Staff Report — Santa Ana City Council, June 2, 2026

Finance and Management Services
www.santa-ana.org/finance
Item # 23
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 2, 2026
TOPIC: Proposed Fiscal Year 2026-27 City Budget, Changes to the City’s Classification and Compensation Plan, Uniform Schedule of Miscellaneous Fees, Seven-Year Capital Improvement Program, and the City’s Annual Update to Comply with AB2561

AGENDA TITLE
Public Hearing - Ordinance to Adopt the Fiscal Year 2026-27 Budget, Resolution for Changes to the City’s Basic Classification & Compensation Plan, Uniform Schedule of Miscellaneous Fees, Seven-Year Capital Improvement Program, and the City’s Annual Update to Comply with AB2561
Legal notice published in the OC Reporter on May 20 and May 27, 2026.

RECOMMENDED ACTION

1. Approve the introduction and first reading of an Ordinance to adopt the budget for Fiscal Year 2026-27, which begins on July 1, 2026, and ends on June 30, 2027. (Requires five affirmative votes)
UNCODIFIED ORDINANCE NO. NS-XXXX entitled AN ORDINANCE OF THE

CITY COUNCIL OF THE CITY OF SANTA ANA APPROPRIATING MONIES TO

THE SEVERAL OFFICES, AGENCIES, AND DEPARTMENTS OF THE CITY FOR FISCAL YEAR BUDGET PERIOD COMMENCING JULY 1, 2026

2. Adopt a Resolution to effect certain changes to the City’s basic classification and compensation plan.

RESOLUTION NO. 2026-XXX entitled A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF SANTA ANA TO EFFECT CERTAIN CHANGES TO THE CITY’S CLASSIFICATION AND COMPENSATION PLAN

3. Adopt a resolution establishing a Uniform Schedule of Miscellaneous Fees for Fiscal Year 2026-27.

RESOLUTION NO. 2026-XXX entitled A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF SANTA ANA ESTABLISHING A UNIFORM SCHEDULE OF MISCELLANEOUS FEES FOR FISCAL YEAR 2026-2027

Proposed Fiscal Year 2026-27 City Budget, Changes to the City’s Classification and Compensation Plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
June 2, 2026

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4. Adopt the Seven-Year Capital Improvement Program (CIP) beginning FY2026-27 through FY2032-33, as required by the Orange County Transportation Authority (OCTA) for Measure M2 eligibility.

5. Deposit $1,500,000 into the Section 115 Pension Trust Fund as part of the City’s Pension Debt Strategy.

GOVERNMENT CODE §84308 APPLIES: No

DISCUSSION
The City Council provided budget direction on April 7, May 5, and May 19, 2026, and staff incorporated that feedback into the proposed Fiscal Year 2026–27 budget. The proposed budget was developed with input from the City Council and through community engagement efforts beginning in January 2026 to help ensure that resident priorities and neighborhood needs were reflected in funding recommendations. Outreach efforts included visits to all six Council Wards, participation in 14 Listening Tour visits held throughout the community, and two citywide events designed to encourage broad public participation. In addition to in-person outreach, the City used online surveys and social media to expand engagement. Collectively, these efforts resulted in nearly 2,100 survey submissions and participation by 282 attendees at various community meetings and events.

The annual operating budget is the City’s primary financial and policy document, reflecting the City Council’s priorities and allocating resources to support essential public services, infrastructure investments, and community programs for the upcoming fiscal year. Earlier budget projections indicated a $19 million General Fund deficit. Through a combination of expenditure reductions, revenue adjustments, and other balancing measures, staff closed the estimated deficit and prepared a balanced proposed General Fund budget.

The proposed FY26–27 budget was developed to maintain core City services and achieve a balanced General Fund budget without layoffs or furloughs of full-time employees.

As required by Santa Ana City Charter Sections 604 and 605, the City Manager proposes the FY26-27 Budget for City Council consideration during this Public Hearing. Staff has prepared estimates of available resources, including beginning fund balances and estimated revenues, to support ongoing public services and capital improvement projects.

Santa Ana Charter Section 607 requires the City to adopt the annual budget by July 31.

If the Council approves the recommended action, the Ordinance will return to the City Council on June 16 for consideration and adoption.

