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Home My WebLink AboutFiscal Year 2025-26 Proposed Budget Review (2) '(' o N. 2000 Main Street, �oFr �<9 Huntingtgo2n6Beach,CA City of Huntington Beach NO VOTE TAKEN 4bONTV CPS File #: 25-406 MEETING DATE: 5/20/2025 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Travis Hopkins, City Manager PREPARED BY: Robert Torrez, Interim Chief Financial Officer Subiect: Fiscal Year 2025-26 Proposed Budget Review Statement of Issue: The City Charter requires the City Manager to submit the proposed budget to the City Council at least thirty days prior to the beginning of each fiscal year. After reviewing the proposed budget and making such revisions as it may deem advisable, the City Council shall hold a public hearing thereon at least fifteen days prior to the beginning of each fiscal year. The Proposed Budget for Fiscal Year 2025-26 is presented for City Council consideration. Financial Impact: A proactive Budget Balancing Plan was implemented as part of the Fiscal Year 2025-2026 Proposed Budget to address an anticipated budget deficit. The Budget Balancing Plan identified additional offsetting revenues and expenditure reductions that will be discussed. The FY 2025-2026 Proposed Budget is structurally balanced. The proposed Citywide expenditure budget for all funds is projected at $588.9M, subject to change prior to May 20. The General Fund proposed expenditure budget totals $297.5M. Expenditures for all funds and departments are offset by a combination of expenditure reductions, revenues, one-time transfers, and prudent use of reserves. Recommended Action: A) City Council receive and discuss the Proposed Budget for Fiscal Year 2025-26; and B) Set the date for adoption of the City budget as June 3, 2025. A meeting date of June 17, 2025, is set as an alternative should the City Council require additional deliberation to approve the budget. Alternative Action(s): Do not approve and direct staff accordingly. Analysis: Adoption of the City Budget is the most important decision that the City Council is required to make each year. The City Budget establishes funding for every City program and service. It is the roadmap City of Huntington Beach Page 1 of 2 Printed on 5/15/2025 powered by LegistarTM 17 File #: 25-406 MEETING DATE: 5/20/2025 that guides the City for the upcoming fiscal year. Staff is presenting an overview of the proposed Citywide budget. Since the General Fund provides for all traditional City services, such as public safety, public works, parks, recreation and other vital services, it will be the primary focus of staffs presentation. The City Council and the public have received updates on the City budget at various times during the current fiscal year. Staff have discussed with the City Council that, based on year-to-date and forecasted expenditures and revenues, a deficit of approximately $8.8M is anticipated for Fiscal Year 2025-26. The presentation will provide an overview of the strategies employed in developing a balanced budget for Fiscal Year 2025-26; discuss the significant impacts of the City's Unfunded Accrued Liability with CaIPERS; provide an update on the forecast of City revenues and expenditures over the next ten years; and, also discuss options for Council consideration in addressing future potential deficits. Environmental Status: Not applicable. Strategic Plan Goal: Non Applicable -Administrative Item City of Huntington Beach Page 2 of 2 Printed on 5/15/2025 powered by LegistarTTM 18 i' mTIN `� G T.