Financial Performance Indicators
PRELIMINARY
2025-2026 Fiscal Year-End Results
as of June 30, 2026
Financial Performance Indicators
1 General Fund Revenue Trends
Monitors key tax and fee revenues that support ongoing General Fund operations.
Revenue Per Capita: The percentage of total government revenue divided by the local population.
Rising revenue per capita indicates an expanding capacity to deliver services.
Assessed Valuation (AV) Growth Trend: Since Prop 13 caps annual growth at 2% absent a sale/reassessment, consistent AV growth reflects turnover and new construction.
Operating Revenue Growth Trend: Compare to Expenditure Growth Trend on next page. Expenditures consistently outpacing revenues merit close monitoring, and a corrective action plan should be developed to realign expenditure growth with available revenues.
**FY 2025-2026 YTD column is preliminary until all year-end closing entries are completed and the annual financial audit has concluded.
2022-2023
Actuals
2023-2024
Actuals
2024-2025
Actuals
2025-2026
YTD**
2026-2027
Adopted Budget
Property Taxes $41,049,070 $43,067,609 $44,973,260 $47,536,230 $49,562,999 Sales & Use Tax 11,647,065 11,579,888 13,593,041 19,108,736 19,196,152 Transient Occupancy Tax 6,599,847 8,734,605 9,049,324 9,550,885 9,257,200 Business License Tax 4,935,627 5,422,317 5,589,153 6,551,463 5,900,000 Other Taxes & Assessments 1,993,354 2,152,618 2,133,734 2,152,819 2,100,000 Building Permits 1,661,661 2,512,240 2,390,192 3,095,288 3,193,000 Other Licenses & Permits 2,377,838 1,987,985 2,032,026 2,054,792 2,169,362 Building Plan Check Fees 1,703,380 1,754,456 2,215,433 3,885,775 3,066,000 Parks & Recreation Class Fees 4,374,436 4,437,368 4,812,027 5,210,376 5,208,335 Other Charges for Services 2,461,402 3,770,045 4,979,059 4,194,225 4,132,740 Fines 2,612,257 1,953,584 2,480,863 3,481,716 2,987,078 Use of Money & Property 4,727,310 6,736,206 7,253,672 6,862,775 5,611,100 From Other Governments 214,318 299,759 381,985 301,734 312,800 Miscellaneous Revenues 987,716 572,971 1,104,310 1,557,481 1,007,000 Operating Transfers In 3,557,607 3,731,200 3,540,490 4,787,392 5,261,998 Total Operating Revenues $90,902,887 $98,712,851 $106,528,567 $120,331,687 $118,965,764 Grants 238,699 442,998 365,210 229,740 - Bond Proceeds - - - 16,649,819 - Interfund Transfers In 490,571 775,434 230,407 341,016 146,750 Total Revenues & Sources of Funds $91,632,157 $99,931,284 $107,124,184 $137,552,262 $119,112,514 Operating Revenue Per Capita $2,645 $2,951 $3,129 $3,505 $3,465 Assessed Valuation (AV) Growth
Trend 6.7% 5.3% 5.2% 5.3% 5.3%
Operating Revenue Percent Change
from Prior Year 7% 9% 8% 13% -1%
Goal Based On Prior Year Average 7%
FISCAL YEAR
Financial Performance Indicators
2 Key Revenue Variances highlighted in the above chart include:
FY 2024:
• Property Taxes: Assessed Valuation grew by 5.31% annually (about $2 million). • Transient Occupancy Tax: Increased rate from 12% to 14% on July 1, 2023 and short-term rentals added another $1.1 million within FY 2024.
• Other Charges for Services: The recovery of Ambulance Fees increased significantly due to the transition of the City’s ambulance billing and collection vendor. • Use of Money & Property: Fluctuation due to year-end fair market value.
FY 2025:
• Property Taxes: Assessed Valuation grew by 5.17% annually (about $2 million). • Other Charges for Services: The City received extraordinary Fire Reimbursements due to mutual aid response to the Pacific Palisades Fire and other regional fire incidents.
FY 2026:
• Property Taxes: Assessed Valuation grew by 5.29% annually (about $2.5 million). • Sales & Use Tax: The new Local and Transaction Use Tax, Measure MMB, added $6.7 million within FY 2026. Additionally, Sales Tax activity remained strong due to regional events such as the FIFA World Cup occurring within the month of June 2026. • Business License Tax: The City’s new Discovery and Collection Program through HDL added approximately $864,000 in recovered business license payments to the City. • Building Permits & Plan Check Fees: Building activity was at an all-time high due to large development projects.
