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HomeMy WebLinkAboutQ1 2026 Financial ReportQuarterly Financial Report Through March 2026 This report provides an overview of the City’s overall cash-basis financial position for the fiscal period ending March 31, 2026, reflecting data available as of May 11, 2026. References to budget, actual and prior year amounts reflect year-to-date numbers, unless otherwise stated. Year-to-date budget expectations are generally based on the two prior years of data. General Fund Overview Throughout 2025, the City continued to see growth in many aspects of City operations and infrastructure. However, the City experienced a significant natural disaster at the end of 2025 when an atmospheric river caused widespread flooding. In response, the President approved a major disaster declaration for Washington state on April 7, 2026. Many City facilities and operations were affected, and these impacts – referred to throughout this report as the “flooding event” – will be referenced throughout the report. Although the City anticipates cost recovery for most flood-related damages, the favorable variances seen in prior years are expected to diminish in 2026. Revenue collections this year are also expected to be influenced by the FIFA World Cup matches being hosted in Washington, though the financial impact of this on the City remains uncertain. With the adoption of Ordinance #7000 in November 2025, the 2026 annual budget consists of $110.1 million in revenues and $116.4 million in expenditures, resulting in a planned decrease in General Fund balance of $6.3 million. Through the first quarter of 2026, the General Fund outperformed revenue expectations by $1.7 million (8%). Year-to-date revenue collections are $1.1 million (5%) higher than the same period in 2025. A major contributor to this favorable variance is Business and Occupation (B&O) tax revenue. The City collected $3.4 million in B&O taxes, including payments made in arrears. Despite a strong performance thus far, the City anticipates B&O revenues will decline from a peak of $13.4 million in 2025 as payments related to prior periods decrease. Sales tax collections also contributed to the positive revenue performance. Year-to-date sales tax revenue totals $6.6 million, exceeding the same period in 2025 by $838,000. These revenue gains support the City’s continued growth and offset rising costs. General Fund expenditures increased $2.4 million (9%) compared to the same period last year, driven by planned increases in overhead costs, professional services for citywide projects and improvements, and insurance premiums. Overall, General Fund revenues collected through the first quarter of 2026 totaled $23.3 million, exceeding the year-to-date budget of $21.6 million by $1.7 million, or 8% above budget expectations. Expenditures totaled $28.6 million compared to the year-to-date budget of $30.3 million, resulting in a $1.7 million or 6% underspend. Quarterly Financial Report Through March 2026 2 Revenue: The following factors had the most significant impact on the budget vs. actual revenue collected: • Retail Sales and Use Tax: Collections totaled $6.6 million, exceeding the year-to-date budget by $933,000. Much of this favorable variance is attributable to the automotive sector, where reporting requirements have changed for some companies. The City anticipates the trend of higher collections will continue throughout the end of the year. [pages 7-9] • Business and Occupation Tax: Revenues collected throughout Q1-2026 totaled $3.4 million, exceeding the year-to-date budget by $805,000. Some of this favorable variance is due to the collection of tax obligations incurred in prior years, which is not expected to continue at the same level in the future. [pages 9-10] • Fines and Penalties: Year-to-date revenues totaled $891,000 and are unfavorable to budget projections by $516,000 (38%). However, partially mitigating the unfavorable variance is the collection of fines and penalties assessed on backdated B&O taxes, totaling $321,000, or 36% of total collections year-to-date. [pages 19-20] • Building Permits: Revenues totaled $602,000, significantly exceeding the year-to-date budget of $220,000. While permit volume is higher than the same period last year, the majority of the favorable variance comes from a single high-value project within City limits. [pages 14-15] • Interest and Investment Earnings: Collections totaled $468,000, exceeding budget expectations by $328,000. Several investments matured during the quarter, and the City has structured its portfolio to provide quarterly maturities which support steady cash flow. Based on current market indicators, the City anticipates exceeding budget expectations by the end of the year. [pages 20-21] Quarterly Financial Report Through March 2026 3 Expenditures: Most City departments operated within year-to-date expectations throughout the first quarter of 2026, with some variances due to the timing of professional services payments. Overall, expenditures were $1.7 million below the year-to-date budget. Contributing to the favorable variance was a savings in salaries and benefits of roughly $456,000; as of the compilation of this report, the City had 32 vacant regular full-time positions. Additionally, services and charges were approximately $110,000 below budget expectations. This is partially due to the timing of spending on ARPA-related projects in progress within the City. Enterprise Funds Overview The City’s enterprise funds account for operations in which revenues are primarily provided by user fees, charges, or contracts for services. While the City’s investments have seen a high rate of return in the past several years, the maturation of certain investments has slowed year-over-year growth in interest earnings. Through Q1-2026, interest earnings for the City’s enterprise funds were $776,000, 3% lower than interest earnings through Q1-2025. The Water Utility Fund ended Q1-2026 with operating income of $1.3 million, an increase of $173,000 compared to the same period last year. This variance is due primarily to increased revenues from charges for services (+$554,000), offset by a decrease of $127,000 in interest earnings. Expenditures also increased by $263,000 compared to Q1-2025, driven by increased personnel costs (+$121,000), supplies (+$28,000) and miscellaneous service charges (+$132,000). Overall, the fund’s operating income had an $845,000 favorable variance to year-to- date budget expectations, driven by strong