CITY OF TUSTIN BIENNIAL BUDGET 2025-2027 2ND YEAR UPDATE (2026-2027)
FY 2025-2027 BIENNIAL BUDGET 2ND YEAR UPDATE (FY 2026-2027) JUNE 2, 2026 CITY OFFICIALS ALDO E. SCHINDLER, CITY MANAGER NICOLE M. BERNARD, ASSISTANT CITY MAN A GER BRIAN R. MONCRIEF, DEPUTY CITY MANAGER - REAL PROPERTY ALEXA SMITTLE, DIRECTOR OF COMMUNITY DEVELOPMENT JENNIFER KING, DIRECTOR OF FINANCE/CITY TREASURER SEAN THUILLIEZ, CHIEF OF POLICE MICHAEL GRISSO, DIRECTOR OF PUBLIC WORKS CHAD W. CLANTON, DIRECTOR OF PARKS AND RECREATION DERICK L. YASUDA, DIRECTOR OF HUMAN RESOURCES ERICA N. YASUDA, CITY CLERK
CITY ATTORNEY DAVID E. KENDIG
Introduction City Manager’s Transmittal Letter ............................................................................................................................................................... 3 City of Tustin – A Profile ................................................................................................................................................................................. 5 Tustin City Council ............................................................................................................................................................................................ 8 Boards, Commissions, and Committees .................................................................................................................................................... 9 The Budget Process Basis of Accounting / Budgeting ................................................................................................................................................................12 Fund Structure ..................................................................................................................................................................................................14 The Budget Process........................................................................................................................................................................................16 Financial Summaries General Fund at a Glance .............................................................................................................................................................................21 General Fund Long-Term Forecast ...........................................................................................................................................................31 2025-2026 Projected Fund Balance – All Funds .................................................................................................................................32 2026-2027 Proposed Fund Balance – All Funds.................................................................................................................................33 2026-2027 Revenue Summary – All Funds ..........................................................................................................................................34 2026-2027 Revenue Summary – General Fund...................................................................................................................................36 2026-2027 Expense Summary – All Funds ...........................................................................................................................................37 2026-2027 Expense Summary by Type – All Funds ..........................................................................................................................39 2026-2027 Department/Division Expense Summary – General Fund .........................................................................................47 2026-2027 Position Control Lists (Benefited/Non-Benefited)........................................................................................................52 City Departments Administration (Summary) ...........................................................................................................................................................................58 City Council........................................................................................................................................................................................................60 City Manager .....................................................................................................................................................................................................62 City Attorney .....................................................................................................................................................................................................69 Finance Department .......................................................................................................................................................................................70 Human Resources ...........................................................................................................................................................................................76 Fire Services ......................................................................................................................................................................................................81 Community Development.............................................................................................................................................................................83 Public Works .....................................................................................................................................................................................................93 Police Department ....................................................................................................................................................................................... 112 Parks & Recreation ....................................................................................................................................................................................... 132 Non-Departmental ....................................................................................................................................................................................... 146 Debt Service Administration ..................................................................................................................................................................... 148 Capital Improvement Program Capital Improvement Summary ............................................................................................................................................................... 149 2026-2027 Capital Improvement Program – Projects & Funding............................................................................................... 150 2027-2033 Capital Improvement Program – Seven-Year Schedule.......................................................................................... 152 Years 2027-2029........................................................................................................................................................................ 152 Years 2030-2033........................................................................................................................................................................ 154 2026-2027 Capital Improvement Program Project Detail by Project Type............................................................................. 156