• Fines: Parking Citations increased due to an increase in the volume of parking violations coupled with an increase in the citation amount.
• Operating Transfers In: The implementation of a new Cost Allocation Plan in FY 2026 allowed for greater cost recovery from other funds that are supported by the General Fund. Additional transfers in are supported by Engineering Service Charges that are associated with staff time spent on CIP projects.
FY 2027 ADOPTED BUDGET:
• Property Taxes: Assessed Valuation is expected to grow by 5.29% annually (about $2.0-$2.5 million).
• Sales & Use Tax: Sales tax is expected to remain strong with the inclusion of the new Measure MMB funds, along with regional events that draw visitors to the City, such as the FIFA World Cup (July 2026) and the Los Angeles Super Bowl (February 2027). • Building Permits & Plan Check Fees: Building activity is expected to remain strong due to large- scale residential projects, which are at various stages of the development process.
Financial Performance Indicators
3 General Fund Expenditure Trends
Monitors the growth in ongoing expenditure categories.
Operating Expenditures Per Capita: The percentage of General Fund expenditures divided by the local population. Rising expenditures per capita can indicate expanding service levels and/or cost pressures.
Operating Expenditure Growth Trend: Compare to Revenue Growth Trend on previous page.
Expenditures consistently outpacing revenues merit close monitoring, and a corrective action plan should be developed to realign expenditure growth with available revenues.
**FY 2025-2026 YTD column is preliminary until all year-end closing entries are completed and the annual financial audit has concluded.
Key Expenditure Variances highlighted in the above chart include:
FY 2024:
• Salaries & Wages: Increased by 8% due to 15 added full-time positions and MOU increases. 2022-2023
Actuals
2023-2024
Actuals
2024-2025
Actuals
2025-2026
YTD**
2026-2027
Adopted Budget
Salaries & Wages $37,722,402 $40,924,332 $45,699,908 $47,041,283 $48,410,664 Employee Benefits 13,506,732 15,997,363 16,639,537 17,319,622 21,426,361 Contract & Professional Services 13,925,304 13,702,579 14,759,786 16,555,155 16,411,172 Materials & Services 2,778,794 3,702,734 3,922,865 4,446,459 5,381,750 Utilities 1,312,949 1,508,110 1,468,748 1,499,617 1,554,220 Internal Service Charges 9,344,177 12,223,288 12,095,245 14,843,359 16,736,817 Debt Service 5,634,542 5,640,406 5,644,322 5,698,724 6,314,700 Operating Transfers Out 9,447 221,282 276,972 15,667 13,134 Total Operating Expenditures $84,234,346 $93,920,096 $100,507,383 $107,419,886 $116,248,818 One-time Capital Purchases &
Equipment $180,138 $111,641 $45,289 $3,545,632 $418,300 Interfund Transfers Out 9,113,109 4,328,558 17,224,449 8,961,071 11,270,688 Total Expenditures & Uses of Funds $93,527,593 $98,360,295 $117,777,121 $119,926,590 $127,937,806 Operating Expenditures per Capita $2,451 $2,808 $2,952 $3,129 $3,386 Operating Expenditures to Adopted
Budget Ratio 98.8% 101.2% 102.1% 101.7% - Total Operating Expenditures %
Change from Prior Year 8% 11% 7% 7% 8%
Goal Based On Average
Revenue Growth 7%
Los Angeles Area CPI-U, All Items,
as of April 7.9% 3.8% 3.9% 3.0% 3.7%
FISCAL YEAR
Financial Performance Indicators
4 • Employee Benefits: Increased by 18% overall due to higher medical insurance costs, CalPERs contributions related to 15 additional positions, and Workers Compensation Internal Services Charges for increased claims activity.
• Materials & Services: Departmental supplies returned to pre-pandemic levels in line with operational levels and catching up on deferred maintenance. • Internal Service Charges: Allocations were increased for the Insurance Reserve Fund due to Liability Claims by $1.2 million and to the Information Technology Fund by $927,636 for projects and equipment replacements.
FY 2025:
• Salaries & Wages: Increased by 12% due to 20 added full-time positions and MOU increases. • Employee Benefits: Increased by 4% overall due to higher medical insurance costs and higher Sworn CalPERS contributions.