performance in charges for service and interest and investment earnings on the revenue side and lower-than-expected insurance expense. [pages 24- 25] The Sewer Utility Fund ended Q1-2026 with operating income of $1.3 million, which was $105,000 higher than Q1-2025. While operating revenues increased $488,000 compared to the same period last year, operating expenditures also increased (+$384,000). The increase in operating expenditures was driven primarily by increased service charges (+$404,000), a portion of which is related to ongoing mitigation efforts associated with the flooding event. In total, operating income for this fund was $926,000 higher than budget projections, due to favorable variances in both operating revenues (+$911,000) and operating expenses (-$16,000). [page 25] The Stormwater Utility Fund ended Q1-2026 with operating income of $898,000, a moderate increase of $64,000 (8%) compared to the same period last year. Operating revenues increased $140,000 compared to the prior year, mainly due to an increase in charges for storm service (+$125,000) and interest and investment earnings (+$15,000). Operating expenditures for this fund also increased compared to the prior year (+$76,000) due mainly to increased service charges (+$100,000), though partially offset by lower personnel costs (-$22,000). This fund outperformed operating income budget projections by $321,000 due to favorable variances in both operating revenues (+$180,000) and expenditures (-$141,000). [pages 25-26] The Solid Waste Utility Fund ended Q1-2026 with operating income of $1.8 million, a $110,000 increase compared to the prior year. This variance is due primarily to a timing difference between revenues collected for solid waste service and payments made to the City’s solid waste provider. Charges for service revenues saw a $494,000 increase from the prior year, reflecting higher service rates adopted for 2026. Operating expenditures also increased (+$402,000), consistent with the correlation between rate revenues and charges from the City’s solid waste provider. Compared to budget expectations, operating income was $173,000 higher than anticipated, driven by a favorable budget variance in revenues (+$254,000) and offset by higher-than-expected expenditures (+$81,000). [page 26] Quarterly Financial Report Through March 2026 4 Internal Service Funds Overview Internal service funds provide services to other City departments and include functions such as Insurance, Worker’s Compensation, Facilities, Innovation & Technology, and Equipment Rental. The City’s Insurance Fund incurred an annual insurance charge approximately $1.8 million lower than originally anticipated. This resulted in decreased interfund allocation charges for all funds, including the Enterprise Funds noted above. The Facilities Fund saw a significant increase in professional services charges over 2025 (+$643,000) as a direct result of ongoing flood mitigation efforts. These increased costs resulted in a negative working capital balance of $302,000 in Q1-2026. Facilities expenses related to the flood event were reimbursed from the Cumulative Reserve Fund in April 2026; the City will continue to monitor these efforts. No other significant variances were reported in these funds during Q1-2026. [page 26] Quarterly Financial Report Through March 2026 5 General Fund Details The following chart is a detailed breakdown of the General Fund’s different sources of revenue and expenditures, broken down by department: General Fund 2026 2025 Summary of Sources and Uses Annual YTD YTD YTD Budget Budget Actual Amount Percentage Actual Amount Percentage Operating Revenues Property Tax 25,815,300$ 1,151,100$ 1,035,053$ (116,047)$ (10.1)%1,190,817$ $ (155,763)(13.1)% Retail Sales Tax 22,808,000 5,683,800 6,617,004 933,204 16.4 %5,778,793 838,211 14.5 % Public Safety Sales Tax 2,000,000 500,000 - (500,000)(100.0)%- - % Affordable Housing Sales Tax Credit 149,500 47,500 45,208 (2,292)(4.8)%47,903 (2,695)(5.6)% Sales Tax - Pierce County Parks 132,400 32,400 35,839 3,439 10.6 %33,546 2,293 6.8 % Criminal Justice Sales Tax 3,098,200 773,000 834,176 61,176 7.9 %784,634 49,542 6.3 % Brokered Natural Gas Tax 317,100 116,700 73,493 (43,207)(37.0)%78,519 (5,026)(6.4)% City Utilities Tax 7,629,100 1,767,100 1,856,836 89,736 5.1 %1,705,971 150,865 8.8 % Business & Occupation Tax 10,091,600 2,633,830 3,438,725 804,895 30.6 %3,413,483 25,243 0.7 % Admissions Tax 260,200 83,200 126,227 43,027 51.7 %129,758 (3,530)(2.7)% Electric Tax 4,924,800 1,131,000 1,361,030 230,030 20.3 %1,179,218 181,812 15.4 % Natural Gas Tax 1,367,000 339,600 359,080 19,480 5.7 %375,249 (16,169)(4.3)% Cable Franchise Fee 905,800 226,450 156,040 (70,410)(31.1)%177,098 (21,058)(11.9)% Cable Utility Tax 894,400 223,600 166,060 (57,540)(25.7)%186,009 (19,949)(10.7)% Cable Franchise Fee - Capital 52,200 13,050 7,640 (5,410)(41.5)%9,057 (1,417)(15.6)% Telephone Tax 581,990 195,520 336,410 140,890 72.1 %246,283 90,127 36.6 % Solid Waste Tax (external)1,017,900 114,795 401,767 286,972 250.0 %418,767 (17,000)(4.1)% Leasehold Excise Tax 297,400 16,200 21,309 5,109 31.5 %15,438 5,871 38.0 % Gambling Excise Tax 293,200 57,976 114,424 56,448 97.4 %92,736 21,688 23.4 % Taxes sub-total 82,636,090$ 15,106,821$ 16,986,323$ 1,879,503$ 12.4 %15,863,279$ $ 1,123,044 7.1 % Business License Fees 588,000$ 151,000$ 200,202$ 49,202$ 32.6 %189,859$ $ 10,343 5.4 % Building Permits 974,000 219,700 602,324 382,624 174.2 %223,266 379,058 169.8 % Other Licenses & Permits 1,449,300 319,700 271,770 (47,930)(15.0)%244,539 27,232 11.1 % Intergovernmental (Grants, etc.)6,495,885 1,179,389 870,171 (309,218)(26.2)%919,800 (49,629)(5.4)% Charges for Services: - General Government Services 5,253,717 1,313,429 1,314,431 1,001 0.1 %1,280,053 34,377 2.7 % Public Safety 1,255,571 313,893 256,428 (57,465)(18.3)%214,183 42,245 19.7 % Development Services Fees 1,273,900 417,600 350,326 (67,274)(16.1)%716,004 (365,678)(51.1)% Culture and Recreation 3,026,300 659,505 679,535 20,030 3.0 %781,493 (101,957)(13.0)% Fines and Penalties 4,816,697 1,407,272 891,232 (516,039) (36.7)%779,743 111,490 14.3 % Fees/Charges/Fines sub-total 25,133,370$ 5,981,488$ 5,436,420$ (545,068)$ (9.1)%5,348,939$ $ 87,481 1.6 % Interest and Investment Earnings 790,900$ 140,167$ 467,693$ 327,526$ 233.7 %617,105$ $ (149,412)(24.2)% Rents and Leases 1,190,180 255,600 256,282 682 0.3 %302,492 (46,211)(15.3)% Contributions and Donations 16,000 2,109 5,457 3,348 158.8 %5,167 291 5.6 % Other Miscellaneous 208,000 32,322 72,587 40,265 124.6 %37,995 34,592 91.0 % Transfers In 126,000 31,500 - (31,500)(100.0)%- - % Insurance Recoveries - Capital & Operating 25,000 6,250 59,242 52,992 847.9 %19,425 39,817 205.0 % Other Revenues sub-total 2,356,080$ 467,948$ 861,261$ 393,312$ 84.1 %982,184$ $ (120,923)(12.3)% Total Operating Revenues 110,125,540$ 21,556,257$ 23,284,004$ 1,727,747$ 8.0 %22,194,402$ $ 1,089,602 4.9 % Operating Expenditures Council & Mayor 1,915,503$ 557,817$ 423,638$ 134,179$ 24.1 %502,612$ $ (78,974)(15.7)% Administration 1,067,010 293,035 218,889 74,146 25.3 %214,968 3,921 1.8 % Human Resources 2,857,163 753,344 647,524 105,820 14.0 %694,663 (47,139)(6.8)% King County Court & Probation 4,809,090 681,823 898,208 (216,386)(31.7)%360,702 537,506 149.0 % Finance 5,856,264 1,543,099 1,537,992 5,107 0.3 %1,437,566 100,426 7.0 % City Attorney 4,969,972 1,438,010 1,537,964 (99,954)(7.0)%1,138,641 399,323 35.1 % Municipal Court 258,163 64,541 - 64,541 100.0 %- - % Community Development 7,564,295 1,962,082 1,843,159 118,923 6.1 %1,732,199 110,960 6.4 % Human Services 2,568,086 649,259 331,935 317,324 48.9 %498,518 (166,583)(33.4)% Office of Equity 1,045,388 279,447 93,761 185,686 66.4 %99,712 (5,951)(6.0)% Jail - SCORE 7,050,000 1,762,500 1,709,844 52,656 3.0 %1,463,808 246,036 16.8 % Police 41,831,608 11,732,595 10,935,130 797,465 6.8 %9,960,347 974,783 9.8 % Public Works 6,449,916 2,139,980 1,463,841 676,139 31.6 %1,581,097 (117,257)(7.4)% Parks, Arts & Recreation 17,569,666 4,544,138 4,375,204 168,934 3.7 %4,140,726 234,478 5.7 % Streets 5,309,285 1,510,222 1,516,050 (5,828)(0.4)%1,373,749 142,301 10.4 % Non-Departmental 5,309,576 358,347 1,039,639 (681,293)(190.1)%967,251 72,389 7.5 % Total Operating Expenditures 116,430,985$ 30,270,237$ 28,572,778$ 1,697,459$ 5.6 %26,166,558$ $ 2,406,220 9.2 % 2026 YTD Actual vs. 2025 Actual Favorable (Unfavorable) 2026 YTD Budget vs. Actual Favorable (Unfavorable) Quarterly Financial Report Through March 2026 6 Quarterly Financial Report Through March 2026 7 General Fund Revenue Tax revenues, including property, sales/use, utility, business & occupation, gambling, and admissions taxes provide 73% of all resources supporting general governmental activities. Licenses, charges for services, intergovernmental revenue (grants, state shared revenue, etc.) and fines contribute a further 23% of total revenue to the General Fund. The remaining 4% is comprised of a combination of one-time resources. The following section provides additional information on the most significant resource streams. Property Tax collections through the first quarter totaled roughly $1.0 million, approximately $116,000 or -10% below budget projections. As depicted in the graphic below, the majority of property taxes are collected during the months of April and October, coinciding with the due dates for county property tax billings. Retail Sales Tax collections throughout Q1-2026 totaled $6.6 million, representing taxes remitted to the City of Auburn on sales occurring from November 2025 through January 2026. Collections increased by $838,000 (15%) compared to Q1-2025 and exceeded budget expectations by $933,200. This year-over-year growth of 15% significantly exceeds the most recent King County economic forecast1 of 6.5% annual growth over 2025 collections. If current trends continue, retail sales tax collections are expected to surpass both budgeted and prior-year totals by year-end. 1 King County, WA. 2025. The Office of Economic and Financial Analysis. https://kingcounty.gov/en/legacy/independent/forecasting. Quarterly Financial Report Through March 2026 8 Industry performance was mixed. Strong gains were reported in automotive (+$605,948), manufacturing (+$210,746), and services (+$87,720) categories, with smaller gains in transportation and warehousing (+$10,793), and wholesale trade (+$7,333). These increases were partially offset by declines in the construction (-$63,961), retail trade (-$17,850), and miscellaneous (-$2,518) categories. The chart below illustrates the year-over-year changes in retail sales tax collections by industry through the first quarter. Quarterly Financial Report Through March 2026 9 Business & Occupation (B&O) Taxes are collected from businesses based on either the value of gross receipts or square footage of occupied warehousing space, subject to certain constraints. While the City receives collections throughout the year, B&O taxes are primarily remitted on a quarterly basis. Through reconciliation with the State’s Business Licensing System, the City has identified tax amounts due from prior periods. This effort has significantly increased year-to-date performance and is expected to push total annual collections above budget projections. Collections through the first quarter totaled $3.4 million versus a year-to-date budget of $2.6 million. Of the $3.4 million collected, roughly $1.2 million (36%) consists of back taxes. By comparison, an average of 55% of collections in 2025 consisted of back payments. Current 2026 collections outpace 2025 collections throughout the same period by a slim margin of $25,000 (0.7%); while the proportion of back taxes (and the occasional large payments associated with them) has slowed, overall revenue remains consistent as more businesses are added through the discovery process. Compared to prior year-to-date totals, the City collected roughly $234,000 (11%) more in gross- receipts-based revenue, while square-footage-based collections decreased by $209,000 (16%). 2025 2026 Component Group YTD Actual YTD Actual Amount Construction 611,356$ 547,395$ (63,961)$ (10.5)% Manufacturing 121,039 331,785 210,746 174.1 % Transportation & Warehousing 84,567 95,360 10,793 12.8 % Wholesale Trade 380,173 387,506 7,333 1.9 % Automotive 1,243,828 1,849,776 605,948 48.7 % Retail Trade 1,754,392 1,736,542 (17,850) (1.0)% Services 1,476,200 1,563,920 87,720 5.9 % Miscellaneous 107,238 104,720 (2,518) (2.3)% YTD Total 5,778,793$ 6,617,004$ 838,211$ 14.5 % Comparison of Retail Sales Tax Collections by Group Through March 2026 Change from 2025 Percentage 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage Gross Receipts 7,188,400$ 1,876,117$ 2,349,599$ 473,482$ 25.2%2,115,403$ 234,195$ 11.1% Square Footage 2,903,200 757,713 1,089,127 331,414 43.7%1,298,079 (208,953) -16.1% Total 10,091,600$ 2,633,830$ 3,438,725$ 804,895$ 30.6%3,413,483$ 25,243$ 0.7% Business & Occupation Tax Through March 2026 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Quarterly Financial Report Through March 2026 10 Utility Taxes consist of an 11.5% tax