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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