Flood Control Facilities Projects ............................................................................................................................................ 156 Park Facilities Projects .............................................................................................................................................................. 158 Public Facilities Projects ........................................................................................................................................................... 162 Traffic Control Projects ............................................................................................................................................................. 165 Transportation Maintenance Projects .................................................................................................................................. 177 Tustin Legacy Projects .............................................................................................................................................................. 183 Water Distribution Projects..................................................................................................................................................... 189 Water Production Projects ...................................................................................................................................................... 190 Appendix Gann Appropriations Limit Calculation & Resolution ...................................................................................................................... 192 Budget Resolution........................................................................................................................................................................................ 196 Financial & Budget Policies ....................................................................................................................................................................... 200 Fund Balance Policy ................................................................................................................................................................... 200 Revenue Management Policy ................................................................................................................................................. 200 Pension Funding Policy............................................................................................................................................................. 200 Investment Policy........................................................................................................................................................................ 201 Purchasing Policy ........................................................................................................................................................................ 202 Purchasing Policy Flowcharts ............................................................................................................................... 202 Purchasing Card Policy............................................................................................................................................ 204 Internal Control – Integrated Framework............................................................................................................................................. 204 Budget Glossary ........................................................................................................................................................................................... 206
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INTRODUCTION
Honorable Mayor and Members of the City Council: It is my pleasure to present the City of Tustin’s Fiscal Year 2026–2027 Operating Budget and Capital Improvement Program (CIP), which continues the City of Tustin’s commitment to fiscal responsibility, long-term planning, and the delivery of high- quality municipal services that foster public safety, quality of life, and economic vitality throughout the community. The Fiscal Year 2026–2027 Budget continues to advance the City Council’s 10-Year Fiscal Sustainability Strategy, which was established to guide the City toward achieving and maintaining a structurally balanced budget. Consistent with Government Finance Officers Association (GFOA) best practices, a structurally balanced budget aligns recurring annual revenues with recurring annual expenditures while maintaining sustainable reserve levels. The Fiscal Sustainability Strategy seeks to achieve these goals through the following objectives: • Increase General Fund recurring revenues by advancing development of City-owned properties, which will generate ongoing revenues such as sales tax and property taxes ; • Decrease recurring General Fund expenditures by continuing to explore pension paydown strategies and other operational efficiencies; and • Reduce the use of one-time revenues to fund the following: o Maintain the General Fund Reserve level (Council Policy sets reserves at 15%-20% of annual General Fund operating expenditure); o Paydown unfunded pension accrued liability; and o On-going operations and programs. To this end, the City team has advanced a number of major developments throughout Tustin under the Council’s direction. At Tustin Legacy, projects such as the Advantech North America Campus, Irvine Company’s 1,336-unit apartment project, and Clearwater Living Senior Community are either underway or approaching construction. Outside of Legacy, residential developments such as The Jessup, Cypress Grove, Stafford Glen, and Compass at Red Hill have either been completed or are under review. Strong economic development and prudent fiscal management are the keys to our continue success. General Fund Revenues, Expenditures, and Reserve Levels General Fund revenues are generated from both recurring and non-recurring sources. Total General Fund revenues for Fiscal Year 2026–2027 are projected at $123 million, including the use of $3.5 million from General Fund’s reserves. Recurring revenues total $105.4 million. Non-recurring revenues total $14 million and include $2.2 million associated with the sale of City-owned property and $11.8 million from internal sources such as transfers from the Land Sale Proceeds Fund. The City’s two largest recurring revenue sources continue to be sales tax and property tax, which together account for 57% of all General Fund revenues. Sales tax revenues are projected to increase between 2% and 3% year over year, while property tax revenues are projected to increase 4%, reflecting continued stability in consumer spending, economic activity, and assessed property valuations throughout the City. General Fund expenditures similarly consist of both recurring and non-recurring costs. Total General Fund expenditures for Fiscal Year 2026–2027 are budgeted at $123 million, including recurring expenditures of $106.2 million. Non-recurring expenditures primarily include $4.3 million for major vehicle, equipment, and technology purchases; $7.7 million associated with funding for the City’s Unfunded Accrued Liability (UAL); and $2.2 million to support operations of the Tustin Temporary Emergency Shelter. Public safety continues to be the City’s top operational priority, with approximately 53% of recurring General Fund expenditures dedicated toward police and fire services. Additional expenditures support the maintenance and enhancement of City facilities, parks, streets, landscaping, and community programs throughout Tustin.