on the gross revenues of water, sewer, storm drainage and solid waste utilities and a 6.0% tax on electric, natural gas, and telephone utilities operating within the City. Of those utilities taxed at 11.5%, the General Fund receives 9% while the remaining 2.5% is dedicated to funding City streets projects. For utilities taxed 6%, 5% is allocated to the General Fund and 1% to City streets projects. Overall, utility tax revenues increased by $365,000 (9%) from Q1-2025 and are $666,000 favorable to budget. Roughly 71% of utility tax receipts are City interfund utility taxes and electric utility taxes. These two revenue sources accounted for $3.2 million of the collected $4.6 million throughout the first quarter of 2026. The largest portion of the overall favorable budget variance occurs within the external utility taxes (+$287,000) category due to an increase in solid waste hauler usage, as well as rate adjustments effective in 2026. The remaining favorable variances are due to the collection of backdated taxes. While collections of back taxes are expected to continue, the City anticipates that large increases from newly-identified businesses will diminish over time. Electric utility taxes exceed budget expectations by $230,000 and surpassed prior-year collections by $182,000, largely due to an approximately 6% rate increase at the beginning of the year. With this rate increase, the City anticipates these revenues will continue the favorable variance throughout the year. Telephone utility taxes increased by $90,000 from Q1-2025, primarily as the result of the timing of collections related to prior year activity. Additionally, the City collected a large sum from one provider that became current in remitted filings. The table and charts below summarize utility tax revenues and compare actual revenues to budget. These figures represent only the General Fund portion and exclude amounts dedicated to City streets projects. Quarterly Financial Report Through March 2026 11 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage City Interfund Utility Taxes 7,629,100$ 1,767,100$ 1,856,836$ 89,736$ 5.1%1,705,971$ 150,865$ 8.8% Electric 4,924,800 1,131,000 1,361,030 230,030 20.3%1,179,218 181,812 15.4% Natural Gas 1,367,000 339,600 359,080 19,480 5.7%375,249 (16,169) -4.3% Telephone 581,990 195,520 336,410 140,890 72.1%246,283 90,127 36.6% External Utility Taxes 1,017,900 114,795 401,767 286,972 250.0%418,767 (17,000) -4.1% Brokered Natural Gas 317,100 116,700 73,493 (43,207) -37.0%78,519 (5,026) -6.4% Cable 894,400 223,600 166,060 (57,540) -25.7%186,009 (19,949) -10.7% Total 16,732,290$ 3,888,315$ 4,554,677$ 666,362$ 17.1%4,190,016$ 364,660$ 8.7% Utility Tax by Type (General Fund Portion) 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Through March 2026 Quarterly Financial Report Through March 2026 12 Note: The significant jump from 2022 ($12.8 million) to 2023 ($15.8 million) is largely due to higher service revenue following a rate increase effective in 2023, combined with higher service usage and the collection of B&O taxes on businesses that provide utility services. Similarly, 2024 ($15.2 million) to 2025 ($17.6 million) is largely due to increases in solid waste and electricity rates. An Admission Tax of 5% is placed on charges for general admission, season tickets, cover charges, and similar activities, and is generally collected on a quarterly basis. Admission tax revenues of approximately $126,000 through March 2026 were a slight decrease (3%) from Q1- 2025. Although this tax is historically volatile due to external factors such as economic conditions and weather, revenues are favorable to budget by $43,000 through the first quarter. Gambling Tax applies to all card games, punch board games, pull tabs, bingo games, raffles and amusement games played within City limits. The majority of gambling tax revenues are generated from card games (78%) and punch boards and pull tabs (12%). Collections of $114,000 through the first quarter are $22,000 higher than 2025 year-to-date totals, and reflect a $56,000, favorable variance to budget. The primary drivers of the favorable variance are higher collections from card games (+$57,000) and punch boards and pull tabs (+$8,000). Amusement games are $9,100 less than year-to-date budget assumptions resulting in a lower overall favorable variance. Gambling tax revenues have historically exhibited high volatility both month-over-month and year- over-year. Excluding 2021, when COVID-19 restrictions materially disrupted activity, first-quarter revenues in recent years have averaged about $60,000, with a high of $104,000 in 2023 and a low of $29,000 in 2024. The City will continue to monitor these taxes closely – along with sales tax – given their value as an indicator of consumer discretionary spending. Quarterly Financial Report Through March 2026 13 Licenses and Permits include business licenses, building permits, plumbing, electric and other licenses and permit fees. Building permit fees and other licenses – such as excavation, street/curb, and plumbing permits – typically comprise most of the budgeted revenue in this category, at approximately 32% and 48%, respectively. The annual Business License renewal fee for each business located within the City is $107, with the renewal cycle based on the anniversary of the business’s initial license issuance. Year-to-date collections totaled $200,000 in 2026, compared to $190,000 in 2025, representing a 5% increase. Historically, business license collections have been a highly volatile, and therefore budgeted conservatively. However, through business discovery efforts and enhanced use of the State’s Business Licensing System as part of the B&O tax reconciliation process, these revenues have become more consistent. Comparing to budget projections, business license revenues are favorable by $49,000 (33%). The City generally experiences the highest collection levels during the first and fourth quarters of the year due to the renewal cycle. Quarterly Financial Report Through March 2026 14 Building Permit revenues collected through March 2026 totaled $602,000, approximately $379,000 higher than 2025 collections year-to-date and favorable to budget by $383,000 (+174%). A major contributor to this favorable variance is the increased valuation of construction permits on warehouses, along with a single high-value project within City limits. Additionally, the number of permits submitted throughout the first quarter increased by 17% over the same period last year, indicating elevated construction activity and permitting workload throughout the City. Quarterly Financial Report Through March 2026 15 Quarterly Financial Report Through March 2026 16 Intergovernmental revenues include grants and stimulus monies (direct and indirect federal, state, and local), revenue from the Muckleshoot Indian Tribe (MIT) compact, and various state shared revenues. Collections throughout Q1-2026 totaled $870,000 and were $309,000 unfavorable to budget expectations. Much of this unfavorable variance is due to the timing of state and federal grant reimbursements. These grants are generally collected on a cost-reimbursement basis, and several projects have experienced delays, thus postponing reimbursements. The City anticipates that the identified projects will be completed and reimbursed in 2026. Furthermore, the City’s proposed 2026 MIT compact request is still pending approval; the City anticipates approval and collections are expected to begin in Q2-2026. 