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Seal Beach projects balanced FY25‑26 budget but warns of mid‑term deficits; Measure GG reduces near‑term gap
Summary
Finance director presented a five‑year forecast showing property tax as the largest revenue source, sales tax volatility, rising pension and benefits costs, and a forecasted deficit in year three even after Measure GG revenue.
The Seal Beach finance director told council on May 8 that the city is presenting a balanced FY25‑26 budget and a five‑year forecast that still shows structural pressure from rising fixed costs, including pensions and health benefits.
Property tax is the city’s largest and most stable general fund revenue source, the presentation said, accounting for roughly the mid‑30 percent range of general fund revenue and showing average growth in recent years. Finance staff cited a median housing price for Seal Beach of about $1.6 million and said annual property‑tax growth has moderated from the recent high but remains the most stable revenue stream.
Sales tax is the second largest general fund revenue source, budgeted at about $14.6 million for FY25‑26; staff emphasized its volatility. The presentation noted a 4.6% decline in Q3 2024 sales tax compared with the prior year, tied mainly to restaurants and hotels. Finance said HDL projections expect flat‑to‑moderate growth in 2025–26 and stronger growth in 2027–28 if consumer confidence returns.
The forecast highlighted a 15% rise in health plan costs that drove a 22.6% increase in the “other pay and benefits” category year over year; retirement costs are projected to rise by double digits over the five‑year period due to CalPERS discount‑rate changes and the pension actuarial lag. Staff set aside $1.5 million in an economic reserve to manage short‑term shocks, and they said Measure GG (voter‑approved local tax measure implemented in FY25‑26) brings approximately $3 million annually back into city finances—partially restoring a $6 million set of cuts adopted the prior year.
Finance presented a range of contingency and corrective actions if a recession or sharp revenue downturn occurs: freeze vacant positions, pause nonessential spending, defer contracts where feasible, and use the economic reserve. Staff emphasized the city’s 25% contingency reserve target and a recently launched pension pay‑down plan as tools to preserve fiscal stability.
Council and staff discussed potential revenue options under consideration, including billboard agreements, revisiting business license fees, and an updated fee study. Staff and council members also highlighted nonbudget avenues to support Main Street and retail viability, including marketing, parking strategies and encouraging experiential retail.
On other budget items, the council asked and staff confirmed that the proposed FY25‑26 budget includes $120,000 operational support plus $160,000 capital for audio/visual and studio improvements for Seal Beach TV, moving the TV entity’s funding above its historical $70,000 allocation so it can pursue a part‑time manager and upgrades.
No formal council action was taken on additional revenue options at the workshop; staff will return with final budget documents on June 9.
