HomeMy WebLinkAboutItem 6a. Review of FY 2025-26 Second Quarter Budget Report Item 6a
Department: Finance
Cost Center: 2002
For Agenda of: 2/17/2026
Placement: Business
Estimated Time: 60 minutes
FROM: Emily Jackson, Finance Director
Prepared By: Riley Kuhn, Principal Budget Analyst
SUBJECT: REVIEW OF FY 2025-26 SECOND QUARTER BUDGET REPORT
RECOMMENDATION
1. Receive and file the FY 2025-26 Second Quarter Budget Report; and
2. Appropriate $3,468,954 in FY 2024-25 unassigned fund balance as detailed in the
report; and
3. Appropriate $2,000,000 in FY 2024-25 assigned fund balance and authorize an
Additional Discretionary Payment to CalPERS of $3,506,187; and
4. Appropriate the $20,000 National League of Cities Health and Wellbeing award of
$20,000 to the Community Development Department’s non-staffing operating budget
for the purchase of Tolemi BuildingBlocks software.
POLICY CONTEXT
The City’s budget policies require that the City Council review the City’s budget and
financial condition at least every six months. City Charter Code Section 804 states that at
any meeting after the adoption of the budget, the Council may amend or supplement the
budget by motion adopted by a majority vote of the Council.
The second quarter budget review is part of the ongoing budget reporting and review
process and fulfills these requirements. The accompanying Second Quarter Budget
Report for FY 2025-26 provides a detailed review of the City’s financial results as
compared to budget half-way through the fiscal year.
DISCUSSION
Background
Budget Report Organization
The Second Quarter Budget Report (Attachment A) is intended to provide a high-level
overview of the City’s performance against budget during the fiscal year. Additional
emphasis is placed on those areas where results are expected to differ from budget over
the full year. The report also includes an update on the Capital Improvement Projects and
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Major City Goal Tasks active during the quarter. The report (Attachment A) includes the
following sections and themes:
General Fund Summary: Halfway through the year, staff note two areas of divergence
from revenue budgets. First, the City’s consultants have advised that sales tax revenue
may not grow as expected and a revenue miss is possible. Second, staff note that
development activity has picked up since the last fiscal year and expect development
review fees to exceed budget at year end.
Staff also note that several departments are at risk of exceeding their staffing budgets,
and lower unassigned fund balance at year-end should be expected.
Use of FY 2025-26 Fund Balance: The City’s Annual Comprehensive Financial Report
(ACFR), including audited financial statements, was presented to Council on January 13,
2026. The ACFR indicated there was General Fund unassigned fund balance of
$3,468,954 as of June 30, 2025. The Second Quarter Report details staff
recommendations for allocation of Fiscal Year 2024-25 unassigned fund balance,
including additional discretionary payments to address pension liabilities and investments
in infrastructure.
Enterprise Fund Summary: The Second Quarter Report includes a detailed analysis of
the Water, Sewer, Parking, and Transit enterprise funds. All enterprise funds are
expected to achieve their budgeted fund balance targets for the year.
Special Revenue and Other Funds: The Report includes information on the various
Community Financing District funds and certain other funds. All are expected to finish the
year in line with their budgets.
Capital Improvement Program Update: The Report includes an update on the various
projects completed or in progress during the first half of the fiscal year. Key projects
highlighted in the report include the Water Resource Recovery Facility Upgrade, Mission
Plaza Enhancements, and the Cultural Arts District Parking Structure.
Major City Goal Update: The Report also includes a summary of the Major City Goal
tasks with completion dates in the first half of the fiscal year. Halfway through the year,
eleven tasks are on track and four are proposed to be delayed to the second half of the
fiscal year.
Additional Recommendations
Quarterly budget reports are occasionally used to make appropriation recommendations
as needed throughout the year. This report includes one such recommendation:
National League of Cities Health and Wellbeing Award: The City was awarded
$20,000 from the National League of Cities. Staff recommend an appropriation of this
funding to purchase a trial license of BuildingBlocks software from Tolemi. It is hoped that
this tool can be used to build a ‘Green and Healthy Homes Concierge Service’, the goal
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Item 6a
of which is to provide residents with a single point of contact to access coordinated
municipal and community partners services including weatherization, electrification,
home repairs, and housing stability support.
Previous Council or Advisory Body Action
Council adopted the FY 2025-26 budget on June 17, 2025. During the FY 2024-25 year-
end budget report hearing on November 4, 2025, Council directed staff to include a
recommendation to provide $500,000 to the San Luis Obisp o Museum of Art (SLOMA),
contingent upon availability of funds as demonstrated by a completed audit and a
satisfactory grant agreement. A proposed Grant Agreement with SLOMA will be
presented for consideration in a separate item on the same agenda as this report as part
of the February 17, 2026 regular City Council meeting, which would memorialize the
terms and conditions for the $500,000 grant.
Public Engagement
Public engagement on this item can be provided to the City Council through written
correspondence prior to the meeting or through public testimony at the meeting. The
report will also be posted on the City’s website for public review.
CONCURRENCE
All departments were involved in preparation of the report and concur with the staff
recommendations.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended
action in this report because the action does not constitute a “Project” under CEQA
Guidelines Sec. 15378.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2025-26
Funding Identified: Yes
Fiscal Analysis:
Staff recommend appropriation of FY 2024-25 General Fund unassigned fund balance of
$3,468,954 according to the audited financial statements as follows:
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Item 6a
The Second Quarter Report provided in Attachment A includes further explanation and
discussion of these recommended allocations.
The amounts above are in addition to the $2,000,000 in General Fund assigned fund
balance for an Additional Discretionary Payment (ADP) to CalPERS to continue progress
toward paying down the City’s unfunded pension liability. Staff recommend total
Additional Discretionary Payments as follows:
ALTERNATIVES
Council could direct staff to use fund balance for another purpose. Such purposes
could include higher or lower payments to CalPERS, funding for specific projects, or to
be held in reserve for future years or future needs.
ATTACHMENTS
A - FY 2025-26 Q2 Budget Report
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Second Quarter Financial Report
Fiscal Year 2025-26
IntroducƟon
This financial report provides an overview of the City’s revenues and expenditures through the first half of
the fiscal year (July 1, 2025 – December 31, 2025). It also provides an update on the status of the City’s
Capital Improvement Plan (CIP) projects and progress on Major City Goal tasks.
Throughout the document, reference will be made to the data available as of the Ɵme the report was
draŌed. Revenues are oŌen not available for up to two months aŌer month-end and in some cases,
revenues are not received evenly throughout the year (e.g. property tax which is largely received in the
second half of the fiscal year). Expenditures are oŌen recorded in advance for annual costs or for purchase
orders opened at the beginning of the year. The net impact is that actual results booked halfway into the
year should not always be expected to equal one half of budgeted amounts. Commentary will be provided
only when analysis suggests that full-year results may differ significantly from budget.
Table of Contents
General Fund Summary………………………………………………………………………….……...2
Use of FY 2024-25 Unassigned Fund Balance………………………………………….….…. 5
Water Fund Summary……………………………………………………………………………..…..…9
Sewer Fund Summary………………………………………………………………………………..…10
Parking Fund Summary…………………………………………………………………………..…….12
Transit Fund Summary……………………………………………………………...…………….…...14
Special Revenue Summaries………………………………………………..………………..………16
CIP Update………………………………………………………………..………….…………….………..21
Major City Goal Update……………………………………………………….……………….……….23
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General Fund Summary
Halfway through the year, staff expect that revenue targets will be aƩained and expenditures will finish
the year on budget. The tables below detail year-to-date (YTD) results as compared to budget and prior
year actuals. Commentary is provided where results are not in line with expectaƟons.
Revenue:
Tax Revenue:
Sales Tax (including Local Revenue Measure & Prop 172 Safety Tax): The budget for sales tax revenue was
developed in February 2025, prior to the announcement of significant new and increased federal import
taxes. The City’s sales tax consultants advised staff in May 2025 that these tariffs would have a negaƟve
impact on sales tax revenue and presented a risk of up to $1.3 million to the revenue budget. This impact
has yet to appear in sales tax data, which includes results through October. At 34% received, sales tax to
date is slightly higher than the 31% received at the same point in FY 2024-25 budget, but considerably
lower than the 41% received at the same point in FY 2023-24. Staff will closely monitor results and any
developments in federal trade policy which could impact local spending.
Property Tax: The City parƟcipates in the Teeter Plan, which means that the City is not exposed to
delinquent payments and can reasonably expect to collect 100% of budgeted amounts. Staff expect to
meet or modestly exceed budget by year-end.
