CC SR 20250417 01 - FY25-26 Budget Assumptions CC
CITY COUNCIL MEETING DATE: 04/17/2025
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consideration to receive a report on the FY 2024-25 year-end estimates and review of
the preliminary budget assumptions for developing the FY 2025-26 General Fund budget.
RECOMMENDED COUNCIL ACTION:
1. Receive and file an update on FY 2024-25 year-end estimates;
2. Approve closing the $2.8 million Los Angeles County Supervisor Hahn’s Social
Program Grant on June 30, 2025 and allocating the remaining balance of
approximately $570,000 to the Capital Infrastructure Program (CIP) Fund for
landslide emergency and mitigation efforts;
3. Review the budget assumptions to develop the proposed FY 2025-26 General
Fund Budget, and provide Staff with direction on the following:
• Affirming the FY 2025-26 budget assumptions, which include:
i. Revenue projections of $41.6 million which includes continuing the 3%
Utility User Tax rate and Transfers-In of $250,000;
ii. Personnel costs of $15.8 million:
a. Including all existing and approved positions for competitive, part -
time, confidential, elected officials, and management;
b. Using assumptions based on current labor agreements for the cost-
of-living adjustment (COLA), performance merits, and benefits ;
c. Adding one full-time Public Safety Manager (City Manager, Public
Safety Division);
d. Adding one full-time Recreation Coordinator (Recreation and Parks,
Open Space);
e. Reclassifying one Accounting Clerk position (Finance);
f. Continuing to underfill Accounting Supervisor (Finance);
g. Continuing to freeze Executive Assistant (City Manager): and
h. Continuing to freeze GIS Coordinator (Community Development).
iii. Non-personnel costs of $21.0 million, including one-time expenditures
and contingency budget for emergency repairs in General Fund ;
iv. Transfers-Out of $4.2 million, including $3.9 million to the CIP Fund and
Other Funds; and
v. Transfers-out of $889,500 of additional transfers to the CIP Fund in
accordance with the City Council Reserve Policy No. 41 and $400,000
to the Employee Pension Service Fund in accordance with the Pension
Guidelines.
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• Funding priorities for the projected FY 2025-26 positive variance of $620,200
(projected revenues, minus operating expenditures, minus annual transfers)
which may include:
i. Additional funding for the City Council Goals;
ii. Additional transfer to the CIP Fund;
iii. Establish a new Facilities Maintenance Fund to save for the future
maintenance costs of city-owned facilities; and/or
iv. Establish an Emergency Reserve Fund or Disaster Recovery Fund;
and/or
v. Keep the projected positive variance in the General Fund.
4. Review Staff’s report on Fiscal Sustainability in response to the City Council’s
direction at the March 17 City Council Goal Workshop , and provide Staff with
direction on the following:
i. Potential revenue sources for FY 2025-26 and future years for further
research;
ii. Cost containment strategies applied in the FY 2025-26 budget
assumptions; and
iii. Receive the FAC’s recommendations from the April 3, 2025 meeting.
ORIGINATED BY: Robert Moya, Deputy Director of Finance RM
James O’Neill, Senior Administrative Analyst JO
REVIEWED BY: Vina Ramos, Director of Finance VR
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
BACKGROUND:
Budget Process
The City’s budget is a financial plan based on projected revenues and expenditures in a
fiscal year starting July 1 through June 30. Each year, the budget is prepared by applying
the City’s long tradition of fiscal responsibility and transparency, prioritizing public safety,
and providing the highest possible service levels to the community. The annual budget
cycle begins with the City Council Goals Workshop, and subsequently, Staff presents the
proposed budget assumptions, which includes the General Fund assumptions for the
following year.
The framework for the budget assumptions starts with reviewing the mid -year and year-
end figures, which then determines the City’s needs for the following year. Generally, prior
to presenting them to the City Council, Staff reports the General Fund budget
assumptions to the Finance Advisory Committee (FAC) and the capital projects to the
Infrastructure Management Committee (IMAC). Any feedback and recommendations
received from the Committees are then included into the staff reports for City Council’s
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consideration during the budget workshops. Overall, the City Council’s budget process
consists of the following:
During the March 17, 2025 Council Goals Workshop, the Council received a third-quarter
status report on the FY 2024-25 Goals, which include 18 different projects to enhance
Public Safety, Public Infrastructure, City Lands and Facilities, Citizen Involvemen t, and
Quality of Life. The City Council recommended continuing these Goals into FY 2025 -26,
while adding an action item to start looking into enhancing fiscal sustainability. Many of
these Goals include multi-year initiatives focused on emergency preparedness, landslide
remediation, and economic development such as the Western Avenue Storefront
Improvement Program. A final draft of the FY 2025 -26 Goals will be presented to City
Council on June 3 for consideration. In the meanwhile, the budget , among other things,
for these projects will be discussed at two Budget Workshops for the General Fund (April
17) and Capital Infrastructure Program (CIP) Fund (April 29).
Finance Advisory Committee – April 3, 2025
On April 3, 2025, as part of the FY 2025 -26 budget process, the Finance Department
presented the draft budget assumptions to the Finance Advisory Committee (FAC). In line
with the City Council direction from March 17, 2025 City Council Goals Workshop, Staff
also presented potential financial sustainability strategies, including a review of existing
revenue sources, suspended revenues, financial assistance programs, and cost -
containment measures. Staff’s presentation was str uctured into (1) potential short-term
actions, such as reviewing current resources and uses, and (2) long -term strategies,
developing a framework for fiscal sustainability.
Overall, the FAC provided feedback in all categories, including a suggestion to provide
the City Council with a scenario, showing a sensitivity analysis of the current budget
assumptions, factoring in a 5% decrease in revenues and a 5% increase in expenditures.
Revenue-generating ideas were also provided and are included in this report for City
Council’s consideration (Discussion Item No. 4 Fiscal Sustainability). The
recommendations from the FAC include potential short -term revenue-related actions for
City Council’s consideration, estimated to generate between approximately $100,000 and
$530,000 in FY 2025-26. These include, for City Council consideration, reinstating certain
business license taxes previously set at $0 and adjusting fees that have remained flat
year-over-year. The recommendations also include starting to research long-term
strategies that may take more than a year to implement . This includes Staff evaluating
viable revenue source options that are currently set significantly lower compared to similar
agencies.
City Council
Goals
Workshop
March 17
Budget
Workshops
April 17 (GF)
April 29 (CIP)
Preliminary
Budget
June 3
Budget
Hearing &
Adoption
June 17
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The focus of the April 3 FAC meeting was to discuss the City’s current revenue sources
and potential options for City Council consideration at the upcoming budget workshop.
Staff will continue collaborating with the FAC to discuss the development of a long-term
fiscal sustainability framework in future meetings.
Budget Assumptions
The framework for developing the budget assumptions begins with a review of mid-year
and year-end financial data, providing an outlook on trends and fiscal requirements for
the upcoming period. In light of the recent $36.3 million projected expenditures for
emergency response and mitigation efforts, w ith 80% of the funding from the City’s
General Fund and CIP reserves for the Greater Portuguese Bend Landslide Complex,
the Department Heads have conducted an additional review of expenditures. The review
focused on identifying cost-saving and cost-neutral strategies through a thorough analysis
to prevent unnecessary cost growth, reducing budget line items when necessary,
offsetting cost increases through savings, controlling base budget growth by reviewing
one-time expenditures, and exploring alternative funding sources such a s special revenue
funds and grants.
Over the past three months, the City Manager, Finance Team, and Department Heads
have held various budget meetings to formulate the budget, ensuring balance, and
alignment with community and organizational priorities. Throughout these discussions,
Staff considered the status of the baseline budget, year-end estimates, and programmatic
changes approved by the City Council. Adjustments were also made to accommodate
regulatory requirements, contractual obligations, and operational needs such as
personnel, maintenance, professional services, and equipment.
Following thorough discussions and approval from the Department Heads and City
Manager, Staff prepared this staff report with a focus on the General Fund.
In summary, the following financial information is presented in this report:
• FY 2024-25 General Fund Year-End Estimates
• FY 2025-26 Revenue and Expenditure Assumptions
• FY 2025-26 Fund Balance Summary
The majority of the City’s capital expenditures, such as landslide emergency and
mitigation efforts are funded through the CIP Fund and Special Revenue Funds. For these
funds, Staff will present the budget assumptions and projected fund balances at the April
29 CIP Budget Workshop. The Public Works Department and the Infrastructure
Management Advisory Committee (IMAC) h eld a meeting on March 31 and will meet
again on April 21 to discuss the Capital Improvement Program for Fiscal Years 2025-26
through 2029-30.
Fiscal Sustainability
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At the March 17 Goals Workshop, the City Council directed staff to prepare for
consideration at the upcoming budget workshops the following action items on financial
sustainability:
• Suggest initiatives to generate added revenue that would be achieved by
collaborating with the FAC and other advisory committees.
• Identify cost containment strategies, considering the future financial outlook of the
City and the capital infrastructure needs.
Staff are developing a framework and guiding principles to support the City Council ’s
direction on fiscal sustainability. As outlined in the Financial Sustainably section
(Discussion Item No. 4), Staff also presented information to the FAC at its April 3 meeting
for feedback and recommendations on the following potential short-term and long-term
action items:
Short-Term (FY 2025-26 budget process – April and May 2025)
• Through the upcoming budget workshops, Staff will provide an overview of the
City’s sources and uses (April), the 10-Year Financial Model for the General Fund
(April and May), and Financial Model for the Five-Year Capital Improvement
Program (May).
• Evaluate revenue sources that were previously paused and/or suspended to
provide financial assistance and tax relief measures to residents and businesses.
(April).
• Request feedback and/or recommendations from the FAC on potential revenue
sources for staff to explore in response to the City Council’s direction (April).
Although this is a long-term process due to legal requirements and public outreach,
the initial research will help establish the framework for a long-term plan.
• Review the proposed budget assumptions that include cost-containment and cost-
neutral strategies and budget optimization strategies.
Long-Term (> 1 Year)
• Develop a framework by establishing a future strategy for ongoing cost
containment strategies, enhancing revenue sources, and identifying other funding
opportunities to maintain the City’s long-term financial sustainability.
• This action item presents several options for City Council’s consideration, requiring
thorough consideration, planning, committee collaboration, and public input.
Therefore, Staff anticipates this action item will be part of a long-term plan to
support City Council’s direction on fiscal sustainability.
DISCUSSION:
1. FY 2024-25 General Fund Year-End Estimates
Staff projects the fund balance for the General Fund, including transfers out, at almost
$37.5 million, an increase of $2.4 million (7%) compared to the revised budget (Table 1).
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After applying the 50% City Council Reserve Policy of $16.8 million, and additional
transfers out to the CIP Fund and the Employee Pension Services (EPS) Fund, the
estimated unallocated fund balance is $11.9 million. This represents an increase of
approximately $2.4 million (25%) from the revised budget, primarily due to the slight
increase in year-end estimated revenues of $0.5 (1.2%) and estimated lower
expenditures by $1.9 million (-4.2%) from staff vacancies ($0.7 million) and projected
lower year-end from operations and maintenance including professional and technical
services and repairs and maintenance ($1.2 million).
While the estimated year-end fund balance increased compared to the revised budget,
the unallocated fund balance of $11.9 million represents a decrease of approximately
$4.1 million (-22%) compared to the original budget adopted in June 2024, which was
projected $15.2 million. Over the past five years of solid revenue sources, prudent
spending, year-end budget balances, and consistent financial planning, the General Fund
had an average fund balance growth rate of 10%. Considering the available balance and
emergency needs, in October 2024, the City Council approved an additional $6.4 million,
for a total of $8.5 million in transfers to the CIP Fund in FY 2024-25. These additional
transfers to the CIP Fund helped fund a portion of the City’s $36.3 million in expenses
related to the landslide emergency and mitigation efforts which consequently reduced the
estimated fund balance.
Including all transfers from the prior year’s unallocated fund balance, the General Fund
revenues are estimated to end the year at $43.2 million, with expenditures and annual
transfers of $42.7 million, and additional transfers of $8.9 to CIP and Employee Pension
Service Fund, reaching $51.6 million by year-end (Table 1 and Chart 1).
