CC SR 20260420 01 - FY26-27 Budget Assumptions
bCITY COUNCIL MEETING DATE: 04/20/2026
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consider receiving a report on the City’s financials, Fiscal Year (FY) 2025-26 year-end
estimates, and review of the preliminary budget assumptions for developing the FY 2026 -
27 General Fund budget.
RECOMMENDED COUNCIL ACTION:
1. Receive and file the City’s Statement of Activities for all funds (similar to Income
Statement) for the past five years;
2. Receive and file the City’s Fund Balance for Governmental Funds for the past five
years;
3. Receive and file the FY 2025-26 General Fund year-end estimates;
4. Review the budget assumptions to develop the FY 2026-27 General Fund Budget,
and provide direction on the following:
• Affirm Revenues of $42.5 million:
i. Revenue projections of $42.5 million with continuation of the same rate
of 3% for Utility User Tax.
• Affirm Annual Transfers-In of $320,000, which include:
i. $240,000 from Public Safety Grant Fund
ii. $80,000 from Measure A Los Angeles Open Space Grant
• Affirm Expenditures of $38.0 million:
i. Personnel costs of $16.3 million, which include:
a. All existing and approved positions in competitive (full-time), part-
time, confidential, and management groups, and stipends for elected
officials;
b. Assumptions based on current labor agreements for cost-of-living
adjustment (COLA), performance merits, and benefits;
c. Underfilling the Accounting Supervisor (Finance);
d. Freezing the Executive Assistant (City Manager); and
e. Freezing the GIS Coordinator (Community Development).
ii. Non-Personnel costs of $21.7 million, which include:
a. Los Angeles County Sheriff’s Annual Contract for $8.9 million;
b. Legal Services for $1.3 million; and
c. Operations and Maintenance for $11.5 million.
• Affirm Annual (using FY 2026-27 sources) Transfers-Out of approximately $3.8
million, which include:
a. $3.4 million to the CIP Fund for capital maintenance and
improvements;
b. $215,000 to the Habitat Restoration Fund
c. $55,000 to the Sub-region One Fund
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d. $50,000 to the Abalone Cove Sewer Fund
e. $15,000 to the Improvement Authority for Portuguese Bend
• Affirm Additional Transfers-Out of $1.1 million to the CIP Fund based on FY
2026-27 projected revenues exceeding expenditures and annual transfers ;
• Affirm Additional Transfers-Out of $2.6 million, from the FY 2025-26
unallocated balance, in accordance with the City Council Reserve Policy No.
41, as follows:
a. $1.3 million to the CIP Fund for capital maintenance and
improvements;
b. $889,500 to the CIP Fund equivalent to the Ladera Linda Community
Park loan payment;
c. $400,000 to the Employee Pension Service Fund , in accordance with
the Pension Guidelines;
5. Receive and file FY 2026-27 Projected General Fund Balance Summary; and,
6. Receive and file the Finance Advisory Committee’s (FAC) feedback and
recommendations.
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:
A. https://www.rpvca.gov/Financial-Management-Policies
EXECUTIVE SUMMARY:
Chart 1a: FY 2026-27 General Fund – Operating Budget Assumptions
The proposed FY 2026–27
General Fund budget
assumptions reflect revenues
of $42.8 million and
expenditures of approximately
$38 million (Chart 1a).
Compared to the current
budget, the proposed budget
assumptions reflect an increase of $1 million or 2.3% in revenues, and a decrease of $0.9
million or 2.3% in expenditures.
In accordance with the City Council Reserve Policy No. 41, the City funds most of its
capital maintenance and improvement projects through a pay-as-you-go approach,
primarily using a combination of General Fund transfers and eligible Restricted Special
Revenue Funds (for special purposes). Therefore, the Capital Infrastructure Projects
(CIP) Fund continues to rely heavily on available General Fund resources (through
transfers) to fund projects that are not eligible for Restricted Special Revenue Funds.
$42.8
$38.0
$34.0
$36.0
$38.0
$40.0
$42.0
$44.0
Operating Revenues
Operating
Expenditures
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Based on the proposed budget assumptions, the General Fund’s positive financial
performance allows for annual and additional transfers to the CIP Fund (Chart 1b).
However, it is important to recognize that the trend shows this capacity is narrowing as
expenditure pressures continue. Based on the current budget and commitments, the CIP
Fund is estimated to have an ending fund balance of $14.1 million, of which $5 million is
held for emergency reserves.
In addition to identifying cost reductions, continued fiscal discipline and identifying
additional funding sources will be critical to ensure adequate future funding to support
capital priorities. In a recently conducted community survey, RPV residents identified the
following priorities:
• Maintain roads
• Prepare for and respond to wildfires and other natural disasters
• Reduce wildfire risk by managing brush and other fuels
• Prevent property crimes, home invasion break-ins, and vehicle thefts
• Prevent landslides and land movement
Chart 1b: FY 2026-27 Transfers (CC Reserves Policy No. 41)
To continue supporting the CIP
Fund, the budget assumptions
propose a total annual and
additional transfer of $6.7 million.
This is an increase of $0.9 million
or 17% compared to current
budget.
The General Fund is projected to
end the FY 2026-27 with a $34.5 million fund balance minus reserve policies, projecting
an unallocated fund balance of almost $12.1 million. Compared to the prior year’s budget,
the unallocated balance is projected to decrease by $0.8 million or 6%. The change is
primarily driven by an increase in proposed additional transfers to the CIP Fund, as well
as meeting the higher reserve requirements, which increased from $17 million to $18.7
million or 10.2% (Chart 1c on the next page).
Continued on the Next Page
$3.4 $3.3
$0.3 $0.4
$0.3
$0.0
$1.0
$2.0
$3.0
$4.0
Annual
Transfers-In
Annual
Transfers-Out
Additional
Transfers-Out
CIP Fund Other Funds General Fund
3
Chart 1c: FY 2026-27 Projected Fund Balance and Unallocated Fund Balance
BACKGROUND:
The City's budget serves as a financial plan that projects revenues, expenditures, and
transfers for one fiscal year from July 1 to June 30. This annual financial plan upholds the
City's longstanding commitment to fiscal responsibility, transparency, and the delivery of
exceptional services to the community.
The budget development process formally starts with the approval of a Budget
Development Calendar, which sets the dates and times for meetings for the City Council
to review staff recommendations, provide staff direction, and take necessary action in the
budget process. For FY 2026-27 Budget, the City Council adopted the calendar at its
regularly scheduled meeting on January 20, 2026.
This year’s Budget Development Calendar includes the following key dates:
City Council Goals Workshop (February 23, 2026)
On February 23, 2026, the City Council held its annual Goals Workshop whereby the
Council reviewed the progress of the current FY 2025-26 Goals and outlined FY 2026-27
Goals to be formally adopted at the same meeting the Budget is scheduled to be adopted
on June 16, 2026. Specifically, the Council directed staff to remove completed projects
and tasks, and to carry over all goals, projects, and subtasks that are still in progress.
General Fund
FY 2025-26
Revised
Budget
FY 2025-26
Year-End
Estimates
FY 2026-27
Budget
Assumptions
Beginning Fund Balance 33,270,667 33,270,667 33,422,265
Add: Revenues 41,562,700 42,462,048 42,502,450 939,750 2.3%
Add: Transfers-In 320,000 320,000 320,000 - 0.0%
Total Revenues and Transfers 41,882,700 42,782,048 42,822,450 939,750 2.2%
Less: Expenditures (38,870,199) (36,267,300) (37,973,200) (896,999)-2.3%
Less: Transfers to CIP (TOT) (3,374,150) (3,374,150) (3,425,800) 51,650 1.5%
Less: Other Transfers-Out (230,000) (230,000) (335,000) 105,000 45.7%
Total Expenditures and Transfers (42,474,349) (39,871,450) (41,734,000) (740,349)-1.7%
Projected Ending Fund Balance 06/30/2026 32,679,018 36,181,265 34,510,715 1,831,697 5.6%
City Council Restricted Fund Balance
Less: Additional Transfers - CIP Ladera (PY Surplus) (889,500) (889,500) (889,500) - 0.0%
Less: Additional Transfers - CIP Landslide (PY Surplus) (1,469,500) (1,469,500) (2,384,700) 915,200 62.3%
Less: Transfers to Pension (PY Surplus) (400,000) (400,000) (400,000) - 0.0%
50% Reserve Policy (17,000,000) (17,000,000) (18,738,600) 1,738,600 10.2%
Projected Unallocated Fund Balance 12,920,018 16,422,265 12,097,915 (822,103) -6%
Change
Increase/(Decrease)
from Revised Budget
City Council
Goals
Workshop
February 23
Budget
Workshops
April 20 (GF)
May 4 (CIP)
Preliminary
Budget
June 2
Budget
Hearing &
Adoption
June 16
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In summary, the following tasks were approved to be removed as they are annual,
recurring tasks that are already part of the City’s general operations:
• Increase registrations for Alert SouthBay and MyRPV
• Identify funding for Emergency Preparedness Efforts
• Create Asset Management Program for Abalone Cove Sewer System
The City Council also directed staff to add the following tasks that were recommended by
the City’s Commissions/Committees and Staff:
• Prepare annexes to the Emergency Operations Plan
• Develop a Peninsula-Wide Mass Care and Evacuation Plan
• Conduct Routine Citywide and Regional Emergency Preparedness Training
• Establish quarterly meetings to educate residents on crime prevention strategies
and regularly engage with the business community to strengthen communication,
collaboration and public safety education
• Create a Traffic Signal Asset Management Program
• Increase the City’s engagement with the South Bay Council of Governments
(SBCCOG) economic roundtable groups to explore and implement effective
strategies to support local businesses.
• Broaden the goal to “Develop and Implement Small Wireless Facilities Master
Plan” to incorporate other strategies to enhance wireless coverage and renamed
the goal as “Expand Wireless Coverage Citywide”.
• Temporarily remove the Western Avenue Streetscape Beautification Master Plan
until funding for construction is secured and the project can proceed.
• Update the Civic Center Campus Master Plan, if the City is able to acquire the
Battery Barnes Bunker Parcel from the Federal government.
• Move up the Fiscal Sustainability task in priority listing, under the Quality of Life
goal. Under that task, add a risk assessment review for major capital projects,
include education and outreach efforts to improve understanding of Fiscal
Sustainability, and research revenue enhancement, such as a potential TOT
increase.
