Item No. 11
STAFF REPORT
DATE: February 23, 2026
TO: Honorable Mayor and City Council
FROM: Dr. Sean M. Moore, City Manage
PREPARED BY: Phil White, Director of FinanceV
SUBJECT: FY26 Mid -Year Budget Status
RECOMMENDATION:
That the City Council:
1. Receive a report on the budget to actual status of the General Fund and Public Safety Fund from July 1, 2025 thru December 31, 2025; and
2. Authorize the following amendments to the FY26 Budget adjustments:
a. General Fund Revenue
i. Increase the revenue budget for Measure S by $2 million ii. Decrease the revenue budget for Bradley Burns sales tax by $100 thousand
iii. Decrease the revenue budget for charges for services by $400 thousand b. General Fund Expenditures
i. Increase the General Services expenditure budget for Agenda Management Software by $15 thousand and for an upgrade to the bulletin board by $7 thousand
ii. Increase the Public Works capital expenditure budget for a bucket truck by $60 thousand or an amount corresponding to alternative City Council direction; and
3. Approve and authorize the City Manager or his designee to execute the following procurement transactions (no budget impact):
a. Contract Amendment No. 4 with Animal Pest Management Services, Inc. in the not -to -exceed amount of $13,706
b. Replenish the on -call emergency contracts as follows:
i. Three Peaks Corporation Contract Amendment No. 4 in the amount of $13,498
ii. Jeremy Harris Construction Contract Amendment No. 4 in the amount of $1,249
iii. MCC Equipment Rentals, Inc. Contract Amendment No. 4 in the amount of $17,492; or
4. Provide further direction to staff as applicable.
BACKGROUND/DISCUSSION:
The City Council adopted the Fiscal Year 2025-2026 Operating Budget (FY26 Budget) on June 9, 2025. The adopted budget was developed using conservative revenue assumptions, anticipated service levels and achieved the City Council's goal of maintaining financial balance.
The FY26 Budget serves as the City's annual spending plan. Since adoption, the City Council has approved budget amendments to address operational needs, service demands, and policy direction.
This Mid -Year Budget Status Report provides an opportunity for the City Council to evaluate how actual revenues and expenditures are tracking relative to adopted assumptions and to assess whether the City's current fiscal course remains appropriate for the remainder of the fiscal year.
This update also highlights emerging trends that may inform City Council policy direction and staff s preparation of the upcoming fiscal year budget — an exercise that is currently underway.
This report reflects financial activity through December 31, 2025, representing approximately 50 percent of the fiscal year.
GENERAL FUND BUDGET UPDATE
The General Fund and the Public Safety Fund are the two primary operating funds of the City. For municipalities, anticipated revenues provide the resources to deliver services. In other words, a balanced budget requires that budgeted revenues be treated as an upper limit to spending. It is imperative that revenue estimates are met or exceeded. As of December 31, 2025, actual revenue compared to the budget in the General Fund is as follows:
Property taxes, franchise fees, Intergovernmental, investment income, and other revenue streams are tracking to at least meet budget. Sales and use taxes include two components, Bradley Burns and Measure S. The Bradley Burns revenue stream has been adjusted downwards by the sales tax consultants to $5.6 million. Measure S commenced April 1, 2025 and therefore had no historical data at the time of FY26 Budget adoption. Early data and payments provided by the California Department of Tax and Fee Administration (CDTFA) were inaccurate. While it is still too soon to determine a trend, the improved data recently received suggests that the $6 million projection will not only be met, but will be exceeded by approximately $2 million. Charges for services are trending 9% below budget estimates. There is a correlation between charges for services and the cost of facilities hosting events. Those costs are similarly tracking 7% less than budget. Overall, actual revenues are anticipated to exceed budget estimates and staff is recommending a budget adjustment of a net $1.5 million increase. This is comprised of a $100 thousand decrease in projected Bradley Burns sales tax, a $2 million dollar increase in the Measure S projection, and a $400 thousand decrease in projected charges for services revenue.
The $44 million projected revenue in the General Fund is programmed for spending as directed by the City Council. Budget to actual comparisons through December 2025 are as follows:
General Fund spending is trending below budget estimates. This is due primarily to a greater than 20% vacancy rate in authorized full-time positions. A high number of vacancies creates bottlenecks in service delivery, resulting in less than maximum results. In other words, the volume of service delivered has a limited capacity. Employees administer the planned programming in the adopted budget. Vacant positions cause delays in that administration. The City is actively filling those vacancies and has recruitments in various stages of completion.
The spending is anticipated to pick up as maintenance projects are heavily programmed in the second half of the fiscal year, significant contracts such as animal control are invoiced at the end of the year, and costs such as election charges will also be incurred in the 2nd half. Additionally, transfers are posted at year-end and typically are very close to budget.
While planned programming is tracking budget, additional services are being considered in a couple of areas as follows:
± Agenda Management Software — Yucaipa's process for routing and processing City Council agenda packets is manual. Effectiveness and efficiency can be gained with management software. Additionally, Yucaipa is nearing the SB 707 threshold that would require these changes to be made. The estimated cost of implementing this software is $15,000 and staff is requesting that the City Council consider amending the General Services budget in FY26 to include this item.
± Bulletin Board Upgrade — SB 707 is also requiring the City to make updates to its bulletin board at the front of City Hall. The cost of these upgrades are expected to be less than $7 thousand, however the programming was not contemplated at FY26 Budget adoption. Staff is requesting that the City Council consider amending the General Services budget in FY26 to include this item.
