La Palma council ratifies three-year labor agreements amid warnings about future deficits

The La Palma City Council voted unanimously to ratify new three‑year labor agreements for the city’s three bargaining units and to adopt an updated management salary schedule, while also approving a $4.3 million transfer from unreserved general fund balance into reserve accounts.

Deputy City Manager Joseph Snaros summarized the tentative memoranda of understanding (MOUs) the council adopted effective July 1, 2025. The packages include base-salary increases of 5% in year one, 4% in year two and 4% in year three — a cumulative increase the staff estimates at roughly 15.7% — together with other adjustments such as higher medical premiums, an increased vision reimbursement, a revised overtime calculation for the Police Association, and additional longevity pay steps for sworn personnel. Snaros said the full fiscal impacts are detailed in the staff report and will be incorporated into future budgets.

Council also approved moving $4,300,000 of the unreserved general fund balance into reserves: $2,300,000 to the city’s emergency reserve, $1,000,000 to the capital outlay reserve and $1,000,000 to a general fund budget stabilization reserve. Mayor Mark Waldman made the motion to transfer the funds; the motion carried on a 5–0 roll call.

The actions followed a lengthy staff presentation by financial consultant Mike Matsumoto, who told the council that as of March 2025 the city’s spendable reserves totaled $20,500,000 (about 133% of projected FY25–26 general fund expenditures). Matsumoto said the capital outlay reserve reflects roughly $2.8 million in pending receipts, including a $2.0 million federal grant for median improvements and about $800,000 in other street-related grants. His 10‑year projection shows a small near‑term surplus followed by several years of projected deficits if current assumptions hold.

Those projections drew pushback from residents and a former finance official in the audience. Gerard Goodhart, who identified himself as a former finance director and council member, urged the council to postpone approval of the labor agreements until the budget assumptions were clarified. "You cannot approve these agreements tonight," Goodhart told the council, saying the staff chart lacked assumptions and that revenue growth estimates appeared optimistic in the face of a possible recession.

Other members of the public echoed concerns about sales‑tax and utility‑tax estimates and urged more conservative planning. Several council members acknowledged the risks but said the city had built conservative revenue assumptions into the forecast and retained contractual reopening language. Mayor Pro Tem Nitesh Patel highlighted that the MOUs include a standard reopening clause allowing renegotiation of wages, benefits and staffing levels if the city experiences a major revenue loss.

Matsumoto and staff told the council they rely on quarterly sales‑tax monitoring from HDL (the city’s sales‑tax consultant) and that the council will receive regular updates to inform any required course corrections. Council Member Keogh and others also pointed to prior instances — including the COVID‑era midyear adjustments — where staff revised projections and the council adjusted policy choices accordingly.

The council cast separate roll‑call votes to adopt the MOUs for the La Palma General Employees Association, the La Palma Professional Employees Association and the La Palma Police Association, and to adopt the executive management salary schedule; each measure passed 5–0. The staff report and the adopted resolutions will be used to build the FY25–26 budget and to set pay schedules once the agreements take effect.

Next steps: the fiscal impacts will be incorporated into the FY25–26 budget documents for further review, and staff will report quarterly sales‑tax and revenue updates to the council so members can consider reopening wage and benefit terms if revenues deteriorate.