General Fund Summary
Proposed Fiscal Year 2026-27 City Budget, Changes to the City’s Classification and Compensation Plan, Uniform Schedule of Miscellaneous Fees, and the Seven-Year Capital Improvement Program
June 2, 2026

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The General Fund is the City's primary operating fund and accounts for all unrestricted revenue. A summary of the proposed FY26-27 General Fund activity is provided below.

The proposed FY 2026–27 General Fund budget is balanced, with recurring revenues totaling $427,349,780, equal to recurring expenditures. City Council’s Budget and Reserve Policy requires a General Fund Reserve equivalent to 18% of annual recurring General Fund revenue, and staff estimates the General Fund Reserve will remain compliant with this policy through June 30, 2027. After accounting for the required reserve level, $9,186,800 in one-time uses is proposed to be funded through estimated spendable fund balance, including a $1.5 million contribution toward pension stabilization. A full reconciliation of changes from the revised FY 2025–26 budget to the proposed FY 2026– 27 budget is included in Exhibit 1.

The following is a summary of the proposed FY26-27 General Fund budget, identifying recurring and one-time activities.

General Fund Ten-Year Outlook

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The Outlook is a tool that projects the future General Fund budget based on the proposed budget structure and known future events, such as the scheduled Measure X rate decrease.

This Outlook includes the following assumptions:
Recurring amounts only
Debt pay-offs
Measure X rate decrease (1.5% to 1.0% in April 2029)
Inflationary increases FY27-28 and later, based on the California Department of Finance forecast of CPI
Labor increases based on MOUs
Orange County Fire Authority (OCFA) contract increase of 4.5% annually Employee pension unfunded liability contributions as estimated by CalPERS Contributions to, and uses of, the Pension Stabilization Account have been included to smooth the pension debt fluctuations
The Ten-Year General Fund Outlook indicates that future budget adjustments will be necessary to maintain a balanced budget. For FY26–27, General Fund revenues are projected to increase by approximately 3%. Combined with expenditure reductions, revenue adjustments, and other balancing measures, staff closed the estimated budget deficit and prepared a balanced General Fund budget.

In future years, revenue growth assumptions are based on projections provided by the California Department of Finance. However, operating costs are expected to continue increasing faster than revenues due to factors such as negotiated salary and benefit increases, rising construction and operating costs, increasing pension contribution

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requirements, and contractual obligations, including the Orange County Fire Authority (OCFA) agreement for fire services.

In addition, CalPERS' investment performance has periodically fallen short of actuarial assumptions, contributing to higher pension-related costs and increased pressure on future budgets. The Outlook also reflects a significant revenue reduction beginning in 2029, when the Measure X sales tax rate is scheduled to decrease.

Charter Requirement for Public Recreation Program Spending Santa Ana Charter Section 607 requires the City Council to adopt a budget that provides the support of public recreation programs of at least the equivalent of six (6) cents on each one-hundred dollars ($100) of the assessed value of taxable property in the City on the legal assessment date for the previous fiscal year. The net taxable value of property for FY2025-26 was $37,395,765,281. When applying the calculation required by the Charter, the required expenditure budget for public recreation programs is $22,437,459.

The proposed General Fund budget includes $13,947,230 for the Parks, Recreation & Community Services Agency (PRCSA), $16,047,780 for the maintenance of parks and facilities, and $3,403,290 for youth services funded by Cannabis tax revenue. The proposed budget exceeds the Charter requirement by $10,960,841 or 49%.

Citywide Budget
The proposed FY26–27 Citywide Budget includes the General Fund and a variety of other City funds that support operations, capital improvements, debt service, and enterprise activities. These funds include internally restricted funds, designated by City policy or Council direction, and externally restricted funds, legally limited to specific purposes by state or federal regulations and grant requirements. A summary of the Citywide Budget is provided below.

The negative net activity reflects a proposed use of accumulated fund balances for one- time, nonrecurring projects. Exhibit 1 provides detailed budget information for each fund.

Pension Stabilization Trust and Annual Prepayment of Unfunded Liability The proposed budget includes a $1.5 million General Fund deposit into the City’s Section 115 Pension Trust in FY26-27. The Trust was established to help fund future increases

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in pension debt payments. In addition, CalPERS requires the City to make an annual payment toward its Unfunded Actuarial Liability (UAL). The City can pay the full amount, prepay at a discount by July 31, or spread the payment evenly over 12 months. The proposed budget includes this discounted prepayment.

Proposed Workforce Changes
After accounting for all proposed additions, deletions, reallocations, and reclassifications, the FY26–27 Citywide Budget reflects a net decrease of eighteen (18) full-time positions.

