TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Hillary Guirola-Leon, Finance Director
DATE: November 12, 2025
SUBJECT: RECEIVE AND FILE FINANCIAL REPORT FOR FISCAL YEAR 2024-25, 5-YEAR FORECAST, AND DISCUSSION ON A
2026 SALES TAX MEASURE
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Efficient, Responsive, and Effective City Services
Fiscally Responsible and Transparent City Government
BACKGROUND
The following presents the financial activity of the City for Fiscal Year 2024- 25 at June 30, 2025. These figures are unaudited and have been compiled by the Finance Department. Financial information as noted at June 30, 2024, has been included for comparative purposes.
The Five-Year forecast was updated and continues to indicate structural deficits in each of the next 5 years. Maintaining local control of sales tax revenue is a key strategy for addressing projected structural deficits and unfunded capital needs identified in the City’s Five-Year Capital Improvement Plan.
Many cities in Los Angeles County have implemented a local Transaction and Use Tax (TUT) to generate additional revenue for essential services and fiscal stability, and to protect local revenues from being taken for services outside of cities. The City currently has up to 1% available capacity within the 2% district tax limit, which could otherwise be implemented by another outside agency if not claimed by the City for local use. Based on HDL revenue projections, a 1% TUT could generate an additional $1.65 million annually to support City services and infrastructure. To place a TUT measure on the June Gretchen Shepherd Romey, Mayor
Tony Chou, Vice Mayor
Hunter Chang, Council Member
John Chou, Council Member
Calvin Lo, Council Member
2, 2026, ballot, the City Council must unanimously declare the existence of a fiscal emergency and adopt the necessary resolution. Staff is therefore seeking City Council direction on whether to move forward with this measure; if approved, staff will return with the necessary declarations, draft ordinance, and resolution to place the proposed tax on the ballot for voter consideration.
DISCUSSION
The General Fund Group ended Fiscal Year 2024-25 with Year-to-date revenues of $37.7M as shown on Table 1. General fund revenues increased by approximately $1.3M from prior year actuals. The majority of this increase is due to an overall increase in tax revenues of $982K or 3.5% from prior year.
Tax revenues continue to be the highest revenue source for the City at about 75% of total General Fund group revenues. Another reason for the revenue increase compared to last year is due to an increase in License and Permits revenue of $387K from prior year.
Table-1
FY 24/25
Actuals
FY 23/24
Actuals
CY vs PY
$$
General Fund Group
TOTAL REVENUES
37,716,656
36,425,947
1,290,708
Total General Fund expenditures for FY 2024-25 increased by $4.3M or 13.6% compared to last year as shown on Table 2.
Table- 2
FY 24/25
Actuals
FY 23/24
Actuals
CY vs PY
$$
General Fund Group
TOTAL EXPENDITURES
36,134,015
31,796,980
4,337,035
June 30, 2024 YTD versus June 30, 2025 YTD Financial Information Below is Table 3 showing the General fund group expenditures by fund for FY 2024-25 and FY 2023-24 for comparative purposes.
All Expenditures by Fund
For Quarter Ended June 30, 2025 -- 100% of Fiscal Year Complete Year-to-Date Increase/(Decrease) Prior Year
Actual v. Prior Year Actual
General Funds Group
General Fund 15,996,260 2,066,274 13,929,986
Public Safety Fund 17,151,423 1,258,949 15,892,474
Fourth of July 105,817 7,275 98,542
Donations to City 159,934 104,125 55,809
American Rescue Plan 0 (6,236) 6,236
Workers' Compensation 1,745,006 697,627 1,047,379
General Liability 975,575 209,021 766,554
Total General Fund 36,134,015 4,337,035 31,796,980
The Workers’ Compensation fund had an increase of $697K or 67% from prior year and is primarily due to one-time workers compensation settlements paid throughout the Fiscal Year. The General Liability Fund had an increase of $209K or 27% from prior year and is due to an increase in insurance premiums.
