2 • Budget Approach for FY 2025-26
• FY 2025-26 consolidated budget process – 1.5 months
• Two Council Work-Study Sessions:
• 05/29/25 – FY 2024-25 Update, FY 2025-26 Proposed Budget, & Authorized Positions
• 06/12/25 – Parks & Rec programs, Capital Improvement Program, Non-General Funds
3 1. Budget Practices
• No Budget Process
• Inadequate maintenance of the City’s financial system – unclear budget figures
• Deficient Budget Oversight & Control
• No Appropriations for large items
• No position control or position budgeting in at least five years (MOUs were being approved, PERS increases, health insurance increases; these impacts were never added to the budget)
• Lacking long-term planning
• No published budget book since FY 2022-23
4 2. Financial Practices
• Significantly delayed audited financial statements
• Inadequate maintenance of the City’s General Ledger– unclear cost centers for Depts.
• Several audit findings have not been addressed
• Outdated policies and procedures
• Deficiencies in the Accounts Payable Process
• Internal controls need improvement with an emphasis on separation of duties
5 3. Other Areas
• Transit Fund Deficit – potentially up to $15 million by the end of current fiscal year • No investment of idle cash – significant loss of investment earnings in high-interest environment
• Comingling of Successor Agency Bank Account and the General Account • Unauthorized payments to vendors:
• No existing contracts
• Expired Contracts
• Payments exceeded or will exceed the “not-to-exceed” threshold • High fees for services that offer little value to the City (continue to pay for services that are no longer needed)
• Equity adjustments
• No Master User Fee Schedule
• No Reserves Policy or other Policies required by the Govt Code 6 7
FY 2024-25 FY 2024-25
Revenue Source Amended Through April $ %
License Fees - Card Club $ 29,370,000 $ 20,260,154 $ 9,109,846 31% Sales Tax 27,350,000 16,170,922 11,179,078 41%
Other Taxes 8,213,578 5,254,056 2,959,522 36%
Licenses & Permits 5,435,160 4,958,640 476,520 9%
Use of Money 1,730,000 1,797,507 (67,507) -4%
Rev - Other Agencies 1,525,000 2,220,626 (695,626) -46% Current Charges 1,101,587 922,772 178,815 16%
Transfers-In 800,000 800,000 - 0%
Parks and Recreation 261,838 355,881 (94,043) -36%
Misc. Revenue 340,603 670,618 (330,015) -97%
Fines & Penalties 308,200 366,983 (58,783) -19%
Total $ 76,435,966 $ 53,778,158 $ 22,657,808 30%
Left to collect
8 FY 2024-25 FY 2024-25
Department Amended Through April $ %
Administrative Services 231,494 16,447 215,047 93%
City Administration 3,370,216 2,000,584 1,369,632 41%
Debt Service/Transfers-Out 2,145,000 3,862,298 (1,717,298) -80% Economic Development & Planning 1,445,303 432,238 1,013,065 70% Finance 2,362,763 1,829,778 532,985 23%
Human Resources 1,614,053 1,237,169 376,884 23%
Library Services 3,597,230 2,934,174 663,056 18%
Non-Departmental 9,068,758 4,484,032 4,584,726 51%
Parks and Recreation 9,046,151 7,360,703 1,685,448 19%
Public Safety 27,982,825 22,064,351 5,918,474 21%
Public Works 10,261,715 7,195,390 3,066,324 30%
Transportation 483,887 1,261,650 (777,763) -161%
Total 71,609,395 54,678,816 16,930,579 24%
Remaining
• No revenue or expenditure budget for most Non-General funds • Need appropriations (zero budget) for the following funds:
• 22 ( COPS Grant), 26 (Gas Tax), 29 (CDBG), 30 (AQMD), 31 (Housing), 33 (Community Assistance Fund), 50 (Water Utility)
• Need additional appropriations for the following funds:
• Fund 40 (Capital Projects):
• Wash-Tel project $1.8 million in exp and $0 budget
• Fund 41 (Measure AA) – comingling sales and use tax with grant reimbursements
9 • Baseline Budget for FY 2025-26 – “Bridge Year”
• Core expenditure growth outpacing revenue growth
• New ongoing costs were carefully evaluated
• Potential recession (even a mild one) or decreased economic activity may threaten a balanced budget
• Biennial Budget for FY 2026-28
• Some changes incorporated into FY 2025-26 budget, further changes to be considered in FY 2026-28
10 • Tariffs, tariffs, and more tariffs – overall avg. tariff rate 17.8%, which is the highest level since 1934 • Economic volatility – outlook: increased probability of a recession in the next 12 months • “Growth Recession”
• CPI – US: 2.8%, California : 3.1%, Commerce: 3.1
• Unemployment – US: 4.2%, California: 5.3%, Commerce: 3.3% • 2025 & 2026 outlook
• Market volatility – market reacting to tariff threats • SB 549: Tribal Nations Access to Justice Act
• Cannabis Operations
• Major company no longer operating since 2023.
