CC SR 20260518 01 - FY 26-27 CIP Budget Workshop Part 2
bCITY COUNCIL MEETING DATE: 05/18/2026
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consider proposed revisions to the Capital Improvement Program (CIP) for Fiscal Years
(FY) 2026-27 through 2030-31 and potential changes to the FY 2026-27 General Fund
budget assumptions.
RECOMMENDED COUNCIL ACTION:
1. Review the proposed changes to develop the FY 2026-27 General Fund Budget
and provide direction on the following:
• Affirm Additional Budget Reductions of $500,000 consisting of:
i. Personnel $200,000:
a. Defer funding two vacant positions of Assistant Planner and
Senior Planner for $154,000 in FY 2026-27;
b. Defer funding one vacant position of Public Safety Liaison for
$41,000 in FY 2026-27; and
c. Reduce staff hours for special events by $5,000.
ii. Non-Personnel $300,000:
a. Defer approximately 50% of the Equipment Replacement
Charges for $110,000;
b. Freeze Neighborhood Beautification Grants and Western Avenue
Storefront Improvement Grants by $75,000 in FY 2026-27;
c. Reduce Special Events by $50,000;
d. Reduce Maintenance and Operations by $125,000; and,
e. Add $60,000 in maintenance for maintenance of sanitary sewer
systems in Agua Amarga Canyon in lieu of the Sewer
Maintenance Access Improvements in Agua Amarga Canyon
Project (CIP Project 8727).
• Approve Additional Transfers of $2.5 million to the CIP Fund:
i. $2.0 million from General Fund Unallocated Fund Balance; and
ii. $500,000 from General Fund budget reductions.
2. Review the proposed revisions to the CIP for FY 2026-27 through 2030-31 funded
by the CIP Fund thereby increasing CIP Fund Balance by $4.2 million:
i. $151,400 in beginning fund balance due to a decrease in FY 2025-26
year-end estimates for expenditures;
ii. $744,000 in additional Revenue for an estimated FEMA BRIC Grant
Reimbursement in FY 2026-27;
iii. $2.5 million of additional Transfers-In from the General Fund
Unallocated Fund Balance and budget reductions in FY 2026-27;
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iv. $300,000 in budget reduction from the Portuguese Bend Landslide
Remediation Emergency Stabilization Measures (Project 8307) in FY
2026-27 and FY 2027-28; and,
v. $500,000 budget reduction from the Sewer Maintenance Access
Improvements in Agua Amarga Canyon Project (CIP Project 8727) in FY
2026-27.
3. Review the revised FY 2026-27 CIP (all funds) and affirm the following:
i. CIP Fund $11.0 million; and
ii. Special Revenue Funds $20.0 million
4. Receive and file an analysis on the City Council Policy No. 41 Reserve Policy.
5. Receive and file an update on the City Council Goal of Financial Sustainability.
ORIGINATED BY: Vina Ramos, Director of Finance VR
Ramzi Awwad, Director of Public Works
Robert Moya, Deputy Director of Finance RM
David Copp, Deputy Director of Public works
REVIEWED BY: Catherine Jun, Deputy City Manager CJ
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. May 4, 2026 Staff Report – CIP Budget Workshop (Linked)
B. City Council Policy No. 41 (Reserve Policy) (page B-1)
BACKGROUND:
On May 4, 2026, the City Council held its third budget workshop, focused on the five-year
Capital Improvement Program (CIP) (Attachment A). During the workshop, the City
Council reviewed four proposed project and funding scenarios based on different
assumptions related to landslide response efforts. Each scenario showed that the total
cost of recommended capital projects exceeded available resources by an amount
ranging between approximately $55 million and $98 million, depending on the approach
to landslide response and level of grant funding.
Given these constraints, the City Council directed Staff to continue landslide emergency
stabilization efforts within budget constraints under the assumption that additional
landslide response grant funding will not be received and to return to a fourth budget
workshop with additional analysis showing potential cost reductions to the CIP Fund.
The revised budget assumptions continue to reflect several high priorities identified
through a recent Community Needs Survey of Rancho Palos Verdes residents, which
include:
• Maintaining roads
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• Preparing for and responding to wildfires and other natural disasters
• Reducing wildfire risk by managing brush and other fuel loads
• Preventing property crimes, home invasion break-ins, and vehicle thefts
• Preventing landslides and land movement
DISCUSSION:
Staff has prepared revised budget assumptions and funding options for City Council
consideration, including potential General Fund budget reductions , proposed additional
General Fund transfers to the CIP Fund, and a revised Five-Year CIP. Tonight’s report
also includes updated fund balance projections and a financial sustainability analysis
pursuant to City Council direction at its May 4 CIP Budget Workshop .
1. General Fund
Reassessing the proposed FY 2026-27 General Fund Budget, Staff has identified $2.5
million from reductions and the unallocated fund balance that can be transferred to the
CIP Fund as detailed below.
Budget Reductions of $0.5 Million
On April 20, 2026, during the General Fund Budget Workshop, the City Council affirmed
$42.8 million in revenues and transfers and $41.7 million in expenditures and transfers
(consisting of $38 million in operating expenditures and $3.7 million in annual Transfers-
Out) as shown in Table 1 on the next page. In accordance with City Council Policy No.
41 Reserve Policy, the City Council also approved additional transfers of approximately
$3.3 million to the CIP Fund and $400,000 to the Employee Pension Service Fund used
to address long-term employee pension liabilities. These transfers were based on the
available unallocated fund balance from prior years.
After transfers, the total estimated General Fund balance is $34.5 million, and after
applying the 50% Reserve Policy, the General Fund is estimated to have an unallocated
fund balance of approximately $12.1 million (Table 1).
