STAFF REPORT
Meeting Date:
June 23, 2026
BUSINESS
23 SUBJECT: ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF FISCAL YEAR 2026-27 COMMUNITY ASSISTANCE GRANTS, APPROVAL OF FISCAL YEAR 2026-27 CULTURAL ARTS GRANTS; APPROVE FISCAL YEAR 2026-27
APPROPRIATIONS LIMIT, AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
RECOMMENDATION: It is recommended that the City Council:
1. Approve the City budget for the Fiscal Year 2026-27 by adopting the Resolution titled, "A
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAGUNA BEACH, CALIFORNIA, ADOPTING THE ANNUAL CITY BUDGET FOR THE 2026-27 FISCAL YEAR";
2. Adopt the Resolution titled “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
LAGUNA BEACH, CALIFORNIA, TO RESTRICT FUNDING IN THE DISASTER
CONTINGENCY FUND, TRANSFER TRANSIENT OCCUPANCY TAX REVENUE IN EXCESS
OF BUDGET ESTIMATES TO THE HOUSING FUND, AND TRANSFER MID-YEAR BUDGET SAVINGS UP TO $300,000 TO THE OPEN SPACE FUND”;
3. Approve the salary schedules for the Fiscal Year 2026-27 by adopting the Resolution titled, "A
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAGUNA BEACH, CALIFORNIA, SETTING PAY RANGES FOR CITY EMPLOYEES";
4. Approve or modify the funding recommendations made by the subcommittee regarding the Community Assistance Grants for Fiscal Year 2026-27 and direct the City Manager, or their designee, to disburse the funds accordingly and review the subcommittee recommendations regarding the changes to the future Community Assistance Grants application process and direct staff as to desired changes;
5. Approve the recommended Cultural Arts Grants for Fiscal Year 2026-27 and direct the City Manager, or their designee, to disburse the funds accordingly;
6. Approve the appropriations limit for the Fiscal Year 2026-27 by adopting the Resolution Titled, "A
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAGUNA BEACH, CALIFORNIA,
DETERMINING AND ADOPTING AN APPROPRIATIONS LIMIT FOR THE FISCAL YEAR 2026-27 IN ACCORDANCE WITH ARTICLE XIIIB OF THE CONSTITUTION OF THE STATE OF CALIFORNIA, CHAPTER 1205 OF THE REVENUE AND TAXATION CODE SECTION 791";
7. Appropriate $80,900 of carryover funds from the Business Improvement District Fund’s (112) Fiscal Year 2025-26 budget to its Fiscal Year 2026-27 budget to increase funding for the Cultural Arts program grants from $240,000 to $320,900;
8. Appropriate and authorize the transfer of $88,000 of restricted revenues on hand from the City’s General Fund (#110) to the new Certified Access Specialist Program Special Revenue Fund (#204) in Fiscal Year 2025-26;
9. Appropriate $165,000 from the Animal Shelter Donations Fund (142-2120-72088) in Fiscal Year 2025- 26 to fund program activities; and
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
10. Authorize the City Manager to approve capital asset/equipment purchases over $100,000 for capital outlay purchases approved in the Fiscal Year 2026-27 annual budget.
SUMMARY OF THE MATTER
This report presents the proposed budget for Fiscal Year 2026-27 and recommends that the City Council adopt the budget, salary schedules, and related resolutions necessary to meet the July 1 deadline under the Laguna Beach Municipal Code. The proposed budget reflects updates based on input received from the City Council at the May 12, 2026, public budget workshop. In addition, the proposed budget includes modifications based on new information staff received since May 12, 2026. Total Fiscal Year 2026-27 estimated revenues (for all City funds) are decreasing by $935,900 to $166.2 million and total estimated Fiscal Year 2026-27 expenditures (for all City funds) are increasing by $715,500 to $170.4 million. In addition, interfund transfers (between all City funds) are increasing by $1.1 million next year. A summary of the proposed modifications made to the proposed budget since May 12, 2026, is presented in Attachment 1, Exhibit A to the staff report.
City staff met with the City Council Budget Ad-Hoc committee on May 27, 2026, and again on June 2, 2026, to discuss the Fiscal Year 2026-27 proposed budget and review the City’s financial forecast. In addition, the City held two budget-related community sessions for the public:
• A City Services discussion / forum held online on Wednesday, May 20th, 2026; and • An in-person Town Hall meeting on June 16, 2026, focused on the FY 2026-27 budget.
Other key actions requested include authorizing the automatic carryover of unspent funds in the capital improvement funds, the assessment district funds, and the Wildfire Mitigation and Fire Safety Fund as of June 30, 2026; adopting the salary schedules for Fiscal Year 2026-27; approving allocations for Community Assistance and Cultural Arts Grants; and adopting the Gann Appropriations Limit for Fiscal Year 2026-27.
