Item 20 - Proposed Fiscal Year 2025-26 Mid-Year Budget Update

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Proposed Fiscal Year 25-26 Mid -Year Budget Update, Appropriation Requests, Workforce Changes, and Capital Improvement Program Amendment March 3, 2026 Page 7 and are being addressed through this adjustment. The request is funded by investment earnings generated by the Trust, which total approximately $756,000 as of December. The requested appropriation recognizes $130,000 in investment income and appropriates the same amount to the General Fund Non -Departmental budget. Because the costs are fully offset by investment earnings, there is no impact on the General Fund. Housekeeping Adjustments for Labor Agreements The FY 25-26 General Fund budget includes $2 million set aside in the Non - Departmental budget to cover anticipated labor agreement costs. Following City Council approval of labor agreements, staff reviewed the resulting cost impacts for the current fiscal year. Under the approved agreements, departments will absorb a portion of the labor costs using available vacancy savings. This adjustment transfers funding from the Non -Departmental budget to department budgets to ensure departments remain budgetary compliant for the current fiscal year. Allocation amounts were adjusted based on year-to-date spending and whether departments had available vacancy savings. This housekeeping adjustment has no net fiscal impact on the General Fund. Adjustments to Other Funds Cannabis Public Benefit Fund The Newhope Library Renovation project is underway. As noted in the October 7, 2025, Staff Report to City Council, contractors continue to encounter unforeseen conditions associated with the building's advanced age and original construction quality. Most recently, extensive termite damage was discovered in wooden structural beams and exterior framing. Staff expects to execute a $100,000 change order to cover the additional repairs. Staff requests an appropriation of $50,000 from the Cannabis Public Benefit Fund and will reallocate existing resources to fund the remaining $50,000. The Cannabis Public Benefit Fund balance of $6,149,131 is sufficient to support this request. Gas Tax Fund Gas tax revenues are restricted to transportation -related uses, including traffic management. Staff proposes relocating the Traffic Management Control Center from the third floor of City Hall to the Ross Annex to support more efficient coordination with traffic engineering staff. The City maintains two Gas Tax funds, one primarily for ongoing operations and the other for capital projects. As a capital project, staff requests to transfer the $342,266 project budget from the Gas Tax Operating Fund to the Gas Tax Capital Fund, also known as the Select Street Construction Fund. Air Quality Improvement Fund Human Resources (HR) is requesting a one-time use of fund balance to address an FY 25-26 budget item that was missed during the budget process. The request is to