• // ' City of Huntington Beach •'•,��o R P o RA r ••► .. Fo •• \ Proposed FY 2025/26 Budg etet am �!l/ t. • C) \ • '�' ' ‘ " General Fund -_ c` _=-__ �_'� _ -- : • CIP _s = — - -_ •• ` • Pension Overview Fiscal Sustainability Strategies lookiiikhOP --. ,/ )/_7/ ,: -.. t F • 17 1909 , ,• ` 0 ••••.:....••- C �0 0 C P _ v N T�( ....SIP;0/ FY 2025/26 All Funds Proposed Budget Review $554.9M Capital Debt Special Internal Trust and General Projects Service Enterprise Revenue Service Agency Other Department/ Fund Fund Funds Funds Funds Funds Fund Funds Funds TOTAL City Council 468,951 468,951 City Manager 3,101,687 100,000 35,000 3,236,687 City Attorney 4,223,414 4,223,414 City Clerk 1,196,874 1,196,874 City Treasurer 2,194,073 2,194,073 Community Development 10,618,628 2,334,861 129,000 13,082,489 Community & Library Services 16,663,318 2,615,383 1,334,000 20,612,701 Finance 5,870,337 110,000 7,677,672 13,658,009 Fire 64,520,419 332,916 893,400 466,315 66,213,050 Human Resources 2,516,074 26,955,484 29,471,558 Information Services 8,546,183 549,044 9,095,227 Non-Departmental 58,485,785 8,200,000 25,541,969 104,000 25,916,664 118,248,418 Police 96,249,310 2,304,000 50,000 98,603,310 Public Works 24,339,119 12,249,413 100,508,770 35,862,266 1,644,300 174,603,868 Grand Total 298,994,172 20,449,413 25,541,969 100,841,686 44,872,954 34,633,156 28,027,279 1,548,000 554,908,629 2 FY 2025/26 All Funds Proposed Expenditures - $554.9M Other Revenue Charges for Current Services 0.6% Non-Operating Revenue 11.3% 1.7% Revenue from Other Agencies 1.3% Use of Money& Property Property Tax 7.9% 37.9% Fines& Forfeitures 1.8% License & Permits 3.3% Utility Users Tax 7.8% Sales Tax Transient Occupancy Franchises 17.6% Tax 3.2% 5.7% FY 2025/26 General Fund Proposed Budget Review • Proposed FY 2025/26 General Fund Budget is structurally balanced, with a projected $1 .1M surplus General Fund (Fund 100) Proposed in thousands) Revenues (recurring) $295,089 • Portion of Waterfront allocation with the Revenues (one-time) * 5,013 remaining$4.3M set side in reserves. Total Revenues 300,102 Personnel Costs 189,647 Operating Costs 54,518 ** Includes Debt Service,Capital Expenditures, Non-Operating Costs ** 54,829 and Transfers Total Expenditures 298,994 Surplus / (Deficit) $1,108 • Continued Infrastructure Investments in FY 2025/26 ➢ General Fund transfer to the Infrastructure Fund totals $14.5M ➢ CIP budget totals $63.6M (increase from prior year of $28.3M) includes $7.9M in General Funds FY 2025/26 General Fund Proposed Revenues - $300. 1 M Other Revenue Charges for Current Services 0.6% Non-Operating Revenue 11.3% 1.7% Revenue from Other Agencies 1.3% Use of Money& Property Property Tax 7. 0° 37.9% Fines& Forfeitures 1.8% License & Permits 3.3% Utility Users Tax 7.8% Sales Tax Transient Occupancy Franchises 17.6% Tax 3.2% 5.7% FY 2025/26 General Fund Proposed Revenues - $300.1M • Major revenue variances include: ➢ Property Tax: $113.9M (5.0% or $5.7M increase) - Higher assessed valuations as of January 1 , 2025 versus prior fiscal year ➢ Other Local Taxes: $102.7M (1 .19% or $1 .2M net decrease) - Sales Taxes: $49.6M (1 .4% or $0.7M decrease) • Prop 172: $3.1M (0.7% or 22k decrease) - Utility Users Tax (UUT): $23.3M (1 .27% or $0.3M increase) - Franchises: $9.5M (11 % or $1 .1 M decrease) - Others: $17.1 M (1 .80% or $0.3M increase) > Revenue from other Agencies: $1 .7M (16.1 % or $4.5M decrease) - Expected reimbursement of $1 .7M from participation in the Voluntary Rate Range Intergovernmental Transfer (VRRP IGT) Program. These revenues are partially offset by $0.7M of expenditures related to program participation, for anticipated net revenues of approximately $1 .0M. FY 2025/26 General Fund Proposed Expenditures - $299.0M BY CATEGORY BY DEPARTMENT Finance Human Transfers * Other ** 2,0% Resources Information Services 17.3% 3.7% 2.9% 0.8% Community Debt Service Development 1.1% Police 3.6% 32.2% pa iiii Community& Library Services Operating 5.6% 18.2% Public Works Personnel 8.1% 63.4% Fire Non- 21.6%111111, Departmental 19.6% * Transfers include Infrastructure, Equipment, General Liability & ** Other includes City Council, City Manager, Section 115 Trust Transfers City Attorney, City Clerk, and City Treasurer FY 2025/26 General Fund Proposed Expenditures - $299.0M • Major expenditure variances include: - Personnel Services: $189.7M (6.88% or $13.1 M increase) • Renegotiated Memoranda of Understanding (MOU) during FY 24/25 including Minimum Wage, Base Salaries, Public Safety Overtime and Leave Buyout: $9.0M increase • CaIPERS UAL Safety Contribution: $3.5M increase • CaIPERS UAL Misc Contribution: $1 .6M increase • Increase Vacancy Attrition: $1 .0M net expense decrease FY 2025/26 General Fund Proposed Expenditures - $299.0M • Major expenditure variances include: ➢ Operating Expenses: $54.5M ($2.9M net decrease) • Voluntary Rate Range Intergovernmental Transfer (VRRP IGT) Program: ($2.6M decrease) expenditures related to program participation. • Metro Cities JPA: ($0.6M increase) • Water Purchases: ($0.2M increase) • Contracts for Repairs and Maintenance: ($0.3M decrease) • Other Professional Services: ($0.4M decrease) • Equipment and Supplies: ($0.4M increase) FY 2025/26 Budget Balancing Strategy 1 . Operating Reductions - Personnel ➢ Personnel: $1 .98M - Eliminate 6 positions - $0.96M - Deputy City Manager - Senior Deputy City Attorney - Human Resources Manager - Principal Management Analyst (Fire) - Office Assistant II — Permit Center (Community Development) - Office Assistant II — Maintenance Administration (Public Works) - Downgrade 1 position - $13K - Public Affairs Manager to Public Affairs Officer (City Manager's Office) - Increase Vacancy Attrition by $1 .0M FY 2025/26 FTEs by Department 2024/25 2025/26 Variance £= ,____, Description ` -_ - City Council 1.00 1.00 City Attorney 15.00 14.00 (1.00) Eliminate 1.00 Senior Deputy City Attorney City Clerk 6.00 6.00 City Treasurer 9.50 9.50 City Manager 16.00 15.00 (1.00) Eliminate 1.00 Deputy City Manager Community Development 61.50 62.00 .50 Eliminate 1.00 Office Asst II (Permit Center), Transfer 1.50 FTE from Public Works (Real Estate Services) Comm & Library Services 62.25 63.25 1.00 Transfer 1.00 Capital Projects Admin from Public Works Finance 28.50 28.50 Fire 202.00 202.00 Eliminate 1.00 Principal Management Analyst, Upgrade 3.00 PT to 4.00 FTE Marine Safety Specialists: 1.00 FTE Human Resources 15.00 14.00 (1.00) Eliminate 1.00 Human Resources Manager Information Services 26.00 26.00 Police 351.00 350.00 (1.00) 2.00 Police Officers exchanged for 1.0 Police Sergeant Public Works 212.00 208.50 (3.50) Eliminate 1.00 Office Asst II (Maint), Transfer 1.50 to Community Development & 1.00 to Comm & Library Srvs 1005.75 999.75 (6.00) FY 2025/26 Full Time Equivalent — All Funds 1,010.00 1,005.75 1,001.75 999.75 1,000.00 991.7 Proposed Pre-COVID Budget 990.00 987.25 980.75 980.00 -- -- -- 970.00 Restr'cture 9 ;.2 'Ian 960.00 950.00 FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 2025/26 Budget Balancing Strategy 2. Operating Reductions - Non-Personnel $2.9M Object Account 444Amount Professional and Contract Services (includes $1.5M for Mind OC — Be Well) $2,010,000 Conference and Training $201,000 Equipment Repairs $150,000 Liability Reserves $150,000 General