Table 4 below shows a snapshot of the year-to-date revenues and expenditures for the General Fund (Fund 101), the Public Safety Fund (Fund 103), and all of the Special Revenue Funds.
Table-3
QUARTERLY FINANCIAL REPORT- June 30, 2025
GOVERNMENTAL FUNDS (UNRESTRICTED)
General Fund (101)
Revenues YTD PY YTD $$$ %
Taxes 24,562,612 23,607,747 954,865 4.0% Note 1
Licenses & Permits 1,431,113 1,043,196 387,917 37.2% Note 2 Charges for Service 1,685,518 1,571,469 114,049 7.3% Note 3 Intergovernmental 2,210,572 2,047,620 162,951 8.0% Note 4 Fines & Forfeitures 6,520 6,690 (170) -2.5%
Money & Property 1,326,744 1,232,999 93,745 7.6% Note 5 Miscellaneous 1,034,953 80,175 954,777 1190.9% Note 6
General Fund Total Revenues 32,258,031 29,589,897 2,668,134 9.0% Expenses YTD PY YTD $$$ %
City Council 27,458 25,807 1,651 6.4%
City Attorney 473,612 556,050 (82,438) -14.8%
Non-Departmental 2,454,531 1,490,857 963,674 64.6%
City Manager's Office 856,740 814,077 42,663 5.2%
Human Resources 775,207 584,745 190,462 32.6%
Finance Department 828,181 742,556 85,625 11.5%
Community Development 2,249,396 2,059,686 189,710 9.2%
Emergency Services 53,815 57,092 (3,277) -5.7%
Parks and Public Works 4,676,268 4,006,378 669,890 16.7% Recreation Department 2,062,624 2,041,993 20,631 1.0%
Library Department 1,478,428 1,490,745 (12,317) -0.8%
El Molino Viejo 60,000 60,000 - 0.0%
General Fund Total Expenses 15,996,260 13,929,986 2,066,274 14.8% Note 7 Net Income-General Fund 16,261,771 15,659,911 601,860 3.8% Public Safety Fund (103)
Revenues YTD PY YTD $$$ %
Taxes 3,735,430 3,707,821 27,609 0.7%
Charges for Service 927,013 864,029 62,984 7.3% Note 8
Intergovernmental 11,165 29,073 (17,908) -61.6%
Fines & Fees 76,060 102,205 (26,146) -25.6%
Miscellaneous 54,196 6,939 47,256 681.0% Note 9
Total Revenues 4,803,863 4,710,067 93,796 2.0%
Expenses YTD PY YTD $$$ %
Police Department 9,319,587 8,745,319 574,268 6.6%
Fire Department 7,831,836 7,147,155 684,681 9.6%
Total Expenditures 17,151,423 15,892,474 1,258,949 7.9% Note 10 Net Income-Public Safety Fund (12,347,560) (11,182,407) 0.0%
SPECIAL REVENUE FUNDS (RESTRICTED)
YTD PY YTD $$$ %
Revenues 2,806,113 2,653,303 152,810 5.8% Note 11
Expenses 5,447,774 747,306 4,700,468 629.0% Note 12
Net Income-Special Revenue Funds (2,641,661) 1,905,997 (4,547,658) -238.6% CY vs PY
CY vs PY
CY vs PY
CY vs PY
CY vs PY
Table-4
Items of Note:
1. Increase in Taxes is due to property taxes increasing by $694k (4%) compared to last year and is in line with trends and budget. Sales taxes (increase of $46k) and Utility Users Taxes (increase of $238k) have also increased compared to prior year.
2. Increase in Licenses & Permits is due to Building Permits increasing by $437K from prior year due to more building permits issued in FY 24/25.
3. Increase in Charges for Service is primarily due to an increase in Planning & Building revenues of $212K from prior year.