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The General Fund reserve level remains a key indicator of the City’s fiscal health and long-term stability. General Fund reserves are projected to total $22 million as of June 30, 2027, representing 21% of recurring General Fund operating expenditures. This reserve level remains above the City Council’s established reserve policy target and continues to support the City’s long-
term fiscal sustainability goals. Pension Paydown Strategy
Fiscal Year 2025–2026 marked the completion of the City’s five-year Pension Funding Plan originally implemented in 2021. As part of the long-range financial planning, the City completed a comprehensive review of its existing pension obligations and funding options going forward. A “baseline” approach to fund the annual required obligations only was recommended to and approved by the City Council. Additionally, the Council directed staff to conduct regular updates of the City’s pension obligation status. Under the “baseline” funding strategy, the City is projected to transition payments for unfunded pension liabilities to the City’s PARS Pension Trust in 2031, thereby relieving General Fund of its pension obligations, assuming all actuarial assumptions and investment return expectations continue to be met. This approach balances continued progress toward reducing long- term pension liabilities while preserving operational flexibility and reserve stability. Capital Improvement Program The proposed Fiscal Year 2026–2027 Capital Improvement Program totals $68 million and includes funding for 33 active capital projects throughout the City. The CIP continues to prioritize strategic infrastructure investment and long-term asset preservation with major focus areas including City facilities, parks, streets and roadway improvements, traffic mitigation measures, water infrastructure, storm drain facilities, and continued investment within the Tustin Legacy area. The CIP reflects the City’s ongoing commitment to maintaining and improving critical public infrastructure while supporting operational efficiency, community growth, and quality of life enhancements for residents and businesses throughout Tustin. Conclusion The Fiscal Year 2026–2027 Budget reflects the City Council’s continued commitment to fiscal sustainability, strategic infrastructure investment, public safety, and responsible long-term financial planning. The proposed budget advances the objectives of the City Council’s 10-Year Fiscal Sustainability Strategy by aligning recurring revenues and expenditures, maintaining strong reserve levels, investing in critical infrastructure, and continuing progress toward addressing long-term pension obligations. I would like to thank the City Council for their continued leadership and support and recognize City staff for their hard work and dedication in developing a fiscally responsible budget that continues to prioritize the needs of the Tustin community.
Respectfully submitted, Aldo E. Schindler City Manager
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Tustin’s story is one of transformation, resilience, and community pride. Nestled in the heart of Orange County at the crossroads of Interstate 5 and State Route 55, the City has grown from its agricultural beginnings into one of the region’s most vibrant and desirable communities. Located approximately forty miles southeast of Los Angeles and eighty miles north of San Diego, Tustin’s central location, strong neighborhoods, thriving business environment, and commitment to quality of life continue to make it a place where residents and businesses alike choose to put down roots. Long before the modern city was established, the land that would become Tustin was home to the Gabrielino-Tongva people, the Indigenous stewards of much of present-day Orange County and Los Angeles County. The Tongva established thriving communities throughout the region and developed deep cultural traditions tied closely to the land and waterways of Southern California. Their enduring legacy remains an important part of the region’s history and identity. Tustin’s modern history began in 1868 when Columbus Tustin purchased a portion of the former Rancho Santiago de Santa Ana land grant and envisioned a community surrounded by citrus groves and fertile farmland. That vision laid the groundwork for a flourishing agricultural town supported by California’s booming citrus industry and generations of families and entrepreneurs drawn to the area’s opportunity and mild climate. Officially incorporated on September 21, 1927, Tustin steadily evolved from a rural farming community into a growing suburban city. One of the most defining chapters in the City’s history emerged during World War II with the establishment of Marine Corps Air Station Tustin in 1942. The base became internationally recognized for its two massive wooden blimp hangars, among the largest wooden structures ever constructed. For decades, the air station played a major role in military aviation and regional development while becoming one of the City’s most iconic landmarks. Today, Tustin’s history continues to shape the community’s identity. Historic Old Town Tustin remains a centerpiece of the City, where preserved architecture, locally owned businesses, community gatherings, and tree-lined streets reflect the character and charm that residents value so deeply. At the same time, the City continues to embrace thoughtful growth and modernization. One of the clearest examples of that forward-looking vision is Tustin Legacy, the approximately 1,600-acre master-planned community developed on the former Marine Corps Air Station property. What was once a military installation has been transformed into a vibrant mixed-use district featuring residential neighborhoods, parks, educational facilities, commercial development, and regional destinations such as The District at Tustin Legacy. The project reflects the City’s ongoing commitment to balancing economic opportunities, community amenities, and quality of life. Tustin’s commitment to community extends beyond development and into the everyday experiences of its residents. The City is known for its expansive network of 28 parks, numerous trails, and recreational amenities that support an active and family- oriented lifestyle and plenty of opportunities for recreation, connection, and outdoor enjoyment throughout the community. Today, Tustin is home to approximately 80,000 residents and continues to be recognized for its strong neighborhoods, diverse community, and balanced approach to growth and fiscal sustainability. The City provides a full range of municipal services including police services, water utility, public works, recreation, community development, and transportation planning, while fire protection and emergency medical services are provided through a partnership with the Orange County Fire Authority.