± Bucket Truck —.The vehicle is utilizedfor various jobs by several divisions. Public Works houses the vehicle and uses it for maintenance jobs. Community services uses the truck to set up and tear down events. Public safety uses the vehicle in coordination with the IT Division to install and maintain cameras throughout the City, including the Automated License Plate Reader cameras. The truck needs to be replaced as its 26 years old, has 245,544 miles on it and while it has no hour meter, its constantly idling when in service.
Maintenance is increasing as it ages. Because of the specialization of the truck, the operational uses are narrow, and the City's planned service life is 15-20 years.
Specialization and planned service life lower the viability of lease candidacy and, accordingly, the bucket truck was previously scoped out of the fleet in the lease program.
However, the lease program partner has confirmed that leasing is an option if the City Council chooses. Financing costs associated with the lease are currently in the 7% range.
The current market for a new bucket truck is approximately $175,000 and a used truck is approximately $110,000. Public Works has available capital spending in the FY26 Budget of $50,000. Staff is requesting that the City Council consider amending the budget to add authorized spending of either $125,000 for a new truck or $60,000 for a used truck or direct staff to finance the truck as part of the lease program to allow for replacement.
PUBLIC SAFETY FUND BUDGET UPDATE
The Public Safety Fund accounts for Police, Fire, Paramedic and Code Enforcement services. As of December 31, 2025, actual revenue compared to the budget in the Public Safety Fund is as follows:
Property tax and intergovernmental revenue are tracking to meet estimates. Charges for services have already exceeded annual estimates. Transfers -In are posted at year-end. Overall, Public Safety Fund Revenue is tracking budget and staff is not recommending modifications. It is important to note that revenues generated in the Public Safety Fund are credited to the applicable service e.g. property tax committed to fire prevention is credited to the fire division and the special assessment for paramedic services is credited to the paramedic division. That means that fire related charges for service revenue exceeding budget estimates is added to the fire "savings account" making upward revenue budget adjustments less necessary.
The Public Safety Fund is programmed for spending in accordance with the City Council's directives. Budget to actual comparisons through December 2025 are as follows:
The primary cost for Police Services is the contract with the San Bernardino County Sheriff's Department ($14.5M) which is invoiced monthly. The City is billed 1/12 of the contract monthly.
As discussed at previous City Council meetings, the department has been operating at less than full staffing for some time and anticipates full staffing by the end of the fiscal year. This means that the number of personnel paid for on the monthly invoices needs to be reconciled with actual delivery of service. This reconciliation is performed as part of contract administration and the City receives credit for any variances. Accordingly, costs (net of credits) are tracking slightly under budget through December. Note there is also a month or two lag on the invoices so the December invoice is not reflected in the numbers above. The costs attributed to the Code Enforcement
Division are also recorded under Police Services. Costs are on track with budget through December in the Code Enforcement Division.
Fire Protection Services are comprised substantially of the $6.2M contract with the California Department of Forestry and Fire Protection (CAL FIRE). The City is invoiced quarterly with the Q 1 and Q2 invoices not reflected in the balances above. Costs associated with operating are tracking budget. Additionally, two engines ($2.5M) were previously procured with payment due on delivery — estimated in FY27. Capital costs are not anticipated to be incurred until engine delivery in FY27.
Paramedic Services also consists of a contract with CAL FIRE. The City is invoiced quarterly with the Q 1 and Q2 invoices not reflected in the balances above. Costs associated with operating are tracking budget.
Public Safety Admin, comprised of two positions, is tracking budget and Public Works in this accounting fund is related to building maintenance and is tracking budget.
Overall, Public Safety Fund spending is tracking closely to budget and staff is not recommending budget amendments to spending.
PROCUREMENT UPDATES
The Development Services team is requesting authorization to execute the following contract amendments:
Animal Pest Management Services, Inc. - Pest Management Program Approve and authorize the City Manager or his designee to execute Contract Amendment No. 4 to the contract with Animal Pest Management Services, Inc. in the not -to -exceed amount of $13,706 for FY26 for the Pest Management Program.
On -Call Emergency Construction and Maintenance Services On -call emergency construction/maintenance service contracts exist to efficiently deploy resources as needed. $20,000 contracts are in place with five companies. Staff would like to replenish three of the contracts back up to $20,000 to ensure efficient continuity of service. Specifically, staff is requesting:
Approve and authorize the City Manager or his designee to execute Contract Amendment No. 4 with Three Peaks Corporation in the not -to -exceed amount of $13,498 for FY26 for On -Call Emergency Construction and Maintenance Services.
Approve and authorize the City Manager or his designee to execute Contract Amendment No. 4 with Jeremy Harris Construction, Inc. in the not -to -exceed amount of $1,249 for FY26 for On -Call Emergency Construction and Maintenance Services.
Approve and authorize the City Manager or his designee to execute Contract Amendment No. 4 with MCC Equipment Rentals, Inc. in the not -to -exceed amount of $17,492 for FY26 for On -Call Emergency Construction and Maintenance Services.
The contracts with Borden and Jeff Ott Construction remain at $20,000 — the targeted level for on -call services.
FISCAL IMPACT:
The fiscal impact of Recommendation 2 is dependent on the action taken by the City Council as described in the body of this report. The other recommendations do not result in a fiscal impact.