STAFF REPORT
Meeting Date:
November 18, 2025
CONSENT
12 SUBJECT: FISCAL YEAR 2025-2026 CARRYOVER APPROPRIATIONS; REQUEST FOR NEW FUNDS CREATION; TRANSFER OF BUDGETARY APPROPRIATIONS RECOMMENDATION: It is recommended that the City Council:
1. Carryover appropriations of $13,878,200 to Fiscal Year 2025-26 to provide continuing funding for projects in progress at the end of the last fiscal year;
2. Carryover revenue estimates of $2,503,966 expected to be received in Fiscal Year 2025-26;
3. Create a new Animal Shelter Donations Special Revenue and authorize the transfer of $1,497,850 of accumulated unspent donations from the City’s General Fund (110) to the new fund as of June 30, 2025;
4. Create a new Air Quality Management District (AQMD) Special Revenue Fund and authorize the transfer of $84,038 of unspent funds from the City’s General Fund (110) to the new fund as of June 30, 2025;
5. Create a new State Asset Forfeiture Special Revenue Fund and authorize the transfer of $50,439.08 of unspent funds from the City’s Federal Asset Forfeiture Fund (135) to the new fund as of June 30, 2025;
6. Create a new Library Impact Fees General Fund and authorize the transfer of $83,680 of unspent funds from the City’s General Fund (110) to the new fund as of June 30, 2025;
7. Create a new Cultural & Environmental Stewardship Special Revenue Fund; and
8. Transfer of FY 2024-25 available budgetary funding from General Fund Non-Departmental to the City Clerk and Police Departments (see explanation in discussion section).
SUMMARY OF THE MATTER
Annually, the City Council approves the carryover of revenues and appropriations from the prior fiscal year.
Carryovers consist of appropriations and revenue estimates approved in the previous fiscal year that remain unspent or received by the end of that fiscal year. For appropriations, a carryover is requested for items such as supplies and services ordered but not received or department projects in progress. Revenues carried over typically include grant funding. Staff recommends the approval of these carryover appropriations and revenues.
Additionally, staff recommend the creation of new Special Revenue funds to track revenues that are restricted or committed for specific City programs and activities. Staff also recommends, as part of the FY 2025-26 year-end close process, that budget appropriations be transferred from General Fund NonDepartmental available funding to two departments (the City Clerk’s Office and the Police Department).
The Non-Departmental budget is set up to address unplanned or unexpected occurrences in a planned way – in FY 24-25’s case, certain unfunded pension liabilities were assigned later through this transfer. In addition, overtime and certain personnel costs were higher than budgeted when certain salary and FISCAL YEAR 2025-2026 CARRYOVER APPROPRIATIONS; REQUEST FOR NEW FUNDS CREATION; TRANSFER OF BUDGETARY APPROPRIATIONS
November 18, 2025
contractual savings were lower than expected.
In addition, staff is recommending City Council approve the creation of several new funds to help streamline accounting and financial reporting and to be in compliance with state and contractual agreements.
DISCUSSION
Attachment 1 details $13,878,200 in carryover appropriations for Fiscal Year 2025-26. The General Fund carries the largest portion of carryovers, amounting to $6.2 million or 44.7% of the total. The primary appropriation carryovers include Public Safety CAD/RMS projects of $950,000, the carryover of Animal Shelter Donations of $1.5 million, and $1.4 million for the solid waste landfills implementation and recycling and organics programs. Attachment 2 outlines $2.5 million in revenue carryovers, including $1.7 million in expected grant and transit revenue and $667,000 in General Fund grant revenues.
It is important to note that the City Council authorized the automatic carryover of unspent capital improvement and assessment district budgets as of June 30, 2025, with the adoption of Resolution #25-048 on June 24, 2025. Therefore, unspent capital improvement projects and assessment district budgets are not included in the carryover appropriations. Attachment three outlines the current status of ongoing capital improvement project expenditures as an informational item for the City Council.
Further, the City’s Municipal Code (LBMC Section 3.24.060) requires that staff bring forth to Council a recommendation for approval for the establishment of new funds. The Finance Department recommends the creation of five (5) new special revenue funds, outlined in recommendation numbers three through seven, and as described in greater detail below, to segregate and track funds for these specific activities and programs, to ensure greater transparency and accountability on the use of these funding sources, which cannot be used for general City operations. The creation of the new funds will allow for greater accountability and transparency in reporting.
The Non-Departmental budget is our way to plan for the unplanned. It contains additional resources that serve as a contingency to support departments that may exceed their budgets during the year, until adjustments can be incorporated through the next budget cycle. Staff recommends transferring available funding from the FY 2024-25 Non-Departmental budget to the City Clerk’s Office (because we did not account for the appropriate amount for production services for City Council meetings), and to the Police Department (where a portion of the unfunded liability costs was assigned to Non-Departmental at the start of the year, and where overtime and certain personnel costs were higher than expected while more typical savings in salary and contractual services were lower than expected).
