CITY COUNCIL MEETING SUPPLEMENTAL MATERIAL

2 of 2 • $2.4M to the Streets Capital Improvement Program (CIP) Fund • $3.08M to replace the cancelled transfer from the Capital Reserve Fund • $0.5M to replace the cancelled transfer from the Golf Fund • $62,000 to the Library & Recreation Facilities and Equipment Fund The remaining funds are used to maintain a 20.0% General Fund reserve target. On the revenue side, while property tax was lower than the budget by about $1.3M, the decrease was offset by increases in business license tax and sales tax. The one-time development revenue discussed above was mainly derived from some large development projects and increased development activities. Certain impact fee funds (non-General Funds) also collected more revenues in FY 2024/25 due to large projects; the new development impact fees approved by the Council in late 2024 may have also contributed to additional revenues, as they took effect in the second half of the fiscal year. On the expenditure side, the staffing savings were approximately $1.1 million, net of nearly $0.9 million related to the adjustment for compensated absences. With the implementation of a new accounting standard, GASB 101, the adjustment for FY 2024/25 is higher than the prior year's adjustment by approximately $ 0.7 million. The vacancy saving factor is about 2.8% taking into account the GASB 101 adjustment, compared to 2.0% reflected in the General Fund budget. The vacancy factor will be re- evaluated as part of the 2027-29 budget development. In terms of the General Fund reserve, the calculation is not a straight calculation of prior year fund balance plus current year net income/deficit due to the unrealized investment gain/loss. For the February 2025 Mid-Year Budget Report, the June 30, 2024 ending fund balance was from the FY 2023/24 year-end report, which reflects approximately $1.6M in unrealized investment loss that was added back to the June 30, 2023 fund balance (or beginning fund balance for FY 2023/24). For the FY 2024/25 year-end report, the June 30, 2024, beginning fund balance excludes $3.0M in unrealized investment gain. Additionally, due to the restricted Public Agency Retirement Services (PARS) pension trust funds, if there is an increase in the investment balance, resources must be set aside for the restricted reserve before being made available to the unrestricted reserve. That is why the available resources from FY 2024/25 cannot be just added to the unrestricted reserve. Exhibit A to the resolution shows the calculation of fund balance for the General Fund and other funds. Please note that the fund balance used for budget development represents estimates, which may change due to variations in available financial resources. As stated above, Staff will seek input and bring forward options and strategies to balance the budget for the current budget cycle during the Mid-Year Budget Review in February 2026 and the Mid-Term Budget Update in May 2026.