[CONTINUED ON THE NEXT PAGE]
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Table 1: FY 2026-27 General Fund Budget Assumptions
In support of the City Council Fiscal Sustainability Goal , a total of approximately $1.3
million was identified for budget reductions from recurring expenditures between FY
2025-26 and the proposed FY 2026-27. Of this amount, approximately $0.6 million of
reductions is proposed for FY 2026-27.
Based on City Council direction at the May 4, 2026 Budget Workshop, Staff is now
proposing an additional budget reduction of $0.5 million as described on the following
page:
[CONTINUED ON THE NEXT PAGE]
General Fund
FY 2026-27
Budget
Assumptions
Beginning Fund Balance 33,422,365
Add: Revenues 42,502,450
Add: Transfers-In 320,000
Total Revenues and Transfers 42,822,450
Less: Expenditures (37,973,200)
Less: Transfers to CIP (TOT) (3,425,800)
Less: Other Transfers-Out (335,000)
Total Expenditures and Transfers (41,734,000)
Projected Ending Fund Balance 06/30/2026 34,510,815
City Council Policy No. 41 Reserve Policy
Less: Additional Transfers-Out to CIP Fund (from prior year balance) (3,274,200)
Less: Additional Transfers-Out to Pension Fund (from prior year balance) (400,000)
50% Reserve Policy (18,738,600)
Projected Unallocated Fund Balance 12,098,015
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Table 2: FY 2026-27 Proposed Additional Reductions $0.5M
Personnel Proposed Changes Total
Two Full-Time -
Community Development
Defer funding for two vacant positions - Assistant
Planner and Senior Planner. Previous budget
assumption included 50% funding. However, the
proposed change now is to not fund the vacancies in FY
2026-27.
-$154,000
One Part-Time - Public
Safety
Defer funding for one vacant position - Public Safety
Liaison in FY 2026-27. -$41,000
Part-Time - Special Events Reduce staff hours for the Winter Holiday Event and
Concerts in the Parks Series -$5,000
Personnel - Subtotal -$200,000
Non-Personnel Proposed Changes Total
50% of Equipment
Replacement Funding
Defer the funding level from 100% to 50% for future
equipment replacement funding. -$110,000
Freeze City Grants
Freeze grants issued by the City based on current
participation levels.
1) Neighborhood Beautification Grant ($25K)*
2) Western Ave. Storefront Improvement Grant ($50K)
-$75,000
Special Events
Limit the number of Special Events to reduce operating
expenses:
1) Winter Holiday Event - Reduce events from 6 days
to 2 days with no skating rink ($37K)
2) Reduce the Concerts in the Park Series from 2 to 1
concert (not including concert at the Fourth of July
Event) ($13K)
-$50,000
Reduce Maintenance and
Operations
(Public Works)
Reduce overall maintenance and operations budget by
eliminating contingencies as follows:
1) Reduce trail repairs ($55K)
2) Reduce parks routine and one-time repairs ($39K)
3) Reduce sanitary sewer repairs ($31K)
-$125,000
Increase Maintenance
(Public Works)
Add a budget line item for Agua Amarga Canyon
maintenance (See Section 2 below for details) +$60,000
Non-Personnel - Subtotal -$300,000
Total Additional Proposed Reductions -$500,000
*No Neighborhood Beautification Grant applications were submitted for FY 2025-26
Staff seek City Council affirmation to reduce FY 2026-27 budget assumption expenditures
by $0.5 million. If approved, Staff will incorporate the changes described above into the
FY 2026-27 Preliminary Budget. The reductions will result in an increase of the Transfers-
Out to the CIP Fund to continue supporting the City’s capital infrastructure needs.
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Additional Transfers-Out – CIP Fund $2.0 million
In accordance with City Council Policy No. 41 (Reserve Policy) and City Council Policy
No. 52 (Debt Management Policy), 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, eligible Special Revenue, and Grant Funds (for special
purposes). Therefore, the CIP Fund continues to rely heavily on available General Fund
resources (through transfers) to fund projects that are not eligible for Special
Revenue and Grant Funds.
Transfers-Out are interfund transfers to support and/or subsidize other funds such as the
CIP Fund, Employee Pension Service Plan Fund, and Improvement Authority for
Portuguese Bend and Sub-region One. The total combined annual Transfers-Out from
the General Fund in FY 2026-27 is $7.4 million. The following discussion explains the
major Transfers-Out equating to $7.4 million that was approved by the City Council as
part of the FY 2026-27 Budget Assumptions:
• Transfer Out to CIP Fund $6.7 Million
Generally, the City’s CIP Fund is not directly supported by operating tax revenues,
as those revenues are designated for general purposes and recorded in the
General Fund. However, when recurring revenues exceed recurring expenditures,
City Council Policy No. 41 (Reserve Policy) (Attachment B) provides the City
Council with discretion to transfer available General Fund resources (available
balance minus 50% reserves), along with Grant and Special Revenue Funds, to
support capital infrastructure needs.
The CIP Fund (capital and maintenance) is 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).
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 (Los Angeles Sheriff’s
Department Contract). The cumulative public safety 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, 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
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million, exceeding by $4.1 million more in transfers to support the City’s
capital maintenance and improvement needs.
• Transfer Out to Other Funds $0.7 Million
The remaining transfers provide subsidies to other funds that do not have
sufficient revenues to support required contractual operations and
commitments, as follows:
o $400,000 to the Employee Pension Service Fund
o $215,000 to the Habitat Restoration Fund
o $55,000 to Sub-Region One Fund
o $50,000 to Abalone Cove Sewer Fund
o $15,000 to Improvement Authority for Portuguese Bend
In summary, as presented at the April 20 Budget Workshop, the FY 2026-27 General
Fund’s projected fund balance is $34.5 million, of which $18.7 million is set aside in
accordance with the City Council’s 50% Reserve Policy to address emergency events or
sudden declines in revenue, resulting in an unallocated fund balance of $12.1 million.