Table 1: FY 2024-25 General Fund – Projected Fund Balance Summary
General Fund
(in millions)
FY 2024-25
Adopted
FY 2024-25
Revised Budget
FY 2024-25
Year-End
Estimates
Beginning Fund Balance 34.5 37.0 37.0
Add: Revenues 39.5 42.5 43.0 0.5 1.2%
Add: Transfers-In 0.3 0.3 0.3
Total Revenues 39.8 42.7 43.2 0.5 1.2%
Less: Expenditures (35.6)(40.4)(38.5)(1.9)-4.7%
Less: Transfers to CIP (TOT)(3.9)(3.9)(3.9)
Less: Other Transfers-Out (0.3)(0.3)(0.3)
Total Expenditures (39.8)(44.6)(42.7)(1.9)-4.2%
Projected Ending Fund Balance 06/30/2025 $34.5 $35.1 $37.5 $2.4 7%
City Council Restricted Fund Balance
Less: Additional Transfers - CIP Ladera (PY Surplus)(0.9)(0.9)(0.9)
Less: Additional Transfers - CIP Landslide (PY Surplus)(6.4)(6.4)
Less: Additional Transfers - CIP Additional (PY Surplus)(1.2)(1.2)(1.2)
Less: Transfers to Pension (PY Surplus)(0.4)(0.4)(0.4)
50% Reserve Policy (16.8)(16.8)(16.8)
Projected Unallocated Fund Balance - 06/30/25 $15.2 $9.5 $11.9 $2.4 25%
Increase/(Decrease)
from Revised Budget
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Chart 1: FY 2024-25 Adopted Budget vs. Revised Budget vs. Year-End Estimates
Staff seeks for City Council approval to receive the year-end estimates for FY 2024-25,
which reflect an increase of $0.5 million (1.2%) in revenues and expenditures ending the
year lower than the revised budget by almost $1.9 million (-4.2%).
2. Supervisor Hahn’s Landslide Financial Assistance Social Grant Program
The social grant program inception was in September 2024 and implementation began in
October 2024. As of April 9, 2025, the City has received over 232 applications and has
disbursed payments for 221 completed and verified applications for a total of $2.2 million.
Staff anticipates ending the year with a balance of $570,000. If acceptable to the City
Council, Staff will start the public outreach with a target end date of June 30, 2025.
Based on the available balance in this grant and given that the funds are restricted for
landslide-related efforts, Staff seeks City Council approval to close out the grant program
on June 30, 2025 and to transfer the remaining balance of $570,000 to the CIP Fund for
landslide emergency response and mitigation, in accordance with the grant requirements.
3. FY 2025-26 General Fund Revenue Assumptions
Revenues – Overview
Economic conditions remained generally stable over the past fiscal year, though signs of
softening growth have emerged in several key sectors. The City’s core revenue sources,
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particularly property taxes and transient occupancy taxes —continued to demonstrate
resilience, supported by a strong real estate market and stable tourism demand.
Investment earnings also contributed positively, aided by persistently high interest rates.
However, broader inflationary pressures, elevated borrowing costs, and continued market
uncertainty have moderated the pace of revenue expansion compared to previous years.
Based on the set of assumptions presented in this report, the FY 2025-26 General Fund
revenues are conservatively projected to reach $41.6 million (Table 2), reflecting a 3.8%
decrease from the FY 2024-25 year-end estimate of $43.2 million. This decrease is
primarily from the prior year’s one -time grant of $2.8 million from the Los Angele County
Supervisory Hahn office. When excluding this one-time grant, the revenues are $1.4
million (3.5%) higher than the prior year’s original budget of $40.2 million.
Table 2: FY 2025-26 Proposed Budget Assumptions, General Fund Revenues
The budget remains conservative, accounting for ongoing economic shifts, including
interest rate policies, inflation trends, and regional market activity. While the Rancho
Palos Verdes’ economy continues to show resilience, factors such as higher borrowing
costs, shifting consumer behavior, and rising operational expenses are shaping revenue
trends. Steady property values and tourism activit ies provide stability, though changes in
discretionary spending, business investment, and development activity could i ntroduce
variability.
The proposed budget assumptions also reflect the City’s ongoing commitment to prudent
financial management while recognizing economic fluctuations that may impact revenue
performance. Monitoring key indicators, including consumer behavior, housing market
trends, and financial conditions, will remain a priority throughout the budget cycle to
ensure long-term fiscal sustainability.
A comprehensive discussion and analysis of the General Fund's primary revenue sources
is highlighted below.
Revenue Sources
(in millions )
FY 2023-24
Actuals
FY 2024-25
Revised
Budget
FY 2024-25
YE Estimate
FY 2025-26
Budget
Assumptions
Property Tax $17.1 $17.5 $17.6 $18.2 $0.6 3.3%
Transient Occupancy Tax 6.4 6.6 6.8 7.0 0.3 3.7%
Sales Tax 2.83 2.85 2.87 2.85 -0.01 -0.5%
Permits & Fees 4.0 4.1 4.1 4.3 0.2 4.7%
Franchise Tax 2.4 2.3 2.4 2.4 0.0 0.0%
Utility Users Tax 2.69 2.55 2.44 2.46 0.02 0.7%
Other Taxes & Misc. Revenues 4.4 6.6 6.8 4.1 (2.6) -39.1%
Subtotal $39.9 $42.5 $43.0 $41.4 -$1.6 -3.8%
Transfers In 0.3 0.3 0.3 0.3 - 0.0%
Total Revenues $40.2 $42.7 $43.2 $41.6 ($1.6) -3.7%
Changes from
FY 2024-25
YE Estimates
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Revenues – Analysis
Property Tax
Property tax continues to serve as the primary and most stable revenue source in the
General Fund. The FY 2025-26 proposed budget assumption anticipates property tax
revenues to reach approximately $18.2 million, reflecting an increase of approximately
$580,000 (3.2%) over the FY 2024-25 year-end estimate of $17.6 million. This projection
reflects a steady growth in assessed valuation and accounts for both Citywide trends and
localized economic impacts. The methodology used is a combination of staff analysis and
projections provided by the City’s consultant, HdL Companies. While the estimate
includes parcels within the Portuguese Bend Landslide Complex, no downward
adjustment was made at this time due to uncertainty regarding how the County Assessor
will treat property values in the area. Based on the current net taxable value of properties
within that area, the City’s share of property tax revenue is estimated at approximately
$169,000; this figure represents a potential maximum revenue loss should widespread
reductions occur, but the final impact will not be known until the FY 2025 -26 roll is
released in late summer.
Several key factors contribute to the expected change in property tax revenue:
• Inflation Adjustment (Based on the California Consumer Price Index – CCPI):
The County Assessor has applied the maximum 2 .0% CCPI adjustment for FY
2025-26. This increase, which applies to properties not reduced under Proposition
8, contributes to the overall rise in assessed value across the City.
• Property Sales and Transfers:
According to HdL, the Property sales and transfers occurring between January and
December 2024 are expected to add approximately $310 million in reassessed
value to the property tax roll. Based on an average property tax apportionment of
approximately 16%, this increase is projected to generate an estimated $496,000
in additional annual General Fund revenue for the City. This figure reflects a 9%
increase over the prior year’s reassessed sales value of $285 million during the
same time period, which resulted in approximately $456,000 in revenue to Rancho
Palos Verdes. These reassessments are particularly valuable because they result
in recurring annual revenues, unlike one -time grants or volatile sources. This
stable growth in the assessed roll helps strengthen the City's long -term fiscal
position and provides a reliable cushion against fluctuations in other areas, such
as development activity, temporary Proposition 8 reductions, or revenue losses
associated with the Portuguese Bend landslide.
Although higher mortgage rates have slowed transaction volume, Rancho Palos
Verdes remains a highly desirable coastal community, supporting a relatively
strong real estate market and maintaining assessment stability.
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• New Construction and Property Improvements: Assessed valuation is further
supported by residential remodels and permitted construction activity, which
trigger partial reassessments under state law. These improvements are factored
into the City’s long-term revenue base and help offset softness in ot her areas of
the market.
• Proposition 8 Reductions and Recaptures: Properties affected by market shifts
or environmental factors may receive temporary reductions in assessed value
under Proposition 8. Conversely, as conditions improve, these properties are
eligible for value recapture. Monitoring these fluctuations, especially in
neighborhoods impacted by landslide activity—will be critical in the coming year.
Any fluctuations would impact the next year’s budget.
• Landslide Activity and Buyout Program: A voluntary property buyout program,
funded through FEMA and CalOES, will convert some parcels into open space,
removing them from the tax roll. The property value for the entire landslide complex
is approximately $315 million, bringing approximately $3 million in property tax
revenues to the County, and the City’s portion of that revenue is approximately
$169,000 (~6%). At this time, the potential changes are not reflected in the budget
assumption as these will likely affect next year’s budget.
• Impact of Regional Wildfires: While Rancho Palos Verdes was not directly
affected by the January 2025 Palisades and Alta Dena Fires, the destruction of
approximately 15,000 structures in Los Angeles County significantly increased
regional housing demand. Displaced residents have sought housing in
surrounding communities, including Rancho Palos Verdes, placing upward
pressure on both property values and rental rates. This market shift may contribute
to higher sale prices and reassessed values, particularly for properties sold in late
2024 and early 2025. The City will continue to monitor housing trends for any
sustained impacts on assessed valuations and property tax revenues.
Together, these factors contribute to an estimated 3.5% increase in overall assessed
valuation for FY 2025-26. The combined total for secured property taxes ($11.1 million),
property taxes in lieu of vehicle license fees ($6.7 million), and property tax from RPTTF
and transfer taxes ($460,000) results in a projected property tax revenue of approximately
$18.2 million. This represents a $580,000 increase (3.3%) over the FY 2024-25 year-end
estimate of $17.6 million.
Property Taxes
FY 23-24 Actual Revenue: $17,114,113
FY 24-25 Year-end Estimate: $17,631,720
FY 25-26 Proposed Budget Assumption: $18,210,000
FY 25-26 Net Change to YE Estimate: +$580,000 (3.2%)
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Transient Occupancy Tax (TOT)
TOT remains the second-largest revenue source for the General Fund, with 98 % of
collections generated by Terranea Resort. The City projects $72.5 million in room revenue
for FY 2025-26, incorporating Terranea Resort’s calendar year 2025 projections. Based
on this estimate, TOT revenue could reach $7.3 million under the City’s 10 percent tax
rate. However, the FY 2025-26 proposed budget assumptions take a conservative
approach, forecasting TOT total revenue at $7.0 million or approximately 4% below
Terranea’s forecast and historical trends. Of that amount, $6.8 million is attributed to
Terranea Resort, while the remaining $200,000 comes from miscellaneous TOT sources,
including short-term rentals and smaller lodging establishments. This reflects a 3.7%
increase over the $6.7 million year-end estimate for FY 2024-25.
This conservative forecast accounts for potential fluctuations in occupancy rates due to
broader economic conditions, evolving travel behaviors, and corporate travel policies.
While the luxury hospitality sector remains strong, high borrowing costs, shifting
consumer spending, and changes in business and group travel trends present factors
that warrant a measured approach. Given these considerations, the City’s projection
balances optimistic market forecasts with a fiscally responsible outlook to ensure revenue
stability.
Moreover, recent landslide activity in the Portuguese Bend area has primarily affected
residential properties and infrastructure but has had no direct impact on Terranea Resort
or other hospitality businesses. Despite concerns regarding the landslide near Terranea,
at this time, there continues to be no material impact on occupancy rates or revenue
collections. The resort continues to project to perform well, maintaining strong room rates
and steady visitor traffic.
Los Angeles County’s tourism sector continues to recover, with the region projected to
welcome 50 million visitors annually, contributing over $18 billion to the local economy.
In 2023, LA County recorded 49.1 million visitors, representing a 97% recovery compared
to pre-pandemic levels. As part of this trend, Rancho Palos Verdes benefits from its status
as a premier coastal destination, drawing both domestic and international visitors seeking
high-end accommodations. With continued demand for luxury hospit ality, TOT remains a
stable and growing revenue source for the City.
Transient Occupancy Tax
FY 23-24 Actual Revenue: $6,449,008
FY 24-25 Year-end Estimate: $6,750,000
FY 25-26 Proposed Budget Assumption: $7,000,000
FY 25-26 Net Change to YE Estimate: +$250,000 (3.70%)
Sales and Use Tax
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Sales and Use Tax revenues for FY 2025 -26 are projected at $2.85 million, reflecting a
modest decrease of $14,200 (-0.5%) from the FY 2024-25 year-end estimate of $2.87
million. This conservative forecast is based on local sales activity and guidance from the
City’s sales tax consultant, HdL, and incorporates both recent performance and expected
consumer behavior trends.
While the taxable sales base remains stable, factors such as elevated interest rates,
reduced discretionary spending, and a cooling labor market are expected to moderate
local economic activity. HdL’s latest statewide forecast highlights continued disinfla tion
and slower job growth, particularly in retail and auto sectors, contributing to subdued sales
tax growth. Regionally, spending has softened in sectors like fuel, building materials, and
durable goods, while restaurants and online sales have remained m ore resilient.