In addition to what’s contained in the Budget, the Budget Ad Hoc Committee will have some recommendations to make on Tuesday night that will be provided separately. Staff appreciates their ideas and suggestions to continuously improve the City and its efficiencies. Lastly, the City Manager has included Attachment 7 to this staff report, as he seeks additional Council direction on some outstanding matters.
DISCUSSION
The City held a public budget workshop on May 12, 2026, to present and receive input on the City’s proposed budget for Fiscal Year 2026-27. The proposed modifications to the City’s Fiscal Year 2026-27 proposed budget since the May 12th meeting are itemized on Attachment 1, Exhibit A.
Changes to the Proposed General Fund Budget for Fiscal Year 2026-27: The table below summarizes the proposed changes for the General Fund for Fiscal Year 2026-27:
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
In addition, the following adjustments are proposed that have a net impact of $0 to the General Fund’s budget:
• Funding one additional limited term Associate Planner position, however, the change does not impact the General Fund’s expenditures because the original proposed budget inadvertently included the cost of two limited term positions.
• Elimination of Building Official position, however, this change does not impact the General Fund’s expenditures because the cost of the position was offset by salary savings in the original proposed budget. The duties of the Building Official are being provided by the Deputy Director of Community Development.
• Eliminating the Engineering Technician and Associate Civil Engineer position to fund 2 Assistant Engineers based on the Public Works and Utilities Director’s review of the Department’s needs after the Associate Civil Engineer position was recently vacated. If approved, one Assistant Engineer position will be underfilled by the City’s current Engineering Technician.
Following these adjustments, total General Fund appropriations for Fiscal Year 2026-27 are $101.0 million.
The General Fund remains balanced (after a transfer of $2.3 million from the Capital Improvement Fund), with a 20% contingency reserve of $19.0 million.
Changes to the Proposed Budget in Other Funds for Fiscal Year 2026-27: The table below summarizes the proposed changes for other funds for Fiscal Year 2026-27:
Request
Description Ongoing
Unfreeze Assistant City Manager position (315,500)$
Reallocate funding of Community Services Officer I
from Parking Fund (108,000)
Increase residency incentive for former City Manager (15,000) Funding for CalPERS retiree replacement benefit program (60,000) Eliminate City Arborist position (122,800)
Funding for Assistant Planner position 122,800
Increase transfer from Capital Improvement Fund 367,000 Net Fund Balance Impact of Budget Changes (131,500)$
Available Fund Balance as of 5.12.26 134,395$
Available Fund Balance, after adjustments 2,895$
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
Total appropriations for all Other Funds (Parking Fund, Capital Improvement Fund, Wastewater Fund, etc.) are $69.4 million, which includes $12.3 million in funding for capital improvement programs.
Attachment 1, Exhibit C itemizes capital outlay items that (if approved) will be funded by the General Fund ($450,000), South Laguna Fund ($30,000), Vehicle Replacement Fund ($4.9 million), and Capital Improvement Fund ($750,000).
Funding Policy Resolution (Attachment 2)
The City Council has also asked to renew a resolution, which reaffirms fiscal policies. Specifically, the resolution restricts the use of the Disaster Contingency Fund to emergencies involving the protection of life and property and public infrastructure repair, requiring a four-fifths Council vote for any expenditure. It also establishes an aspirational goal of maintaining this fund at 10% of the General Fund budget.
Additionally, the resolution directs up to $500,000 in excess Transient Occupancy Tax revenue to the Housing Fund, contingent on property tax growth exceeding budget estimates, and designates all transient Description One-Time Ongoing
Capital Improvement Fund: Increase transfer to General Fund (367,000)$ Capital Improvement Fund: Add transfer to Housing Fund (300,000) Parking Fund: Reallocate funding for Community Services Officer I (108,000)
Parking Fund: Increase transfer to Transit Fund (391,000) Vehicle Replacement Fund: Include conversion costs for
Marine Safety vehicle (30,000)
Vehicle Replacement Fund: Reduce revenues to align
with funding included in General Fund (500,000)
Street Lighting & Utility Fund: Increase revenues for Southern California Gas Company payment per license agreement 10,100 South Laguna Fund: Revise revenue estimates (75,000) 20,000 Wildfire Mitigation and Fire Safety Fund: Outdoor Warning System (265,000) Wildfire Mitigation and Fire Safety Fund: Videographer (5,000) Wildfire Mitigation and Fire Safety Fund: Emergency
preparedness training and workshops (25,000)
Housing Fund: Add transfer from Capital Improvement Fund 300,000 Transit Fund: Eliminate passenger fare revenue (391,000) Transit Fund: Increase transfer from Parking Fund 391,000 Subtotal of Budget Changes (1,231,900)$ (504,000)$
Total Requests (1,735,900)$
Request
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
occupancy tax revenue from short-term lodging units approved after July 2022 to the Housing Fund. Finally, the resolution reaffirms the Council’s policy of transferring up to $300,000 in mid-year General Fund savings to the Open Space Fund to support the acquisition and stewardship of open space resources. The City’s past practice has been to reaffirm this action annually.
