FROM: Robert Thompson, General Manager
Originator: Wally Ritchie, Director of Finance
SUBJECT:
title
FY 2025-26 BUDGET AMENDMENT
end
GENERAL MANAGER'S RECOMMENDATION
recommendation
RECOMMENDATION: Recommend to the Board of Directors to:
Approve a budget increase of $27,900,000 for FY 2025-26, for a total budget as follows:
|
|
$ |
FY 2025-26 |
|
Net Operating |
$ |
260,365,399 |
|
Self-Insurance |
$ |
6,745,565 |
|
Net Capital Improvement Program |
$ |
345,859,620 |
|
Debt/COP Service |
$ |
60,431,104 |
|
Intra-District Joint Equity Purchase/Sale (1) |
$ |
3,500,000 |
|
Total |
$ |
676,901,688 |
(1) Cash to/from Revenue Area 14 (RA14) in exchange for capital assets to/from Consolidated Revenue Area 15 (RA15)
body
BACKGROUND
In June 2025, the Board of Directors approved the Operating, Capital, Debt Service, and Self-Insurance Budgets for FY 2025-26. An accelerated execution rate for the Capital Improvement Program (CIP) and planned repairs and maintenance activities have driven the need to request a FY 2025-26 budget increase.
In April 2026, the Board of Directors approved a FY 2025-26 budget increase of $68,000,000 for a total budget of $649,001,688. The budget increase for the Capital Improvement Program (CIP) was intended to be calculated based on year-to-date actuals from July 2025 through February 2026 and projected cash flow from March 2026 through June 2026. At the time the calculations were initially developed, the actuals for February 2026 were not available, so costs through January 2026 were initially included in the calculation spreadsheet. After the projected cash flow was complete the CIP budget increase was finalized. The actuals for February 2026 associated with the Engineering CIP were inadvertently left out, creating a budgeting error of $16,750,868.
RELEVANT STANDARDS
• Ensure the public’s money is wisely spent
• Produce appropriate financial reporting - annual financial report & audit letter and Ops & CIP budgets every two years, with annual update
PROBLEM
The budget authority for FY2025-26 is not adequate to cover the actual expenses for the fiscal year.
PROPOSED SOLUTION
Approve the proposed budget increase for FY 2025-26.
TIMING CONCERNS
The budget increase needs to be approved prior to finalizing the audit for FY 2025-26.
RAMIFICATIONS OF NOT TAKING ACTION
OC San will not have a budget approved at sufficient levels to accommodate the expenses incurred in FY 2025-26.
PRIOR COMMITTEE/BOARD ACTIONS
April 2026 - Approved a budget increase of $68,000,000 for FY 2025-26, for a total budget as follows:
|
|
|
FY 2025-26 |
|
Net Operating |
$ |
260,365,399 |
|
Self-Insurance |
$ |
6,745,565 |
|
Net Capital Improvement Program |
$ |
317,959,620 |
|
Debt/COP Service |
$ |
60,431,104 |
|
Intra-District Joint Equity Purchase/Sale (1) |
$ |
3,500,000 |
|
Total |
$ |
649,001,688 |
(1) Cash to/from Revenue Area 14 (RA14) in exchange for capital assets to/from Consolidated Revenue Area 15 (RA15)
June 2025 - Approved the proposed Operating, Capital, Debt Service, and Self-Insurance Budgets for FY 2025-26 as follows:
|
|
|
FY 2025-26 |
|
Net Operating |
$ |
246,365,399 |
|
Self-Insurance |
$ |
6,745,565 |
|
Net Capital Improvement Program |
$ |
254,276,633 |
|
Debt/COP Service |
$ |
60,431,104 |
|
Intra-District Joint Equity Purchase/Sale (1) |
$ |
3,500,000 |
|
Other Requirements |
$ |
10,000,000 |
|
Total |
$ |
581,318,701 |
(1) Cash to/from Revenue Area 14 (RA14) in exchange for capital assets to/from Consolidated Revenue Area 15 (RA15)
ADDITIONAL INFORMATION
The table below shows the approved budget and estimated actuals for FY 2025-26 (in millions).
|
|
Approved Budget |
Estimated Actuals |
Variance |
Performance Percentage |
|
Capital |
$318 |
$346 |
$28 |
109% |
|
Operating |
$260 |
$256 |
$(4) |
99% |
|
Debt Service |
$60 |
$60 |
$0 |
100% |
|
Other |
$11 |
$11 |
$0 |
100% |
|
Total |
$649 |
$673 |
$24 |
|
The requested increase does not impact the long term cashflow due to the capital increase request in FY 2025-26 being predominantly driven by accelerated project spending, not project budget increases. These spending increases are offset by a reduction in spending for the relevant projects in future years.
CEQA
N/A
FINANCIAL CONSIDERATIONS
Increase in budget will not affect long-term cash flow.
ATTACHMENT
The following attachment(s) may be viewed on-line at the OC San website (www.ocsan.gov) with the complete agenda package:
• Presentation