Sebastopol City Council
February 3, 2026

CITY OF SEBASTOPOL CITY COUNCIL
AGENDA ITEM REPORT FOR MEETING OF: February 3, 2026
=========================================================================================== To: Honorable Mayor and City Councilmembers
From: Ana Kwong – Administrative Services Director
Subject: FY25-26 Quarter 2 (October - December 2025) Financial Update – General Fund =========================================================================================== RECOMMENDATION:

Staff recommends the Sebastopol City Council receive year-to-date financial information for the General Fund.

EXECUTIVE SUMMARY:

As of December 31, 2025, the city’s general fund revenue stands at approximately 40.7% of the annual budget. The variance is primarily due to timing: sales tax receipts and transient occupancy tax are historically reported two months in arrears, and other revenue streams do not follow a uniform monthly pattern. Consequently, the 10% gap from the 50% benchmark reflects timing differences rather than a shortfall.

BACKGROUND:

Revenues are collected on a cash basis for the purpose of this update. The City has received the first installment of property tax payments, which represent our second-largest source of revenue. This initial installment accounts for approximately 56% of the annual property tax budget, primarily because some property owners have paid their full obligation upfront rather than in two installments.

In addition to property taxes, other revenue streams—such as sales tax and transient occupancy tax—do not follow a uniform monthly pattern. These non-linear collection schedules often create temporary variances in the general fund, making certain categories appear under budget at this point in the fiscal year. However, these variances are timing-related indication.

On the expenditure side, some costs are not incurred on a recurring monthly basis. As a result, individual budget accounts may appear over budget during certain periods, even though overall spending aligns with annual projections.

DISCUSSION:

This report provides a comprehensive overview of the City’s General Fund performance at the mid-point of fiscal year 2025–26, using the most current financial data available as of December 31, 2025. It offers a detailed accounting of revenues and expenditures recorded during the first six months, presenting a clear snapshot of the City’s financial position as we reach the halfway mark of the fiscal year.

This update also shows trends and explains why some revenues and expenses don’t line up perfectly with the budget right now. For example, certain taxes come in later in the year, so some categories look low even though they’re on track. The report also compares this year’s progress to the same time last year, showing where we’re seeing growth and where we might need to keep an eye out for challenges.

Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

As part of this mid-year review, staff has evaluated projected collections and spending patterns and is recommending minor budgetary adjustments to ensure alignment with actual performance and anticipated yearend outcomes.

STAFF ANALYSIS:

General Fund Revenues:

The financial report for the second quarter of fiscal year 2025–26, reflecting transactions through December 31, indicates that general fund revenue totals $6.33 million—just 40.7% of the adopted annual budget of $15.69 million. Given these timing dynamics, the current revenue picture reflects a predictable seasonal lag. Some revenue categories have already exceeded the 50% benchmark for the quarter, while others remain below target due to collection schedules. As part of the mid-year review,staff is recommending minor budgetary adjustments to reflect the actual projected collections.

The quarter-to-quarter comparison—this quarter versus the same quarter of the prior year—provides insight into revenue performance and timing variances. As of December 31, 2025, total operating revenues stand at $6.38 million, which represents 40.7% of the adopted budget of $15.69 million. This is slightly ahead of the prior year’s mid-year actual of $5.54 million, indicating an overall improvement in revenue collection compared to the same point last year.

Key Revenue Highlights
• Property Tax: The City received the first semiannual property tax installment, our second-largest revenue source. Year-to-date collections total $1.99 million, or 54.8% of the adopted budget, slightly higher than last year’s $1.91 million. This percentage is higher due to some property owners chose to pay their full yearly obligation upfront.
• Sales Tax: Collections are at $1.97 million, or 32.2% of budget, compared to $1.50 million at the same time last year. While this reflects growth and primarily because of new Measure U, sales tax receipts typically lag by two months, so the current figure does not yet represent full activity for the quarter. • Transient Occupancy Tax (TOT): Year-to-date revenue is $190,807, consistent with last year’s $190,505, and represents 35.7% of budget. TOT remains subject to seasonal fluctuations and reporting delays. • Licenses & Permits: Collections have increased significantly to $394,584, compared to $197,014 last year, though still only 31.7% of budget. This growth indicates increased permitting activity but still falls short of linear projections due to timing factors. Building activity is also seasonal, with most occurring in the spring, and the building department is closely monitoring these trends. • Other Categories: Franchise fees, user taxes, and miscellaneous revenues are trending below 50% of budget, consistent with historical collection patterns and timing differences.

Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

Description
2024-25
Actual
Y-T-D
Actual
12/31/24
2025-26
Adopted
Budget
Y-T-D
Actual
12/31/25
% of
Adopted
Budget

OPERATING REVENUE
Property Tax 3,642,556 1,906,707 3,639,105 1,995,758 54.8% Real Property Transfer Tax 62,203 35,688 50,000 30,797 61.6% Sales Taxes 5,015,508 1,501,145 6,130,700 1,974,439 32.2% User Taxes 925,705 354,369 962,050 367,654 38.2%
Transient Occupancy Tax 480,263 190,505 534,500 190,807 35.7% Franchise Fees 490,118 143,123 530,000 144,329 27.2%
Licenses & Permits 676,253 197,014 1,244,000 394,584 31.7% Fines & Special Assessments 70,935 38,479 77,300 42,134 54.5% Intergovernmental Revenues 27,724 5,048 20,200 5,112 25.3% Interest & Rents 166,399 62,644 157,450 84,914 53.9%
Charges for Services 182,375 77,276 162,300 85,171 52.5% Miscellaneous Revenue 393,335 42,359 110,790 39,350 35.5% Cost Allocation Plan 1,761,797 880,899 1,796,323 898,161 50.0% Transfers In 209,622 101,364 275,000 129,500 47.1%
TOTAL REVENUES 14,104,793 5,536,621 15,689,718 6,382,709 40.7% General Fund Expenditures:

At the halfway point of fiscal year 2025–26, total General Fund expenditures are $7.32 million, which is 46.7% of the adopted annual budget of $15.69 million. This is higher than last year’s mid-year total of $6.37 million and reflects planned expenditures spending along with some costs that occur early in the year. • Overall spending is on track, with most departments close to the mid-year benchmark. • Differences between departments are mostly due to timing. For example, Fire & Prevention and Debt Service show higher percentages because major costs were paid early such as annual fire contribution, and debt service is fully paid for the year at mid-year.
• Other areas, such as City Manager and Senior Center, are well below 50%. For the Senior Center, spending is expected to pick up in the second half of the year, while the City Manager budget reflects savings due to a vacancy.

Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

Description
2024-25
Actual
Y-T-D
Actual
12/31/24
2025-26
Adopted
Budget
Y-T-D
Actual
12/31/25
% of
Adopted
Budget
OPERATING EXPENDITURE - By Department
City Council 176,804 69,884 183,214 73,673 40.2%
City Manager 827,312 326,610 581,282 118,514 20.4%
City Attorney 646,785 275,501 643,750 162,752 25.3%
Assistant City Manaer | City Clerk 457,159 212,149 470,818 256,510 54.5% Administrative Services (Finance) 1,385,796 656,006 1,466,539 751,730 51.3% Planning 657,815 302,356 701,666 298,633 42.6%
Building 303,081 110,428 437,909 125,562 28.7%
Fire & Prevention 1,492,276 520,973 1,247,640 1,208,384 96.9% Police 5,123,538 2,390,391 5,767,329 2,854,100 49.5%
Senior Center 2,298,834 12,785 47,650 9,514 20.0%
Public Works 42,620 1,072,541 2,650,318 1,128,133 42.6% Community Center 172,309 82,378 164,202 62,419 38.0%
Ives Pool 212,031 103,702 225,761 56,860 25.2%
Non Departmental 97,126 53,802 146,940 62,274 42.4%
Debt Service Payments 269,979 179,391 150,755 150,754 100.0% Transfers Out 300,000 - 800,000 - 0.0%
TOTAL EXPENDITURES 14,463,465 6,368,897 15,685,773 7,319,812 46.7% Transfer-out: The $800,000 transfer from the General Fund is primarily allocated to capital improvement projects, consistent with the City Council’s adopted Measure U policy. This policy emphasizes investments in critical infrastructure—such as roads, streets, drainage systems, and parks—which are central to Sebastopol’s long-term priorities. These projects are scheduled for implementation during the second half of the fiscal year.