As our City remains largely residential with limited commercial activity compared to
neighboring cities, revenue growth from sales tax is structurally constrained. Other nearby
cities such as Redondo Beach approved a sales tax increase in March 2024, citing long -
term structural budget needs. Other Peninsula and South Bay cities have considered
similar actions to help offset rising service costs and inflationary impacts.
In November 2024, voters approved Measure A, the LA County Homelessness Services
and Affordable Housing Ordinance, to replace Measure H. This replaced a 0.25% sales
tax with a 0.50% sales tax, increasing the countywide sales tax rate by 0.25%. Such
proceeds are collected by Los Angeles County, not the City of Rancho Palos Verdes,
resulting in no increased revenue to the City.
For FY 2025-26, the City continues to maintain a conservative and flat estimate for FY
2025-26, while continuing to monitor economic trends, consumer behavior, and state -
level developments that may impact this key revenue source.
Sales and Use Tax
FY 23-24 Actual Revenue: $2,834,674
FY 24-25 Year-end Estimate: $2,867,740
FY 25-26 Proposed Budget Assumption: $2,853,500
FY 25-26 Net Change to YE Estimate: -$14,240 (-0.5%)
Permits and Fees
Permits and Fees revenues, driven primarily by activity levels within the Community
Development Department, are projected to total approximately $4.3 million in FY 2025-
26. This represents an increase of approximately $194,000, or 4.7%, over the FY 2024-
25 year-end estimate. The increase is largely attributable to steady demand for building
and safety permits, plan check services, and business license revenues, which continue
to reflect strong development activity and business complian ce efforts across the City.
While some categories like animal licenses and temporary permits remain relatively flat,
the overall growth indicates a stable construction and permitting environment. Staff will
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return to the City Council on May 20, 2025, to present the annual Master Fee Schedule
for consideration of applying or opting out of the Consumer Price Index (CPI) adjustments,
which, if adopted, will be incorporated into the FY 2025 -26 Proposed Budget.
Permits and Fees
FY 23-24 Actual Revenue: $4,035,163
FY 24-25 Year-end Estimate: $4,122,246
FY 25-26 Proposed Budget Assumption: $4,316,500
FY 25-26 Net Change to YE Estimate: $194,254 (4.7%)
Franchise Tax
Franchise tax revenues are derived from payments made by franchisees for the use of
the City’s public rights-of-way, including utility providers such as EDCO, Southern
California Edison, Cox Communications, and Southern California Gas Company.
Projections for FY 2025-26 remain flat at $2.4 million, consistent with the FY 2024 -25
year-end estimate and reflecting a slight decline from FY 2023 -24 actuals. Staff based its
estimates on historical performance , current industry trends, and contracts, while also
monitoring regional changes and regulatory activity that could affect franchise revenues
moving forward.
In line with the best regional practices, staff is reviewing existing franchise agreements to
ensure they continue to align with infrastructure use, evolving service needs, and long -
term fiscal sustainability.
Franchise Taxes
FY 23-24 Actual Revenue: $2,428,769
FY 23-24 Year-end Estimate: $2,400,000
FY 24-25 Proposed Budget Assumption: $2,400,000
FY 24-25 Net Change to YE Estimate: $0 (0.0%)
Utility User Tax (UUT)
UUT revenue is influenced by several external factors, including weather conditions, utility
consumption, natural gas prices, and utility rate adjustments. Staff uses historical trends
and CPI data from the Bureau of Labor Statistics to inform revenue projections. FY 2025-
26 UUT revenue is projected at $2 .5 million, reflecting a modest increase of $17,200, or
0.7%, over the FY 2024-25 year-end estimate. However, it remains below FY 2023-24
actuals due to continuing declines in utility usage across key sectors.
In particular, the projected figures for FY 2025 -26 account for the impact of service
disruptions resulting from the active landslide in Rancho Palos Verdes, primarily affecting
the Portuguese Bend and Seaview neighborhoods. As of late 2024, electricity ha s been
shut off to approximately 245 homes, and gas services have been suspended for over
130 properties due to safety concerns. These shutdowns have resulted in an estimated
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5% drop in electricity-related UUT and a 10% decline in gas-related UUT collections,
totaling an anticipated reduction of approximately $100,000. The FY 2025-26 projections
reflect these known impacts.
Staff will continue to monitor utility usage levels, market volatility in energy rates, and the
evolving landslide conditions to update revenue forecasts as new information becomes
available.
UUT
FY 23-24 Actual Revenue: $2,691,520
FY 24-25 Year-end Estimate: $2,440,000
FY 25-26 Proposed Budget Assumption: $2,457,200
FY 25-26 Net Change to YE Estimate: +$17,200 (0.7%)
Other Taxes and Miscellaneous Revenues
Other Taxes and Miscellaneous Revenues include a variety of sources such as the Golf
Tax, lease and rental revenues, program and event fees, interest earnings, and one -time
or nonrecurring revenue. The FY 2025-26 proposed assumptions for revenues is
approximately $4.1 million, reflecting a decrease of $2.6 million (-39.1%) from the FY
2024-25 year-end estimate. This substantial variance is primarily attributed to the $5.0
million grant from Los Angeles County Supervisor Hahn’s Social Program Grant, awarded
earlier in FY 2024-25 to assist with landslide-related impacts in the Portuguese Bend
area. Of this amount, $2.8 million was recorded under General Fund revenues for the
Financial Assistance Grant Program, which provided direct support to homeowner s
impacted by land movement and utility disruptions. The remaining $2.2 million was
allocated to the CIP Fund to support the City’s ongoing stabilization efforts, public safety
measures, and long-term mitigation planning.
Interest earnings remain a strong performer for the General Fund, supported by sustained
higher interest rates and solid investment performance. The year -end estimate for FY
2024-25 is approximately $1.4 million, reflecting favorable returns on the City’s
investment portfolio and prudent cash management practices.
For FY 2025-26, interest revenue is projected at $1.2 million, a decrease from the prior
year primarily due to anticipated lower available cash balances, as one -time revenues
are drawn down and capital project expenditures increase. Despite the lower projection,
interest earnings continue to provide a stable and mean ingful source of revenue. Staff
continues to maintain oversight of investment performance and market trends to ensure
continued compliance with the City’s investment policy and alignment with lo ng-term fiscal
objectives.
Staff continues to use historical trends, CPI data, and known programmatic activity to
project revenues in this category. While certain recurring revenues, including the Golf Tax
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and rental income, are expected to remain stable, the FY 2025 -26 forecast is more
conservative and excludes one-time items that elevated the prior year’s total.
Per Rancho Palos Verdes Municipal Code (RPVMC) Section 3.40.140, a legislative
review of the Golf Tax is required every four years prior to budget adoption. The City
Council set the same Golf Tax rate at 10% on April 6, 2023, for FY 2023-24. The FY 2025-
26 Golf Tax revenue is estimated at $770,000 and will continue to support ongoing
operations. The next review of the Golf Tax will occur as part of the FY 2027-28 budget
cycle.
Other Taxes and Miscellaneous Revenues
FY 23-24 Actual Revenue: $4,354,002
FY 24-25 Year-end Estimate: $6,757,558
FY 25-26 Proposed Budget Assumption: $4,113,000
FY 25-26 Net Change to YE Estimate: -$2,644,558 (-39.1%)
Revenues - Summary
In summary, the FY 2025-26 proposed revenue assumptions totals $41.6 million,
including transfers, reflecting a decrease of approximately $1.6 million (-3.8%), compared
to the FY 2024-25 year-end estimate of $43.2 million. This change is primarily due to the
one-time $2.8 million grant received in the prior year. When excluding this one-time
revenue, the FY 2025-26 budget assumptions represent an increase of $1.4 million
(3.5%), compared to the prior year’s original budget. Property tax remains the largest and
most stable General Fund revenue source, accounting for approximately 44% of total
projected revenues (excluding transfers), TOT continues as the second -largest source,
comprising 17% of the General Fund. Chart 1 below illustrates the breakdown and
allocation of major General Fund revenue sources.
CONTINUED ON THE NEXT PAGE
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Chart 2: FY 2025-26 Proposed Budget Assumptions, General Fund Revenues (excluding
transfers)
Staff seeks the City Council’s affirmation of $41.6 million in projected revenues which
includes continuing the 3% Utility User Tax rate and Transfers -In of $250,000.
Expenditures - Overview
The development of the FY 2025-26 budget assumptions is designed to maintain
essential services while addressing anticipated operational shifts and fiscal priorities. This
process ensures continued alignment with City Council Goals, compliance with City
Council Policy No. 41 on Reserve Policies, and adherence to regulatory requirem ents. It
also accounts for contractual increases, such as CPI adjustments, and incorporates
limited one-time costs for new initiatives.
This year, City staff were asked to identify cost-saving and cost-neutral strategies. These
include identifying savings to offset rising costs and managing base budget growth by
thoroughly evaluating one-time expenditures. Additionally, Staff identified alternative
funding sources, such as special revenue funds and grants, to alleviate the additional
funding needed in the General Fund.
Overall, the proposed budget assumptions for the General Fund, before transfers-out, is
approximately $36.8 million, reflecting a $3.6 million (-9.0%) decrease from the FY 2024-
25 revised budget of $40.4 million. Excluding the one-time grant of $2.8 million, the
proposed budget assumptions reflect a decrease of approximately $800,000 (-2%) from
the FY 2024-25 revised budget.
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In total, when including transfers-out, the proposed budget assumptions for the General
Fund expenditure budget is $41.0 million. This amount reflects a decrease of $12.5 million
(-23.3%) from the FY 2024-25 revised budget of $53.4 million. This decrease is primarily
from the one-time transfers from the unallocated fund balance to the CIP Fund to support
capital projects and the landslide emergency response and mitigation efforts.
As shown in Table 3 below, the major increases in prior year expenditures were primarily
driven by 3.5% increase in public safety service costs from the Los Angeles County
Sheriff’s Department, and an increase of 9.4% in personnel costs for a combined total of
$1.6 million. The increase is primarily due to fewer vacancies compared to previous years,
proposed two new positions, estimated pay increases based on labor agreements, and
an increase of 8.4% increase in benefits, mainly from higher required payments for
CalPERS.
As part of broader cost containment efforts, the $1.6 million increase was offset through
departmental budget reductions ranging from 1% to 5%, using cost-neutral strategies,
and identifying alternative funding sources. With these efforts, instead of an increase, the
proposed budget assumptions, excluding one-time uses, reflect a decrease of $800,000
(-2%) compared to the FY 2024-25 revised budget.
Table 3: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures
Below is a detailed analysis of the budget assumptions for FY 2025-26. The analysis
compares expenditures with the FY 2024-25 revised budget rather than year-end
estimates. Year-end estimates were excluded from the analysis as they do not account
for unfilled or vacant positions and incomplete projects or programs by year -end.
Personnel Costs
Personnel costs account for the salaries and benefits for City employees, including full -
time, part-time, interns, and stipends for the City Council and Planning Commissioners.
Overall, based on the assumptions, the personnel budget is estimated at almost $15.8
Expenditure Category
(in millions)
FY 2023-24
Actuals
FY 2024-25
Revised Budget
FY 2024-25
YE Estimates
FY 2025-26
Budget
Assumptions
Personnel
Salaries $8.7 $10.8 $10.5 $11.9 $1.0 9.4%
Benefits 3.2 3.6 3.3 3.9 0.3 8.4%
Non-Personnel
Sheriff Contract 7.6 8.2 7.9 8.5 0.3 3.5%
Legal Services 1.1 1.5 1.3 1.1 -0.4 -25.3%
Operations & Maintenance 10.3 16.2 15.5 11.4 -4.8 -29.8%
Capital Outlay 0.1 0.1 0.1 0.1 0.0 -29.4%
Subtotal $31.1 $40.4 $38.5 $36.8 ($3.6) -9.0%
Transfers Out 5.4 13.0 13.0 4.2 -8.8 -67.8%
Total Expenditures $36.5 $53.4 $51.6 $41.0 ($12.5) -23.3%
Changes from
FY 2024-25
Revised Budget
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million (38%) of the budget, before transfers out. This is an increase of $1.3 million (9%)
over FY 2024-25 revised budget, which is highlighted below.
Personnel Costs
FY 24-25 Revised Budget: $14,441,600
FY 24-25 Year-end Estimate: $13,729,310
FY 25-26 Proposed Budget Assumption: $15,757,600
FY 25-26 Net Change to FY 24-25 Revised Budget: +$1,316,000 or 9%
Salaries
Currently, the City is in the collective bargaining process with the Rancho Palos Verdes
Employee Association (RPVEA) for full-time employees and American Federation of
State, County and Municipal Employees (AFSCME) for part-time employees. The
agreement for next fiscal year has not been finalized, therefore, Staff estimated personnel
costs for FY 2025-26 using the same terms from the contract that is currently in place.