In short, the $18.7 million is equivalent to the City’s recurring operating costs and would
allow the City to continue operations for approximately six (6) months in the event of an
emergency while permanent solutions are determined. Beyond the required reserve
policy of $18.7 million (50% of recurring expenditure), the City Council has the discretion
to transfer a portion or all the unallocated fund balance of $12.1 million to the CIP Fund
to fund capital projects. With that in mind, Staff recommends the following for the identified
$12.1 million in unallocated funds:
• FEMA Hazard Mitigation Grant Program (HMGP) Voluntary Property Buyout
Program ($10M for reimbursable grant)
To prepare for the City’s HMGP Voluntary Property Buyout Program of $42
million, Staff recommend holding $10 million in the General Fund. As
previously reported in the 60-day landslide staff report, the grant is expected to
be fully funded by FEMA; however, it is structured as a reimbursement-based
program, requiring the City to initially fund eligible costs and subsequently
submit reimbursement requests, which are expected within 6 months. Given
the City’s cash flow constraints and FEMA’s lack of advance funding, the $10
million reserve will be needed to support the Program through completion,
which is anticipated to take up to 4 years. Staff recommend maintaining these
funds in reserve should the City Council be asked at a future meeting
(potentially in FY 2026-27) to authorize the initial funding once FEMA approves
and releases program funding.
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• General Fund Unallocated Fund Balance of $2M
Based on the potential upcoming front costs for the HMGP grant of $10 million,
Staff recommend transferring the remaining $2 million of the unallocated fund
balance to the CIP Fund thereby retaining the up-front funds needed for the
Voluntary Property Buyout Program.
Total Transfers-Out – CIP Fund $2.5M
In summary, combining budget reductions of $0.5 million and available unallocated fund
balance of $2 million, Staff seek City Council approval to transfer a total of $2.5 million
from the General Fund to the CIP Fund to further support capital priorities in FY 2026-27.
If approved, the total General Fund Transfers-Out to the CIP Fund will be $9.2 million,
which is approximately 37% higher than the level of transfers suggested under the
Reserve Policy based on projected Transient Occupancy Tax (TOT) revenues of $6.7
million.
Staff seek City Council approval to transfer a total of $2.5 million from the General Fund
to the CIP Fund to further support capital priorities.
2. FY 2026-27 Revised Capital Improvement Program (CIP Fund Only)
Pursuant to City Council direction at the May 4 CIP Budget Workshop, Staff reassessed
the proposed CIP projects and identified potential cost reductions to support the CIP Fund
and CIP Program as described below.
Proposed Reductions (CIP Fund)
Based on City Council direction to continue landslide response efforts within budget
constraints and under the assumption that additional grant funding will not be received,
Staff evaluated Scenario 2A presented at the May 4, 2026 CIP Budget Workshop
(Attachment A) for budget reductions. When determining which projects would be
proposed for budget reductions, Staff excluded projects for which deferring the work now
would result in more costly future repairs because infrastructure would deteriorate to the
point that a different, and more costly repair would be required in the future. Accordingly,
Staff identified two projects for budget reductions as follows:
• Project 8307: Portuguese Bend Landslide Emergency Stabilization Measures
Staff evaluated the PBL Emergency Stabilization project for budget reductions to
determine if reductions could be enacted without significant impact to emergency
stabilization efforts. Accordingly, Staff consulted with the project geologist Geo-
Logic Associates (Geo-Logic), and the peer review geologist Cotton, Shires &
Associates (CSA). Geo-Logic and CSA advised that that Deep Dewater Wells
(DDWs) should be prioritized over winterization measures because DDWs have
more of a proven effect as compared to any one element of winterization.
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Therefore, Staff focused their cost reduction analysis on emergency winterization
measures through an updated assessment of current landslide conditions. Staff
found that opportunities for emergency winterization of Portuguese, Ishibashi, and
Paintbrush Canyons are very limited. This is because of th e center area of the
Portuguese Bend Landslide (PBL) landward of Palos Verdes Drive South (PVDS)
has subsided significantly, creating a condition where drainage improvements are
very limited without implementing significant grading as well as improvements
under and seaward of PVDS; which is a very costly long-term measure that is part
of the scope of the Portuguese Bend Landslide Remediation Project.
Staff propose reducing the PBL Emergency Stabilization budget by $300,000 per
fiscal year for grading and canyon shaping associated with winterization of
Portuguese Canyon, Ishibashi Canyon, and Paintbrush Canyon . The remaining
project budget would still provide funding for continued maintenance and re -
grading/shaping of existing winterized areas and fissure filling in various areas
within the Landslide Complex, as well as continued operation of the DDW program.
The proposed cost reduction to the CIP Fund is $300,000.
• Project 8727: Sewer Maintenance Access Improvements in Agua Amarga Canyon
This project is identified for budget reductions because it can be deferred to future
years by applying increased operations and maintenance measures in the interim.
The Los Angeles County Public Works Sanitary Sewer Division (LACDPW), who
operates and maintains the City’s sanitary sewers outside of Abalone Cove, ha s
determined that existing conditions are unsafe for its crews to inspect and maintain
certain sections of sanitary sewers in Agua Amarga Canyon. Therefore, the Five-
Year CIP included a project to implement access improvements so that LACDPW
could return to maintaining the sanitary sewer. The project’s estimated cost in FY
2026-27 is $500,000. As an alternative to funding this project as part of the
proposed 5-year CIP, Staff recommend moving this project to the Needs-Wants
list and allocating $60,000 to the Public Works operating budget from General
Fund Budget, which would allow the City to operate and maintain the affected
sections of sanitary sewers directly through a specialty contractor until funding is
available to construct the necessary access improvements. Additionally, Staff will
continue to search for grant funding opportunities for this project.
The proposed cost reduction to the CIP Fund is $500,000, however $60,000 is
being added to the General Fund for routine operations and maintenance by the
City.
