To: Honorable Mayor and Members of City Council
From: Donna Lee, Finance Director
Prepared By: Seth Anderson, Budget Officer
TITLE:
Title
2026 Long-Term Financial Forecast
LABEL
RECOMMENDED ACTION:
Recommendation
Receive and discuss the 2026 Long-Term Financial Forecast.
Body
DISCUSSION:
The City of Napa prepares the Long-Term Financial Forecast (LTFF) on an annual basis to report projected revenues and expenditures of the General Fund. The 2026 LTFF includes audited actuals for Fiscal Year 2024-25, projected updates to the Fiscal Year 2025-26 budget, and a five-year projection based on current service levels and economic trends.
Growth has been observed in most City revenue sources. With the introduction of Measure G as a General Fund revenue source into the LTFF, the model shows the City’s revenues growing in alignment with the City’s expenditures. Prior to the passage of Measure G, the City was experiencing a structural budget deficit and the LTFF was projecting a negative operating position. Now in the updated model, projected expenditures are lower than projected revenues in each future year of the forecast. The model uses historical growth rates to forecast expenditures as well as actuarial data. The forecast is based on the current staffing plan and does not include additional positions.
Measure G, the City’s new one-cent (1 cent) local transactions and use tax (TUT), began collection on April 1, 2025. Measure G is anticipated to generate approximately $22 million annually. Consistent with ballot themes and Council Focus Areas, the appropriation of Measure G will support maintenance, sidewalk repairs, park development and improvement, senior/youth recreation programs, public safety, encampment cleanups, and City facilities. Measure G also protects and maintains funding that cannot be taken by the State of California.
Within the LTFF, Measure G appropriations are reflected as adopted in the FY 2025/26 and FY 2026/27 budgets. Future-year Measure G expenditures assume the continuation of on-going, Council approved commitments within the General Fund. Additionally, available Measure G fund balance is programmed as a set-aside in the model for projected needs related to a future Harvest Recreational Site bonding payment and for one-time capital improvement and non-capital projects. Programming Measure G funds toward one-time projects allows the City to adapt quickly to external financial pressures or sudden revenue losses by reducing or deferring these discretionary costs.
The LTFF includes the following information:
• Current Economic Information
• Revenue and Expenditure Assumptions
• General Fund Financial Forecast including Measure G
The LTFF is a model that looks at reasonable revenue growth assumptions and compares those potential revenues to expenditures grown at historical rates; it is a “what-if” of financial position if the City continues its current staffing, programs, and budget growth. The LTFF can be a useful tool in planning future spending, but is not a budget, a labor relations plan, or a set of promises. The model is based on current information and may be modified in the future in response to a variety of factors and trends.
The LTFF includes a revenue forecast which requires collaboration with staff, professionals and consultants to acquire the best available information at this given moment. As seen in recent years, a large portion of the City’s General Fund revenue is highly elastic and can be strongly impacted by changes in the local economy, particularly if the number of overnight visitors is reduced.
The LTFF also includes an expenditure forecast, which is based on growing the current budget at historical growth rates. Actual expenditures brought to Council in the next budget may vary from these amounts.
Although the updated LTFF is a positive reflection of the effort to identify and manage the City’s previous structural budget deficit, the City is continuing to take a deliberate and strategic approach to its financial commitments as it navigates potential revenue losses, including the Vehicle License Fee and uncertainties in federal and state funding. This forecast reflects a focus on fiscal discipline, prudent planning, and maintaining essential services while preserving long-term financial stability.
FINANCIAL IMPACTS:
There is no financial impact as the Long-Term Financial Forecast is presented for informational purposes only.
CEQA:
The Finance Director has determined that the recommended actions described in this agenda report are not subject to CEQA, pursuant to CEQA Guidelines Section 15060(c).
DOCUMENTS ATTACHED:
ATCH 1 - 2026 Long-Term Financial Forecast Presentation
NOTIFICATION:
None.