Westminster City Council
SUBJECT
Title
Fiscal Year 2025-26 Midyear Budget Review.
End
From: Erin Backs, Finance Director
Requested by: Administration
Prepared by: Erin Backs, Finance Director
____________________________________________________________
RECOMMENDED ACTION
Recommendation
Receive and file the report.
end
BACKGROUND
The City Council approved the fiscal year (FY) 2025-26 budget on June 25, 2025. The FY 2025-26 Adopted Budget includes special revenue, capital project, enterprise, and internal service funds; however, this report will focus only on the General Fund which is the main operating fund of the city. The report contains information on General Fund resources and expenditures throughout the 2nd quarter of FY 2025-26, which is the period between July 1, 2025 and December 31, 2025.
Top Revenues
The top revenue sources for the City’s General Fund are sales tax, transaction use tax (TUT), property tax, utility users’ tax and charges for service which combined make up 85% of total General Fund revenue. Current projections for FY 2025-26 show total revenues above budgeted numbers by $2.3 million. Sales tax/TUT is projected to be lower than budgeted by $421 thousand, charges are up $1.2 million, investment and rentals are up $650 thousand and property tax is up $385 thousand.
FY 2025-26 revenues are budgeted at $92 million and are currently projected to be $94.4 million at year end. The City has received $27.3 million in revenue in the General Fund or 30% as of December 31, 2025.
Sales Tax/Transaction Use Tax
The following charts from the City’s sales tax consultant, HdL Companies, represent 3rd quarter calendar year sales, July 2025 through September 2025. The first chart shows sales tax year-over-year receipts up 4.8% compared to the 3rd quarter sales in the prior year. Autos and Transportation receipts were up 14.1% due to record-breaking zero emission vehicle sales, driven partly by expiring federal tax credits. A new business addition contributed to a 17.4% increase in the Food and Drugs category. The City’s share of the countywide use tax pool increased 8.9% when compared to the same period in the prior year. Revenue from building and construction was down 2.5% and general consumer goods were down 7.1%. Measures Y & E, the City’s voter-approved transactions and use taxes, brought in $5.7 million for the 3rd quarter. Net of aberrations, taxable sales for Orange County rose 2.2% over the comparable time-period; the Southern California region was up 1.9%.
Sales and Use Tax
The following two charts show the category year-over-year changes for the transaction use tax, Measures Y and E. There is no category for state and county pools because the TUT generated from online sales is directly allocated to the City. Westminster’s voter-approved Measure Y transaction use tax generated $3.8 million, up 1.2% compared to the 3rd quarter of 2024. Measure E generated $1.9 million, up 2.6% over the prior year.
Transaction Use Tax - Measure Y
Transaction Use Tax - Measure E
Sales tax and TUT receipts are remitted to the City in arrears, so the quarter totals shown in the table below represent four months of receipts from the California Department of Tax and Fee Administration (CDTFA). Projections from the City’s sales tax consultant, HdL Companies, anticipate FY 2025-26 receipts to be $398 thousand below the actual receipts in FY 2024-25 primarily due to the slowing market and loss of businesses. This is still a very early estimate as we have only received the four months of receipts for FY 2025-26. This conservative projection would result in sales tax and TUT receipts $549 thousand below budget although current trends are not showing declines from the prior year.
|
|
Budget 2025-26 |
YTD Q2 Actual 2025-26 |
% of Budget |
Prior Year Q2 Actual 2024-25 |
Increase/ (Decrease) from PY |
|
Sales and Use Tax |
$18,748,000 |
$6,363,549 |
33.9% |
$6,052,246 |
$311,303 |
|
Transaction Use Tax |
22,977,000 |
7,485,506 |
32.9% |
7,482,378 |
3,128 |
|
Total |
$41,725,000 |
$13,849,055 |
33.2% |
$13,534,624 |
$314,431 |
Property Tax
Property tax revenue is below the prior fiscal year at the end of the 2nd quarter. Based on the estimates from the County of Orange tax ledger, this revenue source will come in about $385 thousand above budget. This is very early in the fiscal year as most of the revenue from property tax receipts is received in January and April.
