Pasadena
INITIAL PRESENTATION ON CITY BUDGET PROCESS,
OVERVIEW OF CURRENT FINANCIAL STATUS, AND
DISCUSSION ON CITY COUNCIL PRIORITIES
Matthew Hawkesworth
Finance Director
Finance Committee – Item 4
City Council Meeting - Item 12
March 24, 2025
Key Fund Types
General Fund – Only fund with NO restrictions on how funds are spent
Special Revenue Funds – Funding from special tax or other governments with specific restrictions (Gas Tax, Transportation Taxes)
Enterprise Funds – Funding from customers with specific restrictions (Water, Electric, etc.)
Internal Service Funds – Funding from internal
customers/departments to support services or benefits (I.T., Fleet Maint., Benefits)
2 Where Does Our Money Come From?
General Fund
Taxes
Franchise fees
Permit fees
Charges for Service
Intergovernmental
Gas Tax
Utility rates
Sewer fees
Development fees
Transportation Sales
Tax
Parcel Tax
Special Revenues &
Assessments
Bonds
3 Where’s Income Tax?
Revenues – Two Major Categories
Taxes, Fees and Charges
Revenue generating
purpose
Not directly related to the
cost of a service
Some are adjusted
annually by CPI
Impact Fees, Business
License, In-Lieu Fees, UUT
& TOT
General Fee Schedule
Cost recovery purpose
Directly related to the
cost of a service
Must be able to
support the cost
Some are adjusted by
CPI
More than 1,400 unique
fees
4 Revenues – The Big 4
Property Tax - $112m
Pasadena gets roughly 21 cents on the
dollar
Sales Tax – 10.25% - $76.6m
Local Sales - Pasadena gets 1% of the 9.5%
County Pool – Pasadena gets 2% of the 1%
Measure I – Pasadena keeps the full 0.75%
(1/3 goes to PUSD per MOU)
Utility Users Tax - $34m
Tax varies based on the utility type 7.5% -
9.4%
Transient Occupancy Tax - $19.3m
City keeps the 12.11%
About 66% goes to PCOC for debt service
5 Measures I and J
Initial Forecast of $21 million annually, FY 24 - $32.2m, FY 25 Forecast - $33.1m
Measure J supports the City giving 1/3 to PUSD
More than $10.0m annually
Tax became effective April 1, 2019
Requires out-of-state vendors to charge sales tax on ALL purchases if vendor does $100k or 200 transactions
annually.
California requires collection of Special Transaction Taxes for in-state and out-of-state ($500k of transactions
annually) per same parameters
6 Expenditures
Personnel
FY 25 growth factor was
5.7%.
CalPERS Pension – FY 25
Contribution Rates
Non-Safety – 35.98%
Safety – 57.78%
Benefits & Workers Comp
self-funded
Services & Supplies
Based on contracts and
work plans
Most growth based on
CPI, PPI or Inflation
Includes transfers to
PCOC and PUSD
7 Expenditures
Internal Service Funds
I.T. Services
Building Maintenance
Fleet Maintenance
Fleet Replacement
Capital Outlay
GF historically provided
little funding for Capital
Not Included
Bldg. replacement or
major renovations
Infrastructure
Major equipment
Enterprise funds manage
own replacements –
Water, Electric, Refuse,
Transportation
8 Budget Outlook – General Fund
Property tax is up 4.6% through Feb. 2025, which is slightly better than the budget (4.2%). Slower growth is anticipated into FY 26 of 3.5%. Total property tax related revenue approx. $116 million.
Sales tax has been flat for more than a year. The FY 25 forecast is approx. $2 million lower than budget. Future growth is projected at 3.6% for FY 26 and 3.2% for FY 27.
Recent federal actions such as tariffs, plus ongoing inflationary challenges may negatively impact these forecasts.
Transient occupancy tax will get a one-time boost for increased stays related to the fire and windstorm. Normalized year-over-year growth is expected to be minimal with stagnant occupancy levels and average daily rates.
9 Budget Outlook – General Fund
Utility user tax revenues vary. Water and electricity up about 6%, other categories are flat or declining. Overall – projecting an increase of
3.46% for FY 26.
Taxes and franchise fees account for $265.7 million of the $340.8 million General Fund budget, but we must also focus on areas where we can recover or generate new or additional revenue.
Initial forecasts for many fees, permits, and charges are reflecting flat or declining revenue.