These projects reflect the City’s commitment to responsibly managing voter-approved Measure U funds while addressing high-priority infrastructure needs.

Planned Measure U Projects Include:

1. Various Street Paving Projects - $550,000

2. Emergency Operations Center (EOC) Generator - $150,000

3. Fueling Station Upgrade – $85,000

4. Unallocated Reserve – $15,000

BUDGET COMMITTEE REVIEW
This item was reviewed by the Budget Committee at its meeting on January 12, 2026.

CITY COUNCIL GOALS/PRIORITIES/AND OR GENERAL PLAN CONSISTENCY:

Goal 5 – Long Term Financial Sustainability
Achieving Greater Fiscal Resilience and Long Term Fiscal Sustainability Action Plan 2 – Quarterly Financial Report
General Fund: A quarterly update is an essential tool for monitoring and managing the financial health of an organization. It provides a snapshot of the financial performance over the past three months, allowing City Council to assess progress, identify trends, and make informed decisions.

Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

FISCAL IMPACT:

There is no fiscal impact in receiving this informational financial update.

PUBLIC COMMENT:

As of the writing of this staff report, the City has not received any public comment on this item. However, if staff receives public comment from interested parties following the publication and distribution of this staff report,such comments will be provided to the City Council as supplemental materials before or at the meeting.

COMMUNITY OUTREACH:

This item has been noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to the scheduled meeting date.

RESTATED RECOMMENDATION:

That the City Council receive year-to-date financial information.

CITY COUNCIL OPTION(S):

There are no options to consider.

ATTACHMENTS:

Second Quarter Financial Reports
APPROVALS:

Department Head Approval: Approval Date: __1/5/2026____ CEQA Determination (Planning): Approval Date: ___N/A_______ The proposed action is / is not exempt from the requirements of the California Environmental Quality Act (CEQA) Administrative Services/Financial Approval: Approval Date: ___1/5/2026___ Costs authorized in City Approved Budget: ☐ Yes ☐ No  N/A Account Code (f applicable) ___________________________ City Attorney Approval: Approval Date: __1/21/26_____
City Manager Approval: Approval Date: __1/21/26_____
Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

Description
2024-25
Actual
Y-T-D
Actual
12/31/24
2025-26
Adopted
Budget
Y-T-D
Actual
12/31/25
% of
Adopted
Budget

OPERATING REVENUE
Property Tax 3,642,556 1,906,707 3,639,105 1,995,758 54.8% Real Property Transfer Tax 62,203 35,688 50,000 30,797 61.6% Sales Taxes 5,015,508 1,501,145 6,130,700 1,974,439 32.2% User Taxes 925,705 354,369 962,050 367,654 38.2%
Transient Occupancy Tax 480,263 190,505 534,500 190,807 35.7% Franchise Fees 490,118 143,123 530,000 144,329 27.2%
Licenses & Permits 676,253 197,014 1,244,000 394,584 31.7% Fines & Special Assessments 70,935 38,479 77,300 42,134 54.5% Intergovernmental Revenues 27,724 5,048 20,200 5,112 25.3% Interest & Rents 166,399 62,644 157,450 84,914 53.9%
Charges for Services 182,375 77,276 162,300 85,171 52.5% Miscellaneous Revenue 393,335 42,359 110,790 39,350 35.5% Cost Allocation Plan 1,761,797 880,899 1,796,323 898,161 50.0% Transfers In 209,622 101,364 275,000 129,500 47.1%
TOTAL REVENUES 14,104,793 5,536,621 15,689,718 6,382,709 40.7% OPERATING EXPENDITURE - By Department
City Council 176,804 69,884 183,214 73,673 40.2%
City Manager 827,312 326,610 581,282 118,514 20.4%
City Attorney 646,785 275,501 643,750 162,752 25.3%
Assistant City Manaer | City Clerk 457,159 212,149 470,818 256,510 54.5% Administrative Services (Finance) 1,385,796 656,006 1,466,539 751,730 51.3% Planning 657,815 302,356 701,666 298,633 42.6%
Building 303,081 110,428 437,909 125,562 28.7%
Fire & Prevention 1,492,276 520,973 1,247,640 1,208,384 96.9% Police 5,123,538 2,390,391 5,767,329 2,854,100 49.5%
Senior Center 2,298,834 12,785 47,650 9,514 20.0%
Public Works 42,620 1,072,541 2,650,318 1,128,133 42.6% Community Center 172,309 82,378 164,202 62,419 38.0%
Ives Pool 212,031 103,702 225,761 56,860 25.2%
Non Departmental 97,126 53,802 146,940 62,274 42.4%
Debt Service Payments 269,979 179,391 150,755 150,754 100.0% Transfers Out 300,000 - 800,000 - 0.0%
TOTAL EXPENDITURES 14,463,465 6,368,897 15,685,773 7,319,812 46.7% Net Surplus/(Deficit) (358,672) (832,276) 3,945 (937,103)