• Budget est. for revenue since FY 2021-22: $1.3 million • Currently, on avg, generating approx. $550k annually
• Federal & State Budget
• Federal cuts across the board are highly anticipated
• State budget projected $12 billion shortfall
11 • Analyzed over 140 revenue accounts and “right-sized” each account • Low to Moderate increases across the board
• Major increases/decreases reflect adjustments due to inaccurate low or high estimates in the prior year
• Sales tax increase of 5% - staff will be monitoring sales tax closely • Casino License Fee (card club) moderate increase of 3% • Removed Gas Tax transfer-in to the General Fund; all gas tax eligible expenditures to be recorded in the Gas Tax Fund
• Assumes no recession or economic downturn
12 13
FY 2024-25 FY 2025-26
Revenue Source Amended Proposed $ %
License Fees - Card Club $ 29,370,000 $ 30,320,000 $ 950,000 3% Sales Tax 27,350,000 28,793,200 1,443,200 5%
Other Taxes 8,213,578 9,632,700 1,419,122 17%
Licenses & Permits 5,435,160 5,744,800 309,640 6%
Use of Money 1,730,000 2,241,200 511,200 30%
Rev - Other Agencies 1,525,000 1,694,200 169,200 11%
Current Charges 1,101,587 1,402,000 300,413 27%
Transfers-In 800,000 755,000 (45,000) -6%
Parks and Recreation 261,838 368,100 106,262 41%
Misc. Revenue 340,603 441,500 100,897 30%
Fines & Penalties 308,200 323,000 14,800 5%
Total $ 76,435,966 $ 81,715,700 $ 5,279,734 7%
Difference
14 • Developed position budgeting model for 470 (178 FT & 292 PT) citywide positions • GF Labor = $28.2 million, $5.1 million increase (22%) due to inaccurate/lack of labor budget from previous year
• MOU-driven increases incorporated into the FY 2025-26 Budget:
• 4% Cost of Living Adjustment (COLA)
• 9% Health Insurance increase
• Step Increases
• Deferred Compensation contributions
• CalPERS:
• 10.93% Normal Cost (approx. $2.8 million for FY 25-26) • Unfunded Actuarial Liability (UAL) - approx. $700k for FY 25-26 15 16
FY 2024-25 FY 2025-26
Department Amended Proposed $ %
Administrative Services 231,494 652,600 421,106 182%
City Administration 3,370,216 3,367,600 (2,616) 0%
Debt Service/Transfers-Out 2,145,000 2,915,500 770,500 36% Economic Development & Planning 1,445,303 1,638,800 193,497 13% Finance 2,362,763 3,067,600 704,837 30%
Human Resources 1,614,053 2,131,300 517,247 32%
Library Services 3,597,230 5,006,600 1,409,370 39%
Non-Departmental 9,068,758 9,540,700 471,942 5%
Parks and Recreation 9,046,151 10,765,000 1,718,849 19% Public Safety 27,982,825 28,901,200 918,375 3%
Public Works 10,261,715 11,256,600 994,885 10%
Transportation 483,887 2,472,200 1,988,313 411%
Total 71,609,395 81,715,700 10,106,305 14%
Difference
17 City Administration/Admin Services:
• $4.1 Million budget:
• 11 FT & 3 PT - $2.7 million
• Legal Services - $1.0 million
• Contracts, supplies, travel - $0.4 million
• New for FY 2025-26:
• Supplies for City calendar & Commerce
Connect - $18,500
Economic Development & Planning:
• $1.6 million budget:
• 9 FT & 1 PT - $1.5 million
• Contracts, supplies, other - $0.1 million
• New for FY 2025-26:
• Rearranging EDPD office space and
cubicles & furniture - $50,000
18 Finance:
• $3.1 Million budget:
• 12 FT & 4 PT - $2.2 million
• IT Contracts/Subscriptions - $0.5 million
• Contracts, supplies, travel - $0.4 million
• New for FY 2025-26:
• Deletion of Assistant Finance Director
• Addition of IT Technician
• Reclassification of IT Specialist to IT Supervisor
• Reclassification of Purchasing Manager to Finance Manager • Equity Adj for Accounting Supervisor, Account Technician & Payroll Specialist classifications 19 Net impact:
savings of
$62,300
Human Resources:
• $2.1 million budget:
• 8 FT - $1.4 million
• Yes Program - $0.2 million
• Recruitment, Medical Exams, supplies - $0.2
million
• Other -$0.3 million (see below)
• New for FY 2025-26:
• Job classification & Analysis - $50,000
• Investigation Services - $70,000
• Tuition Reimbursement for FT ($120,000) & PT
($84,000) employees - $204,000
20 Library:
• $5.0 Million budget:
• 21 FT & 25 PT - $4.4 million
• Library Collection - $0.1 million
• Contracts, equipment, supplies,
travel - $0.5 million
• New for FY 2025-26:
• Summer reading program, additional
library collection, 10 laptops & 20
computers - $112,500
Non-Dept.:
• $12.4 million budget:
• General Services - $5.8 million
• Liability Insurance premium - $1.5 million
• UP Sales Tax Sharing Agreement - $1.5 million
• Utilities – Electricity - $1.3 million
• Active and Retiree Benefits - $3.7 million
• Medical Insurance Retirees - $1.4 million
• CalPERS UAL - $0.7 million
