Costa Mesa study session: staff outlines $6.4M sales-tax shortfall, recommends CIP deferrals and soft hiring freeze

Costa Mesa City Council members examined a midyear budget update on Tuesday, March 11, 2025, after Finance Director Lorraine Molina told the council staff now projects about a $6.4 million reduction in general fund revenues for FY 2024–25, largely tied to weaker sales tax receipts in retail and the auto sector.

The shortfall has prompted staff to present a series of options: realign $1.4 million of street‑sweeping costs entirely into the gas tax fund (which would free roughly $700,000 in the general fund); temporarily defer about $2.9 million in general‑fund‑supported capital improvement program (CIP) projects that have not started; and consider using up to $3.6 million from the city's economic reserves. Staff also proposed a soft hiring freeze for non‑sworn positions effective April 1 and said it would continue monitoring federal grant obligations.

Molina opened the presentation with the city's revenue picture: the adopted All‑Funds 2024–25 budget is $239.8 million with a general fund of $189.9 million. "Sales tax represents 43% of our general fund revenues," Molina said, and staff now projects sales tax receipts will fall to about $75.2 million for the year, a decline that produces roughly a $6.4 million hit to revenues. Property tax and some other categories remained close to adopted estimates; cannabis tax receipts are slightly higher than expected, Molina said.

Why it matters: Costa Mesa currently holds roughly $60.4 million in general fund reserves, including an $9.0 million economic‑reserves category that staff proposed could be tapped to cover the projected $3.6 million shortfall. Molina presented the…