The following are highlights from the preliminary personnel budget in General Fund for
FY 2025-26:
• Includes budgeting for all existing and approved competitive, confidential, and
management positions funded at 100%, minus a 3% vacancy rate formula to
account for historical average of unspent budget due to vacancies. The funding
needs are aligned with the recruitment schedule as recommended by the
Departments.
• $10.3 million for approximately 77 full-time positions, with 10 positions currently
vacant but expected to be filled in FY 2025-26.
• $252,000 for two new positions and one reclassification. After applying the
proposed offsets, the net increase for these changes is $136,200:
o Up to $160,000 for the Public Safety Manager for Public Safety.
The City Administration Department is requesting to convert its existing
part-time Public Safety Manager position into a full-time position to better
meet the demands of launching and operating a new Public Safety Division.
The total salaries and benefits for this position are approximately $209,300.
If approved by the City Council, the total cost would be offset by
approximately $84,000 for the current part -time position, net increase of
$125,300.
The position plays a lead role in the new Division, whose mission is to cost-
effectively enhance public safety through a combination of sworn,
contracted deputies and non-sworn City personnel. Currently, the Public
Safety Manager oversees strategic planning and day -to-day operations,
including managing the City’s largest professional services agreement (with
the Los Angeles County Sheriff’s Department); serving as a community
liaison to residents, HOAs, businesses, and deputies; managing five
support staff members that include four part-time employees and one full-
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time employee; overseeing administrative tasks such as budgets,
equipment purchases, and other operational needs; implementing new
public safety programs; and conducting analyses to support data -driven
decisions.
Given the complexity of this new Division and the demands of the role, the
Public Safety Manager requires more than the allotted 30 hours per week
(part-time) and would be more effective as a full-time, exempt, and non-
represented management position that can be readily available for off-hour
emergencies and community meetings, staff management, and trainings.
This role is typically full-time and fully benefitted in other agencies such as
Carson, Lakewood and Paramount. A full-time position in Rancho Palos
Verdes would make the role more competitive and support retention efforts.
If this conversion request is approved, staff will transfer the existing part-
time Public Safety Manager incumbent into the full-time role, given her
familiarity with the position and her ongoing successful performance of its
full duties and responsibilities to date. Staff h as duly notified AFSCME that
the position is being recommended for full-time, non-represented status,
and if approved, the position would no longer be part of their membership.
The current salary range for the Public Safety Manager is $141,911 –
$184,484 annually.
o Up to $85,300 Recreation Coordinator for Open Space and Trails Division
The Recreation and Parks Department is requesting the addition of a full -
time Recreation Coordinator position to support the increasing operational
and maintenance demands within the Open Space and Trails (OST)
Division. The total salaries and benefits for this position are approximately
$97,000. If approved, the position would be funded in part by eliminating
two long-time vacant Recreation Specialist positions in the OST Division,
resulting in a budget offset of approximately $92,800, for a total net increase
of $4,200.
The position would play a critical role in maintaining and enhancing the
City’s open space and trail network, which includes over 1,500 acres of
public open space and 30 miles of trails. The Recreation Coordinator would
lead efforts in trail maintenance, vegetation trimming and removal, graffiti
abatement, and signage installation or replacement. The position would
also conduct regular maintenance assessments and inspections, utilize
CityWorks software to track and assign maintenance tasks, coordinate
volunteer work efforts, and organize training for OST staff. Currently,
maintenance responsibilities are distributed among existing staff and limited
part-time support, which constrains the division’s ability to proactively
address deferred maintenance and community concerns. A full -time,
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exempt, and non-represented Recreation Coordinator would ensure
consistent oversight, increased efficiency, and improved responsiveness to
maintenance needs throughout the City’s open space system. This role is
commonly a full-time position in other jurisdictions that manage comparable
open space systems.
The current salary range for the Recreation Coordinator is $72,021 –
$93,626 annually.
o Up to $6,700 Reclassification of one Accounting Clerk position to
Administrative Assistant for the Finance Department.
The Finance Department requests to reclassify an existing Account ing
Clerk position to Administrative Assistant. Reclassifying the position to
Administrative Assistant aligns with its current responsibilities while
providing a clearer pathway for advancement, which supports employee
retention.
Over the past fiscal year, the Accounting Clerk position has taken on
broader responsibilities that include administrative coordination, support for
budget development, assistance with department -wide projects, and
serving as a key liaison with both internal staff and external customers . The
position will continue to support centralized cashiering, purchasing, and
general accounting activities—responsibilities that have expanded in both
volume and complexity. The Administrative Assistant classification will
strengthen internal workflows, provide more advanced administrative
support to management, and assist in preparing level financial documents,
reports, and presentations. Additionally, the position will continue to
enhance the City’s responsiveness to residents and vendors by serving as
a primary point of contact for administrative functions.
The current salary range for the Account ing Clerk classification is $59,630
– $77,519 annually. The proposed Administrative Assistant classification
has a salary range of $70,628 – $91,816 annually. Staff estimates an
increase of approximately $6,700 in annual salary costs associated with the
reclassification.
• $1.8 million for approximately 65 part-time positions or approximately 31 full-time
equivalent (FTE). This amount includes part-time positions at the Recreation and
Park Department, Public Safety, and RPVtv.
Of this amount, approximately $1.4 million (73.5%) is Recreation and Park’s
budget and approximately $221,000 (11.7%) to support staffing for the City’s
Public Safety Program. The Recreation and Parks budget includes approximately
51 positions or 24 FTE’s.
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For the City’s newly formed Public Safety Division, this includes three part-time
Public Safety Liaisons (PSL) and one Field Training Officer (FTO). These positions
enhance the City’s ability to support field operations, community outreach, and
coordination with law enforcement. The FTO also provides onboarding and
supervision to ensure consistent service delivery and operational readiness among
the liaison team.
The remaining $197,000 is allocated for RPVtv for Television Producers and one
part-time Human Resources Specialist. This budget also includes $24,000 for the
City Council’s stipend and $11,400 stipend for the Planning Commissioners.
• $157,200 is allocated for overtime for all full-time and part-time positions.
• Approximately $318,00 accounts for COLA and $418,400 of estimated merit
increase for all full-time employees, including competitive positions, part-time
positions, confidential positions, and management positions. Based on the City’s
current Memorandum of Understanding with RPVEA, COLA is estimated at 3%,
which is the maximum percentage based as measured by CPI-U reported by the
U.S. Bureau of Labor Statistics for the Los Angeles -Long Beach-Anaheim,
California metropolitan area covering the prior twelve-month period March to
March each year. The CPI-U for February is 3.1%, and the CPI-U for March will be
released in mid-April. Also, the budget assumption for merit increase is estimated
at an average of 4.5%. The merit increase is based on emplo yee’s performance
evaluation ranging from 1% to 6% per the City’s current MOU with RPVEA.
• As part of the budget assumptions, approximately $51,100 in salaries has been
allocated to support the City’s Internship Program. The City’s Internship Program
was first established in FY 2023-24 to support the City Council Goal of Citizen
Involvement and Public Outreach. The program was designed as a structured
academic opportunity for high school and college students —or recent graduates—
to gain meaningful hands-on experience in local government while applying and
expanding their academic knowledge in a professional setting. Total cost for this
program with required statutory benefits is approximately $58,000. Interns are
assigned to various City departments and assist with projects, reports,
assessments, and other work aligned with their fields of study. The program
continues to serve as a valuable pipeline for developing future public service
professionals and enhancing community engagement. In addition, interns perform
administrative work that allows Staff to focus on more critical assignments;
complete research projects that help inform City decisions; and provide staffin g
redundancies that have helped fill in temporary gaps, when appropriate. Currently,
interns receive a minimum wage of $16.50/hour.
Given that prospective interns arrive with a range of experience (from none to
extensive), Staff requests to replace their flat wage with a salary range of $16.50
to $19.50/hour. A salary range is consistent with the salary structure of all other
job classifications; however, please note that Interns will remain unrepresented,
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at-will positions. A range will also allow the City to be more competitive in attracting
and retaining qualified interns. Based on an initial survey, most South Bay cities
offer a salary range or a flat rate that is above the minimum wage.
• In the past few years, several vacant positions have been frozen and underfilled
and are excluded from the current budget. While most positions have now been
filled, the following positions continue to remain frozen in the budget assumptions
for FY 2025-26:
• Executive Assistant in the City Manager’s Office
• GIS Coordinator in the Community Development Department
• Accounting Supervisor in the Finance Department (underfilled)
Management will continue to reassess the department’s needs in the coming fiscal year,
and any changes will be reported to the City Council for approval during the annual
budget workshops.
Benefits
The projected benefit assumptions for the FY 2025-26 amount to around $4.1 million,
reflecting an increase of approximately $0.2 million (4.7%) over the FY 2024-25 revised
budget. Key budget assumptions for developing the benefits include:
• $1.9 million allocated for health, dental, vision, worker’s compensation, Medicare,
retirement health savings, and ancillary benefits . The approximate increase in
health, dental, and vision is approximately 5%.
• $1.9 million for the CalPERS normal rate payment and the CalPERS Unfunded
Accrued Liability (UAL) payment. This payment covers the City’s normal costs for
current employees across Tiers 1, 2, and 3. The increase of $0.1 million (10%)
over the previous year is driven by the City's unfunded liability for current and
retired employees across all Tiers. Per the City’s Pension Guideline, the Employee
Pension Service (EPS) Fund will relieve the General Fund of UAL payments
exceeding $900,000. Based on these assumptions, an allocation of $0.3 million
will be funded from the EPS Fund to offset increases in the benefits category.
• $27,900 benefits for the Public Safety Program.
• $48,200 in additional benefits for proposed new positions, including $30,700 for a
Public Safety Manager in the Public Safety Division, $500 the reclassification of
the Administrative Assistant in the Finance Department, and $17,000 for a
Recreation Program Coordinator in the Recreation and Parks Department.
Non-Personnel Costs
The non-personnel category includes the Los Angeles County Sheriff contract, legal
services, professional and technical services, repairs and maintenance, supplies, training
and conferences, utilities, and miscellaneous/other expenses. This category represents
$21.6 million, or 52% of the proposed budget assumptions, before transfers out. As
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illustrated below, the FY 2025-26 budget assumptions include a decrease of $4.5 million
(-17.3%) over the FY 2024-25 revised budget.
Non-Personnel Costs
FY 24-25 Revised Budget: $25,990,802
FY 24-25 Year-end Estimate: $24,818,111
FY 25-26 Proposed Budget Assumption: $21,027,450
FY 25-26 Net Change to FY 24-25 Revised Budget: -$4,507,902 or -17.3%
Below are major highlights of the budget assumptions used to develop the non-personnel
budget. The amounts listed and the percentage to budget per category are based on the
proposed budget assumptions, before transfers-out.
Public Safety
Los Angeles Sheriff Department Contract:
• Accounts for $8.5 million or 20% of the proposed budget assumptions and
includes:
o 56-Hour Unit Deputy Sheriff
o Deputy Non-Relief
o Deputy, Bonus 1 Non-Relief
o Deputy, Grant Special Assignment
o Motor Deputy Non-Relief
o Liability Trust Fund (12.5%)
• To maintain the same level of services, the budget assumption for this contract
includes a 3.5% increase (or approximately $286,000) over the FY 2024-25
revised budget. LASD is expected to set a final rate increase later this month.
Once it is set, Staff will adjust the contract cost, if needed, and present it to the City
Council for consideration, as part of the proposed FY 2025-26 budget.
• A five-year contract with three Peninsula cities that is based on a fixed percentage
cost-sharing model with the City of Rancho Palos Verdes paying 68%, Rolling Hills
Estates 28% and Rolling Hills 4%. The current contract was approved by the City
Council at its regular meeting on June 18, 2024.
Special Programs
• Special Programs for $278,500, including School Resource Officers for outreach
and education at Peninsula schools;, Neighborhood Public Safety Grant Program
providing reimbursements to individual homes and HOA’s for the installation of
safety-enhancing technology; and Automated License Plate Reader (ALPR)
cameras installed across the Peninsula to assist LASD for various purposes
including identifying stolen vehicles, Amber Alerts, and missing persons, and
Everbridge emergency notification software.
• Supplemental Program for $70,000 for funding of additional miscellaneous
supplemental (overtime) patrol around the City by the Sheriff’s Department as
needed and as requested by Staff, including crime suppression, specialized traffic
patrols, and fireworks suppression.
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Public Safety Program
• The goal of this Program is to enhance public safety services and increase
responsiveness by utilizing non-sworn Public Safety Liaisons to respond to non-
emergent calls for services dispatched out of the Lomita Sheriff’s Station. This
Program was presented to the City Council in response to residents’ concerns
regarding increasing public safety needs and the rising cost of the LASD
agreement.