Budget Workshops (April 20 and May 4)
Budget Process and Framework
The City’s budget framework is guided by Chapter 3.32 (Budget Administration) of the
Rancho Palos Verdes Municipal Code (RPVMC), as well as established guidelines and
City Council policies, summarized below, with the full Finance Policies available at the
following link [https://www.rpvca.gov/Financial-Management-Policies]:
Continued on the Next Page
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Policy/Guidelines Description
No. 45 Balance
Operating Budget
(General Fund)
Defines a structurally balanced operating budget as one in which
recurring revenues are greater than or equal to recurring operating
expenditures. Transfers to other funds for capital rehabilitation or
improvement of the City’s infrastructure are not considered recurring
and vary year-over-year based on available fund balance, at the
discretion of the City Council.
No. 41 Reserve
Policy
Requires designated reserve levels for each fund and provides
guidelines for managing available balances, ensuring that any funds
above required reserves are appropriately utilized.
No. 18 Financial
Model
Originally established as a five-year model to support deliberations on
new revenue measures, the now 10-Year Financial Model has evolved
into a broader tool. It helps to project revenues, expenditures, transfers,
and fund balances based on historical data and updated economic
assumptions. It also supports the annual budget process by identifying
potential budgetary issues early and respond proactively to changing
financial conditions.
Pension
Guidelines
Provides a framework to enable the City to develop sound funding
policies and provide Staff a direction to adequately and appropriately
monitor the City’s pension plans and obligations.
Additionally, the framework for developing the General Fund budget assumptions begins
with the Finance Department reviewing revenues and expenditures recorded to date
(commonly referred to as “actuals”) in the current fiscal year to assess how actuals are
tracking compared to the budget. In coordination with City departments, Finance also
prepares the FY 2025-26 year-end estimates using actuals, departmental projections,
and historical trends. These estimates help develop the budget assumptions and review
department requests for the upcoming fiscal year.
As part of an ongoing process, and in response to significant expenditures on landslide
emergency response and stabilization efforts in recent years which is projected to reach
$64.4 million by year-end, the City continues to tighten its belt and take a more diligent
approach in preparing the budget. The denial (under appeal review) of FEMA Disaster
Recovery request of almost $38 million made a significant impact to the City. Of the $64.4
million projected cost responding to the landslide since 2022, approximately $45 million,
or 70% of the total has been funded through a combination of General Fund and CIP
Fund reserves, resulting in a decline of available reserves.
Also, similar to last year’s budget process, in support of the City Council Fiscal
Sustainability Goal, the City Manager asked the Department Heads to identify a potential
5% reduction using a methodology based on the FY 2025-26 non-personnel base budget.
The proposed reductions exclude costs related to the Los Angeles Sheriff Department’s
annual contract, maintenance, and other contractual obligations. Additional information is
later discussed in under budget assumptions for expenditures. These efforts are projected
to contain base line expenditure growth by approximately $1.3 million in the past two
years.
6
Over the past three months, the City Manager, Director of Finance, and Department
Heads have held various budget meetings to formulate the budget assumptions aligned
with City Council Goals, and community and organizational priorities. Budget
assumptions also accommodate regulatory requirements, contractual obligations, and
operational needs such as personnel, maintenance, professional services, and
equipment.
Budget Workshop - General Fund (April 20)
The City Council holds two budget workshops each year – one for the General Fund
(operating budget) and one for the Five-Year Capital Improvement Program (capital
maintenance and projects). This approach has been consistently followed due to the level
of detail presented to the City Council and the public, as well as the time needed to
discuss and deliberate these items. The decisions and directions provided during these
workshops help develop the preliminary budget.
At the April 20, 2026 Workshop, the General Fund budget assumptions will be presented
to the City Council for review and consideration. This includes budget assumptions for
general operations such as public safety, personnel, and services, including legal,
professional, and general maintenance (not capital). As the CIP Fund continues to rely
heavily on funding from the General Fund, tonight’s meeting will also include discussion
of potential General Fund Transfers-Out to the CIP Fund to support the upcoming capital
maintenance and improvement projects.
Budget Workshop - Capital Improvement Program (May 4)
At the May 4, 2026 Workshop, the City Council will be presented with the budget
assumptions to build the Five-Year CIP. The Public Works Department tracks progress
of projects and reviews that progress with the Infrastructure Management Advisory
Committee (IMAC). Potential adjustments and potential new projects are discussed in
preparation for the City Council’s CIP Workshop.
While the City Council can only appropriate the budget on an annual basis, this workshop
supports the City’s policy of long-term strategic planning by presenting the projected
budget needs for improvement, development, and maintenance beyond a single year (5
years). The main sources of funds of this program are the General Fund through
Transfers-Out to the CIP Fund and Restricted Special Revenue Funds (special purpose).
The program is based on available and funding resources, with priority given to projects
that utilize special purpose funds to maximize and preserve the CIP Fund.
Preliminary Budget – All Funds (June 2)
After receiving direction at both Budget Workshops, staff proceeds with preparation of the
FY 2026–27 Preliminary Budget. This process results in a comprehensive budget report
that incorporates the General Fund, CIP Fund, and other funds for City Council
7
consideration at the June 2 meeting. The City Council may continue to provide direction,
with final adoption scheduled on June 16.
Staff will also present the preliminary Financial Model pursuant to City Council Policy No.
18. This is a key tool in the annual budget process that uses historical data and economic
assumptions to project revenues, expenditures, transfers, and fund balances over a 10-
year period. It supports decision-making by evaluating the long-term fiscal impact of
various scenarios. The model is updated regularly and presented each June with the
budget, incorporating City Council input and revised assumptions to guide forecasting for
the upcoming fiscal year and beyond.
Budget Hearing and Budget Adoption – All Funds (June 16)
This is the final process in which the City Council will hold a budget hearing to adopt the
budget for FY 2026-27.
DISCUSSION:
This report focuses on providing a brief Citywide financial overview, followed by a more
detailed focus on the General Fund.
In summary, the following information is presented in the following order:
1. Statement of Activities for All Funds (Income Statement) for the Last Five Years
2. Fund Balance for Governmental Funds for the Last Five Years
3. FY 2025-26 General Fund Year-End Estimates
4. FY 2026-27 Budget Assumptions - Revenues, Expenditures, Transfers
5. FY 2026-27 Projected Fund Balance Summary
Additional Information
a. Preliminary Financial Model
b. City Council’s Financial Sustainability Goal Update
1. Statement of Activities (Income Statement) for the Last Five Years
As requested by City Councilmember Lewis, this year’s report presents the City’s
Statement of Activities (similar to an Income Statement) to provide a Citywide view of
revenues and expenses without focusing on individual funds. The statement presents
information on how the City’s financial position changed across all funds, including
General Fund, CIP Fund, Restricted Special Revenues Funds, and Other Funds.
As part of the City’s Annual Comprehensive Financial Report (ACFR), Statement of
Activities is similar to an Income Statement used in the private sector. The main difference
is that it reflects changes in the City’s financial position rather than profitability. This gives
the readers a perspective of the City’s bottom line for year-over-year.
8
As shown in Table 1 on the following page, in FY 2025-26, the City’s estimated program
revenues total approximately $25.1 million or 39%, while the remaining $39.7 million or
61% are from General Fund taxes and other revenues. For expenditures, approximately
$32.3 million or 50% of the total is projected to be spent on maintenance and capital
improvements. It is important to note that the “Net Position” of $239.5 million is the City’s
net worth when combining all assets minus liabilities. This amount is not the available
cash or fund balance. As presented in the Fund Balance Section No. 2 (Chart 2), the
combined fund balances are $73.8 million, with $23.8 million or 32% are restricted for
special purpose use only, with remaining amounts in the General Fund and CIP Fund.
Table 1: Statement of Activities FY 2021-2026 (similar to Income Statement)
*Net Position is the City’s combined assets minus liabilities. This is not the City’s cash or available funds.
Chart 2 on the following page provides a visual summary of revenues and
expenditures from FY 2021-22 through FY 2025-26, including year-over-year
percentage changes. As shown, the highest changes in expenses were in FY 2023 -
24 for additional $10 million (+25%) and FY 2024-25 for $9 million (+19%), primarily
from the landslide emergency and stabilization efforts.
Continued on the Next Page
in millions
Fiscal Year
FY 2025-26
Percentage Share
FY 2025-26
Estimates
FY 2024-25
Actual
FY 2023-24
Actual
FY 2022-23
Actual
FY 2021-22
Actual
Program revenues:
Charges for services 7.5%$4.8 $5.6 $5.3 $5.9 $5.3
Grants/Special Restricted Revenues 31.3%20.3 16.0 9.5 11.3 8.5
Total Program Revenues:38.8%25.1 21.6 14.8 17.2 13.8
General revenues:
Property taxes 30.2%19.6 19.0 18.1 17.3 16.6
Other taxes 28.7%18.6 15.8 15.2 15.8 14.5
Investment Income 1.9%1.2 4.1 4.6 0.7 (0.4)
Other 0.4%0.3 0.8 0.8 1.0 0.9
Total General Fund Revenues:61.2%39.7 39.7 38.7 34.8 31.6
Total Revenues $64.8 $61.3 $53.5 $52.0 $45.3
Programs:
Administration 11.7%7.5 6.5 6.3 5.6 5.3
Public Safety 12.7%8.2 8.6 8.0 7.4 7.3
Public Works - Operations 11.8%7.6 7.5 6.5 5.5 4.9
Public Works - Capital
Maint/Improvements/Other 50.1%32.3 28.2 21.3 14.8 16.3
Community Development 7.3%4.7 3.8 3.7 3.9 3.1
Recreation and Parks 6.2%4.0 5.3 4.6 3.2 3.9
Interest Expense 0.2%0.1 0.1 0.2 0.2 0.0
Total Expenses $64.5 $60.0 $50.6 $40.6 $40.8
Change in net position 0.4 1.3 2.9 11.4 4.5
Net position - beginning of fiscal year 239.1 238.5 235.7 224.3 219.8
Restatement (GASB 101) - (0.8) - - -
Net Position $239.5 $239.1 $238.5 $235.7 $224.3
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Chart 2: Revenues and Expenses (All Funds) – FY 2021 -2026 (in millions)
Based on the past five years of actuals, the gap between revenues and expenditures is
beginning to narrow; therefore, Staff must remain diligent in budgeting and financial
planning, supported by financial modeling and forecasting, to maintain long -term financial
sustainability. Adherence to the City Council’s financial policies—such as the Reserve
Policy, a balanced General Fund operating budget, and the Financial Model—has been
key to maintaining the City’s financial stability and its ability to absorb landslide-related
expenditures over the past three years. Continued compliance with these policies will be
important for the City’s ongoing financial health.