Supplies $125,000 Clothing/Uniforms $90,000 Sales Tax Rebate $50,000 Cellular Wireless Data $46,000 Overtime $20,000 Miscellaneous $9,000 Total $2,851,000 FY 2025/26 Budget Balancing Strategy 3. Interfund Transfers > Withdrawal from Section 115 Trust for FY2025-26 UAL Expense: $1 .5M ➢ Reduce General Fund transfer to Self Insurance Workers' Compensation Fund: $2.0M > Reduce General Fund transfer to Self Insurance General Liability Fund: $2.5M > Transfer of $2.4M to the General Fund for second repayment related to the Waterfront Loan Superior Court Judgement 4. Use of Reserves ➢ Equipment Replacement Reserves - $3.3 M 5. Revenue Increases ➢ Community and Library Services - $0.5 M ➢ Fire Department - $0.5 M General Amount Amount Type Description Thousands Sub Total ype Description Thousands Sub Total GF Fund GF Fund Reserves As of 6/30/2024 (Thousands) Sub Total Reserves As of 6/30/2024 (Thousands) Sub Total Nonspendable Assigned Prepaids $148 $148 Litigation Reserves $3,650 Capital Improvement Reserve $9,425 Restricted Equipment Replacement $8,295 Underground $364 General Plan Maintenance $1,651 Restitution $317 HB Recovery Fund $10,886 Donations $777 Oceanview Estates $641 Section 115 Trust Funded $20,212 $21,670 General Liability Plan Migration $2,801 Pension Rate Stabilization $5,517 Committed Section 115 Trust Reserves $4,211 Economic Uncertainties $49,090 Year-end Fair Value $3,025 Other Capital Projects $1,379 Other Purposes $8,376 $58,478 Other Purposes $1,554 $52,023 Total $132,319 FY 2025/26: Waterfront Settlement $4,370 Revised Total $136,689 le ord•�W.►..,.► ING — \ W' •••••••• \ FY 2025/2026 `� . •. 4/ c �•.• c_pRP 0RA 7- .�• \ • o • 6' Capital Improvement % - •. c--) .....- --• •• Program (CIP) .... ,, o.... .._ �YYi, n:,, ___.- ,I. � .. ",.� ,fiR. ; "":--A 4, Pa , ✓ 1 Ye.,+^ ---. '4 +Y. lYz,s — _—_` — ._- — __ • ` . x, - -il j 1, `,V, ;1 3C'Y__— —... - — • *3' Ikk':4•7 "'--•'' ',,si ',.:,,, 1,,-i- '.- - � Lt 9C� 11.a. t xr- p. s ��Y( f /y1,, u l 0 11 1,0 �/ J//• ' i is ' «.T+\ ' Y. r,.A'e---i , .y 0,, ''''''- '"------ ._ :r F -9 I' , . .,, . ..... ., ... . ..,. .. J.,:, . _ .. •� B• 1 9 P �.• Q4(7w - .�0 ,� .. .;,,N.� -Ti s • 5 is. o c _ .a NTH _........__ FY 2025/26 CIP BUDGET ➢ Budget ➢New Appropriations: $ 63.6 Million ➢Continuing Appropriations: $ 7.3 Million Total $ 70.9 Million ➢ Funding sources proposed: ➢General/Infrastructure Fund ($38M requested - $7.9M recommended) ➢ Enterprise Funds (Water and Sewer) ➢Special Revenue Funds (Measure M, Gas Tax, Prop 42, RMRA, ParWPD DIF, Quimby, TIF) ➢Grants/Other (CDBG, OCTA) 2025/26 PROJECT SUMMARY • Drainage and Stormwater 1 projects $600K • Facilities 10 projects $3.6M • Neighborhood 3 projects $6.8M • Parks and Beaches 10 projects $3.3M • Sewer 3 projects $7M • Streets and Transportation 17 projects $28.6M • Water 6 projects $13.7M CIP 25/26 PROJECTS TOTAL $63.6M DRAINAGE $600 , 000 Local Storm Channel Repair C6-SC1 (INFR & DRAINAGE FUND) ,.,..., •_ ',-f.-.*ii , ,r'','..'"...i••74.';'1.*(!'-',;-:-!;,!-,1,'.-r'•4 *1 . „ , . •.., .,---,•,-. .:=, •4,.. -',.. ,.. .,t i k, , ,. '''r ' 'I' . - , ,----.....,,. : I 1,, "',i Y-r 1 ' . ` ••-‘,., '-' ','Y:;t' ' .t. . --, t.„ ' ' ` it'l 'ZiO'I'.'41.4,..' • ',V.i IL./‘444) .. , , .. "1,4-1,kith'14*,..5je,.14i44',.*;',',4' '''' -•'''''',.,,,'2'''.''T.. -'' ;' r .-'4 ,, , , 1,;."4"4444,114",,.. ''Nit3" ,";-:.•"".-*:' i::1.," 1., ,':=-,.' .',...,:,;'0- -1--,-,*1;. . , I. '4 ., '• ' ,.. '''... 44-- ik. . i","'",.'fis:f•""'''-' ‘.;--''' A.'-,./460•14A' ' ''' , „„, ,,, . • ' , -, ' ' , . .-, ' 4-,. . • 1 ... ., •. % , . ' , t 19 FACILITIES $3 . 