The recommended workforce changes reflect citywide operational and funding needs across all funds while preserving core City services and minimizing impacts to service delivery. In many cases, proposed deletions reflect positions that have remained vacant for extended periods, were previously unfunded, or are no longer necessary due to changing operational demands, the completion of grant-funded initiatives, or organizational restructuring efforts.

A summary of proposed workforce changes follows.

Departments with the most significant workforce changes include the following:
City Attorney: The City Attorney’s Office is adding two Paralegal positions and one Assistant City Attorney position to support increasingly complex and high-volume public records requests, legal reviews, and related compliance obligations. These additions are intended to improve response times, manage workload demands, and, where feasible, reduce reliance on outside legal support. Finance: The Finance Department is deleting three positions: one Meter Reader, one Buyer, and one Payroll Systems Analyst. The Meter Reader position was previously unfunded during the FY25–26 budget-balancing process and this action

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formally removes it from the authorized staffing list. The vacant Buyer position had been funded through the American Rescue Plan Act (ARPA) to support elevated purchasing activity associated with this revenue source. As ARPA-funded projects near completion and purchasing activity returns to more typical levels, the position is no longer needed. The vacant Payroll Systems Analyst position is also proposed for elimination as part of ongoing budget-balancing and operational realignment efforts.
Planning and Building: The Planning and Building Agency is eliminating four vacant positions, including one Planning Technician, two Senior Building Inspectors, and one Code Enforcement Associate. These changes reflect staffing adjustments based on operational needs and budget constraints. An additional workforce adjustment within the department is administrative and intended to align a position title with the incumbent employee’s current responsibilities and classification.
Police: The Police Department is formally deleting multiple positions that had previously remained unfunded in prior fiscal years, as well as additional vacant positions identified as part of the City’s efforts to address the budget deficit. This action is largely procedural and updates the department’s authorized staffing structure to better reflect current operational and fiscal realities. None of the positions proposed for elimination are sworn officer positions; rather, they consist primarily of administrative and support classifications. Public Works: Public Works is implementing several workforce changes, the most significant of which is the addition of six positions to support the transition of certain services from contracted operations to in-house delivery. The Gas Tax Fund is adding four Maintenance Worker positions to support pothole repair and street maintenance, while the Sanitation Fund is adding two Equipment Operator positions to support expanded in-house street-sweeping operations. These changes are intended to improve service responsiveness, operational control, and long-term cost efficiency. Remaining workforce adjustments within Public Works are primarily housekeeping changes to align classifications with employee duties or budget-balancing modifications.

The remaining departments are primarily eliminating vacant full-time positions as part of the City’s broader efforts to address the structural budget gap and maintain a balanced FY26–27 budget. These reductions are not expected to materially impact service levels or the City’s ability to meet core operational and community service demands.

Classification and Compensation Resolution
The Human Resources Department, in coordination with other departments, seeks approval to update the City’s Classification and Compensation Plan (Exhibit 3) to meet operational needs. This includes creating one new classification, removing three outdated and vacant classifications, and adjusting titles and pay for several classifications.

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Unrepresented seasonal part-time classifications with comparable full-time counterparts have been aligned in compensation and minor changes to other classifications have been made to ensure internal equity and reflect new supervisory roles. Because most part-time updates concern the unrepresented bargaining unit, there was no requirement to meet and confer. The proposed changes to the Service Employees International Union (SEIU) were shared with SEIU on March 20, 2026. After some discussion, SEIU accepted them without further comments or objections. Additionally, two classifications are being designated as terminal and will be eliminated once they are vacant.

Assembly Bill 2561: Public Reporting of Vacant City Positions Assembly Bill 2561 (AB 2561) requires local public agencies in California to publicly report on job vacancies and discuss ongoing efforts to strengthen recruitment and retention practices. The legislation is intended to promote transparency about staffing challenges and to evaluate barriers in hiring processes that may affect personnel stability and service delivery.

To comply with the legislation, the City’s public hearing on AB 2561 will include a review of the following:
Current status of vacancies across bargaining units
Efforts and strategies currently underway
Identification of any policies, procedures, operational practices, or other factors that may create obstacles or delays within the hiring process, along with any proposed or implemented changes intended to address those challenges.

