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CC SR 20260217 F - Mid Year Financial Report CITY COUNCIL MEETING DATE: 02/17/2026 AGENDA REPORT AGENDA HEADING: Consent Calendar AGENDA TITLE: Consider the Fiscal Year (FY) 2025-26 Mid-Year Financial Report. RECOMMENDED COUNCIL ACTION: (1) Receive and file the FY 2025-26 Mid-Year Financial Report for the General Fund, and Mid-Year Expenditure Report for the Capital Infrastructure Project s (CIP) Fund, Special Revenue Funds, and Other Funds. (2) Approve an additional appropriation of $11,700 in the State Grant Fund for the Pano AI Wildfire Detection Camera Program. FISCAL IMPACT: This financial report provides an update on the General Fund, CI P Fund, and Other Funds, for the second quarter of FY 2025-26 through December 31, 2025. An additional appropriation of $11,700 is requested to meet grant requirements for the Pano AI Wildfire Detection Camera Program . The FY 2025-26 budget is $140,000; however, total estimated costs are $151,700 and are fully funded by previously received grant revenues. VR Revised Budget: General Fund: Revenues: $41,562,700 Transfers In: $ 320,000 Expenditures: $38,874,081 Transfers Out: $ 5,073,650 *(Expenditures and Transfers - includes transfers and PO carryover balances from prior year) VR Other Funds (Expenditures): CIP Fund: $18,207,979 Other Funds: $24,890,355 *(Expenditures and Transfers - includes transfers and PO carryover balances from prior year) VR ORIGINATED BY: Robert Moya, Deputy Director of Finance RM REVIEWED BY: Vina Ramos, Director of Finance VR APPROVED BY: Ara Mihranian, AICP, City Manager ATTACHED SUPPORTING DOCUMENTS: None EXECUTIVE SUMMARY: This report presents the FY 2025-26 Mid-Year Financial Status as of December 31, 2025, focusing on the General Fund, CIP Fund, Special Revenue Funds, and Other Funds. The update compares year-to-date financial activity against prior year benchmarks and evaluates overall performance relative to the City’s adopted and revised budgets . Key mid-year highlights include: • General Fund Revenues o Totaled approximately $19.7 million, or 47.0% of the revised $41.9 million budget. o Reflects a decrease of $2.5 million (11.4%) compared to the same period last year, primarily due to the $5.0 million one-time grant received in FY 2024–25. o Core revenue streams (property tax, transient occupancy tax (TOT), sales tax, utility users tax (UUT)) are stable and tracking within expected ranges. • General Fund Expenditures o Totaled approximately $19.8 million, or 45.0% of the revised $43.9 million budget. o Down $1.1 million (5.5%) from prior year, due to lower non-personnel and grant-related expenditures. o Personnel costs have increased modestly, reflecting steady staffing levels and agreed upon labor cost adjustments. o Transfers-out occurred as planned, supporting capital projects, pension liabilities, and other restricted purposes. • Based on total spent, the General Fund is projected to end the year slightly lower than adopted budget. A more refined year-end estimate will be provided in the next quarterly report, which will be presented during the FY 2026-27 budget workshop (April 20, 2026). • CIP Fund o Total spent is approximately $4.4 million or 23.9% of the revised $18.2 million budget. In addition to the $4.4 million, approximately $2.4 million has been committed (encumbered). o Activity is largely driven by landslide-related projects within the Portuguese Bend Landslide Complex. o Other CIP activity spans multiple categories, including sewer and storm drain improvements, roadway and sidewalk asset management, facilities and civic infrastructure, parks and playground improvements, traffic and transportation improvements, and local emergency response projects. o CIP spending reflects the timing of grant reimbursements, multi-year project phases, and seasonal construction cycles. o Based on total spent and commitments, the fund is estimated to finish the year lower than budgeted. A more refined year-end estimate will be provided in the next quarterly report, which will be presented during the FY 2026-27 budget workshops. • Special Revenue Funds and Other Funds o Total spent at approximately $3.6 million or 14.3% of the revised $24.9 million budget. In addition to the $3.6 million, approximately $8.1 million has been committed (encumbered). o Activity within these funds primarily supports transportation and street - related programs, street and landscape lighting, maintenance and infrastructure upkeep, waste reduction and environmental programs, public safety and emergency response, parks and recreation improvements, bicycle and pedestrian access, equipment replacement, and grant-funded capital and operating activities. o An additional appropriation of $11,700 is being requested as a mid-year budget adjustment to meet State grant requirements. o Based on total spent and commitments, these funds are estimated to finish the year lower than budgeted. A more refined year-end estimate will be provided in the next quarterly report, which will be presented during the FY 2026-27 budget workshops. Additional details of the midyear report are provided below. BACKGROUND: The Finance Department presents a mid-year status report on General Fund revenues and expenditures as part of the City’s ongoing budget monitoring and financial transparency efforts. The City’s fiscal year runs from July 1 through June 30, with the mid - year period covering activity from July 1 through December 31. This report provides an overview of