10 Budget Outlook – Other Funds
Cost of service studies and rate approvals in FY 24 are providing improved Refuse and Sewer/Storm Water programs. Future studies will be staggered.
Some special revenue funds, such as Gas Tax, are based on revenue methodologies that do not keep up with the service needs and construction costs.
Other special revenue funds are not able to recoup all costs due to state law or other regulatory requirement limits
Prior Council decisions have determined how funds are used. Grant funded program revenues are not increasing at the same rate as expenses, and rarely provide sufficient funding to pay for overhead costs Cost allocation plan gap of more than $5.5 million
11 Budget Guidance
Every budget cycle is challenged with how to balance the budget Due to economic uncertainty and fiscal pressures on the budget, we continue to evaluate our spending and tighten our belts wherever possible The base budget largely reflects ongoing commitments that consist of Charter/PMC requirements, prior policy decisions, and contractual obligations. Leaves minimal financial capacity for new programs
Short-term solutions are okay, but we need to think about longer-term, strategic solutions to address any structural imbalance
Not only about the General Fund
Pursuit of new revenue opportunities and cost recovery How do we stop doing something?
Legislative advocacy may be necessary as some state and county funding is based on older methodologies
12 FY 25 Operating Budget by Department
13 City Departments
Water and Power 345,312,250$
Police 111,078,762
Public Works 93,537,291
Fire 69,634,048
Transportation 50,942,703
Housing 46,327,327
Parks, Recreation and Community Services 27,300,063
Information Technology 25,259,791
Planning and Community Development 23,000,982
Public Health 21,184,489
City Manager 19,442,646
Library and Information Services 16,784,344
Finance 15,778,287
City Attorney 12,542,216
Human Resources 7,535,382
Rent Stabilization 4,696,732
City Clerk 3,542,982
City Council 3,473,450
Department Total 897,373,745$
Obligations and Commitments
Pensions - $42m from GF
Debt service - $25m (City &
PCOC)
Library GF contribution - $12.6m
Measure I to PUSD - $10.7m
Insurance/General Liability -
$10.2m GF, $15.9m overall
Animal control - $1.75m
Tree/Brush maintenance – over
$1.2m
Consolidated elections - $551k
Crossing guards - $350k
Direct GF Non-profit support
Aquatics Center - $180k
Norton Simon - $337k
State mandated programs -
limited cost recovery
14 Insurance/General Liability
15 $0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Fiscal Year
FY 16-25 Property Citywide
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
Fiscal Year
FY 16-26 Excess GL
Budget Highlights
Personnel Budget
Preliminary estimate: approximate increase of 8.2%
Salary – 7.26% (Fewer vacancies, class/comp adjustments, MOU increases) Pension – Non-Safety: 4.6%, Safety: 16.6%
Medical – 9.0% (Premium increases, fewer vacancies)
Services & Supplies Budget
Review contracts (end date, extension clause, escalator %) and apply appropriate increases
January 2025 CPI 3.3%
FY 2019 Palm Tree Pruning - $64 per tree - $179,200
FY 2023 Palm Tree Pruning - $99 per tree - $277,200, a 55% increase in 4 years.
Price secured through Dec. 2026.
16 Budget Highlights
Internal Service Charges
At minimum, Internal Service rate increases keep pace with Personnel growth An internal audit review of Fleet Services completed in the last year. A finding that the cost recovery methodology was insufficient to support the necessary maintenance and was not charging enough to the gasoline/diesel users. Should increase by 43%.
Annual fleet replacement funding should increase by 29% due to inflation and clean fleet transition.
2021 Pierce Fire Engine - $977,480.15
2025 Pierce Fire Engine - $1,454,648.26 (49% increase) Manufacturer offering a 12% discount for payment at order. Currently a 42-48 month build time.
Price only includes commodities (aluminum/steel) increases up to 5%. Ford “F” series trucks reported to be one of the top vehicles to be impacted by the tariffs on aluminum.