6M • City Gym & Pool Flooring Replacement $155k (INFR FUND) • HB Art Center Electrical & Lighting Rehabilitation $270k (INFR FUND) • Helen Murphy Branch Foundation Design $80k (INFR FUND) • Main Promenade Parking Structure Anti-Slip Tile $80k (INFR FUND) • Fire Department Remodel at City Hall $100k (INFR FUND) *- y • r- &wo • Fuel Station Canopies $500k (INFR FUND) '�.. er • Partial Re-Roof City Gym and Pool $385k (INFR FUND) • City Yard Admin Building Roof $187k (INFR FUND) • Replace R22 Air Conditioning $150k (INFR FUND) • PD South Sub Station $1 .7M (PD DIF) NEIGHBORHOOD $6 . 8M • Residential Curb Ramps $750k (Measure M, CDBG FUND) • Residential Overlay/Slurry $5.45M (Gas, Measure M, Prop 42, Sewer and Water Fund) • Residential Alley Rehab $600k (Measure M) -. I rl '!! r t'� _ j' p i rL H i- t i . - - Il l .. r W I — per^ ♦-_ --=? . .. r y.1 _ ( r v by � . '^'4 PARKS AND BEACHES $ 3 . 3M • Arevalos Park Playground $190k (Park) • Drew Park Playground $467k (Park) • Edison Park Reconfiguration $1M (Park) • South Beach Lots Booth Roof & Rehab $121k (INF) • Bluff Top Park Irrigation Controller Replacement $100k (INF) • Central Park Electrical Switchgear Replacement $525k (INF) • Sunset Beach Restroom Restoration $85k (INFR FUND) • Beach Restroom Renovations $300k (INFR FUND) • Bluff Top Slope Stabilization Repair $310k (INFR FUND) • Harbour Bulkhead $250k (INFR FUND) �1-7 - '_-:w-ter..,4. r.-3 ,17- M �e � .= s,.,, SEWER IMPROVEMENTS $7M • Sewer Lining — Various Locations $2.5M (Sewer Fund) • Gilbert Sewer Lift Station Improvements (Design) $500k (Sewer Fund) • Davenport Sewer Lift Station Improvements $4M (Sewer Fund) :-.P. I' ii.; -14 rt _ ,,,,F i � .ram I. " �.a � ` STREETS & TRANSPORTATION $28 . 6M • Arterial Rehabilitation $6.6M (RMRA, Prop 42) • ADA Improvement Program $250k (Measure M) • Banning Roundabout and SE Corridor Improvements $5.6M (OCTA/AES) • Hamilton Avenue Corridor Improvements $4.5M (OCTA/AES) • Magnolia Street Corridor Improvements (Design) $416K (OCTA/AES) • Humboldt Bridge Rehabilitation $5.3M (Caltrans HBP/Measure M) • Bridge Preventative Maintenance (Bolsa) $655k (MEAS M) • Driveway Sports Complex $400k (INFR FUND) • Traffic Signal Mod Bolsa at Amazon (Design) $40k (TIF) e- • Bushard Fire Station Signal and Fiber Optics (Design) $40k (TIF) • Traffic Signal Goldenwest and Norma/Lydia (Design) $40k TIF • Traffic Signal Goldenwest and Rio Vista (Design) $30k (TIF) • CCTV Camera Installation $90k (TIF) • Downtown Street Lighting $3.8M (INFR FUND/GRANT) • Citywide Safe Route to School Evaluation $625k (Measure M/TIF) • Citywide Mobility and Corridor Improvements $150k (TIF) • Graham and Springdale Street Reconfiguration $70k (TIF) WATER IMPROVEMENTS $ 13 . 6M • Annual Water Main Replacement $1 .5M (WATER) • Well 14 Drilling and Casing Project $2M (WATER) • Well 14 Storm Drain $2M (WATER) • Well 9 GAC Replacement $400k (WATER) • On Site Gas Generation Wells 4,7, and 13 $7.1M (WATER) ,L.: .\-- I • Well 15 Drilling and Casing Project $650k (WATER) \ I, =� )/) III'1. . _ o . 1, a fi t� �... 1: r� ,,,.�.,..�v ' ` to p; . , 46....jr ,,:: , ,,,,04.4) , - t. -' —r --". i _ 0..lirel:,'--- A ! -,., 'L\ r •,....•. I N G Ilk •• O. •.