• Public Safety Program for $120,800 for operational needs (not including
personnel), such as supplies, uniforms, lease, equipment, fuel costs, and training.
This new program was approved in FY 2023-24, began to roll out this fiscal year,
and it is anticipated to be fully implemented in the upcoming year.
Legal Services
• Accounts for $1.1 million or about 3% of the proposed budget assumptions.
• This is a decrease of $0.4 million (-38%) from the revised budget of $1.5 million in
FY 2024-25, primarily from the one-time costs in litigation costs related to landslide
and the goal of maintaining costs at approximately $1.1 million.
• Includes general legal services, code enforcement, litigation, labor negotiation,
and legal services related to public records act requests.
Professional and Technical Services
• Accounts for almost $3.9 million or 9.5% of the proposed budget assumptions.
• Majority of this category includes managed information technology services,
engineering, environmental planning services, code enforcement related services,
flagging/crossing guard services, recreation program instructors, special events,
inspections, the peafowl program, other legal services, audit services, and other
miscellaneous consulting services.
• The proposed budget assumptions are approximately $1.3 million (-25%) lower
than the revised budget, primarily due to staff’s efforts in increasing efficiencies in
the permitting process, resulting in reduced costs, reducing billable hours as
vacancies are projected to decrease, and identifying alternative funding sources,
such as Measure W, for eligible expenditures including water quality and
stormwater programs and Measure A for eligible parks and open space
maintenance.
• One-time costs for this category include:
o $20,000 for contracted scanning of Geo files. This initiative will continue
the work of digitizing historical documents to improve staff efficiency through
the Laserfiche portal. Once scanned and verified as accurate copies, the
hardcopy files will either be destroyed or archived according to retention
policies. This ongoing effort will not only enhance document searchability
but also alleviate storage constraints by freeing up valuable physical space.
(Community Development).
o $50,000 for Regional Mass Evacuation and Care Plan . The Plan will be
developed through a partnership between the four Peninsula cities to outline
evacuation resources on and near the peninsula and the Peninsula’s
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response plan and regional coordination strategy during large scale
emergencies that cause displacement and/or evacuations of part or all of
the Peninsula. The plan will include an internal evacuation playbook that
identifies available emergency center, shelter, and safe refugee locations
and the evacuation route options available on the Peninsula. (City Manager)
o $200,000 for updating the City’s Open Space Element pursuant to SB1425.
The City’s Open Space was last updated in 2018 as part of the City’s
General Plan Update. Pursuant to SB1425, every city and county in
California is required to review and update its local open space plan by
January 1, 2026. Required updates are needed to address climate
resiliency and environmental justice policies at State level. (Community
Development)
o $15,000 for Housing Element Outreach. The City’s 2021-2029 Housing
Element was certified in 2024 by the California Department of Housing &
Community Development. The housing element includes various housing
programs including, but not limited to, ADU development and residential
rehabilitation that are aimed at implementing goals and policies of the
document. Public outreach measures are required to promote availability of
programs. (Community Development)
o $50,000 Regional Program Settlement Fees. (Public Works). The Regional
Stormwater Program Settlement Fee represents the City's contribution to
five Settlement Offers related to regional violations concerning stormwater
quality standards at Machado Lake, specifically regarding the Nutrients and
Toxics Total Maximum Daily Loads (TMDLs). Future contributions will
depend on the completion of stormwater -related projects within the region.
Repairs and Maintenance
• Accounts for $2.9 million or 7% of the proposed budget assumptions.
• Most of this category includes licensing and support for technology services, tree
trimming, landscape and median maintenance, fuel modification, traffic control,
custodial, graffiti abatement, and building and park maintenance.
• The proposed budget assumptions decreased by approximately $0.8 million (-
1.5%) from the prior year’s revised budget. This decrease is primarily attributed to
the reallocation of costs for the fuel modification program (goat grazing), now
funded through the Hazard Mitigation Grant program, and open space
repairs/maintenance, which will be funded through Measure A funds.
Supplies, Utilities, Training, and Conference, Miscellaneous Expense
The remaining non-personnel costs are supplies, training and conference, and
miscellaneous expenses, which represent $4.1 million or 10% of the proposed budget
assumptions. There is a decrease of approximately $2.7 million from the prior year’s
revised budget (-40%), primarily due to the removal of one-time grant expenditures in FY
2024-25 funded through LA County Supervisor Hahn’s Social Grant Program, which
provided assistance to property owners affected by the landslide and energy shutoff. The
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decrease also reflects reductions in required operational expenses and other one -time
costs.
• Some of the major items under the miscellaneous category are:
o $900,000 for the City’s insurance premium payments for general
liabilities, property damages, and pollution.
o $185,100 for equipment replacement savings. These are charges to the
departments based on an equipment replacement schedule. The
accumulation of the charges is recorded in the City’s internal service
fund for future use.
o $697,000 for utilities – gas, water, electricity.
o $680,000 tax assessments from ACLAD and KCLAD. Based on the
District’s recent adopted tax formula, the City’s share, as a landowner,
is approximately 60%. This budget item has increased by approximately
$488,000 since FY 2023-24, primarily due to higher maintenance costs
related to the landslide in both ACLAD and KCLAD. The increase in this
line item represents a permanent change to the 10 -Year Financial
Model, resulting in a sustained increase from FY 2025 through FY 2034.
o $372,600 for training, conference, and meetings.
o $765,000 for miscellaneous expenses, including equipment, tools,
supplies, uniform, special grant programs such as Western Avenue
Commercial Storefront Improvement Program for $50,000 .
Transfers Out
Transfers Out from General Fund are interfund transfers such as transfers to the CIP,
Employee Pension Service Plan Fund, and other funds such as the City’s Improvement
Authority for Portuguese Bend and Sub -region One, as described in detail below.
• Transfer Out to CIP
The transfer out of General Fund revenue to the CIP Fund has been a factor of the
City’s public safety contract with the Los Angeles County Sheriff’s Department (LASD)
since FY 2017-18. In FY 2017-18, with the goal to continue enhancing public safety
services for the residents of Rancho Palos Verdes, the City Council approved reducing
the TOT transfers to the CIP Fund by cumulative annual increases in the public safety
contract. As a result, ongoing increases to the public safety contract reduce transfers
to CIP. However, to offset these reductions in transfers, when the City ends the fiscal
year with a positive variance between revenues and expenditures, the City Council
typically approves additional transfers to the CIP Fund in the following year. For
example, in FY 2024-25, the City Council approved $1.1 million during the budget
process, and in October 2024, approved an additional $6.4 million to support the
landslide emergency and mitigation efforts.
For FY 2025-26, Staff estimates to receive approximately $6.8 million in TOT revenue
from the Terranea Resort. Based on this estimate, the TOT transfer to the CIP Fund
is approximately $3.9 million (10%) of the proposed budget assumptions. This reflects
26
the net amount after applying the cumulative annual increases (since FY 2017-18) of
$2.8 million in the public safety contract, as shown in Table 4 on the next page.
Table 4: FY 2025-26 Budget Assumptions, Transfers Out to CIP
Based on costs provided by the LASD, the estimated increase in FY 2025-26 is
roughly $286,000, or 3.5%, over the FY 2024-25 adopted budget.
Additionally, in accordance with the City Council Reserve Policy No. 41, the City may
transfer to the CIP Fund all or a percentage of the prior year’s (final audited balance)
unallocated fund balance in General Fund (FY 2023-24) in the amount of $14 million.
As such, the same as FY 2024-25, Staff recommends transferring $889,500 (6%) to
the CIP fund for FY 2025-26. This amount is equivalent to the annual loan payment
for the Ladera Community Park.
• Transfers Out to Employee Pension Service (EPS) Fund
On February 2, 2021, the City Council approved the CalPERS Pension Plan
Guidelines which provides a financial plan to address the City’s outstanding pension
liability and CalPERS’ continuous change in valuation methodology. Based on the City
Council’s discretion, the goal is to transfer funds to the EPS Fund of at least 10% but
no more than 25% of the annual General Fund surplus (revenues minus expenditures,
including transfers). As a result, the accumulated funds in the EPS Fund would then
relieve the General Fund of payment more than $900,000 of the City’s UAL.
Since the inception of the pension guidelines, the EPS Fund has an estimated fund
balance of approximately $1.04 million ending FY 2024-25. Based on the year-end
results of FY 2023-24 (final audited balance), the City’s surplus (revenues minus
expenditures including transfers) is $3.9 million. Therefore, Staff is proposing the
same amount in prior years of $400,000 from the General Fund to EPS Fund in FY
2025-26.
FY 2025-26 TOT Estimates
(Terranea)6,800,000$
Less Public Safety Increases:
FY 2017-2018: (893,000)
FY 2018-2019: (200,500)
FY 2019-2020: (230,800)
FY 2020-2021: (101,000)
FY 2021-2022: (102,900)
FY 2022-2023: (103,700)
FY 2023-2024: (616,000)
FY 2024-2025: (269,600)
FY 2025-2026: (286,000)
FY 2025-26 Budget Assumptions (2,803,500)
Transfers to CIP $3,996,500
27
Based on the estimated year-end balance of $1.04 million in the EPS Fund, as part of
FY 2024-25 FAC Workplan, Staff is evaluating the financial benefits for the City of
using a portion of the available balance to make additional payments toward reducing
the City’s unfunded pension liability. Given the significant capital expenses the City is
facing with landslide and other major capital projects, if any additional payments are
proposed, Staff recommends using a portion of the $1.04 million balance in the EPS
Fund to avoid adding fiscal impact to the General Fund. Analysis of the benefits of the
additional payments will be presented at the FAC meeting in May, prior to the budget
hearing in June for City Council’s consideration.
• Other Miscellaneous Transfers Out
The transfers out for Sub-region One and the Improvement Authority are intended to
cover annual maintenance charges and to maintain endowment requirements. Since
the estimated interest earned in the funds are not enough to cover the costs incurred
in these funds, the General Fu nd will need to transfer funds of $60,000 to subsidize
Sub-region One in the amount, $15,000 to Improvement Authority for Portuguese
Bend, and $70,000 to Abalone Cove Sewer Fund, and $100,000 to Habitat
Restoration Fund.
In closing on expenditures, Chart 3 shows the General Fund expenditures by
department and their respective contribution in percentage to the City’s overall total
expenditures. Tables 5 – 12 provide a summary of each Department’s budget.
Chart 3: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures – by
Department
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Table 5: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures – City
Council
Table 6: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures –
Administration
Table 7: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures – Public
Safety
CONTINUED ON THE NEXT PAGE
29
Table 8: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures – Finance
Table 9: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures – Public
Works
Table 10: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures –
Community Development
CONTINUED ON THE NEXT PAGE
30
Table 11: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures –
Recreation and Parks
Table 12: FY 2025-26 Proposed Budget Assumptions, General Fund Expenditures – Non-
Departmental
As described above, Staff seeks the City Council affirmation on the following estimated
budget assumptions for personnel:
• Approving the budget assumptions of $15.8 million for all competitive full-time
positions, management positions, part-time positions, COLA, and merits;
• Adding two positions, Public Safety Manager and Recreation Coordinator, and
reclassification of Accounting Clerk to Administrative Assistant;
• Continuing to freeze the GIS Coordinator position (Community Development)
and Executive Assistant (City Administration), and underfill Accounting
Supervisor with Senior Accountant (Finance).
• Transfers-Out of $4.2 million, $889,500 to CIP for additional transfers, and
$400,000 to EPS Fund for FY 2025-26.
As described above, Staff seeks the City Council affirmation on the following estimated
budget assumptions for non-personnel and transfers:
• Non-personnel costs of $21.0 million, including one-time expenditures and
contingency budget for emergency repairs in General Fund;
• Transfers-Out of $4.2 million, including $3.9 million to the CIP Fund and Other
Funds; and
31
• Transfers-out of $889,500 of additional transfers to the CIP Fund in accordance
with the City Council Reserve Policy No. 41 and $400,000 to the Employee
Pension Service Fund in accordance with the Pension Guidelines.
City Council’s Funding Priorities for the FY 2025-26 Projected Positive Budget
Variance of $620,200
Based on the proposed budget assumptions of $41.6 million in revenues and
approximately $41 million in estimated expenditures and transfers, the General Fund
would meet the City Council’s policy of a balanced budget, and with an estimated amount
of $620,000 in available funding. In this year’s budget process, this positive variance was
specifically and carefully planned with the Departments in consideration of the City’s
significant capital funding needs.