financial performance through the first six months of the fiscal year, comparing current year’s activity to the prior year and evaluating alignment with adopted and revised budget assumptions. If significant variances are identified, staff may recommend budget adjustments to ensure continued fiscal stability. In recent years, proposed mid-year changes have generally focused on incorporating grant revenues, aligning CIP transfers with project timelines, or responding to major unplanned events. Further details and changes in all categories are provided in the Discussion Section below. DISCUSSION: General Fund Revenue - Overall The General Fund revenue adopted budget of $41.9 million, including transfers, is divided into seven (7) primary categories, as illustrated in Chart 1 below. Chart 1: General Fund Revenue by Category (FY 2025-26 Revised Budget) As shown in Chart 1 above, Property Tax and Transient Occupancy Tax (TOT) together make up the largest portions of the City’s General Fund revenue, accounting for 43% and 17% of total budgeted revenues, respectively. These sources represent more than half of the City’s total General Fund revenue. Other key sources include Permits and Fees (11%), Other Taxes and Miscellaneous Revenues (10%), Sales Tax (7%), Franchise Tax (6%), and the Utility Users Tax (6%), and Transfers-In at 0.7%. Not all revenue is received evenly throughout the fiscal year, and the collection can vary year-over-year. Therefore, a low percentage of budgeted revenue received to date is not necessarily a concern for categories such as Property Tax. Although Property Tax is the City’s largest source of revenue, the majority of this revenue is received in December (part of the second quarter) and June (part of the fourth quarter) of each fiscal year. Similarly, TOT and Sales Tax also fluctuate throughout the fiscal year. As shown in Table 1 and Chart 1 on the following page, General Fund revenues through December 31, 2025, total approximately $19.7 million, including transfers, representing mid-year activity for FY 2025-26. Compared to the same period in FY 2024-25, total revenues declined by approximately $2.5 million, or 11.4%, a variance that is primarily attributable to the absence of significant one-time revenues recognized in the prior fiscal year rather than a decline in core ongoing revenue sources. Property Tax $18.2 M 43% TOT $7.0 M 17%Sales Tax $2.9 M 7% Permit & Fees $4.5 M 11% Franchise Tax $2.4 M 6% UUT $2.5 M 6% Other Tax and Misc. $4.1 M 10% Transfer In 0.7% $41.9M Table 1: Mid-Year General Fund Revenues and Transfers – Current Year vs. Prior Year Chart 1: Mid-Year General Fund Revenues and Transfers – Current Year vs. Prior Year Revenues and Transfers FY 2024-25 Mid-Year Actuals FY 2025-26 Mid-Year Actuals Property Tax 7,917,435$ 8,344,490$ 427,055$ 5.4% Transit Occupancy Tax 3,423,811 3,721,861 298,050 8.7% Sales Tax 1,345,155 1,476,954 131,799 9.8% Permit & Fees 1,696,210 1,802,807 106,597 6.3% Franchise Tax 673,291 543,266 (130,026) -19.3% Utility Users Tax 1,572,508 1,518,623 (53,885) -3.4% Other Taxes & Misc. Revenues 5,460,236 2,122,926 (3,337,311) -61.1% Subtotal 22,088,646 19,530,926 (2,557,720) -11.6% Transfers In 125,000 160,000 35,000 28.0% Total Revenues and Transfers 22,213,646$ 19,690,926$ (2,522,720)$ -11.4% Year-Over-Year Change Table 2 below shows the percentage of revenues received through the mid-year. As of December 2025, the $19.7 million received accounts for 47.0% of the $41.9 million in revised revenues, indicating that collections are progressing as expected at the mid -year mark. Table 2: FY 2025-26 Mid-Year Revenues and Transfers Status As shown above, the change in mid-year revenues is influenced by the performance of individual revenue sources. While overall revenues are at 47.0% of the revised FY 2025- 26 budget at mid-year, several major revenue categories, including Property Tax, Transient Occupancy Tax, and Sales Tax, are tracking near historical mid-year collection patterns. Other revenue sources, such as Franchise Tax and Permit and Fees, reflect timing-related variances, as collections are typically weighted toward the second half of the fiscal year. In addition, the absence of prior-year one-time revenues contributes to the overall year-over-year change. Further details on specific revenue category variances are provided below. General Fund Revenue – Property Tax Property tax revenues total $8.3 million, accounting for 45.8% of the revised budget of $18.2 million. This represents an increase of approximately $0.4 million, or 5.4%, compared to mid-year FY 2024-25, when property tax revenues totaled $7.9 million. Secured property taxes, the largest component, have reached $4.7 million (42.3%) of their $11.1 million. Property taxes related to the Redevelopment Property Tax Trust Fund (RPTTF) have not yet been received at mid-year and are expected later in the fiscal year. Additionally, property transfer taxes, which are tied to real estate transactions, have generated approximately $235,000, accounting for 58.7% of the $400,000 revised budget. Compared to mid-year FY 2024-25, overall property tax collections have increased, primarily due to continued growth in secured property taxes and property taxes in lieu of VLF. Property transfer tax revenues are slightly higher at mid-year and continue to reflect Revenues and Transfers FY 2025-26 Revised Budget FY 2025-26 Mid-Year Actuals ($) FY 2025-26 Mid-Year Actuals (%) Property Tax 18,210,000$ 8,344,490$ 45.8% Transit Occupancy Tax 7,000,000 