• �cORPORAT O. AO It.. \ • V C 4 ) • • City of Huntington Beach • _ -__ 111 Pension Overview sicr-• A- - t 7•••• �FB:. P� . . �S • 17, 1909 , •••� c N) F •••• iV 0 C P NT City of Huntington Beach Unfunded Accrued Liability • UAL is the difference between estimated value cost of retirement benefits earned & expected to be paid to current employees and retirees in the future, and the market value of investments held by CaIPERS. • The City's most recent CaIPERS report of assets, liabilities and funded status are measured as of the valuation date of June 30, 2023. • Employer contributions determined by the 6/30/23 valuation are imposed in FY 2025-26. • This 2-year lag is due to the time needed by CaIPERS to extract and test the membership and financial data. • The UAL must be rolled forward two years from the valuation date. $ millions Misct Safety Total Liability S693 $943 $1.636 Assets $607 $805 $1,412 UAL $86 $138 S224 Funded Ratio 87.5% 85.4q-c 86.3c-c How Are Pension Costs Determined? CaIPERS CaIPERS CaIPERS Funding a Pension Plan investment earnings employers members Emptoyer Contributions is\ 5 Sc . , 'HI 1..", I'..74;rill,:I) Sr k ' ,t ;,I, ,k .‘. is Employee 1 Aso 4 4 investment Contributions ----"N‘ t,e-- Income eb.V.'''.-A'l . 4OP ' ' - t.4....!,•1,-...,..•'..- - 1• 4,•,- 4 la I 4 , - 0"---"\Benefits and 1 Expenses CaIPERS Pension Buck: a 20-year Average (as of June 30, 2024) 1 I 28 What drives PERS Costs? • Change in mortality assumptions (increased life expectancy) • Increases in number of employees • Increases in "PERS-able" salaries & wages • PERS amortization policy (20 years) • Changes by CaIPERS in the assumed investment earnings/discount rate — currently 6.8% ✓ Assumed discount rate assessed against UAL ✓ Investment earnings below assumed 6.8% rate increases the UAL • Any action by City to pay down the UAL results in savings City of Huntington Beach - Annual CaIPERS Pension Costs CatPERs Pension Expense 2018-2026 Source:CalPERSActuarial Valuation Reports r$56.6 Pension Obligation Bonds Issued •$60.0 S57.9 352.8 A $47.8 $50.0 _ 1 $43.6 538.3 ut $40.0 10.0% o • S32.3 .. • $29.1 to $30.0 • 5.0% $24.7 $20.0 0.0% 510.0 •5.0% • $0.0 -10.0% Actual FY Actual Actual FY Actual Actual FY Actual FY Actual FY Projected Projected 2017/18 FY 2018/19 2019/20 FY 2020/21 2021/22 2022/23 2023/24 FY 2024/25 FY 2025/26 .RXI111111UAL $22.1 $25.8 S29.9 $32.6 $34.9 $5.7 $0.0 56.0 $11.9 NM Normal Cost $21.5 $21.9 S22.9 $24.0 $22.9 $23.4 $24.7 S26.3 $26.4 =OP-Investment Returns 8.6% 6.7% 4.7% 21.3% -6.1% 5.8% Options to reduce UAL status • Timely Payments: Make required monthly contributions in full and on time. • Pre-pay Annual Contributions: Make each year's full payment/contribution in July to reduce interest cost (3% discount) • Additional Discretionary Payments (ADP): Employers can make additional payments above the required contributions to reduce their unfunded liabilities. • Understand Impact of Interest Costs: Make ADPs when investment returns are stable or growing and in advance of when payments are due to avoid negative amortization. • Establish a UAL Funding Target: Targeting anywhere from 90%-95% allows room for investment performance or pension trust assets to make up the 5%-10% difference. • Use Section 115 Pension Trust: Established by Council policy for use in offsetting pension cost volatility (Increases). • Cost Sharing with Employees: Increasing employee contributions to share the burden of funding the employees own pension cost. ✓ Employees investment in their own future Fiscal Year Current 20Year 15Year Accelerated UAL Payment Schedule Ending Amortization Amortization Amortization 2025 $11.9 $22.4 $26.2 Funding Schedule Options (millions) 2026 $20.7 $22.4 $26.2 2027 $20.7 $22.4 $26.2 2028 $25.0 $22.4 $26.2 ` 2029 $25.3 $22.4 $26.2 2030 $25.3 $22.4 $26.2 2031 $25.3 $22.4 $26.2 2032 $25.3 $22.4 $26.2 1 2033 $25.3 $22.4 $26.2 2034 $25.3 $22.4 $26.2 2035 $25.3 $22.4 $26.2 2036 $25.3 $22.4 $26.2 2037 $25.3 $22.4 $26.2 2038 $25.3 $22.4 $26.2 2039 $25.3 $22.4 $26.2 2040 $25.3 $22.4 2041 $25.3 $22.4 2042 $25.3 $22.4 15 VA 2043 $25.3 $22.4 $15.0 2044 $2.7 $22.4 2045 2046 IIP2047 $10.0 Urrerlt 2048 2049 Current 20 Yr 15 Yr $5.0 Total $455.7 $448.9 $392.8 20 Y Interest Paid $206.2 $199.3 $143.2 Estimated Savings $0.0 $6.8 $62.9 $0.0 _. 