Staff seeks the City Council’s direction and may allocate the amount to the following:
• Additional transfer to the CIP Fund; and/or
• Establish a new Facilities Maintenance Fund to save for the future maintenance
costs of city-owned facilities. This fund is similar to the City’s Equipment
Replacement Fund and Employee Pension Service Fund, in which funds are
incrementally funded through annual contributions, allowing the fund to grow
incrementally over time. The Facilities Fund would help the General Fund and CIP
Fund from unforeseen emergency repairs specifically for city-owned facilities in the
future. If approved, the use of funds would require City Council’s approval; and/or
• Establish an Emergency Reserve Fund or Disaster Recovery Fund which may only
be approved by the City Council during declared emergencies. While the City
already has a 50% reserve policy, this fund would be funded through annual
contributions, allowing it to grow incrementally over time and provide dedicated
financial capacity for emergency response and recovery. While the City currently
maintains a 50% General Fund Reserve Policy, this is designed to ensure fiscal
stability and only holds the balance required, without accumulating any funds for a
specific purpose.
FY 2025-26 General Fund - Estimated Fund Balance
Based on the presented assumptions, Staff projects the General Fund balance as of June
30, 2026, would be approximately $29.2 million, net of transfers out. This represents a
decrease of $5.8 million (-17%) from the FY 2024-25 revised budget, primarily due to $6.4
million in additional transfers from the prior year’s unallocated balance to the CIP Fund
for landslide emergency response and mitigation efforts.
After applying the City Council’s Reserve Policy of 50% of the operating budget for
approximately $17 million, additional transfers-out of $889,500 for the Ladera Linda loan
payment, and $400,000 for the Pension Fund, the estimated unallocated fund balance is
$11.0 million. This reflects an increase of approximately $1.5 million (16%) compared to
the FY 2024-25 revised budget.
32
A calculation of the estimated FY 2025-26 Fund Balance is illustrated in Table 13 below.
Table 13: FY 2025-26 General Fund – Projected Fund Balance Summary
4. City Council Goal – Fiscal Sustainability
Overview
Considering the City’s $36.3 million in landslide emergency and mitigation efforts and its
impact on the City’s overall financial condition, at the City Council Goal Workshop on
March 17, the City Council directed staff to prepare for the upcoming budget workshop s
for the following action items on financial sustainability:
• Suggest initiatives to generate added revenue for the City Council’s consideration.
This would be achieved by collaborating with the FAC and other advisory
committees.
• Identify cost containment strategies, considering the future financial outlook of the
City and the capital infrastructure needs.
In response to the City Council’s directive, and as previously mentioned, Staff presented
the following information to the FAC on April 3, 2025. The same information is also being
presented at tonight’s meeting, along with FAC’s recommendations.
General Fund
(in millions)
FY 2024-25
Revised
Budget
FY 2024-25
Year-End
Estimates
FY 2025-26
Budget
Assumptions
Beginning Fund Balance 37.0 37.0 28.6
Add: Revenues 39.7 40.2 41.4 1.7 4.3%
Add: Revenues (Grant)2.8 2.8 0.0 (2.8)-100.0%
Add: Transfers-In 0.3 0.3 0.3
Total Revenues 42.7 43.2 41.6 (1.1)-2.6%
Less: Expenditures (37.6)(35.7)(36.8)(0.8)-2.3%
Less: Expenditures (Grant)(2.8)(2.8)0.0 2.8 -100.0%
Less: Transfers to CIP (TOT)(3.9)(3.9)(4.0)0.1 2.5%
Less: Other Transfers-Out (0.3)(0.3)(0.2)(0.1)-16.9%
Total Expenditures (44.6)(42.7)(41.0)(3.6)-8.1%
Projected Ending Fund Balance 06/30/2025 $35.1 $37.5 $29.2 -$5.8 -17%
City Council Restricted Fund Balance
Less: Additional Transfers - CIP Ladera (PY Surplus)(0.9)(0.9)(0.9)0.0%
Less: Additional Transfers - CIP Landslide (PY Surplus)(6.4)(6.4)(6.4)-100.0%
Less: Additional Transfers - CIP Additional (PY Surplus)(1.2)(1.2)(1.2)-100.0%
Less: Transfers to Pension (PY Surplus)(0.4)(0.4)(0.4)0.0%
50% Reserve Policy (16.8)(16.8)(17.0)0.2 1.5%
Projected Unallocated Fund Balance - 06/30/26 $9.5 $11.9 $11.0 $1.5 16%
Increase/(Decrease)
from Revised Budget
33
• Short-term action items (FY 2025-26 budget process – April and May 2025):
o Provide an overview of the fund balances for the General Fund and CIP
Fund.
o Provide an overview of City’s main revenue sources.
o Provide an overview of revenue sources that were previously paused and/or
suspended, providing financial assistance and tax relief measures to
residents and businesses.
o Request feedback and/or recommendations from the FAC on potential
revenue sources for staff to explore in response to the City Council’s
direction (April). Although this is a long-term process due to legal
requirements and public outreach, the initial research will help establish the
framework for a long-term plan.
o Provide an overview of the FY 2025-26 proposed budget assumptions that
include cost-containment and cost-neutral strategies and budget
optimization strategies.
• Long-Term (> 1 Year)
• Develop a framework by establishing a future strategy and guiding
principles to support the City Council’s direction on fiscal sustainability.
Overview – Fund Balance (General Fund)
As presented in this report, the FY 2025-26 budget assumptions for the General Fund
propose a balanced budget and a structurally balanced budget over the next 10 years.
These projections key budget assumptions include:
• Revenue growth starting 2026 is approximately 2.8% and expenditure growth at
2.7%, net of transfers.
• Meeting City Council reserves policy of 50% (~$17 million).
• Reducing the TOT transfers to the CIP Fund by cumulative annual increases in the
public safety contract approved in 2017 (~$2.8 million). To offset this and optimize
funding, the City Council approves additional transfers to the CIP fund at the end
of the year, when revenues end the year higher than expenditures . For example,
in 2024, the City Council approved $1.2 million in additional transfers and $6.4
million for the landslide emergency and mitigation efforts.
• Maintaining approximately $10-$11 million in unallocated fund balance. However,
it is important to note that this balance is a decrease of 50% from FY 2023-24,
prior to the landslide emergency and mitigation efforts. As shown in Chart 4 below,
the $21 million in unallocated fund balance had accumulated from year-over-year
increases since 2015.
CONTINUED ON THE NEXT PAGE
34
Chart 4: FY 2015-2026 Projected Unallocated Fund Balance, General Fund
Overview – Fund Balance (CIP Fund)
The expenditures for the landslide emergency and mitigation efforts is projected to reach
$36.3 million, with $18.8 million funded from the CIP Fund. As presented to the City
Council in January, based on CIP’s estimated ending balance of $23 million, Chart 5
below presents a revised five-year forecast using the FY 2024-25 Adopted Five-Year
Capital Program for illustrative purposes only. Further changes to the future capital
program and the forecast will be revised and presented at the upcoming April 29 Budget
Workshop (Capital).
The forecast presented in January to the City Council included the FY 2024-25 deferred
projects of $3.9 million, as well as the adding an assumption of $5.5 million in annual
maintenance costs for the DDWs in FY 2025 -26. Assuming the estimated $21 million in
FY 2025-26 will be spent and encumbered by June 30, 2026, subsequently by FY 2026-
27, the CIP Fund projects in the Five-Year Capital Program would have to be revisited in
order to meet the City Council’s reserve policy of a minimum fund balance of $5 million.
CONTINUED ON THE NEXT PAGE
in millions
35
Chart 5: Estimated Funding for the FY 2024-25 Adopted Five-Year Capital
Program (as of January 2025)
Summary
Based on the projected fund balance in the General Fund, the City’s general operations
are expected to remain structurally balanced over the next 10 years. This outlook is
contingent on continued prudent spending, conservative revenue budgeting, and City
Council’s policy of reducing TOT transfers to the CIP Fund by the annual increases of
public safety.
The financial impact of the $36.3 million in capital spending is becoming increasingly
evident across both the CIP and General Funds. The CIP Fund has been significantly
depleted, and without new revenue sources, its capacity to fund future capital programs
will be limited to the annual TOT transfers from General Fund of approximately $4 million.
This transfer is also projected to decline in future years due to the reduction of transfers
to offset annual increases in public safety.
The General Fund’s unallocated fund balance has also dropped from $21 million to $11
million since October 2024. As the gap between revenues and expenditures continues to
narrow, it will become more challenging for General Fund to add new programs or expand
existing services without identifying additional revenue sources. Additionally, as the
General Fund is the primary source of funding for the CIP Fund through transfers from
surplus, the narrowing gap between revenues and expenditures will limit future transfers,
thus reducing the capacity to fund capital improvement projects.
CONTINUED ON THE NEXT PAGE
*Five-Year Capital Program are based on projected expenditures (approx. @ 70% of total costs )
36
Short-Term Action Items (FY 2025-26 budget process – April and May 2025)
Provide an Overview of Current Sources (Revenues)
The following provides an overview of the primary general fund resources, including the
tax authority, FY 2025-25 budget assumptions using current rates, City’s allocation, and
comparable rates when applicable. Any new or increases for general purposes require a
majority voter approval, while special purpose taxes require a two -third vote.
FAC’s recommendations have been added below for City Council’s consideration.
Property Tax
Description Authority
FY 2025-26
Budget
Assumptions
Ad valorem tax on real property (1% of
assessed value), administered by the
County. Imposed by state and County
allocates to various agencies including the
City. City share was set with allocation
formula based on local agencies' average
property tax revenue for 1975-1977. The
California Consumer Price Index (CCPI)
increase is set at maximum 2.0%
California Constitution
Article XIII and XIIIA;
Revenue and Tax Code
§§95, 97.
$18,210,000
44% of Total
General Fund
Revenues
Chart 6: Property Tax Allocation RPV’s 6% of the 1% Assessed Value
37
FAC Recommendations:
• Increasing revenue from Property Tax is n ot a viable option.
• The ability to increase will be challenging such as the legal authority including
State, County, and other agencies.
Transient Occupancy Tax
Description Authority Comparable Rates
FY 2025-26
Budget
Assumptions
Locally levied tax
imposed on occupants
for privilege of
occupying rooms in a
hotel or similar for 30
days or less.
Approximately 98% of
taxes are collected from
Terranea Resort.
Municipal Code
Chapter 3.16
(1973). General
purpose requires
majority vote of
voters, special
purpose requires
2/3 vote.
Rancho Palos Verdes 10.0%
Anaheim 15.0%
Carson 12.0%
Culver City 14.0%
El Segundo 12.0%
Hermosa Beach 14.0%
Inglewood 15.5%
Long Beach 13.0%
Lomita 10.0%
City - Los Angeles 12.0%
County Los Angeles 12.0%
Malibu 15.0%
Marina Del Rey 14.0%
Redondo Beach 12.0%
Santa Monica 14.0%
Torrance 11.0%
Destination Areas
Half Moon Bay 15.0%
Laguna Beach 12.0%
Napa County 13.0%
Newport Beach 10.0%
San Diego (Tax Zone 1) 11.75%
San Diego (Tax Zone 2) 12.75%
San Diego (Tax Zone 3) 13.75%
San Francisco 14.0%
Santa Monica 14.0%
Sonoma 13.0%
$7,000,000
(@ current
rate of 10%)
16.9% of
Total General
Fund
Revenues
FAC Recommendations:
• The City is low compared to other cities, especially given the City is a coastal
community and a premier destination.
• As a coastal community, the City of Rancho Palos Verdes is more of a “destination
area” than other communities. Therefore, City staff should provide rates from other
“destination areas” (i.e. other coastal communities, Napa, etc.) for comparison of
T.O.T. rates for City Council’s consideration.
• Part of the long-term strategy (> 1 Year to implement).
38
• Based on the budget assumption for FY 2025-26 of $7 Million (at a 10% T.O.T.
rate), below is the calculated impacts of potential rate increases: (FAC did not
recommend a specific percentage)
o +1% = + $700,0000
o +2% = +$1.4 million
o +3% = +$2.1 million
o +4% = +$2.8 million
o +5% = +$3.5 million
• Consider charging a documentary tax (i.e. Culver City 1.5% transfer tax) for
property sales
Sales and Use Tax
Description Authority Comparable Rates
FY 2025-26
Budget
Assumptions
Tax imposed on total
retail price of any
tangible personal
property and the use
or storage of such
property when sales
tax is not paid.
Tax is
administered by
the state.
California
Constitution
Article XIII
§§25.5(a)(2),
29; Revenue
and Tax Code
§7200.