• Contract & Professional Services: Increased by 8% due to higher contract services and legal services.
FY 2026:
• Salaries & Wages: Increased by 3% due to MOU increases. • Employee Benefits: Increased by 4% due to medical insurance costs and CalPERS contributions in line with salary increases.
• Contract & Professional Services: Increased by 12%, mainly due to plan check and engineering services necessary to backfill vacancies and supplement staff resources. • Internal Service Charges: Increased by 23% due to rising costs in the Insurance Fund, necessitating additional charges of nearly $1.4 million. Additionally, charges to the Information Technology Fund were increased by $1.0 million for projects and equipment replacements.
FY 2027 ADOPTED BUDGET:
• Salaries & Wages: Projected to increase by 3% due to MOU increases. • Employee Benefits: Projected to increase by 24% due to CalPERS Unfunded Accrued Liability (UAL) payments ($2.6 million) and higher Workers Compensation Internal Service Charges of $720,193.
• Internal Service Charges: Projected to increase by 13% due to additional allocations to the Insurance Reserve Fund of $1.1 million and the Fleet Fund of $772,342. • Debt Service: Increase of 11% due to Certificates of Participation debt service issued for public safety radio equipment.
Financial Performance Indicators
5 General Fund Operating Structural Balance
Monitors whether recurring revenues consistently exceed recurring expenditures.
Operating Margins: The difference between operating revenues and expenditures, calculated as a percentage. An operating surplus indicates funds are available for capital improvements or growing reserves, whereas a deficit points to structural financial strain.
**FY 2025-2026 YTD column is preliminary until all year-end closing entries are completed and the annual financial audit has concluded.
FY 2024-2025 Actuals include the significant expenditure for the investment purchase of 400 Manhattan Beach Boulevard for $13.2 million. In FY 2025-2026, critical public safety radio equipment was replaced for $3.6 million. Certificates of Participation were then issued in August 2025 (FY 2025-2026) to replenish the General Fund balance and spread both of these significant purchase costs over time.
Of the $17.6 million Increase in Fund Balance in FY 2025-2026, $16.6 million is derived from the bond proceeds from the 2025 A and B Certificates of Participation related to the purchase of 400 MBB and Public Safety Radios.
2022-2023
Actuals
2023-2024
Actuals
2024-2025
Actuals
2025-2026
YTD**
2026-2027
Adopted
Budget
Total Operating Revenues $90,902,887 $98,712,851 $106,528,567 $120,331,687 $118,965,764 Total Operating Expenditures 84,234,346 93,920,096 100,507,383 107,419,886 116,248,818 Operating "Structural" Surplus $6,668,541 $4,792,756 $6,021,184 $12,911,801 $2,716,946 Structural Surplus as % of Revenues 7% 5% 6% 11% 2%
GOAL >5% >5% >5% >5% >5%
Including all Inflows/Outflows such
as Interfund Transfers:
Total Revenues & Sources of Funds $91,632,157 $99,931,284 $107,124,184 $137,552,262 $119,112,514 Total Expenditures & Uses of Funds 93,527,593 98,360,295 117,777,121 119,926,590 127,937,806 Increase/Decrease in Fund Balance ($1,895,436) $1,570,989 ($10,652,937) $17,625,672 ($8,825,292) Increase/(Decrease) in Fund Balance as
% of Total Expenditures & Uses -2% 2% -9% 15% -7%
GOAL >0% >0% >0% >0% >0%
FISCAL YEAR
Financial Performance Indicators
6 General Fund Budgetary Fund Balance
Measures accumulated reserves (often represented as a percentage of annual operating expenditures) to cover emergencies or economic downturns.
Budgetary Fund Balance as % of Expenditures: S&P Global Ratings generally views unrestricted/available fund balance of 8–15% of expenditures as "strong," and above 15% as "very strong." AAA issuers commonly sit in the 20–30%+ range, especially in California, given revenue volatility.
*FY 2025-2026 YTD column is preliminary until all year-end closing entries are completed and the annual financial audit has concluded.
**The FY 2026-2027 Estimated Fund Balance is based on the Adopted Budget plus FY 2025-2026 year -end results. A more refined projection will occur with the Mid-Year Budget Update.
