Report Prepared by: Venus Rodriguez, Finance Officer
Title
SUBJECT: Mid-Year Budget Review for Fiscal Year 2025-2026, General Fund Supplemental Appropriations in the Amount of $157,400 and $652,545 in Budget Amendments in Various Funds
REPORT IN BRIEF
Presents the Fiscal Year 2025-2026 Mid-Year Financial Report, seeks approval of General Fund Supplemental Appropriations in the amount of $157,400 and $652,545 in Budget Amendments in Various Funds.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving a Supplemental Appropriation from the unreserved, unencumbered General Fund balance in the amount of $20,000 for Project # CP260025 City Clerk’s Office Remodel; and,
B. Approving the deletion of one Payroll Supervisor position and adding one Senior Accountant; and,
C. Approving Resolution 2026-14, A Resolution of the City Council of the City of Merced, California, Amending the Classification Plan by Updating the Personnel Allocation in the Finance Department by Deleting one Payroll Supervisor and Adding one Senior Accountant; and,
D. Approving a Supplemental Appropriation from the unreserved, unencumbered General fund balance in the amount of $60,000 for the Fire Department; and,
E. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 2003- Measure Y Fire Department in the amount of $60,000; and,
F. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 2002- Measure Y Police Department in the amount of $20,300; and,
G. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 1020-Affordable Housing up to the amount of $352,600 and transferring to Fund 2500 Housing Administration; and,
H. Approving a Supplemental Appropriation from the unreserved, unencumbered fund General Fund balance up to the amount of $77,400 and transferring to Fund 2500 Housing Administration; and,
I. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 1020-Affordable Housing in the amount of $72,773 and transferring to Fund 2507-Cal HOME; and,
J. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance in Fund 3000-Development Services for the Engineering Division in the amount of $110,000; and,
K. Approving a Supplemental Appropriation from the unreserved, unencumbered fund balance of Fund 7006-Fleet Replacement in the amount of $109,645.
L. Authorizing the Finance Officer to make any necessary budget adjustments.
Body
ALTERNATIVES
1. Approve, as recommended; or
2. Approve, subject to other than recommended (identify specific findings and/or conditions amended to be addressed in the motion; or
3. Deny; or
4. Continue to a future meeting (date and time to be specified in the motion).
AUTHORITY
Charter of the City of Merced, Section 1105.
DISCUSSION
Mid-Year Update
The purpose of the Mid-Year update is to provide the City Council with a reconciliation on how the City ended Fiscal Year 2024-25, a General Fund update for the current Fiscal Year 2025-26, and to request changes to the budget due to needs that have been identified since the budget was adopted on June 16, 2025.
Beginning Fund Balance July 1, 2025
The table below reflects the Fiscal Year 24-25 adopted budget assumptions compared to actual fund balance on June 30, 2025.
|
Fund |
FY 2025-26 Actual Beginning Balance |
FY 2025-26 Beginning Budget Balance |
Savings or (Deficit) |
|
General Fund |
$14,027,278 |
$11,776,222 |
$2,251,056 |
|
Development Services |
$2,691,692 |
$2,144,200 |
$547,492 |
|
Parks & Community Services |
$25,774 |
$16,001 |
$9,773 |
|
Airport |
$175,936 |
$36,425 |
$139,511 |
|
Measure C (2001/2030) |
$5,604,332 |
$5,161,391 |
$442,941 |
|
Measure Y |
$1,022,938 |
$657,079 |
$1,022,938 |
|
Housing Administration |
($84,361) |
$0 |
($84,361) |
Fiscal Year 2025-26
The City Council adopted the Fiscal Year 2025-26 budget for all funds on June 16, 2025. Subsequent to the budget adoption, there have been several actions approved by the City Council that affected the budget.
