General Fund Long-Term Forecast The City’s long-term financial outlook reflects directions from the City Council’s 10-Year Fiscal Sustainability Strategy, which outlines three main objectives to guide the City toward a structurally balanced budget: • Increase recurring revenues by advancing development of City-owned properties, which will generate ongoing revenues such as sales tax and property taxes ; • Decrease recurring 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; o Paydown unfunded pension accrued liability; and o On-going operations and programs. The long-range forecast is built upon prudent financial assumptions, realistic revenue estimates, and a commitment to maintaining structural balance. Under Council directions, the City has advanced a number of new developments throughout the City, including several City-owned real properties that have either reached an agreement or under negotiations. These City-owned properties include 150 E. First Street, the Mariners Church at Tustin Legacy, the Clearwater Senior Living Project at Tustin Legacy, a 52-acre site also at Tustin Legacy, and the 11-acre site at Pacific Center East. All of them, when completed, create community expansion and increase tax base. Revenue projections assume continued growth in property tax resulting from citywide new development, assessed valuation increases, and strategic economic development initiatives. Sales tax revenues are projected to grow at moderate rates consistent with regional economic expectations, while development activity within Tustin Legacy and other key investment corridors is expected to continue expanding the City's long-term revenue base. Continued investment in economic development, redevelopment of key commercial areas, and development of the City's tax base remain central components of the City's long-term financial strategy. On the expenditure front, like other cities, Tustin has experienced rising personnel costs, including negotiated salary adjustments, pension obligations, healthcare costs, and inflationary increases in the cost of providing municipal services, all of which continue to place pressure on the City's operating budget. One of the more significant personnel budgets is related to the pension unfunded accrued liability (UAL), which is projected to exceed $8 million annually in the next year. Since 2018, the City Council has taken proactive steps to address UAL by establishing and funding a Section 115 Trust to set aside dedicated funding as well as authorizing additional payments to pay down pension obligations. Additionally, the Council has directed staff to continue evaluation of funding status and paydown options, and report back on a regular basis. In June 2026, the City completed a five-year pension funding plan, and the City was projected to achieve 100 percent funding status by 2032 if all assumptions are met. CalPERS announced recently that it achieved a 14.8 percent preliminary investment return for the fiscal year ended June, 30, 2026, beating the original assumption of 6.8% by a wide margin. As a result, Tustin’s funding status is now projected to be 92 percent at June 30, 2026 when incorporating the Section 115 set-aside fund and the payoff year has been forwarded to year 2031. Other initiatives from the 10-Year Fiscal Sustainability Strategy include ongoing evaluation of operational efficiencies, disciplined expenditure management, and strategic use of one-time resources. While the forecast reflects current economic conditions and the best information available, uncertainties remain. Changes in economic activity, consumer spending, inflation, interest rates, state and federal legislation, and development timing may influence future financial performance. Accordingly, the City continuously monitors revenue trends, expenditure forecasts, and economic indicators throughout the budget cycle and adjusts financial strategies as necessary. Through conservative financial planning, disciplined fiscal management, and continued investment in sustainable revenue opportunities, the City is committed to maintaining balanced operations, preserving service levels, and ensuring long-term financial stability for the community.
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