The City's General Fund continues to maintain a policy reserve above 20% of operating expenditures, or about $23.2 million in FY 2026-2027, exceeding the GFOA recommendation of no less than 2 months (17%) of regular General Fund operating revenues or expenditures. Since the policy reserve is aligned with operating expenditures, the reserve grew by $2.1 million (10.9%) from the prior year.
Since the early 2000s, the City Council has maintained a $4.0 million “Economic Uncertainty” reserve.
Due to the one-time transfer of $6.0 million to the Insurance Fund necessitated by unprecedented claims activity and the lack of sufficient reserve funds, a planned temporary use of the General Fund Economic Uncertainty Reserve was included in the FY 2026-2027 Adopted Budget.
With preliminary positive results in FY 2025-2026, staff recommends maintaining the Economic Uncertainty Reserve at $4.0 million. Ongoing economic concerns, inflationary cost increases, and the unprecedented liability claims and litigation expenses underscore our renewed focus on long-term planning and building up greater reserves.
2022-2023
Actuals
2023-2024
Actuals
2024-2025
Actuals
2025-2026
YTD*
2026-2027
Estimated**
Financial Policy Reserve $17,055,030 $18,565,193 $ 19,548,282 $21,101,166 $23,249,764 Economic Uncertainty Reserve 4,000,000 4,000,000 4 ,000,000 4,000,000 4,000,000 Unreserved Fund Balance 14,709,384 13,994,776 2 ,128,343 18,201,131 5,805,137 Total Budgetary Fund Balance $35,764,414 $36,559,969 $ 25,676,625 $43,302,297 $33,054,901 Budgetary Fund Balance as % of
Operating Expenditures 42% 39% 26% 4 0% 28%
GOAL 20-30% 20-30% 2 0-30% 20-30% 20-30%
Section 115 Pension Trust Fund Balance $2,859,803 $3,599,985 $ 4,711,798 $6,545,671 $6,600,000
FISCAL YEAR
Financial Performance Indicators
7 Debt Burden
Monitors the overall weight of the City's outstanding debt obligations and budgetary flexibility.
Debt Service as % of Operating Expenditures: Measures the percentage of General Fund Expenditures committed to debt service, which leaves less flexibility for other spending. Rating agencies generally consider under 8% as strong/favorable and consistent with AAA-level credit quality. Between 8-10% is considered moderate risk; and over 10% is considered an elevated risk.
Net Direct Debt per Capita: Measures the City’s outstanding tax-supported debt, including Certificates of Participation and Pension Obligation Bonds, attributable to each resident.
Debt to Assessed Value: Evaluates the total outstanding debt against the total taxable property base, indicating the overall burden on taxpayers. California Government Code Section 43605 limits a city's bonded indebtedness for public improvements to 15 percent of the total assessed value of all real and personal property in the city. Rating agencies often view under 1-2% of AV as low, and higher than 4- 6% as elevated. AAA issuers are typically well under 1-2%.
*Includes Debt Service in General Fund and Capital Improvements Fund related to Pension Obligation Bonds, Marine Avenue Sports Fields, Police/Fire Facility, Fire Station No. 2, Public Safety Radio Equipment, and 400 MBB Acquisition. Excludes Metlox COP Debt Service allocated to Parking Fund. Excludes Pension Obligation Bond Debt Service allocated to Enterprise and Internal Service Funds.
**FY 2025-2026 YTD column is preliminary until all year-end closing entries are completed.
The City has planned debt service issuances in the next few years, including the Senior and Scout House reconstruction and development project at 400 Manhattan Beach Boulevard. For the project at 400 Manhattan Beach Boulevard, debt service is expected to be covered by corresponding land lease revenues.
2022-2023
Actuals
2023-2024
Actuals
2024-2025
Actuals
2025-2026
YTD**
2026-2027
Adopted
Budget
Principal and Interest on Long-term Debt* $6,804,016 $6,808,534 $6,815,784 $7,627,927 $8,111,439 Total Operating Expenditures $84,234,346 $93,920,096 $100,507,383 $107,419,886 $116,248,818 Debt Service as % of Operating
Expenditures 8.1% 7.2% 6.8% 7.1% 7.0%
GOAL <8% <8% <8% <8% <8%
Direct Debt Per Capita $197.98 $203.53 $200.16 $222.17 $236.26 Taxable Property AV Base $23,681,804,263 $24,938,781,033 $26,227,077,038 $27,613,632,196 $29,073,402,771 Debt to Assessed Value 0.03% 0.03% 0.03% 0.03% 0.03%
GOAL <1% <1% <1% <1% <1%
FISCAL YEAR
Financial Performance Indicators
8 Pension Obligations Burden
Monitors trends in required Employer Contribution rates and Unfunded Accrued Liability payments, CalPERS pension funded ratio, Unfunded Accrued Liabilities, and Pension Obligation Bond Debt Service.