3,721,861 53.2% Sales Tax 2,853,500 1,476,954 51.8% Permit & Fees 4,529,000 1,802,807 39.8% Franchise Tax 2,400,000 543,266 22.6% Utility Users Tax 2,457,200 1,518,623 61.8% Other Taxes & Misc. Revenues 4,113,000 2,122,926 51.6% Subtotal 41,562,700 19,530,926 47.0% Transfers In 320,000 160,000 50.0% Total Revenues and Transfers 41,882,700$ 19,690,926$ 47.0% steady real estate transaction activity. Secured property tax collections remain on schedule, as the majority of receipts are typically received in December and June, resulting in a lower percentage of collections at mid -year. While current trends suggest stable real estate activity, property transfer tax revenues remain subject to market conditions and may fluctuate through the remainder of the fiscal year. Property tax collections are progressing as expected, with a year-over-year increase and over 45.8% of the revised budget realized at mid-year. No budget adjustments are recommended at this time. Staff will continue to monitor property tax receipts closely to ensure revenues align with projections and will provide updates as necessary. General Fund Revenue – Transient Occupancy Tax (TOT) TOT revenues (10% of taxable transient rents) have reached $3.7 million (53.2%) of the revised $7.0 million budget. Terranea Resort continues to be the primary contributor, generating $3.7 million (54%) of its $6.8 million allocation. Miscellaneous TOT sources, which primarily include short-term rental activity at Terranea, have generated approximately $49,600, or 24.8% of the revised $200,000 budget at mid -year. A portion of this activity reflects the receipt of prior-period payments, which modestly increased mid- year collections. While mid-year revenues are higher than the same period last year, this category continues to be subject to timing variability, and full-year results may differ from mid-year trends. Staff will continue to monitor this revenue source and provide an update during the third quarter report in April. Year-over-year, TOT revenues continue to demonstrate stability, reflecting sustained demand within the hospitality sector. Despite ongoing concerns related to the Portuguese Bend Landslide Complex near Terranea, there has been no material impact on occupancy levels or revenue collections at this time. The resort continues to perform well, supported by strong room rates and steady visitor demand . At 53.2% of the budget collected at mid-year, TOT revenues are on track to meet or may exceed year-end projections. No budget adjustments are recommended at this time. Updates will be provided at the April budget workshop to ensure fiscal alignment with budget expectations. General Fund Revenue – Sales Tax Sales tax revenues total approximately $1.5 million (51.8%) of the revised $2.9 million budget. General sales tax accounts for $1.4 million (51.9%) of its $2.8 million budget, while Public Safety Augmentation Fund (PSAF) revenues, a state-allocated share of statewide sales tax revenues provided to cities for public safety purposes, total $50,800, reaching 49.1% of the $103,500 budget. Compared to mid-year FY 2024-25, sales tax revenues have increased by approximately $131,800, or 9.8%, rising from $1.4 million to $1.5 million at mid-year. This increase reflects more stable consumer spending patterns and steady local economic activity compared to the prior fiscal year. Sales tax for the City is 9.75%. Sales tax collections have improved as a percentage of budget, increasing from 47.2% at mid-year in FY 2024-25 to 51.8% in FY 2025-26, indicating stronger mid-year performance relative to budget expectations. Sales tax receipts are generally received evenly throughout the fiscal year, and current collection levels are consistent with historical timing patterns. With just over half of the revised budget realized at mid -year, sales tax revenues are tracking as expected. No budget adjustments are recommended at this time. Staff will continue to monitor sales tax performance and provide updates during the April budge t workshop, including any necessary adjustments should trends change. General Fund Revenue – Permits and Fees Permits and Fees revenues total $1.8 million, representing 39.8% of the revised $4.5 million budget. Building and Safety permits remain the largest contributor, generating approximately $0.9 million, or 45.4% of the $2.2 million revised budget. Plan Check permits have reached approximately $0.3 million, accounting for 52.1% of the $0.5 million budget. Planning permits total approximately $0.2 million, representing 53.2% of the revised budget, while Geology permits have generated approximately $0.1 million, or 50.1% of the $0.2 million budget. Compared to mid-year FY 2024-25, total Permits and Fees revenues have increased by approximately $0.1 million, or 6.3%, reflecting steady permitting and entitlement activity during the first half of the fiscal year. While several major categories are tracking at or above historical mid-year collection levels, Building and Safety permit activity remains moderate, consistent with broader construction and development trends. Business license tax collections total approximately $0.1 million, or 14.7% of the revised $1.1 million budget. This is expected, as the majority of business license revenues are typically received later in the fiscal year, primarily during the third quarter. Staff anticipates this revenue source will continue to increase as annual renewals are processed. At 39.8% of the budget collected at mid-year, permit and