FY 2024-25 FY 2025-26
General Fund Actuals Budget YTD Actuals % Received
Tax & Franchise Revenue
Sales Tax 54,357,111$ 55,470,441$ 18,801,871$ 34%
Property Tax 24,923,847 25,944,966 4,662,363 18%
Transient Occupancy Tax 11,417,888 11,099,705 4,882,559 44%
Utility User Tax 7,501,436 6,605,306 2,707,760 41%
Business Tax 3,138,271 3,230,170 3,121,913 97%
Franchise Fees 2,622,351 2,242,429 645,423 29%
Cannabis Tax 814,502 1,000,000 429,254 43%
Total Tax & Franchise Revenue 104,775,406 105,593,017 35,251,142 33%
User Fees
Development Review 5,697,332 4,606,812 3,753,392 81%
Parks & Recreation 2,643,907 2,280,283 1,154,881 51%
Fire 3,331,998 1,759,183 1,158,712 66%
Police 834,584 690,200 386,622 56%
Business Licenses 792,548 632,470 317,840 50%
Total User Fees 13,300,370 9,968,947 6,771,447 68%
General Government 7,778,702 1,669,077 2,783,372 167%
2023 Storm Reimbursement 909,090 - 53,123
Total Revenue 126,763,568$ 117,231,041$ 44,859,085$ 38%
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Business Tax: This revenue stream is generally received at the beginning of the fiscal year with license
renewals and is largely collected for this fiscal year. Staff expect to collect addiƟonal payments throughout
the remainder of the year and meet budget by year-end.
While other tax revenue categories show year to date results higher or lower than 50%, staff do not expect
significant variances for the full year.
Fee & Other Revenue:
Development Review Fees: FY 2025-26 revenues are trending above projecƟons. At midyear, the
Community Development Department has collected 81% of the total annual budget. This over-realizaƟon
of fee revenue was due in large part to an unusually strong July during which fees were received for review
for Phase 5 of Avila Ranch, as well as the steady ongoing permiƫng acƟvity supported by the build out of
Avila Ranch and strong Accessory Dwelling Unit (ADU) acƟvity. Based on current trends, the Department
anƟcipates finishing the year approximately $1 million above budget.
The FY 2025-26 revenue budget was based on revenues from the first half of FY 2024-25, a period marked
by slowing development acƟvity and macroeconomic uncertainty. ProjecƟons were set conservaƟvely at
the lowest level since 2019 due to the trends being observed as well as the ongoing uncertainty in the
market. While overall development remains below historical highs, the ongoing build-out of Avila Ranch,
and steady ADU and other development is anƟcipated to support a steady stream of revenue for the
department for the next several years.
Fire Department Fees: Halfway through the year, the Fire Department has collected 66% of its budgeted
revenue. This is primarily due to the agreement to provide fire services to Cal Poly for which revenue has
been recognized for the full year. Fire Department Permits are also trending above budget and prior year
actuals from the same period. Staff expect a modestly favorable result at year-end.
General Government: This line includes earnings on cash and investment balances which have benefited
greatly from elevated interest rates. Staff expect investment income to outperform budget once again,
although to a lesser degree due to recent policy acƟons by the Federal Reserve.
Though other fee categories show year-to-date results other than 50% of budget, staff do not expect
significant variances for the full year.
OperaƟng Expenditures: Year-to-date results for the General Fund are largely as expected at this point in
the year.
Staffing: While more than 50% of staffing budgets have been expended halfway through the year, adjusted
for upfront annual payments including unfunded pension liabiliƟes, this line is expected to finish the year
under budget. The General Fund is trending towards 3% salary savings at year-end, which is lower than
the 4% assumpƟon built into the long-term forecast for the General Fund. This is in large part due to lower
vacancy rates Citywide which may be aƩributable to a deterioraƟng labor market. Other more disƟnct
FY 2024-25 FY 2025-26
General Fund Actuals Budget YTD Actuals % Expended
Staffing 75,489,526$ 78,908,239$ 43,772,097$ 55%
Other Operating Expenditures 18,291,470 21,313,033 13,796,103 65%
Total 93,780,996$ 100,221,272$ 57,568,200$ 57%
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drivers are detailed in the departmental secƟons below. Staff expect that the primary impact of lower
salary savings will be that unassigned fund balance at year-end will be slightly lower than in recent years.
In the last three years, salary savings rates of 4-7% have delivered budgetary savings of $2.5 to $3.8 million.
Other OperaƟng Expenditures: This line item shows 65% spent halfway through the year due to typical
purchasing acƟviƟes. Staff open purchase orders and encumber funds at the beginning of each fiscal year
to be spent throughout the year. Excluding balances on open purchase orders, just 38% of budget has been
paid to vendors.
The table below details the budget and year-to-date actuals for both staffing and other operaƟng
expenditures by department:
While the General Fund as a whole is expected to finish the year on budget, staff note several
departmental level variances:
City AƩorney’s Office: As directed by City Council on September 12, 2025, staff increased the contract for
outside counsel legal support in the California VoƟng Rights Act maƩer related to the City’s transiƟon to a
Citywide Single Vote form of elecƟons. The necessary increase was unplanned and has caused a $50,000
unbudgeted expenditure. Staff plan to offset this unbudgeted spending via an administraƟve budget
amendment during the fourth quarter of the fiscal year and no variance is expected at year-end.
Fire: The Department’s staffing expenditures are trending above budget at the mid-point of the fiscal year.
Several vacant posiƟons and two long-term injury vacancies are driving significant unbudgeted overƟme
expenditures. Four firefighter posiƟons are currently vacant, requiring a minimum of one shiŌ daily to be
filled at overƟme rates. The next recruit academy to hire new firefighters is planned for FY 2026-27 and
shiŌ coverage overƟme will persist unƟl then. The savings from these vacant posiƟons will parƟally offset
overƟme costs, as will reimbursements for mutual aid. Despite these offsets, staff expect that the
department will exceed its staffing budget at year-end.
Police: The Department’s staffing expenditures are trending slightly above budget mainly due to overƟme
expenditures. Comparing the same Ɵme frame to last fiscal year, overƟme hours increased by 8.9% or
FY 2024-25 FY 2025-26
Department Actuals Budget YTD Actuals % Expended
Police 24,657,118$ 25,604,534$ 15,268,412$ 60%
Fire 18,787,150 18,114,272 10,826,401 60%
Public Works 16,581,895 18,136,536 10,678,028 59%
Administration & IT 11,565,191 12,392,391 6,817,022 55%
CDD 7,864,816 9,059,766 5,570,933 61%
Parks & Rec 6,014,160 6,231,512 3,327,294 53%
Finance 2,686,591 2,850,096 1,670,222 59%
Non-Departmental 350,542 2,399,772 251,409 10%
HR 2,085,986 2,061,730 1,152,405 56%
City Attorney 1,652,744 1,863,615 1,144,438 61%
Utilities 1,534,804 1,507,048 861,636 57%
Total 93,780,996$ 100,221,272$ 57,568,200$ 57%
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roughly 800 hours. This was primarily due to mandatory training that occurs every other year, providing
personnel to assist with the Gifford Fire, increasing enforcement for Cal Poly back to school in September
and an increase in invesƟgaƟve cases. The Department sƟll needs to plan for St. Patrick’s Day enforcement,
which will occur in March. It is likely that the Department will exceed the staffing budget at year end.
Parks and RecreaƟon: The Department is trending slightly above budget for FY 2025-26 due to temporary
staffing costs, primarily within the Youth Services Division. Expanded childcare programming has increased
the need for temporary staffing to support program delivery. Although salary expenditures are expected
to exceed currently budgeted amounts, increased program parƟcipaƟon and associated revenues are
expected to fully offset these costs.