If a recognized City bargaining unit reaches or exceeds a 20% vacancy rate in its authorized full-time positions, that unit may request additional information, including vacancy details, compensation structures, and hiring process data. As of March 31, 2026, none of the City’s bargaining units met or exceeded the 20% vacancy threshold established under AB 2561. Accordingly, no additional reporting requirements have been triggered at this time. Vacancy rates for each bargaining unit as of that date are provided below.

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Uniform Schedule of Miscellaneous Fees
The proposed FY26–27 Miscellaneous Fee Resolution, included as Exhibit 4, updates various fees charged for City services provided for individual benefit. In accordance with state law, the proposed fees are intended to recover, but not exceed, the City’s actual cost of providing the associated services. Because staff labor is the primary cost component for many of these services, annual fee adjustments are necessary to reflect increases in employee compensation, including negotiated salary adjustments, step increases, and rising benefit costs.

Staff recommends a general 4% increase to applicable miscellaneous fees, consistent with the negotiated salary increase for all bargaining units in FY26–27. In addition to the standard inflationary adjustments, the proposed resolution includes several modified, new, and deleted fees across multiple departments to better align charges with current service delivery costs, operational practices, and program needs. Notable proposed changes include:
Updates to Parks, Recreation, and Community Services facility rental, athletic field, recreation program, and stadium fees, including modifications to certain user group rates and the addition of new picnic shelter and event-related fees. New Library meeting room rental, custodial, security, and expedited reservation fees to support expanded facility use and cost recovery. Adjustments to Fire and Emergency Medical Services fees, including revised medical response and ambulance-related charges to better reflect actual service costs and industry billing practices.
New technology fee for certain permitting and development-related services to support ongoing technology and system maintenance costs. Modifications to Finance-related administrative and utility service fees, including implementation of a credit card processing fee for certain transactions. Public Works conducted a comprehensive user fee study, concentrating on permitting and inspection services. The suggested modifications shift from hourly

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charges to flat-fee procedures in various cases, introduce deposit-based fees for expedited review, and implement tiered fee structures based on project size, roadway type, or service level.

The proposed FY26-27 Miscellaneous Fee Schedule (Exhibit 5) identifies all assessed fees, as well as proposed new fees, deleted fees, and fees recommended for modification. If approved, all fee changes will take effect on July 1, 2026.

Capital Improvement Program (CIP)
As part of the annual budget development process, the City Council adopts a seven-year financial plan that serves as the City’s long-range framework for capital investment, infrastructure maintenance, and strategic priorities. The proposed budget represents the first year of this multi-year spending plan and establishes the near-term appropriation of funds.

The CIP identifies and prioritizes major infrastructure projects, including facility improvements, street and roadway enhancements, parks and recreation investments, and other long-term capital needs. These projects are programmed across the seven years based on available funding sources, project readiness, and alignment with City Council priorities and General Plan goals.

In accordance with state law and local planning requirements, the Planning Commission reviewed the proposed CIP and affirmed its consistency with the City’s General Plan on April 27, 2026. A summary of the proposed CIP follows.

The draft CIP was included in the May 19 budget agenda item on page 667 of Exhibit 1 and in the staff presentation on slide 17. After the May 19 meeting, the following CIP projects were added, increasing the proposed CIP budget by $1.95 million:
Cabrillo Park Restroom & General Site Improvements - $650K Alton Bike Trail Lights & Security Cameras - $600K
Streetlights at 18th & Jefferson - $350K
Edna Park Shade Structure - $250K
Streetlights at Harvey & Carol Cul de Sacs - $100K
The proposed document, in full, is located in Exhibit 6.

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ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.

FISCAL IMPACT
The Estimated Spendable Fund Balance is located in Exhibit 1. All exhibits are accessible on the City’s website at: https://www.santa-ana.org/fy-2026-27-proposed-budget- documents/

EXHIBIT(S)

1. June 2 Proposed Budget Document: https://www.santa-ana.org/fy-2026-27- proposed-budget-documents/

2. Ordinance No. NS-XXXX to Adopt the FY2026-27 Budget

3. Classification and Compensation Resolution

4. Miscellaneous Fee Resolution

5. Proposed Uniform Schedule of Miscellaneous Fees

6. Proposed Capital Improvement Program (CIP), including Seven-Year CIP Submitted By: Alexander Trinidad, Executive Director, Finance and Management Services Agency
Approved By: Alvaro Nuñez, City Manager

Santa Ana City CouncilJune 2, 2026

Santa Ana City Council
June 2, 2026