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The City operates under a Council-Manager form of government led by a five-member City Council. In recent years, Tustin transitioned to a district-based election system that includes a Mayor to be elected at large, reflecting the City’s continued commitment to civic engagement and local representation. As Tustin approaches its second century as an incorporated city, it continues to build upon a foundation shaped by history, innovation, and community pride. From its agricultural beginnings and military legacy to its emergence as one of Orange County’s most dynamic communities, Tustin remains focused on preserving its unique identity while planning thoughtfully for the future. The City’s story is deeply rooted in the values that continue to connect its residents and shape its direction forward. From the citrus groves and ranchlands that once defined the landscape to the innovation and investment represented by Tustin Legacy today, Tustin has consistently evolved while maintaining the sense of character and community that makes it unique.
Tustin is a vibrant Orange County community where rich history, strong neighborhoods, and thoughtful planning contribute to an exceptional quality of life. With an estimated population of 79,175 and a median age of 37.1, the City continues to reflect a diverse and well-established community. Tustin includes approximately 27,551 households, with an average household size of 2.84 persons. Nearly half of occupied housing units are owner-occupied, with a homeownership rate of 48.8 percent. The median home value is approximately $950,400, reflecting the strength of the local housing market and Tustin’s desirable location within central Orange County. The City also benefits from a strong economic base. Median household income is approximately $112,503, while per capita income is $54,989. As of April 2026, the local unemployment rate was 3.6 percent. These indicators reflect a stable community supported by access to employment opportunities throughout Orange County and the greater Southern California region. Educational attainment remains an important characteristic of the community. Approximately 65.5 percent of residents age 25 and older have earned an associate degree or higher. Public schools located within the City serve approximately 11,247 students in kindergarten through twelfth grade, reinforcing the importance of education to Tustin families and the broader community. Tustin’s identity is also shaped by its history and community character. Known as the “City of Trees,” Tustin maintains a longstanding commitment to preserving and enhancing its natural beauty. The City’s heritage includes its agricultural roots and its important role in military aviation history, most notably through the former Marine Corps Air Station Tustin.
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As the City looks ahead, it remains committed to honoring its past while embracing opportunities for the future. Through thoughtful planning, strong community partnerships, and continued investment in public services and quality of life, Tustin continues to move forward with a clear vision for generations to come.
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Austin Lumbard Mayor At-Large Term 2022-2026
Ray Schnell Mayor Pro Tem District 3 Term 2022-2026
Ryan Gallagher Council Member District 4 Term 2024-2028
Lee K. Fink Council Member District 1 Term 2024-2028
John Nielsen Council Member District 2 Term 2024-2028
The City of Tustin operates under a Council-Manager form of government designed to provide responsive leadership, professional administration, and effective delivery of municipal services. Under this structure, the elected City Council establishes the City’s vision, priorities, and policies, while the appointed City Manager oversees the day-to-day administration and implementation of Council-adopted goals, programs, and initiatives. The Tustin City Council is a five-member governing body consisting of the Mayor and four Council Members elected by district. The Mayor serves as the City’s presiding officer and represents the community at official functions and regional agencies. The Mayor Pro Tem is selected annually by the City Council from among its members and serves in the Mayor’s absence.
As a general law city, the City Council is responsible for approving the City’s biennial operating and capital improvement budget.
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Board, Commission, and Committee members are appointed by the Mayor with the approval of the City Council, All members shall serve until their respective successors are appointed and qualified.
More information for Board, Commissions, and Committees can be found at the City’s website https://www.tustinca.org/335/Boards-Commissions Audit Commission The primary duties of the Audit Commission are to provide recommendations to the City Council on matters relating to finance, investments, and audit as prescribed by the City Council from time to time. The Audit Commission is responsible for establishing guidelines related to the selection of the independent auditors pursuant to Tustin City Code section 1632. The Audit Commission typically meets with the auditors during the planning stage of the audit, and upon the conclusion of the audit. Current Commission members are:
Building Board of Appeals The Building Board of Appeals will hear appeals of determinations made by the City’s Building Official which may arise during plan check or construction inspection. Individuals experienced or trained in the interpretation of Building Codes or experienced in construction are highly desirable. Current Board members are:
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Planning Commission The Planning Commission serves as not only an advisory body, but as a regulatory body, having authority to make final determination in applicable circumstances. The Planning Commission was established by ordinance (Ordinance 1874 §1, 1982) and outlined in the Tustin City Code. The Planning Commission consists of five members who are residents and registered voters in Tustin. The Planning Commission’s primary responsibilities include: • Considering and making recommendations to the City Council on zoning map and zoning ordinance changes; • Considering other policies and programs affecting development and land use in Tustin for final City Council action; • Preparing and making recommendations to the City Council on the City’s General Plan regarding development; • Reviewing and making recommendations to the City Council on subdivisions, on appeals on variances and use permits; and • Advising the City Council on all matters relating to historic and cultural resources, including without limitation, matters affecting the establishment of a Cultural Resource District, designation of Cultural Resources, and as a liaison between residents, property owners, and the City Council within a Cultural Resources District. Current Commission members are:
Public Art Commission The primary duties of the Public Art Commission are to advise the City Council on all public art related issues, exercise judgment that is fair and consistent with the Public Art policy, and uphold the reputation and integrity of the Public Art Program and the City of Tustin. The Commission’s responsibilities include: • Advising on planning and policy matters relating to the display of public art; • Evaluating artwork, including artwork proposed to be gifted to the City; • Planning and commissioning public art; • Receiving community input concerning public art; • Seeking grant funding, donors and/or sponsors for projects and building partnerships and collaborations with community groups; and • Collaboration with the Community Services Commission.