Recommended Use of FY 2024-25 Unassigned Fund Balance
The City’s Annual Comprehensive Financial Report, including audited financial statements, was presented
to Council on January 13, 2026. The report included the following table detailing General Fund unassigned
fund balance of $3,468,954 as of June 30, 2025:
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In addiƟon to the unassigned fund balance, the assigned balance includes General Fund balance for
purposes including:
115 Trust Fund: As part of the 2019-21 Financial Plan, the City Council idenƟfied establishment of a
SecƟon 115 Trust Fund as a work task under the Fiscal Sustainability Major City Goal. Establishment of the
Trust was to be completed by February 2020 but was delayed due to uncertainty about the budgetary
impacts of COVID-19. The Trust was established in early 2023 and, prior to its establishment, $2.0 million
was assigned in the General Fund (shown above) to be deposited to the Trust upon establishment. In
addiƟon to the $2.0 million assigned for this purpose, staff had planned to recommend allocaƟon of $2.4
million of FY 2022-23 unassigned fund balance to make an iniƟal contribuƟon to the Trust, but instead
recommended allocaƟon of that funding to the Infrastructure Investment Fund to address increased
infrastructure costs due to inflaƟonary factors. Despite $2.0 million being assigned for the 115 Trust, the
City has not made an iniƟal contribuƟon to the Trust. The $2.0 million could be deposited into the Trust,
paid directly to CalPERS, or unassigned and moved into the General Fund budget to support capital or
operaƟng costs. As part of the comprehensive budget update scheduled to be presented to Council on
March 3, 2026, staff will provide an overview of the purpose of a SecƟon 115 Trust fund and seek direcƟon
from Council on whether or not the City should deposit the $2.0 million assigned for this purpose into the
115 Trust or reallocate it for another purpose.
Tenant Improvement: Funding for tenant improvements was assigned via ResoluƟon No. 11203, using
funding that arose from passage of Local Revenue Measure in November 2020. Originally intended to be
used for tenant improvements in the downtown area, this money has since been used to fund Economic
Development iniƟaƟves like the Buy Local Bonus program. The balance at June 30, 2025, of $608,000 is
expected to be drawn down enƟrely in the 2025-27 Financial Plan.
Financial Plan Fiscal Policies SecƟon 8. CalPERS and Unfunded LiabiliƟes sets the following prioriƟzaƟon
for use of unassigned General Fund balance:
a. AddiƟonal DiscreƟonary Payments (ADP) to CalPERS
b. Infrastructure investments
c. Emerging Health and Safety needs of the community
In line with this policy, staff make the following recommendaƟons for one-Ɵme use of FY 2024-25
unassigned fund balance:
Unassigned Fund Balance* 3,468,954$
Appropriation Recommendations
Increased CalPERS ADP 869,804
Infrastructure Investments 1,212,229
Insurance Fund 802,798
SLOMA Contribution 500,000
Parks & Rec Grants 84,123
Remainder -$
*After $2.0 million CalPERS ADP
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CalPERS ADP: Staff recommend a contribuƟon of $869,804 in addiƟon to the $2.0 million held in Assigned
Fund Balance within the General Fund. This increased payment reflects the growth in staffing costs since
the City began making these payments.
These ADPs are criƟcal to reducing the City’s pension debt. The City’s unfunded liability as of June 30,
2024, the most recent actuarial measurement date, decreased by $7.0 million or 3.6% year over year
thanks to strong investment returns in conjuncƟon with the City’s commitment to making regular ADPs.
As detailed in the table below, the City’s Funded RaƟo also improved to 66.2%:
In addiƟon to the General Fund, staff recommend ADPs from all funds with staffing costs. InformaƟon on
each of the other funds can be found in their respecƟve writeups in the Enterprise Fund and Special
Revenue and Other Funds secƟons that follow. These payments will be made from each fund’s year-end
reserves, which are sufficient to cover the increased payments.
Insurance Fund Reserves: Staff recommend a transfer of $802,798 to the Insurance Fund to help meet
reserve requirements for liability and workers compensaƟon self-insurance policies. Policy calls for funding
the reserve at 150% of the trailing five-year average claims, or the Historical Claims Basis level, and as
called for by the City’s actuaries, or the Actuarial Basis level. Staff’s recommendaƟon will increase the
fund’s reserve to the Historical Claims Basis level. Staff plan to recommend addiƟonal contribuƟons from
unassigned fund balance over the next five years to meet the reserve level recommended by the City’s
actuaries, which is $3.1 million higher than the Historical Claims Basis level as detailed in the table below:
AddiƟonal informaƟon can be found in the Insurance Fund writeup within the Special Revenue & Other
Funds secƟon of this report.
SLOMA ContribuƟon: As directed by Council on November 4, 2025, staff have included a recommended
appropriaƟon of $500,000 as a grant to the San Luis Obispo Museum of Art (SLOMA) to assist with their
Downtown museum expansion. A proposed grant agreement with SLOMA will be presented to Council for
consideraƟon as a separate Council agenda item.
Parks and RecreaƟon Grants: This amount represents CAPSLO sƟpends for childcare provided to the Parks
and RecreaƟon department that was unused in FY 2023-24 and contributed to the unassigned fund
balance amount in that year. This appropriaƟon will return the funds to the Parks and RecreaƟon
Department to ensure that these funds are used for their intended purpose.
Infrastructure Fund Investments: Staff recommend transferring the remaining unassigned fund balance
to the Infrastructure Investment Fund (IIF) for use on eligible infrastructure projects. The Public Works
Department has idenƟfied an immediate funding need of approximately $2 million for the Higuera
Funded Status 6/30/2023 6/30/2024
Unfunded Liability 195,372,315$ 188,434,821$
Funded Ratio 63.5% 66.2%
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Complete Streets Project, which is construcƟon-ready and scheduled for Council consideraƟon as a
business item also on February 17, 2026. Staff recommend allocaƟng the remaining FY 2024-25 unassigned
fund balance ($1,212,229) to the IIF with the intent that it remain available for appropriaƟon to the
Higuera Complete Streets Project, should Council authorize the issuance of a Request for Proposals to
move this project forward to construcƟon. If Council does not authorize the Higuera Complete Streets
Project to move forward at that Ɵme, the funding would remain available in the IFF for that project in the
future or another infrastructure project that requires funding.
Current Infrastructure Investment Fund Earmarks
FY 2025-2026 IIF Fund Summary
Payment Amount Ending Account Balance
Starting Fund Balance FY 25-26 $14,658,406.00 $14,658,406.00
Prado Bridge Widening (Design) FY 26-27 $(3,500,000.00) $11,158,406.00
Prado Bridge Widening FY 27-28 $(11,158,406.00) $-
Local Revenue Measure Fund Balance: In addiƟon to the General Fund unassigned balance, the Local
Revenue Measure had a fund balance of $848,111 at the end of FY 2024-25. AppropriaƟon of Local
Revenue Measure funds requires review and approval of recommendaƟons by the Revenue Enhancement
Oversight Commission. As detailed in the Sales Tax variance explanaƟon above, staff have been advised by
the City’s consultants to expect a shorƞall in revenue in the current year. Staff and the Revenue
Enhancement Oversight Commission do not recommend appropriaƟon of Local Revenue Measure Fund
Balance since the balance may be necessary to offset this revenue sho rƞall.
Enterprise Fund Summaries
The City uses Enterprise funds to account for operaƟons that are financed and operated in a manner
similar to private business enterprises, where the intent is that the costs of providing certain services is
recovered primarily through user charges. This secƟon of the report includes a write up on the budget
status of the City’s four enterprise funds (Water, Sewer, Parking and Transit) through the second quarter
of FY 2025-26. As noted in the General Fund Summary above, staff is recommending use of General Fund
unassigned fund balance to increase the planned addiƟonal discreƟonary payment (ADP) to CalPERS to
ensure that the ADP amount reflects changes in staffing costs for each fund since the City began making
these payments. This amount supplements the $2 million that the City holds in assigned fund balance in
the General Fund. A porƟon of the unassigned fund balance in the General Fund will be used to
supplement the $2 million for the General Fund share of cost for the ADP and the four enterprise funds
will make payments for their share of costs from each fund’s year-end reserves, which are sufficient to
cover the increased payments. The total amounts paid from each fund are as follows:
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Water Fund Summary
The Water Fund’s year-to-date actuals for revenues and expenditures are generally in line with
expectaƟons and anƟcipated trends. Observed variances are primarily aƩributable to seasonal revenue
paƩerns, Ɵming of grant receipts, and standard budget administraƟon pracƟces, rather than structural
changes to the fund.
Revenue:
Base Charges: Base charge revenue reflects normal billing and collecƟon paƩerns and is not a cause for
concern at this Ɵme. Approximately 7% of the variance from the expected 50% of base charge revenue
collected by the second quarter is due to Ɵming differences in billing. Part of the July uƟlity bills reflects
service provided in June and is therefore recorded in the prior fiscal year. Staff will conƟnue to monitor
base charge revenues, and no material variance is anƟcipated based on current trends.
Setup Fees: Setup fee revenues are trending above budget and include a one-Ɵme $36,000 payment
resulƟng from a seƩlement agreement with the developer of Avila Ranch. Because setup fees are driven
by the Ɵming of development acƟvity, they are inherently variable and fluctuate throughout the fiscal year.