As presented above, Staff seeks for City Council approval to receive the City’s Statement
of Activities (similar to Income Statement) for all funds on year-over-year revenues and
expenditures for the past five years.
2. Fund Balance for All Funds - Last Five Years
To supplement the Statement of Activities ( similar to Income Statement), Chart 3 on the
following page provides a comprehensive view of the City’s financial position by
presenting a summary of fund balances for all governmental funds. The chart illustrates
the decline in fund balances due to increases in expenditures, showing a projected
decrease of $11.2 million or 13% since FY 2021-22.
As shown in Chart 3, the FY 2025-26 projected combined fund balances are $74.2 million
and consist of the following:
$45.3
$52.0 $53.5
$61.3
$64.8
$40.8 $40.6
$50.6
$60.0
$64.5
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
FY 2021-22
Actual
FY 2022-23
Actual
FY 2023-24
Actual
FY 2024-25
Actual
FY 2025 -26
Estimates
Total Revenues Total Expenses
+19%
-<1%
+7%
+15%+3%
+15%+6%
+25%
10
• $23.9 million or 32% in Grants/Restricted Special Revenue Funds. These funds
are restricted for special purposes and serve as the primary funding sources for
capital maintenance and improvements.
• $36.2 million or 49% in General Fund (minus 50% restricted for reserves). This
fund supports day-to-day operations and the main funding source for transfers to
the CIP Fund, as well as subsidies to other funds.
• $14.1 million or 19% in CIP Fund (minus $5 million restricted for reserves). This
fund is for capital maintenance and improvement projects that are not eligible for
Grants/Restricted Special Revenue Funds.
Chart 3: Fund Balance (All Governmental Funds) – FY 2021-2026 (in millions)
*Fund Balances are the total balances for all funds and do not reflect prior year surplus transfers
and City Council Reserve Policy requirements of $5M for the CIP Fund and 50% (approx. $17M)
for the General Fund*
As presented above, Staff seeks for City Council approval to receive a report on
Governmental Fund Balances year-over-year for the past five years.
3. FY 2025-26 General Fund Year-End Estimates
Staff projects the fund balance for the General Fund, including transfers out, at almost
$36.2 million, marking a $3.5 million or almost 10.7% increase over the revised budget.
After applying the 50% City Council Reserve Policy, and other transfers out to CIP Fund,
and Employee Pension Services (EPS) Fund, the estimated unallocated fund balance is
approximately $16.4 million, reflecting an increase of approximately $3.5 million or 27%
from the revised budget.
$31.4 $34.1 $38.0 $34.4 $36.2
$38.1 $35.3 $29.6
$20.3 $14.1
$14.9 $16.3 $20.3
$22.8 $23.9
FY 2021 -22
ACTUAL
FY 2022 -23
ACTUAL
FY 2023 -24
ACTUAL
FY 2024 -25
ACTUAL
FY 2025 -26
ESTIMATES
General Fund CIP Fund Grants/Restricted Special Revenue Funds
$85.7M
+2%
$87.9M
+3%$77.4M
-12%$74.2M
-4%
$84.3M
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As indicated in Table 2 below, City revenues and transfers are anticipated to finish the
year roughly $42.8 million or approximately $0.9 million, or 2.1%, higher than the revised
budget, with expenditures and annual transfers estimated to be almost $2.6 million, or
6.1%, lower than the revised budget. The expenditure savings are primarily attributed to
personnel savings, cost savings from vacancies and lower than anticipated overtime, as
well as reduced spending on professional services, maintenance, and other operational
accounts due to project timing and one-time expenditures not materializing as budgeted.
Table 2: FY 2025-26 General Fund – Fund Balance Summary
As presented above, Staff seeks for City Council approval to receive the year-end
estimates for FY 2025-26. If applicable, any material changes to the estimates will be
reported at the future budget meetings.
4. FY 2026-27 Budget Assumptions - Revenues, Expenditures, Transfers
FY 2026-27 General Fund Revenue Assumptions
Revenues – Overview
Economic conditions have remained stable over the past fiscal year, though revenue
growth has moderated compared to previous years. In FY 2025-26, General Fund
revenues, including transfers, are projected to reach approximately $42.8 million,
reflecting a 2.1% increase over the revised budget. This growth is primarily driven by
steady property tax collections, resilient Transient Occupancy Tax (TOT) revenues, and
a Consumer Price Index (CPI) related increase in permits and fees revenue. However,
inflationary pressures and a tighter monetary environment continue to temper overall
revenue expansion, resulting in a measured pace of growth.
General Fund
FY 2025-26
Revised
Budget
FY 2025-26
Year-End
Estimates
Beginning Fund Balance 33,270,667 33,270,667 -
Add: Revenues 41,562,700 42,462,048 899,348 2.2%
Add: Transfers-In 320,000 320,000 - 0.0%
Total Revenues and Transfers 41,882,700 42,782,048 899,348 2.1%
Less: Expenditures (38,870,199) (36,267,300) (2,602,899)-6.7%
Less: Transfers to CIP (TOT) (3,374,150)(3,374,150) - 0.0%
Less: Other Transfers-Out (230,000)(230,000) - 0.0%
Total Expenditures and Transfers (42,474,349) (39,871,450) 2,602,899 6.1%
Projected Ending Fund Balance 06/30/2026 32,679,018 36,181,265 3,502,247 10.7%
City Council Restricted Fund Balance
Less: Additional Transfers - CIP Ladera (PY Surplus) (889,500) (889,500) - 0.0%
Less: Additional Transfers - CIP Landslide (PY Surplus) (1,469,500) (1,469,500) - 0.0%
Less: Transfers to Pension (PY Surplus) (400,000) (400,000) - 0.0%
50% Reserve Policy (17,000,000) (17,000,000) - 0.0%
Projected Unallocated Fund Balance 12,920,018 16,422,265 3,502,247 27%
Change
Increase/(Decrease) from
Revised Budget
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Looking ahead to FY 2026-27, General Fund Revenue Budget Assumptions, including
transfers, are projected at approximately $42.8 million, representing a 2.2% increase over
the FY 2025-26 Revised Budget. This growth, as discussed below under Revenue
Analysis, is supported primarily by continued strength in property tax revenues, driven by
steady assessed valuation increases, as well as moderate gains in sales tax and
franchise revenues. At the same time, Transient Occupancy Tax is projected slightly
lower based on a conservative outlook tied to the evolving travel patterns and broader
economic conditions. Other revenues, including interest earnings and certain one -time
sources, are anticipated to decline, contributing to a more tempered overall growth rate.
Overall, the budget remains conservative, accounting for ongoing economic shifts,
including interest rate policies, inflation trends, and regional market activity. Factors such
as higher borrowing costs, shifting consumer behavior, and rising operational expenses
are shaping revenue trends. Steady property values and tourism activities provide
stability, though changes in discretionary spending, business investment, and
development activity could introduce variability. While certain indicators remain positive,
others suggest a slowing pace of growth, underscoring the need for a thoughtful and
balanced approach to forecasting.
A comprehensive discussion and analysis of the General Fund's primary revenue sources
is highlighted below.
Revenues – Analysis
Property Tax
Property tax continues to serve as the primary and most stable revenue source in the
General Fund. As shown in the dollar graphic below, under Proposition 13 (AB 8), the
City receives 6% of the 1% property tax collected or $0.06 of every $1.00 (as shown in
the tax allocation diagram on the next page). The remaining majority of the share is
distributed to Los Angeles County, the Los Angeles Community College District, Palos
Verdes Unified School District, Palos Verdes Library District, the Consolidated Fire
Protection District, and the Educational Revenue Augmentation Fund (ERAF),
established under Proposition 172.
Continued on the Next Page
13
Property Tax Allocation for RPV = $0.06 of every $1.00
The FY 2026-27 budget assumption for property tax revenues is $19.0 million, reflecting
an increase of $790,000, or 4.3%, over the FY 2025-26 Revised Budget $18.2 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 property tax consultant, HdL Coren
& Cone.
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 2026-
27. 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: Transfer of ownership of 433 properties occurring
between January and December 2025 are expected to add an estimated $393
million in reassessed value to the property tax roll. This reflects a slow growth trend
over the past three years, but still short of the volume and value of transfers of
ownership in 2021 and 2022. Rancho Palos Verdes remains a highly desirable
coastal community, supporting a relatively strong real estate market and maintaining
assessment stability.
• 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 other areas of the market.
14
• 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. Parcels in the landslide areas were reassessed for FY 2025-26 and
169 parcels received value reductions of between 30% and 97%. The total valuation
reduction related to these reductions was $128 million. Based on this amount, the
estimated impact is approximately $80,000 of revenue loss for the City. Monitoring
these fluctuations, especially in neighborhoods impacted by landslide activity, will be
critical in the coming year.
The Proposition 8 reductions had the biggest impact on the Redevelopment Property
Tax Trust Fund (RPTTF), which is funded by the net tax increment of increased
property values in the project area from the base year since 1978. As a result, Staff
estimates approximately $110,000 in revenue loss within the miscellaneous revenue
category in General Fund due insufficient property tax collections to fully support
repayment obligations back to the City.
• Buyout Program: A voluntary property buyout program of $42 million, funded
through FEMA’s Hazard Mitigation Grant Program (HMGP), once fully implemented,
the City will convert some parcels within the Landslide Complex into open space
owned by the City, removing them from the tax roll. Based on the available
information, the estimated appraisal value of approximately 22 properties is $51.1
million. If the grant is funded by FEMA during FY 2026-27, the estimated revenue
loss to the City’s property tax revenue is approximately $31,000.
Together, these factors contributed to an estimated 3.4% increase in overall assessed
valuation for FY 2025-26. This compares to a 3.9% increase in taxable assessed value
for the County of Los Angeles. The combined total of Budget Assumption of $19.0 million
includes the following:
• Secured property taxes of $11.7 million
• Property taxes in lieu of vehicle license fees $6.9 million
• Property transfer taxes $0.4 million
• This represents about $0.8 million, or 4.3%, increase over the FY 2025-26 Revised
Budget of $18.2 million.