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage Federal Grants 917,333$ 229,333$ 5,783$ (223,550)$ -97.5%26,417$ (20,634)$ -78.1% State Grants 77,000 3,100 4,275 1,175 37.9%39,208 (34,933) -89.1% Interlocal Grants 418,352 84,400 - (84,400) -100.0%18,571 (18,571) -100.0% Muckleshoot Casino Services 1,400,000 - - - - - State Shared Revenues: Streamlined Sales Tax 368,700 92,175 102,416 10,241 11.1%128,020 (25,604) -20.0% Motor Vehicle Fuel Tax 1,208,900 279,200 284,375 5,175 1.9%226,600 57,776 25.5% Criminal Justice - High Crime 294,500 73,625 79,341 5,716 7.8%75,156 4,185 5.6% Criminal Justice - Population 35,900 8,700 9,317 617 7.1%8,803 514 5.8% Criminal Justice - Special Prog.125,600 30,400 32,547 2,147 7.1%30,868 1,679 5.4% Marijuana Excise Tax 201,300 50,325 47,911 (2,414) -4.8%51,991 (4,080) -7.8% State DUI 7,800 1,950 2,616 666 34.2%1,913 703 36.8% Fire Insurance Tax 123,400 - - - - - Liquor Excise 657,300 161,231 135,191 (26,040) -16.2%144,076 (8,885) -6.2% Liquor Profit 659,800 164,950 166,398 1,448 0.9%168,177 (1,779) -1.1% Subtotal State Shared:3,683,200 862,556 860,113 (2,443) -0.3%835,604 24,509 2.9% YTD Total 6,495,885$ 1,179,389$ 870,171$ (309,218)$ -26.2%919,800$ (49,629)$ -5.4% Intergovernmental Revenues (Grants, Entitlements & Services) Through March 2026 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Quarterly Financial Report Through March 2026 17 Charges for Services consist of general governmental service charges, public safety charges, development service fees, and culture and recreation fees. Revenues collected through March totaled $2.6 million and were $104,000 (4%) lower than year-to-date expectations. This shortfall was mainly due to lower-than-anticipated revenues in public safety and development services. The General Government revenue category primarily includes the interfund assessment for support departments (Finance, Human Resources and Legal). Operating costs for these departments are charged to the respective General Fund home departments, and the portion of those costs that provide citywide benefit are recouped from other funds through interfund charges. General government revenues also include fees for passport services, quarterly administrative fees received by the City in return for acting as the fiscal agent for South King Housing and Homelessness Partners (SKHHP), and crime lab analysis fees. Public Safety revenues mainly consist of reimbursements for law enforcement services, which are extra-duty security services where officers are contracted by external agencies. This category also includes reimbursements from the Muckleshoot Indian Tribe (MIT) for a full-time dedicated police officer and associated expenditures, as well as payments from the Auburn School District for services rendered. Public safety revenues through the first quarter of 2026 totaled $256,000, an increase of $42,000 from Q1-2025. This increase is primarily due to the timing of collections for law enforcement services rendered last year. However, DUI fees received by the City have decreased $3,000 compared to last year. In total, public safety revenues hold an unfavorable variance to year- to-date budget of $57,000. Development Services fee collections consist primarily of collections generated from plan check fees, facility extension charges, and zoning and subdivision fees. Through Q1-2026, these revenues totaled $350,000, which is $67,000 lower than budget expectations and $366,000 lower than prior year-to-date totals. Unfavorable variances to year-to-date budget occurred in plan check fees (-$47,000), other planning and development fees (-$196,000), and zoning and subdivision fees (-$25,000). The large variance within “other planning and development fees” is the result of the timing of collections on a single project; the City expects to collect the full amount budgeted by the end of the year. These variances were offset by a favorable variance in FAC charges (+$8,000). 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage General Government 5,253,717$ 1,313,429$ 1,314,431$ 1,001$ 0.1%1,280,053$ 34,377$ 2.7% Public Safety 1,255,571 313,893 256,428 (57,465) -18.3%214,183 42,245 19.7% Development Services 1,273,900 417,600 350,326 (67,274) -16.1%716,004 (365,678) -51.1% Culture & Recreation 3,026,300 659,505 679,535 20,030 3.0%781,493 (101,957) -13.0% Total 10,809,488$ 2,704,427$ 2,600,719$ (103,708)$ -3.8%2,991,732$ (391,013)$ -13.1% 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Charges for Services by Type Through March 2026 Quarterly Financial Report Through March 2026 18 Most Culture and Recreation revenues are derived from green fees and pro shop sales at the Auburn Golf Course, recreational classes, ticket sales for performing arts events (currently held at alternate venues during construction of the Auburn Avenue Theater), senior programs, and special events. Overall, this category of revenues outperformed budget expectations by $20,000 (3%). Recreation classes account for 50% of year-to-date culture and recreation collections and remain consistent with prior-year levels, totaling $340,000 in Q1-2026. Ticket sales for performances held at local school venues have increased by $17,000 (43%) from prior year totals and carry a favorable variance to budget of $35,000. This is mainly due to the success of several shows and as a result, ticket revenue was higher than the same period last year based on increased ticket prices and attendance. With continued participation in community activities throughout the remainder of the year, the City is expecting