Other Revenue: Other revenues are below budget due to the Ɵming of ProposiƟon 1B grant
reimbursements, which fund the Groundwater Well Development project and increases the City’s water
supply and resiliency. Of the $4.1 million that was budgeted for the ProposiƟon 1B grant, $176 thousand
CalPERS ADP
General Fund 2,869,804$
Water Fund 238,745
Sewer Fund 246,093
Parking Fund 98,570
Transit Fund 15,959
Whale Rock 27,033
TBID 9,983
Total 3,506,187$
FY 2024-25 FY 2025-26
Water Fund Actuals Budget YTD Actuals % Received
Water Sales 21,379,368$ 21,449,631$ 10,668,685$ 50%
Base Charges 7,650,544 8,448,140 3,547,393 42%
Setup Fees 125,561 160,000 124,485 78%
Other Revenue 6,972,868 4,351,680 722,316 17%
Total Revenue 36,128,340$ 34,409,451$ 15,062,879$ 44%
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has been realized to date. Staff anƟcipate more aggressive drawdowns on this grant funding once
construcƟon is underway.
Strong investment performance has parƟally offset lower-than-anƟcipated revenues elsewhere in the
Other Revenue category. Investment income was budgeted at $50 thousand for the fiscal year, and
approximately $326 thousand has been realized to date. Investment earnings are inherently variable and
should not be relied upon as a consistent or ongoing source to offset revenue shor ƞalls.
Expenditures:
Staffing: Excluding upfront annual payments for CalPERS unfunded liability and reƟree healthcare,
approximately 41% of the staffing budget has been expended through the second quarter, compared to
an expected midyear spend of approximately 46.6%. Staffing expenditures are trending below
expectaƟons primarily due to vacancies within the UƟlity Billing and Water DistribuƟon teams.
OperaƟng Expenditures: Year-to-date actuals are over 50 % expended primarily due to purchase orders
that were opened at the beginning of the fiscal year and annual prepaid expenditures. While these
amounts are reflected as obligaƟons, only about 60% of the budget has actually been paid to vendors to
date. About $11.4 million of the early-year acƟvity is aƩributable to Source of Supply costs. These costs
primarily cover expenses related to dam operaƟon, maintenance, and capital infrastructure for the City's
raw water supplies. Staff expect the Water Fund to finish the fiscal year within budget.
Sewer Fund Summary
The Sewer Fund’s year-to-date financial performance through the second quarter is generally in line with
expectaƟons. Variances are primarily driven by the Ɵming of grant receipts, revenue allocaƟons, and
standard budget administraƟon pracƟces rather than changes in underlying financial drivers.
Revenue:
Service Charges: Service charge and base fee revenues are tracking slightly ahead of the propor Ɵonal mid-
year benchmark, with approximately 51% of the budgeted amount realized through the second quarter.
FY 2024-25 FY 2025-26
Water Fund Actuals Budget YTD Actuals % Expended
Staffing 5,495,997$ 6,225,377$ 3,085,746$ 50%
Other Operating Expenditures 15,015,367 20,974,582 16,863,771 80%
Total Expenditures 20,511,364$ 27,199,960$ 19,949,517$ 73%
FY 2024-25 FY 2025-26
Sewer Fund Actuals Budget YTD Actuals % Received
Service Charges 15,201,167$ 15,229,215$ 7,792,980$ 51%
Base Charges 5,942,531 6,329,610 2,730,136 43%
Other Revenue 3,748,643 210,000 1,424,094 678%
Total Revenue 24,892,342$ 21,768,825$ 11,947,210$ 55%
Page 296 of 444
11
This reflects accurate forecasƟng, and staff do not anƟcipate a material variance in this revenue category
by the end of the fiscal year.
Base Charges: Base charge revenue reflects normal billing and collecƟon paƩerns and is not a cause for
concern at this Ɵme. Approximately 7% of the variance from the expected 50% of base charge revenue
collected by the second quarter is due to Ɵming differences in billing. Part of the July uƟlity bills reflect
service provided in June and is therefore recorded in the prior fiscal year. Staff will conƟnue to monitor
base charge revenues, and no material variance is anƟcipated based on current trends.
Other Revenue: Other revenues are performing above budgeted expectaƟon, due to strong interest on
investments, one-Ɵme reimbursements from regional partners, and delayed grant payments. Strong
investment performance reflects favorable variance of about $534 thousand. One-Ɵme reimbursements
from regional partners reflect a favorable variance of $355 thousand. Delayed grant payments reflect a
favorable variance of $208 thousand. All variances are due to one-Ɵme or variable revenues and should
not be relied upon as a consistent or ongoing sources of revenue.
Expenditures:
Staffing: Excluding upfront annual payments for CalPERS unfunded liability and reƟree healthcare,
approximately 43% of the staffing budget has been expended through the second quarter, compared to
an expected spend of approximately 46.6% at midyear. Expenditures are trending below expectaƟons
primarily due to vacancies within the UƟlity Billing team.
Other OperaƟng Expenditures: Year-to-date actuals are greater than 50% of budget, primarily due to
purchase orders that were opened at the beginning of the fiscal year. While these amounts are reflected
as obligaƟons, 37% of the budget has actually been paid to vendors to date. While the Sewer Fund is
expected to finish the fiscal year within budget, staff are monitoring two operaƟonal challenges. First, the
Water Resource Recovery Facility's (WRRF) regulatory sampling requirements are currently being
determined by the Regional Water Board. Performance in baseline tesƟng will establish ongoing sampling
requirements and can materially impact budgetary needs. Second, the WRRF biogas cogeneraƟon system
is at the end of its useful life. This asset offsets electrical and natural gas usage at the facility, which reduces
operaƟonal costs and aligns with the City's Lead by Example Climate AcƟon Plan. Staff plan to keep Council
informed of any recommendaƟons in maintaining or replacing this asset. Beyond these two challenges,
the WRRF’s post-construcƟon operaƟng budget will be evaluated in the coming year to determine whether
the forecasted operaƟng condiƟons and the associated allocated resources are sufficient.
FY 2024-25 FY 2025-26
Sewer Fund Actuals Budget YTD Actuals % Expended
Staffing 5,552,235$ 6,042,596$ 3,116,835$ 52%
Other Operating Expenditures 3,905,154 4,828,711 2,717,979 56%
Total Expenditures 9,457,388$ 10,871,306$ 5,834,813$ 54%
Page 297 of 444
12
Parking Fund Summary
The Parking Fund’s year-to-date performance is generally in line with expectaƟons. Revenue variances,
primarily in Fines and Other Revenue, are due to delayed receipt of payments that will be realized by year-
end. Year-to-date expenditures reflect a minor variance due to annual upfront payments and purchase
orders opened at the beginning of the fiscal year.
Revenue:
The revenue budget is based on projecƟons from the 2024 Parking Rate Study, reflecƟng reduced rates
effecƟve July 1, 2024. Technology upgrades recommended in the Technology Roadmap, including new
payment equipment in parking garages and at on-street locaƟons, were installed during the current fiscal
year and are operaƟng as anƟcipated.
Meters: Parking meter revenue includes hourly parking sessions from on-street and surface parking lot
areas, including mobile app payments. New payment equipment was installed on-street and in surface
parking lot areas in November 2025. While the equipment is funcƟoning as intended, meter revenue is
currently tracking slightly below budget due to fewer parking transacƟons compared to the same period
in the prior fiscal year. If on-street parking acƟvity does not increase, staff anƟcipates a modest negaƟve
variance to budget by year-end.
Structures: New parking structure gaƟng equipment recommended by the Technology Roadmap was
installed at the beginning of the fiscal year. The equipment is funcƟoning as intended, resulƟng in higher
revenue compared to the prior fiscal year when equipment failures occurred, and is meeƟng budget
expectaƟons. Staff does not anƟcipate a variance to budget by year-end.
Long-Term Parking: Long-term parking revenue includes sales of on-street permits, residenƟal district
permits, and garage parking permits. Garage parking permit rates were reduced from $85 per month to
$45 per month effecƟve July 1, 2024. Since the rate reducƟon, garage permit sales have steadily increased
and are expected to conƟnue to grow with the opening of the Cultural Arts District Parking Garage in
Spring 2026. In addiƟon, the digital permit plaƞorm will be expanded in April 2026 to include 10-Hour On-
Street Permits, which is anƟcipated to further support permit sales. Staff expect this increased adopƟon
will lead to budget aƩainment at year-end.