• Workers Comp Premium - $0.6 million
• Debt Service Payments - $2.9 million
• 2021 POBs - $2.1 million
• 2014 Lease Rev Bonds (Aquatorium) - $0.8 million
21 Parks & Recreation:
• $10.8 Million budget:
• 24 FT & 221 PT - $8.8 million
• Special Events - $0.7 million
• Parks & Rec Activity – 0.3 million
• Aquatics Center - $0.3 million
• Park Operations - $0.2 million
• Camp Commerce - $0.2 million
• Other (Admin, Pre-School, Kids Club, Day Camps, Rec operations, Sports program, Admin) - $0.2 million
• Senior Center & Teens Center - $0.1 million
22 Public Safety:
• $28.9 million budget:
• 3 FT & 15 PT - $1.1 million
• L.A. County Fire contract - $16.1 million
• L.A. Sheriff Contract - $11.1 million
• Animal Control/Crossing Guards/Community Safety Spec./Emergency Preparedness/Probation - $0.6 million
• New for FY 2025-26:
• Rearranging office space for Public Safety and cubicles & furniture -$50k • National Night Out Budget - $30k
23 Public Works:
• $11.3 Million budget:
• 37 FT & 10 PT - $4.9million
• PW Contracts - $2.9 million
• PW Engineering & Building- $2.2 million
• Facilities Operations & Environmental -$0.8 million
• Street & Tree Maintenance - $0.3 million
• Park Maintenance - $0.2 million
• New for FY 2025-26:
• Additional funding for Engineering & Building - $900k • Freeway on/off ramp maintenance - $150k
• Project Management contract - $140k
• Addition of Maintenance & Operations Manager
• Reclassifications - 1 supervisor and 1 lead in each of the following operations: park maintenance, street & trees, & facilities 24 Transportation:
• Partially funded by the General Fund
• $2.5 million budget:
• Leases, fuel, vehicle maintenance & replacements - $1.0 million • Proposition A Exchange program- $1.0 million
• Partial Labor of certain positions - $0.5 million
25 26
• Fund Balance – Accumulation of operating surpluses during years in which revenues exceed expenditures. “Cash-on-hand” available in each of the city’s 18 funds (one-time funding).
• Five different categories of fund balance:
1. Nonspendable – not available to spend due to legal or contractually constrains – ex: inventory, notes and loans, prepaid items
2. Restricted – external restrictions imposed by grantors, contributors, or laws or regulations – ex: federal and state grants for a specific purpose or restricted donations or contributions
3. Committed – amounts committed by the City Council – ex:
capital projects or contractual obligations
4. Assigned – amounts the City intends to use for specific purposes – ex: Economic Contingency Reserve, Equipment
Replacement Fund, Rainy Day Fund, Project Management
Fund, etc.
5. Unassigned – one-time amounts available for any
governmental purpose
As of June 30, 2024 (latest audited figures):
FUND
UNASSIGNED
FUND BALANCE
10 - General Fund $ 106,359,316
22 - COPS Grant 206,348
26 - State Gas Tax 301,695
29 - CDBG -
30 - AQMD AB 2766 Rideshare Grant 42,059
31 - Housing 2,089,952
32 - Art in Public Places 1,939,924
33 - Community Assistance Fund 511,119
34 - Storm Water Management 1,459,861
40 - Capital Improvement 8,247,968
41 - Measure AA 26,739,477
42 - Community Center Debt Service 2,727
50 - Water Utility 2,476,584
57 - Transit (10,698,819)
58 - CNG/LNG Station 3,693,131
70 - Trust Fund (Donations) 366,813
81 - Successor Agency Admin Fund 1,923,333
92 - Successory Agency Projects/Bonds $ 17,596,500
Reserve Policy for Unassigned fund balance:
• Government Finance Officers Association (GFOA) recommends at least two months of operating expenditures (16.7%)
• Due to the City’s revenue base and its susceptibility to a recession or economic downturn, the goal should be 100%
• As a practice, the recommendation will be a minimum of six months of operations (50%)
• Excess of 100% = Project Management Assigned Fund Balance • One-time funding for:
• Economic uncertainty; Pension stability; OPEB stability; IT server replacements/other major IT replacements; facility improvements; equipment replacements; risk management stability, etc. 27 • Position Control = a system that ensures all positions are budgeted properly, authorized by the City Council, and accounted for
• Each position is clearly defined, including title, salary grade, and responsibilities and ensures that the number of authorized positions is not exceeded
• Official list of positions approved by the City Council (hard copy provided) is the basis of the position control system
• AB 2561 compliance
28 •June 12th – Second work-study session
•June 24th – Budget Adoption by the City Council
29 30