Agenda Item Wording:
title
General Fund Surplus Policy - Review current General Fund surplus policy and consider making revisions to the policy.
body
Agenda Date: 10/19/2026
Prepared by:
Renee Nagel, Finance and Technology Director,559-713-4375, Renee.Nagel@visalia.gov, Amee Swearingen, Budget Analyst, 559-713-4170, Amee.Swearingen@visalia.gov
Department Recommendation:
Review current General Fund surplus policy and provide direction for revisions to the policy to be effective for FY 25/26, for future fiscal years, or to leave as is Council’s current policy.
Summary:
On April 20, 2026, staff presented to Council the Mid Cycle Budget report which included updated projections for FY 2025/26 for the General Fund. During the presentation, staff reviewed the current surplus policy and was directed to come back to Council for further discussion on possible revisions to the surplus policy.
Background Discussion:
The current General Fund emergency reserve and surplus policy was amended in March 2024. The policy states that any revenues, in excess of actual expenditures, would first be deposited in the emergency reserve to maintain the reserve at a maximum of 30% of operating expenditures and then all remaining surplus is to be deposited into the Civic Center Reserve Fund. The surplus policy also states that all one-time monies and land sales not otherwise required to be allotted to specific funds, will be deposited in the Civic Center Fund. Staff has presented the policy to Council to make potential changes in July 2025 and April 2026. At that time Council elected to not make any changes to the policy, and directed that the policy be brought back prior to the transfer of the surplus funds for 2025-26 fiscal year.
The 2025/26 year-end surplus is projected to be anywhere from $3-5 million. The surplus number is not finalized until the audit is complete. This amount is then transferred into the designated fund.
As of June 30, 2026 the Civic Center Reserve Fund has approximately $8.1 million available in funds. This is June 30th cash minus all obligations (Civic Center Phase 2 + Phase 3 design project).
Civic Center Phase 3 Funding
On June 1, 2026 Council authorized staff to award a contract to Darden Architects to design phase 3 for $5.4 million.
The total cost of this phase is estimated to be $82 million. The funding plan for this building is cash from Civic Center Reserve Fund, plus other funds potentially, and a debt issuance. The presentation will include funding options which will help Council determine if they would like to continue with the current surplus policy or make changes.
Policy Changes
The surplus policy can be changed at any time by Council, however, if Council desires to change it for the FY 25/26 surplus, this change will need to occur before November 9th.
Going forward, staff is looking to Council to provide direction on where they would like to deposit surplus funds. In the past, these funds have played a vital role in being able to purchase and develop the Riverway Sports Park, purchasing the East Regional Park land, Recreation Park Stadium Improvements,198 Open Space, and now constructing the Civic Center Phase II which includes a Council Chamber, Public Safety Building, Evidence Building. The City has many more projects that are needed and have been deferred due to funding priorities. To name a few that have been mentioned over the years is constructing East Regional Park, Corp Yard expansion, a pool complex, purchasing land for another regional park, a Convention Center refresh and expansion, public art, a multi-purpose recreation facility, and the Civic Center Phase 3. In addition, there are road projects, such as the extension of Santa Fe, that will need to be funded and do not qualify for impact fees.
Large projects are difficult to fund in any given year due to funding availability. A majority of the surplus is typically from vacancy savings which can be set aside to fund large projects. The surplus can be set-aside for one project or split amongst multiple by having a policy that assigns a percentage of the surplus to each project.
Fiscal impact including annual maintenance and operating costs:
No fiscal impact.
Prior Council Action:
FY 2026/27 & 2027/28 Budget Adoption June 15, 2026 and FY 24/25 Mid-Year Report April 20,2026.
Alternatives:
None.
Recommended Motion (and alternative motions if expected):
recommendation
I move to continue with the current surplus policy after funding the emergency reserves.
Or
I move to approve surplus policy as revised for FY 25/26 and future (Council to insert priorities and percentages).
Or
I move to approve no changes to the surplus policy for FY 25/26 and change future surpluses (Council to insert priorities and percentages.)
Environmental Assessment Status:
N/A
California Environmental Quality Act (CEQA) Review:
N/A
Deadline for Action: 10/31/2026
Attachments:
Presentation
Strategic Goal: Indicates which City Strategic Goal(s) this item supports. Select all that apply.
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