4. Increase in Intergovernmental revenue is due to a 4% increase in VLF (Motor Vehicle In-Lieu) revenue from prior year. During FY 2024-25, the City also received $70K in one-time FEMA reimbursement for COVID-19 expenditures incurred during the Pandemic.
5. Increase in Money & Property ($93k) is primarily due to fluctuations of the market value of the City’s investments. Although not a cash inflow, the City is required to recognize the unrealized gain or losses from the change in market value of its investments.
6. Miscellaneous revenue increased by $954K from prior year. The variance is due to one-time revenue received during FY 2024-25. The City received $225K from Valley Vista Services as reimbursement for costs associated with the RFP process. The City also received one-time revenue of $750,000 for the sale of Proposition A funds to the City of Pasadena.
7. General Fund Expenditures increased from prior year by $2.1M or 14.8%. $1.2M of this increase is related to personnel costs and $853K is related to an increase in other operating expenditures. The increase in personnel costs was driven by a 4% MOU negotiated increase in salaries, increase in medical premiums, and a 23% increase in the City’s required Unfunded Accrued Liability (UAL) contributions as determined by CalPERS valuations. Other operating expenditures increased by $853K from prior year. The City received reimbursement in the amount of $225,000 to offset this increase related to solid waste negotiations. The city also incurred emergency response expenditures as a result of the Windstorm incident. In FY 25/26, the City received $454K in insurance reimbursement for expenditures incurred as part of the Windstorm incident response. Utility costs also increased from prior year by $304K.
8. Charges for Services in the Public Safety Fund increased from prior year by $62K. The increase is primarily due to a 4% increase in Paramedic Services Revenue from prior year.
9. Miscellaneous Revenue in the Public Safety Fund increased by $47K from prior year due to strike team reimbursements received during FY 24/25.
10. Public Safety Fund 103 expenditures increased from prior year by $1.3M (7.9%). Salaries and benefits increased from prior year by $547K or 4.5%.
The City’s required UAL contribution increased by $405K or 18.4% from prior year. Other Operating expenditures increased by $306K from prior year and is primarily due to an increase in Shared Command Services of $278K. The variance in Shared Command Services from prior year is due to late invoices received from the City of Pasadena.
11. Special Revenues increased from prior year by $152K or 5.8%. The increase is due to grant reimbursements received during the year. During FY 2024-25, the City received $61K in expenditure reimbursement from the Body Worn Camera Grant. The City also received $65K in expenditure reimbursements from the Rubberized Pavement grant.
12. Expenditures under Special Revenue funds increase from prior year by $4.6M. The increase from prior year is primarily due to the street rehabilitation project expenditures and the sale of $1M Proposition A funds.
Fiscal Year 2024-25 General Fund Group Unassigned Fund Balance Overall, the ending General Fund unassigned fund balance as of June 30, 2025 is $19.07 million, or 52.4% of operating revenues. The City’s financial policy requires a minimum of 40% of operating revenues and this minimum has been met as of June 30, 2025.
Capital Projects Fund Transfer
The Capital Project Fund gets its resources from the General Fund and the City has a history of making annual transfers from the General Fund to the Capital Projects Fund. The City Council authorized the transfer of $15.1 million in FY 2017-18, $5.1 million in FY 2019-20, $2.9 million in FY 2020-21, $2.3 million in FY 2021-22, $3.5 million is FY 2022-23, and $2.0 million in FY 2023-24 of the General Fund reserves to the Capital Projects Fund. These transfers provided funding resources for the City to invest in capital projects.
The Capital Projects Fund is estimated to end Fiscal Year 2025-26 with a fund balance of $15,468. Based on the City’s current 5-year capital improvement plan, there are $46.8 million in unfunded capital needs city wide. Staff recommends a transfer from the General Fund to the Capital Projects Fund in the amount of $2,300,000 to provide funding resources to fund upcoming capital needs.
