City Council adopts 20% minimum reserve policy for FY2026 budget

The City Council voted to adopt a resolution setting a 20% minimum unassigned general fund reserve to guide preparation of the FY2026 operating and capital budgets.

City finance director Sergio Villasana presented the item at the council meeting, describing fund balance terminology and saying the proposed policy would set a 20% floor so the city can fund a “reserve for major contingencies.” He told the council that financial advisors recommended a minimum equivalent to roughly two months of operating expenses and a target in the 20–25% range; he concluded publicly: “I would recommend what we recommended is to go to the 20%.”

The policy matters because an unassigned fund balance is the principal local mechanism cities use to respond to revenue shortfalls, storm…