CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Receive the 2026 Mid-Year Financial Report
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
The Finance Department monitors revenues and expenditures throughout the year to identify trends that impact the annual budget and Capital Improvement Program (CIP). Regular financial reporting informs the City Council and the public on important issues related to the City's finances, including discussions around short- and long-term financial strategies.
This mid-year report focuses on budget performance through the first six months of 2026 and will discuss the preparation of the 2027 annual budget.
The PowerPoint presentation will be made available along with the Agenda Q&A posted prior to the meeting.
DISCUSSION:
As of June 30, budget performance is largely consistent with expectations across most funds. Due to the budget's size and complexity, revenues and expenditures are summarized according to three major fund categories: Maintenance and Operating, Capital and Debt Service, and Special Funds.
Staff measures year-to-date revenues and expenditures against three milestones: the full-year budget, a monthly projection based on three years of historical data, and the prior year’s year-to-date actuals. These three measures allow for the budget to be analyzed against a single point in time (last year) and current expectations.
Revenues
Revenue through June across all funds totaled $280.62 million. This is a 3.9% increase over the same period in 2025, and 0.8% lower than the current year projection of $282.76 million:
• Revenue in the General Fund is 1.5% above projections and 3.3% higher than 2025.
• Electric Utility Fund revenue is 0.7% higher than projected and 4.5% higher than last year.
• Revenues in the Water Utilities Fund are 0.8% higher than projected and 12.1% higher than 2025.
Compared to the prior year, most major revenue streams remain consistent and in line with expectations. Certain revenues have increased, such as Sales Tax, Food & Beverage Tax, Home Rule Sales Tax, and Wastewater Charges. However, some revenues have declined compared with the prior year, including Local Use Tax and Hotel/Motel Tax. The following section will discuss these variances.
Revenue by Fund Category ($ in millions)
|
|
2026 Budget |
YTD Actual |
% of Total Budget |
YTD Projection |
% of YTD Projection |
2025 YTD Actual |
Variance to 2025 (%) |
|
Maintenance & Operating |
$490.04 |
$233.66 |
42.6% |
$231.40 |
101.0% |
$219.74 |
6.3% |
|
Capital & Debt Service |
$67.35 |
$24.37 |
36.2% |
$29.76 |
81.9% |
$29.13 |
-16.3% |
|
Special Funds |
$41.51 |
$22.59 |
54.4% |
$21.60 |
104.6% |
$21.18 |
7.0% |
Below is a summary of major revenues and their performance against the current year-to-date projection and the same period last year.
Revenues ($ in millions)
|
|
2026 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2025 YTD (%) |
|
State Shared Revenues |
|
Sales Tax |
$52.44 |
$26.85 |
6.3% |
1.1% |
|
Income Tax |
$26.95 |
$15.72 |
4.6% |
2.6% |
|
Motor Fuel Tax |
$7.27 |
$3.86 |
6.7% |
2.6% |
|
Local Use Tax |
$0.56 |
$0.65 |
99.4% |
-59.4% |
|
Local Tax Revenues |
|
Hotel/Motel Tax |
$4.00 |
$1.65 |
-2.7% |
-6.2% |
|
Food & Beverage Tax |
$8.02 |
$3.96 |
-0.2% |
8.5% |
|
Real Estate Transfer Tax |
$5.00 |
$2.32 |
3.1% |
1.5% |
|
Home Rule Sales Tax |
$25.06 |
$12.56 |
4.8% |
12.7% |
|
Local Gas Tax |
$2.40 |
$1.21 |
0.6% |
2.5% |
|
Grocery Tax |
$6.50 |
$1.63 |
-24.6% |
- |
|
Service Charges & Other Fees |
|
Electric Charges |
$162.56 |
$78.27 |
2.2% |
7.7% |
|
Water Charges |
$61.88 |
$26.10 |
-4.2% |
5.1% |
|
Wastewater Charges |
$35.26 |
$18.97 |
10.2% |
23.2% |
|
Building Permits/Fees |
$1.61 |
$1.11 |
56.6% |
-4.5% |
|
Commuter Parking Fees |
$1.20 |
$0.66 |
10.4% |
4.2% |
Revenues Trending Higher Compared to Budget
• Local Use Tax is 99.4% higher than projections, but decreased year-over-year (YOY) by 59.4%, or $0.96M, due to further changes to state law as of 2026, which requires certain out-of-state retailers with a connection or presence in Illinois to remit sales tax rather than use tax. Additionally, trends in online sales tax are difficult to estimate based on the information available from the Illinois Department of Revenue.