Updated Five-Year Financial Forecast
The Five-Year Forecast was last updated during the FY 2025-26 budget process. Since then, relevant trend data from the FY 2024–25 year-end, along with updated CalPERS valuations and the latest HDL property tax estimates, have been incorporated. These updates are reflected in the Five-Year Forecast shown in Table 5 below.
Table 5- General Fund Group 5-Year Forecast
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
Revised Budget
FY 2025-26
Projected
FY 2026-27
Projected
FY 2027-28
Projected
FY 2028-29
Projected
FY 2029-30
Operating Revenues Operating Expenditures
Five-Year Forecast
General and Public Safety Funds
The Five-Year Financial Forecast is the fiscal projection for the next five fiscal years for the General Fund Group. The assumed projected growth rate was determined using various data points from prior year actuals, current pension valuations, three-year averages, current year trends, and other relevant information.
Below are significant assumptions used in this forecast:
• Renewal of the Utility User’s Tax upon its expiration on March 31, 2027; • Renewal of the Public Safety Parcel Tax upon its expiration in FY 2028- 29;
• All CalPERS required pension costs paid in full each year; • 5% annual increase in Public Safety Parcel Tax;
• Annual Sewer operating costs funded through Sewer Service charges; and
• Property Tax Growth Rate of 4% per year
Based on these projections, operating revenues will not grow at the same rate as ongoing expenditures, resulting in a structural deficit. The projected deficit for the next 5 years ranges from $787,867 to $1.25 million. Without new revenue streams, the City will not be able to continue funding the same level of service.
(41,644)
(787,867) (861,969)
(1,221,740) (1,250,339)
(2,000,000)
(1,500,000)
(1,000,000)
(500,000)
-
500,000
1,000,000
Revised Budget
FY 2025-26
Projected
FY 2026-27
Projected
FY 2027-28
Projected
FY 2028-29
Projected
FY 2029-30
Annual Operating Surplus (Deficit)
Five-Year Forecast
General and Public Safety Funds
Roadmap to Fiscal Stability
The City Manager outlined a roadmap to fiscal stability during the FY 2024-25 budget cycle and the following actions have been implemented since then:
• The passage of the Public Safety Parcel Tax (Measure SM) by voters in the November 2024 Election
• Updated User Fee Study to help recover costs of providing services • Various one-time budget-balancing efforts have been implemented during FY 2024-25 and FY 2025-26 budget cycles:
o The sale of excess Proposition A funds to the City of Pasadena; o Reallocation of COPS funds to better support Police Department operations;
o Freezing two (2) vacant positions in the Police Department (One Police Officer and one part time Cadet for a temporary savings of $200,000);
o Funded Capital Projects with existing capital reserves; and o Conducted a Sewer Rate Study and implemented a Sewer Service Charge to fund 25% of estimated capital improvements needed; Importantly, several mid-, and long-term steps still remain in the workplan in order to return the City’s finances to a balanced level. Without the combination of all of these steps or their fiscal equivalents, the City will not be able to deliver the services that the community has come to expect.
Priority Initiative: Maintain Local Control of Sales Tax Dollars City Council Priority Initiatives were approved as part of the FY 2025-26 budget process to help address fiscal stability. One of the priority initiatives which received strong support from the community survey and was subsequently adopted by the City Council is to ‘Build upon our Fiscal Health by maintaining Local Control of Sales Tax.’
The General Fund Forecast indicates structural deficits in the next 5 years along with $46.8 million in unfunded capital projects citywide. Maintaining local control of sales tax revenues has been identified as one of several potential strategies to address the City’s fiscal stability.
Staff reached out to HDL for revenue projections based on the potential 1% Transaction and Use Tax. Based on projections, a 1% TUT can generate $1,651,000 in addition to the sales taxes the City already receives.