fee revenues are generally tracking as expected, with no immediate budget adjustments recommended. Permit activities are typically higher in the third quarter and fourth quarter. Staff will continue to monitor this revenue source closely, particularly considering ongoing development trends, and provide updates at the April budget workshop. General Fund Revenue – Franchise Tax Franchise taxes are levied on utility, refuse, and cable service providers in exchange for the use of the City's public rights-of-way. As of mid-year, franchise tax revenues total approximately $0.5 million, representing 22.6% of the revised $2.4 million budget. Compared to mid-year FY 2024-25, franchise tax revenues have decreased by approximately $0.1 million, or 19.3%, reflecting timing-related variances in utility and service provider remittances. Franchise tax revenues are historically weighted toward the second half of the fiscal year, with a significant portion of receipts typically received after December. While mid-year collections are below the 50% mark, this pattern is consistent with historical trends. In prior fiscal years, including FY 2024-25, final collections were realized later in the year and reached near full budgeted levels. Based on current tim ing patterns, franchise tax revenues are progressing as expected, and no budget adjustments are recommended at this time. General Fund Revenue – Utility Users Tax (UUT) UUT revenues are influenced by weather conditions, utility consumption rates, and the prices of electricity, gas, and water. As of mid-year, UUT revenues total $1.5 million (61.8%) of the revised $2.5 million budget. Electricity UUT collections lead the category, generating approximately $0.7 million (63.4%) of the $1.2 million budget. Water UUT revenues stand at $0.6 (67.9%) of the $0.9 million budget, while gas UUT collections total $0.2 million (42.7%) of the approximately $0.4 million budget. Compared to mid-year FY 2024-25, overall UUT revenues have declined modestly, primarily due to lower gas-related collections and normalization of utility usage following prior-year pricing and consumption increases. Electricity and water UUT revenues continue to perform strongly at mid-year, reflecting seasonal demand and rate adjustments, while gas revenues remain lower relative to other utility categories. With approximately 61.8% of the revised budget realized at mid-year, UUT revenues are performing ahead of historical mid-year averages. No budget adjustments are recommended at this time. Staff will continue to monitor utility consumption trends and revenue performance throughout the remainder of the fiscal year and provide updates as necessary. General Fund Revenue – Other Taxes and Miscellaneous Revenue Revenues in the Other Taxes and Miscellaneous Revenues category total approximately $2.1 million at mid-year, representing 51.6% of the revised FY 2025-26 budget of $4.1 million. Compared to mid-year FY 2024-25, revenues in this category have decreased by approximately $3.3 million, or 61.1%, primarily from the $2.5 million in one-time landslide- related funding from Los Angeles County in the prior fiscal year, which is not expected to recur in FY 2025-26. Key ongoing revenue sources continue to perform steadily. • Golf tax, consisting of a percentage-based tax on golf course operations, at 10% of golf fees paid, revenues total approximately $0.4 million, or 51.7% of the $0.7 million budget, while rental and lease revenues across multiple departments have generated approximately $0.4 million, reflecting mid-year collection levels generally consistent with historical timing patterns. • Interest earnings continue to remain a notable contributor, totaling approximately $562,200, or 46.8% of the $1.2 million budget at mid -year. In addition, a fair value adjustment to the City’s investment portfolio resulted in an unrealized gain of approximately $186,400, recorded in accordance with Governmental Accounting Standards Board (GASB) requirements. Transfers In related to Public Safety and Measure A Maintenance total $0.2 million at mid-year, representing 50% of the revised $0.3 million budget, consistent with expected mid-year timing. Excluding prior-year one-time items, Other Taxes and Miscellaneous Revenues are tracking generally in line with budget expectations and historical mid -year trends. Based on current information, no budget adjustments are recommended at this time. Staff will continue to monitor this category and provide updates should revenue performance materially deviate from projections. General Fund Expenditures – Overall As of December 31, 2025, the total General Fund expenditures were approximately $19.8 million. Compared to the same period last year, the mid -year actuals decreased by approximately $1.1 million, or 5.5%. Table 3 and Chart 2 provide a comparison of mid- year expenditures for FY 2025-26 and FY 2024-25, highlighting overall spending trends and key changes. Table 3: Mid-Year General Fund Expenditures and Transfers – Current Year vs. Prior Year Chart 2 below compares mid-year General Fund expenditures by department through December 31, 2025, to the same period in the prior fiscal year, alongside the revised budgets for FY 2024-25 and FY 2025-26. Expenditures and Transfers FY 2024-25 Mid-Year Actuals FY 2025-26 Mid-Year Actuals Personnel Salaries and Benefits 6,458,711$ 7,188,548$ 729,837$ 11.3% Non-Personnel Sheriff Contract 3,969,364 4,291,950 322,586 8.1% Legal Services 632,553 520,000 (112,553) -17.8% Operation and