Revised Projected Five-Year CIP Fund Balance (FY 2026-27 through FY 2030-31)
The following summarizes the revised proposed Five-Year CIP budget with reductions.
Compared to the May 4, 2026 proposed budget, if approved, the revised proposed budget
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would increase the fund balance by approximately $4.2 million, as shown in Table 3. The
changes are as follows:
• $151,400 of additional beginning fund balance due to a decrease in FY 2025-26
year-end estimates for expenditures.
• $744,000 of additional Grant Reimbursements estimated to be received in FY
2026-27. These are the eligible landslide expenditures approved by CalOES
related to the BRIC grant.
• $2.5 million of additional Transfers-Out from the General Fund. This is a
combination of $0.5 million reductions in expenditures and additional $2 million
transfers from the General Fund’s unallocated fund balance.
• $300,000 proposed budget reduction from the PBL Remediation Emergency
Stabilization Measures (CIP Project 8307).
• $500,000 proposed budget reduction from the Sewer Maintenance Access in Agua
Amarga Canyon (CIP Project 8727). Instead, Staff proposes to include a
maintenance budget in the General Fund for $60,000.
[CONTINUED ON THE NEXT PAGE]
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Table 3 – Revised Proposed Five-Year CIP (Revised from May 4, 2026)
Notes (Project 8307):
1 - Proposed expenditures are estimated values. Some line items may expend over or under their estimated amounts but the total of
proposed project expenditures for each fiscal year will not be exceeded.
2- Proposed expenditures in Fiscal Year 2027-28 account for annual escalation, which is expected to be offset by reduced DDW re-
drilling resulting from continued deceleration in land movement.
Table 4 on the next page is a comparison of the CIP Fund’s Projected Restricted Fund
Balance (Net of $5 million reserves) from May 4, 2026 to tonight’s proposal. If approved,
the proposed changes increase the projected fund balance by almost $4.2 million or 46%
in FY 2026-27, and this amount reaches $4.5 million by FY 2030-31, compared to the
original projection of $156,300.
CIP Fund Fiscal Year
2026-27
Fiscal Year
2027-28
Fiscal Year
2028-29
Fiscal Year
2029-30
Fiscal Year
2030-31
Beginning Fund Balance 19,489,328 18,229,308 14,702,808 14,172,408 12,430,308
Revenues
Interest Earnings 617,700 636,200 655,300 675,000 695,300
Loan Payments from Districts 342,900 342,900 342,900 342,900 342,900
ADD: Grant Reimbursement (BRIC)744,000
Transfers In
Transfers-In: General Fund (Annual and Additional)6,700,000 5,044,700 4,120,000 3,878,100 3,342,300
ADD: Transfers-In: General Fund Proposed Additional Transfers 2,500,000
Total Revenues and Transfers In (Estimates)10,904,600 6,023,800 5,118,200 4,896,000 4,380,500
Expenditures
8202-Ab Cove Santiary Sewer Repair Program 1,750,000 1,500,000 1,750,000 2,000,000 2,250,000
8302-PVDS Landslide Repair Program Special Funds*2,655,000 2,250,000 1,125,000 750,000 750,000
8302-PVDS Landslide Repair Program 1,530,000 2,250,000 2,500,000
8304-Portuguese Bend Landslide Remediation 91,420 Unfunded Unfunded Unfunded Unfunded
8307-PBL Remediation Emergency Stabilization Measures Unfunded Unfunded Unfunded
GPS Survey Monitoring 275,000 275,000
DDW-1, DDW-2, & DDW-3 950,000 950,000
DDW-9A & DDW-10 575,000 575,000
DDW-5 500,000 500,000
DDW-8 500,000 500,000
DDW-6 375,000 375,000
DDW-4 375,000 375,000
Altamira Canyon 1,375,000 1,375,000
Paintbrush, Ishibashi and Portuguese Canyons 300,000 300,000
Proposed Reductions - Paintbrush, Ishibashi, Portuguese Canyons (300,000) (300,000)
Kelvin Canyon 25,000 25,000
Klondike Canyon 50,000 50,000
Fissure Filling 650,000 650,000
Seaview Neighborhood 50,000 50,000
8308-PBL Remediation DDW 1-6 Permanent Power 470,000 - - - -
8503-New Civic Center Master Plan (includes EOC)225,000 - - - -
8509-Facilities Maintenance Program 435,000 Unfunded Unfunded Unfunded Unfunded
8701-Storm Drain Asset Mgmt Prgm & Master Plan Update 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
8726-Storm Drain at Montemalaga Canyon 375,000 - - - -
8727-Sewer Maint Access Imps in Agua Amarga Canyon 500,000 - - - -
8727 - Proposed Reductions (500,000) - - - -
8855-Roadway Maint Program PVDS and PVDW (PHASE 1)785,000 - - - -
Personnel for Capital Programs (1) 243,700 260,800 279,100 298,600 319,500
Ladera Loan Payment 889,500 889,500 889,500 889,500 889,500
Total Expenditures (Estimates)12,164,620 9,550,300 5,648,600 6,638,100 7,159,000
Projected Ending Fund Balance 18,229,308 14,702,808 14,172,408 12,430,308 9,651,808
City Council Restricted Fund Balance
Less: Reserve Policy (5,000,000) (5,000,000) (5,000,000) (5,000,000) (5,000,000)
Projected Restricted Balance 13,229,308 9,702,808 9,172,408 7,430,308 4,651,808
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Table 4 – Comparison of Projected CIP Fund Balance (May 4 and May 18, 2026)
Staff seek City Council approval of the proposed changes to Grant Revenues, additional
Transfers-In, and reductions in Expenditures, which would increase the CIP Fund balance
by approximately $4.2 million.
3. Revised Capital Improvement Program for FY 2026-27
The proposed FY 2026-27 Capital Improvement Program (CIP) includes six major capital
project categories totaling approximately $30.9 million for a total of 19 projects. The
proposed CIP reflects the City’s continued commitment to maintaining and improving
critical public infrastructure, enhancing public safety, addressing landslide -related
impacts, and preserving long-term community assets.