Property Taxes
FY 2025-26 Revised Budget: $18,200,000
FY 2025-26 Year-end Estimate: $18,306,400
FY 2026-27 Budget Assumptions: $19,000,000
FY 2025-26 Net Change to Revised Budget: +$790,000 (+4.3%)
Transient Occupancy Tax (TOT)
TOT remains the second largest revenue source for the General Fund, at a tax rate of
10%, with 98% of collections generated by Terranea Resort. Based on the recent
15
information provided by Terranea, the FY 2026-27 Budget Assumptions takes a
conservative approach, forecasting TOT revenue at about $6.9 million, of which $6.7
million is attributed to Terranea, while the remaining $150,000 comes from miscellaneous
TOT sources, including short-term rentals operated at the Terranea Resort and smaller
lodging establishment (Best Value Inn along Western Avenue). This reflects a 2.1%
decrease from approximately $7.0 million Revised Budget for FY 2025-26.
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, shifti ng
consumer spending, and changes in business and group travel trends present factors
that warrant a measured approach. Industry reports indicate that while leisure travel
demand has stabilized, business and conference travel has not fully returned to pre -
pandemic levels. Given these considerations, the City’s projection balances optimistic
market forecasts with a fiscally responsible outlook to ensure revenue stability.
There continues to be no indication that the landslide activity in the Portuguese Bend area
has had a direct impact on Terranea Resort or other hospitality businesses. As a result,
the City does not anticipate any adverse effects on TOT revenue. Additionally, Terranea
has continued full operations and has even supported relief efforts by providing
assistance to impacted residents.
Additionally, the Los Angeles County’s tourism sector has largely rebounded to pre -
pandemic levels, with annual visitation returning to approximately 50 million visitors and
overall economic impact exceeding $18 billion. Following 49.1 million visitors in 2023 —
about 97% of 2019 levels — the market continued its recovery trajectory in 2024, with
visitation nearing or matching prior peak volumes as international travel improved.
However, emerging headwinds in 2025, including a projected decline in international
travel and broader economic uncertainty, have tempered growth expectations despite
strong domestic demand. Within this context, Rancho Palos Verdes continues to benefit
from its positioning as a premier coastal destination, attracting both domestic and
international visitors seeking high-end accommodations. As demand for luxury hospitality
remains resilient, transient occupancy tax (TOT) revenues are expected to remain a
stable and important source of funding for the City, supported by the region’s long -term
tourism fundamentals.
As the City continues to evaluate long-term fiscal sustainability, opportunities to enhance
TOT revenue are being explored. This may include revisiting the existing TOT rate for
Terranea to align with regional benchmarks, assessing the feasibility of expanding short -
term rental regulations to ensure full compliance, and identifying new revenue -generating
opportunities within the hospitality sector. Any potential changes will be carefully analyzed
to balance economic growth, tourism competitiveness, and the City’s ongoing
commitment to financial stability.
Transient Occupancy Tax
FY 2025-26 Revised Budget: $7,000,000
16
FY 2025-26 Year-end Estimate: $6,950,000
FY 2026-27 Budget Assumptions: $6,850,000
FY 2026-27 Net Change to Revised Budget: -$150,000 (-2.1%)
Sales and Use Tax
The Sales and Use Tax rate for the City is 10.25%. Of this amount, the City receives
approximately 1% of the taxes collected (Chart 3). The tax is imposed on total retail price
of any tangible personal property. This tax revenue is administered by the State of
California and distributed across the following multiple agencies:
Chart 3: Sales and Use Tax Distribution of 10.25%
The FY 2026-27 Budget Assumptions for the City’s portion for the Sales and Use Tax is
about $3.0 million, reflecting an increase of $151,000, or 5.3%, from the FY 2025-26
Revised Budget of $2.9 million. This assumption reflects continued necessary spending
on goods and services with price increases and reduced discretionary spending. 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 generally stable, a combination of elevated
borrowing costs, moderating consumer demand, and a gradually cooling labor market is
expected to temper near-term economic activity. According to HdL Companies, the
statewide outlook reflects modest and uneven sales tax growth, supported by continued
disinflation but constrained by cautious consumer behavior and slower employment
gains. Insights from Beacon Economics further indicate that job growth has softened and
unemployment is trending slightly upward, reinforcing a more measured pace of
expansion. Sector performance remains mixed; revenues tied to fuel and service stations
City of RPV
1.00%
LA
County/District
Programs
3.00%
State
General Fund
3.94%
State -Local
Programs
2.31%
17
have shown uneven performance, reflecting fluctuations in fuel prices over the year and
softer consumption levels, which have tempered overall sales tax growth in this category,
while building and construction activity continues to contract amid high interest rates.
General consumer goods show only modest gains as shoppers prioritize essentials, and
auto sales remain subdued despite some stabilization. In contrast, restaurants a nd
hospitality, along with online spending, have demonstrated relative resilience, helping to
offset softness in other categories and supporting a cautiously optimistic outlook for local
revenues.
The Budget Assumptions reflect an increase from the FY 2025-26 Revised Budget, yet
equal to the FY 2025-26 Year-end Estimate. With uncertainty future surrounding
consumer spending due to recent international conflict, rising gas prices and delayed
impacts from tariffs, Staff will continue to monitor economic trends, consumer behavior,
and state-level developments that may impact this key revenue source.
Sales and Use Tax
FY 2025-26 Revised Budget: $2,853,500
FY 2025-26 Year-end Estimate: $3,004,500
FY 2026-27 Budget Assumptions: $3,004,500
FY 2025-26 Net Change to Revised Budget: $151,000 (5.3%)
Permits and Fees
The City’s Permit and Fees are established through the adopted Master Fee Schedule,
which is presented by Staff annually by the City Council. Revenue is generated by
recovering the cost of providing requested City services for such activities as reviewing
plans for proposed construction, providing inspections, renting City facilities, conducting
business within the City limits.
The FY 2026-27 Budget Assumptions for Permits and Fees are $4.6 million. This reflects
an increase of $76,300, or 1.7%, over the FY 2025-26 Revised Budget of $4.5 million.
The increase is driven by steady, though slowing, demand for building and safety permits
and plan check services. It also reflects higher business license revenues, due to the
Consumer Price Index (CPI) adjustment, discontinuation of the small business financial
assistance program and the $0 business license tax rate for home occupancy businesses.
Permits and Fees
FY 2025-26 Revised Budget: $4,529,000
FY 2025-26 Year-end Estimate: $4,501,300
FY 2026-27 Budget Assumptions: $4,605,300
FY 2026-27 Net Change to Revised Budget: +$76,300 (+1.7%)
18
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, Cox
Communications, and Southern California Edison and Southern California Gas Company.
The City’s rates are the following:
• Solid Waste Franchise Fees
o 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. The City’s contract
with EDCO in FY 2026-27 represents year 4 of a 7-year contract.
o 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 – 5% of gross revenues
• In-Kind PEG Fees – 1% of gross revenues for Public, Educational and Government
(PEG) access channels
The FY 2026-27 Budget Assumptions for Franchise Tax is approximately $2.6 million,
reflecting a slight 2.7% increase over the FY 2025-26 Year-End Estimates of $2.5 million
that is consistent with historical trends, and $0.1 Million (6.3%) over the $2.4 million
Revised Budget. Staff based their estimates on historical performance and current
industry trends, while also monitoring regional changes and regulatory activity that could
affect franchise revenues moving forward.
In line with regional best practices, staff are reviewing existing franchise agreements to
ensure they continue to align with infrastructure use, evolving service needs, and long -
term fiscal sustainability. While no changes are currently proposed, this evaluation
supports ongoing policy discussions and may inform future considerations.
Franchise Taxes
FY 2025-26 Revised Budget: $2,400,000
FY 2025-26 Year-end Estimate: $2,483,256
FY 2026-27 Budget Assumptions: $2,550,000
FY 2026-27 Net Change to Revised Budget: +$150,000 (+6.3%)
Utility User Tax (UUT)
UUT revenue is generated by a 3% tax on the consumption of electricity, gas and water,
as authorized under RPVMC Chapter 3.30 (1993). Effective on May 19, 2015, Ordinance
568 repealed the collection of UUT on telecommunication services.
UUT revenue is influenced by several external factors, including weather conditions, utility
consumption, natural gas prices, and utility rate adjustments. The FY 2026-27 Budget
Assumptions for UUT is $2.9 million, reflecting a slight 0.7% decrease from the FY 2025-
19
26 Year-End estimates of approximately $3.0 million and $0.5 million or 19% higher than
the FY 2025-26 Revised Budget, reflecting recent trends in this revenue category.
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 2025-26 Revised Budget: $2,457,200
FY 2025-26 Year-end Estimate: $2,945,000
FY 2026-27 Budget Assumptions: $2,925,000
FY 2026-27 Net Change to Revised Budget: $467,800 (+19.0%)
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 2026-27 Budget Assumptions for Other Taxes and
Miscellaneous Revenues is $3.6 million, reflecting a decrease of $0.5 million, or -13.7%,
from the FY 2025-26 Revised Budget of $4.1 million. The decrease is primarily attributed
to decreases in Interest Earnings, Administrative Overhead and Miscellaneous Revenue,
and the anticipated lack of a Redevelopment Agency (RDA) loan payment in the
upcoming fiscal year due to decreased RPTTF revenue from the landslide area
properties.
Staff continue to use historical trends, CPI data, and known programmatic activity to
project revenues in this category. While certain recurring revenues, including the Golf Tax
and rental income, are expected to remain stable, the FY 202 6-27 forecast reflects a
conservative approach to revenue assumptions.
Per 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 Golf Tax rate at 10% on April 6,
2023 for FY 2023-24. The budget assumptions for FY 2026-27 Golf Tax revenue is
estimated at $780,000 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, or at the discretion of
City Council to revisit.
Other Taxes and Miscellaneous Revenues
FY 2025-26 Revised Budget: $4,133,000
FY 2025-26 Year-end Estimate: $3,951,592
FY 2026-27 Budget Assumptions: $3,567,650
FY 2026-27 Net Change to Revised Budget: -$545,350 (-13.3%)
20
Transfers-In
Transfers-In remain unchanged from the FY2025-26 Budget, with $240,000 to help offset
the cost of the Community Resource (CoRe) deputy within the Sheriff program in the
Public Safety section of the budget, and $80,000 from Measure A Maintenance Fund (Los
Angeles Open Space Grant) to help offset the costs of fuel modification in the Public
Works section of the budget.