Fines: Parking Fines revenue includes all revenue collected from paid parking citaƟons. In March 2025, the
City implemented a new citaƟon management system consistent with recommendaƟons from the
Technology Roadmap. Under the new system, citaƟon payments are temporarily held in an escrow account
and reconciled monthly once mailed check payments are received. This change has resulted in a slight
FY 2024-25 FY 2025-26
Parking Fund Actuals Budget YTD Actuals % Received
Meters 4,589,728$ 4,312,367$ 2,007,477$ 47%
Structures 1,886,338 2,860,504 1,501,682 52%
Long-Term Parking 522,895 500,000 233,422 47%
Fines 1,113,016 1,231,100 441,034 36%
Other Revenue 2,671,989 671,984 187,102 28%
Total Revenue 10,783,966$ 9,575,955$ 4,370,716$ 46%
Page 298 of 444
13
delay in revenue recogniƟon, contribuƟng to the year-to-date variance. Staff expects these funds to be
received and does not anƟcipate a material variance to budget by fiscal year-end.
Other Revenue: Other Revenue in FY 2024-25 included $1.7 million generated through higher returns on
investments. Elevated interest rates during FY 2024–25 produced stronger earnings on pooled cash
balances from the Cultural Arts District Parking Structure (CADPS) bond issuance, while budget
assumpƟons remained conservaƟve. Investment interest is based on available cash, and as the CADPS
construcƟon progresses toward compleƟon, cash balance will dwindle; therefore, staff expects minimal
investment income and budgeted accordingly. This line also includes Other Rent & Lease Revenue which
is budgeted based on current lease agreements, for which most of the revenue is collected toward the
end of the fiscal year. Staff expect this line to finish on budget once all lease payments are collected.
Expenditures:
Staffing: Excluding upfront annual payments for the CalPERS unfunded liability and reƟree healthcare,
approximately 48% of the staffing budget has been expended through the second quarter. Staffing
expenditures are forecasted to conƟnue tracking as anƟcipated and staff does not project a variance to
the budget by year-end.
Other OperaƟng Expenditures: Year-to-date actuals include purchase orders established at the beginning
of the fiscal year. While these amounts are reflected as obligaƟons, only 41% of the budget has been
expended through the second quarter. Staff will conƟnue to monitor expenditures closely and anƟcipate
the fund will finish the fiscal year under budget.
FY 2024-25 FY 2025-26
Parking Fund Actuals Budget YTD Actuals % Expended
Staffing 2,109,475$ 2,198,513$ 1,182,929$ 54%
Other Operating Expenditures 1,707,291 1,750,531 931,628 53%
Total Expenditures 3,816,767$ 3,949,044$ 2,114,557$ 54%
Page 299 of 444
14
Transit Fund Summary
The Transit Fund’s year-to-date results are generally consistent with expectaƟons. The Transit Fund is
heavily subsidized by Federal grants which are reimbursement-based; as a result, revenues are realized
aŌer expenses are incurred and draw down requests are submiƩed. Grant funds budgeted but not
expended during the current fiscal year will remain available for reimbursement in future fiscal years.
Through the first six months of the current fiscal year, overall transit ridership has increased by 18%
compared to the same period in the prior fiscal year, which significantly exceeds the 2% annual growth
forecasted in the recently adopted Short-Range Transit Plan.
Revenue:
Local (Bus Fare): Local bus fare revenue includes fares collected on board buses, as well as revenue from
physical and digital pass sales.
Cal Poly Transit Payments: Cal Poly transit payment revenue is generated through a three-year agreement
between the City and Cal Poly for transit services. Payments are received quarterly, and three payments
have been received to date. Staff does not anƟcipate a variance to budget by year-end.
Federal Grants: Federal grant revenue includes capital and operaƟng funds from federal formula grant
programs and is dependent on the Ɵming of capital expenditures and operaƟng drawdowns. The City
conƟnues to draw down American Rescue Plan Act (ARPA) operaƟng funds awarded in 2022, with
drawdowns occurring quarterly (October, January, April, and July) to align with federal reporƟng
requirements. To date, one drawdown is reflected in the table above. Several federally funded capital
projects are currently underway, and reimbursement for eligible expenses is expected by year-end. Federal
funds budgeted to these projects but not expended will remain available for reimbursement in future fiscal
years.
State Grants: State grant revenue primarily consists of TransportaƟon Development Act (TDA) funds, which
are generated by statewide sales tax and administered by the San Luis Obispo Council of Governments
(SLOCOG). Because the City adopts its budget prior to the final calculaƟon of TDA allocaƟons, actual
funding amounts may differ from budgeted assumpƟons. Based on final allocaƟon amounts provided by
SLOCOG, the final calculaƟon was less than previously esƟmated. Staff anƟcipate a negaƟve variance of
$384,000 by year-end. This reducƟon in funding is not expected to impact service levels or the delivery of
capital projects because the Transit Fund has sufficient TDA fund reserves from prior fiscal years that can
be drawn upon to cover any eligible operaƟng or capital expense shorƞalls resulƟng from the negaƟve
variance.
FY 2024-25 FY 2025-26
Transit Fund Actuals Budget YTD Actuals % Received
Bus Fares 234,855$ 260,000$ 121,081$ 47%
Cal Poly Transit Payments 750,000 750,000 562,500 75%
Federal Grants 8,859,273 8,254,281 641,382 8%
State Grants 1,360,509 2,733,722 1,174,746 43%
Other 998,813 30,455 520,452 1709%
Total Revenue 12,203,449$ 12,028,458$ 3,020,161$ 25%
Page 300 of 444
15
Other Revenue: Other revenue includes earnings on cash and investment balances, as well as other grants
and subvenƟons. During the fiscal year, the City applied for and received a $400,000 rebate from Central
Coast Community Energy (3CE) related to the purchase of six new electric buses. In addiƟon, interest
earnings are currently exceeding budget by approximately $60,000 due to higher than anƟcipated
investment returns driven by the conƟnued elevated interest rate environment. As a result, staff
anƟcipates a significant posiƟve variance by year-end.
Expenditures
Staffing: Excluding upfront annual payments for the CalPERS unfunded liability and reƟree healthcare,
approximately 48% of the staffing budget has been expended through the second quarter. Staffing
expenditures are expected to conƟnue tracking as anƟcipated, and staff does not project a variance to the
budget by year-end.
Other OperaƟng Expenditures: Year-to-date actuals include purchase orders established at the beginning
of the fiscal year. While these amounts are reflected as obligaƟons, only 37% of the budget has been
expended to date. Staff will conƟnue to monitor expenditures closely and anƟcipates a posiƟve variance
by year-end.
FY 2024-25 FY 2025-26
Transit Fund Actuals Budget YTD Actuals % Expended
Staffing 393,432$ 391,095$ 215,680$ 55%
Other Operating Expenditures 4,992,796 5,612,975 4,412,387 79%
Total Expenditures 5,386,228$ 6,004,069$ 4,628,066$ 77%
Page 301 of 444
16
Special Revenue and Other Fund Summaries
Tourism Business Improvement District
The Tourism Business Improvement District (TBID) assessment is set at 2% of the lodging industry’s gross
receipts. The program annually aligns its operaƟng budget with its anƟcipated revenues, and any
difference is due to open purchase orders carried over from the prior year.
Revenue:
While less than half of the budget has been recorded to date, revenue is recorded on a more than one
month delay and staff expect to collect at least the budgeted amount for the full year.
Expenditures:
The TBID procures many of its services in advance, leading to a high percent of other operaƟng
expenditures budget expended early in the year. The fund is expected to finish on budget for the full year.
Boysen Ranch ConservaƟon Fund
Boysen Ranch consists of approximately 116 acres bounded by Los Osos Valley Road, Foothill Boulevard,
and O’Connor Way. The City holds a series of conservaƟon easements that protect approximately 25 acres
of the Ranch to miƟgate impacts to wetlands and waters caused by the nearby commercial development
projects on Los Osos Valley Road. As part of the original easement agreement, Boysen Ranch’s owners
provided the City with an endowment to fund required monitoring acƟviƟes.
Revenue:
The Boysen Ranch ConservaƟon Fund is an endowment fund and its budgeted revenue is provided by
investment income. The fund is expected to benefit from the current interest rate environment and meet
or exceed its revenue budget.
Expenditures
FY 2024-25 FY 2025-26
TBID Actuals Budget YTD Actuals % Received
Assessments 2,304,764$ 2,219,941$ 986,917$ 44%
Total Revenue 2,304,764$ 2,219,941$ 986,917$ 44%
FY 2024-25 FY 2025-26
TBID Actuals Budget YTD Actuals % Expended
Staffing 241,390 262,464$ 105,615$ 40%
Other Operating Expenditures 1,911,188 2,109,984 1,856,979 88%
Total Expenditures 2,152,578$ 2,372,448$ 1,962,594$ 83%
FY 2024-25 FY 2025-26
Boysen Ranch Actuals Budget YTD Actuals % Received
Investment Income 20,157$ 7,500$ 4,241$ 57%
Total Revenue 20,157$ 7,500$ 4,241$ 57%
Page 302 of 444
17
The fund has made its budgeted payment for authorized conservaƟon acƟviƟes. Staff expect no further
payments and the fund will finish on budget.
