Laguna Beach staff present $161 million proposed budget; council hears warnings on transit subsidy, pension risk

Laguna Beach City Council members reviewed a proposed $161 million all‑funds budget for fiscal year 2025–26 at a special meeting that city staff described as a workshop for council feedback ahead of final adoption scheduled for June 24.

City Manager (presenting staff) told the council the all‑funds proposal totals about $161,000,000 with a general fund appropriation of about $95,000,000 and about $97,000,000 in general‑fund expenditures, producing a requirement for approximately $2,300,000 in transfers from the capital improvement and parking funds to balance the plan. Staff said reserves are fully funded, including a 20% general fund reserve and a disaster reserve of about $7,200,000.

The proposal includes roughly $28,000,000 in capital improvement program (CIP) projects for the coming year, a roughly $4,000,000 allocation to wildfire mitigation, and expanded transit and on‑demand services partially funded by Orange County Transportation Authority (OCTA) grants, staff said. City Manager and assistant city manager Gavin Curran emphasized that revenue estimates were modestly conservative and that the council could request refinements before adoption.

Why this matters: the draft mixes one‑time transfers with recurring spending and faces long‑term pressures from pension costs, labor agreements and higher operating costs. Staff framed a tiered risk strategy — holding vacancies now (tier 1), then examining contracts and incentives (tier 2), and deferring capital projects if revenues weaken (tier 3) — with decisions tied to early fiscal‑year revenue performance.

Details and council questions City staff told council that property tax is performing well (projected to rise roughly 4.2% from the current estimate) and will help offset weaker sales‑tax and transient‑occupancy‑tax (TOT) receipts tied to hotel remodelings and rooms offline. Staff said TOT and sales tax have been “fairly flat” over recent years and that the draft budget relies in part on a one‑time transfer to balance recurring expenditures.

Gavin Curran, assistant city manager and budget presenter, walked the council through revenue and expenditure tables showing a 1% projected increase in general‑fund revenues and a 3% rise in general‑fund expenditures compared with this year’s estimates. The transit operating budget was shown at about $9,000,000, of which roughly 40% is grant funded, meaning the remainder is supported by local sources, including sizable transfers from the parking fund.

Pension liability and contingency planning Council members pressed staff about the city’s unfunded pension liability. Staff said Laguna Beach’s unfunded liability has varied with CalPERS investment returns and market movements; the city has made large one‑time payments in the past and staff is evaluating options including a trust or other prepayment strategies to smooth future rate spikes. Staff recommended a separate, in‑depth review of pension options.

Public comment and council direction Speakers during public comment urged prioritizing fire‑safety spending. A speaker representing the South Laguna Civic Association urged the council to delay a proposed Aliso Beach parking expansion and reconsider whether new parking would attract more day‑trippers while delivering limited net revenue. Several speakers urged the council to use a larger share of available revenue for wildfire mitigation and fire prevention.

Next steps Staff said the council will consider final adoption of the budget on June 24, when the council is also expected to adopt a spending limit (Gann limit), reaffirm funding resolutions, and adopt a master fee schedule. Council members directed staff to return with more precise TOT and grant estimates, options for community‑development fee adjustments, analysis of transit service levels and contracts tied to the upcoming RFP, and a recommended approach to pensions and a potential Section 115 trust.

Ending No formal votes were taken at the workshop; council members asked for follow‑up reports and analysis on revenue assumptions, service‑level tradeoffs, pension options and wildfire spending ahead of the June 24 adoption hearing.