With the new Tyler-Munis system, improved position control (including Part-Time assignments), a more precise calculation of FLSA hours worked, as well as with the designation of the five funds, we should be able to address these issues better in FY 25-26 and beyond.
During the course of closing the City’s books and preparing for the City’s annual audit for Fiscal Year 2024-2025, staff identified a number of new funds that should be created in the City’s Finance system.
FISCAL YEAR 2025-2026 CARRYOVER APPROPRIATIONS; REQUEST FOR NEW FUNDS CREATION; TRANSFER OF BUDGETARY APPROPRIATIONS
November 18, 2025
Section 3.24.060 requires City Council approval to create a new fund. Staff is recommending the creation of the following funds:
• Animal Shelter Donations Special Revenue Fund to account for donations received to support the City’s Animal Shelter. Currently, these funds are recorded in the City’s General Fund. Staff recommends that the accumulated funds be tracked in a separate fund for increased transparency and to segregate restricted donations from General Fund revenues. There are no expenditures from the fund that will occur as a result of this administrative action. • Air Quality Management District (AQMD) Special Revenue Fund to account for the vehicle registration fees the City receives from the South Coast Air Quality Management District (SCAQMD) pursuant to Assembly Bill (AB) 2766. These funds are restricted by state law to fund programs that reduce motor vehicle emissions. The City has historically recorded the revenue received in the City’s General Fund. However, during a recent audit performed on behalf of SCAQMD, the auditors recommended the City create a separate AQMD Fund to record both revenues and expenditures for this program to comply with SCAQMD’s guidelines. • State Asset Forfeiture Special Revenue Fund to account for the assets seized under state laws and procedures. The City currently has an Asset Forfeiture Special Revenue Fund (135) that is being used to track assets seized under federal laws and procedures and assets seized under state laws and procedures. Currently, Finance staff tracks the revenue and expenditures for federal asset forfeitures vs. state asset forfeitures in a manual Excel spreadsheet. Staff recommends segregating these two programs into two funds to eliminate the need to use a manual Excel spreadsheet and consequently improve efficiency for the recordkeeping and recording of these two programs. • Library Impact Fee General Fund to account for impact fees collected in compliance with Laguna Beach Municipal Code Chapter 25.85. Specifically, Section 25.85.050 requires these fees to be recorded in a separate fund.
• Cultural & Environmental Stewardship Special Revenue Fund to account for contributions from Visit Laguna Beach pursuant to Amendment No. 1, dated June 10, 2025, to the Agreement between the City and Visit Laguna Beach dated December 16, 2024 (together, the “Agreement”). The Agreement requires the contributions from Visit Laguna Beach are recorded in a separate fund to be used exclusively for City improvements and services that support “Cultural and Environmental Stewardship” as outlined in the 2025 Laguna Beach Tourism Marketing District (TMD) Management District Plan.
Attachment 3 provides a summary of Capital Improvement Program (CIP) carryovers. City Council approval is not required. This document is provided for communication purposes only.
FISCAL YEAR 2025-2026 CARRYOVER APPROPRIATIONS; REQUEST FOR NEW FUNDS CREATION; TRANSFER OF BUDGETARY APPROPRIATIONS
November 18, 2025
FINANCIAL ANALYSIS
There is no fiscal impact associated with the proposed carryover appropriations. The estimated fund balances presented in the Fiscal Year 2025-26 budget already account for these appropriations and continuing them from one year to the next has no impact on the ending fund balances. There is no financial impact regarding the establishment of the City’s new Special Revenue Funds, as current funds available in the General Fund or other funds will be transferred into the new Special Revenue Funds. Additionally, there is no financial impact associated with recommendation number four, as the transfer of available budgetary funding between the General Fund Non-Departmental expenditure budget and the two General Fund departments result in a $0 net impact to the City’s General Fund for FY 2024-25.
ENVIRONMENTAL ANALYSIS
The approval of the carryover appropriations and revenues, creation of new funds, and transfer of budget appropriations is not considered a project subject to the California Environmental Quality Act (“CEQA”) pursuant to State CEQA Guidelines section 15378(b)(4), which states that a project does not include “[t]he creation of government funding mechanisms or other governmental fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.” This action is a fiscal activity that is not tied to any specific project that may have significant environmental impacts and therefore is not a project requiring environmental review.
ATTACHMENTS
1. Carryover Appropriation Requests (Pgs. 5-6)
2. Carryover Revenue Estimates (Pg. 7)
3. Carryover of CIP Appropriations (Pgs. 8-11)
Submitted By: .Michelle Bannigan Approved: .David A Kiff Michelle Bannigan, Finance
Director
Dave Kiff, City Manager
Report Prepared By:
Shannon Espinoza, Finance Manager