Maintenance 6,510,149 4,810,099 (1,700,050) -26.1% Capital Outlay 32,378 62,840 30,462 94.1% Subtotal 17,603,155 16,873,437 (729,718) -4.1% Transfers-Out 3,307,825 2,891,575 (416,250) -12.6% Total Expenditures & Transfers 20,910,980$ 19,765,012$ (1,145,968)$ -5.5% Year-Over-Year Change Chart 2: Mid-Year General Fund Expenditures by Department – Current Year vs. Prior Year Table 4 below provides the General Fund expenditures representing 4 5.0% of the total revised FY 2025-26 budget at mid-year. The increase from the $41.8 million adopted budget to the $43.9 million revised budget is primarily attributable to purchase order carryovers from FY 2024-25 and mid-year budget adjustments to support ongoing operational needs. Unlike the prior fiscal year, the FY 2025 -26 revised budget does not include significant one-time grant-related appropriations. Table 4: FY 2025-26 Mid-Year Expenditures and Transfers Status Further details on the specific variances for each revenue category are provided in the following sections. General Fund Expenditures – Personnel Costs (Salaries and Benefits) Total General Fund personnel costs (salaries and benefits) at mid-year FY 2025-26 are approximately $7.2 million, representing about 45.4% of the revised personnel budget. Compared to the same period in FY 2024-25, personnel expenditure increased by approximately $800,000 (12%), reflecting continued staffing stabilization efforts and contractual compensation adjustments. At mid-year, salary costs total approximately $5.2 million, or about 44 .0% of the revised salary budget. This represents an increase of approximately $0.5 million (11.0%) compared to mid-year FY 2024-25. The increase is primarily attributable to the filling of previously vacant positions, approved cost-of-living adjustments, and merit-based increases for both full-time and part-time employees. Benefit costs total approximately $2.0 million at mid-year, accounting for about 49.0% of the revised benefits budget. This reflects an increase of approximately $0.3 million (16.0%) compared to the same period last year. The increase is largely driven by higher health insurance rates and the City’s annual CalPERS unfunded liability payment, consistent with labor agreements and actuarial requirements. Expenditures and Transfers FY 2025-26 Adopted Budget FY 2025-26 Revised Budget* FY 2025-26 Mid-Year Actuals ($) FY 2025-26 Mid-Year Actuals (%) Personnel Salaries and Benefits 15,725,200$ 15,818,200$ 7,188,548$ 45.4% Non-Personnel Sheriff Contract 8,587,000 8,587,000 4,291,950 50.0% Legal Services 1,250,000 1,250,000 520,000 41.6% Operation and Maintenance 11,706,350 13,106,041 4,810,099 36.7% Capital Outlay 38,000 112,840 62,840 55.7% Subtotal 37,306,550 38,874,081 16,873,437 45.2% Transfers-Out 4,493,650 5,073,650 2,891,575 57.0% Grand Total 41,800,200$ 43,947,731$ 19,765,012$ 45.0% *FY 2025-26 Revised Budget includes PO Carryover from FY 2024-25 Personnel expenditures continue to track as expected at the mid-year point. No budget adjustments are recommended at this time. Staff will continue to monitor staffing levels, overtime usage, and benefit costs and will provide updates as part of the third -quarter budget review. General Fund Expenditures – Non-Personnel Costs At the end of mid-year, non-personnel expenditures totaled approximately $9.7 million (46.0%) of the revised budget. This category includes legal services, the Sheriff’s Department contract, repairs and maintenance, professional and technical services, capital expenditures, supplies, and miscellaneous expenses. Miscellaneous expenses include equipment replacement charges, grant disbursement, tax assessments from the Abalone Cove Landslide Hazard Abatement District (ACLAD) and Klondike Canyon Landslide Abatement District (KCLAD), and general liability insurance premiums. Non-personnel costs decreased by approximately $729,718 (4.1%), compared to the same period last year. Key contributing factors include: • Sheriff’s Contract Costs accounted for $4.3 million in expenditures, reflecting an increase of approximately $0.3 million (8.1%) mainly from the standard rate adjustments for public safety services. • Legal Services totaled approximately $0.5 million, representing a decrease of about $0.1 million (17.8%) from the prior year, largely due to the timing of litigation activity and lower landslide-related legal expenditures at mid-year. • Operations and Maintenance costs totaled $4.8 million, a decrease of approximately $1.7 million (26.1%) compared to the same period last year. The reduction is primarily attributable to the absence of one -time expenditures incurred last year related to landslide response efforts and grant-funded programs, as well as the timing of citywide maintenance and professional services. • Capital Outlay expenditures totaled $62,840, an increase of $30,462 (94.1%) compared to the prior year, reflecting the timing of equipment and facility -related purchases early in the fiscal year. Mid-year trends indicate that non-personnel costs are expected to end the year slightly lower than the revised budget for FY 2025-26, with fluctuations primarily attributed to new programs, ongoing maintenance, and contractual labor and service agreements. General Fund Transfers-Out At the end of mid-year, Transfers-Out totaled approximately $2.9 million (64.3%) of the FY 2025-26 revised budget. This category includes General Fund transfers to the CIP Fund, the Employee Service Pension Fund, Habitat Restoration, Abalone Cove Sewer, and Subregion One