GENERAL FUND
OCTOBER - DECEMBER 2025
QUARTER 2 REPORTING
Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

Revenue Categories
2024-25
Actual
Y-T-D
Actual
12/31/24
2025-26
Adopted
Budget
Y-T-D
Actual
12/31/25
% of
Adopted
Budget
3000 - Property Tax Secured / Unsecured 2,650,054 1,410,456 2,626,755 1,468,166 55.9% 3002 - Real Property Transfer Tax 62,203 35,688 50,000 30,797 61.6% 3004 - Property Tax in Lieu of VLF 992,502 496,251 1,012,350 527,592 52.1% Property Tax 3,704,759 1,942,395 3,689,105 2,026,555 54.9% 3010 - Sales Tax-Bradley Burn 2,248,299 707,862 2,212,000 715,323 32.3% 3011 - Sales Tax-1/4 cent (T) 763,260 250,957 772,000 256,776 33.3% 3012 - Sales Tax-1/2 cent (Q) 1,529,446 498,151 1,544,000 499,001 32.3% 3018 - Sales Tax-1/2 cent (U) 370,737 -0 1,500,000 458,970 30.6% 3014 - Sales Tax-Prop 172 103,766 44,175 102,700 44,369 43.2% Sales Taxes 5,015,508 1,501,145 6,130,700 1,974,439 32.2% 3020 - Transient Occupancy Tax 480,263 190,505 534,500 190,807 35.7% 3050 - Garbage Franchise 302,261 126,498 330,000 129,371 39.2% 3051 - PG&E Franchise 121,902 -0 125,000 -0 0.0%
3052 - Cable TV Franchise 65,955 16,625 75,000 14,958 19.9% Franchise Fees 490,118 143,123 530,000 144,329 27.2%
3055 - Vehicle in lieu Tax 11,862 -0 12,500 11,502 92.0% 3056 - UUT PG&E 488,518 173,817 494,100 177,433 35.9%
3057 - UUT Sonoma Clean Power 122,164 55,385 129,150 54,028 41.8% 3058 - UUT Garbage 98,326 41,150 108,200 42,085 38.9%
3059 - UUT Cable 71,201 29,213 77,000 28,640 37.2%
3060 - UUT Misc 132,562 54,433 140,600 53,767 38.2%
3061 - UUT (AB-1717) 1,072 372 500 199 39.8%
User Taxes 925,705 354,369 962,050 367,654 38.2%
3101 - Business License 139,028 68,413 140,000 73,541 52.5% 3102 - Business License-Late Fees 4,399 180 4,000 90 2.3% 3103 - Building Permits 532,826 128,421 1,100,000 320,953 29.2% Licenses & Permits 676,253 197,014 1,244,000 394,584 31.7% 3105 - Vehicle/ Criminal Code Fines 14,643 6,950 12,500 9,041 72.3% 3106 - Parking Fines 14,278 5,522 18,000 6,959 38.7%
3107 - RBS Training Fees 14,200 1,000 14,800 -0 0.0%
3110 - Business License - DSA 70% $1 5,213 2,423 5,500 2,905 52.8% 3202 - State Mandated Cost Reimb 22,602 22,584 26,500 23,229 87.7% Fines & Special Assessments 70,935 38,479 77,300 42,134 54.5%

