CITY COUNCIL MEETING AGENDA PACKET

Page 1 of 17 Item #12.a CITY COUNCIL AGENDA REPORT November 18, 2025 Finance TITLE: ADOPT A RESOLUTION TO ACCEPT THE FY 2024/25 YEAR-END OPERATING BUDGET REPORT, APPROVE BUDGET AMENDMENTS IN MULTIPLE FUNDS, AND DESIGNATE THE GENERAL FUND BALANCE SUMMARY This report presents the unaudited results of City operations for the FY 2024/25 Operating Budget (Budget) and recommends adjustments and designations of the General Fund reserves. The audited information will be included in the City’s Annual Comprehensive Financial Report (ACFR), which will be presented to the City Council after the City’s independent auditor has issued its opinion and it has been reviewed by the Audit Committee. Staff are planning to present the ACFR the City Council in December 2025 or January 2026. Several highlights from this report, which are discussed in more detail below, include: • Due to high interest rates and a cooler real estate market, property tax revenue was lower than budgeted, and the increase from FY 2023/24 was less than 3.0 percent. Lower property tax revenue was offset by higher sales tax and business license tax revenue. Development services fees were higher than budgeted, primarily due to several large development projects moving forward, resulting in one-time revenue increases. • The General Fund’s financial results reflect the recognition of $12.8 million in revenues (other financing sources) and expenditures (capital outlay) associated with the Costco project; these transactions have no impact on net income. Based on a prior agreement, the transportation improvement costs are shared between the City and Costco, with Costco having advanced a significant portion of the costs. In addition to recognizing revenues and expenditures, the City has also recorded $12.8 million in long-term loans payable. A portion of the annual sales tax revenue generated from Costco will be used to pay off the loan over time. Upon project completion, the capital assets associated with public improvements are expected to be transferred to the City. • In FY 2024/25, the City held some vacant staff positions or postponed filling certain positions with the intention of achieving savings and planning for cost reductions in the 2025-27 budget. Staffing savings were partially offset by the implementation of a new accounting standard, Governmental Accounting Standards Board (GASB) 101, which pertains to compensated absences (such as vacation and sick leave). The standard requires agencies to recognize liabilities for certain types of leave, aiming for a more consistent and accurate representation of agencies’ financial obligations. In addition to accrued vacation and unused compensated time recorded in prior fiscal years, the City is now required to report other related benefits, such as sick leave. GASB 101 requires agencies to restate their FY 2023/24 financial statements to reflect the overall liability and adjust the liability annually. The FY 2023/24 restatement of obligation amounted to approximately $7.4 million, primarily associated with sick leave liability, although the adjustment/expenditure for FY 2024/25 is less than $1.0 million, with a significant Page 347 of 399