Insurance Fund
The Insurance Fund serves to pay the City’s annual costs for liability, workers’ compensaƟon, polluƟon,
volunteer, and property insurance needed to protect the City as well as direct claims-related expenses. It
is also intended to maintain adequate reserves for future claims and unpredictable increases in insurance
costs.
Revenue:
Insurance Fund revenues are transfers in from the General Fund and will finish on budget.
Expenditures:
While recent acƟons to reduce premiums have delivered savings to the Insurance Fund, addiƟonal
contribuƟons from the General Fund are necessary to build and maintain adequate reserves in this fund
according to City policy and actuarial esƟmates. The City’s Fund Balance and Reserve Policy establishes
that the Insurance Fund will maintain funding to cover 150% of the average claim costs for the past five
years. The policy also states that actuarial informaƟon will be taken into consideraƟon. Based on the most
recent actuarial study dated October 10, 2025, the City should maintain a reserve of $5,129,000 for liability
claims and $3,222,000 for workers’ compensaƟon claims, totaling $8,351,000, if funding at a 75%
probability level. The insurance fund reserve was $4,437,620 as of June 30, 2025. This is $802,798 below
the required funding level of 150% of the five-year average claims costs, and $3,913,380 below the
actuarial recommended funding level at a 75% probability level, as detailed in the table below:
FY 2024-25 FY 2025-26
Boysen Ranch Actuals Budget YTD Actuals % Expended
Authorized Expenditures 5,023 12,535$ 12,535$ 100%
Total Expenditures 5,023$ 12,535$ 12,535$ 100%
FY 2024-25 FY 2025-26
Insurance Fund Actuals Budget YTD Actuals % Received
Transfers in 6,000,000$ 6,000,000$ 4,500,000$ 75%
Total Revenue 6,000,000$ 6,000,000$ 4,500,000$ 75%
FY 2024-25 FY 2025-26
Insurance Fund Actuals Budget YTD Actuals % Expended
Workers Comp 774,732 2,069,183$ 1,269,313$ 61%
Liability & Other 3,020,344 3,457,975 2,285,842 66%
Total Expenditures 3,795,076$ 5,527,158$ 3,555,155$ 64%
Insurance Fund Historical Claims Basis Actuarial Basis
Fund Balance at 6/30/2025 4,437,620$ 4,437,620$
Target 5,240,418 8,350,000
Variance 802,798$ 3,912,380$
Page 303 of 444
18
As noted earlier in the report, staff is recommending allocaƟon of $802,792 from FY 2024-25 General Fund
unassigned fund balance to address a porƟon of the variance and plans to recommend addiƟonal
unassigned fund balance allocaƟons of up to $1 million per year (pending availability) over the next five
years to bring the Insurance Fund reserves to a policy-compliance level.
Public Safety Equipment Replacement Fund
The Public Safety Equipment Fund (PSEF) was created with the 2019-21 Financial Plan to help budget and
forecast the replacement of Public Safety equipment that has expired or become damaged. The Fund had
received an original seed amount with the FY 2019-20 budget and, going forward, an annual allocaƟon is
made from the General Fund.
Revenue:
The fund receives revenue in the form of transfers in from the General Fund and will finish on budget.
Expenditures:
The fund budgets for replacement of public safety equipment currently in service and is expected to finish
the year on budget. Any unspent funds remain available for future scheduled purchases.
San Luis Ranch CFD
A Mello-Roos Community FaciliƟes District (CFD) was established and approved by City Council on April
16, 2019 (Ordinance No 1661) pursuant to secƟon 5.02 of the San Luis Ranch Development Agreement.
The boundaries of the CFD are idenƟcal to the San Luis Ranch Specific Plan and includes 131.4 acres
approved for up to 580 dwelling units and commercial development, a 200-room hotel, 100,000 square
feet of office space, 150,000 square feet of retail space, 7.8 acres of parks/ open space, and 52.3 acres of
farmed agriculture land. The purpose of the CFD is to fund major road improvements, potable and non-
potable water system improvements, drainage system improvements, wastewater system improvements,
solid waste improvements, park and paseo improvements, open space improvements, and uƟliƟes.
Revenue:
FY 2024-25 FY 2025-26
Public Safety Actuals Budget YTD Actuals % Received
Transfers in 387,334$ 236,226$ 177,170$ 75%
Total Revenue 387,334$ 236,226$ 177,170$ 75%
FY 2024-25 FY 2025-26
Public Safety Actuals Budget YTD Actuals % Expended
Equipment Purchases 307,329 222,889$ 92,175$ 41%
Total Expenditures 307,329$ 222,889$ 92,175$ 41%
FY 2024-25 FY 2025-26
San Luis Ranch CFD Actuals Budget YTD Actuals % Received
Tax Revenue 1,911,925$ 1,368,152$ 272,192$ 20%
Total Revenue 1,911,925$ 1,368,152$ 272,192$ 20%
Page 304 of 444
19
The fund collects property tax from residents under the Teeter Plan with the County and is expected to
finish the year on budget or beƩer.
Expenditures:
The fund budgets for authorized expenditures, largely debt service, and is expected to finish the year on
budget.
Avila Ranch CFD
A Mello-Roos Community FaciliƟes District was established and approved by City Council on October 24,
2017 (ResoluƟon No 10844) pursuant to secƟon 5.02.1 of the Avila Ranch Development Agreement. The
CFD boundaries are idenƟcal to that of the Avila Ranch Development project and located at the northeast
corner of Buckley Road and Vachell Lane. The Avila Ranch Project will include up to 720 dwelling units,
15,000 square feet of office and retail, 18 acres of parks, 53 acres of open space, riparian corridors and
farmed agricultural land. The CFD was formed with purpose of funding services as well as faciliƟes of the
CFD. Services to be funded can include the maintenance and lighƟng of parks, parkways, streets, roads,
and open space; flood and storm protecƟon services; police & fire protecƟon services; maintenance and
operaƟon of real property. FaciliƟes to be funded can include park, recreaƟon, parkway, and open space
faciliƟes; construcƟon and undergrounding of uƟliƟes (water, natural gas, telephone lines, electric, cable
television); for the acquisiƟon, improvement, or rehabilitaƟon of real property.
Revenue:
The fund collects property tax from residents under the Teeter Plan with the County and is expected to
finish the year on budget or beƩer. Year to date results include accruals for tax payments to be made in
April and are subject to change.
Expenditures:
FY 2024-25 FY 2025-26
San Luis Ranch CFD Actuals Budget YTD Actuals % Expended
Authorized Expenditures 181,313 339,417$ 193,242$ 57%
Transfers 245,664 207,243 155,432 75%
Debt Service 927,450 946,700 562,600 59%
Total Expenditures 1,354,427$ 1,493,360$ 911,274$ 61%
FY 2024-25 FY 2025-26
Avila Ranch CFD Actuals Budget YTD Actuals % Received
Tax Revenue 560,516$ 767,253$ 771,488$ 101%
Total Revenue 560,516$ 767,253$ 771,488$ 101%
FY 2024-25 FY 2025-26
Avila Ranch CFD Actuals Budget YTD Actuals % Expended
Authorized Expenditures 50,435 99,011$ 85,367$ 86%
Transfers 386,517 234,122 175,592 75%
Total Expenditures 436,952$ 333,133$ 260,958$ 78%
Page 305 of 444
20
The fund budgets for authorized services expenditures including maintenance, uƟliƟes, and supplies, and
is expected to finish the year on or under budget. Because the development is new, maintenance costs
are currently lower than revenues. At full buildout it is expected that costs to serve this neighborhood will
exceed revenue and the General Fund will provide services above and beyond what the CFD pays for. All
unexpended funds fall to fund balance and are available for expenditure in future years
Page 306 of 444
21
Capital Improvement Program Update
During the first half of the fiscal year, the City conƟnued to make significant progress in delivering its Capital
Improvement Program (CIP) projects. The capital summary table below provides detail on completed and
ongoing projects through the first two quarters, showcasing efforts to enhance infrastructure, maintain
criƟcal systems, and improve community spaces.
Key projects completed during this period include the Water Resource Recovery Facility Upgrade,
Downtown MulƟ-Space Pay StaƟon InstallaƟon, and sewer replacement projects at Morro and Mill and
Sierra Way. These accomplishments underscore the City's commitment to providing high-quality public
faciliƟes and ensuring long-term reliability of essenƟal infrastructure.
