Riverside officials said the city's finances remain stable despite continued economic uncertainty as the City Council unanimously approved the third-quarter financial update and a series of budget adjustments Tuesday.
Budget and Revenue Manager Peter Kakos told council members the city "continues to maintain a strong financial position with record level reserves," while cautioning that geopolitical tensions, evolving federal policies and the possibility that expenditures could continue to outpace ongoing revenue growth remain risks to the city's financial outlook.
The general fund has approximately $76.4 million in policy reserves, meeting the city's 20 percent reserve policy, along with $152.1 million in other reserves designated for specific purposes, for a total of about $228 million in general fund reserves, Kakos said.
Measure Z is projected to end the fiscal year with approximately $28.86 million in fund balance, including its $5 million policy reserve, although that balance is expected to decline over the next several years.
Staff recommended a $701,234 increase to both general fund revenues and expenditures to account for an end-of-year adjustment to the Fire Mutual Aid program. Because the revenue increase is offset by matching expenditures, the adjustment keeps the general fund budget balanced, according to the report.
No budget adjustments were recommended for Measure Z.
As of the third quarter, general fund revenues were at 60.6 percent of budget, a pace officials said generally aligns with the previous fiscal year because much of the city's revenue is received during the second half of the year. General fund expenditures were at 71.4 percent of budget, with personnel spending tracking within expectations after overtime adjustments approved during the second quarter budget update.
The report notes that while most revenue categories are expected to meet budget projections, some development-related revenues remain soft. Cannabis tax revenue is also expected to underperform revised estimates because only one dispensary operated during the fiscal year.
The city also continues to monitor rising personnel costs, including those associated with recently negotiated labor agreements and public safety overtime, which staff said continue to place pressure on the general fund. Despite those trends, officials said expenditures are expected to remain within current budget appropriations.
The financial update also reviewed the city's enterprise funds. Staff reported electric, water, refuse and parking funds are generally performing in line with budget expectations, while the sewer fund continues to experience lower revenues because of reduced development activity and fewer new sewer connections.
In addition to receiving the financial update, the council approved several accounting and budget actions, including nearly $1.64 million in fiscal year 2025-26 revenue adjustments and supplemental appropriations, $10.96 million in interfund transfers to the General Liability Trust Fund, $110,435 in FY 2026-27 supplemental appropriations and $624,686 in interdepartmental transfers.
No members of the public spoke on the item. Council members approved the staff recommendations on a unanimous vote after a brief presentation and without council discussion.
The financial update comes after Riverside voters in June rejected a ballot measure that would have raised the Measure Z sales tax from 1 percent to 1.25 percent and eliminated its 2036 sunset clause. Measure Z revenue is projected to fall short of expenditures by $9.9 million in fiscal year 2026-27 and $12.4 million in 2027-28 compared to earlier forecasts.
Even before the June ballot measure failed, Measure Z funds were already fully committed through 2028. The Budget Engagement Commission, which is chartered to help recommend how Measure Z dollars are spent, raised concerns earlier this year that no funding was available for community nonprofits seeking support.
The interfund transfers to the General Liability Trust Fund approved Tuesday stem from deficit-reduction measures built into the city's newly adopted two-year budget. That budget, approved by the council last month, closes projected general fund deficits of $27.1 million in fiscal year 2026-27 and $34 million in 2027-28 through a combination of cost reductions and reserve draws — though Deputy Finance Director Sergio Aguilar told the council the city still holds "a strong position with record level reserves," most of which remain untouched under the plan.
The two-year budget approved last month includes some cuts to Public Works alongside a boost to public safety spending, with reductions coming from unfilled vacant positions, adjusted construction material spending and lower-than-expected crossing guard contract costs. The city's Parks Department also proposed cuts to help close the shortfall.
