FY 2026-27 BUDGET – DISCUSSION OF UNRESOLVED ITEMS
Items that have come up in conversation with Council and others are summarized in this memo (in no particular order of importance) as items that could either be discussed, modified, rejected or considered and approved as changes to the proposed Final Budget, or brought back soon as Budget Amendments.
1. Affordable Housing. Council Member Whalen asked for consideration of finding ways to support the Housing Fund, which has a projected ending fund balance of $1,489,000 as of June 30, 2026. The Housing In Lieu fund has another $754,000 in it as of the same date (total $2,243,000). This amount is generally committed to a proposed project to be considered by the Council after July 1, 2026 (the Neighborhood Congregational Church project).
Per various policies (Resolution 23.035, and Resolution 23.045), the Housing Fund is supported by:
• Up to $500,000 annually, when actual property tax revenues as updated by the July Assessment Roll come in over estimates made when the budget is adopted in June.
The transfer shall be the amount of the overage up to $500,000. • Transient Occupancy Taxes (TOT) from short-term lodging permits issued during or after July 2022, which is about $100,000 annually.
Options for creating a different or more reliable revenue stream for the Housing Fund may include, but not be limited to:
• A regular transfer from the Parking Fund and/or the Capital Improvement Fund.
These funds include revenues that are considered general fund revenues in other jurisdictions. The downside of this is less funding for capital and parking infrastructure improvements – but housing may be as or more important in a revenuestrained environment. • An increase in the TOT levied on Short-term Lodgings, possibly higher than that levied on hotels. The justification for a higher rate – which must be approved by the Laguna Beach electorate and may involve further legal analysis – would be that ShortTerm Lodgings can reduce the community’s housing supply for non-visitors. • Reconsidering the Disaster Relief Fund, which earns about $150,000 per year in interest income, with a balance of $7,422,000 as of 6-30-2026. Some of the funds (interest or principal) could be redesignated for affordable housing, although clearly their intended purpose is important, too.
Attachment 7
48 2. Artificial Intelligence – Community Development. This effort would implement the use of artificial intelligence (AI) in the Zoning Plan Check (ZPC) and Building Plan Check review process. Specifically, AI could verify and interact directly with applicants to ensure that all required information submitted through the City's online application portal is sufficient to complete a review.
Currently, many applications are submitted without all required information, and the resulting back-and-forth communication between applicants and staff can take several days before an application is deemed complete and routed to the appropriate City departments and disciplines for review. AI assistance could help identify deficiencies at the time of submittal, streamline communications with applicants, and accelerate the completeness determination process.
Additionally, AI could assist with conducting initial zoning and building plan check reviews and begin the process of drafting redlined comments and a consolidated review letter to the applicant. Based on testing conducted to date, the results have been encouraging and suggest that these tools could further improve review efficiency, reduce processing times, and allow staff to focus on more complex planning and building code issues requiring professional judgment.
Subject to additional procurement policy reviews, one vendor’s product is about $150,000 for a six-month trial period. At some point, the cost of this service could be borne by fees, and could likely be a near-complete offset to the fees that involve manual review for both completeness checks and ZPC. This funding is not identified in the proposed Final Budget.
3. The Main Beach Boardwalk. Council member Whalen has asked about the Boardwalk at Main Beach – when to repair it, using what materials. The choices generally are the same Douglas Fir that is used now for repairs, or a Brazilian hardwood alternative.
If Council would like to staff to start design work on this project, Public Works staff could assign $100,000 from unencumbered CI Funds (Fund 616) to the FY 2026-2027 Year One CIP. If Council has strong opinions about the materials here, Council may wish to give direction now (fir v. hardwood) or whether to defer this to the Planning Commission.
When the Main Beach park was renovated in 2025, an informal bid alternate ask was made of the contractor – the contractor estimated a Douglas Fir replacement to be about $1,300,000 for the entirety of the Boardwalk.
49 4. Mermaid Lot and Key Intersection improvements. The proposed CIP has an allocation of $200,000 from the CI Fund (Fund 616) for design, landscaping, irrigation, and infrastructure improvements to the Mermaid Lot at the corner of Glenneyre and Mermaid.