Transfers-In
FY 2025-26 Revised Budget: $320,000
FY 2025-26 Year-end Estimate: $320,000
FY 2026-27 Budget Assumptions: $320,000
FY 2026-27 Net Change to Revised Budget: $0 (0.0%)
In summary, the FY 2026-27 proposed revenue budget totals $42.8 million, including
transfers, and indicates an increase of approximately $0.4 million, or 0.9%, over Year-
End Estimates and about $0.9 million, or 2.2% over the FY 2025-26 Revised Budget.
Property Tax remains the largest revenue source in the General Fund, representing
44.4% of proposed revenue, excluding transfers. TOT retains its position as the second -
largest revenue source, comprising 16.0% of the General Fund. Table 3 and Chart 4
below illustrate the amounts and allocations of the major revenue sources in the General
Fund.
Table 3: FY 2026-27 General Fund Revenue and Transfers Assumptions
Continued on the Next Page
Category
FY 2025-26
Revised
Budget
FY 2025-26
Year-End
Estimates
FY 2026-27
Budget
Assumptions
Property Tax 18,210,000 18,306,400 19,000,000 790,000 4.3%
Transit Occupancy Tax 7,000,000 6,950,000 6,850,000 (150,000) -2.1%
Sales Tax 2,853,500 3,004,500 3,004,500 151,000 5.3%
Permits & Fees 4,529,000 4,501,300 4,605,300 76,300 1.7%
Franchise Tax 2,400,000 2,483,256 2,550,000 150,000 6.3%
Utility Users Tax 2,457,200 2,945,000 2,925,000 467,800 19.0%
Other Taxes & Misc Revenues 4,113,000 3,951,592 3,567,650 (545,350) -13.3%
Subtotal 41,562,700 42,142,048 42,502,450 939,750 2.3%
Transfers In 320,000 320,000 320,000 - 0.0%
Grand Total 41,882,700 42,462,048 42,822,450 939,750 2.2%
Revised Budget vs.
Budget Assumptions
21
Chart 4: FY 2026-27 Revenue Budget Assumptions (excluding transfers-in)
Staff seek the City Council’s affirmation of $42.5 million in projected revenues which
includes continuing the 3% Utility User Tax rate and Transfers-In of $320,000.
FY 2026-27 General Fund Expenditures Assumptions
Expenditures - Overview
The development of the FY 2026-27 Budget Assumptions are 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 Policy, and adherence to regulatory requirements. It
also accounts for contractual increases, such as CPI adjustments, and incorporates
limited one-time costs for new initiatives.
As part of the ongoing process of containment strategies supporting the City Council’s
Fiscal Sustainability Goal, prior to the start of the budget process, the City Manager asked
the Department Heads to identify a potential 5% reduction using a methodology based
on the FY 2025-26 non-personnel base budget. The proposed reductions are limited to
operational budget, excluding expenditures related to the Los Angeles Sheriff Department
annual contract, maintenance, and other contractual obligations. Department Heads also
identified items that could be reduced with the least impact on services, eliminat ing
duplicative or superfluous budgeted items, and reviewed projects with constraints that
may prevent completion within one year.
$19.0
45%
$6.9
16%
$3.0
7%$4.6
11%
$2.6
6%
$2.9
7%
$3.6
8%
Property Tax
Transient Occupancy
Tax
Sales Tax
Permits & Fees
Franchise Tax
Utility Users Tax
Other Taxes &
Misc. Revenues
$42.5 M
22
Based on this process, the budget assumptions reflect total reductions of approximately
$0.6 million, representing a 5% decrease to the FY 2025-26 non-personnel base budget
of $9.9 million. To date, the Fiscal Sustainability Goal is projected to save General Fund
approximately $1.3 million in FY 2025-26 for $0.7 million and FY 2026-27 for $0.6 million
(Table 4). Additionally, staff continue to explore alternative funding sources, such as
special revenue funds and grants, to reduce reliance on the General Fund.
Table 4: FY 2026-27 General Fund - Budget Reductions for Non-Personnel
Overall, the proposed Budget Assumptions for FY 2026-27 for the General Fund, before
transfers-out, is approximately $38.0 million, reflecting approximately $0.9 million (-2.3%)
decrease from the FY 2025-26 Revised Budget. Compared to FY 2025-26 year-end
estimates, the FY 2026-27 Budget Assumptions, before transfers-out, reflect an increase
of approximately $1.7 million (4.6%). Transfers-out are projected at $3.8 million, indicating
a decrease of $2.6 million (40.9%) from the prior year’s revised budget.
When including annual Transfers-Out, the FY 2026-27 General Fund Budget
Assumptions are $41.7 million. This reflects a decrease of $3.4 million (-7.7%) from the
FY 2025-26 revised budget. This decrease is primarily from the one-time transfers from
unallocated fund balance to the CIP Fund to support capital projects and the landslide
emergency response and mitigation efforts.
As shown in Table 5 on the next page, the major increases in prior year expenditures
were driven by higher public safety service costs from the Los Angeles County Sheriff’s
Department, as well as personnel-related adjustments consistent with labor agreements,
including reduced vacancy levels and increased CalPERS contribution requirements.
Continued on the Next Page
Department
FY 2025-26
Base Budget
(Non-Personnel)*
5% Target
Reduction
Department's
Proposed
Reductions ($)
Department's
Proposed
Reductions (%)
Administration 1,859,750 (90,400) (90,650) -5%
Finance 202,400 (10,220) (10,220) -5%
Public Works 4,966,000 (248,300) (352,000) -7%
Community Development 1,308,400 (65,400) (65,600) -5%
Recreation and Parks 1,047,400 (52,400) (23,250) -2%
Public Safety Program 469,300 (23,500) (58,900) -13%
Grand Total $9,853,250 ($490,220) ($600,620) -6%
*FY 2025-26 Base Budget excludes Sheriff Contract, one-time expenditures,
maintenance, and other contractual obligations*
23
Table 5: FY 2026-27 Proposed General Fund Expenditures
Below is a detailed analysis of the budget assumptions guiding the preparation of General
Fund Budget Assumptions expenditures for FY 2026-27. The analysis compares
expenditures with the FY 2025-26 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, and stipends for the City Council and Planning Commissioners. Overall,
Budget Assumptions are estimated at almost $16.3 million (42.8%) of the budget, before
transfers out. This is an increase of about $0.4 million (2.7%) over FY 2025-26 revised
budget, which is highlighted below.
Personnel Costs
FY 2025-26 Revised Budget: $15,818,200
FY 2025-26 Year-end Estimate: $14,777,500
FY 2026-27 Budget Assumptions: $16,252,700
FY 2026-27 Net Change to FY 25-26 Revised Budget: +$434,500 or 2.7%
Salaries
Currently, the City concluded the collective bargaining process with the American
Federation of State, County and Municipal Employees (AFSCME) for part-time
employees. The Rancho Palos Verdes Employee Association (RPVEA) agreement for
full-time employees was finalized in the prior fiscal year. Accordingly, the budget
assumptions reflect the terms of these labor agreements. These same assumptions
have also been applied to unrepresented employees including management,
confidential, and the City Manager. For FY 2026-27, there are no new positions or
reclasses being proposed.
Category
FY 2025-26
Revised
Budget
FY 2025-26
Year-End
Estimates
FY 2026-27
Budget
Assumptions
Salaries and Benefits 15,818,200 14,777,500 16,252,700 434,500 2.7%
Sheriff Contract 8,587,000 8,587,000 8,896,500 309,500 3.6%
Legal Services 1,250,000 1,087,700 1,260,000 10,000 0.8%
Operations & Maintenance 13,214,999 11,840,300 11,564,000 (1,650,999) -12.5%
Subtotal 38,870,199 36,292,500 37,973,200 (896,999) -2.3%
Transfers Out 6,363,150 6,363,200 3,760,800 (2,602,350) -40.9%
Grand Total 45,233,349 42,655,700 41,734,000 (3,499,349) -7.7%
Revised Budget vs.
Budget
Assumptions
24
The following are highlights from the Budget Assumptions in General Fund for FY
2026-27:
• Includes funding for all existing and approved competitive, confidential, and
management positions at 100%, less a 3% vacancy rate factor to reflect the
historical average salary savings due to vacancies. The Senior Planner and
Assistant Planner positions are budgeted at 50%, consistent with the
anticipated timing of recruitment and hire if it is determined that these vacant
positions will be filled during FY 2026-27. Overall funding levels are aligned
with department-recommended recruitment schedules.
• $10.1 million for approximately 80 full-time positions, with 6 positions currently
vacant but expected to be filled in FY 2026-27. Compared to the current year’s
revised budget, this represents an increase of approximately $302,810, or
3.1%, primarily due to filling of vacant positions.
• $1.8 million reflects the current cost for approximately 82 part-time positions
(approximately 30 full-time equivalents (FTE) and includes City Council and
Planning Commissioners) and includes the first-year impacts of the newly
approved AFSCME MOU. Employees receive a flat COLA adjustment in FY
2026-27, along with performance-based merit increases that were already
assumed in the base budget. The agreement also includes added benefits such
as tuition reimbursement, boot reimbursement, and expanded holiday/overtime
provisions. Overall, the first-year impact represents a moderate increase over
the current base budget, with cost escalation occurring in the out years . The
following are the major highlights for the proposed budget assumptions:
o $1.5 million (76%) is for Recreation and Park for approximately 58
positions or 24 FTE’s.
o $0.2 million (10%) is for the City’s Public Safety Program for three part-
time Public Safety Liaisons (PSL) and one Field Training Officer (FTO).
o $0.2 million (12%) is for the City Manager’s Department including three
Television Producers and one part-time Human Resources Specialist.
o Approximately $46,000 (2%) for the City Council’s stipend and about
$12,000 (0.6%) stipend for the Planning Commissioners.
o Approximately $48,400 (2%) for the City’s Internship Program for 3,060
hours for all Departments. 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 hands-on experience in local government while
applying and expanding their academic knowledge in a professional
setting. Interns are assigned to various City departments and assist with
projects, reports, assessments, and other work aligned with their fields of
study. Interns will receive a pay range between $16.50 to $19.50/hour.
• Approximately $162,000 is allocated for overtime for all full-time and part-time
positions. Compared to the current year’s revised budget, this represents an
increase of approximately $4,790, or 3.0%.