General Fund Expenditures
The City Council has approved revenue increases of $185,802 with equal offsetting expenditures. In addition, there has been $224,171 in Supplemental Appropriations for the following:
Community Assessment & Public Opinion Survey Agreement $53,250
Maintenance District Assessment ballot cost 16,546
Lew Edwards Group-Engagement & Consulting Services
Agreement 104,375
HdL-Business License Ordinance/Fee Study 50,000
Net Appropriations $ 224,171
MID-YEAR RECOMMENDATIONS
City Clerk Division (Recommendation A)
The Engineering Department retained an architectural firm for a little under $20,000 to assist with the design on the Clerk’s office remodel to ensure compliance with current Building Codes and ADA. Due to the rising costs of construction, staff is requesting an increase of $20,000 to offset the consultant cost and ensure the project has a contingency budget.
The funding of $20,000 will be appropriated from the General Fund unreserved, unencumbered balance.
Finance Department (Recommendation B and C)
The Finance Department is requesting to remove a Payroll Supervisor position and add a Senior Accountant position. The department currently has two Senior Accountants that oversee budget, treasury, grants, general ledger, accounts payable, and audit. The Payroll Supervisor oversees payroll. These two positions are similar in the supervisory structure and there is no salary difference. By changing the position, it will allow the position to be more flexible by continuing to oversee payroll and take on additional supervisory accounting tasks. This would help in balancing out the workload at the supervisory level.
Fire Department (Recommendation D and E)
Weed Abatement
The Fire Department is requesting $60,000 to hire and pay for a contractor for forced weed abatement on non-compliant private parcels. Due to multi-year neglect, there are many lots not meeting Merced Municipal Code Title 8, Section 8.40’s safety standards. The overgrowth creates rodent infestations, negatively impacts property values, jeopardizes the property and life of neighboring residents and businesses, creates an area for unhoused people to set up encampments and/or conduct illegal activities on the property, creates a future fire hazard after the weather warms up and the weeds dry up, and demonstrates to our citizens that we are listening to their complaints and taking action. Many non-compliant owners have not cleaned up their property in years, because we have not had sufficient funding to force clean their lots and they are aware that there are no financial consequences to them. Once the city cleans the lot, the owner is billed for the cost of abatement plus a 15% administrative fee. If they do not pay their bill, we will place a lien on their property and eventually recoup our cost plus the 15% administrative fee.
The funding of $60,000 for weed abatement services will be appropriated from the General Fund unreserved, unencumbered balance. Any recovery fees would go back into the General Fund.
The Fire Department is also requesting $60,000 in mid-year funding to replace existing Automatic External Defibrillators (AEDs) that are no longer compatible with the County’s new ambulance service provider.
With the transition to the new ambulance provider, the Department’s current AED units cannot interface with the ambulance cardiac monitors. This incompatibility creates some operational and patient care concerns:
First, when Fire Department personnel initiate patient care using an AED and the transporting ambulance arrives on scene, firefighters are required to remove the Department’s AED pads and replace them with the ambulance provider’s monitor pads. This process introduces an avoidable delay during critical cardiac events, when uninterrupted care and rapid defibrillation are essential to patient survival.
Additionally, the Department’s current AEDs do not interface with the Fire Department’s own cardiac monitors, requiring similar pad changes during care transitions between Department personnel.
Automated External Defibrillators
Second, the Department can no longer restock AED pads through the ambulance provider. As a result, the full cost of replacing expired or used pads has shifted back to the Fire Department, creating an unplanned and ongoing operational expense. Replacing the AED units with compatible equipment will eliminate this inefficiency and restore streamlined resupply.
Additionally, this request supports future compliance with Assembly Bill 310, which requires youth sports organizations to ensure access to an AED by January 1, 2028. The Fire Department plans to retain its current AED units and repurpose them for use by Parks and Community Services, helping the City meet this forthcoming legislative requirement without the need for additional AED purchases.
The funding of $60,000 for the AED’s will be appropriated from the unreserved, unencumbered balance of Fund 2003 Measure Y-Fire.
Police Department (Recommendation F)
During the FY 25-26 budget process the Police Department budgeted several items in the General Fund, including $20,300 in software costs. As Finance was determining which budgeted items could be moved to other funds this item was left out of the budget in error. The software expense should have been moved to Fund 2002 Measure Y Police as part of the budget process. The Police Department is still in need of this software.