The largest project category is Right-of-Way Improvement Projects (8800), totaling
approximately $14.4 million, or 47% of the overall FY 2026-27 CIP budget. These projects
primarily include roadway rehabilitation, transportation-related infrastructure
improvements, pedestrian and accessibility improvements, traffic signals, and grant-
funded transportation projects supported through Gas Tax, Measure R, Measure M,
Proposition C, federal grants, CDBG funds, and other restricted funding sources.
Landslide Improvement Projects (8300) represent approximately $10.6 million, or 34% of
the total CIP budget, and continue to reflect the City’s ongoing response and mitigation
efforts associated with landslide emergency conditions and related infrastructure
stabilization activities. Funding for these projects includes Gas Tax SB1, Proposition C,
federal grants, and CIP funds.
Sewer and Storm Drain Improvement Projects (8700) account for approximately $3.0
million, or 10% of the FY 2026-27 CIP budget, and include improvements to aging storm
drain infrastructure funded through the CIP Fund, as well as storm water quality
compliance projects funded through Measure W funds. The CIP also includes
approximately $1.8 million for the Abalone Cove Sanitary Sewer Repair Program (8200),
approximately $0.7 million for Building Improvement Projects (8500), and approximately
$0.5 million for Parks, Open Space, and Recreation Facilities Projects (8400) funded
through Measure A maintenance funds.
Projected CIP Balance
(Net of $5M Reserves)
Fiscal Year
2026-27
Fiscal Year
2027-28
Fiscal Year
2028-29
Fiscal Year
2029-30
Fiscal Year
2030-31
Projected Fund Balance
(May 4, 2026)
9,033,884 5,207,405 4,676,974 2,934,846 156,300
Projected Fund Balance
(May 18, 2026)13,229,308 9,702,808 9,172,408 7,430,308 4,651,808
Proposed Changes ($)$4,195,424 $4,495,403 $4,495,434 $4,495,462 $4,495,508
Proposed Changes (%)46%86%96%153%2876%
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If the proposed changes above are approved by the City Council, Table 5 provides a
summary of the proposed Five-Year Capital Improvement Program for FY 2026-27 and
Table 6 provides a list of the proposed projects by program and by funding source.
Table 5 – FY 2026-27 Proposed Capital Improvement Program (by Program)
[CONTINUED ON THE NEXT PAGE]
Capital Improvement Program Proposed
2026-27
8202 - Abalone Cove Sewer Repair Program 1,750,000
8302 - PVDS Landslide Repair Program 2,655,000
8304 - Portuguese Bend Landslide Remediation 365,685
8307 - PBL Remediation Emergency Stabilization Measures 5,700,000
8308 - PBL Remediation DDW 1-6 Permanent Power 1,880,000
8426 - Park Playground Improvements 500,000
8503 - New Civic Center Campus Master Plan (includes EOC)225,000
8509 - Facilities Asset Management Program 435,000
8701 - Storm Drain Asset Mgmt Program & Master Plan Update 1,200,000
8721 - Multi-Jurisdictional Stormwater Treatment - Torrance Airport 660,000
8725 - Peninsula Verde Stormwater Treatment Drywell 775,000
8726 - Storm Drain Improvements At Montemalaga Canyon 375,000
8809 - Western Avenue Traffic Flow Improvements 3,280,000
8837 - New Traffic Signal At PVDS & PVDE 70,000
8846 - Traffic Calming Program - Citywide 320,000
8847 - PVDE Guardrail Improvements 918,450
8855 - Roadway Maintenance Program -PVDS and PVDW (Phase 1) 3,872,000
8858 - Roadway Maintenance Program - PVDE (Phase 1)5,600,000
8861 - Sidewalk Management Program 370,000
Grand Total 30,951,135$
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Table 6 – FY 2026-27 Proposed Capital Improvement Program (By Program and Funding
Source)
Capital Improvement Program Proposed
FY 2026-27
Budget
Allocation %
8200 Abalone Cove Sanitary Sewer Repair Program 1,750,000 6%
330 - CIP FUND 1,750,000
8202 - Abalone Cove Sewer Repair Program 1,750,000
8300 Landslide Improvement Projects 10,600,685 34%
204 - GAS TAX-SB1 1,830,000
8302 - PVDS Landslide Repair Program 1,830,000
215 - PROPOSITION C 825,000
8302 - Pvds Landslide Repair Program 825,000
331 - FEDERAL GRANTS 1,684,265
8304 - Portuguese Bend Landslide Remediation 274,265
8308 - PBL Remediation DDW 1-6 Permanent Power 1,410,000
330 - CIP FUND 6,261,420
8304 - Portuguese Bend Landslide Remediation 91,420
8307 - PB Landslide Remediation Emergency Stabilization Measures 5,700,000
8308 - PBL Remediation DDW 1-6 Permanent Power 470,000
8400 Parks, Open Space & Recreation Facilities Projects 500,000 2%
224 - MEASURE A MAINTENANCE 500,000
8426 - Park Playground Improvements 500,000
8500 Building Improvements Projects 660,000 2%
330 - CIP FUND 660,000
8503 - New Civic Center Campus Master Plan (Includes EOC)225,000
8509 - Facilities Asset Management Program 435,000
8700 Sewer & Storm Drain Improvements Projects 3,010,000 10%
343 - MEASURE W 1,435,000
8721 - Multi-Jurisdictional Stormwater Treatment - Torrance Airport 660,000
8725 - Peninsula Verde Stormwater Treatment Drywell 775,000
330 - CIP FUND 1,575,000
8701 - Storm Drain Asset Mgmt Program & Master Plan Update 1,200,000
8726 - Storm Drain Improvements At Montemalaga Canyon 375,000
8800 Right-of-Way Improvements Projects 14,430,450 47%
202 - GAS TAX 1,655,000
8855 - Roadway Maintenance Program - PVDS And PVDW (Phase 1)1,355,000
8858 - Roadway Maintenance Program - PVDE (Phase 1)300,000
204 - GAS TAX-SB1 2,110,000
8855 - Roadway Maintenance Program - PVDS And PVDW (Phase 1)400,000
8858 - Roadway Maintenance Program - PVDE (Phase 1)1,710,000
211 - 1911 ACT STREET LIGHTING 70,000
8837 - New Traffic Signal At PVDS & PVDE 70,000
215 - PROPOSITION C 140,000