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Current Commission members are:
Community Services Commission The Community Services Commission (formerly the Parks and Recreation Commission) advises the City Council on matters pertaining to the activities of the Parks and Recreation Department, excluding daily administrative operations. The Community Services Commission consists of five members who are residents and registered voters of the City during all times they hold office. The Commission’s responsibilities include: • Oversight of Senior Advisory Board and Special Events Committees; • Advising on parks, park design and development, recreation, and community services; • Advising on planning relating to the construction and renovation of capital facilities; • Receiving community input concerning parks, open space, and recreation activities; and • Collaboration with the Public Art Commission. Current Commission members are:
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BUDGET PROCESS
Accounting Method Tustin utilizes accounting practices designed to provide transparency, fiscal accountability, and meaningful financial information to decision-makers, residents, and stakeholders. Governmental funds are maintained using the modified accrual basis of accounting, which is the standard methodology prescribed for local governments and emphasizes the measurement of current financial resources and obligations. Under the modified accrual basis, revenues are recognized when they are both measurable and available to finance current operations. Revenues are considered measurable when the amount can be reasonably determined and available when collection is expected within the current fiscal period or soon enough thereafter to pay current liabilities. Expenditures are generally recognized in the period in which the related liability is incurred and goods or services are received. Certain long-term obligations, including debt principal and interest, claims and judgments, and compensated absences, are recognized when payment becomes due. This approach provides a practical and reliable measurement of the City’s near-term financial position and budgetary compliance. To further enhance financial accountability and stewardship, the City utilizes fund accounting to segregate resources based on their intended purpose and legal restrictions. Individual funds are maintained for governmental operations, capital improvement projects, debt service, and other designated activities. In accordance with governmental accounting standards, fund balances are classified as non-spendable, restricted, committed, assigned, or unassigned based on the nature and level of constraint placed on the use of financial resources.
The modified accrual basis supports effective financial management by providing City leadership with timely and accurate information for budget development, operational oversight, long-term planning, and fiscal sustainability initiatives.
The City’s Water Enterprise Fund is accounted for using the full accrual basis of accounting, which is consistent with accounting practices utilized by private-sector enterprises. Under this method, revenues and expenses are recognized when earned or incurred, regardless of the timing of related cash flows. The full accrual basis provides a comprehensive view of the financial condition and operational performance of the utility, including long-term assets, liabilities, capital investments, and infrastructure obligations.
Together, these accounting methodologies support the City’s commitment to sound financial management, transparent reporting, and responsible stewardship of public resources.
Budget Method Tustin utilizes a comprehensive budget development process designed to support fiscal sustainability, operational accountability, and long-term strategic planning. The biennial budget serves as the City’s primary financial planning document and provides a framework for aligning available resources with community priorities, service delivery objectives, and City Council policy direction. The budget process is conducted in accordance with California law and incorporates industry best practices intended to promote transparency, public participation, and responsible stewardship of public funds. Development of the budget is a collaborative effort involving the City Council, City management, operating departments, and the community.