• Home Rule Sales Tax is higher than projected by 4.8% and increased YOY by 12.7%, or $1.42M, mainly due to the change in use tax remittance mentioned in the previous section. Online sales tax in 2025 was almost double that of 2024.
• The City’s Local Grocery Tax was established on January 1, 2026, following the elimination of the state’s 1% grocery sales tax. While year-to-date revenues are nearly 25% below projections, monthly remittances are increasing by approximately 8% each month, signaling improved tax reporting compliance by local businesses.
• Electric Charges are 2.2% over projections and increased YOY by 7.7%, or $5.63M, due to approved rate increases and an increased cost of electricity, resulting in positive PPA returns through June.
• Wastewater Charges are 10.2% over projections and increased by 23.2%, or $3.57M, primarily due to an amendment to the intergovernmental agreement between Naperville and Warrenville. The agreement was updated to reflect significant upcoming investments at Springbrook, resulting in new payments totaling $2.5M.
Revenues Trending Lower Compared to Budget
• Food & Beverage Tax is lower than projected by 0.2%, but increased YOY by 8.5%, or $0.31M, as new developments around the City, including restaurant openings in Block 59 and downtown, are fueling positive growth.
• Hotel/Motel Tax is 2.7% below projections and decreased YOY by 6.2%, or $0.11M, mainly due to 2025 revenue being higher than normal because of a larger volume of delinquent payments from the prior year.
• Water Charges fell 4.2% below projections but increased YOY by 5.1%, or $1.26M, reflecting approved rate increases as well as fluctuations in consumption. The variance is expected to narrow through the summer, when water usage typically increases.
Expenditures
Expenditures across all funds total $254.65 million. Total expenditures are 12.2% below current projections and 2.1% higher than this time last year:
• Spending in the General Fund is 1.7% below projections and 8.2% higher than in 2025.
• Electric Utility Fund expenditures are 1.5% higher than projected but 1.5% lower than last year.
• Expenditures in the Water Utilities Fund are lower than projected by 14.5% but 27.6% higher than in 2025.
The following section will discuss these variances.
Expenditures by Fund Category
|
|
2026 Budget |
YTD Actual |
% of Total Budget |
YTD Projection |
% of YTD Projection |
2025 YTD Actual |
Variance to 2025 |
|
Maintenance & Operating |
$559.80 |
$226.13 |
40.4% |
$238.43 |
94.8% |
$211.65 |
6.8% |
|
Capital & Debt Service |
$79.99 |
$11.45 |
14.3% |
$32.36 |
35.4% |
$21.42 |
-46.5% |
|
Special Funds |
$45.56 |
$17.07 |
37.5% |
$19.22 |
88.8% |
$16.44 |
3.8% |
Below is a summary of major expenditures and their performance against the current year-to-date projection and the same period last year.
