Department of City Manager
Reference: 2026 Budget Amendment No. 1
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Kathryn Mortensen, Director of Budget and Innovation
Date Prepared: February 6, 2026
PURPOSE
To amend the 2026 budget to account for expenditures related to the YouthLink IGA, an unanticipated water share purchase, an acceleration of spending on the Sable Corridor Improvements project, a reimbursement of impact fee revenue to the utility funds, use of lodging tax fund balance, increase costs concerning landscaping contracted maintenance, use of impact fees on developer agreements, newly awarded grant funds, and appropriating the total amount of cemetery perpetual care fund interest.
BACKGROUND
The City Council adopted the 2026 Budget on October 21, 2025, at $279,681,910.
This first amendment to the 2026 budget includes several items that were unknown at the time the budget was adopted in 2025. The first item is the City’s intergovernmental agreement with YouthLink to provide personnel support to the organization in lieu of the previously anticipated monetary contribution. This support involves the City paying salary and benefits for YouthLink employees. While these costs will eventually be fully reimbursed by revenue from YouthLink, an appropriation is required as it will show as an expense. While that will result in an increase in budget, the financial impact is neutral.
This amendment also includes an increase in appropriation to cover a water share purchase that staff became aware of the opportunity in January 2026. The water share purchase has been approved by City Council and there are sufficient funds to cover the purchase. This amendment will provide the appropriation for the spending.
There is an additional increase in appropriation to accelerate the timeline of the Sable Corridor Improvements projects. This brings a portion of the appropriation planned in 2027 forward to the current fiscal year to complete as much of the project in 2026 as possible.
The next item included in this amendment is r elated to the Ravenfield development. In 2025, City Council approved a fee reduction based on the affordable housing policy for this development. As permits are anticipated to be issued this year for the project, this appropriation provides for the transfer that is required from the General Fund to the Utility Enterprise Funds.
This amendment also provides for increased appropriation to support the spend down of excess fund balance in the Lodging Tax Fund. This fund balance will be spent on the purchase of a screen for outdoor movies to be shown at City parks. Additional spending will be made on updates to the Main Street Creatives building for ADA accessibility.
This amendment includes an additional allocation from the General Fund balance to increase the amount spent on park contracted landscape maintenance. The city is in the process of evaluating current contracts and will re-bid these contracts in the hope of reducing costs next year. To get through the gap where additional funding is needed, the use of General Fund balance will provide additional funding.
Impact Fees are used to fund projects related to increased government services stemming from development’s impact on the city. These impact fees are spent either as reimbursements to developers who complete this work or as revenue to fund city projects accomplishing this. Reimbursement of collected impact fees related to Developer agreements do not always have a concrete timeline. Based on existing development agreement terms, the City anticipates that we will have reimbursements from the Parks Capital Fund that require additional appropriation.
City staff have been notified of additional grant awards for sustainability and affordable housing projects that were approved after the 2026 budget was adopted. These grants funds are being added to the budget and appropriated.
The final item this amendment provides funding for is appropriation to cover the annual transfer of interest earning from the Cemetery Perpetual Care Fund to the Cemetery Fund. While this transfer occurs each year, interest earnings were higher than originally projected, necessitating an additional $9.6 thousand dollars in appropriation.
Overall, this is an increase of $11,926,633 and brings the total city budget appropriation for 2026 to $291,608,543.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
All changes to Fund-level appropriations of the adopted budget must be made by a Supplemental Budget Appropriation.
FINANCIAL IMPACT
There is a budget impact of $11,926,633 for anticipated expenditures.
STAFF RECOMMENDATION
Staff is recommending approval of the attached Amendment to the 2026 Budget Resolution.
OPTIONS FOR COUNCIL CONSIDERATION
Approve, amend, or deny the proposed resolution.
ATTACHMENTS
Proposed Resolution
Presentation