8858 - Roadway Maintenance Program - PVDE (Phase 1)140,000
220 - MEASURE R 3,470,000
8846 - Traffic Calming Program - Citywide 320,000
8858 - Roadway Maintenance Program - PVDE (Phase 1)3,150,000
221 - MEASURE M 3,580,000
8809 - Western Avenue Traffic Flow Improvements 3,280,000
8858 - Roadway Maintenance Program - PVDE (Phase 1)300,000
310 - CDBG 230,000
8861 - Sidewalk Management Program 230,000
331 - FEDERAL GRANTS 2,250,450
8847 - Pvde Guardrail Improvements 918,450
8855 - Roadway Maintenance Program - PVDS And PVDW (Phase 1)1,332,000
340 - BICYCLE/PEDESTRIAN ACCESS 140,000
8861 - Sidewalk Management Program 140,000
330 - CIP FUND 785,000
8855 - Roadway Maintenance Program - PVDS And PVDW (Phase 1)785,000
TOTAL - Capital Improvement Program (All Funds)$30,951,135 100%
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4. City Council Reserve Policy
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, including City Council Policy No. 41 (Reserve Policy). City Council
Policy No. 41 requires designated reserve levels for each fund and provides guidelines
for managing available balances, ensuring that any funds above required reserves are
appropriately utilized. Key reserve requirements for the two primary funds are
summarized below:
• General Fund
o Required to maintain a minimum fund balance equal to 50% of annual
operating recurring expenditures to support cash flow needs, economic
uncertainty, and unforeseen costs.
• CIP Fund
o Required to maintain a minimum reserve of $5 million to support major
infrastructure projects, including roads, storm drains, parks, facilities, rights -
of-way, and sewer systems.
o Previously established at $3 million until it was increased in 2021 due to
rising capital costs.
To date, the City Council has not used General Fund reserve funds to support general
operations. However, in October 2024, the City Council approved the use of CIP Fund
reserves in the amount of $5 million for landslide emergency efforts.
At the May 4, 2026 meeting, the City Council directed staff to return with additional
information regarding potential amendments to the City’s Reserve Policy No. 41 to
explore alternative means to support the CIP Fund. Table 7 presents various scenarios
based on potential percentage changes to the reserve requirement, along with the
corresponding potential increases in available funds that could be used if the reserve
policy threshold is reduced for FY 2026-27.
Table 7 – City Council Policy No. 41 Reserve Policy – FY 2026-27 Scenarios
Local agencies generally maintain General Fund reserves consistent with G overnment
Financial Officers Association (GFOA) guidance (approximately 17% minimum), with
Scenarios Reserves
Illustrative
Change in
Available Funds
Current - 50% Reserves $18,700,000
Scenario 1 - 40% Reserves $15,200,000 $3,500,000
Scenario 2 - 30% Reserves $11,400,000 $7,300,000
Scenario 3 - 20% Reserves $7,600,000 $11,100,000
*Based on $38M in operating recurring expenditures
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many jurisdictions targeting or maintaining reserves between the 20% and 40% range
depending on fiscal structure, revenue volatility, and credit considerations.
At this time, based on the projected General Fund balance of $34.5 million, including
$18.7 million in reserves and $12.1 million in unallocated fund balance, staff recommend
not reducing the 50% reserve policy to support the CIP Fund but rather using the
unallocated fund balance first. While the current 50% reserve level is higher than the
GFOA minimum, it conservatively sets aside funds the City can utilize based on fiscal
volatility and exposure to unforeseen events, including landslide or other natural
disasters.
The CIP Fund is experiencing financial uncertainty and faces significant unfunded capital
infrastructure needs projected to occur over the next five years. The $5 million reserve
provides flexibility in the event of emergencies or unexpected capital needs and remains
available for City Council consideration at anytime throughout the year as needed, as
seen in 2024.
For both funds, the City Council retains discretion to approve the use of funds at any time
to address emergencies or other sudden, unanticipated needs, as necessary. For those
reasons, it is not recommended to reduce the reserve policies in order to continue setting
aside funds that may be needed in response to unforeseen events rather than budgeting
those funds for use in FY 2026-27.
Staff recommend receiving and filing this analysis on the City Council Policy No. 41
Reserve Policy.
5. Financial Sustainability Update
City Council Fiscal Sustainability Goal
As part of the City Council’s Fiscal Sustainability Goal, the City implemented several
measures to improve financial stability, including forming a Fiscal Sustainability Council
Subcommittee (Councilmembers Bradley and Lewis), reinstating CPI adjustments for key
revenue sources, and restoring revenues that were previously suspended. Between FY
2025-26 and proposed FY 2026-27, Staff estimates these efforts resulted in
approximately $9.3 million in additional fund balances including:
• $600,000 in additional annual revenues
• $4.5 million in grant funding
• $2.9 million lower in capital expenditures from reassessing budgets and reducing
costs; and
• $1.3 million lower in General Fund operating expenditures
Additionally, staff continue to pursue and secure grants from local, state, and federal
agencies to offset past costs responding to the landslide and to help provide additional
revenue streams for future projects.
