City finance staff presented the draft Fiscal Year 2026 budget and revenue forecasts at a July 19 budget work session, proposing not to continue a recent practice of diverting 2% of general‑fund sales tax to the public‑improvement fund and instead keep that share at 1% within the general fund. Finance Director Matthew Lu said staff will monitor the public‑improvement fund balance and return unused funds to capital projects if community priorities require it.

Why this matters: The proposed treatment of sales‑tax revenue affects the size of the general fund available for operations and the public‑improvement fund available for capital projects. Staff framed the recommendation with multi‑year revenue assumptions — including population and development fee trends — that shape the city’s ability to pay for projects now versus saving for later.

Finance staff told the council the budget forecast uses a population assumption of about 1.17% annual growth drawn from American Community Survey data; Lu said, “we are seeing on an average around 1.17% annual growth in population, and that's kind of our key assumption when we go to the pop property tax and other revenue assumptions.” That growth, plus permit‑related development fees, is central to revenue forecasts for capital projects.

Staff noted the public‑improvement fund still shows roughly $1 million in estimated annual revenue and relatively modest planned expenses for FY26. That revenue mix includes sales and use taxes, development fees and investment income; finance staff said development fees have recently comprised a larger share of the fund as development activity increased. The presentation showed that in some recent years sales and use taxes were less than half of public‑improvement fund revenue after development fees rose.

Council members asked for additional detail on the public‑improvement fund and the capital improvement plan (CIP). Staff said the CIP materials and a community trends manual will be released and presented at a council meeting later in July and that staff can provide a line‑item breakdown of planned CIP expenditures when the council asks. Staff also explained that development fees are paid by private developers at permitting and, under current rules, may be used only for collector and arterial roadways, and therefore are commonly applied to street projects on the capital ballot list.

Other revenue and fund items presented included the convention and visitors bureau (hotel tax) fund, park sales tax funding for parks and recreation operations and capital, and transportation sales tax reserves. Finance staff said the transportation fund has built reserves (in part from CARES Act grants) and that FY26 plans call for spending down some reserves on fleet and public‑works vehicles and projects. Council members asked staff to identify a target reserve level for transportation; staff said there is not a fixed number but expressed comfort with a substantially lower reserve than the current balance.

Ending: Finance staff said the full FY26 proposed budget and CIP detail will be available before formal public hearings in August and September. Staff also promised to provide the council with the community trends manual, the CIP breakdown, and the reimbursement calculation details requested by council members.