consumer confidence noted above, staff may recommend a reduction in spending later in the fiscal year once we have more data.
The City’s property tax consultant is projecting higher growth than initially anticipated, primarily due to higher residential values, which account for 93% of total assessed value growth. The median home price continues to rise, though at a slower pace than in prior years. Final figures will not be known until all of the exemptions have been applied and half of the property taxes have been received.
A summary of General Fund expenditures through September 30 follows.
General Fund Expenditures
FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025
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As of September 30, General Fund expenditures totaled $103.1 million, tracking closely with the prior fiscal year. Consistent with FY24-25 trends, most department spending remains below the 25% threshold for the first quarter, reflecting a typical timing of expenditures early in the fiscal year.
A few exceptions are noted. Spending for museum support and the Fire & Emergency Medical Services department is paid one month in advance, as discussed in the footnote above. Non-departmental expenditures are also higher than the prior fiscal year, primarily due to increased employee pension-related payments in the first quarter, which are approximately $3.1 million higher than in FY24-25.
The Library and the Parks, Recreation, and Community Services Agency’s (PRCSA) expenses do not yet reflect the carryovers approved at the October 7 City Council meeting. Once the carryovers are uploaded to the budget, their expense levels are expected to fall below the 25% marker, aligning them more closely with other City departments. The carryovers are anticipated to be posted to the general ledger and reflected in the City’s budget in November.
Ayuda Sin Fronteras
At the October 21, 2025 City Council meeting, Council directed staff to identify an additional $100,000 to $150,000 to continue short-term emergency assistance for households impacted by ICE actions. In response, staff indicated that this additional funding would be identified from existing City resources without requiring increased appropriations. Consistent with that commitment, staff have identified $150,000 in available funding, primarily through departmental vacancy savings, to support the continuation of the Ayuda Sin Fronteras Program. The table below outlines the departmental funding contributions.
Staff is not proposing to reallocate funds from departments with small operating budgets or limited vacancy savings. The contributing departments listed above have sufficient vacancy savings to support this effort. Approval of this item will authorize the budget transfers needed between departments to support the program. Once approved, the
FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025
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budget will be moved from the contributing departments to the Community Assistance Fund – Contract Services (01113231-62300), which was recently established to track program expenses.
Overview of Restricted Fund Adjustments
Grates for the Dyer Stormwater Channel (Fund 057)
The Clean Water Act authorized the National Pollutant Discharge Elimination System (NPDES), which regulates the discharge of pollutants into U.S. waters. Cities, such as Santa Ana, that operate stormwater systems and/or wastewater treatment facilities often have NPDES permit programs and are therefore allowed to dedicate permit revenue to activities that directly support compliance with NPDES requirements. One eligible use of these funds is capital improvements that construct or upgrade storm drain infrastructure to reduce pollutants and improve water quality. The proposed project will install steel barriers over the Dyer Stormwater Channel at the point where it runs underneath Dyer Road. This location has experienced repeated trespassing and encampments, resulting in the accumulation of trash and debris in the channel. The installation of the steel barriers will prevent unauthorized access, enhance public safety, and support compliance with NPDES requirements by reducing the amount of solid waste entering the stormwater system. Staff is requesting to appropriate NPDES (Fund 057) fund balance in the amount of $200,000.
Workforce Innovation Fund Increased Allocation (Fund 123) The Workforce Innovation and Opportunity Act (WIOA) serves adults, youth, and individuals with disabilities while promoting coordination among workforce development, education, and economic development initiatives. California’s Employment Development Department (EDD) released final WIOA fund allocations late in the budget process, leaving insufficient time for staff to make necessary adjustments. For FY25-26, the City received an increase to the federal WIOA formula allocation. To align the budget with the actual award amount, staff is recommending recognizing $445,785 in revenue and appropriating the same amount in expenditures. Further detail is provided in Exhibit 1.
Home Program Federal Grant (Fund 130)
The HOME Investment Partnerships is a federal block grant that provides funding to states and local governments to develop and preserve affordable housing for low-income households. The Federal Government did not release FY25-26 award amounts until late in the budget process, leaving insufficient time for staff to make necessary adjustments.
To align the budget with the actual award amount, staff is recommending a $25,008 decrease in revenues and an $678,202 increase in expenditures. Further detail is provided in Exhibit 1. The revenue adjustment aligns the budget with the award, while the expenditure adjustment corrects costs that were inadvertently omitted during budget development.
FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025
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Community Development Block Grant (Fund 135)
The Community Development Block Grant (CDBG) is a federal grant that funds activities such as housing rehabilitation, infrastructure improvements, public services, and initiatives to prevent blight or address urgent community needs. The Federal Government did not release FY25-26 award amounts until late in the process, leaving insufficient time to make necessary adjustments. To align the budget with the actual award amount, staff is recommending a $27,908 increase in revenues and a $563,092 decrease in expenditures. The revenue increase aligns the budget with the actual grant award, while the expenditure decrease removes costs that were overstated during the initial budget development.
The final CDBG allocation is determined based on a community’s overall conditions. As community indicators improve—such as reductions in poverty, improved housing conditions, and faster population growth—the City receives a smaller allocation, as it is assessed to have comparatively lower need than other jurisdictions.
Additionally, though to a lesser extent, a $45,250 reduction to the CDBG Emergency Solutions Grant (ESG) allocation is required to align with the actual grant award. Further detail is provided in Exhibit 1.
Housing Authority- Housing Assistance Payment (Funds 136 & 140) On September 18, 2025, the Housing Authority received a funding notification from the Federal Government awarding additional funds of $464,445 for FY25-26 to support the Foster Youth to Independence (FYI) Program under the Housing Authority – Voucher HAP Fund (Fund 136). The Housing Authority – Voucher Admin Fund (Fund 140) also received an additional allocation of $18,750 to support the continued administration and expansion of these services. To align the budget with the actual award amounts, staff is recommending an increase in revenues paired with a corresponding increase in expenditures. Further detail is provided in Exhibit 1.
Vacancy Report
Exhibit 2 includes the staff vacancy report as of September 30, 2025. It reflects all authorized staffing changes to date across City departments.
As of September 30, there is a total of 193 funded vacancies, which does not include the 23 unfunded positions. Of the funded vacancies, 123 are General Fund positions and 70 are Non-General Fund positions. The overall vacancy rate across the organization is 13%.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FY 2025-26 First Quarter Budget Update and Proposed Appropriation Adjustments December 2, 2025
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FISCAL IMPACT
There are no changes to the General Fund revenue estimates or total appropriations at this time, except for reallocations of departmental vacancy savings to the Community Assistance Fund, with no net fiscal impact, to support the Ayuda Sin Fronteras Program.
Staff will continue to monitor General Fund revenue and expenditure trends throughout the year and will provide a more comprehensive financial analysis as part of the Mid-Year Budget Update. Exhibit 1 presents line-item changes to various revenues and expenditures across multiple funds.
EXHIBIT(S)
1. Recommended Line Item Changes
2. 1 st Quarter Vacancy Rate Summaries
Submitted By: Alexander Trinidad, Executive Director – Finance and Management Services Agency
Approved By: Alvaro Nuñez, City Manager