GENERAL FUND REVENUES DETAILED
OCTOBER - DECEMBER 2025
QUARTER 2 REPORTING
Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026

Revenue Categories
2024-25
Actual
Y-T-D
Actual
12/31/24
2025-26
Adopted
Budget
Y-T-D
Actual
12/31/25
% of
Adopted
Budget

GENERAL FUND REVENUES DETAILED
OCTOBER - DECEMBER 2025
QUARTER 2 REPORTING
3203 - POST Reimb 32 -0 -0 -0 0.0%
3204 - Casino Mitigation 20,192 5,048 20,200 5,112 25.3% 3206 - County Grant 7,500 -0 -0 -0 0.0%
3207 - State Grant -0 -0 -0 -0 0.0%
3209 - Federal Grant -0 -0 -0 -0 0.0%
Intergovernmental Revenues 27,724 5,048 20,200 5,112 25.3% 3300 - Interest Income 118,282 37,391 100,000 40,502 40.5% 3308 - Interest Income- FMV -18,421 -0 18,420 0.0%
3301 - Cell Tower Lease Rental 37,540 19,470 44,300 20,054 45.3% 3302 - City Property Rental - Little League 4,396 2,473 3,150 2,341 74.3% 3304 - City Property Rental - Parking Space 430 60 500 120 24.0% 3305 - City Property Rental - Palm Ave 3,500 2,250 2,500 1,500 60.0% 3390 - Lease Interest Income 9,422 -0 -0 0.0%
3401 - Plaza and Special Event Fees 11,250 1,000 7,000 1,977 28.2% Interest & Rents 166,399 62,644 157,450 84,914 53.9%
3404 - Credit Card Transaction Fee 1,934 697 2,000 1,008 50.4% 3405 - Finance Fee 6,486 2,515 7,000 3,224 46.1%
3425 - Fire Dept Fees 68,125 25,796 40,000 22,493 56.2% 3426 - Planning Fees 35,721 11,000 38,000 24,501 64.5%
3441 - Encroachment Permits Fee 26,540 15,030 30,000 11,898 39.7% 3442 - Grading Permit Fee 1,130 1,090 2,000 71 3.6%
3445 - Public Works Services 2,053 1,002 7,500 748 10.0% 3502 - Police Services 25,494 11,773 18,000 13,558 75.3% 3504 - Impounded Vehicle Release Fee 2,003 826 1,800 1,584 88.0% 3505 - Police Reports Copy Fee 1,545 480 2,000 560 28.0% 3506 - Police False Alarms Fee 60 -0 -0 -0 0.0%
3507 - Police OT Reimbursement 2,964 2,964 6,000 1,563 26.1% 3615 - Solar Payback 8,320 4,104 8,000 3,963 49.5%
Charges for Services 182,375 77,276 162,300 85,171 52.5% 3801 - Sales of Surplus Equipment 870 870 -0 -0 0.0%
3804 - Insurance Claims 39,973 8,258 500 98 19.5%
3805 - Miscellaneous Income 830 590 500 2,879 575.8%
3806 - Donations & Contributions 253,000 -0 500 1,500 300.0% 3807 - Rebates 17,332 6,963 15,300 8,630 56.4%
3810 - Pool Expense Reimbursement 81,331 25,678 93,990 26,243 27.9% Miscellaneous Revenue 393,335 42,359 110,790 39,350 35.5% 3998 - Cost Allocation Plan 1,761,797 880,899 1,796,323 898,161 50.0% 3999 - Transfers In 209,622 101,364 275,000 129,500 47.1% Total Revenue 14,104,793 5,536,621 15,689,718 6,382,709 40.7% Agenda Item Number 10 Agenda Item Number 10
City Council Meeting Packet of February 3, 2026