Rancho Palos Verdes 9.50%
Anaheim 7.75%
Carson 10.25%
Culver City 10.25%
El Segundo 9.50%
Hermosa Beach 9.50%
Inglewood 10.00%
Long Beach 10.25%
Lomita 10.25%
Los Angeles 10.25%
Malibu 10.00%
Marina Del Rey 9.50%
Redondo Beach 9.50%
Santa Monica 10.75%
Torrance 10.00%
* Rates in areas of LA County
were raised by 0.25% as of
April 1, 2025 due to the
passage of Measure A in
November 2024. (This
includes RPV, but the
increased revenue is collected
by LA County and does not
increase revenues to RPV)
$2,853,500
(@ current rate of
9.5% with City’s
portion at 1.06%)
6.9% of Total
General Fund
Revenues
39
Chart 7: Sales Tax Allocation - RPV 1.06%
FAC Recommendations:
• Increasing revenue from Sales Tax is not a viable option, given the lack of legal
authority the City has to increase the City’s share of sales tax collected within the
City.
Utility Users Taxes (UUT)
Description Authority Comparable Rates
FY 2025-26
Budget
Assumptions
Rancho Palos
Verdes tax rate is
3% on consumption
of electricity, gas
and water
Ordinance 568
repealed the
collection of Utility
User Tax on
telecommunication
services on May 19,
2015
Authorized under
the Municipal Code
3.30 (1993),
requiring a majority
vote of voters,
special purpose
requires 2/3 vote.
Rancho Palos Verdes 3.0%
Culver City 11.0%
El Segundo 3.0%
Hermosa Beach 5.5%
Inglewood 4.5%
Long Beach 3.0%
Los Angeles 4.5%
Malibu 5.0%
Manhattan Beach 4.5%
Marina Del Rey 4.5%
Palos Verdes Estates N/A
Redondo Beach 4.7%
Rolling Hills Estates N/A
Santa Monica 10%
Torrance 6.5%
$2,457,200
6% of Total
General Fund
Revenues
(Electric, Gas,
Water)
FAC Recommendations:
• The City’s UUT rate is behind other cities and the City should consider raising its
rate
• City staff should further research for City Council’s consideration.
• Part of the long-term strategy (> 1 Year to implement).
40
• Given the support for suspending the UUT collection from telecommunication
providers in 2015, reinstating its collection does not appear to be a viable option
given that it would require a majority vote of voters.
Franchise Tax
Description Authority Comparable Rates
FY 2025-26
Budget
Assumptions
Solid Waste Franchise
Fees
For residential waste hauler
services, the Collector Fee
and Environmental
Programs Fee are set
annual fees established in
the City’s exclusive
residential waste hauler
contract, which is subject to
CPI-U escalation.
(FY 2025-26 represents year
3 of a 7-year contract)
For commercial waste, the
Collector Fees are
calculated at 5% of gross
quarterly revenue, based on
tonnage of waste collected,
with the Environmental
Programs Fees equal to the
Collector Fees, less a
proportional credit for the
percentage of waste diverted
to recycling programs.
Electric, Gas, Water, Other
Franchise Fees: 5% of gross
revenues
In-Kind PEG Fees of 1% of
gross revenues
Authorized under the
California Integrated
Waste Management
Act of 1989, with AB
939 Fees collected to
support
environmental
programs in the City.
Local governments
are authorized to
implement programs
and collect fees to
fund waste
management and
environmental
protection activities
within their
jurisdiction.
All cities vary, based on
negotiated contracts/RFP
process.
For Commercial Waste
Services:
Rancho Palos Verdes 5%
Hermosa Beach 10%
Lomita 9%
Redondo Beach 13.4%
RHE 12%
Signal Hill 11.2%
$2,400,000
6% of Total
General Fund
Revenues
41
Chart 8: Franchise Fees Collected – FY 2024-25
FAC Recommendations:
• As the City is entering year 3 of a 7 year contract with EDCO for residential trash
collection service, increasing revenue from this tax does not seem to be a viable
option
• As the City will be negotiating an exclusive commercial trash collection franchise
for future years, FAC encourages staff to look to this area for potentially increasing
revenue in 2027 and beyond
• of the City staff should further research for City Council’s consideration .
• Part of the long-term strategy (> 1 Year to implement).
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42
Golf Tax
Description Authority Comparable Rates
FY 2025-26
Budget
Assumptions
Tax imposed on the
user of a golf course
within the City. Tax
is 10% of golf fee
paid.
Government-owned
golf courses are
exempted (i.e.
county owned Los
Verdes Golf
Course).
2 Golf Courses:
Terranea Resort
Trump Golf Course
Municipal Code
Chapter 3.40 (1993).
General purpose
requires majority
vote of voters,
special purpose
requires 2/3 vote.
Legislative review
every four years.
The City Council set
the same Golf Tax
rate at 10% on April
6, 2023, for FY
2023-24. The next
review is the budget
cycle in FY 2027-28.
Rancho Palos Verdes 10.0%
Seal Beach
$0.41 per $1,000 of total gross
receipts
*Based on staff research, only
information that was available to
public was Seal Beach.
$770,000
2% of Total
General Fund
Revenues
FAC Recommendations:
• Increasing revenue from Golf Tax does not appear to be a viable option, as one
of the three golf courses in the City, Los Verdes Golf Course, is owned by the
County and exempt from the golf tax.
Provide an Overview Financial Assistance Programs and Suspended Fees/Taxes
The following provides an overview of revenue sources that were put on hold and/or
suspended, providing financial assistance and tax relief measures to residents and
businesses.
• Business License Taxes for Home Occupation and Small Businesses
In accordance with Section 5.04.440 of the Rancho Palos Verdes Municipal Code
(RPVMC), changes to the Business License Tax (BLT) may occur on January 1 of
each year. In August 2019, Ordinance No. 623 amended this section, specifying
that the tax may be increased annually by an amount not exceeding the CPI and
is subject to approval from the City Council. The amendment to this sectio n was
made in response to the City Council’s previous request to discontinue the practice
of applying automatic annual increases. Consequently, the City Council has
withheld from adjusting the BLT for inflation each year since 2017, setting the
annual rate at zero.
43
In addition to the 2019 amendments, the City Council also instituted a similar
approach for home occupancy businesses and established a Small Business
Assistance Program in 2020. This decision benefited residents with in-city home
occupancy businesses and small businesses generating less than $1.5 million in
annual gross receipts. This program, established in 2020, was also in response to
the economic challenges arising from the Covid-19 pandemic.
As described in Chapter 5.04.015 of the RPVMC, the intent of BLT is to “contribute
to the general fund and will thereby partially offset the cost of providing city
services, such as public roads and other public infrastructure and utilities”. Since
the City has historically ended the year with revenues exceeding expenditures, the
City Council supported the pro-business initiatives and kept the rates with no CPI-
U increase, keeping BLT at $0 for home occupation businesses and small
businesses.
Since its inception, this program has provided approximately $400,000 of tax
savings, supporting over 600 local businesses and residents of Rancho Palos
Verdes since 2019.
If deemed necessary by the City Council, a majority of voter approval is not
required, and the City Council may consider this revenue source to be reinstated
and include it in the FY 2025-26 budget process for approximately $100,000 in
general fund revenues.
FAC Recommendations:
• City Council consider reinstating as part of the short-term strategy (include
in the FY 25-26 budget process).
• Utility User Tax - Telecommunications Services
In August 2014, the City Council suspended the collection of the 3% UUT from
telecommunication providers. Ordinance 568 was adopted on May 19, 2015, to
repeal the collection of Utility User Tax on telecommunication services. The UUT
program generated approximately $700,000 in general fund revenues.
Authorized under the Municipal Code 3.30 (1993), a change to UUT requires a
majority vote of the voters.
FAC Recommendations:
• Not a viable option, given the support for suspending the UUT collection in
2015 from telecommunication providers and reinstating its collection would
require a majority vote of voters.
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• Storm Drain Fees
The City’s Storm Drain User Fee (Fee) was established in 2005 and was collected
from 80% of property owners with an imposed 10-year sunset on the Fee. The City
collected approximately $1.3 million annually, which was restricted to maintain and
improve City-owned storm drain facilities. The user fee sunset in FY 2015-16. Any
expenditures after FY 2015-16 were funded by the CIP Fund.
Reinstating or proposing new fees requires a majority vote of the voters.
FAC Recommendations:
• City has the legal documents from prior collection of fees
• This would be a dedicated revenue source
• Staff should further research for City Council consideration as part of the
City’s long-term strategy
• 1972 Act Landscaping/Lighting District Assessments
In 1992, the City Council formed an assessment district designated as the Citywide
Landscaping and Lighting Maintenance District (LLMD) for the purpose of
providing funding for the ongoing operation, maintenance, and servicing of
landscaping, street trees, irrigation systems, hardscapes, sidewalks, streetlights,
and traffic signals in City rights-of-way and dedicated easements.
On June 21, 2005, to reduce the overall tax burden on residents, the City Council
approved to fund streetlight and traffic signal operation and maintenance costs
using a different fund, the 1911 Act Lighting and Maintenance District Fund (1911
Act Fund), rather than LLMD funds. Accordingly, the City Council reduced the
LLMD assessment rate and annual levy to $15.92 per parcel for single-family
residences, resulting in revenue of approximately $256,000.
On May 16, 2017, the City Council set the LLMD rate to zero, which means
property owners were not assessed. Since suspended, approximately $300,000
has been funded by a combination of the General Fund, Gas Tax, Measure M, and
Waste Reduction Fund. The LLMD assessment and funding strategy will be
presented to the City Council for discussion and direction on April 15, 2025.
FAC Recommendations:
• Consider reinstating to the original rate (from 1996) of ~$23.60 per parcel
as part of the short-term strategy. Based on staff’s research, this
assessment do not require a majority vote of the voters.
• Consumer Price Index (CPI) Adjustments and Master Fee Schedule
Since the adoption of Resolution No. 2021-15 on April 20, 2021, which established
the City’s Master Schedule of Fees and a Fully Burdened Hourly Rate (FBHR)
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schedule based on a comprehensive cost -of-service analysis, City Council has
directed staff to return annually with recommendations on whether to adjust fees
in accordance with the March Consumer Price Index for All Urban Consumers
(CPI-U). This annual review ensures that fees remain aligned with the rising costs
of providing municipal services while adhering to state law, which mandates that
City-imposed fees cannot exceed the estimated reasonable cost of service.
Over the past three fiscal years, the March CPI -U has remained elevated,
reflecting broader national inflation trends:
Year CPI-U %
March 2022 8.5
March 2023 3.7
March 2024 4.0
To lessen the financial pressure on residents and businesses during a period of
high inflation, while continuing to promote housing modernization and economic
recovery from the Covid-19 pandemic, the City Council opted not to apply the CPI-
U increases on the Master Schedule of Fees such as planning permits, public right
of way, recreation programs, reservations, and facility rentals. Additionally, this
was made based on the City’s ongoing positive variance, where revenues have
consistently exceeded expenditures year-over-year.
This pause in CPI-U adjustments has saved the residents and businesses of
approximately $540,000 since 2021.
If deemed necessary by the City Council, a majority of voter approval is not
required, and the City Council may consider this revenue source to be reinstated
and include it in the FY 2025-26 budget process for approximately $1 30,000 in
general fund revenues.
FAC Recommendations:
• Consider reinstating the CPI as part of the short-term strategy.
FAC additionally recommended the following ideas for consideration:
• Research additional commercial filming and film permit possibilities for
additional revenue
• Creating an in-house position to handle certain tasks, such as transactional
tasks, currently addressed by the City Attorney’s Office.
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Review of the FY 2025-26 Cost Containment Strategies
The General Fund expenditures are estimated to decrease by $12.5 million (23.3%),
including transfers. The significant decreases are from one-time expenditures and
transfers include:
• $2.8 million in grant expenditures (LA County Supervisor Hahn’ Social Grant
Program) for property owners affected by the landslide and energy shutoff.
• $6.4 million from General Fund Reserves to the CIP Fund for the landslide
emergency and mitigation efforts. While staff anticipate this grant to end the year
at $2.3 million, the remaining $570,000 is restricted for the grant until the City
Council takes an action to release the funds for other purposes in accordance with
the grant requirements.
• $1.2 million of additional transfers from prior year’s unallocated general fund
balance to CIP Fund to support capital projects.
• $320,000 of non-personnel one-time costs including election costs, State
Mandated Safety Element Local Hazard.
Excluding one-time costs and additional transfers to CIP, the General Fund’s overall
proposed budget assumptions decreased by $800,000 (-2%) compared to the revised FY
2024-25 budget. This reduction was part of an effort to stabilize expenditure and control
growth while minimizing the impact on services.
