City of Huntington BeachFY 2026/27 General FundFinancial Discussion
Table of Contents•10 – Year Forecast •Milestones of Bankruptcy•CalPERS•How CalPERS UAL Is Created•Huntington Beach CalPERS UAL Payments•Pension Obligation Bonds POBs•General Fund Reserves•Managing a Deficit•Additional Revenue Options
10 – Year ForecastFY 35/36FY 34/35FY 33/34FY 32/33FY 31/32FY 30/31FY 29/30FY 28/29FY 27/28FY 26/2790,708,16082,540,92569,824,82262,063,25756,796,06051,135,73847,330,69842,506,15126,624,91417,155,636GF Deficit/POA TA83,129,76475,391,49563,080,07655,700,29050,793,26145,472,72041,988,22837,466,08523,117,29614,405,272GF Deficit
10 – Year ForecastFY 35/36FY 34/35FY 33/34FY 32/33FY 31/32FY 30/31FY 29/30FY 28/29FY 27/28FY 26/2782,352,11974,657,867 62,387,975 55,047,364 50,177,293 44,891,618 41,440,019 36,948,907 21,416,56712,257,483GF Deficit/POA TA74,982,36667,705,27055,828,92148,859,57844,339,75839,384,51036,244,63432,047,60018,005,5179,582,840GF Deficit
Milestones of BankruptcyA long-range structural deficit is an early warning — not a determination of insolvency.STRUCTURALIMBALANCECORRECTIVEACTIONRESERVE / LIQUIDITYPRESSUREFISCALEMERGENCYCHAPTER 9ELIGIBILITYWE ARE HERERecurring costs exceedrecurring revenuesREQUIRES A PLANBudget balancing,service/revenue optionsPOLICY DECISIONSReserves decline;near-term cash stressWARNING STAGECA finding: unable to payobligations within 60 daysLEGAL THRESHOLDInsolvent + state authorization+ federal requirementsCOURT FILING ELIGIBILITYThe key distinctionProjected future deficits or reserve depletion ≠ Chapter 9.The fiscal-emergency pathway requires a much more immediate inability to pay obligations.60 DAYSCalifornia fiscal-emergency findingUnable, or expected to be unable, to pay obligations CalPERS
•Guaranteed lifelong monthly pension formula•Legally binding municipal contractual obligation•Essential for competitive employee recruitment•Two tiers: Classic and PEPRA•Centrally administered by board governance•Social Security Integration Status CalPERSEconomic Assumptions•6.8% Return on Investment•2.3% Long-Term Inflation Rate•Payroll Growth (FTE Count)•3% Individual Merit•3% Salary GrowthDemographic & Actuarial Assumptions& Funding Policies•Mortality, Life Expectancy, Retirement Rates, Ages, Terminations & Turnover Assumptions•Asset Smoothing and Amortization policies•PEPRA Tier Blending How CalPERS UAL Is Created — and Why Payments Can Build Over TimeConceptual flow: actuarial experience → separate amortization bases → overlapping annual payments1. UAL IS CREATED2. BASE IS AMORTIZED3. BASES STACKACTUAL EXPERIENCE≠ACTUARIAL ASSUMPTIONSExamples:• Investment gain / loss• Demographic experience• Assumption changesNew actuarial gain or lossEach gain/loss becomes its own layerNew UAL Amortization BaseAmortization scheduleBeginning balance+ interest− required payment= ending balancePaid over multiple yearsMultiple bases can be active at once2022 loss base2023 loss base2024 gain base2025 loss base+++NETUALPAYMENTKEY POINT: The annual UAL payment is not one fixed debt payment.It is the net result of multiple positive and negative amortization bases created in different valuation years and paid over different periods.