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 -Current Amortization -20 Year Amortization -15 Year Amortization 32 TING .. ,,....,,, ...,„ { , ,,, Nit �..••:,,o p o Rq r� •.,� \ _____ ._. _ _ _ . o . o ,,,,,...._________ __ _ _ __ _ _ .. _Fp _ __ �1___..... ,!, •. c--) ___ '(, 'rf'i'_r g -- = -- Proposed Financial Policy - - •• ' Amendments • - ; i & OS � • • 0 �FB � . . • Q °•., • 17, 19 p 9 , �••• C. F •• JOUNTN I clow Need for Policy Changes • Current financial policies constrain ability to use surplus and other available funds to balance the budget during economic downturns. • Proposed changes allow for the allocation of surplus funds on a case-by-case basis by the City Council, with input from the City Manager each year. • Commitments to Economic Uncertainties Reserve and annual transfer of $1 million to the Section 1115 Pension Trust are maintained. mi!mimmurmwilir siormimmoltr General Fund • 50% of Economic Uncertainties Reserve • Approximately 50% used to address long- Surplus commitment term obligations pension, liabilities, other Utilization • 25% for Infrastructure Fund post-employment benefits, bonded debt, • 25% to Capital Improvement Reserve (CIR) lease obligations and other long-term needs. commitment • Approximately 50% used to address infrastructure or neighborhood capital After Economic Uncertainties Reserve improvements. commitment, unassigned fund balance to allocated as follows: Allocation to be made on a case-by-case basis • 50% for Infrastructure Fund by the CC, with input from the CM after all • 25% to Capital improvement Reserve (CIR) discretionary fund reserve balances and one- Commitment time monies reviewed by Staff. • 25% to Equipment Replacement commitment Based on budgetary constraints or needs, an assessment shall be coordinated to determine Unassigned revenues received during the FY the cost/benefit of utilizing methodology added to GF fund balance described. Minimum of 25% of the unrestricted one-time transferred to Section 115 Trust Unfunded • Annual $1M contributed to Section 115 • Annual $1M contribution to the Section Accrued Trust. 115 Trust. Allow to be used for Liability • Perpetual set aside of 50% of Pension discretionary purposes based on funding Pension Refinance Savings. availability. Funding • Annual set-aside of an additional 50% of • Annual Prepayment of UAL Payment. Policy General Fund surplus at year-end. (currently doing) • Establishment of accelerated UAL • Allocation of Liabilities Across Funds. payment schedule. (currently doing) • Annual assessment of Additional • Cost Sharing & Contract/MOU Provisions. Discretionary Payments ("ADP") to be • Examine Medical Benefit Levels and made to CaIPERS. Eligibility Criteria. • Use and Allocation of One-Time Monies. • Synthetic Fresh Start. • Annual assessment of Additional Discretionary Payments ("ADP") to be made to CaIPERS. i' .4111W WTIN111111. N G T ,,.••••,, 0 ..... 1. • • , * , �..• ,c pRP0RATF ••• 0. \ 1 . \ 0 •• . ,- . 0 .67 ‘ -- h=_= •• City of Huntington Beach - -.__ - % Fiscal Sustainability Planning ;010..iathiur."01617 • / • c,.. . -- : _ ,s, . .4. r.:fiki. 00 lis.•,• 17, 19n , ;•• <<' ••••• ,••• F ••• C P 4 t ,,I/ _ v NT`f ,.t ,Po.0/ Baseline Forecast — Revenue & Expenses Trends Total Revenues & Expenses Baseline Forecast $ato,o0o,000 Annual Operating $390,000,000 Deficits Until FY 2032 $370,000,000 $350,000,000 -� Debt Obligations $330,000,000 - " (lease financings ..).