The City’s budget development process generally includes the following components:
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• Budget Calendar and Planning Framework - Budget preparation is guided by City Council strategic plan, operational needs, financial policies, revenue projections, and long-term fiscal sustainability objectives. The budget process begins with the establishment of a comprehensive budget calendar outlining major milestones, deadlines, departmental review periods, and City Council budget workshop. This framework ensures timely coordination and structured evaluation throughout the budget cycle. • Departmental Budget Development - Departments evaluate existing service levels, operational efficiencies, staffing needs, and capital improvement priorities as part of the development process. Departments prepare detailed operating and capital budget requests supported by workload analysis, performance considerations, and service delivery objectives. Revenue and expenditure projections are evaluated to ensure ongoing alignment with available financial resources and organizational priorities. • Financial Review and Executive Evaluation - Proposed departmental budgets are reviewed by the Finance Department and City management to evaluate fiscal impacts, operational requirements, and consistency with Citywide goals and financial policies. This review process includes analysis of revenues, expenditures, reserves, capital needs, and long-term obligations. • Public Engagement and Budget Workshop - To provide transparency into the budget development process and encourage community participation, the City communicates budget information through various channels such as a budget video posted to social media, a budget-in-brief document that condenses complex information into an easy- to-understand format, and public budget workshop in which the community is invited to attend and provide feedback on City programs, services, and priorities. Budget Adoption Following public review and City Council deliberation, the biennial operating and capital improvement budget is formally adopted by the City Council. The adopted budget serves as the City’s official financial plan and authorizes the appropriation of resources for municipal operations, services, and capital projects. Ongoing Monitoring and Fiscal Oversight Throughout the fiscal year, the City continuously monitors revenues, expenditures, staffing levels, and operational performance to ensure compliance with the adopted budget and financial policies. Budget to actual comparison and financial forecasting are reviewed by the City Manager and City Council on a quarterly basis. Budget adjustments, financial forecasts, and periodic reporting provide accountability and support informed decision-making by the City Council and management.
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A fund is a grouping of related accounts that is used to maintain control over resources that have been separated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds The City maintains various individual governmental funds which are further organized into three types by respective spending purposes and funding restrictions (general fund, special revenue funds, and capital project funds). Description of each fund can be found in the “Governmental Funds (Detail)” section below.
Proprietary Funds The City maintains one type of proprietary (Enterprise) fund, which is used to
report water utility operation in financial statements.
Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties other than the City of Tustin. The City has three fiduciary funds. The first fiduciary fund is the Successor Agency, which was created on February 1, 2012 with the dissolution of the Tustin Community Redevelopment Agency (RDA). The Successor Agency’s primary responsibility is to wind down the affairs of the former Tustin Community Redevelopment Agency, including paying off the former RDA’s debts. The second fiduciary fund is the Other Post-Employment Benefit (OPEB) Trust Fund, which is used to account for the assets in the Section 115 trust with the Public Agency Retirement Services (PARS) for pre-funding the City’s OPEB obligations. The City Council approved the establishment of the trust in April 2017, and the City has made several deposits to the trust since its inception.
The third fiduciary fund is a custodial fund that is used to account for the assets of Community Facilities Districts 04-1, 06-1, 07-1, and 2014-1.
Governmental Funds(Detail) •
The General Fund is the primary operating fund of the City and is used to account for all revenues and expenditures that are not required to be accounted for in another fund. • Capital Projects Funds are used to account for financial resources including grants, to be used for the acquisition or construction of major capital facilities. • Gas Tax Fund accounts for revenues and expenditures apportioned under the Street and Highways Code of the State of California. Expenditures may be made for any street-related purpose allowable under the Code. • Community Development Block Grant Fund is used to account for funds received from U.S. Department of Housing and Urban Development to meet low-income housing and community development needs. • Asset Forfeiture Fund is used to account for monies received from the Federal government that are used for special law enforcement purchases.
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• Air Quality Fund is used to account for funds received from the South Coast Air Quality Management District to be used for reducing pollution. • Supplemental Law Enforcement Fund was established under Government Code Section 30061 enacted by AB3229, Chapter 134, of the 1996 Statues and is an appropriation from the State Budget for the “Citizen Option for Public Safety Program”. This fund can only be used for police front line municipal activities that provide police services to the City in prevention of drug abuse, crime prevention and community awareness programs. • Special Tax B Fund is used to account for Special Tax B service tax levied on taxable property in the Tustin Legacy to pay for public services and administrative expenses. • Road Maintenance and Rehabilitation Fund is used to account for revenues and expenditures apportioned under the Road Repair and Accountability Act of 2017 (SB1) for road maintenance and rehabilitation. • Voluntary Workforce Housing Incentive Fund is used to account for in-lieu fees collected and the associated expenditures that support development of City affordable housing programs and projects under the City of Tustin Ordinance 1491. • Solid Waste Fund is used to account for solid waste program revenues and expenditures. • Park Acquisition and Development Fund is used to account for fees received from developers and park activities as well as federal and state grants to develop the City’s park system. • Measure M Fund is used to account for monies received from the Orange County Transportation Authority for street projects and transportation activities. • Cable PEG Fees Fund is used to account for monies received from cable franchise PEG revenues for capital equipment and improvements supporting public, educational, and governmental access programming. • Landscape Lighting Fund is used to account for monies received from assessment revenues that are restricted for landscaping and street-lighting within the district. • The Housing Authority Fund is used to account for revenues and associated expenditures to be used for increasing or improving low-and-moderate income housing.
