-Editorial
The El Centro City Council on March 17 held a detailed discussion on the city’s mid-year budget review for fiscal year 2025-26, highlighting updated revenue and expenditure projections, long-term fiscal outlooks, and ongoing efforts to maintain financial stability while navigating economic uncertainty.
The mid-year budget review serves as a financial checkpoint, allowing city officials to evaluate performance during the first half of the fiscal year, revise assumptions based on current conditions, and align the adopted budget with actual trends. City staff noted that the review reflects adjustments tied to inflationary pressures, negotiated salary increases, evolving service demands, and previously approved council actions.
According to the report, the General Fund, the city’s primary operating fund, is projected to generate $51.1 million in revenue and incur $49.8 million in expenditures by the end of the fiscal year. The updated figures reflect an approximate $1.4 million increase in revenues and a $143,000 increase in expenditures compared to the original adopted budget.
The city anticipates ending the fiscal year with a surplus of about $1.26 million, largely driven by one-time revenues and expenditure savings.
Key revenue increases include higher-than-expected interest earnings due to strong cash balances, additional grant funding tied to the “Heart of El Centro Revitalization” effort, fire strike team reimbursements, and increased recreation program usage. These gains were partially offset by a projected $450,000 decline in sales tax revenues based on updated economic forecasts.
On the expenditure side, increases were attributed to one-time appropriations for grant-related projects, equipment purchases, and state-mandated program funding. However, those costs were largely offset by approximately $800,000 in salary savings resulting from vacant positions during the first half of the fiscal year.
The General Fund budget also continues to incorporate several significant one-time and ongoing financial commitments, including a $6.5 million payment related to the transfer of El Centro Regional Medical Center operations, as well as a $1.2 million placeholder for potential future labor costs tied to ongoing negotiations and compensation studies.
Additional funding strategies built into the budget include transfers from the Measure P Fund to support parks and recreation staffing, contributions from retirement trust funds to offset pension and retiree health costs, and the redistribution of excess funds from internal service funds.
City officials estimate that total General Fund reserves will reach approximately $38.7 million by June 30, 2026, including both restricted and undesignated funds.
City staff also presented a multi-year General Fund forecast designed to evaluate long-term fiscal sustainability. The model assumes conservative growth in revenues such as property tax, sales tax, and fees, along with increasing costs related to pensions, salaries, and operations.
The forecast anticipates continued, though modest, annual surpluses under current assumptions. However, officials noted that rising pension obligations remain a significant cost driver, with California Public Employees’ Retirement System (CalPERS) expenses projected to increase by approximately $1.5 million over the next four years. For fiscal year 2025-26, pension costs are expected to total nearly $7.6 million, representing about 19% of ongoing General Fund expenditures.
Reserve levels are projected to remain strong, fluctuating between approximately $33.9 million and $36.5 million in the coming years, providing a financial cushion against potential economic downturns.
The council also reviewed updates to the Measure P Fund, which is supported by a voter-approved half-cent sales tax and funds services such as police, fire protection, parks, libraries, and street maintenance.
Mid-year projections show revenues decreasing by approximately $443,000 due to lower-than-expected sales tax collections, partially offset by increased interest earnings. Expenditures are expected to rise by about $234,000, driven by higher costs for parks and recreation staffing, community events, and facility improvements.
The Measure P Fund continues to support $8.35 million in capital projects, including building repairs, accessibility upgrades, police vehicles, and major projects such as the Valley Point Center demolition. The fund is projected to end the fiscal year with a balance of approximately $7.2 million.
The city’s enterprise funds, which include water and wastewater operations, also showed mid-year adjustments.
The Water Fund is projected to see a modest increase in revenues—about $225,000 above initial estimates—due to higher water sales and interest earnings. Expenditures are expected to remain slightly below budget, with capital projects continuing as planned. The fund is projected to end the fiscal year with approximately $26.9 million in reserves and working capital.
The Wastewater Fund, meanwhile, is projected to experience a larger increase in expenditures—about $3.79 million above original estimates—primarily due to expanded capital investments, including the Southern Pump Station and UV disinfection system projects. Revenues are expected to increase by about $352,000. The fund is projected to end the fiscal year with approximately $15.7 million in reserves.
Transportation-related special revenue funds are expected to see a combined increase in revenues of about $157,000, largely due to higher interest earnings. Expenditures vary across projects, including increased funding for the Danenberg Drive rehabilitation project and adjustments to other regional transportation projects. Combined fund balances for these accounts are projected to total approximately $10.8 million at year’s end.
The city also provided an update on its Special Fire Fund, which captures revenues from fire strike team deployments. The fund is expected to support equipment purchases, training, and other operational needs, with an anticipated year-end balance of about $169,000.
Officials reported that bond-funded capital project accounts, including those for the city’s library and police station, are nearing completion, with remaining balances of approximately $684,000 and $1.2 million, respectively. These funds are restricted to eligible project-related expenses.
Internal service funds, which cover costs such as workers’ compensation, employee health benefits, and fleet services, were also reviewed. The city previously restructured these funds and issued one-time refunds to operating funds after determining they were overfunded in prior years. Staff indicated additional adjustments may be considered during the next budget cycle.