The following are the key highlights that helped offset the overall increases in General
Fund:
• Securing a Hazard Mitigation Plan grant for to partially fund the fuel modification
maintenance (goat grazing). The grant is for approximately $915,000 which will
partially support the program in the next 3 years.
• Optimizing available resources in other special revenue funds such as Measure W
for eligible expenditures including water quality and storm water programs.
• Reducing salaries and benefits by applying a 3% vacancy rate to better align
budgeted amounts with actual personnel expenditures , helping to prevent
overstating budgetary needs.
• Adjusting the budget in professional and technical contracts that were previously
used to augment services due to vacancies.
• Monitoring budget requests to ensure one-time expenditures are not carried over
into the base budget.
• Using current available resources for one-time costs instead of requesting a new
budget in FY 2025-26.
• Continuing the annual practice of reviewing supplies and equipment needs to
control cost growth.
• Continuing to identify efficiencies and opportunities to reduce billable hours for
citywide professional and services contracts.
• Other department reductions of $728,500:
o $66,000 City Administration: delay purchase of one vehicle for Public Safety
Division unless a grant can cover the full purchase and equipment cost ;
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o $60,000 Finance/Non-Department: reduce professional and technical
services previously approved for a financial advisor service for investments
and identify other solutions for a lower amount;
o $50,000 Community Development: reduce Western Avenue Commercial
Storefront Improvement Program from $100,000 to $50,000;
o $142,500 Recreation and Parks: reduce funding for non-personnel costs
including special event storage container repairs, trash and recycling can
purchases, lighting installation for exhibits, drone purchase, new track
lighting fixtures, and personnel savings from the Recreation Specialis t and
Special Events position;
o $310,000 Public Works: re-allocate funding for fuel modification and open
space repairs/maintenance to Measure A, reduce engineering processional
and technical services, and neighborhood beautification program; and
o $100,000 Public Works: cancel funding for new carpeting at City Hall as part
of the general maintenance and repairs.
Long-Term Planning (> 1 Year)
This action item presents several options for City Council’s consideration, requiring
thorough consideration, planning, committee collaboration, and public input. Therefore,
Staff anticipates this action item will be part of a long -term plan to support City Council’s
direction on fiscal sustainability.
• Develop a framework by establishing a future strategy for ongoing cost
containment strategies, enhancing revenue sources, and identifying other funding
opportunities to maintain the City’s long-term financial sustainability.
As described above, Staff seeks the City Council’s direction on the following for Fiscal
Sustainability:
• Potential revenue sources for FY 2025-26 and future years for further research;
• Cost containment strategies applied in the FY 2025 -26 budget assumptions; and
• Receive the FAC’s recommendations from the April 3, 2025 meeting.
ADDITIONAL INFORMATION:
Financial Model
The City’s Financial Model, overseen by the Finance Department, is a critical tool utilized
in the annual budget process, aligning with City Council Policy No.18. This 10-year model
integrates historical and current data with economic assumptions to forecast long -term
revenues, expenditures, and fund balances. It serves as a foundation for decision -
making, providing insights into the fiscal impact of various alternatives.
The model undergoes regular updates and enhancements, with a comprehensive
overview presented each budget cycle in June using draft budget figures. Any
improvements or analyses recommended by the City Council are incorporated.
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Preliminary assumptions, detailed in the table below, help guide forecasting for the FY
2025-26 Proposed Budget assumptions and beyond. Staff continually monitors key
indicators, with material updates included in the financial model staff report presented in
June.
Table 14: Economic Model Input Factors
The chart on the next page provides a comparison between the 2025 and the preliminary
2026 model, before transfers. General Fund revenues and expenditures increased on
average by approximately $1.0 million and $1.1 million, respectively. The changes in
revenues are primarily from increases in property tax, TOT, and interest earnings. For
expenditures, the significant change from the prior year is the estimated increases in tax
assessments from the ACLAD and KCLAD Districts, and the new public safety program.
Chart 9: 2024 Model vs 2025 Model Forecast Comparison (excluding transfers)
2025E 2026B 2027F 2028F 2029F 2030F 2031F 2032F 2033F 2034F
REVENUES
PROPERTY TAX 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
TRANSIENT OCCUPACY TAXES 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
SALES TAX 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
FRANCHISE TAX 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
UTILITY USERS TAX 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
PERMIT REVENUES 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
INVESTMENT INTEREST 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
EXPENDITURES
NON-PERSONNEL EXPENDITURES 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PERSONNEL EXPENDITURES 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
HEALTH INSURANCE 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
PERS NORMAL COSTS 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
SHERIFF CONTRACT 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FORCAST ASSUMPTIONS - 2025 FINANCIAL MODEL
FY 2024-25 YE EST.
AND FY 2025-26
BUDGET PREPARED
OUTSIDE OF THE
MODEL
FY 2024-25 YE EST.
AND FY 2025-26
BUDGET PREPARED
OUTSIDE OF THE
MODEL
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The second pair of charts on the following page focuses on the preliminary 2025 model,
providing a 10-year outlook including transfers in and out of the General Fund. A
comprehensive report and detailed overview of the latest financial model will be presented
by staff in June.
Chart 10: 2025 Model - General Fund 10-Year Forecast (Excluding Transfers)
Chart 11: 2025 Model - General Fund 10-Year Forecast (Including Transfers)
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In FY 2024-25, General Fund year-end expenditure estimates exceeds year-end
revenues estimate by approximately $8.6 million. This variance is primarily attributed to
one-time transfers funded by the City’s unallocated General Fund balance and reserves.
Specifically, in 2024, the City Council approved $1.2 million in additional transfers from
the prior year’s unallocated General Fund balance to support capital projects, along with
a $6.4 million transfer from General Fund reserves to the CIP Fund for landslide
emergency and mitigation efforts. These one -time transfers, totaling $7.6 million, account
for the majority of the gap and are not indicative of an ongoing structural imbalance .
It should be noted that the transfers-out in FY 2025-26 do not include the additional
transfers to the CIP Fund for the annual debt payment for the Ladera Linda Community
Park or the EPS Fund, which has been done in the past. Generally, these transfers are
not part of the annual operating transfers, instead, the transfers are based on the City
Council’s approval using the prior year’s surplus in accordance with the City Council
Reserve Policy and the City’s Pension Guidelines.
General Fund Sensitivity Analysis
Following direction from the City Council, Staff continue to use the Financial Model as a
tool to test unique scenarios that may impact the long -term fiscal health of the City. The
purpose of these sensitivity analyses is to inform the Council of potential financial
outcomes should significant shifts occur in key economic variables . The scenario shown
below is a hypothetical situation for reference only and does not represent the City's
current forecast.
In the 2025 Model, as recommended by the FAC, Staff applied a sensitivity analysis using
a higher percentage at -5% revenue reduction and a +5% expenditure increase to
illustrate the financial impact if baseline conditions were to deteriorate over time. These
assumptions reflect a stress test in which the City experiences slower -than-expected
revenue growth, while operating expenditures increase at a faster rate due to inflationary
pressures, labor cost growth, or new programmatic needs. Chart 6 below shows the
compounding effects of these assumptions over the 10 -year forecast period.
CONTINUED ON THE NEXT PAGE
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Chart 12: Sensitivity Analysis: -5% Revenue / +5% Expenditure
Under this scenario, expenditures are projected to reach approximately $53.1 million by
FY 2033-34, compared to the baseline expenditure forecast of $5 0.6 million. Meanwhile,
revenues are projected to lag significantly behind, reaching only $49.3 million by FY 2033-
34, compared to the baseline revenue forecast of $52 .2 million. On average, the
discrepancy between expenditures and revenues is approximately $4 million, with
expenditures consistently outpacing revenues. This gap between revenues and
expenditures grows over time, reflecting the structural imbalance that could result if
expenditure growth is not accompanied by sustainable revenue increases.
This scenario also demonstrates the importance of ongoing fiscal discipline and highlights
the risks associated with taking on fixed costs without secured, ongoing revenue sources.
While the assumptions used are hypothetical, they emphasize the need to closely monitor
economic conditions and remain cautious when expanding services or increasing staffing
levels.
Staff will continue to use the Financial Model to test various financial scenarios and
provide the City Council with the tools necessary to make sound, data -driven decisions
that preserve the long-term stability of the General Fund.
CIP Workshop
On April 29, 2025, the City Council will conduct its budget workshop on the Capital
Improvement Program (CIP). At this workshop, staff will present the status of FY 2024-
25 capital projects, propose new capital projects, and the five-year CIP for discussion.
Any direction provided by the City Council will be incorporated in the Preliminary Budget
to be presented on June 3, 2025.
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RPV Community Foundation Update
On March 7, 2023, the City Council authorized Staff to move forward with taking the next
steps to form a nonprofit that will accept philanthropic donations to alleviate costs b orne
by the City for capital projects and support programming to enrich the quality of life in
City. The Council also selected RPV Community Foundation as the name and affirmed
the governing structure, which will be the Council serving as the board of directors.
On August 15, 2023, the City Council approved FAC’s recommendation to hire a
development consultant to develop and lead a capital campaign to raise funds to pay for
certain City projects. Subsequently, Staff worked with the FAC to initiate the process of
soliciting request for proposals for a consultant to conduct a feasibility study and lead the
capital campaign for, among other City projects, the proposed Civic Center Master Plan .
However, the project was temporarily put on hold due to the RPV Community Foundation
not yet being officially established as it would be challenging for the City to secure
significant donations without the foundation in place.
The City filed papers with the state to establish the Community Foundation but received
corrections. The City Attorney’s Office is working with staff on resubmitting its application
with corrections.
CONCLUSION:
Overall, the proposed budget assumptions for FY 2025 –26 estimate General Fund
revenues at $41.6 million, exceeding estimated expenditures of $41.0 million, resulting in
a balanced budget with $620,000 in available funding.
The City’s key revenue sources such as property tax and transient occupancy tax are
remaining stable. These revenue streams provide a solid foundation for the City’s
financial planning, allowing the City to continue essential services despite economic
uncertainty. Because the City’s general operations do not rely heavily on federal or state
funding, the City is less affected by broader economic shifts than many other cities.
However, the denial of funding for the landslide emergency and mitigation efforts of
approximately $38 million from FEMA is a significant setback for the City’s CIP Fund.
For expenditures, the proposed assumptions reflect a careful approach to managing cost
management. As such, departments have proactively reviewed their expenditures,
identified cost-neutral strategies to offset increasing costs for operations to align with the
current economic outlook, and identified budget reductions. Personnel costs have also
been carefully planned, with a conservative vacancy rate incorporated to align closer with
actual personnel expenditure needs .
In light of the significant $36.3 million expenditure for landslide emergency response and
mitigation in FY 2024-25, the City’s General Fund and CIP Fund reserves have been
substantially impacted. This amount is almost equivalent to the City’s General Fund
operating budget for the entire City. In response, and at the direction of the City Council,
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Staff has initiated the process to develop both short-term and long-term strategies to help
maintain fiscal sustainability. In the short term, as outlined in this report, Staff presents
information for City Council’s consideration regarding previously paused or suspended
revenue sources that may be evaluated for reinstatement to help generate additional
revenue for the City. As part of this effort, at its April 3 regular meeting, the FAC provided
recommendations for short-term strategies for City Council’s consideration, estimating
between $100,000 and $530,000 in potential revenue . These strategies include
reinstating certain business license taxes currently set at $0, adjusting fees that have
remained flat year-over-year, and reinstating landscaping and lighting assessment, which
has also been set at $0 since 2017. Additionally, the FAC has also provided
recommendations for a long-term strategy for Staff to research other revenue sources
and for City Council’s consideration, including TOT, UUT (Electric, Gas, Water), and
Franchise Taxes.
In this year’s budget process, it is important to highlight the growing financial impact of
the $36.3 million in capital spending on both the CIP Fund and General Fund. While the
General Fund is estimated to remain structurally balanced over the 10-year forecast
based on projected prudent spending and conservative revenue projections, the CIP’s
Fund balance has been significantly depleted. Without new revenue sources, its ability to
fund future capital programs will be limited to an estimated annual $4 million TOT transfer
from the General Fund.
Overall, the proposed General Fund budget assumptions remain conservative, and Staff
will continue to closely monitor the City's financial position until the budget adoption in
June. As part of the financial reporting process, Staff will continue to provide regular
financial updates, with any material changes reported to the City Council. In this year’s
budget process, the estimated revenue sources of $41.6 million exceed the proposed
uses of $41 million, resulting in available funding of $620,000. Excluding the $2.8 million
one-time grant, the budget assumptions in revenues proposes a conservative increase of
$1.4 million (3.5%) from prior year’s adopted budget and a decrease in expenditures by
$800,000 (-2%). This positive result for the General Fund was specifically and carefully
planned by the City management in consideration of the City’s significant capital funding
needs.
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