|
|
Budget 2025-26 |
YTD Q2 Actual 2025-26 |
% of Budget |
Prior Year Q2 Actual 2024-25 |
Increase/ (Decrease) from PY |
|
Property Tax |
$21,835,000 |
$1,250,224 |
5.7% |
$1,115,448 |
$134,776 |
Utility Users Tax
Utility Users Tax is higher than the prior year by $81 thousand but is projected to come in lower than budget by $164 thousand. The actual received for FY 2024-25 was $5.5 million and the projection for FY 2025-26 is $5.6 million.
|
|
Budget 2025-26 |
YTD Q2 Actual 2025-26 |
% of Budget |
Prior Year Q2 Actual 2024-25 |
Increase/ (Decrease) from PY |
|
Utility Users Tax |
$5,800,000 |
$2,571,415 |
44.3% |
$2,490,106 |
$81,308 |
Charges for Service
Charges for services are positive for FY 2025-26. This is primarily due to the increase in ambulance services charges which are up $408 thousand compared to FY 2024-25. Planning, building and engineering fees are projected $220 thousand over budget. Charges for services receipts to date are 15.5% above this time last year and overall projections to year-end are favorable at $1.2 million higher than budget. The actual received for FY 2024-25 was $10.5 million and the projection for FY 2025-26 is $10.9 million. This revenue category is dependent on the economy and development within the city.
|
|
Budget 2025-26 |
YTD Q2 Actual 2025-26 |
% of Budget |
Prior Year Q2 Actual 2024-25 |
Increase/ (Decrease) from PY |
|
Charges for Service |
$9,783,500 |
$5,081,821 |
51.9% |
$4,398,550 |
$683,271 |
Expenditures
General Fund expenditures are below budget. Expenditures for the 2nd quarter of FY 2025-26 are $1.8 million higher than the prior fiscal year at the same time. This is due to timing of payroll, higher PERS unfunded liability costs, increases in contractual expenditures and increases in department charges from internal services funds.
|
|
Budget 2025-26 |
YTD Q2 Actual 2025-26 |
% of Budget |
Prior Year Q2 Actual 2024-25 |
Increase/ (Decrease) from PY |
|
Expenditures |
$91,824,368 |
$52,823,044 |
57.5% |
$51,009,593 |
$1,813,451 |
Midyear projections show general fund expenditures ending the year $2.3 million under budget. This is primarily due to the large number of vacancies in the City. At the time of this report, there were 23 vacant positions -- 20 in the general fund. The savings realized from these vacancies are offset by the increase in overtime, part-time staffing and contractual services to cover the shortages. Any increase in costs between now and the end of the year will reduce these savings.
FY 2025-26 expenditures are budgeted at $91.8 million and currently projected to be $89.5 million at year end. We have spent $52.8 million in the General Fund or 57.5% as of December 31, 2025.
The net anticipated increase in fund balance or addition to reserves for FY 2025-26 is $4.8 million, which is $4.6 million better than the budget amount. This is only a projection. The economy, increased costs for goods and services, unexpected expenditures and filled vacancies will impact on how the fiscal year ends.
|
|
Actual 2024-25 |
Budget 2025-26 |
Estimated Actual 2025-26 |
Increase/ (Decrease) from Budget |
|
Beginning Balance |
$44,347,681 |
$52,300,299 |
$52,300,299 |
$0 |
|
Change |
7,952,619 |
182,570 |
4,812,536 |
4,629,966 |
|
Ending Balance |
$52,300,299 |
$52,482,869 |
$57,112,835 |
$4,629,966 |
FISCAL IMPACT
There are no budget adjustments requested at this time. The next review will be provided as part of the budget process.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
FY 2025-26 expenditure projections are lower than budget numbers as of December 31, 2025, so no budget adjustments are requested. The General Fund is projected to end the year with an increase to fund balance of $4.8 million which is $4.6 million better than anticipated at the time of budget adoption. Revenue is projected to come in $2.3 million higher than budgeted, and expenditures are projected at $2.3 million under budget. The savings of $2.3 million in expenditures is primarily due to vacancies and as we fill these positions, the savings will be eliminated. The next update will be part of the FY 2026-27 budget process. The FY 2026-27 budget process has already started, and study sessions are projected to begin in May 2026. The discussion will include updated projections for FY 2025-26, FY 2026-27 proposed budget numbers and capital project allocations for council consideration.
ATTACHMENTS
1. General Fund Revenue/Expenditure Summary
REVIEWED BY
Erin Backs, Finance Director
City Attorney’s Office
Christine Cordon, City Manager