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The City of Tustin utilizes a biennial budget process, with appropriations adopted annually for each fiscal year beginning July 1 and ending June 30. This approach provides a longer-term planning framework while allowing the City to remain responsive to changing economic conditions, operational needs, and community priorities. This budget document serves as a comprehensive financial plan, outlining how resources are allocated to support core services, infrastructure investment, and community programs. It reflects the City’s ongoing commitment to fiscal responsibility, transparency, and strategic resource management. Fiscal Sustainability Strategy FY 2026–2027 represents the second year of the City Council’s 10-year Fiscal Sustainability Strategy, which was adopted in accordance with best practices identified by the Government Finance Officers Association for establishing a sustainable, structurally balanced budget. The strategy is designed to align recurring operating revenues with recurring operating expenses in a sustainable manner over the next 10 years.
Key Objectives of the Fiscal Sustainability Strategy To achieve long-term fiscal sustainability, the City has established the following key objectives:
• Increasing General Fund recurring revenues by advancing development of City-owned properties, generating ongoing revenues such as sales tax and property taxes • Decreasing General Fund recurring expenses by continuing to explore pension paydown strategies and other operational efficiencies • Reducing the use of one-time revenues to fund the following: o Maintaining General Fund reserves (Council Policy sets reserves at 15% to 20% of annual General Fund operating expenditure) o Paying down unfunded pension accrued liability o Ongoing operations and programs Community Engagement Public participation remains an important component of the budget process. The City provides opportunities for community input through public budget workshop, budget video, and budget-in-brief publication. The various outreach channels help to ensure that the budget reflects resident priorities and maintains transparency in decision-making. Budget Development Timeline
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As the City advances through the 2026–2027 fiscal year, it continues implementation of the adopted biennial budget while refining projections based on updated economic conditions. The budget development process spans approximately six to seven months, beginning with departmental planning early in
the calendar year and concluding with City Council adoption in June. Departments play a central role in this process and are responsible for: • Reviewing baseline revenues and expenditures • Evaluating service demands and operational priorities • Identifying staffing, program, and capital needs • Submitting recommended budget adjustments
This collaborative approach ensures that the budget remains aligned with organizational priorities and responsive to changing conditions. While formal preparation occurs from January through June, budget monitoring and adjustments take place throughout the fiscal year. Operating Budget and Administration The General Fund is the City’s primary operating fund, supporting day-to-day municipal services. Revenues are largely derived from property and sales taxes, which are sensitive to broader economic conditions.
The City budgets governmental funds using the modified accrual basis of accounting. Under this method: Revenues are recognized when measurable and available and expenditures are recognized when liabilities are incurred. Enterprise funds, including the Water Fund, are budgeted using the full accrual method, where revenues are recorded when earned and expenses when incurred. The City’s budgeting methodology aligns with its accounting practices, ensuring consistency and transparency. Departments begin with a baseline budget, typically the prior year’s adopted or amended budget, and propose adjustments to reflect updated service levels and operational needs.
Administration *
Sales Tax
Community Development
Property Tax
Fire Authority
Other Taxes
Parks & Recreation
Fees, Charges, and Earnings
Police Department
Public Works
* Administration includes the City Manager’s Office, City Attorney, City Council, Finance, and Human Resources.