Updated Salary Schedules (Attachment 3):
The salary schedules for Fiscal Year 2026-27, along with the Resolution approving the schedules, are included in Attachment 3. The revised salary schedules include the following changes:
• 1.5% salary range adjustment for Laguna Beach Municipal Employees’ Association (per MOU) • 3% salary range adjustment for Firefighters’ Association employees (per MOU) • 3% salary range adjustment for Police and Fire Management Association-Fire employees (per MOU)
• 1.5% salary range adjustment for Unrepresented Executive and Management employees and PartTime employees to match the increases for the Municipal Employees’ Association • 3.6% salary adjustment for City Attorney (per contract terms) • 3.6% salary adjustment for City Manager (per contract terms) • 1.5% salary adjustment for Elected City Clerk (per Resolution No. 25.057) • 1.5% salary adjustment for Elected City Treasurer (per Resolution No. 24.066) • Adjust Animal Shelter Manager salary range to align with the recommended range provided in the Citywide Classification and Compensation plan to facilitate recruitment efforts (MGMT 3040) Classification Updates:
• Move Wastewater Mechanical & Facilities Supervisor from MISC 122 to MISC 128. • Update the classification title of Emergency Operations Coordinator to Emergency Management Administrator and move from MISC 128 to MGMT 2005.
• New classifications added: Assistant Engineer (MISC 120), Housing Program Manager (MISC 128), and Transit and Parking Manager (MGMT 2010).
The salary schedules do not include the 4% salary adjustment included in the tentative agreement with the Laguna Beach Police and Fire Management Association-Police Unit because the agreement is pending City Council approval on the consent calendar. If the agreement is approved by the City Council, then the salary schedules for this bargaining unit will be adjusted accordingly.
Position Changes:
The budget includes eliminating 3 limited-term Associate Planner positions and 6 vacant regular full-time positions:
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
1) Communications Manager (City Manager)
2) Communications Coordinator (City Manager)
3) Senior Management Analyst (Administrative Services)
4) Administrative Analyst (Administrative Services)
5) Building Official (Community Development)
6) City Arborist (Public Works) (the City will still have two other staff members who are certified arborists)
These 9 reductions were offset by the addition of 2 new regular full-time positions: Jailer (Police Department) and Records Management Coordinator (Community Development Department). The full-time Jailer position resulted in the elimination of 2 part-time Jailer positions to improve staff consistency in keeping the position filled. A Records Management Coordinator position was permanently transferred from the Community Development Department to the City Clerk Department during Fiscal Year 2025-26.
However, the Community Development Department’s needs necessitate a Records Management Coordinator position. Therefore, the proposed budget includes the addition of this position. The net impact to the City’s total authorized and limited term full-time positions is a reduction of seven FT positions.
Community Assistance Grants
The City Council appointed Councilmember Kempf and Councilmember Jones to review the community assistance grant applications. This program is funded through the City's lease with the Festival of Arts.
Attachment 4 depicts their funding recommendations. The total grant funding of $234,500 is included in the City’s proposed budget for Fiscal Year 2026-27 (1103604-71000).
Cultural Arts Grants
The Laguna Beach Tourism Marketing District (LBTMD) Management District Plan allocated $240,000 of funding for Cultural Arts Grants for Fiscal Year 2026-27. The Arts Commission has submitted recommendations for Cultural Arts Grants (Attachment 5). The total grants awarded by the Arts Commission is $320,900 ($80,900 more than the LBTMD allocation for Fiscal Year 2026-27). The Sawdust Art Festival returned its Fiscal Year 2025-26 grant of $23,500 to the City. The additional shortfall of $57,400 can be funded from unspent funding available in the Fiscal Year 2025-26 budget for Cultural Arts Facilities. As a result, staff is requesting the City Council authorize the carryover of $80,900 of unspent funds from the Business Improvement District Fund (112) and appropriate this amount effective July l, 2026 to fund all grants recommended by the Arts Commission.
Constitutional Appropriation Limit:
Each year, the City must adopt an appropriation limit, known as the Gann Limit, which restricts the amount of revenue that can be appropriated in a given fiscal year. The limit applies to expenditures funded by proceeds of taxes, such as Property Tax, Sales Tax, and Transient Occupancy Tax, after excluding qualified capital outlay, debt service, and federal mandates costs. The finance staff has calculated the Gann Limit for FY 2026-27 to be $88,686,767. As the City appropriations remain well below the limit, there is no fiscal impact on the City of Laguna Beach. Attachment 6 includes the resolution to meet the state mandate.