Maintenance Fund. Compared to the same period last year, Transfers-Out decreased by approximately $416,250 (-12.6%), primarily reflecting lower overall transfer activity in the current fiscal year and the timing of transfers to the CIP Fund. The decrease is consistent with the FY 2025-26 adopted and revised budget and reflects planned allocations rather than a reduction in ongoing commitments: Key transfers at mid-year include: • $2.6 million transferred to the CIP Fund, representing 53.2% of the revised $4.8 million budget, to support infrastructure maintenance, capital improvements, and long-term investment in City facilities. • $0.2 million transferred to the Employee Service Pension Fund, in accordance with pension guidelines, to mitigate the rising costs of unfunded actuarial liability. • $85,000 allocated for Habitat Restoration, ensuring compliance with the Preserve Management Agreement between the City and the Palos Verdes Peninsula Land Conservancy for habitat and trail maintenance. • $20,000 for Subregion One Maintenance, covering annual maintenance costs and endowment requirements. Mid-year trends indicate that Transfers-Out are tracking as expected for FY 2025-26, with expenditures aligning with planned funding schedules. No budget adjustments are recommended at this time. Staff will continue to monitor transfer activity and provide updates as part of the City Council budget workshop in April. Staff seeks City Council approval to receive and file the General Fund’s FY 2025-26 mid- year report. CIP Fund, Special Revenue Funds, and Other Funds Mid-Year Financial Report Capital Infrastructure Projects (CIP) Fund As of December 31, 2025, the CIP Fund expenditures totaled approximately $4.4 million, representing 23.9% of the $18.2 million revised FY 2025 -26 CIP budget. In addition to expenditures recorded through mid-year, the CIP Fund includes approximately $2.4 million in commitments (encumbrances) for contracts and purchase orders associated with active and multi-year projects that are expected to be expended later in the fiscal year. Mid-year spending reflects the timing of project design, environmental review, procurement, and construction schedules, with many projects programmed for later phases of the fiscal year. Table 5, on the following page, summarizes adopted and revised budgets alongside mid-year actuals for active CIP projects, highlighting overall spending progress and key project activity. continued on next page Table 5: FY 2025-26 CIP Fund Mid-Year Expenditures Status Expenditure Type Program Code FY 2025-26 Adopted Budget FY 2025-26 Revised Budget* FY 2025-26 Mid-Year Actuals FY 2025-26 Commited (Encumbered) FY 2025-26 Mid-Year Actuals (%) Personnel Salaries and Benefits 3110 227,900$ 227,900$ 99,612$ -$ 43.7% Project Name ABALONE COVE SEWER REHAB 8202 3,000,000 3,000,000 223,816 162,814 7.5% PVDS LANDSLIDE RESURFACE 8302 - 592 1,813 - 306.4% PB LANDSLIDE REMEDIATION PROJECT 8304 700,000 530,000 102,919 - 19.4% LANDSLIDE EMERGENCY STABILIZATION 8307 8,050,000 7,635,775 2,822,020 - 37.0% DDW ENERGIZATION 8308 525,000 525,000 - - 0.0% PB LANDSLIDE HYDROLOGY 8309 1,400,000 1,265,000 202,720 1,265,500 16.0% LADERA LINDA LOAN PAYMENT 8405 889,500 941,400 57,027 - 6.1% PARK PLAYGROUND IMPR 8426 - 50,000 - - 0.0% WILDLIFE CORRIDOR ENCR REMOVAL 8427 - 521,359 297,502 65,164 57.1% CIVIC CENTER 8503 105,000 105,000 - - 0.0% FACILITIES ASSET MGMT PROGRAM 8509 435,000 720,599 261,312 26,787 36.3% STORM DRAIN LINING PROGRAM 8701 1,000,000 1,011,858 - 50,286 0.0% STORMDRAIN OUTLET @ OCEAN CRST 8722 - 45,286 15,529 - 34.3% LIFT STATION IMPR AT LOWER PV 8724 - 7,373 - 7,373 0.0% SD IMPR MONTEMALAGA CANYON 8726 695,000 695,000 - 29,055 0.0% SEWER IMPR AGUA AMARGA CANYON 8727 75,000 75,000 - - 0.0% TRAFFIC/TRANSPORT IMPROVE 8828 - 69,493 19,261 23,653 27.7% WESTERN BEAUTIFICATION 8840 - 87,240 548 86,693 0.6% GUARDRAIL IMPROVEMENTS - PVDE 8847 - 10,100 - - 0.0% ROADWAY ASSET MGMT @ PVDS 8855 - 30,600 18,033 3 58.9% ROADWAY ASSET MGMT PRGRAM-PVDE 8858 350,000 435,176 64,652 84,545 14.9% SIDEWALK MGMT PROGRAM 8861 22,000 43,421 12,383 6,736 28.5% LOCAL EMERGENCY - LANDSLIDE 9102 - 174,808 151,414 116,245 86.6% Grand Total 17,474,400$ 18,207,979 4,350,559$ 1,924,853$ 23.9% *FY 2025-26 Revised Budget includes PO Carryover from FY 2024-25 Mid-year CIP Fund expenditure reflects the timing of multi-year capital projects, many of which are currently in the planning, design, permitting, or procurement phases. As a result, several projects show limited or no expenditures at mid -year, which is consistent with historical spending patterns. Construction-related expenditures are expected to increase in the second half of the fiscal year as projects advance into active implementation. At mid-year, the CIP Fund spending is heavily concentrated in projects related to the Portuguese Bend (PB) Landslide Complex, specifically Program Codes 8304 through 8309, which collectively represent the City’s ongoing strategic response, emergency mitigation, and long-term stabilization efforts. The PBL Emergency Stabilization project (Program 8307) accounts for the largest share of activity, with expenditures totaling approximately $2.8 million, or about 65% of total CIP expenditures. Additional landslide - related projects, including PB Landslide Remediation Project (Program 8304) and PB Landslide Hydrology Study (Program 8309), have incurred combined expenditures of approximately $305,600, reflecting continued technical analysis, monitoring, and early - stage