a slight increase in revenues in 2026. A further $122,000 (18%) of year-to-date Culture and Recreation revenues was generated by the Auburn Golf Course. This is considerably lower than prior year collections due to the late 2025 flooding event, which forced the golf course to close from December 2025 until mid-February 2026. As a result, green fee revenues decreased by $112,000 (60%) from the same period last year and are unfavorable to year-to-date budget by $287,000. The City projects that green fee collections will return to normal levels throughout the remainder of the year, as the golf course typically collects about 65% of its total revenues during the peak months of May through September. Quarterly Financial Report Through March 2026 19 Fines & Penalties include civil penalties (such as code compliance fines), parking and traffic infraction penalties, criminal fines (including criminal traffic, criminal non-traffic, and other criminal offenses) as well as non-court fines such as false alarm fines. The table below shows a detailed breakdown of the different types of fines and penalties collected by the City. Total revenues collected through March 2026 were $891,000, compared to a budget of $1.4 million, and were 37% below budget expectations. This is primarily due to a reduction in photo enforcement collections throughout the first quarter. Offsetting a portion of the shortfall, collections of non-court fines and penalties exceeded both budget expectations (+$313,000) and Q1-2025 totals (+$164,000), largely driven by assessed fines and penalties on past-due B&O taxes. The City contracts with the King County Court to operate its municipal court services. Court-related activity – including hearings, judgments, and collections – began declining in 2019 and has continued to trend downward. Although the graph below shows a large spike in revenue in 2023 and 2024, this is almost entirely due to photo enforcement and B&O-related collections rather than traditional court activity. Excluding those sources, court-related collections have declined to $61,000, approximately one-third the level observed between 2015-2018, before the City began contracting with King County. Partly in response to this trend, the City Council has approved the establishment of a municipal court in Auburn effective January 1, 2027. 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage Civil Penalties 1,000$ 72$ 3,340$ 3,268$ 4551.2%345$ 2,995$ 867.2% Civil Infraction Penalties 156,700 34,300 56,130 21,830 63.6%55,978 152 0.3% Photo Enforcement 1,100 400 - (400) -100.0%- - #DIV/0! Parking Infractions 4,516,497 1,338,400 508,853 (829,547) -62.0%518,187 (9,334) -1.8% Criminal Traffic Misdemeanor 31,800 9,600 6,943 (2,657) -27.7%27,906 (20,963) -75.1% Criminal Non-Traffic Fines 49,200 11,000 (6,810) (17,810) -161.9%17,353 (24,163) -139.2% Criminal Costs 12,400 5,400 1,800 (3,600) -66.7%2,588 (788) -30.4% Non-Court Fines & Penalties 48,000 8,100 320,976 312,876 3862.7%157,385 163,591 103.9% Total 4,816,697$ 1,407,272$ 891,232$ (516,039)$ -36.7%779,743$ 111,490$ 14.3% Fines & Penalties by Type 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Through March 2026 Quarterly Financial Report Through March 2026 20 Miscellaneous Revenues consist of investment earnings, income from facility rentals, revenue collected for golf cart rentals at the Auburn Golf Course, contributions and donations, and other income such as the quarterly purchasing card (P-card) rebates. The most significant miscellaneous revenue categories are listed in the table below. Revenues collected year-to-date totaled $802,000 and were $372,000 (86%) favorable to budget. Of the favorable variance, 88% is attributable to interest and investment collections, far exceeding budget projections due to higher-than-expected interest rates (though lower than the prior year) and the maturation of multiple investments during the first quarter. The rents and leases category includes payments for facility rentals, golf cart rentals, and the restaurant lease at the golf course. Revenues in this category were par for the course compared to year-to-date budget expectations. However, the flooding event forced the closure of the golf course until mid-February, significantly reducing golf cart rental revenues (-59,000). Moreover, the golf cart fleet itself was rendered inoperable, although the City was able to replace these vehicles prior to the reopening of the course. Mitigating the loss of golf-related revenue, the City saw strong performance in facility and other rentals and concessions. This is a good sign for the outlook of these revenues as the City collects most of these revenues in the warm spring and summer months. Likewise, facility rentals were favorable to budget expectations by $14,000, resulting in a slight favorable variance for the category. To date, rents and leases are $46,000 below Q1-2025 levels, mainly due to the loss of golf cart rental revenue. 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage Interest & Investments 790,900$ 140,167$ 467,693$ 327,526$ 233.7%617,105$ (149,412)$ -24.2% Rents & Leases 1,190,180 255,600 256,282 682 0.3%302,492 (46,211) -15.3% Contributions & Donations 16,000 2,109 5,457 3,348 158.8%5,167 291 5.6% Other Miscellaneous Revenue 208,000 32,322 72,587 40,265 124.6%37,995 34,592 91.0% Total 2,205,080$ 430,198$ 802,018$ 371,820$ 86.4%962,759$ (160,740)$ -16.7% Miscellaneous Revenues by Type 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Through March 2026 Quarterly Financial Report Through March 2026 21 The “Other Miscellaneous Revenue” sub-category reported $35,000 more than the same timeframe last year and was favorable to the year-to-date budget by $40,000. This category includes revenue related to a national opioid settlement distribution program; however, the City did not receive settlement payments during the first quarter of the year, offsetting a portion of the favorable budget variance. These payments are expected to experience volatility over the upcoming years, as some companies involved in the settlements elect to pay off their obligations early, while other companies are still navigating the settlement process and may begin payments in the future. Quarterly Financial Report Through March 2026 22 OTHER FUNDS Real Estate Excise Tax (REET) revenues are taxes on the sale of both commercial properties and single-family residences. These collections are receipted into the Real Estate Excise Tax Fund and transferred to other funds to support governmental capital