The City has participated in the California Public Employees Retirement System (CalPERS) to provide retirement benefits to employees since 1947. The CalPERS retirement system is a defined benefit plan, which means any shortfall in the plan is the City's responsibility. Due to the significant financial implications, it is important for the City to actively monitor its financial standing with CalPERS. Managing rising pension costs and meeting retirement obligations remain among the City’s biggest challenges. Over 95% of retirement costs are attributable to the City’s Governmental Funds, and growing pension costs have the potential to crowd out other funding needs. Below is a chart of the payments attributed to pension costs since FY 2022-2023:
**FY 2025-2026 YTD column is preliminary until all year-end closing entries are completed.
Payments
Contribution payments are made through the payroll process to fund current service levels. Unfunded Accrued Liability (UAL) and Pension Obligation Bond (POB) payments are for past service when contributions and earnings are insufficient to cover the cost of the pension.
Pension Liability
Pension liability plays a significant role in the volatility of pension costs. To determine the accrued pension liability, CalPERS makes actuarial assumptions and projections about the employee population, including salary progression, expected retirement dates, mortality, turnover, and, most importantly, the rate of return on investments. CalPERS also determines the value of its fiduciary net position (cash and investments). If the fiduciary net position is less than the accrued pension liability, the difference is the UAL. The UAL is amortized over time and is billed to the City annually. Below is a chart depicting the pension liability and funding ratio over the last 5-years. FY 2021 shows a pension asset due to the issuance of Pension Obligation Bonds, which paid off the pension liability by using proceeds from the bonded debt.
2022-2023
Actuals
2023-2024
Actuals
2024-2025
Actuals
2025-2026
YTD**
2026-2027
Adopted
Budget
Current Service Contributions $4,638,320 $5,624,434 $5,912,093 $6,186,691 $6,514,616 Pens
ion Obligation Bonds Debt Service $5,508,235 $5,520,349 $5,523,521 $5,521,298 $5,519,461 Unfunded Accrued Liability Payments $364,895 - $1,070,168 $2,011,313 $2,770,663 Total Expenditures $10,511,450 $11,144,783 $12,505,782 $13,719,302 $14,804,740
FISCAL YEAR
Financial Performance Indicators
9 Section 115 Trust Fund
In an effort to mitigate rising pension costs, a Section 115 Trust was established in 2017 as a “savings account” for future pension costs. The trust assets can be accessed at any time to pay CalPERS. The balance of the trust at the end of FY 2026 is $6.5 million.
Funding Goal
*Complete data for FY 2026 is not yet available as the next Actuarial Report will become available in August 2027.
A funding goal of 100% indicates the City has sufficient assets to cover future anticipated long-term liabilities. A funding status greater than 100% indicates that the plan has sufficient assets to cover all future obligations and absorb fluctuations in CalPERS’ investment returns. Investment returns are measured against the discount rate, which can dramatically affect the funding status. The discount rate is the assumed rate of return used when calculating pension liabilities. When CalPERS’ investment returns end below the set discount rate, additional unfunded liabilities accrue. Conversely, if CalPERS’ investment returns exceed the discount rate, the City’s unfunded liabilities are reduced. The City’s current discount rate is 6.8%. Below is a chart with the CalPERS historical returns compared to the discount rate depicted with the orange line:
Source: CalPERS Actuarial Reports
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Accrued Pension Liability (a) $366,549,149 $384,956,138 $403,369,325 $421,052,011 $442,977,158 Fiduciary Net Position (b) $398,212,419 $356,713,877 $367,154,077 $389,114,075 $423,965,390 Unfunded Accrued Liability/(Asset) (a-b) ($31,663,270) $28,242,261 $36,215,248 $31,937,936 $19,011,768 Liability Funded Ratio (b / a) 108.6% 92.7% 91.0% 92.4% 95.7% Section 115 Balance (c) $1,820,529 $1,603,037 $2,859,803 $3,599,985 $4,711,798 $6,545,671 Funded Ratio with Sec. 115 ((b+c) / a) 109.1% 93.1% 91.7% 93.3% 96.8% Goal >100% >100% >100% >100% >100% >100%
FISCAL YEAR
Financial Performance Indicators
10 Investment Returns
In FY 2025, CalPERS investment returns were 11.6%, which reduced the City’s UAL by $12.9 million, from $31.9 million to $19.0 million. In addition to investment returns, the discount rate can affect UAL. CalPERS implemented a risk mitigation policy to potentially lower the discount rate and derisk the plan when investment returns exceed the discount rate (6.8%). If CalPERS does not implement the risk mitigation policy, the City can expect the UAL to be significantly lower next year, given the preliminary investment return announced for FY 2026 of 14.8%.
