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Port Hueneme council hears preliminary three‑year budget forecast showing multi‑year shortfalls
Summary
City staff told the council a status‑quo three‑year projection shows operating deficits beginning in fiscal 2025–26, driven by falling sales and cannabis receipts and rising personnel and pension costs; council directed staff to prioritize CIP review and return with options.
City Manager James Vega and Finance Director Lupe Acero presented a preliminary three‑year forecast to the Port Hueneme City Council on Feb. 4 that projects operating deficits beginning in fiscal year 2025–26 if current policies and service levels remain unchanged.
The presentation said the forecast assumes a conservative outlook for sales taxes and lower cannabis tax receipts and factors in rising operating costs. "If we adopt a sort of status quo budget...this is our forecast of what we expect the next three years," Lupe Acero said.
The nut graf: The forecast projects a general‑fund operating gap and shows the city’s unassigned fund balance could be largely depleted within the three‑year window if no corrective actions are taken. Staff recommended using the forecast to guide discussions on spending, capital projects and revenue options ahead of the June budget adoption process.
City staff told the council the biggest near‑term revenue vulnerabilities are sales tax (about 24% of general‑fund revenue) and cannabis receipts. Acero described recent trends reported by the city’s sales‑tax consultant and said the city’s cannabis business tax — a 5% measure on gross receipts that generated nearly $3 million in 2022 — has declined sharply: "In our revised budget, we have $1,900,000; it is very likely that when we come back with a mid‑year update, that's going to be decreased," she said.
On the expenditure side, staff highlighted that personnel costs account for roughly 70% of operating expenditures and that pension costs are a significant line item. The forecast assumes a 3% increase in operating costs for 2025–26 and 2% in subsequent years; pension contributions were presented at current payment levels pending updated actuarial information.
The forecast included quantified scenario outcomes: a projected operating deficit of about $1,000,000 in 2025–26, growing to about $1.9 million the following year. After adding capital improvement program (CIP) commitments drawn from the adopted five‑year CIP, the cumulative shortfall grows — staff showed a general‑fund plus CIP gap of roughly $2.3 million in 2025–26 and nearly $4 million by 2027–28 under the status‑quo assumptions.
Council members asked detailed questions about sales‑tax forecasting, the contribution of property‑tax changes tied to major property sales, pension funding and options such as vacancy factors, hiring freezes, service reductions, user fees and CIP reprioritization. Councilmember Perez pressed staff on why longer‑range forecasting had not been performed earlier around labor contract negotiations; staff responded that those negotiations predated the current economic headwinds and that the city is adopting a longer forecasting practice now.
Public comment tied to the forecast came from Dulce Sutterfield, who urged staff to use greater geographic and merchant‑level granularity when analyzing sales tax impacts and to consider local business closures and leakage to neighboring Oxnard when assessing revenue trends.
Ending: Councilmembers directed staff to continue updating the forecast, to bring a midyear update and to begin detailed CIP and operating‑cost reviews that will feed into the May–June budget process. A motion to receive the presentation and continue budget work passed unanimously (Gama: yes; Hernandez: yes; Perez: yes; Lopez: yes; Mayor McQueen LaJeanne: yes).