In addiƟon to completed projects, construcƟon resources are dedicated to compleƟng ongoing
construcƟon projects, such as the Mission Plaza Enhancements and the Cultural Arts District Parking
Structure. Both projects are in the City’s downtown core and are highly anƟcipated legacy projects.
Upcoming projects entering construcƟon include EV Bus Charging Infrastructure at the Transit Yard, and
the long awaited Righeƫ Community Park, which is expected to break ground in Spring 2026.
Project Number Project Total Budget Estimated Construction
Completion Date Additional Comments
2000561 Morro and Mill Sewer Replacement $ 2,800,000 Completed
2091219 Water Resource Recovery Facility
Upgrade $ 143,376,754 Completed
2000075-13.01 Jack House Roof and Windows $ 499,554 Completed
2000539-02 Sierra Way Sewer Replacement $ 2,766,449 Completed
2000114-02 City Hall's Finance/IT Remodel $ 1,337,705 Completed
2000574-01 Downtown Multi-Space Pay Station
Installation $ 1,400,000 Completed
2091506-02 Bob Jones Trail Groundwater Well
Drilling (Packet 2) $ 569,037 Completed
2000096 Sewer-main Replacement: Foothill and
Santa Rosa CalTrans $ 598,591 Completed
2090649 Mid-Higuera Bypass $ 11,550,000 Q3 FY 25-26 Construction ongoing.
2091439 Mission Plaza Enhancements $ 3,729,574 Q3 FY 25-26 Construction Ongoing.
2000577-04 1106 Walnut TI $ 1,887,843 Q3 FY 25-26 Construction Ongoing.
2000616 Roadway Paving 2025 $ 9,117,000 Q3 FY 25-26 Construction Ongoing.
2000577-04 1106 Walnut Fence $ 512,734 Q3 FY 25-26 Construction Ongoing.
2000615-01 Grand Ave Striping and Signage
Modifications $ 429,000 Q3 FY 25-26 Construction Started in Q2.
2000117 Cultural Arts District Parking Structure $ 47,000,000 Q3 FY 25-26 Construction Ongoing.
2000402_403 EV Bus Charging Infrastructure $ 1,103,225 Q4 FY 25-26
Construction Starting Q3 FY25-
26
2000054-01 Righetti Community Park $ 13,668,912 Q2 FY 27-28
Construction Starting in Q3
FY25-26
Completed & Ongoing Construction Capital Projects (July 2025 -December 2025)
Page 307 of 444
22
Project
Number Project
TOTAL ESTIMATED
PROJECT COST
(Construction Phase)
Estimated
Construction Start
Date
Additional Comments
2091503 California and Taft Roundabout $ 6,800,000 Q1 FY 26-27
Right of way acquisition in
progress and finalizing
design documents.
Construction start pending
right-of-way resolution,
could slip into Q2 FY27.
2091252 Prado Road Bridge and Road Widening $ 33,100,100 Q2 FY 27-28
Regulatory permits secured.
90% constuction documents
under development. A value
analysis of this project in
coordination with the Prado
Interchange is under
development.
2091613 Prado Road Interchange $ 99,000,000 Q2 FY 29-30
Construction cost reduced by
Council on November 4,
2025 from $124M to $99M.
The consultant team is
currently developing a
supplemental project report
and advancing construction
documents. Supplemental
project report is planned to
be considered by Council in
mid-calendar year 2026.
Status of Major and Legacy Projects in Design
Page 308 of 444
23
Major City Goals Update
This report includes an update on all Major City Goal tasks from the 2025-27 Financial Plan with an original
compleƟon date in the first half of FY 2025-26. As of the second quarter, eleven Major City Goal tasks have
been completed or are on track and four have been delayed. AddiƟonal detail on how each task was
completed or why it was delayed can be found in the tables that follow:
Page 309 of 444
Major City Goal Task Estimated
Completion Status Update
Support the cultural arts, including the Cultural Arts District : c.
Complete the update to the City's Historic Resources Inventory.
Complete initial phase of the project updating the Historic
Preservation Ordinance and Historic Context Statement (Phase 1)
and complete the update of the Historic Resources Inventory (Phase
2). ** (FY 2027 Q4)
FY 2026 Q2
Phase 1 Complete. On December 2, 2025, the City Council held a public
hearing to introduce an ordinance repealing the existing Historic Preservation
Ordinance (SLOMC 14.01) and replacing it with updated provisions, and
adopted a resolution approving updates to the Historic Context Statement.
Following the second reading, the ordinance will become effective on February
13, 2026.
Balance operational needs and infrastructure investments with
consideration of the long-term fiscal sustainability of the City
organization: b. Conduct an RFP process to evaluate banking service
providers that will provide secure banking services at the best value
to the City.
FY 2026 Q2
Complete. On October 7, 2025, the City Council awarded a seven-year contract
to JPMorgan Chase to continue serving as the City’s primary banking services
provider, determining that selecting this provider was in the City’s best
interest.
Facilitate programs and initiatives to support diverse community
engagement and representation: b. Partner with Diversity
Coalition's BIPOC Board Leadership Program to increase
representation of underserved and underrepresented groups on City
Advisory Bodies through a separate training/panel session in
conjunction with the existing program.
FY 2026 Q2
Complete. On Thursday, November 13, at the Ludwick Community Center, the
Office of Diversity, Equity, and Inclusion sponsored and hosted a community
mixer designed to build connections between local nonprofits and community
members. The event created space for nonprofit organizations to share
information about their missions and board opportunities with participants
who had just attended the BIPOC Board Leadership Conference earlier that
day. During the BIPOC Board Leadership Program, the Office of Diversity,
Equity, and Inclusion also presented on City Advisory Bodies and shared clear,
accessible information on how community members can become more
engaged in City and County government. Together, these efforts supported
pathways to civic participation, leadership, and belonging.
Facilitate programs and initiatives to support diverse community
engagement and representation: d. Develop and distribute a “how
to” guide in Spanish and other languages on how to participate in
public meetings and share public comment.
FY 2026 Q2
Near complete. A "How to" Guide has been developed and translated into
Spanish and is currently in the final stages of review. In August 2026, staff will
host a community workshop in the Council Chambers to walk through the
guide in a hands-on and welcoming way. The workshop will offer a deeper
understanding of the content, provide community members with the
opportunity to be present in the Council Chambers, and practice making public
comment in a supportive environment. This approach seeks to strengthen
access, build confidence, and increase community participation by at least 15
percent moving forward.
Facilitate sustainable growth that aligns with climate, economic,
and housing goals: c. Conduct a study session on implications and
implementation of State Fire Hazard maps for local responsibility
areas.
FY 2026 Q2
Complete. A Study Session was held on October 7, 2025, during which Council
provided direction on proposed amendments to the WUI code (adopted
12/2/25), as well as guidance on implementation of the code changes, as
reflected in the meeting minutes.
Promote the expansion and diversification of housing opportunities
for all: b. Create an informational handbook to assist the community
in understanding state and local regulations for the development of
ADUs and the creation of Urban Lot Splits and evaluate options for
adopting pre-approved ADU plans.
FY 2026 Q2
Complete and In Progress. The ADU and Urban Lot Split Guide will be
uploaded to the City website before the end of February 2026. Staff continue
to evaluate options for adopting pre-approved ADU plans, however, with
recent state law changes, architects can request that any of their plans
submitted become "pre-approved" plans and provided on the City's webpage.
Ensure housing is safe, healthy, and affordable, while facilitating
stronger protections for renters: a. Conduct a study session with
the City Council to identify needs and opportunities regarding renter
protections, based on the memo produced in 2024, and receive
direction on items for further consideration and development.
FY 2026 Q2
Complete. A Study Session was held on October 28, 2025, during which Council
provided direction to proceed with near-term strategic actions within the
current work program, advance a Rental Registry study session in February
2026 incorporating Council feedback, and initiate development of a Safe
Housing Strategic Plan in the next fiscal year. Council also directed staff to
conduct additional research on identified policy questions and data gaps
related to rental housing conditions, enforcement, and tenant and landlord
education.
Ensure housing is safe, healthy, and affordable, while facilitating
stronger protections for renters: c. Adopt and implement updated
California Building Standards and local amendments (building code)
FY 2026 Q1
Complete. The updated California Building Standards and local amendments
(building code, fire code, etc.) were adopted by Council on December 2, 2025
via Ordinances 1751 and 1752.
Collaborate with partners to prevent and reduce homelessness : c.
Homeless Services - Meet monthly with CAPSLO to support
effectiveness of the 40 Prado Homeless Service Center, including
updates to Good Neighbor Policy which will be presented to Council
in Q2 of FY25-26.
