Huntington Beach officials outline FY 2025–26 budget with $8.8 million gap; propose reserve transfers and cuts

City finance staff presented a proposed fiscal year 2025–26 budget at the Huntington Beach City Council study session Tuesday, projecting a citywide budget of about $554.9 million and a general fund of roughly $298.9 million and forecasting an $8.8 million deficit for the coming year.

The study session featured presentations from Interim Chief Financial Officer Robert Torres, pension adviser Steve Montano of Baker Tilly and Chief Information Officer John Danka. The council discussed a package of balancing steps that staff recommended, including drawing on a portion of the city’s Section 115 pension trust, transfers from other reserves, operating reductions and continued hiring controls.

Why it matters: the general fund supports basic city services — public safety, parks, libraries and public works — and shortfalls can trigger program cuts, fee increases or use of one‑time reserves. Council members pressed staff on revenue assumptions, reserve levels and the long‑term cost of CalPERS pension liabilities.

City staff laid out the principal figures and tools they will use to close the gap. The proposed budget shows $113 million in property tax revenue and approximately $49 million from the city’s 1% local sales tax share. To reach balance staff proposed: a $1.5 million transfer from the Section 115 pension trust (in accordance with council policy), a $2.0 million transfer from the city’s workers’ compensation self‑insurance fund, a $2.4 million transfer from waterfront loan program funds, reduced general‑liability transfers of about $2.5 million, and $3.3 million from equipment replacement reserves for capital purchases. Staff also proposed continued managed hiring and $2.9 million in non‑personnel cuts across departments.

“Tonight there is a proposed budget that is a balanced budget that is presented to City Council,” City Manager Travis said, noting the charter requires final adoption in June. Interim CFO Torres said the general fund forecast includes a modest $1.1 million operating surplus shown in one scenario but a longer‑term baseline that shows deficits in subsequent years unless structural changes are made.

Pension and long‑term forecasts factored heavily into the discussion. Consultant Steve Montano reviewed Huntington Beach’s unfunded actuarial accrued liability and showed options to reduce long‑term pension costs — including accelerated discretionary payments, changes in amortization schedules and continued use of the Section 115 trust established from prior pension bond proceeds. Montano said earlier CalPERS investment results and the plan’s amortization policy drive future employer costs.

Council members asked about the assumptions behind sales‑tax estimates and online sales. CFO Torres said the city uses consultants HDL and UFI for forecasts and noted a $1.2 million projected decrease in sales tax related partly to auto‑dealer volatility and ongoing online sales trends. Council members also asked staff to return with quarterly updates if revenue trends change.

Staff presented the capital improvement program (CIP) of $70.9 million, led by streets and transportation projects, sewer lining and water infrastructure, and outlined technology and information‑systems costs in the Information Services budget, which is about $8.45 million and supports enterprise software, telephony and cybersecurity.

Actions and next steps: the council treated the session as a study session and did not adopt the budget at the meeting; staff will publish the full proposed budget and return for a public hearing and required adoption at the June council meeting. The council approved related procedural items during the meeting, including receiving the quarterly investment report and voting to bring tentative labor agreements back for formal consideration at the June 3 meeting.

What to watch: staff recommended several one‑time reserve uses to balance FY 2025–26 while continuing to pursue structural solutions — such as new revenue options, department efficiencies and tighter vacancy savings — to address projected deficits beyond next year. The city also signaled it will continue exploring discretionary pension prepayments and other amortization strategies to lower long‑term CalPERS costs.

Sources: presentations and answers from Interim Chief Financial Officer Robert Torres, City Manager Travis, pension advisor Steve Montano (Baker Tilly) and Chief Information Officer John Danka during the May 20 council meeting.