Depending on the Council’s discussion about AB 413-related changes to the downtown as well as the termination of outdoor dining that takes up parking spaces, the Council may wish to consider expanding the Mermaid Lot program to re-design the four corners of this intersection.
As a part of this project, Council may wish to consider minor pedestrian and ADA improvements to the intersection at Ocean and Beach (including a longer extension of Beach on the north side to the flood control channel), and Ocean and Forest. None of these improvements would involve tree removals. If Council wishes to consider this, another $300,000 may be allocated (a very preliminary estimate) to expand this project.
Rather than utilize new appropriations for this, Council may want to consider a redesignation some of the $1,314,000 allocated for Downtown Action Plan improvements within the CI Fund (Fund 616).
5. Continuation of Services with Townsend and Associates – Grant Writing and Advocacy. The City Manager suggested in the Proposed Budget that the City go without advocacy services for a year, given a possibly light legislative effort. The Ad Hoc Committee is interested in continuing these services (at about $7,000 per month, or $84,000 per year) by adding grant writing services to Townsend’s retainer, which Townsend offered verbally to provide to the City at the same monthly price.
Townsend has coordinated and assisted with grants and earmarks in the past, including the BRIC Grant a few years ago (which was part of Cal-OES’s recommendation to the Federal BRIC Program but BRIC was later cancelled by President Trump), and earmarks for Laguna Canyon Road ($850,000), the Moss Street Beach Accessway ($1,225,000), Victoria II Sewer Lift Station ($746,868), and Fire Station #4 ($850,000). We have an earmark request in to US Representative Min this year, for Drones as a First Responder (also $750,000). The proposed contract amount ($84,000) with Townsend would need to be added back into the Final Budget.
6. Police Mounted Unit. Members of the Laguna Beach Police Department and leadership of the Laguna Beach Police and Community Foundation have suggested establishing a 4-member Mounted Enforcement Unit (MEU), where up to four members of the PD would have the specialty assignment of caring for and riding horses that were purchased for the City (with specific ownership to be determined), using LBPCF donations to cover all of 50 the costs of the MEU program for two years. Covered costs include the purchase of the horses, veterinary care, stabling, food, shoeing, and the specialty pay differential that staff may receive for their responsibilities (on and off duty) to care for, train, and ride the horses, sometimes as a part of a Regional Mounted Unit in other locations in addition to Laguna Beach (the regional team would also come to Laguna Beach for events).
Mounted Units serve as ceremonial programs (parades and other community events), crowd control, trail patrols, and an opportunity for officers to expand skills that can serve as a retention and recruitment tool for the Police Department.
On the other hand, the City Manager has expressed concerns that even the generous commitment of the Foundation to fund Years 1 & 2 of the new MEU program may put the City government in a later predicament – whether to continue or discontinue what likely will be a popular program, with animals that are loved and appreciated by the community. In response, the Foundation members have discussed a longer phased commitment covering a larger part of subsequent years.
The City Manager notes, too, that the equestrian program at his former city (Newport Beach) was both popular with the public and effective for crowd control in West Newport Beach and on the Balboa Peninsula. Those same circumstances may be less frequent in Laguna Beach.
The Council and Foundation may wish to consider this request again in 2027 should there be less economic uncertainty, or following the completion of important labor discussions during the second half of 2026.
Should this be added to the Final Budget, it would entail both an expenditure increase of $195,000 (in Year 1 costs – including one-time of $74K and ongoing of $120K) and an offsetting revenue increase of $195,000. The Year 2 cost is estimated to be $150,000.
7. Laguna Local Adjustments. The Council has already determined that a fare for this micro-transit service is not appropriate, but left the door open to further study of microtransit’s days and times of use. This (relatively) low-cost item would direct staff to work with our new booking vendor, Trip Shot, to provide data and reports to help with this analysis. Doing so would allow the City to potentially consider:
• Measuring whether certain hours of the day or days of the week (or both) should be discontinued or modified.
• Whether high LBUSD student use of Laguna Local may warrant a discussion with LBUSD officials as to a transportation cost offset of City’s operating costs for Laguna Local.
51 Staff does not believe we need further direction in this regard. We have met with Trip Shot and Trip Shot appears to be able to easily produce the data and reports we may need to make these decisions.
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