FY 2026 Q2
Ongoing and Near Complete. Leadership and staff from the City and CAPSLO
continue to meet monthly to collaborate on collective homelessness response
strategic planning efforts and partnership opportunities. CAPSLO will present
updates to Council on their Homeless Services Division's 2025-2028 Strategic
Alignment Plan and the 2025 CAPSLO Good Neighbor Policy at the March 17,
2026 City Council meeting.
On track tasks:
Page 310 of 444
Major City Goal Task Estimated
Completion Status Update
Advance street safety improvements and support Vision Zero goals
for all road users: a. Start construction of the 2025 Arterials Paving
project which could include streets such as Sacramento Drive, Tank
Farm, and Calle Joaquin depending on available funding.
FY 2026 Q2 Complete. Construction started in September 2025. Due to insufficient
funding, work on Calle Joaquin was excluded from the project.
Support policies and programs aimed at expanding mass
transportation and public transit: a. Execute new SLO Transit
Operations and Maintenance Agreement.
FY 2026 Q2 Near Complete. RFP has been published and responses are due by February
20, 2026. Council item is scheduled for April 7, 2026 to award the contract.
Continue implementation of the Climate Action Plan (CAP) and Lead
by Example (LBE) Plan Work Programs: g. Develop and adopt
internal polices focused on zero emissions buildings, facilities, and
vehicles (LBE)
FY 2026 Q2
FY 2026 Q4
Delayed. An internal review draft has been written and is currently under
review. Staff expects the internal policies to be completed and enforced by FY
2026 Q4.
Facilitate sustainable growth that aligns with climate, economic,
and housing goals: b. Conduct a study session on the status of the
City's growth management regulations.
FY 2026 Q2
FY 2026 Q3
Delayed and Recommended Change. Given emergent community needs and
an impacted agenda forecast, this item has been moved to FY 2026 Q3 and is
recommended to be presented to Council in memo format rather than as a
study session during this financial plan.
Support the cultural arts, including the Cultural Arts District : a.
Complete the construction of the Mission Plaza Project to enhance
the experience of the plaza and downtown.
FY 2026 Q2
FY 2026 Q3
Delayed and Near Complete. Project construction is expected to be complete
by March. Completion is behind schedule due to weather and contractor
delays. The tenant lease for the kiosk has been executed with the owners of
Linnea's.
Build out park infrastructure to support community recreation and
accessibility: a. Start construction of Righetti Ranch Park (Phase 1).
FY 2026 Q2
FY 2026 Q4
Delayed and Near Complete. On December 2, 2025 the Council awarded a
construction contract for the Righetti Community Park, anticipated to begin in
Spring 2026. Components of the park scheduled for construction include the
fields, playground, and restrooms, as well as the pickleball courts and bike
pump track.
Delayed tasks:
Page 311 of 444
FY 2025-26 Q2 Budget Report
February 17, 2026
Recommendation
a)Receive and file the FY 2025-26 Second Quarter Budget Report; and
b)Appropriate $3,468,954 in unassigned FY 2024-25 General Fund Balance as
detailed in the report; and
c)Appropriate $2,000,000 in assigned FY 2024-25 fund balance and authorize an
Additional Discretionary Payment to CalPERS of $3,506,187; and
d)Appropriate the National Leage of Cities Health and Wellbeing award of $20,000
Year to Date Revenue
Budget % Received Status
General Fund $117.2M 38%
Water $34.4M 44%
Sewer $21.8M 55%
Parking $9.6M 46%
Transit $12.0M 25%
Sales Tax Trend
$51.7M $52.9M $53.4M $54.4M $55.5M
$-
$10.0M
$20.0M
$30.0M
$40.0M
$50.0M
$60.0M
FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26B
+2.4%+0.8%+1.9%+2.0%
Development Fee Revenue Trend
$7.3M $7.2M $6.1M $6.5M $6.2M $5.7M $4.6M
$-
$2.0M
$4.0M
$6.0M
$8.0M
FY
2
0
1
9
-
2
0
FY
2
0
2
0
-
2
1
FY
2
0
2
1
-
2
2
FY
2
0
2
2
-
2
3
FY
2
0
2
3
-
2
4
FY
2
0
2
4
-
2
5
FY
2
0
2
5
-
2
6
B
Expected
$1.1M
Surplus
Year to Date Operating Expenditures
Budget % Expended Status
General Fund $100.2M 57%
Water $27.2M 73%
Sewer $10.9M 54%
Parking $3.9M 54%
Transit $6.0M 77%
Major City Goal Update
0 tasks
4 tasks to be completed in second half of FY 2025-26
11 tasks complete
Of 15 tasks scheduled to be completed during first half of FY 2025-26
CIP Update:
Highlights include several completed projects:
•Morro & Mill, Sierra Way, and Foothill & Santa Rosa Sewer
Replacements
•Water Resource Recovery Facility Upgrade
•Downtown Multi-Space Pay Station
•Jack House Roof and Windows
Ongoing projects include:
•Mission Plaza Enhancements
•Cultural Arts District Parking Structure
•Mid-Higuera Bypass
2023 Winter Storms Update
•$909,090 recognized in FY 2024-25
•$167,408 recognized in FY 2025-26
$1,076,498 received to date
FEMA has obligated $2,047,063 in total
Appropriation Recommendations
Funding
Sources
Use of Unassigned Fund Balance for one-time purposes
Fiscal Policy Section 8. CalPERS & Unfunded Liabilities
The City sets the following prioritization of unassigned General Fund balance:
a.Additional discretionary payments to CalPERS
b.Infrastructure investments
c.Emerging Health and Safety needs of the community
Recommended Use of Fund Balance
CalPERS Funded Status
As of June 30, 2024
Plan Assets Accrued Liability Unfunded Liability Funded Ratio
Miscellaneous 191,435,452$ 291,293,527$ 99,858,075$ 65.7%
Safety 178,415,852 266,992,598 88,576,746 66.8%
Tot a l 369,851,304$ 558,286,125$ 188,434,821$ 66.2%
Total Recommended CalPERS ADP by Fund
Infrastructure Investment Fund
Higuera Complete Streets
Project Need $2,000,000
Infrastructure Investment Fund Transfer (1,212,229)
Remainder $787,771
Insurance Fund Reserves
Insurance Fund Historical Claims Basis Actuarial Basis
Fund Balance at 6/30/2025 4,437,620$ 4,437,620$
Target 5,240,418 8,351,000
Variance 802,798$ 3,913,380$
Recommendation
a)Receive and file the FY 2025-26 Second Quarter Budget Report; and
b)Appropriate $3,468,954 in unassigned FY 2024-25 General Fund Balance as
detailed in the report; and
c)Appropriate $2,000,000 in assigned FY 2024-25 assigned fund balance and
authorize an Additional Discretionary Payment to CalPERS of $3,506,187; and
d)Appropriate the National Leage of Cities Health and Wellbeing award of $20,000
THANK YOU
Appendix
Funded Ratios vs Investment Returns
71.1%
82.6%72.7%72.3%74.9%
61.7%70.1%63.2%63.5%66.2%
4.7%
21.3%
-6.1%5.8%9.3%
-25.0%
0.0%
25.0%
50.0%
75.0%
100.0%
6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024
Average Funded Ratio
SLO Funded Ratio
Investment Return
Infrastructure Investment Fund
Amount
Starting Fund Balance $ 14,658,406
Higuera Complete Streets Feb 2026 $ (2,000,000)
Unassigned Fund Balance (Higuera Repayment) Feb 2026 $ 1,212,229
BALANCE POST FEB 17, 2026 $ 13,870,635
Capital Reserve (Higuera Repayment) July 2026 $ 787,771
Prado Bridge Widening (July 2026)$ (3,500,000)
BALANCE POST July 1, 2026 $ 11,158,406
Prado Bridge Widening (July 2027)$ (11,158,406)
BALANCE POST July 1, 2027 $ -
Infrastructure Investment Fund Alternate Scenario
Amount
Starting Fund Balance $ 14,658,406
Higuera Complete Streets Feb 2026 $ (2,000,000)
Unassigned Fund Balance (Higuera Repayment) Feb 2026 $ 1,212,229
BALANCE POST FEB 17, 2026 $ 12,658,406
Capital Reserve (Higuera Repayment) July 2026 $ 2,000,000
Prado Bridge Widening (July 2026)$ (3,500,000)
BALANCE POST July 1, 2026 $ 11,158,406
Prado Bridge Widening (July 2027)$ (11,158,406)
BALANCE POST July 1, 2027 $ -