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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