Huntington Beach CalPERS UAL PaymentsMiscellaneous + Safety plansHISTORICALREQUIRED / PROJECTED$0M$5M$10M$15M$20M$25M$30M$35M$40MFY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 FY28-29 FY29-30 FY30-31Annual UAL payment ($ millions)MiscellaneousSafetyM $14.7S $20.2$34.9MM $2.3S $3.4$5.7M$0.0MM $2.2S $3.8$6.0MM $4.5S $7.4$11.9MM $5.8S $10.8$16.7MM $6.4S $13.0$19.4MM $7.0S $14.0$21.0MM $5.9S $12.6$18.5MM $4.7S $11.0$15.8MM = Miscellaneous S = SafetySource: Huntington Beach CalPERS Miscellaneous and Safety actuarial valuations. FY21-22–FY25-26 are historical required UAL payments; FY26-27 and FY27-28 are required amounts; FY28-29–FY30-31 are CalPERS projections assuming 6.8% investment returns and other actuarial assumptions.Amounts in millions. Projected UAL payments may vary significantly with investment and actuarial experience.
Pension Obligation Bonds (POBs)The 2021 transaction refinanced most of the UAL that existed at that time; new CalPERS UAL can still develop.2021 TRANSACTIONWHERE WE ARE TODAYPOBS ISSUED$341.5M2021 issuanceEXISTING UAL FUNDED~85%of then-existing UALBOND RATES0.221%–3.376%range of borrowing ratesPROJECTED SAVINGS$166.7Mat time of issuancePRINCIPAL REMAINING$279.7Mapprox. at June 30, 2026ANNUAL DEBT SERVICE$21.149Mapprox. annual paymentPOB DEBT SERVICEFixed bond repayment continuesalongside any newly created CalPERS UALKEY POINTThe POB refinanced approximately 85% of the UAL that existed in 2021 — it did not prevent new UAL from being created in future years.Financial logic: favorable when CalPERS investment returns exceed the City’s cost of borrowing.
General Fund ReservesReserves provide liquidity and time to address a structural imbalance, but they are not a recurring revenue source.AVAILABLE RESERVES$99.2MGeneral Fund reservesAVERAGE MONTHLY EXPENDITURES$27.3Mbased on $327.3M annuallyRESERVE COVERAGE3.64 MONTHSof General Fund expendituresRESERVE COVERAGE2 mo. minimum3.64 mo.WHAT RESERVES PROVIDE•Liquidity for unexpected events•Time to phase in corrective actions•Protection against economic volatilityWHAT RESERVES DO NOT DO•Create recurring revenue•Eliminate a structural deficit•Sustain recurring costs indefinitelyRESERVES BUY TIME — THE GOAL IS TO USE THAT TIME TO RESTORE STRUCTURAL BALANCE.
Managing a DeficitRevenues•Annual Inflation of 3% on Master Fee Schedule•Parking Rates Increase•New Advertising Revenue•Uniform BailExpenses•FTE Count•Operational Costs•Transfers Out•Changed from Employee to Contract Business Models•Managed Hiring•Fund Balance Policy Additional Revenue OptionsNotesApproximate Additional RevenuesFY 24/25 Actual RevenuesTypeAdditional 1% - Requires voter approval.Current Rate - 7.75%$46,267,863$46,267,8631% Allocation Sales TaxAdditional 1% - Requires voter approval. Current Rate - 5%$4,541,277$22,706,385User Utility TaxAdditional 1% - Requires voter approval. Current Rate -10%$1,602,241$16,022,412TOTAdditional Increase - Requires voter approval. Current Rate - $0.01500 per $100 of Assessed Property ValuesTBD$8,021,052Pension Tax OverrideAdditional Increase - Requires voter approval.Current base business license fee - $75TBD$2,380,069Business Licenses Tax Tax levied on a basis rather than value - Requires 2/3 voter approval.TBD$0Property Parcel TaxTax levied on a basis rather than value - Requires 2/3 voter approval.TBD$0Property Transfer TaxTax requires an ordinance to be adopted by the City of Huntington Beach Council. V oters already approved 6% on retailers and 1% on all other businesses in 2022.$300,000 to$600,000$0Cannabis Tax Currently scheduled to increase at a rate consistent with CPI.TBD$16,435,065Parking Fees Expand area of collections.TBD$967,767Short-Term Rentals Questions?