Financial Performance Indicators
11 Other Post Employment Benefit (OPEB) Obligations
Monitors retiree healthcare liabilities.
Other Post Employment Benefits (OPEB) refer to non-pension benefits provided to employees after retirement. The City funds two OPEB programs: Public Employees’ Medical and Hospital Care Act (PEMHCA) benefits and the City’s retiree health plan.
The PEMHCA benefits are governed by State law. The State sets a minimum monthly amount that employers must contribute toward an employee’s retiree health insurance premiums. These payments are included in the health insurance premiums billed by CalPERS.
The retiree medical insurance program is a City program that is negotiated through collective bargaining.
The current provisions stipulate that the employee will receive a set stipend upon retirement after a set number of years of service, and that the benefit ends once the employee becomes eligible for Medicare, reaches age 65, or passes away.
The chart below depicts the OPEB expenditure for the last 5-years:
Annually, the City obtains an actuarial report to determine the funding status of the OPEB programs for financial reporting purposes. Below is a chart illustrating the 5-year history of the funding status:
The retiree premium liability refers to the liability for the expenses the City pays annually for OPEB programs. The implicit rate subsidy liability relates to the hidden financial support that retirees received by allowing them to participate in the same health insurance pool and pay the same premiums as active employees. Based on the latest actuarial report, the City’s OPEB liability decreased by $756,864 in FY 2026, from $3.0 million to $2.3 million, primarily driven by an increase in the interest rate.
The actual OPEB expenditure currently does not exceed $400,000 annually, and significant cost increases are unlikely. Since there are restrictions on entry and participation in the OPEB programs, expenditure growth is primarily driven by an increase in population rather than an increase in cost.
Therefore, although the City records a net OPEB liability for financial statement presentation, the OPEB program financial risk is considered low.
2021-2022
ACTUAL
2022-2023
ACTUAL
2023-2024
ACTUAL
2024-2025
ACTUAL
2025-2026
ACTUAL
2026-2027
ESTIMATE
City's Retiree Health Plan $175,936 $194,365 $168,278 $178,063 $178,288 $188,000 PEMHCA $186,708 $169,353 $193,474 $203,925 $207,788 $211,944 Total Expenditure $362,644 $363,718 $361,752 $381,988 $386,076 $399,944
FISCAL YEAR
2021-2022
ACTUAL
2022-2023
ACTUAL
2023-2024
ACTUAL
2024-2025
ACTUAL
2025-2026
ACTUAL
Retiree Premium Liability $10,040,602 $10,333,018 $9,425,997 $9,404,313 $8,227,195 Implicit Rate Subsidy $7,809,714 $8,047,078 $4,960,508 $5,030,328 $6,271,043 Fiduciary Net Position $12,791,359 $11,185,245 $10,853,922 $11,371,016 $12,191,477 Net OPEB Liability/(Asset) $5,058,957 $7,194,851 $3,532,583 $3,063,625 $2,306,761
FISCAL YEAR
Financial Performance Indicators
12 Insurance Reserve Fund – Internal Service Charges and Year-End Appropriation The City maintains an Insurance Reserve Fund for property, general liability, and workers’ compensation expenses. This fund pays insurance premiums, benefit and settlement payments, and administrative and operating expenses. The Insurance Reserve Fund is supported by charges to other City funds for the services it provides (“internal service charges”). These annual internal service charges should be approximately equal to the annual expenses within the fund.
