To: Honorable Mayor and Members of City Council
From: Donna Lee, Finance Director
Prepared By: Seth Anderson, Budget Officer
TITLE:
Title
City of Napa FY 2026/27 Mid-Cycle Budget Update
LABEL
RECOMMENDED ACTION:
Recommendation
Provide direction to staff to finalize the proposed FY 2026/27 Mid-Cycle Budget and the City-Wide Position Staffing Plan and present those documents for final review and approval at the regularly scheduled meeting on June 02, 2026.
Body
DISCUSSION:
The City’s two-year budget for Fiscal Years 2025/26 and 2026/27 was adopted by the City Council on June 17, 2025. The purpose of the Mid-Cycle Budget is to provide an update to Council regarding revenue and expenditure trends, and to propose appropriate revisions to the FY 2026/27 appropriations.
The FY 2026/27 budget as originally adopted estimated General Fund revenues of $168.4 million and expenditures of $168.2 million, resulting in a balanced General Fund budget after transferring funds to reserves per the Council adopted fiscal policy. Adjustments are proposed both for administrative purposes, for Budget Packages that will enable departments to better meet public needs, for changes to the 5-year Capital Improvement Program, the Fleet Replacement Schedule and for Staffing Plan additions and position reallocations.
All the adjustments referenced in this Staff Report can be found in more detail in Attachment 1, FY 2026/27 Proposed Mid-Cycle Budget.
The Proposed Mid-Cycle Budget for expenditures for all city funds totals $408.8 million in FY 2026/27, up from $396.1 million in the originally adopted budget. The goal of this budget is to adjust to current economic conditions and to realign our workplans to better provide services to the residents, businesses, and visitors of this community.
FY 2026/27
General Fund Revenues
Proposed adjustments to the budget reflect a thorough analysis utilizing economic indicators and trends, consultant provided projections, and alignment with our neighboring partners. Proposed adjustments would increase City revenues by $1.1 million. These adjustments primarily include increases in Property tax of $0.33 million, Sales Tax of $0.42 million, Transient Occupancy Tax (TOT) of $1.5 million, Licenses and Permits of $0.82 million, Charges for Services of $0.36 million, and Miscellaneous Revenue of $0.08 million. These increases are offset by decreases in Business License Tax of $1.16 million, Intergovernmental of $0.1 million, Investment Earnings of $1.0 million, and Transfers In of $0.62 million.
General Fund Expenditures
Proposed FY 2026/27 adjustments reflect a $0.85 million increase in Salaries & Benefits to better align with projected workforce costs, an administrative budget correction for General Government that decreases the budget by $1.0 million which is offset by an increase of $0.22 million for the City’s share of Animal Shelter services, a $1.13 million reduction in General Liability Insurance charges due to a revised premium structure, a $2.1 million increase in Transfers Out from Measure G to the General Fund to support the City’s 9-1-1 and Dispatch Services, and reserve adjustments that reduce General Fund reserve requirements by $0.7 million while increasing transfers to the Capital Improvement Fund’s General Reserve by $0.69 million which ensures that this reserve has the necessary fund balance needed for 5-Year Capital Improvement Program Plan as adopted.
Included in these adjustments to General Fund expenditures is $0.27 million in proposed Budget Packages including a staffing plan change and SB707 compliance. All proposed adjustments to the adopted FY 2026/27 General Fund expenditures would increase the budget from $168.2 million to $169.3 million.
Budget Adjustments - Other Funds
Revenue adjustments totaling $14.48 million are proposed for all other funds. Increases are primarily from changes in projections for Charges for Services which includes newly adopted Utilities rate increases of $8.72 million, $3.4 million in projected material sales revenue at the Materials Diversion Facility, $4.07 million in Intergovernmental revenue for CIP project funding adjustments, and $0.88 million in investment earnings. Proposed reductions for revenues are related to Charges for Services which includes General Liability cost recovery of $1.33 million, $0.82 million reflecting the City’s postemployment benefits obligation being fully funded, and $1.0 million in projected revenue for the Red Light Camera Fund, and a decrease in expected revenue for Sales Tax of $0.37 from updated projections for Measure U.
Expenditure adjustments totaling $11.71 million are proposed for all other funds. Increases result primarily from increases to capital project funds of $10.65 million, Solid Waste and Recycling contract and processing services of $3.7 million, and Water Utilities services and supplies of $1.12 million. Decrease to all other funds are primarily from Salaries & Benefits updates of $.39 million, Red Light Camera services of $0.34 million, postemployment benefit obligations of $0.82 million, and an update to the City’s Cost Allocation Plan transfers in to the General Fund of $2.73 million.
Staffing Adjustments
Proposed staffing plan adjustments are presented in summary along with the proposed 5-Year Staffing Plan in Attachment 1: Appendix A.
Budget Packages
Budget Packages were required for new / reallocated positions and limited term extensions, and new programs and activities requests. These request total of $641K in expenditures for all funds. They are presented in Attachment 1: Appendix C.
FINANCIAL IMPACTS:
None by this action. The purpose of the Public Hearing is to allow an opportunity for the public to comment on the proposed FY 2026/27 Mid-Cycle Budget and for the City Council to offer any changes prior to the presentation of the Budget for final approval at the next City Council meeting.
CEQA:
The Finance Director has determined that the Recommended Action described in this Agenda Report is not subject to CEQA, pursuant to CEQA Guidelines Section 15060(c).
DOCUMENTS ATTACHED:
ATCH 1 - Fiscal Year 2026/27 Proposed Mid-Cycle Budget
NOTIFICATION:
Publication of Legal Ad in the Napa Valley Register on Thursday, May 7th, 2026.