projects. REET revenues collected year- to-date in 2026 total $808,000, which is $425,000 (53%) favorable to budget expectations. Due to its historical volatility, this revenue is budgeted conservatively. With lower current interest rates, the climate for real estate sales seems favorable within the State of Washington. Despite these supportive conditions, year-to-date REET collections in 2026 have generally remained consistant with prior year collections. Although current revenues exceed budget projections, they represent the median first-quarter total of the past fourteen years – suggesting a stablizing market even as interest rates continue to ease from their 2023 peak. REET collections reached their highest point in 2021 following two years of historically low interest rates maintained by the Federal Reserve in response to COVID-19. Subsequent rate increases in 2022 and 2023 to combat inflation slowed the real estate market and reduced REET activity. Interest rates were lowered in January 2026, with an additional rate cut anticipated in April. With market uncertainty throughout the country, the City is monitoring REET collections closely. Generally, REET revenues have reflected the overall market volatility in recent years, with a standard deviation of $959,000 or 104% of the average annual collections over the period of 2017 to 2025. 2025 Revenue Annual Budget YTD Budget YTD Actual Amount Percentage YTD Actual Amount Percentage Real Estate Excise Tax 1,800,000$ 382,822$ 807,682$ 424,860$ 52.6%734,997$ 72,685$ 9.9% Total 1,800,000$ 382,822$ 807,682$ 424,860$ 52.6%734,997$ 72,685$ 9.9% Real Estate Excise Tax Revenues Through March 2026 2026 Favorable (Unfavorable)2026 YTD Actual vs. 2025 Actual Quarterly Financial Report Through March 2026 23 American Rescue Plan Act (ARPA) Fund In March 2021 the American Rescue Plan Act (ARPA) was signed into law, with the intent of mitigating the economic impacts related to COVID-19. Through ARPA’s State and Local Government Fiscal Recovery Fund program, the City was allocated $14.8 million in funding; Council approved the City’s acceptance of ARPA funds in Resolution #5608. The City has since used all $14.8 million of the ARPA funds to mitigate the cost of providing public safety services. As a result of the cost mitigation provided by the ARPA funding, the City has been able to allocate General Fund funding toward projects approved by the Council’s ad hoc committee. As of March 31, 2026, the City has been able to spend $53,000 year-to-date and $10.2 million since 2021 on the following projects: Auburn Avenue Theater (cp2414) In December 2021, a neighboring building fire resulted in damage to the previous Auburn Avenue Theater, necessitating the building’s demolition. The theater is currently being rebuilt, with groundbreaking occurring in May 2026. This project is funded in part by $389,700 of General Fund money available due to savings created by ARPA. The limited spending ($693) of this funding source to date reflects the requirement to utilize other, higher-priority funding sources within the project prior to drawing on this allocation. Project completion is anticipated in 2026. 2026 Lifetime Spend Title Budget Q1 Spend (includes this quarter)Remaining Completed Projects 6,851,617 - 6,851,617 - Human Services Grants Includes Admin 1,000,000 - 445,882 554,118 Theater 389,700 693 693 389,007 2023 Local Street Preservation 148,167 - 58,793 89,374 Translation Services 25,000 - 1,685 23,315 Auburn Way South Roundabout 150,000 - 53,924 96,076 Emergency Housing Voucher Program 2,000,000 28,062 896,934 1,103,066 DEI Dashboard (Inclusive Auburn)130,000 - 92,805 37,195 Downtown Infrastructure Improvements includes Theater 1,819,409 24,671 1,580,148 239,261 Community Violence Intervention Programs (Drone, SPIDR Tech)236,248 - 204,436 31,812 Other Projects (not started)2,001,091 - - 2,001,090 Total:14,751,231 53,426 10,186,918 4,564,313 Quarterly Financial Report Through March 2026 24 Emergency Housing Voucher Program Beginning in 2023, the Emergency Housing Voucher Program is budgeted at $2 million over the life of the program. This program assists residents of Auburn experiencing homelessness and drug addiction who agree to enroll in and complete inpatient treatment. It will cover the costs of clean and sober housing for up to three years for participants who comply with program requirements. There are currently 20 individuals utilizing this program. Life-to-date project spend is $896,934 with $28,062 spent Q1-2026. Downtown Infrastructure Improvements (cp2321) This program will construct infrastructure improvements in downtown Auburn along Auburn Avenue from East Main Street N to 1st Street NE and on East Main Street from Auburn Ave to B Street NE, including B Street Plaza. The project supports existing and future redevelopment activities and replaces infrastructure that is at or near the end of its useful life. Construction has begun and is anticipated to be completed by the early part of 2026. Total expenditures to date are $1.6 million, with $24,671 spent in the first quarter. Enterprise Funds Operating activities include revenues and expenditures associated with day-to-day fund operations, whereas capital activities relate to construction projects and capital acquisitions. The net effect of these activities equals the change in the fund’s working capital balance, which is calculated as current assets minus current liabilities. As noted earlier in this report, the City charges all departments their full insurance allocation in the first quarter, rather than spreading the cost evenly across the year. The total insurance charge for 2026 was lower than expected, resulting in favorable budget variances in interfund allocations for the City’s funds. Through March 2026, the Water Utility Fund had operating income of $1.3 million (operating revenues less operating expenditures), an increase of +$173,000 over the same period last year. This is consistent with expectations following the 2026 rate increases adopted under Ordinance No. 7004. Total operating revenues increased $436,000, from $4.5 million through Q1-2025 to $4.9 million through Q1-2026. This increase was driven by both rate adjustments and higher water consumption; charges for service revenues were $4.8 million through Q1-2026 compared to $4.2 million through Q1-2025, a 13% increase. This was partially offset by a year-over-year decrease of $127,000 in interest earnings. Operating expenses also increased from $3.3 million to $3.6 million (+$263,000). Expenses