implementation activities. Outside of landslide-related efforts, other notable CIP Fund expenditures include the Wildlife Corridor Encroachment Fence Removal project at approximately $297,500 and the Facilities Asset Management Program at approximately $261,300, both of which are progressing in accordance with planned project schedules. Personnel costs associated with the CIP Fund activities totaled approximately $99,600, representing 43.7% of the revised personnel budget. These costs support one Principal Civil Engineer position dedicated primarily to project oversight, coordination, and management. Personnel expenditures are expe cted to remain proportionate as overall project activity increases later in the fiscal year. The CIP Fund expenditures are continuing to progress as expected at mid-year based on project schedules and funding availability. Landslide -related projects will continue to be the primary driver of CIP activity for the remainder of the fiscal year, with additional expenditures anticipated in the third and f ourth quarters as projects advance into active construction and implementation phases. Based on historical trends, capital projects are expected to end the year lower than budgeted. A more refined year-end estimate will be provided at the upcoming budget workshops in April and the CIP workshop in May. Special Revenue and Other Funds The City’s Special Revenue Funds consist of taxes and other revenues that are legally restricted for specific purposes. Major special revenue sources include Gas Tax, Proposition A, ARPA, Measure W, Proposition C, Measure R, Measure M, Measure A, the 1911 Act Street Lighting Fund, and various grant-funded programs. These funds primarily support the City’s Capital Improvement Program, which serves as the City’s five- year planning tool for prioritizing and delivering capital projects and infrastructure investments. In addition to funding capital projects, several Special Revenue Funds also support ongoing operating activities, including street maintenance, public facility upgrades and maintenance, public right-of-way improvements, park upgrades and maintenance, and transit-related expenditures. Mid-year activity within these funds reflects the timing of project delivery, grant reimbursements, and seasonal maintenance work and does not necessarily indicate year-end spending trends. The City’s Permanent Funds account for resources that are legally restricted such that only investment earnings, and not principal, may be used to support City programs. These funds include Habitat Restoration, Subregion One Maintenance, and the Joint Powers Improvement Authority – Abalone Cove. Expenditures from these funds are governed by their respective agreements and are intended to support long-term environmental preservation, infrastructure maintenance, and related programmatic obligations. As of December 31, 2025, expenditures across the City’s Special Revenue and Other Funds totaled approximately $3.6 million, representing 14.3% of the $24.9 million revised FY 2025-26 budget. Mid-year spending reflects the timing of grant-funded programs, restricted revenue expenditures, and capital and operating activities that are scheduled to occur later in the fiscal year. Many of these funds operate on reimbursement -based funding structures or are subject to regulatory and seasonal timing, which typically results in lower expenditure levels at mid-year. The increase from the $20.0 million adopted budget to the $24.9 million revised budget is primarily attributable to grant carryovers, supplemental appropriations, and project - specific budget adjustments approved during the first half of the fiscal year. Th ese revisions align available funding with updated project scopes, timing adjustments, and externally funded program requirements. Table 6 on the following page summarizes adopted and revised budgets alongside mid- year actuals for the City’s Special Revenue and Other Funds, providing an overview of overall spending progress and fund-level activity. Continued on Next Page Table 6: FY 2025-26 Special Revenue and Other Funds Mid-Year Expenditures Status In short, mid-year expenditure levels within Special Revenue and Other Funds are consistent with historical spending patterns and budget expectations. As grant -eligible activities are completed and capital and operating projects progress, expenditures are anticipated to increase in the third and fourth quarters of the fiscal year. Based on total spent and historical trends, capital projects are expected to end the year lower than budgeted. A more refined year-end estimate will be provided at the upcoming budget workshops in April. Staff seeks City Council approval to receive and file the financial report for the CIP Fund, Special Revenue Funds, and Other Funds. Special Revenue Fund – Budget Adjustment Fund Fund Name FY 2025-26 Adopted Budget FY 2025-26 Revised Budget* FY 2025-26 Mid-Year Actuals ($) FY 2025-26 Commited (Encumbered) FY 2025-26 Mid-Year Actuals (%) 202 GAS TAX 1,520,000$ 1,520,000$ 613,148$ 947,071$ 40.3% 203 1972 ACT LANDSCAPE/LIGHT - 331,719 - - 0.0% 204 GAS TAX-SB1 750,000 1,389,845 463,407 945,137 33.3% 211 1911 ACT STREET LIGHTING 561,100 1,436,244 411,080 775,101 28.6% 213 WASTE REDUCTION 347,400 347,400 176,570 206,911 50.8% 215 PROPOSITION C 1,150,000 1,295,720 419,925 968,024 32.4% 216 PROPOSITION A 905,400 905,400 508 1,523 0.1% 217 PUBLIC SAFETY GRANTS 170,000 240,000 120,000 - 50.0% 220 MEASURE R 2,520,000 2,606,704 335,541 705,888 12.9% 