Current Sales Tax
The current sales tax rate in the City of San Marino’s is set at 9.75%. Table 6 below depicts how that 9.75% is allocated amongst different recipients:
Table 6- Sales Tax in the City of San Marino
Description Tax
State General Fund 3.9375%
City of San Marino (Bradley-Burns) 1.00%
County Public Safety (Prop 172) 0.50%
County Realignment (Mental Health/ Welfare/ Public Safety) 1.5625% Countywide Transportation Fund 0.25%
Los Angeles County Measure R 0.50%
Los Angeles County Prop A 0.50%
Los Angeles County Prop C 0.50%
Los Angeles County Measure M 0.50%
Los Angeles County Housing Measure A 0.50%
Total Sales Tax 9.75%
When considering the significance of the 1% Transaction and Use Tax relative to sales taxes already charged in San Marino, it is important to understand how much sales tax is paid in the City versus what the City actually receives.
While the current total sales tax rate in San Marino is 9.75% as shown in Table 6 above, that rate was 9.50% in 2024. It rose by .25% due to the passage of Los Angeles County Housing Measure A. Based on data provided by the California Department of Tax and Fee Administration, an estimated $5,154,776 in sales taxes were generated in San Marino in 2024.
However, the City of San Marino will only receive about $1,840,000 of that total amount. Importantly, over two thirds of that money the City will receive will be in the form of restricted funds based on their generation through Measure R, M, A and Propositions 172, A, and C.
This depicts the significant role that a locally controlled 1% Transaction and Use Tax would play in San Marino’s fiscal stability. As mentioned above, based on projections, a 1% TUT can generate $1,651,000 in addition to the sales taxes the City already receives. Critically however, while revenues from a TUT would contribute to reducing the structural operating deficit, the TUT would not entirely eliminate it over the long run, nor would it solve the City‘s funding needs for the $46.8 million in unfunded capital projects previously mentioned.
District Sales Tax
District taxes are transactions and use taxes permitted to be imposed by cities, counties, and other local jurisdictions on the sale or use of tangible personal property. District taxes are approved by voters in those jurisdictions and imposed under Transaction and Use Tax (TUT) Law. Voter approved district taxes are allocated on a destination methodology where the tax generally follows the buyer. Below is Table 7, prepared by HDL, explaining the difference between Local tax and District tax.
Table 7- Functional Differences between Local Tax and District Tax The maximum combined district tax rate within any county may not exceed 2%. Currently, there is 1% of Transaction Use Tax available to the county, city or other authorized government entity. Any permitted jurisdiction/agency may propose a measure that would no longer make that 1% available to the City of San Marino.
Transaction and Use Tax (TUT) as a funding source for Cities The current maximum sales tax rate is 10.75%. Out of 88 cities in Los Angeles County, 56 have adopted a TUT. Below is a listing of cities in Los Angeles County and the effective sales tax rate:
Cities Sales Tax
Rate
Agoura Hills, Bell, Beverly Hills, Bradbury, Calabasas, Cerritos, City of Industry, Claremont, Diamond Bar, El Segundo, Hermosa Beach, Hidden Hills, La Habra Heights, La Mirada, Los Angeles, Maywood, Palos Verdes Estates, Rancho Palos Verdes, Redondo Beach, Rolling Hills, Rolling Hills Estates, Rosemead, San Dimas, San Marino, Santa Clarita, Temple City, Walnut, West Covina, Westlake Village (29 cities)
9.75%
Avalon, Inglewood, La Puente, Malibu, Manhattan Beach, Torrance (6 cities)
10.25%
Alhambra, Arcadia, Artesia, Baldwin Park, Bell Gardens, Bellflower, Burbank, Carson, City of Commerce, Covina, Cudahy, Downey, Duarte, El Monte, Gardena, Glendale, Hawaiian Gardens, Hawthorne, Huntington Park, La Canada Flintridge, La Verne, Lakewood, Lawndale, Lomita, Long Beach, Monrovia, Montebello, Monterey
Park, Norwalk, Paramount, Pasadena, Pomona, San Fernando, San
10.50%
Gabriel, Sierra Madre, Signal Hill, South Pasadena, Vernon, West Hollywood, Whittier (40 cities)
Azusa, Compton, Culver City, Glendora, Irwindale, Lynwood, Pico Rivera, Santa Fe Springs, Santa Monica, South El Monte, South Gate (11 cities)
10.75%
Lancaster, Palmdale (2 cities, exceeding the 10.75% cap via State Legislation AB 2443)
11.25%
Threshold Considerations
Although staff have been discussing the consideration of an increase in the City’s Transaction and Use Tax rates for over a year, and the critical role it will play in the City’s roadmap to fiscal stability, there are several outside pressures that raise the importance of its consideration by voters at this time.