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
Modifications to the Fiscal Year 2025-26 Amended Budget:
In June of each year, staff review the current fiscal year’s budget and recommends adjustments to the current year budget based on unanticipated changes or operational needs. The following adjustments are recommended:
General Fund:
Staff recommends creating a new Certified Access Specialist Special Revenue Fund (#204). California Senate Bill 1186 requires the City to collect an additional $4 fee on each City business license that is issued.
State law restricts the expenditure of these funds on activities that support disability-access compliance programs and Certified Access Specialist (CASp) services.
The City currently records this restricted revenue in the City’s General Fund and monitors the accumulated balance using a manual spreadsheet. Staff recommends creating a separate fund to follow predominant practice of other cities that administer business license programs and to improve staff efficiency through the elimination of utilizing a manual spreadsheet to monitor the balance. As a result, staff requests an appropriation and authorization to transfer $88,000 of funds on hand to the Certified Access Specialist Special Revenue Fund.

Animal Shelter Donation Fund (#142):
In November 2025, the City Council established a new fund to monitor the expenditures funded from animal shelter donations. At that time, approximately $1.4 million of unspent donation revenue was transferred from the General Fund to the new Animal Shelter Donations Fund. No appropriations for Fiscal Year 2025- 26 were requested at that time or during the Fiscal Year 2025-26 Mid-Year Budget Update in April.
However, during Fiscal Year 2025-26, approximately $165,000 of costs have been incurred (or are under contract with a vendor) that may be eligible for expenditure from the Donations Fund. Staff recommends an appropriation of $165,000 from the Animal Shelter Donations Fund to fund following activities underway in Fiscal Year 2025-26:
(1) An organizational assessment of the Animal Shelter operations being completed by Baker-Tilly ($55,000);
(2) Consultant services for design work for planned Animal Shelter improvements ($26,675); (3) Replacement of the Animal Shelter’s air conditioner ($12,360); (4) Purchase of the Shelter’s new electric van ($63,725) with a vinyl wrap ($2,500); and (5) A new commercial washing machine ($3,700).
This leaves a contingency budget of $1,040 for unanticipated costs through the remainder of the fiscal year.
If not used, it will return to the Donations Fund.
FINANCIAL ANALYSIS
The fiscal impact of the proposed budget adjustments is summarized in the “Net Impact to Available Fund Balance” column in Attachment 1, Exhibit B.
ADOPTION OF FISCAL YEAR 2026-27 BUDGET; APPROVAL OF FISCAL YEAR 2026-27 SALARY SCHEDULES; APPROVAL OF AND REVISIONS TO THE FISCAL YEAR 2025-26 BUDGET
June 23, 2026
ENVIRONMENTAL ANALYSIS
The recommended action consists of the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment and therefore does not constitute a “project” within the meaning of the California Environmental Quality Act. (Public Resources Code Section 21065; 14 CCR Section 15378(b)(4).)
ATTACHMENTS
Link to Proposed Budget discussed May 12, 2026, with formatting and clerical changes made. This document will be further revised by the Recommended Actions on June 23, 2026.
Fiscal Year 2026-27 Proposed Budget 5.12.2026
1. Resolution adopting the annual budget (Pg. 9)
Exhibit A - Modifications to the Fiscal Year 2026-27 Budget (Pgs. 10-12) Exhibit B - Beginning and Ending Fund Balances for the Fiscal Year 2026-27 (Pgs. 13-14) Exhibit C - Capital Equipment Requests for the Fiscal Year 2026-27 (Pgs. 15-17)
2. Resolution for Annual Transfers (Pgs. 18-20)
3. Resolution Approving Salary Schedules for Fiscal Year 2026-27 (Pg. 21) Exhibit A - Fiscal Year 2026-27 Salary Schedules (Pgs. 22-38)
4. Community Assistance Grants (Pg. 39)
5. Cultural Arts Grants (Pgs. 40-44)
6. Resolution approving the annual appropriations limit for the Fiscal Year 2026-27 (Pgs. 45-46) Exhibit A - Fiscal Year 2026-27 Appropriation Limit (Pg. 47)
7. Items identified by the City Manager as unresolved and for discussion (Pgs. 48-52) Submitted By: .Michelle Bannigan Approved: .David A Kiff Michelle Bannigan, Director of
Administrative Services
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Michelle Bannigan, Director of Administrative
Services
Dave Kiff, City Manager
Jane Abzug, Assistant City Attorney