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Under the Fiscal Sustainability Goal, the City also conducted a Community Needs Survey
to identify the most critical areas for improvement, prioritization, or further funding
investment. The priorities identified most often by Survey respondents were maintaining
roads; preparing for wildfires and natural disasters; reducing wildfire risk; preventing
property crime and addressing landslides and land movement.
Survey results also indicated that many residents recognize a need for additional funding
to support community services and programs. Two options that may be considered in the
months ahead are public safety and City services measures supported by a local
Transient Occupancy (hotel) and/or Golf Tax increase, which are types of funding
mechanisms more often paid by visitors rather than by Rancho Palos Verdes residents.
These measures may offer one potential way to help maintain critical City services , and
survey results from February 2026 indicated that a majority of respondents supported
both measures to help fund City priorities and programs.
Table 8 below provides an illustrative estimate of the potential financial impact of the two
options, totaling approximately $26.7 million over 10 years (Year 1 represents 50% of the
total revenues).
Table 8 – Illustrative Impact of Additional Funding Sources
*Includes projected additional annual TOT of $2.2 million and Golf Tax
of $0.4 million, with a 2% annual escalation.
Pay-As-You-Go Approach
The City has a longstanding tradition of utilizing a pay-as-you-go approach to fund both
City operations and capital maintenance and improvements. This reflects the City’s
general practice of maintaining a low-tax city, where debt financing and additional taxes
or fees are not the primary methods for funding capital infrastructure needs. This
approach relies heavily on the use of Special Revenue and Grant Funds for capital
projects and when funds are available from the General Fund. Like many other
municipalities, the pay-as-you-go approach would typically result in capital infrastructure
needs being deferred beyond their intended service life. To address capital infrastructure
needs in a timely manner, many municipalities utilize a combination of funding methods,
including debt financing, dedicated user and service charge fees, development impact
fees, additional tax revenues, municipal bonds, and assessment districts.
Fiscal Year Projected Additional
General Fund Revenues
Year 1 $1,300,000
Years 2-4 $7,957,000
Years 5-7 $8,444,000
Years 8-10 $8,960,900
TOTAL $26,661,900
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In recent years, expenditures have increased at a faster rate than revenues, largely due
to significant landslide emergency and stabilization response costs, which are expected
to reach approximately $61.5 million by the end of FY 2025 -26. As a result, the gap
between revenues and expenditures has narrowed over the past few years, and
combined fund balances have declined, reducing overall financial capacity.
As presented at the CIP Budget Workshop, the City’s unfunded capital needs over the
next five years are estimated to range between approximately $55 million to $98 million,
reflecting a gap between identified infrastructure needs and available funding under the
current pay-as-you-go approach. Continued reliance on this funding model (General Fund
Transfers-Out, Special Revenue and Grant Funds), without additional or alternative
revenue sources, may not be sufficient in the future to fully address long-term capital
needs in a timely manner. To this point, the City should continue to explore new and
additional revenue streams to support funding future capital projects.
Staff recommend receiving and filing this update on the City Council Goal of Financial
Sustainability.
CONCLUSION:
Based on City Council direction on May 4, 2026, Staff present proposed revisions to the
FY 2026-27 through FY 2030-31 CIP and updates to the FY 2026-27 General Fund
budget assumptions for City Council consideration. Staff identified approximately $0.5
million in additional General Fund budget reductions and a proposed $2 million transfer
from the General Fund unallocated fund balance to support the CIP Fund. Proposed
reductions include deferred funding for vacant positions, reduced special event
expenditures, deferred equipment replacement funding, freezing certain City grant
programs, and reductions to maintenance and operations expenditures.
Staff also reassessed the proposed CIP and identified additional reductions and revisions
totaling approximately $0.8 million in FY 2026-27 and $0.3 million in FY 2027-28. These
reductions consist of removal of the Sewer Maintenance Access Improvements in Agua
Amarga Canyon Project from the current CIP and a decrease in the Portuguese Bend
Landslide Emergency Stabilization Measures Project .
The increases in General Fund contributions, CIP reductions, additional estimated grant
reimbursements, and updated beginning fund balance estimates will increase the
projected CIP Fund balance by approximately $4.2 million.
If the proposed revisions are approved tonight, the changes will be incorporated into the
FY 2026-27 Preliminary Budget scheduled for City Council consideration on June 2, 2026.
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CITY COUNCIL POLICY
NUMBER: 41
DATE ADOPTED/AMENDED: 12/02/08 (Amended 4/30/13 and 03/02/2021)
SUBJECT: Reserve Policies
POLICY:
The City utilizes a variety of accounting funds for accounting and budgeting for
revenues and expenditures of the City. Appropriations lapse at each fiscal year-
end. The City Council may authorize continued appropriations and purchase
orders carryover for certain incomplete capital projects, other one-time projects
and services which have not been billed or completed. Remaining dollars left in
each fund that are undesignated and unencumbered constitute available reserves
of the City. It is appropriate that reserve policies for the City be established for
each of the various funds, that the purpose of these reserves be designated, and
that dollars available in excess of the reserve amounts be appropriately and
effectively utilized. This policy governs the City’s reserves as follows:
A. General Fund
The City will maintain a minimum fund balance of at least 50 percent of
annual operating expenditures in the General Fund. This is considered the
minimum level necessary to maintain the City’s credit worthiness and to
adequately provide for:
1. Economic uncertainties, local disasters, and other financial hardships or
downturns in the local or national economy.
