Hawthorne reports midyear budget gaps, plans $20 million short-term investment to bolster earnings

Felice Lopez, Hawthorne’s finance director, presented the city’s midyear financial report and recommended an investment action to help recapture lost investment earnings.

Lopez reported a pooled cash balance of $78,140,000 as of Dec. 31, 2025 and said restricted grant reimbursements lagged, creating a roughly $21,000,000 deficit in the grant/restricted fund balances. She detailed revenue shortfalls of approximately $2.7 million year-to-date, primarily driven by a $1,000,000 reduction tied to cannabis tax receipts, another $1,000,000 decline in fines and parking citations and about $400,000 in lower construction permit revenues. Lopez said departments have identified about $750,000 in internal savings and some other revenue increases offset part of the gap; the amended midyear budget showed expenditures of $113,047,559 against revenues of $113,175,855.

To address reduced investment income resulting from lower interest rates earlier in the fiscal year, Lopez proposed investing an additional $20,000,000 in treasury/MBS (3–5 year maturities) to lock current yields. She characterized the $20 million purchase as tactical: “With this investment, we expect to get us back up to that level at least 800 to 850,000, possibly more, depending on the rates,” Lopez said. Council asked about controls; Lopez described a dual-authorization transfer and reporting process involving finance leadership and the city manager.

Council voted to approve the midyear report and to authorize staff to proceed with the described investment approach; staff said they will complete the transactions using dual signatures and return with confirmations and ongoing reporting.

Next steps: Finance will execute authorized investments as market windows permit, continue to monitor grant reimbursements and bring follow-up reports to council on cash balances and realized earnings.