221 MEASURE M 2,568,500 2,927,623 371,391 897,214 12.7% 222 HABITAT RESTORATION 197,000 201,800 40,767 182,000 20.2% 223 SUBREGION ONE MAINTENANCE 82,400 82,400 21,320 22,757 25.9% 224 MEASURE A MAINTENANCE 660,000 660,000 40,000 - 6.1% 225 ABALONE COVE SEWER DISTRICT 135,300 166,895 59,966 74,551 35.9% 228 DONOR RESTRICTED CONTRIBUTION 17,000 39,300 17,129 20,865 43.6% 285 IA PORTUGUESE BEND MAINTENANCE 51,000 51,000 - - 0.0% 310 CDBG 470,000 620,000 - 5,000 0.0% 331 FEDERAL GRANTS 2,574,900 2,916,400 35,405 402,322 1.2% 332 STATE GRANTS 1,837,000 2,752,394 193,816 768,617 7.0% 334 QUIMBY PARK DEVELOPMENT - 226,323 - - 0.0% 340 BICYCLE/PEDESTRIAN ACCESS 158,000 273,000 - - 0.0% 343 MEASURE W 1,812,000 1,872,336 139,483 502,265 7.4% 681 EQUIPMENT REPLACEMENT 781,929 1,342,852 100,051 668,805 7.5% 682 EMPLOYEE PENSION PLAN 662,000 662,000 - - 0.0% 795 IA ABALONE COVE MAINTENANCE 23,000 23,000 15 - 0.1% Grand Total 19,953,929$ 24,890,355$ 3,559,519$ 8,094,049$ 14.3% *FY 2025-26 Revised Budget includes PO Carryover from FY 2024-25 As part of the FY 2024-25 mid-year budget review, staff is proposing a technical budget adjustment to comply with grant requirements related to the Pano AI Wildfire Detection Camera Program. The City’s adopted budget for this program includes $140,000 annually for subscription and operational costs; however, additional grant -related expenditures require the establishment of expenditure authority within the State Grants Fund. Grant revenues were previously received by the City, deposited into the grant fund balance, and are only appropriated in the fiscal year in which they are expended . An appropriation of $11,700 within the State Grants Fund is proposed to appropriate previously received grant revenues and establish expenditure authority for eligible program expenditures associated with the Pano AI Wildfire Detection Camera Program . This adjustment is administrative in nature and does not impact the General Fund or alter the City’s overall fiscal position. Staff seeks City Council approval to appropriate $11,700 in the State Grant Fund for the Pano AI Wildfire Detection Camera Program. CONCLUSION: At mid-year, the City’s overall financial activities remain stable and are not expected to go over the adopted budget across all funds. General Fund revenues total approximately $19.7 million (47.0%) of the revised budget, reflecting decrease of approximately $2.5 million (11.4%) compared to the same period last year primarily due to the absence of significant one-time revenues recognized in FY 2024-25. Excluding these timing-related items, ongoing revenue sources such as property tax, sales tax, utility users tax, and transient occupancy tax continue to perform within expected mid-year ranges and remain consistent with historical collection patterns. On the expenditure side, General Fund expenditures total approximately $19.8 million (45.0%) of the revised budget, a decrease of $1.1 million (5.5%) compared to mid -year FY 2024–25. Personnel costs total $7.2 million (45.4%), reflecting a year-over-year increase of $0.7 million (11.3%) consistent with staffing levels, negotiated labor agreements, and benefit cost adjustments. Non -personnel expenditures total $16.9 million (45.2%), representing a decrease of $0.7 million (4.1%), primarily driven by the timing of operations, maintenance, and legal expenditures. Transfers -Out total $2.9 million (57.0%), reflecting planned allocations to the CIP Fund, pension obligations, and other designated funds in accordance with the adopted and revised budget. Beyond the General Fund, the CIP Fund expenditures total approximately $4.4 million, or 23.9% of the $18.2 million revised FY 2025–26 CIP budget. Mid-year spending reflects the multi-year nature of capital projects, with many projects currently in design, permitting, or procurement phases. CIP activity is primarily driven by projects related to the Portuguese Bend Landslide Complex, with landslide response and stabilization efforts accounting for the majority of expenditures and expected to continue as the primary focus of capital activity in the second half of the fiscal year. Special Revenue and other restricted funds, including Gas Tax, voter-approved transportation measures, and grant-funded programs, continue to support both capital projects and targeted operating activities such as street maintenance, public facility improvements, and park and right-of-way maintenance. Mid-year activity within these funds reflects project timing and reimbursement cycles and does not indicate year -end spending trends. Permanent Funds, including Habitat Restoration, Subregion One Maintenance, and the Joint Powers Improvement Authority – Abalone Cove, remain in compliance with their respective legal and programmatic restrictions, supporting long - term environmental and infrastructure-related obligations. The City’s financial position at mid-year demonstrates careful fiscal management, adequate liquidity, and disciplined budget execution across all major funds. Staff will continue to monitor revenue performance, expenditure trends, and capital project activity throughout the remainder of the fiscal year and will provide updated information and any recommended adjustments as part of the third -quarter financial report and the April City Council budget workshop. ALTERNATIVES: In addition to the Staff recommendation, the following alternative action is available for the City Council’s consideration: 1. Take other action, as deemed appropriate.