CITY COUNCIL WORKSHOP AGENDA PACKET

Page 2 of 4 estimated increase to general liability related insurance premium. General Fund Baseline Budget Beyond FY 2026/27, the key fiscal assumptions used to develop the City forecast include: • Property Tax increase will range from 3.7% to 3.8% per year. • Sales Tax will increase 2% per year (the increase for FY 2025-27 is higher with the opening of Costco). • Other Taxes will increase 2% per year. • Other Operating Revenues will increase 2% to 3% per year. • Salaries and Benefits increase will range from 2% to 5% per year and the increase is higher in years with higher anticipated unfunded pension liability contributions; the overall increase reflects 3.7% in salary adjustment and expected step increase. • Non-Personnel costs collectively will increase 3.2% per year (operating materials and supplies, contract services, utilities, insurance, software subscriptions, repair & maintenance, etc.). Additional General Fund financial assumptions include: • Capital Project Transfer from the General Fund will range from $3.5 million to $5.2 million, which includes a $250,000 increase every year. Except for the last two forecast years, the contribution for other forecast years is below the City’s $5.0 million minimum goal. The contributions for FY 2025/26 and FY 2026/27 will be $3.0 million and $3.2 million. • To address the City’s deferred maintenance needs, additional contribution for deferred maintenance ranges from $5.6 million to $6.2 million. The contributions for FY 2025/26 and FY 2026/27 are $6.2 million and $6.1 million, respectively. • The preliminary forecast does not include the use of pension/other reserves as drawdowns on reserves require further analysis from the City’s actuary and direction from the City Council. • The forecast does not reflect budget balancing strategies such as cost reductions currently being discussed with the community and the Budget Advisory Committee. The General Fund baseline revenues, including $2.3 million transfer from other funds, are estimated at $162.1 million and $166.9 million for FY 2025/26 and FY 2026/27, respectively. Property tax revenues are projected to increase by 3.6% and 3.5%. Sales tax revenue is projected to increase by 5.1% in FY 2025/26 due to the recognition of a full year of revenue from Costco and 2.8% in FY 2026/27. The General Fund baseline expenditures, including approximately $10.0 million for capital contributions and deferred maintenance, are estimated at $172.5 million and $178.9 million, respectively. The projected deficits for FY 2025/26 and FY 2026/27 are $10.4 million and $12.0 million. For more details, please refer to the General Fund Ten-Year Financial Forecast (Baseline Scenario) provided as Attachment 1. 10-Year Financial Forecast For the 10-Year Financial Forecast, staff has prepared two forecast scenarios given the Page 29 of 33