25
• $716,000 accounts for COLA and merit increase for part-time positions and full-
time employees, including competitive positions, confidential positions,
management positions, and the City Manager. 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 2.4%, and the CPI-U for March will be released
in mid-April. Additionally, this category includes a budget assumption for merit
increase estimated at an average of 4.5%. The merit increase is based on
employee’s performance evaluation ranging from 1% to 6% per the City’s
current MOU with RPVEA and 0% to 5% for AFSCME MOU.
• 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 2026-27:
o Executive Assistant in the City Manager’s Office
o GIS Coordinator in the Community Development Department
o Accounting Supervisor in the Finance Department (underfilled)
o Senior Engineer in the Public Works 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 benefits for the FY 2026-27 Budget Assumptions amount to around
$3.9 million, reflecting an increase of approximately $0.1 million (1.7%) over the
FY 2025-26 revised budget. Key budget assumptions for developing the benefits
include:
• $2.3 million is allocated for employee benefits, including health, dental, and
vision insurance, workers’ compensation, Medicare, retirement health
savings, and other ancillary benefits. Compared to the current year’s
revised budget, this represents an increase of approximately $192,006, or
9.0%, primarily reflecting the filling of previously vacant positions and
increases in health, insurance, and workers’ compensation costs .
• $1.7 million is budgeted for CalPERS normal cost (current employees) and
Unfunded Accrued Liability (UAL) payments, which fund the City’s pension
obligations for current and retired employees across Tiers 1, 2, and 3.
Compared to the current year’s revised budget, this represents a decrease
of approximately $66,900, or 3.8%, primarily reflecting adjustments to
CalPERS normal cost contributions and updated actuarial assumptions.
• Per the City’s Pension Guideline, the Employee Pension Service (EPS)
Fund will relieve the General Fund of UAL payments exceeding $900,000.
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Based on these assumptions, an allocation of $0.7 million will be funded
from the EPS Fund to offset increases in the benefits category.
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
$21.7 million, or 57.2% of the FY 2026-27 Budget Assumptions, before transfers out. As
illustrated below, the Budget Assumptions includes a decrease of $1.3 million (-5.8%)
over the FY 2025-26 Revised Budget.
Non-Personnel Costs
FY 2025-26 Revised Budget: $23,052,000
FY 2025-26 Year-end Estimate: $21,516,000
FY 2026-27 Budget Assumptions: $21,720,500
FY 2026-27 Net Change to FY 25-26 Revised Budget: -$1,331,500 or -5.8%
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, before transfers-out.
Budget Reductions
Departments identified approximately $0.6 million in proposed reductions below,
exceeding the 5% target of $0.5 million based on the FY 2025-26 non-personnel base
budget of $9.9 million.
• Reductions are limited to non-personnel operational expenditures and exclude the
Los Angeles County Sheriff’s Department annual contract, maintenance, and other
contractual obligations.
• Administration met the 5% reduction target, contributing approximately $90,650 in
reductions, which were achieved primarily through adjustments to
professional/technical services, training, and conference expenditures, as well as
aligning budgets with actual spending trends while maintaining core administrative
functions.
• Finance met the 5% reduction target, contributing approximately $10,220 in
reductions. These reductions were achieved primarily through adjustments to
professional/technical services, operating supplies, dues and memberships,
training, and conference expenditures, along with aligning budgets to actual
spending trends.
• Community Development met the 5% reduction target, contributing approximately
$65,600 in reductions. These reductions were achieved primarily through
adjustments to professional/technical services, conference and training
expenditures, and targeted reductions across division operations, including
contract services, while aligning budgets with actual spending trends and
maintaining core service levels.
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• Public Works exceeded the 5% reduction target, contributing approximately $0.4
million in reductions. These reductions were achieved across administration, storm
water quality, building maintenance, trails and open space, parks, and fuel
modification programs, primarily within professional/technical services and repair
and maintenance accounts.
• Public Safety Program contributed approximately $58,900 in reductions, which
were achieved primarily through the elimination of lease costs and targeted
reductions in supplies and printing, partially offset by increased investments in
equipment and risk/safety programs within the Special Programs budget.
• Recreation and Parks contributed $23,500 in reductions, with limited additional
flexibility following prior-year reductions of $142,000 and the need to maintain core
service levels and community recreational programs. The reductions were
achieved primarily through a reduction in trail clearing of excess vegetation within
the Open Space Management (OSM) program, reflecting decreased need due to
preserve closures related to the landslide.
Public Safety
The City’s Public Safety Program of approximately $9.9 million consists of the following
programs (including personnel and non-personnel):
• Los Angeles Sheriff Department Contract $8.9 million
• Public Safety Program $1.0 million:
o Public Safety Division: $698,800
o Special Programs (Sheriff - overtime): $70,000
o Other Programs: $262,700
The following is a summary of the non-personnel portion of the Public Safety Program:
Los Angeles Sheriff Department (LASD) Contract:
• A 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%.
• Accounts for $8.9 million or 21.4% of the Budget Assumptions which includes:
o 56-Hour Unit Deputy Sheriff
o Non-Relief Deputy
o Non-Relief Bonus I Deputy
o Non-Relief Grant Special Assignment Deputy
o Non-Relief Motor Deputy
o Liability Trust Fund (1.5% increase from 13% to 14.5%), totaling
approximately $1.1 million to support liability and risk-related costs.
o To maintain the same level of services, the budget assumption for this
contract includes a $0.3 million or 3.6% increase over the FY 2025-26
revised budget. LASD is expected to set a final rate increase in May. 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 202 6-27 budget.
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Public Safety Division and Special Programs
• Beginning in FY 2026-27, Staff is proposing to consolidate the former Special
Programs (Program 6120) and Public Safety Program (Program 6111) into a
single Public Safety Program (6111) to streamline budgeting and reporting.
• The combined total of $488,500 for non-personnel reflects funding previously
allocated to both programs. This includes School Resource Officers for
outreach and education at Peninsula schools, the Public Safety
Reimbursement Program, Automated License Plate Reader (ALPR) annual
network service fees, administration of the parking citations program,
Everbridge emergency notification software, Los Angeles County Disaster
Management Area G Program membership and resources, and other operating
needs (i.e., supplies, uniforms, equipment, fuel, leases, and training ). The
budget also includes: $70,000 for LASD supplemental overtime services for
targeted crime suppression, traffic enforcement, and other as-needed services
and an additional $55,000 for the City’s share to launch a Lomita Sheriff’s
Station drone pilot program. Three other cities including Lomita, Rolling Hills,
and Rolling Hills Estates will also participate in the program, which is comprised
of four drones operated by deputies to respond to various incidents ranging
from monitoring roadway hazards to critical incidents.
• The proposed consolidation reflects the full implementation of the program and
provides a more comprehensive view of public safety-related expenditures.
Legal Services
• Accounts for approximately $1.26 million or about 3.0% of the Budget
Assumptions.
• This is an increase of $10,000 (0.8%) from the FY 2025-26 Revised Budget of
$1.25 million, reflecting a COLA adjustment of up to 4%, partially offset by the
absence of one-time labor negotiation costs with bargaining groups such as
RPVEA and AFSCME included in the prior year.
• Includes general legal services, code enforcement, litigation, labor negotiation,
and legal services related to public records act requests.
Operations and Maintenance
• Accounts for $11.6 million or about 27.7% of the Budget Assumptions.
• This is a decrease of $1.7 million (-12.5%) from the FY 2025-26 Revised Budget
of $13.1 million, primarily due to reductions in professional and technical services,
repair and maintenance services, and rents and leases, partially offset by
increases in general liability premiums, equipment replacement charges, and
risk/safety activities. The decrease is largely attributable to one-time expenditures
in the prior year related to the Housing Element. Additional changes reflect a shift
in funding sources for certain programs, such as vegetation management (goat
grazing), as well as the timing of Citywide maintenance and professional services
and the filling of vacancies, reducing the need for contracted services . Additional
details for major line items in this category are as follows:
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• Professional and Technical Services account for approximately $3.8 million
or 9.0% of the Budget Assumptions.
o Most 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.
o The Budget Assumptions are approximately $1.0 million (-21.2%)
lower than the Revised Budget, primarily due to lower one-time
expenditures in the prior year that are not required in FY 2026-27
particularly within Community Development related to Housing
Element implementation and associated compliance programs,
including updates to the City’s Open Space Element pursuant to SB
1425. The decrease also reflects department-wide reductions
identified through the budget reduction process, as well as reduced
costs from lower billable hours as vacancies are projected to be filled,
decreasing reliance on contracted services.
• Repairs and Maintenance accounts for approximately $3.0 million or 7.1%
of the 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.
• Insurance premium payments for general liability, property damage,
pollution, and workers’ compensation total approximately $1.4 million.
o The general liability premium is increasing from $798,000 to
$1,038,500, an increase of $239,700 or 30% - the maximum
allowable to be imposed by California JPIA. This amount includes a
surcharge of approximately $119,800, based on activities.
o The overall increase is primarily due to higher claims and reserve
requirements, including exposure related to landslide events .
o For workers’ compensation, the amount increased $307,000 to
$399,100, an increase of $92,100 or 30%. This increase is based on
payroll costs showing fewer vacancies compared to prior years.
• One-time costs included in the Budget Assumptions are as follows:
o $165,000 for the Los Angeles County Clerk to host a November 2026
election for three City Council seats and up to two potential ballot
measures.
o $47,000 for professional technical services to support strategic
landslide communications.
o $10,000 for City website to meet law requirements related to the ADA
transition services.
o $6,000 for Home Hardening Model Contest supplies.
30
o $5,000 for Neogov set-up, the City’s human resources platform for
recruitment, applicant tracking, and onboarding, to support initial
system configuration, including job posting workflows, applicant
tracking, and onboarding setup.
o $15,000 for PVIC storefront software to update outdated cashiering
software.
• Supplies, Utilities, Training, Conference, Miscellaneous Expense
o Gas, Water, Electricity accounts for $697,000, which funds utility
services for City-owned facilities, including parks, buildings, street
lighting, and other public infrastructure necessary to support daily
operations, maintenance, and public safety.
o Tax assessments payable to ACLAD and KCLAD for approximately
$860,300, representing the City’s share as a property landowner for
approximately 60% of the assessed areas. Starting in FY 2025-26,
this line item has increased by approximately $634,300 or 281%. The
previous tax assessments paid were $226,000.
o Citywide training, conference, and meetings is approximately
$249,000.