The funding of $20,300 for software will be appropriated from the unreserved, unencumbered balance of Fund 2002 Measure Y-Police.
Housing Division (Recommendation G-I)
Fund 2500-Housing Administration
The Housing Division leverages its annual Federal and special State grant funding towards two basic project types: 1) housing-related projects and programs that can be considered to create and promote the affordability of housing units; and, 2) non-housing related projects.
Affordable housing projects - Support from Fund 1020-Affordable Housing
Approximately 82% of Housing Division staff’s time is spent towards projects that can be grouped into the general term of “affordable housing.”
These projects include, but are not limited to, the administrative and material costs for:
• Providing a local match for state and federal affordable housing grants and related projects.
• Coordination with affordable housing developers and consultants to construct new permanent or transitional affordable housing units using local, state, and/or federal funding sources. These projects can take as long as five or six years to plan, construct, and occupy.
• First-time homebuyer and homeowner rehabilitation/reconstruction programs that use State or Federal funding.
• Acquisition, maintenance, and environmental cleanup of vacant land that is set aside for future affordable housing projects.
• Acquisition of existing housing units or vacant commercial buildings that will then be rehabilitated and/or converted to affordable housing units.
• Ensuring that California and Federal environmental policy act project reviews are performed for each potential housing project before funding is officially approved or committed - regardless of whether the project or program is eventually built or carried out.
• Costs to support the temporary or permanent relocation of residents that have been displaced because of natural or unnatural causes, such as fire, flooding, or condemnation of existing housing.
• Long-term monitoring, which include on-site walkthroughs and occupant file inspections, of completed affordable housing projects to ensure that habitability and affordability standards are being maintained throughout the required affordability period, sometimes as long as 55 years.
• Soft costs of construction, including building permit fees; development impact fees; costs of engineering and architectural plan preparation; and the deferred costs for sewer and water connections.
• Supportive service programs to assist persons who are experiencing homelessness or at imminent risk of homelessness, including: rehousing costs (security deposits); rental fee assistance; supportive/case management services that assist in obtaining or retaining housing; and operating or capital costs to assist temporary or transitional shelters.
Non-housing-related Projects and Programs - Support from General Fund
Approximately 18% of staff time is spent on projects that cannot be tied to creating or supporting affordable housing.
These projects and programs include the administrative and materials costs involved with:
• Community food assistance programs
• Community employment training or life skills training programs
• Community youth programs
• Public infrastructure and facility projects such sidewalk/water/sewer/storm drain installation/replacement projects, Americans with Disability Act (ADA) improvement projects, community/youth/senior centers, parks improvements, construction of fire stations, etc.
Fund 2500-Housing Administration is the operating fund for staff, materials, supplies, etc. of the Housing Division. Depending on the project type, revenue can typically be received from activity delivery cost (ADC) reimbursement of projects funded by CDBG, HOME, Low- and Moderate-Income Housing, Cal HOME, Begin and other housing grants.
Staff had proposed a FY 25-26 budget of $741,161 in revenue and the same amount in expenses reflecting a balanced budget. Revenues were projected to come from CDBG, HOME, and LMI Housing to support operating staff. Due to delays in funding allocation from HUD or projects not reaching completion until next fiscal year, the Housing Division has adjusted their projected budget. The revised projection includes revenue in the amount of $258,790 mostly from CDBG and $605,283 in operating expenses for the year. The shortfall in revenue will leave the Housing Administration out of balance by approximately $430,000.
Staff is requesting a supplemental appropriation to fill the shortfall from the unencumbered, unreserved fund balance of Fund 1020-Affordable Housing in the amount of $352,600 (82%) and the General Fund in the amount of $77,400 (18%) based on the percentage allocation discussed above.
