HANFORD, Calif. — The Hanford City Council has approved a series of budget amendments totaling nearly $11.9 million as city officials work to balance the Fiscal Year 2026-27 budget while responding to changing revenue projections, infrastructure demands, and operational needs.

According to the City’s Mid-Cycle Budget Review, staff recommended an additional appropriation of approximately $1.26 million in the General Fund and $10.63 million across other city funds. City officials stated the budget remains balanced through a combination of reserve reductions, project deferrals, expenditure adjustments, and revised revenue estimates.

Sales Tax Growth Slows While Property Taxes Continue Rising

One of the report’s central themes was uncertainty surrounding sales tax revenue.

While updated forecasts improved from earlier projections, city staff noted that sales tax revenues are still expected to come in below original budget expectations. Officials cited inflation, changing consumer spending habits, declining fuel sales, lower vehicle sales, and broader economic uncertainty as contributing factors.

Property tax revenues, however, continue to provide stability for the city’s finances. Recent annexations and residential development have expanded Hanford’s tax base, helping offset weaker sales tax performance. Staff noted that property tax revenues increased significantly due to annexed county properties and hundreds of new housing units being added to the city’s tax rolls.

Measure H Revenues Fall Below Expectations

The report also acknowledges that Measure H revenues remain below original budget projections, despite improvements since earlier forecasts.

City staff stated that Measure H is still a relatively new revenue source and that projections are expected to become more reliable as additional years of collection data become available. However, because projected revenues remain lower than anticipated, adjustments were recommended to maintain fiscal stability.

Street Rehabilitation Funding Deferred

One of the largest budget changes involves Measure H street funding.

To address lower-than-anticipated Measure H revenue projections, staff recommended reducing the Street Pavement Rehabilitation Project budget by approximately $2.12 million, lowering the project allocation from approximately $3.09 million to $966,330 for Fiscal Year 2027.

Staff explained that pavement rehabilitation projects provide flexibility because engineering, design, and implementation timelines allow portions of the work to be delayed without immediate operational impacts.

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While the funding reduction does not eliminate the project, it delays a significant portion of planned pavement rehabilitation work.

Public Safety Building Remains a Top Priority

While street funding was reduced, city officials emphasized that the future Public Safety Building remains one of the highest priorities for Measure H funding.

According to the report, the project is expected to exceed $50 million and will likely require future financing. Staff recommended prioritizing available Measure H funding for planning, property acquisition, and pre-construction activities in an effort to reduce future borrowing costs and preserve long-term funding capacity.

Three New Positions Approved

The approved budget also includes three new full-time positions:

Senior Fire Inspector

Fire Inspector

Senior Civil Engineer

City officials stated the fire inspection positions will improve fire and life safety inspections, increase compliance with fire codes, and enhance public safety throughout the community.

The Senior Civil Engineer position is intended to support Hanford’s growing capital improvement program and increasing project workload, helping reduce delays in project design, bidding, and construction management.

Fleet Reserve Contributions Reduced

To maintain a balanced budget, staff recommended reducing fleet replacement reserve contributions by approximately $621,347, representing roughly a 44% reduction across General Fund departments.

According to the report, the Fleet Replacement Fund currently maintains sufficient reserves to absorb the temporary reduction without affecting near-term vehicle replacement needs. Officials described the reduction as a one-year balancing strategy rather than a permanent funding change.

Insurance Costs Continue Climbing

The report highlights significant increases in insurance-related expenses.

Liability insurance costs are projected to increase by approximately $1.76 million, rising from $1.7 million to $3.46 million. Workers’ compensation costs are also projected to increase by an additional $400,000.

Staff attributed the increases to rising claim frequency, prior large-loss years, growing payroll exposure, litigation trends, and broader insurance market pressures affecting public agencies throughout California.

Accumulated Capital Outlay Fund Drops Sharply Since 2021

Another major concern in the budget discussion is the condition of the City’s Accumulated Capital Outlay Fund, also known as the ACO Fund.

The ACO Fund is used to help pay for major capital projects, long-term infrastructure needs, large facility repairs, and other one-time city improvements. In simple terms, it is one of the city’s important capital project funding sources.

For Fiscal Year 2020-21, the City’s Capital Projects Fund, where the Accumulated Capital Outlay Fund was reported, had an ending fund balance of $4,573,806. Under the current budget outlook, the ACO Fund is projected to fall to approximately $230,000 by the end of Fiscal Year 2027.

That means the fund is projected to drop by more than $4.3 million from its 2021 level.

The approved budget also includes $900,000 from the Accumulated Capital Outlay Fund for the City Hall roof replacement, leaving only about $230,000 remaining after FY27 projects.

For residents, this matters because the ACO Fund has historically helped support major repairs and capital improvements. As that fund drops closer to depletion, the city may have fewer flexible dollars available for future infrastructure needs, emergency repairs, or large one-time projects.

Council Approves Staff Recommendation

Following discussion, the Hanford City Council voted to approve the staff-recommended budget amendments.

The approved plan includes approximately $1.26 million in General Fund appropriations, more than $10.6 million in appropriations across other city funds, the addition of three new full-time positions, a reduction of approximately $2.1 million in Measure H street rehabilitation funding, and a reduction of roughly 44% in fleet replacement reserve contributions intended to help maintain a balanced budget.

During the discussion, city staff indicated that if Measure H revenues improve in future years, funding could potentially be restored to pavement rehabilitation projects. Staff also discussed the challenges of balancing current infrastructure needs with long-term financial stability amid fluctuating revenue projections and increasing operating costs.

Council members reviewed the city’s financial outlook, including slower sales tax growth, rising insurance expenses, infrastructure demands, and the declining balance of the Accumulated Capital Outlay Fund.

As part of the approved budget strategy, city officials reaffirmed the Public Safety Building as a major long-term priority while attempting to maintain current service levels without immediate cuts to city operations.

Councilman Travis Payton made the motion to approve the staff recommendation, including the budget adjustments, project deferrals, reserve reductions, and staffing additions. Councilman Lou Martinez seconded the motion, and the proposal was approved by the City Council.

Looking Ahead

City staff will begin development of the Fiscal Year 2028-29 budget cycle in early 2027 and indicated they may take a more conservative approach to revenue forecasting given ongoing sales tax volatility.

Officials emphasized that Measure H projects remain important community priorities, but acknowledged that project schedules may need to be adjusted if revenue growth does not improve as anticipated. While city leaders expressed confidence that projects such as street improvements and the Public Safety Building remain part of the city’s long-term plans, the timing of those projects may ultimately depend on future revenue performance and available funding.

Question for readers: Do you believe delaying more than $2.1 million in street rehabilitation funding was the right decision while the ACO Fund is projected to fall to just $230,000?

Sources:

City of Hanford, Annual Comprehensive Financial Report (ACFR), Fiscal Year Ended June 30, 2021. Capital Projects Fund ending fund balance: $4,573,806.

Link:
https://www.ci.hanford.ca.us/Archive.aspx?AMID=43#docaccess-5a8ce0da51c3d1739b9df11b8d59d154e967d28feb4f936f21770c1b9a5f15f5