Based on the information presented above, Staff seeks the City Council’s affirmation of
$38.0 million in estimated expenditures.
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 Fund
Generally, for local governments, the City’s CIP Fund is not directly funded through
the City’s operating tax revenues, as taxes collected by the City are considered for
general purpose use and, therefore, must be recorded in the General Fund. In
accordance with City Council Policy No. 41 Reserve Policy one method to fund the
City’s capital needs is through additional funds available from the General Fund
and the use of grant and special revenue funds.
The City has a longstanding tradition of utilizing a pay-as-you-go approach to fund
both City operations and capital maintenance and improvements. The CIP Fund
(capital, maintenance, miscellaneous) are primarily funded through Transfers-Out
from the General Fund. Based on the Reserve Policy, the following options are at
the City Council’s discretion during the annual budget process:
o If deemed necessary, may allocate all or a percentage of the prior year’s
General Fund unallocated fund balance (fund balance minus 50% required
reserves).
31
o After achieving a balanced budget, may allocate an amount equal to the TOT
revenues from Terranea.
o To comply with Governmental Accounting Standards Board (GASB), the
transfers authorized by the City Council must be recorded as a “Transfers -
Out” from the General Fund to the CIP Fund.
o Starting in FY 2017-18, for budgeting purposes, transfers may also be
calculated using a methodology based on a factor tied to the cumulative
annual increases in the public safety contract. The cumulative increase since
2017 is approximately $3.3 million. However, when actual year-end revenues
exceed expenditures, the City Council often approves additional transfers to
help make up for these reductions or if needed, additional transfers for
emergency needs. For example, as shown in Chart 5 below, over the past
five years, General Fund transfers to the CIP Fund are projected at $37.2
million, compared to TOT revenues of $33.1 million, exceeding by $4.1 million
more in transfers to support the City’s capital maintenance and improvement
needs.
Based on the information presented above, the Budget Assumptions for FY 2026-27 for
transfers to CIP Fund is $3.4 million. Additionally, based on the projected unallocated
fund balance of $15.7 million (before transfers) in General Fund, and the anticipated
capital expense in the CIP Fund, the City Council may consider an additional transfer of
$3.3 million to the CIP Fund, which would equal the projected Terranea revenues of $6.7
million (Chart 5). The proposed transfer would also include the annual transfer of
$889,500, which is equivalent to the annual loan payment for the Ladera Community
Park. The proposed additional are based on FY 2024 -25 unspent budget of $3.3 million
(net of carryovers) that were returned to fund balance.
Chart 5: General Fund Transfers-Out to CIP Fund (Five Years)
$6.6 $6.4 $6.6 $6.8 $6.7
$7.2
$5.0
$12.6
$5.7 $6.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27
(Budget
Assumptions)
Terranea Revenues ($33.1M)General Fund Transfers to CIP ($37.2M)
32
• 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 unallocated fund
balance. 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 a beginning fund
balance of approximately $1.1 million in FY 2025-26. The accumulated balance
relieves the General Fund year-over-year for anything above $900,000. Based on
the projected available unallocated fund balance in General Fund, it is important
to continue this financial plan by allocating at least $400,000 from the General
Fund to EPS Fund in FY 2026-27.
Additionally, starting in FY 2025-26, the City Council approved Staff and FAC’s
recommendation to implement the City’s first additional discretionary payment
(ADP) of $100,000 toward the City’s UAL. The FY 2026-27 Budget Assumption
continues this strategy of addressing long-term pension obligations. Given the
significant capital demands associated with landslide response and other major
capital projects, the additional payment of $100,000 would be allocated in the EPS
Fund, consistent with the guidelines, to avoid further impacts to the General Fund.
• Other Miscellaneous Transfers Out
The transfers to 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 Fund will need to subsidize and transfer the
following:
o $215,000 to Habitat Restoration
o $55,000 to Sub-region One
o $50,000 to Abalone Cove Sewer
o $15,000 to Improvement Authority for Portuguese Bend
Based on the information presented above, Staff seeks the City Council’s affirmation of
$7.4 million in estimated Transfers-Out.
In closing on expenditures, the following Chart 6 on the following page shows the General
Fund expenditures by department and their respective contribution in percentage (%)
terms to the City’s overall total expenditures.
33
Chart 6: FY 2026-27 Budget Assumptions - General Fund Expenditures – by Department
Staff will continue to monitor the local California economy and any material changes to
the budget assumptions will be updated and reported to the City Council in future budget
meetings and accordingly, the financial model will be updated and reported for review by
the City Council in June.
5. FY 2026-27 General Fund - Projected Fund Balance
Overall, based on the assumptions, Staff projects the fund balance for the General Fund
on June 30, 2027, at approximately $34.5 million, net of regular transfers out. The fund
balance is projected to increase by approximately $1.9 million (5.7%) from the FY 2025-
26 Revised Budget. After applying the City Council Reserve Policy of 50% or $18.7 million
of the operating budget, transfers-out of $889,500 for the Ladera Linda loan payment,
additional transfers of about $2.4 million to the Landslide CIP, and $400,000 for the
pension fund, the estimated unallocated fund balance in is $12.1 million, a decrease of
approximately $0.8 million (-6%) from the FY 2025-26 Revised Budget.
A calculation of the estimated FY 2026-27 Fund Balance is illustrated in Table 6 on the
next page.
Continued on the Next Page
$6.0
15.9%
$4.6
12.2%
$1.7
4.5%$2.5
6.6%
$9.9
26.1%
$8.0
$0.2
$5.1
13.5%
Administration
Community
Development
Finance
Non-
Departmental
Public Safety
Public Works
Rec & Park
34
Table 6: FY 2026-27 General Fund – Fund Balance Summary
Based on the information presented above, Staff seeks the City Council’s affirmation of
the FY 2026-27 Projected General Fund Balance Summary of $34.5 million minus City
Council Policy No. 41 activities, leaving a projected unallocated fund balance of
approximately $12.1 million.
6. Finance Advisory Committee (April 2)
On April 2, 2026, as part of the FY 2026-27 budget process, the Finance Department
presented the draft budget assumptions to the Finance Advisory Committee (FAC).
Overall, the FAC provided the following feedback:
• Budget Assumptions
o FAC approved the assumptions presented by Staff.
• General Observation
o The primary concern on General Fund expenditures is the increasing costs
in Public Safety. FAC suggested that potentially in future years, for the
increase they ask for, the City should attempt to control the increase by no
more than 3%. When increases are necessary, the City should attempt to
work with the Sheriff to clearly define what services or benefits are provided
in return.
o The FAC appreciates the City Manager’s request for 5% reductions from
each Department but expressed concern that the focus is primarily on
cutting expenditures. They noted that there is eventually a limit to reductions
in the future and that the City will eventually need to increase revenues.
o The Committee expressed appreciation for the City’s emergency
preparedness programs, noting they are cost-effective and well received,
and recognized the efforts of Staff and the Emergency Preparedness
Committee.
• Financial Model
General Fund
FY 2025-26
Revised
Budget
FY 2025-26
Year-End
Estimates
FY 2026-27
Budget
Assumptions
Beginning Fund Balance 33,270,667 33,270,667 33,422,265
Add: Revenues 41,562,700 42,462,048 42,502,450 939,750 2.3%
Add: Transfers-In 320,000 320,000 320,000 - 0.0%
Total Revenues and Transfers 41,882,700 42,782,048 42,822,450 939,750 2.2%
Less: Expenditures (38,870,199) (36,267,300) (37,973,200) (896,999)-2.3%
Less: Transfers to CIP (TOT) (3,374,150) (3,374,150) (3,425,800) 51,650 1.5%
Less: Other Transfers-Out (230,000) (230,000) (335,000) 105,000 45.7%
Total Expenditures and Transfers (42,474,349) (39,871,450) (41,734,000) (740,349)-1.7%
Projected Ending Fund Balance 06/30/2026 32,679,018 36,181,265 34,510,715 1,831,697 5.6%
City Council Restricted Fund Balance
Less: Additional Transfers - CIP Ladera (PY Surplus) (889,500) (889,500) (889,500) - 0.0%
Less: Additional Transfers - CIP Landslide (PY Surplus) (1,469,500) (1,469,500) (2,384,700) 915,200 62.3%
Less: Transfers to Pension (PY Surplus) (400,000) (400,000) (400,000) - 0.0%
50% Reserve Policy (17,000,000) (17,000,000) (18,738,600) 1,738,600 10.2%
Projected Unallocated Fund Balance 12,920,018 16,422,265 12,097,915 (822,103) -6%
Change
Increase/(Decrease)
from Revised Budget
35
o In addition to the +5% in expenditures and -5% revenues scenario, the FAC
recommended to add a scenario where the City has another emergency
event in year 5 (Year 2030) and show the impact in the financials.
ADDITIONAL INFORMATION:
Preliminary Financial Model (General Fund)
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 foreca st 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 following charts focus on the preliminary 2026 model, providing a 10-year outlook
without transfers (Chart 7) and including transfers (Chart 8). A comprehensive report and
detailed overview of the latest financial model will be presented by staff in June.
Based on the forecast assumptions used for the 10-Year Forecast, revenues are
expected to rise by almost 29.5% over the next ten years and continue to be greater than
annual expenditures. However, expenditures are expected to outpace revenues in
growth, increasing by slightly more than 44.6% over that same period. Excluding
transfers, the $4.5 million unallocated funds in FY2026-27 is reduced to a $2 million
unallocated funds in FY 2034-35, as shown below in Chart 7.
Chart 7. FY 2026-35 Model - General Fund 10-Year Forecast (Excluding Transfers)
36
When expected transfers to and from other funds are included with the forecast
assumptions for the 10-Year Forecast, revenues and transfers-in are expected to rise
from $42.5 million to $54.5 million (slightly more than 28.7%) over the next ten years and
continue to be greater than annual expenditures and transfers-out. However,
expenditures and transfers-out are significantly closer to expected revenues and
transfers-in, increasing from $41.7 million in FY 2026-27 to $54.6 million in FY 2034-35,
representing slightly more than a 30.9% increase over that same period. This results in
the $1.1 million expected unallocated fund balance in FY2026-27 to be reduced to a $0.5
million unallocated fund balance in FY 2034-35, as shown below in Chart 8.