17 18
FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Final Rev. Budget Forecast Budget Forecast Forecast Forecast Forecast Beginning Amount Available for Appropriations 0 18,086,075 18,086,075 6,803,101 1,587,157 (382,051) (3,661,049) (5,831,290) Revenues
Tax Revenues 256,099,426 250,860,100 254,930,304 265,657,100 275,442,388 284,542,670 293,888,284 303,568,090 Other Revenues 46,153,066 58,823,605 58,823,605 54,732,734 56,053,217 57,407,231 58,795,643 60,219,345 Contributions/Svs. From Other Funds 54,527,524 15,190,438 20,190,438 20,140,438 20,140,438 20,140,438 20,140,438 20,140,438 Total Revenues 356,780,016 324,874,143 333,944,347 340,530,272 351,636,043 362,090,339 372,824,365 383,927,873 Expens es
Personnel 186,024,588 204,966,273 204,966,273 214,778,587 225,493,081 234,312,948 241,929,694 253,055,984 Debt Service 11,426,366 11,692,948 11,692,948 12,318,397 12,323,966 12,317,139 11,290,184 11,288,643 Contributions To Other Funds 18,195,625 25,609,821 25,609,821 14,180,877 14,464,495 14,753,784 15,048,860 15,349,837 Other Expenses 87,921,858 114,997,675 114,997,675 99,468,355 101,323,710 103,985,465 106,725,867 109,547,505 Total Expenses 303,568,437 357,266,717 357,266,717 340,746,216 353,605,251 365,369,337 374,994,605 389,241,969 Operating Income/(Loss) 53,211,579 (32,392,574) (23,322,370) (215,944) (1,969,208) (3,278,998) (2,170,240) (5,314,096) Ending Amount Available for Appropriations 53,211,579 (14,306,499) (5,236,295) 6,587,157 (382,050) (3,661,048) (5,831,289) (11,145,385) Contributions to Capital Projects (7,137,700) (7,137,700) Reserve for Capital & Other Funds (33,860,146) 23,247,300 23,247,300 (5,000,000) - - - - Reduction/(Contribution) to Policy Reserve (1,265,358) 5,000,000 - Net Income/(Loss) with Reserve Contribution 18,086,075 6,803,101 10,873,305 1,587,157 (382,050) (3,661,048) (5,831,289) (11,145,385) General Fund Five-Year Forecast
General Fund 5-Year – FY 25 Budget Adoption
19 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Final Budget Forecast Forecast Forecast Forecast
Beginning Amount Available for Appropriations 18,086,075 16,215,712 13,977,945 8,825,143 3,196,690 (213,228) Revenues
Tax Revenues 262,958,941 265,657,100 274,585,826 284,084,929 294,152,233 304,603,459 Other Revenues 66,399,883 54,985,734 56,308,747 57,665,316 59,056,309 60,482,618 Contributions/Svs. From Other Funds 20,140,438 20,140,438 20,140,438 20,140,438 20,140,438 20,140,438 Total Revenues 349,499,262 340,783,272 351,035,011 361,890,684 373,348,980 385,226,515 Expens es
Personnel 206,097,494 215,348,587 228,380,604 236,779,307 244,022,597 254,779,365 Debt Service 11,619,669 12,318,397 12,323,966 12,317,139 11,290,184 11,288,643 Contributions To Other Funds 25,269,239 14,350,877 14,637,895 14,930,652 15,229,265 15,533,851 Other Expenses 112,156,731 99,932,178 100,845,349 103,492,037 106,216,851 109,022,359 Total Expenses 355,143,133 341,950,039 356,187,814 367,519,136 376,758,897 390,624,218 Operating Income/(Loss) (5,643,871) (1,166,767) (5,152,802) (5,628,452) (3,409,917) (5,397,703) Ending Amount Available for Appropriations 12,442,204 15,048,945 8,825,143 3,196,690 (213,227) (5,610,931) Contributions to Capital Projects (341,750) (6,071,000) Reserve for Capital & Other Funds 10,247,300 5,000,000 - - - - Reduction/(Contribution) to Policy Reserve (6,132,042) - Net Income/(Loss) with Reserve Contribution 16,215,712 13,977,945 8,825,143 3,196,690 (213,227) (5,610,931) General Fund Five-Year Forecast
General Fund 5-Year – Prelim. FY 26
20 General Fund 5-Year – Prelim. FY 26
June 2024 December 2024
Tax Revenues $275,442,388 $274,585,826
Other Revenues 56,053,217 56,308,747
Contributions/Other Funds 20,140,438 20,140,438
Total Revenues 351,636,043 351,035,011
Personnel 225,493,081 228,380,604
Debt Service 12,323,966 12,323,966
Contrib. to Other Funds 14,464,495 14,637,895
Other Expenses 101,323,710 100,845,349
Total Expenses 353,605,251 356,187,814
Operating Income/(Loss) (1,969,208) (5,152,802)
General Fund Reserves
General Fund Reserve is comprised of two parts:
Operating Reserve – 5% of Annual Expenditures
$16,184,000
Emergency Reserve – 15% of Annual Expenditures
$48,552,000
The City also has the Section 115 Trust for Pension and OPEB Benefits
$13.6m and $2.576m respectively as of 12/31/24.