increased in several areas compared to the prior year, including personnel costs (+$121,000), supplies (+$28,000), and other service charges (+$132,000). Compared to projections, the fund’s operating income is $845,000 favorable to the year-to-date budget. Operating revenues were $560,000 higher than anticipated through Q1-2026, with interest earnings outperforming budget expectations by $111,000, along with higher charges for services (+$437,000). Operating expenditures had a $285,000 favorable variance to budget, driven by the lower-than-expected interfund insurance allocation (-$135,000), external utility expenditures (-$89,000), excise tax (-$88,000), professional services (-$49,000). These favorable variances were partially offset by higher than anticipated interfund utility taxes (+$23,000), personnel costs (+$35,000) and supplies (+$16,000). Quarterly Financial Report Through March 2026 25 Billable water consumption through Q1-2026 totaled 625,000 ccf (hundred cubic feet), which is 31,000 ccf (5%) higher than consumption in Q1-2025. Increases in consumption were seen across nearly all customer classes, with the largest gains seen in commercial, manufacturing, schools and multifamily homes. These increases were partially offset by a slight decrease in the irrigation customer class. Compared to the same period last year, the Sewer Utility Fund saw an 9% increase in operating income, from $1.2 million through Q1-2025 to $1.3 million in Q1-2026. Operating revenues increased by $488,000 (16%) to $3.6 million from $3.1 million in the same period last year due to strong performance in charges for City sewer service (+$388,000) and interest earnings (+$65,000). The fund also saw an increase of $35,000 in miscellaneous revenues for insurance recoveries and a refund on excise taxes previously paid. These gains were offset by corresponding increases in operating expenses, which rose $384,000 from $1.9 million through Q1-2025 to $2.3 million through Q1-2026. This increase was driven primarily by repair and maintenance costs related to the flooding event (+$284,000) and higher excise tax and interfund utility tax charges (+$84,000). Through Q1-2026, the fund outperformed budget expectations with a $911,000 favorable variance in operating revenues, led by charges for service (+$493,000) and interest earnings (+$383,000). Operating expenditures ended slightly below budget by $16,000. Costs related to the flooding event drove service charges to be higher than anticipated (+$151,000); however, these overruns were offset by savings from a lower-than-expected interfund insurance allocation (-$78,000) and personnel costs (-$89,000). The Stormwater Utility Fund had operating income of $898,000 through Q1-2026, an increase of $64,000 from the same period last year. While operating revenues were higher through Q1-2026 compared to Q1-2025 (+$140,000), operating expenses for this fund were also higher during the same period (+$76,000). Charges for service revenue increased $125,000 (4%) from Q1-2025. Primary drivers for the increase in operating expenditures were higher service charges (+$100,000), and interfund charges (+$5,000), which were offset by decreases in personnel costs (-$22,000) and supplies (-$7,000). Quarterly Financial Report Through March 2026 26 This fund also outperformed budget expectations, with a $321,000 favorable-to-budget variance in operating income. Operating revenues outperformed budget expectations by $180,000 due to higher than anticipated charges for service (+$57,000) and interest earnings (+$123,000). Meanwhile, expenditures were lower than anticipated (-$141,000), with savings in personnel costs (-$70,000), supplies (-$16,000), professional services (-$40,000) and the interfund insurance allocation (-$31,000). These savings were offset by higher than anticipated repair and maintenance costs unrelated to the flooding event (+$21,000). The Solid Waste Utility Fund finished Q1-2026 with operating income of $1.8 million, which is $110,000 million higher than the $1.7 million reported through the same period last year. Operating revenues increased $512,000, driven by an increase of $494,000 (6%) in charges for service as a direct result of the service rates adopted in Ordinance No. 6920. Operating expenditures also increased, rising from $6.5 million through Q1-2025 to $6.9 million through Q1-2026. This increase is consistent with expectations, as payments to the City’s solid waste provider are correlated with rates adopted for services. Total professional services increased $396,000 compared to the prior year, driven mainly by increased payments to the City’s solid waste provider (+$271,000) as well as higher excise and interfund utility taxes (+$89,000). Compared to budget expectations, operating revenues were higher than anticipated (+$254,000) due primarily to charges for service (+$231,000) and interest earnings (+$23,000). Operating expenses were also higher than expected (+$81,000), due to higher than anticipated excise and interfund utility taxes (+$296,000), partially offset by lower than anticipated payments to the City’s solid waste provider (-$214,000). In total, the fund had a $173,000 favorable variance in operating income compared to budget expectations through Q1-2026. Internal Service Funds The Insurance Fund incurred $3.8 million of expenditures for 2026 insurance premiums, which was $439,000 lower than the $4.2 million charged in 2025. Further, this amount was $1.8 million lower than anticipated, resulting in lower interfund allocations for insurance expense across the City. Because interfund insurance revenues correspond directly to actual charges, the change to working capital was minimal ($12,000). The Facilities Fund reported a negative working capital balance of $302,000 through Q1-2026, driven by unanticipated service charges related to the flooding event. Of the $933,000 in total service charges incurred, $312,000 was specifically for flood mitigation. The remaining $621,000 in service charges included work previously contracted in 2025, along with ad hoc facility repairs and ongoing maintenance fees for the City’s main buildings. No significant variances are reported in the Workers’ Compensation, Innovation & Technology, or Equipment Rental Funds. Contact Information This report has been prepared by the Finance Department. Additional financial information can also be viewed at our website: http://www.auburnwa.gov/. For any questions about this report please contact Jamie Thomas at jdthomas@auburnwa.gov.