The City is a member of the Public Risk Innovation, Solutions, and Management (PRISM) risk management pool. PRISM provides coverage for the City’s general liability and workers’ compensation programs, and reimburses the City for any payments made in excess of the City’s self-insured retention (SIR). The SIR is $500,000 for general liability and $750,000 for workers’ compensation. This means that the City is responsible for paying the first $500,000 for each general liability claim, and the first $750,000 for each worker’s compensation claim. However, the City must pay the claims upfront, and the cases must reach final conclusion (including all avenues for appeal) before any reimbursements are received.
Reserves are maintained for current and long-term general liability claims and workers’ compensation claims (total liability). Current total liability is determined monthly by analyzing the current case reserves and determining the amount the City is liable for in the fiscal year and up to the SIR. For long-term total liability, the City historically maintained a $2 million policy reserve. In FY 2023, the City updated its reserve policy to 50% of the Incurred But Not Reported (IBNR) as determined by an actuarial report.
The City has historically used a “pay-as-you-go” methodology to determine the internal service charges.
However, due to increased claim expenses and insurance costs, internal service charges have not kept pace with expenditures, resulting in a decrease in the fund balance. Staff will be returning to the City Council at a later date for a broader discussion regarding the reserve funding policy for the Insurance Reserve Fund.
The following chart outlines the fund balance in relation to reserve levels over the past five fiscal years:
*Estimate. The planned $6.0 million equity transfer included in the FY 2026-2027 Budget will mitigate this negative balance. 1The City’s current Financial Policy reserve set at 50% of the Incurred But Not Reported (IBNR) liability, as determined by the actuarial reports for the Insurance Fund, is being re-evaluated.
From FY 2024-2025 to FY 2025-2026, the budgetary fund balance in the Insurance Reserve Fund is expected to decrease by $4.6 million. This is primarily driven by the increase in the number and cost of claims. The fund balance in the Insurance Fund is negatively impacted by cases that significantly exceed the SIR and take multiple years to resolve, and the City currently has three cases that fall within this category.
Fiscal Year
Description 2021-2022 2022-2023 2023-2024 2024-2025 2025- 2026* Budgetary Fund Balance $19,617,260 $18,721,978 $19,733,541 $17,481,830 $12,883,338 Case Reserves $10,773,525 $10,922,485 $12,143,308 $11,189,031 $12,945,654 Policy Reserves1 $2,000,000 $7,030,000 $7,204,500 $7,574,500 $8, 004,000 Balance after Reserves $6,843,735 $769,493 $385,733 ($1,281,701) ($8,066,316) Financial Performance Indicators
13 Insurance premiums are another major contributor to the increase in expenses in the Insurance Reserve Fund. Total insurance premiums increased an average of 30% annually from FY 2023 to FY 2026, from $1.8 million to $3.7 million. These significant increases are primarily in liability and property insurance.
The increase in liability insurance premiums is due in part to the City’s loss experience (frequency and severity) and a consequence of the hard insurance market. The insurance premiums are charged out directly in the year they are incurred, so any large year-over-year variance has an immediate impact on other funds.
Current Goals
Ideally, there would be internal cost recovery for 100% of Insurance Reserve Fund expenditures in any given year to ensure sufficient cash balance in the fund. Below is a chart comparing internal service charges versus the expenditures for the past five years:
Internal service charges are determined during the budget cycle and are not adjusted as additional appropriations are made. In the last three fiscal years, there have been additional appropriations in the Insurance Fund with no corresponding increase in internal service charges. Although some of these expenditures may eventually be recouped by the insurance pool to the extent that they exceed the City’s SIR, they still negatively impact available resources in the Insurance Reserve Fund until the cases close.
Year-End Insurance Reserve Fund Appropriation
In FY 2025-2026, approximately $11.9 million in expenditures were originally budgeted in the Insurance Reserve Fund. An additional $1.025 million was appropriated during the mid-year budget update due to expenditures trending above expected levels. As we close the fiscal year, an estimated additional appropriation of $2.175 million is required to align the appropriation with actual expenditures, as liability insurance claim payments have again exceeded the mid-year projection.
Fiscal Year
Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026* Total Expenditures $10, 813,472 $10,272,034 $9,528,177 $11,566,485 $15,141,605 Internal Service Charges $7,122,900 $6,376,497 $8,507,036 $8,623,980 $9,516,300 % Internal Cost Recovery 65.9% 62.1% 89.3% 74.6% 56.4%
Goal 100.0% 100.0% 100.0% 100.0% 100.0%
Financial Performance Indicators
14 Significant Equipment Replacements and Key Projects Funded Status Fleet and Specialty Vehicles are being reviewed by the Public Works Department. Other significant equipment and project expenditures identified by departments are listed below. Although the list is dynamic and subject to change, having a comprehensive approximation is vital for long-term financial planning.