21 FY 26 Plan to Ensure a Balanced Budget
Refine both revenue and expenditure forecasts over the coming months. Review tax forecasts and the economic climate.
Initial revenue forecasts are lower than previous projections Evaluate the financial viability of implementing full cost recovery in FY 26 Review the workload related to rebuilding efforts and where costs may be recovered.
As required by the Charter and authorized by voters, there is no longer a need make a finding that a transfer of 12% would be detrimental to operations of the electric utility.
“the transfer of such amount from the Light and Power Fund would be detrimental to the proper functioning and administration of the power utility during the budget year under consideration”
22 Examples of Prior Funding Decisions
Addition of a Sustainability Coordinator
Creation of the Community Police Oversight Commission Enterprise Risk Management focus
Fund Public Health with General Fund
Historic Resources Survey
Increase Fire budget to fund full Paramedic school for existing sworn staff Increase FY 25 tree planting budget to increase the number of trees planted due to the windstorm
Maintain youth sports participation fees at $10 post COVID Operate John J. Kennedy Pool 7-days per week year-round Rescue Ambulance – add 6th RA due to call volume
23 (Alphabetical)
Budgetary and Priority Needs – External Pressure
Federal Funding - $51 million in FY 24.
Section 8 Housing - $19.3 million
Other Housing programs - $9 million
Foothill Workforce - $3.9 million
Public Health Programs - $10 million
710 Reconnecting Grant - $2 million
Federal cuts not direct City funding – health, medical, education, aerospace
Inflation, Stagflation and/or Recession
Tariffs – fleet, homebuilders, technology/electronics, renewable energy
24 Budgetary and Priority Needs
Public Health Operating shortfall due to grant eliminations or sunset - $1.7 million.
Reduction of 12 grant funded FTEs
Grants ending in FY 25: SAMHSA (PORT), Immunization ,CalVIP, WIC Little by Little
Additional Health Inspectors for night, weekend, and special event enforcement - $100,000
Public Works need for additional Code Enforcement for illegal vending and ROW enforcement - $116,000
25 Budgetary and Priority Needs
Increased tree planting - $80,000
Housing buildout of satellite office - $250,000
Homeless Court (if ongoing for 32 people) - $750,000 - $1 million Climate Change / Sustainability goals beyond PWP energy Zero emission fleet
Infrastructure
Sustainability
26 Budgetary and Priority Needs
710 Master Plan
Consolidate City office leased space in 2027-28 timeframe. Development of City-owned sites: YWCA, Ramona (affordable senior housing), and former Kaiser site (N. Lake Ave.)
Rebuilding/Recovery from Eaton Fire – fast track work or permitting and desire to reduce fees/permit costs.
2028 Olympics preparation
27 Priority Category Examples
ADU construction incentives
Climate Change/Sustainability initiatives
Code Enforcement (Illegal vending/gas
blowers)
Economic development Strategic Plan
implementation
Emergency Preparedness/Enhanced Fire
Prevention
Homeless Prevention
Homeless transition/temp housing
Implement neighborhood specific plans
Maintain Public Health programs when
grants are terminated
28 Mental health, crisis counseling, and
related support for City personnel
Modernize PD record keeping/crime
analysis (Active Intelligence Center)
Offset any Federal Reductions with local
funds
Pedestrian and/or Bicycle safety
Roadways/PCI improvements
Senior programming (PRCS)
Traffic Enforcement (PD)
Urban forest - maintain or improve
Youth programming (PRCS)
(Alphabetical)
City Council Priority Discussion
The budget reflects past City Council decisions. It’s time to review and ensure these align with today’s needs.
Which existing priorities need re-evaluation given current economic and community conditions?
How can we establish a clear, transparent process for ongoing priority setting and adjustment?
What criteria should guide decisions on program adjustments or reductions, if necessary? Such as:
Data-driven decisions made by policy or City Council action Explore potential for partnerships and contracting out services Evaluate the effectiveness and sustainability of current program subsidies and delivery models
Suggested framework for evaluating priorities: (a) Impact on the community, (b) Alignment with City Council goals, and (c) Financial sustainability. 29