Fund 2507-Cal HOME
On April 18, 2022, the City was awarded a California State 2021 Cal HOME program grant in the amount of $2.5 million for first time homebuyer assistance and owner-occupied rehabilitation loans. The grant allowed 10% activity delivery fees (ADF) of the award to be used for administration, so the City partnered with Self Help Enterprises to administer the loan programs. When the grant was awarded the City nor Self Help were aware that the first 5% of the allowable ADF needed to be drawn in the first 90 days from the date the Standard Agreement was fully executed (October 4, 2022). After the initial 90 days, the remaining 5% could only be reimbursed on a per-loan basis. As such, with each loan Self Help processed and invoiced the City to reimburse for administering the program, the reimbursements were more than what could be drawn from the grant to reimburse those costs. The grant has expired and due to not drawing the 5% allowable ADF in the first 90 days, Fund 2507-Cal HOME has a shortfall of $72,773 which was paid to Self Help Enterprises for administration as required by their agreement.
Since this is an affordable housing grant program, Staff is requesting funding of $72,773 from Fund 1020-Affordable Housing to cover the shortfall in Fund 2507-Cal HOME for administering the program.
Engineering Division (Recommendation J)
The Engineering Division has exceeded its revenue projections for FY 2025-26, largely due to work associated with RACE Communications.
The department would like to leverage some of this unanticipated funding for the following:
• Addressing longstanding filing challenges by initiating a project with an estimated cost of $25,000 to scan and index documents and plans which would improve accessibility and record management for the future.
• Explore the use of a consultant with an estimated cost of $25,000 to assist with project management and team building efforts, with the goal of strengthening the overall capabilities of the Engineering Team.
• Replace outdated survey equipment and purchase an addition to the existing GPS unit with an estimated cost of $60,000 which will improve performance and efficiency in field operations.
Total funding in the amount of $110,000 for all three requests will be appropriated from the unreserved, unencumbered balance of Fund 3000-Development Services.
Fleet Division (Recommendation K)
Fleet had budgeted for several vehicle purchases in FY24-25. In order to carryover funding to the next fiscal year it has to be part of a capital project, grant, and/or encumbered. There was funding allocated to certain vehicle purchases but not encumbered by the end of FY 24-25 therefore, the funding did not carry over into FY25-26 for use. The Fleet Division is requesting to re-appropriate $109,645 in funding to finalize the purchase of additional equipment so vehicles can be completed and put into service.
Funding of $109,645 will be appropriated from the unreserved, unencumbered balance in Fund 7006-Fleet Replacement.
Property Based Improvement District and Tourism Based Improvement District (Recommendation L)
PBID and TBID are now active, and the city is administering each of these districts. As part of the administration, we assess and/or bill owners of property in the districts. We than receive the funding and forward to PBID and TBID. When the current fiscal year 2025-26 budget was created, we did not anticipate for delinquencies. Therefore, to forward the additional funds, we will need additional appropriation authority. We are requesting to allow the Finance Officer to make any necessary adjustments to the budget for funds being received as delinquent revenue. This will allow us to pass through all the available funding to the PBID and TBID boards on a timely basis as required by the agreements in place.
Any additional funding will be appropriated from the unreserved, unencumbered balance in Fund 4950-PBID and Fund 4951-TBID.
Vehicle Purchase Resolution
On July 7, 2025, City Council approved Resolution 2025-46 declaring the infeasibility of using public bidding to purchase certain vehicles and authorizing limited direct purchases. The resolution expires on June 30, 2026, and has some controls built in that included each vehicle purchase cannot exceed $100,000 and staff can only use this method for purchases not to exceed $900,000. The resolution also required that a report be provided to the City Council as soon as practical. As an update, 17 vehicles totaling $749,293.33 have been purchased so far under this resolution. Each vehicle ranged between $26,119.05-$68,870.16. The list of vehicles and amounts is attached for reference. A complete list through June 30, 2026, when the resolution expires, will be provided at a later date.
Recommendations A and D-L will require five affirmative votes.
ATTACHMENTS
1. Resolution 2026-14 Amending Classification Plan
2. Vehicle list of purchases under Resolution 2025-46
3. Presentation