` for vehicles, $310,000,000 equip.,and lighting) Expire $290,000,000 $270,000,000 $250,000,000 . . . . • Surplus/Deficit —,—Baseline Revenues - - -1-Time Revenues -.—Baseline Expenses - -1-Time Expenses 38 Baseline Forecast — Annual Surplus/(Deficit) Annual Operating Surplus/(Deficit) Baseline Forecast $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 S- ! $(2,000,000) $(4,000,000) $(6,000,C00) r $(8,000,000) $(10,000,000) $(12,000,000) .F'� 0h Fy.1 f��O1) fy � .�0� Fy1 1,6 Fy�O,� a�3 Fy�4 164 39 Scenario Forecast - Potential Bridge Solutions Expenditures 1. Continue increased vacancy savings by $1 million (representing increase in vacant positions from 40 to 45). 2. With Reserve Policy revisions, suspend annual transfer of $1.5 million from General Fund to Section 115 Trust between 2026 and 2030 (current trust balance = $25 million, investment returns will largely make up the difference). 3. Department Efficiencies: Procure America; Increased Collections through program audits (STRs, TOT, UUT) 40 Scenario Forecast - Potential Bridge Solutions Revenues 1. Annual transfer in of $1.2 million from Section 115 Trust funds to General Fund between 2026 and 2030 to offset pension expense, as per Council policy. 2. Adopt new Business License Tax (change from flat tax to tax on gross receipts and CPI escalation every year) on the November 2026 ballot. Approximate impact = $1 million per year, but could likely be much higher (-$2 to $3 million per year). 3. Adopt new % cent Transaction & Use Tax (TUT) on the November 2026 ballot. 4. Continue event pricing for enhanced Parking Revenue 5. Expand Short Term Vacation Rental Program 41 Long Term Fiscal Sustainability Strategies Reduce Near-Term Capital Control Personnel Costs Spending, Equipment Costs, Organizational Strategies Sourcing Strategies .n. 'n - , - . . • Wage freeze • Defer or cancel capital • Small and/or temporary • Outsource • Hiring freeze projects, maintenance, across the board budget • Insource • Increase part-time labor and/or replacement cuts • Increase Taxes • Reduce hours and pay • Defer noncapital special • Reorganization —centralize • Create special district with • Close facilities projects financial management its own taxing authority • Layoffs or reductions in • Use short term debt to pay • Contract or implement • Audit tax revenue sources force for vehicles shared services model for • Improve billing and • Reduce general fund select programs • Offer early retirement collection methods support to other funds • Divest (eliminate programs) . Examine fees for service • Increase employee (reduce interfund transfers contributions to pensions out) • Audit routine expenditures or OPEB (zero based budget) Fiscal Sustainability Planning Steps (12-24 months) Focus on those Assess feasibility Conduct analysis on Estimate fiscal strategies with High and budget strategies impacts ' or Medium fiscal ' implementation impact difficulty factors Develop budget Present project scenario packages > Draft project report > Present project > report to City for consideration report to Taskforce Council Support Council Develop deliberation and implementation Support staff in selection of budget implementation strategies action plan 43 FY 2025/26 Budget Next Steps • Based on City Council feedback tonight, staff will make requisite adjustments to the proposed FY 2025-26 Budget • Revised budget will be brought back for formal City Council consideration/adoption on June 3rd 44 M. 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