Expenditures ($ in millions)
|
|
2026 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2025 YTD (%) |
|
Personnel Costs |
|
Regular Pay |
$126.81 |
$61.59 |
-2.9% |
9.0% |
|
Overtime Pay |
$12.49 |
$6.28 |
10.3% |
15.5% |
|
Employer Contributions |
$57.71 |
$28.44 |
-0.3% |
11.1% |
|
Insurance Benefits |
$33.15 |
$10.33 |
-25.9% |
-16.8% |
|
Purchased Services |
|
Operational Services |
$13.17 |
$3.42 |
-27.1% |
-20.3% |
|
Architect & Engineering Services |
$9.95 |
$3.36 |
-1.8% |
46.7% |
|
Software & Hardware Maintenance |
$9.93 |
$5.39 |
-1.4% |
12.9% |
|
Purchased Items |
|
Operating Supplies |
$7.35 |
$6.93 |
95.0% |
10.5% |
|
Purchased Electric |
$112.40 |
$52.43 |
3.2% |
1.9% |
|
Purchased Water |
$32.09 |
$12.62 |
-6.3% |
3.2% |
|
Capital Outlay |
|
Infrastructure |
$152.97 |
$29.37 |
-36.8% |
21.4% |
|
Vehicles & Equipment |
$8.34 |
$1.53 |
-86.1% |
-10.8% |
|
Building Improvements |
$8.66 |
$1.21 |
-60.0% |
-8.0% |
|
Technology |
$8.32 |
$1.85 |
-36.5% |
-81.4% |
|
Land |
$1.3 |
- |
- |
- |
Expenditures Trending Lower Compared to Budget
• Regular Pay is 2.9% below projections, but increased YOY by 9.0%, or $5.1M, primarily due to budgeted wage increases across the City.
• Insurance Benefits and claims for healthcare and other related coverages are 25.9% below projections and decreased YOY by 16.8%, or $2.08M, reflective of lowered claim activity by employees through the period.
• Operational Services are 27.1% below projections and decreased YOY by 20.3%, or $0.87M, mainly attributable to a decreased volume of contract tree trimming in the Electric Utility and Public Works, along with traffic signal maintenance in Transportation, Engineering and Development
• Architect & Engineering Services are 1.8% lower than projections, but increased YOY by 46.7%, or $1.07M, due to continued design work on capital projects in the Transportation, Engineering and Development Department. Major projects include South 40 Traffic Improvements, the North Aurora Road Underpass, and 248th Avenue.
• Infrastructure is 36.8% lower than projections, but has increased YOY by 21.4%, or $5.18M, mainly attributable to the Water Utility making significant progress on several Springbrook projects, in particular the South Plant Capacity Upgrades and Improvements. Other projects of note include water main replacements in the Saybrook and Ogden/Washington areas.
• Technology is 36.5% below projections and decreased YOY by 81.4%, or $8.10M, due to substantial completion of work on the Land Mobile Radio Network project following significant capital investment in the prior year.
Expenditures Trending Higher Compared to Budget
• Overtime Pay is 10.3% above projections and increased YOY by 15.5%, or $0.84M, related to retirements and open positions in the Electric Utility and the Fire Department, along with minimum staffing requirements in the Fire Department.
General Fund Financial Position
Through June, General Fund revenues total $88.41M, which is 1.5%, or $1.29M, above projections and 3.3%, or $2.86M, higher YOY. This increase is attributed to sales tax and income tax revenues outperforming expectations.
While staff has generally spoken about financial flexibility as a way to support ongoing services, there is another side to this concept: having the ability to put dollars towards unanticipated events or enhancing services when the need arises. Concerns over moderating revenue that were expressed during last year’s budget process have not materialized, and revenues remain capable of supporting operations without any significant concerns.
This strong revenue performance indicates that the Fund has the capacity to support some unanticipated expenditures. Those include response and clean-up costs associated with June’s severe thunderstorms and addressing several emerging staffing needs in the Transportation, Engineering and Development Business Group. An out-of-cycle staffing proposal will be included on the August 18 City Council agenda for discussion.
2027 Budget Development
The proposed 2027 Annual Budget and Capital Improvement Program will be available in mid-October. The information included in the proposed budget will be presented to the City Council and the community through a series of workshops tentatively scheduled for Monday, Sept. 21, Tuesday, Oct. 27, and Tuesday, Nov. 10. City Council input is essential throughout the budget process. City Council members are encouraged to engage staff early in the budget process on topics of interest for the 2027 budget.
Summary
At the midpoint of the year, revenues and expenditures across most major operating funds are trending in line with budget projections.
FISCAL IMPACT:
N/A