Chart 8. FY 2026-35 Model - General Fund 10-Year Forecast (Including Transfers)
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 (estimated payoff date is in 2032) or the EPS Fund. Generally, these transfers are
not part of the annual transfers, instead, the transfers are based on the City Council’s
approval using the prior year’s available funds in accordance with the City Council
Reserve Policy and the City’s Pension Guidelines. In other words, these transfers would
only be recommended for City Council’s consideration if there are available funds to
transfer.
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. Draft
assumptions, detailed in Tables 7a and 7b below, help guide forecasting for the FY 2026-
37
27 beyond. Staff continually monitor key indicators, with material updates included in the
financial model staff report presented in June.
Tables 7a and 7b below illustrate the various factors taken into consideration for the
forecast assumptions:
Table 7a. Forecast Assumptions - Revenue
Revenues Forecast Assumptions
Property Tax A 4.6% annual growth rate, based on a two-year average growth
rate of 4.5% and a five-year average growth rate of 4.76%.
TOT A decrease of 3.5% to match FY 2026-27 revenue projections of
City staff and Terranea, a temporary 5.0% increase for 2027-28
and a 2% decrease for FY 2028-29 in anticipation of heightened
tourism activity surrounding the 2028 Olympic Games, and a 1%
increase in remaining years of the model.
Sales Tax A conservative 1.5% growth rate for FY 2027-28 to account for
consumer response to economic uncertainty, while transitioning to
a 2.3% growth rate for FY 2029-30 and beyond to reflect anticipated
consumer price indexes for those years.
Franchise Tax A 2.5% growth rate for FYs 2027-28 and 2028-29 and then
transitioning to a 2.3% growth rate for FY 2029-30 and beyond to
reflect anticipated consumer price indexes for those years.
Utility Users Tax A 2.5% growth rate for FYs 2027-28 and 2028-29, and then
transitioning to a 2.3% growth rate for FY 2029-30 and beyond to
reflect historical trends and supported by expected stabilization in
utility usage and rate structures over time. Staff will continue to
monitor energy consumption patterns and evolving conditions in
impacted areas to update revenue forecasts as new information
becomes available.
Permit Revenues A 2.7% growth rate for FY 2027-28, and a 2.4% growth rate for FYs
2029-30 and beyond to be slightly above the anticipated consumer
price indexes for those years.
Investment Interest While recent performance has exceeded expectations, projections
for future years remain conservative, assuming a 2% growth rate
over the long term to account for potential market fluctuations and
changing economic conditions.
Table 7b. Forecast Assumptions - Expenditures
Expenditures Forecast Assumptions
Non-Personnel A 2.4% increase for FY2027-28, and 2.3% annual increases for
FY 2028-29 and remaining years, based on Congressional
Budget Office CPI-U forecasting
Personnel A 7.5% annual increase for FYs 2026-27 and FY 2027-28, to
reflect CPI-U and the current Memorandum of Understanding
(MOU) with employee groups, a 6.5% annual increase for FYs
2028-29 and 2029-30, a 6.0% annual increase for FYs 2030-31
38
and 2031-32, and a 5.5% annual increase for FY 2032-33 and
remaining years
Health Insurance A 2.0% annual increase for FYs 2026-27 through 2030-31, and
1.5% annual increase for FY 2031-32 and remaining years
PERS Normal Costs A 5.4% annual increase based on a five-year average of increases
Sheriff Contract a 4.0% annual increase based on historic trends
Table 7c. Forecast Assumptions - Summary
General Fund Sensitivity Analysis
Staff continue to use the Financial Model as a tool to evaluate scenarios that may impact
the long-term fiscal health of the City. The purpose of these sensitivity analyses is to
inform of the potential financial outcomes should significant shifts occur in key economic
variables. The scenario shown below reflects the City’s current baseline assumptions and
is used to illustrate long-term financial trends under conservative conditions.
For illustrative purposes, in the 2026 Model, Staff applied a baseline assumption of a -5%
reduction in revenues and a +5% increase in expenditures (Chart 9a) to reflect a more
cautious outlook. These assumptions represent a scenario 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 expan ding service demands.
Chart 9 on the following page illustrates the compounding effects of these assumptions
over the 10-year forecast period.
Continued on the Next Page
2026YEE 2027BA 2028F 2029F 2030F 2031F 2032F 2033F 2034F 2035F
REVENUES
PROPERTY TAX 4.6% 4.6% 4.6% 4.6% 4.6% 4.6% 4.6% 4.6%
TRANSIENT OCCUPACY TAXES 5.0% -2.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
SALES TAX 1.5% 1.7% 2.0% 2.3% 2.3% 2.3% 2.3% 2.3%
FRANCHISE TAX 2.5% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
UTILITY USERS TAX 2.5% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
PERMIT REVENUES 2.7% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%
INVESTMENT INTEREST 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
EXPENDITURES
NON-PERSONNEL EXPENDITURES 2.4% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
PERSONNEL EXPENDITURES 7.5% 6.5% 6.5% 6.0% 6.0% 5.5% 5.5% 5.5%
HEALTH INSURANCE 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
PERS NORMAL COSTS 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%
SHERIFF CONTRACT 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PREPARED
OUTSIDE OF THE
MODEL
FORECAST ASSUMPTIONS - 2026 FINANCIAL MODEL
FY 2025-26 YE EST.
AND FY 2026-27
BUDGET
ASSUMPTIONS
PREPARED
OUTSIDE OF THE
MODEL
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Chart 9: Sensitivity Analysis: -5% Revenue / +5% Expenditure
Under this baseline scenario, expenditures are projected to reach approximately $57.3
million by FY 2034-35, compared to revenues of approximately $52.4 million. This results
in an ongoing structural gap, with expenditures exceeding revenues by approximately
$4.9 million by the end of the forecast period. On average, the gap between expenditures
and revenues is approximately $3.8 million over the 10-year period, with expenditures
consistently outpacing revenues. The gap emerges early in the forecast and continues to
widen over time, reflecting the long-term impact of expenditures growing faster than
revenue.
At its meeting on April 2, 2026, the Finance Advisory Committee asked staff for analysis
of a hypothetical emergency event in 2030 where the City would be reimbursed 50% of
its expenses in 2031. As such, Staff analyzed a hypothetical scenario that utilized $13
million of the unallocated fund balance in 2030 – the maximum amount the City can afford
in order to maintain the 50% required of the reserve policy through 2035 - with a $6.5
million reimbursement in 2031. The chart of that analysis is shown on the next page
(Chart 9b):
Continued on the Next Page
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Chart 9b: Sensitivity Analysis: $13 Million Emergency in 2030 (with reimbursement)
Additionally, Chart 9c below shows that same hypothetical scenario without the
reimbursement in 2031. This reflects the $13 million expenditure (the maximum the City
can spend to continue meeting the 50% reserves policy, with the potential of no
subsequent reimbursement from grants or other sources:
Chart 9c: Sensitivity Analysis: $13 Million Emergency in 2030 (w/o reimbursement)
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In summary, the analysis presented above highlights the importance of maintaining fiscal
discipline, following the City Council financial policies, and ensuring that ongoing
expenditures are aligned with sustainable revenue sources. It underscores the need to
closely monitor economic conditions and carefully evaluate future commitments,
particularly as the City considers service expansions, staffing adjustments, and capital
investments.
City Council Fiscal Sustainability Goal Update
As part of the February 23, 2026 Goals Workshop, the following updates were
reported:
• Researched tools and strategies to strengthen City’s fiscal stability;
• Formed the Fiscal Sustainability Council Subcommittee, which helped develop
the Community Needs Survey which concluded the last week of February
2026. The survey is to gather input on resident priorities and help inform
potential future funding and revenue strategies.
• Since the addition of the Fiscal Sustainability Goal, staff estimates the City will
generate approximately $600,000 more in revenues, received $4.5 million
more in grants, and $2.9 million less in capital expenditures in FY 2025-26.
• Changes in revenues are from reinstating the CPI adjustment for the Master
Fee Schedule, business license tax, and Landscaping and
Lighting Maintenance Assessment.
• Preparing to begin a preliminary Developer Impact Fee Study.
Additionally, on March 17, 2026, the City Council received a report related to the
Community Survey. Below are the key action items and updates:
• Staff presented the results of a recent Community Needs Survey, which was
conducted to provide data to help direct limited financial and staff resources
toward the programs and services that matter most to the community and to
determine funding resources.
• The survey found that almost six in 10 respondents perceive there is at least
some need for additional funds to provide services residents need and want,
and one-quarter perceive there is a great need.
• The City does not advocate for any particular outcome associated with the
survey results, the City’s financial or operational condition, or potential funding
measures. However, the City may provide information and educational
materials to inform the public accordingly. As part of this outreach, the Council
awarded a contract to a consultant to provide strategic communications
services.
• The hypothetical ballot measures questions were related to the Transient
Occupancy Tax (TOT) and the Golf Tax.
CIP Workshop
On May 4, 2026, the City Council will conduct its budget workshop on the Capital
Improvement Program (CIP). At this workshop, staff will present the status of FY 2025-
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26 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 2, 2026.
CONCLUSION:
The FY 2026-27 budget assumptions present a balanced plan, with General Fund
revenues and transfers projected at approximately $42.8 million, exceeding annual
transfers and expenditures of $41.7 million. The proposed budget also reflects
approximately $7.4 million in total transfers to the CIP Fund and other obligations,
while maintaining compliance with the City’s reserve policy, including a projected
General Fund balance of approximately $34.5 million and an unallocated balance of
about $12.1 million. These figures demonstrate the City’s continued commitment to
reinvest in infrastructure and community priorities.
The budget assumptions are aligned with City Council goals and community priorities,
including public safety, emergency preparedness, infrastructure maintenance, and
environmental resilience. Through targeted cost controls and departmental
reductions, staff have worked to manage expenditure growth while maintaining service
levels.
Despite this position, the City continues to face increasing financial pressures. Over
the past several years, significant expenditures related to landslide response and
stabilization, projected to reach approximately $64.4 million, have reduced available
reserves and increased reliance on the General Fund to support capital
improvements.
Overall, based on the proposed budget assumptions, the City’s General Fund remains
stable but with reduced flexibility for new programs, as expenditures continue to rise
faster than revenues. The General Fund’s capacity is narrowing, limiting the City’s
ability to fund priorities identified by Rancho Palos Verdes residents in the most recent
community needs survey. As such, future budget decisions may require the City to
balance existing service levels, capital needs, and revenue sources in response to
ongoing fiscal challenges.
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