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Preliminary year‑end results show general fund deficit; staff urges audit‑final numbers before reserve policy changes
Summary
Finance staff presented preliminary (unaudited) December 2025 financials showing a preliminary general fund deficit of about $8.4M (better than the budgeted $11.5M shortfall), a roughly $50M reduction in cash year‑over‑year and pressure on the CIP fund. Staff recommended using audited July figures and clearer encumbrance disclosures before adopting any broad reserve‑policy change.
Finance staff presented preliminary, unaudited year‑end financials for fiscal 2025 and urged caution before making policy changes based on draft numbers.
CFO Hitesh Desai said preliminary general fund results show revenues of about $141 million and expenses of about $150 million, producing a net preliminary deficit of roughly $8.4 million — an improvement versus the $11.5 million budgeted shortfall. Desai and other finance staff emphasized that key receipts (notably property tax remittances and certain December collections) arrive after year‑end and materially change final positions; they described a $50 million decline in reported cash from Dec. 2024 to Dec. 2025 driven by spending on CIP and ARPA drawdowns.
Staff highlighted concerns in the capital improvement plan fund (CIP), which they said was running a negative cash balance (discussed as about $10 million negative) and a negative fund balance (comments referenced nearly $17 million negative), and suggested that an appropriately sized bond issuance (staff mentioned a bare minimum in the $15–20 million range as an option) could cover shortfalls to keep projects moving.
On reserve policy (D3), staff reviewed peer practices and the city's current 16.6% general fund floor. Peers cited by staff use higher targets (commonly 25%–33% or a range). Staff recommended that reserve policy decisions await the audited year‑end (July) numbers and that audit presentations include an extra layer identifying open encumbrances and purchase orders so policymakers can distinguish true excess reserves from money already committed to ordered capital goods.
Committee members agreed more detail was needed and asked staff to return with audit‑final figures, clearer schedules showing how TIF and other special funds flow to taxing bodies (including school revenue shares), and options for aligning reserve policies across general, enterprise and CIP funds.