Capital Improvement Program The Capital Improvement Program (CIP) outlines planned infrastructure investments over a rolling seven-year period, with current-year appropriations included in the annual budget. Due to the scale and complexity of capital projects, many span multiple fiscal years, with funding structured to align with project phases. CIP investments include: • Transportation and utility infrastructure • Public facilities and building improvements • Parks and recreational amenities • Technology systems and major equipment
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The CIP supports long-term planning by prioritizing investments that enhance service delivery, maintain public assets, and accommodate future growth. Special Revenue Fund Budgeting In addition to the General Fund, the City maintains Special Revenue Funds to account for revenues and expenditures dedicated to specific purposes. These funds may be legally restricted or established to enhance financial tracking and reporting. Special Revenue Fund budgets are developed alongside the General Fund and adopted by the City Council as part of the annual budget process. All activity is recorded within the respective funds, with interfund transfers clearly identified to ensure transparency. Financial Reporting & Budget Monitoring
All departments are committed to timely and transparent updates on the City’s financial performance in relation to the adopted and amended budget. Ongoing monitoring and reporting are essential for identifying trends, potential risks, and emerging opportunities that support sound financial stewardship. The budget monitoring process involves a structured, multi-layered approach and multiple touchpoints throughout the year: • Real-Time Department Dashboards – Each
department has access to real-time budget-to-actual reports for both operating and capital accounts. Department heads and key staff receive training on how to effectively use these new tools. • Quarterly Reviews – Finance performs internal quarterly reviews to evaluate trends in major revenue sources (e.g., sales tax, property tax) and assess expenditure levels across departments. Any unexpected deviations are analyzed. • Mid-Year Budget Review – A cornerstone of the City’s financial oversight, this public review takes place during the third quarter of the fiscal year and covers all City funds from July 1 through December 31. Working collaboratively with departments, the Finance Department conducts a comprehensive analysis of: o Actual revenues and expenditures o Capital Improvement Project (CIP) progress and funding
o Departmental projections through fiscal year-end o Identified variances and potential cost pressures
Based on these findings, the Finance Department prepares proposed budget amendments, which are reviewed by the City Manager and submitted to the City Council for consideration and adoption during the Mid-Year Budget Review presentation. • Year-End Review – As the fiscal year coming to a close, the Finance Department compares final budget to actual financial performance, the results of which are used to refine financial forecasting assumptions and update the long- range model to better support the Council in overall policy decisions. • Long-Range Financial Forecast – As part of the regular budget review, the Finance Department also updates the financial forecast to assist the City Manager and City Council in making informed decisions. This continuous cycle of review, analysis, and adjustment ensures that the City’s resources are aligned with operational goals and fiscal priorities.
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Revenue Management The City is committed to maintaining a diversified and stable revenue base that can withstand economic fluctuations and support the long-term delivery of public services. In a dynamic and evolving economic environment, it is critical that future development is approached strategically—with a focus not only on growth, but on sustainable revenue generation that aligns with the City’s operational and infrastructure needs. To ensure accuracy and accountability in forecasting, the annual revenue budget is developed using a multi-faceted analysis process, drawing on a wide range of data sources and analytical tools. These include: • Historical revenue trends to identify long-term patterns and seasonality. • Current-year actuals compared against prior-year baselines for real-time insights. • Economic indicators, such as inflation, interest rates, labor market data, and consumer spending, which influence key revenues like sales and transient occupancy taxes. • Development forecasts, including building permits, housing pipeline data, and anticipated commercial growth. • Input from departments on program-specific revenues such as user fees, licenses, and charges for service. • Third-party data platforms (e.g., HdL for sales and property tax analysis) to provide detailed breakdowns, trends, and comparative benchmarking against peer cities. • Real-time dashboards and financial reporting tools to continuously monitor revenues and flag variances early. This data-driven approach ensures that revenue projections are not only grounded in historical evidence, but also responsive to real-time conditions and future trends. It allows City leadership to make informed decisions that balance caution with opportunity—preserving fiscal health while positioning the City for growth. Expenditure Management The City of Tustin is committed to maintaining a responsible level of expenditures that ensures the ongoing well-being and safety of the community. Expenditure decisions are derived from a framework of Council priorities, fiscal discipline, and data- informed analysis, with an emphasis on aligning operational spending with long-term sustainability. To manage expenses effectively, the City leverages a variety of tools and internal controls: Budget Allocation & Staffing Controls • Expenditures are budgeted based on the Council-approved Position Control List, ensuring that labor costs—including salaries, benefits, and any contractually obligated increases—are accurately assigned to the appropriate fund, department, and division. • Personnel budgeting software supports precision in forecasting full-time equivalent (FTE) costs and analyzing vacancy savings. • Overtime usage is closely managed. It must be pre-authorized by a department head or designee, unless inherently pre-approved due to operational requirements. Departments are expected to explore alternative staffing strategies before relying on overtime. Year-End Spending & Appropriations • Unspent budgeted expenditures are not automatically carried over into the next fiscal year. If an expenditure has not been incurred by year-end but the purpose remains valid, it may be reauthorized through the continuing appropriations process, subject to Council approval. • This same process applies to multi-year CIP projects that are in progress. These projects are carried forward using the prior year’s funding authority, ensuring financial continuity for construction and infrastructure investments.
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