*City User Fee Schedule has specific Building Permit Fees accruing dedicated “General Plan Maintenance” revenues for these tasks. The General Plan Maintenance account has $720,000 currently available and is regularly accruing additional revenue.
2027-2028
Needs
2028-2029
Needs
2029-2030
Needs
2030-2031
Needs
2031-2032
Needs
Future
Needs
FIRE DEPARTMENT
TDA Vehicle Replacement Equipment Fund Replenish $200,000 Standard of Cover and Strategic Plan $80,000
Knox Box eKey Replacement $6,000
High-Rise Equipment $100,000
Fire Nozzles and Appliances $40,000
Fire Extinguisher Training Prop $14,000
Auto-Pulse Replacement $90,000
Thermal Imager Replacement $60,000
Self-Contained Breathing Apparatus $650,000
Radio Equipment Replacements (FY 2033) $923,570
Subtotal Fire Department $440,000 $90,000 $60,000 $0 $650, 000 $923,570
POLICE DEPARTMENT
Weapons Replacement $50,000 $35,000 $40,000
Jail Access Control System $38,000
MDCs for Field Vehicles $44,000 $24,000 $24,000
CradlePoint Modems for Field Vehicles $60,000 $24,000
AEDs for Patrol Vehicles $25,000
Taser Replacement $120,000
Crisis Negotiations Communications Equipment $29,000
Heavy Duty Ballistic Vest Panels $50,000
Helmet Communications Equipment $30,000
Radio Equipment Replacements (FY 2033) $3,608,689
Subtotal Police Department $217,000 $208,000 $168,000 $0 $0 $3, 608,689
COMMUNITY DEVELOPMENT DEPARTMENT
General Plan Housing Element* $500,000
Rest of General Plan, Zoning Code, LCP Update* $2,500,000 Furniture Replacements $40,000 $40,000
Monitors for Digital Plan Checking $15,000
Subtotal CD Department $555,000 $2,540,000 $0 $0 $0 $0
FISCAL YEAR
Financial Performance Indicators
15 2027-2028
Needs
2028-2029
Needs
2029-2030
Needs
2030-2031
Needs
2031-2032
Needs
Future
Needs
INFORMATION TECHNOLOGY DEPARTMENT
Storage-Primary $182,991
Backup System- Primary $159,312
Wireless Access Points - Internal $71,806 $35,903
Website Replacement $80,000
Backup System- Secondary $175,243
Wireless Access Points - External $31,629
Mobile Data Computers (11 Devices) $68,640 $89,232
Storage-Secondary $201,290
Firewalls- Police $112,208
Switches - Core $84,407
Switches - Edge $81,272 $167,278
Plotter $16,475
CradlePoints (10 Devices) $46,636
Enterprise Resource Planning Replacement $896,157
Enterprise Permitting & Licensing $696,157
Document Management Replacement $270,665
Firewalls- City Hall $295,602
Phone System $275,000
Subtotal IT Department $414,109 $391,415 $542,288 $2, 325,859 $364,232 $0 TOTAL $1,626,109 $3,229,415 $770,288 $2, 325,859 $1,014,232 $4,532,259
FISCAL YEAR
Financial Performance Indicators
16 Capital Asset Condition Assessments
Capital asset condition assessments are a foundation of prudent asset management, evaluating the physical state and remaining lifespan of infrastructure to inform budgeting, risk management, and long- term capital planning. Updated Assessments provide the data necessary to prioritize repair and replacement decisions based on actual condition rather than age alone. This approach also extends asset useful life and reduces lifecycle costs through proactive maintenance rather than reactive repairs, while supporting public safety and risk mitigation by identifying deterioration before it results in failure.
Pavement Management Index – Last completed in 2024; Pavement Condition Index (PCI) was 73.3 and considered a “Fair” condition; Triennial update funded in FY 2027.
Pier Structural Assessment – Initial Assessment completed in 2026; final report will be presented to City Council at a future date.
Parking Facilities Assessment – Funded in FY 2028.
Facilities Assessment – Currently unfunded; last completed in 2013.
Utilities Assessment – Currently unfunded.