2. Contingencies for unseen operating or capital needs.
3. Cash flow requirements.
B. Capital Improvement Fund
The City will maintain a minimum of $5 million in the Capital Improvement
Projects (CIP) fund as a reserve for major improvement projects related to
roadways, storm drains, parks, buildings, rights-of-way, and the sewer
system. Subject to the annual budgeting process, the CIP reserve will be
funded, to the extent possible, by allocating the following to the CIP fund:
1. Transient Occupancy Tax (TOT).
a. Pursuant to the City’s Municipal Code Chapter 3.16, Transient
Occupancy Tax is collected from hotels that are located within the
City. "Hotel" means any structure, or any portion of any structure,
which is occupied or intended or designed for occupancy by
transients for dwelling, lodging or sleeping purposes, and
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includes any hotel, inn, tourist home or house, motel, studio hotel,
bachelor hotel, lodging house, rooming house, apartment house,
dormitory, public or private club, mobile home or house trailer at
a fixed location, or other similar structure or portion thereof.
b. The tax imposed in any hotel is based on temporary occupancy.
"Temporary" means a period of thirty consecutive calendar days
or less, counting portions of calendar days as full days.
c. General Fund transfer amounts to the CIP are equal to the TOT
collected from the Terranea Resort, the main source of TOT
revenues. During the annual budget process if it is determined
that the General Fund will not have a balanced budget, the City
Council may reduce the transfer amount to the CIP by a portion
or all of the increases in the public safety contract.
2. If deemed necessary, the City Council may allocate all or a percentage
of the prior year’s General Fund unrestricted excess reserve during
budget adoption process.
All interest earnings in this fund will be used for capital improvement
projects.
C. Equipment Replacement Fund
The City will maintain a minimum reserve of 75% but no more than 100%
of the estimated replacement cost for equipment assets that are due to be
replaced in the City’s next fiscal year.
D. Water Quality Flood Protection Fund
Project spending in the Water Quality Flood Protection (WQFP) fund
fluctuates year to year. The Storm Drain User Fee is a source of funding
for these projects. To avoid a fluctuating Fee, the City will maintain retained
earnings over the life of the WQFP fee to establish rate stabilization, thereby
enabling fund availability for scheduled projects and maintenance.
E. Building Replacement Fund
The City will maintain retained earnings in this fund to accumulate monies
and interest earnings to finance major improvements (e.g. roofing), and
partially provide for future replacement of City owned buildings.
F. Utility Undergrounding Fund
The City will maintain retained earnings in this fund to accumulate monies
for relocating utility poles and lines on City arterial roadways underground,
as well as provide residents assistance with the process leading to utility
undergrounding in residential areas of the City.
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G. Street Maintenance Fund
The City will maintain a minimum of one year’s appropriations for road
maintenance on Palos Verdes Drive South in the landslide area.
H. Habitat Restoration Fund
The City will maintain a minimum of $50,000 in this fund as required by the
National Communities Conservation Plan (NCCP) for emergency use for
habitat restoration purposes in addition to maintaining any interest earnings.
I. Subregion One Maintenance Fund
As part of the development agreement for Subregion One, the developer
provided $750,000 as an endowment to generate interest earnings for
future maintenance of the open space area in Subregion One.
J. Improvement Authority Abalone Cove Fund
In connection with the Horan lawsuit, the Redevelopment Agency’s
Reimbursement and Settlement Agreement with property owners and the
County stipulated that $1,000,000 of County loan proceeds was to be
deposited in the Abalone Cove Maintenance Nonexpendable Trust Fund of
the Joint Powers Improvement Authority. Interest earnings from this deposit
are used to maintain landslide abatement facilities in the Abalone Cove area
of the active landslide, except sewers in accordance with the
reimbursement and settlement agreement
Reserve levels will be reviewed annually during the budget process. Any
recommended adjustments to reserve levels will be presented to City Council for
its consideration during the annual budget process.
COMMITMENTS AND ASSIGNMENTS OF FUND BALANCE:
Governmental Accounting Standards Board Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definitions, provides the City with a
method to self-classify fund balance for financial statement reporting purposes.
A. Committed Fund Balance
Fund balance may be committed to specific purposes using its highest level
of decision-making authority, the City Council. It is the City Council’s policy
that commitments of fund balance for a fiscal year must be adopted by
resolution prior to fiscal year end. Amounts that have been committed by
the City Council cannot be used for any other purpose unless the City
Council adopts another resolution to remove or change the constraint.
B. Assigned Fund Balance
The General Fund balance may be assigned for amounts the City Council
intends to use for a specific purpose. It is the City Council’s policy that
assignments of fund balance for a fiscal year must be approved by
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minute-order of the City Council prior to the fiscal year end. Any changes
to assignments must also be made by minute-order of the City Council.
It is the City Council’s policy to spend classified fund balance in the following
order when amounts in more than one classification are available for a particular
purpose:
1. Restricted Fund Balance – amounts constrained to specific purpose by
their providers through constitutional provisions or enabling legislation.
Examples include grants, bond proceeds and pass-through revenue from
other levels of government.
2. Committed Fund Balance – amounts constrained to specific purpose by
resolution of the City Council.
3. Assigned Fund Balance – amounts in the General Fund which are
intended to be used for a specific purpose, expressed by minute-order of
the City Council.
4. Unassigned Fund Balance – amounts available for any purpose in the
General Fund.
BACKGROUND:
Reserves, rainy-day funds, or contingency funds are a prudent fiscal policy and an
important credit factor in the analysis of financial analysis and management. Local
governments have experienced much volatility in their financial stability due to the
economy, natural disasters, terrorist attacks, and actions taken by state
government which includes taking revenues from local governments to resolve
state budget problems. California cities are at an even greater disadvantage than
the rest of the country due to the unique regulations imposed by Proposition 13,
and the inability to raise property taxes if the need would arise. Sound financial
management includes the practice and discipline of maintaining adequate reserve
funds for known and unknown contingencies. Such contingencies include, but are
not limited to: cash flow requirements, economic uncertainties including downturns
in the local, state or national economy, local emergencies and natural disasters,
loss of major revenue sources, unanticipated operating or capital expenditures,
uninsured losses, tax refunds, future capital projects, vehicle and equipment
replacement, and capital asset and infrastructure repair and replacement. The
establishment of prudent financial reserve policies is important to ensure the long-
term financial health of the City.
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