City Council Agenda Report
Meeting Date: June 2, 2026
From: Alice Hui, Director of Finance/City Treasurer
Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Fiscal Year 2026-27 Budget Workshop II
Recommendation
Conduct a workshop and provide direction to staff on the Fiscal Year (FY) 2026-27 estimated revenues and proposed expenditures in preparation for FY 2026-27 Citywide Budget adoption.
Background
As required by Chapter 8.2 of the City’s Charter, staff presented the Fiscal Year (FY) 2026-27 Proposed Budget to City Council during the first Budget Workshop held on May 19, 2026, to provide an in-depth understanding of the City’s operations and intended fiscal direction prior to adoption. During the workshop, the City Administrator outlined instructions to Departments on the fiscal direction for the upcoming fiscal year. Throughout the budget process there was a focus on achieving operational efficiencies, areas of cost savings, and diversified revenue streams.
The Finance Director provided an overview of the General Fund and Enterprise Funds revenues and expenditures, fund and reserve balances, and detailed the changes from the FY 2025-26 budget to the FY 2026-27 Proposed Budget. The executive team also added context to their proposed internal service departments, Health, Police, Public Works, and Vernon Public Utilities (VPU) budgets while highlighting their accomplishments during the current fiscal year and expanding on goals for the upcoming year.
On May 28, 2026, the FY 2026-27 Proposed Budget was presented to the Business and Industry Commission (Commission) which commented on the proposed electric rate increase, parcel tax, utility users’ tax, business license tax, and rising public safety costs. The City Administrator advised that the Business Tax Contribution Study was forthcoming and would be presented to the Commission at a future date to address the board’s questions about possible inequities in taxation structures; and explained that public safety costs are largely attributed to pension liability, unforeseeable worker’s compensation claims, and staffing to accommodate attrition of retiring personnel.
At their meeting, the Commission also received a presentation on proposed electric rate increases of 4% for FY 2026-27 and 4% for FY 2027-28, and the proposed transition from separate Energy Cost Adjustment (ECA) and Renewable Portfolio Standards (RPS) billing factors to a combined Power Cost Adjustment (PCA) billing factor. Staff acknowledged these proposed changes were incorporated into the proposed FY 2026-27 budget. After a lengthy discussion, the Commission reached consensus on recommending an electric rate increase of 4% for FY 2026-27, revisiting the need for an increase in FY 2027-28 at or near the City’s budget mid-year, and keeping the ECA and RPS as separate billing factors.
Budget Workshop II will cover changes from the previous version of the Proposed Budget to the current iteration for Council’s consideration. As requested by City Council during Budget Workshop I, VPU staff will provide additional details of the Utility’s proposed electric rate increase, the Vernon City Elementary School Principal will be available for any questions in response to her request to fund an interventionist position for one year, and the fiscal impact of incorporating City Council’s strategic goals into the FY 2026-27 budget will be presented. Staff will be available to answer any questions from City Council.
Fiscal Impact
There is no fiscal impact associated with this report.
Attachments
1. FY 2026-27 Proposed Budget