AGENDA TITLE:
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Receive Presentation Regarding Fiscal Year 2025/26 3rd Quarter Budget Review and Fiscal Year 2026/27 Study Session 1 (IS - BUD)
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MEETING DATE:
May 6, 2026
PREPARED BY:
Jennelle Baker, Budget Manager
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RECOMMENDED ACTION:
Receive presentation regarding Fiscal Year 2025/26 3rd Quarter Budget Review and Fiscal Year 2026/27 Study Session 1.
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BACKGROUND INFORMATION:
Staff has planned three presentations to provide the City Council and public an opportunity to review and comment on basic assumptions within the Fiscal Year 2026/27 budget to be proposed to Council on June 17, 2026. This session is designed to provide information on the following:
1) Fiscal Year 2025/26 3rd Quarter Budget Review
2) Fiscal Year 2026/27 Study Session 1
3) 5-Year Forecast based on Fiscal Year 2026/27 draft budget numbers
FISCAL YEAR 2025/26 3RD QUARTER BUDGET REVIEW
This informational item presents unaudited General Fund revenue and expenditure results through the third quarter of FY 2025/26, or nine periods (July-March). In addition, the report highlights General Fund revenue and expenditure results in comparison to estimates used in the development of the current FY 2025/26 budget.
Through the third quarter of FY 2025/26, General Fund expenditures and encumbrances were $70.5 million, or 71.7% of the adjusted budget of $98.3 million. Of the adjusted budget, $5.1 million was re-appropriated from FY 2024/25 for encumbrances and allocations for the remaining American Rescue Plan Act (ARPA) funding assigned to the operation and planning of the Access Center.
The Revised Budget includes projections for labor-related Memorandum of Understanding (MOU) updates as discussed and approved during the mid-year budget review.
General Fund FY 2025/26 3rd Quarter Expenses Listed by Department:
Through the third quarter of FY 2025/26, General Fund revenues totaled $64.3 million, representing 67.9% of the adjusted budget of $94.8 million. Of this adjusted budget, $5.1 million was re-appropriated from FY 2024/25 to cover encumbrances and remaining American Rescue Plan Act (ARPA) funding allocated to the operation and planning of the Access Center.
It is important to note that key revenues, including property taxes, Vehicle In-Lieu, and CFD revenue, are received primarily in January and June. Additionally, sales tax revenue is received with a two-month lag and currently reflects collections from July 2025 through February 2026.
General Fund FY 2025/26 3rd Quarter Revenues Listed by Category:
FISCAL YEAR 2026/27 STUDY SESSION 1
During the development of the FY 2026/27 budget, the City faced several challenges in implementing a priority-based budgeting approach. Administration and the Budget Team focused on aligning General Fund resources with the City’s Strategic Vision goals. However, constraints required difficult trade-offs across the following priority categories:
Quality of Life
• Growth of City Services and Programs
• Economic Development and Job Creation
• Parks, Recreation, and Cultural Services (PRCS) Maintenance, Improvement, and Expansion
• Public Safety
• Managed Growth and Development
Foundational Priorities
• Fiscal Sustainability and Revenue Stability
• Staffing and Labor Costs
• Capital Maintenance and Asset Replacement
Structural Challenges
• Rising Operational, Indirect, and Insurance Costs
• City Facility Maintenance and Improvements
• Fleet Replacement Needs
• Community Facilities District (CFD) Rate Pressures
As part of the budget balancing process, the following actions were incorporated:
• Applied current MOU agreements
• Programmed $4.3 million in General Fund balance to support MOU-related salary and benefit increases
• Implemented a citywide Workers’ Compensation rate holiday totaling $1.2 million:
o General Fund: $981,580
o Other Funds: $218,420
o Reduced contributions to PRCS and Library funds proportionally
• Eliminated credit card and/or other payment-app convenience fees, resulting in an expense reduction of $280,500
To address the remaining budget gap, the following reductions and unfunded items were necessary:
• Reduced Fire Vehicle Replacement funding to straight-line depreciation: $1.5 million
• Eliminated Fire Equipment Replacement request: $132,600
• Eliminated Facility Maintenance Fund request: $2.7 million
• Department-wide budget reductions totaling $2.8 million
• Deferred filling 37 General Fund position requests
The Draft Budget Book is currently in development and is expected to be completed within the next few weeks. It will be provided to the City Council for review well in advance of the scheduled budget adoption on June 17, 2026.
The public outreach tool Balancing Act has been launched to support community engagement. The tool is available online at: https://lodi.abalancingact.com/finding-the-balance. Feedback and analysis of community input will be presented during the June 3, 2026 Study Session.
DRAFT FIVE-YEAR FORECAST
The City’s five-year financial forecast provides a forward-looking assessment of revenue trends and expenditure pressures impacting the General Fund and overall fiscal sustainability. The forecast reflects current economic conditions, adopted labor agreements, and known structural cost drivers, while also incorporating conservative assumptions to account for potential volatility.
On the revenue side, growth is expected to remain modest. Sales tax is projected to slightly decline by 0.6% compared to FY 2025/26, though this is partially offset by a 5.3% increase in Measure L revenues, resulting in a net stabilization of this key revenue source. Property tax revenues are anticipated to grow by 4.7% year-over-year, providing a steady and reliable funding base. Additionally, Property Tax In-Lieu of Vehicle License Fee (VLF) revenues have been adjusted upward by 15.3% to better align with historical trends. Other revenues are expected to decrease, primarily due to the expiration of the Fire Department’s AFG grant. Overall, total revenue growth is projected at 1.9%.
On the expenditure side, the forecast highlights continued upward pressure driven largely by personnel-related costs. Salaries are increasing due to market median adjustments, while the City’s PERS liability and benefit costs are rising as a result of recently adopted MOUs, including increased PERS liabilities. These cost increases are partially offset by reductions in operational expenditures implemented as part of budget balancing strategies. Additionally, transfers to the Parks, Recreation, and Cultural Services and Library funds are increasing in alignment with MOU-related cost allocations.
The forecast highlights the City’s ongoing structural challenges, where expenditure growth; particularly in personnel and long-term liabilities, continues to outpace revenue growth. This dynamic will require decision-making to maintain fiscal stability and service levels over the forecast period.
FISCAL IMPACT:
There is no impact from this informational presentation.
FUNDING AVAILABLE:
Review of 3rd Quarter FY 2025/26 and Discussion on FY 2026/27 Budget Planning.