Currently, there are three statewide propositions being circulated for signature that would limit the ability for voters to raise revenues for local government services. While it is uncertain that these measures would gather enough signatures to qualify for voter consideration, their mere circulation suggests that if San Marino is interested in protecting local control of its revenues, the time to consider a Transaction and Use Tax would be during the June 2026 election.
The voter approval threshold the City’s Transaction and Use Tax would need to pass would be a simple majority (50% +1). However, if the City were to wait to place it on a future ballot, that threshold for passage may be impacted depending on the potential presence of other competing measures on the same ballot.
Timeline and Next Steps
California Constitution Article XIII C, section 2 (b) requires that any proposed general tax be approved by a majority of the voters at a regularly scheduled general municipal election for the City Council, “except in cases of emergency declared by a unanimous vote of the governing body.” California state Elections Code and the California Constitution detail the requirements for cities considering placing a revenue measure on the ballot at an upcoming election.
To place a tax measure on a ballot other than a regularly scheduled general municipal election, the California Constitution requires that a fiscal emergency be declared by a unanimous vote of the City Council.
To place a Transaction and Use Tax Measure on the June 2, 2026 election, a fiscal emergency would need to be declared by City Council. A fiscal emergency requires the adoption of a resolution by unanimous vote of the City Council. Based upon the City’s recent budget process and the significant cost reduction efforts and organizational changes necessary to balance the budget, as well as the structural deficit the City is facing for the foreseeable future, the declaration of a fiscal emergency to support the consideration of a Transaction and Use Tax would be appropriate.
Summary of Key Dates for a Consolidated Primary Election:
February 18, 2026
Last regularly scheduled council meeting for the City Council to declare a fiscal emergency (unless the Council holds a special meeting the last week of February). Last day for the City Council to adopt a resolution giving notice of a municipal election for the purpose of submitting to the voters the proposed tax measure and to adopt resolution consolidating election with ballot wording.
March 6, 2026
Deadline to submit resolutions, ordinance, and other
documents to the County elections office. June 2, 2026, Election day.
FISCAL IMPACT & PROCUREMENT REVIEW
The recommended transfer from the General Fund to Capital Projects fund of $2,300,000 would result in an unassigned ending fund balance of $16.7 million, or 46% of operating revenues.
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends the City Council: (1) receive and file the Financial Transaction Report for FY 2024-25, (2) approve the transfer from the General fund to the Capital Projects Fund and necessary budget adjustments, and (3) direct staff to return to a future City Council meeting with the appropriate declarations, resolutions, and ballot language to place a 1% Transaction and Use Tax on the June 2, 2026, ballot for consideration by voters. If the City Council concurs with staff’s recommendation, an appropriate motion would be:
“I move to (1) receive and file the Financial Transaction Report for FY 2024- 25, (2) approve the transfer from the General fund to the Capital Projects Fund and necessary budget adjustments, and (3) direct staff to return to a future City Council meeting with the appropriate declarations, resolutions, and ballot language to place a 1% Transaction and Use Tax on the June 2, 2026, ballot for consideration by voters.”
ATTACHMENTS
1. Revenues Financials FY 2024-25
2. Expenditures Financials FY 2024-25
3. General Fund Five-Year Financial Forecast