Item 25 - Public Hearing - Fiscal Year 2025-26 City Budget

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Assumptions The City has prepared a multi-year outlook for the City’s major funds, as defined by the Governmental Accounting Standards Board: Unless otherwise noted below, future years' estimated revenue and planned operational spending have been increased by Consumer Price Index (CPI), as forecasted by the California Department of Finance. The Grants Fund is comprised of multiple funds, including HOME, WIOA, and CDBG. For purposes of this outlook, CDBG fund is only included, which is the most significant of that group. The multi-year trend analysis assumes a modest decline in CDBG funding in future years, which informs our expenditure estimates. As the community’s overall conditions improve—such as reduced poverty, better housing conditions, and faster population growth—the City is allocated less CDBG funding due to being assessed as having comparatively lower need than other jurisdictions. The City does not expect to receive any further federal ARPA funding and has a plan to fully expend the entire fund balance by December 2026, in compliance with federal law. Future years' estimates of Gas Tax Fund revenue are based on projections from the League of California Cities Fiscal Policy Advisor, Michael Coleman. Future years’ debt service has been taken from the 2019 Gas Tax Bonds debt service schedule, and future years’ capital spending is limited to the estimate of RMRA revenue. The City Council adopted a Budget and Reserve Policy that sets a target reserve balance for operating funds such as the Gas Tax Fund. That target reserve is not a requirement and is identified as 20% of annual operating expenditures. Street Construction Funds include five key capital project funds with budgeted activity in FY24-25 and/or FY25-26: Measure M2 New Transportation System Improvements Area E New Transportation System Improvements Area F Residential Street Improvements Select Street Construction With the exception of Residential Street Improvements, these funds are primarily used for capital projects, not ongoing operational expenses. As such, they are subject to the Continuing Appropriations process, which is presented annually to the City Council each October. This process authorizes the carry- over of unspent project budgets, recognizing that many capital improvements span multiple fiscal years and require funding continuity to ensure completion. When forecasting revenue across multiple fiscal years, the City utilized the same long-term outlook as the Orange County Transportation Authority (OCTA), since they are the grantor agency for these funds. (Continued on next page) 102