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Committee forwards long‑term financial plan projecting balanced general fund but flags sheriff contract and hotel timing
Summary
Staff presented the city’s five‑year long‑term financial plan projecting a structurally balanced general fund through FY32 while noting the Orange County Sheriff contract and the timing of upcoming hotel openings are the largest expenditure and revenue risks; committee voted 5‑0 to forward the plan to council.
The Financial Review Committee voted April 28 to forward the city’s annual long‑term financial plan (LTFP) to City Council after staff said the five‑year forecast (FY27–FY32) expects revenues to slightly outperform expenditures under current assumptions.
Staff told the committee the LTFP is prepared per Council Policy 02/29 and is updated annually. The plan assumes two new hotels in the harbor by FY30 and incorporates expected increases in the city’s contract with the Orange County Sheriff’s Department. "Our largest expenditure is our Orange County Sheriff's Department contract," staff said, adding the forecast assumes an average 4% annual increase beginning in FY28 based on historical growth.
Committee members pressed on forecasting assumptions and scenario planning. One member asked whether the plan had been back‑tested: staff said historical actuals are included on page 11 of the report and noted the forecasts are intentionally conservative because the city’s tourist‑driven revenues can be volatile.
Members questioned the timing confidence for hotel openings and for Marina closure; staff said the Marina closure and hotel openings are represented in the forecast but noted construction timelines carry uncertainty. Staff estimated average occupancy at about 65% and said the Ritz Carlton’s return to normal operations materially contributed to recent TOT gains.
The plan also reflects the city’s reserve policy: staff said unassigned fund balance sits at roughly 7% of budgeted revenue, within the city’s 4–7% target range, and that the LTFP keeps reserves fully funded across the forecast. The committee discussed the potential budgetary levers and the value of presenting alternative scenarios (conservative/moderate/aggressive) to clarify free cash flow available for CIP sequencing.
By motion, the committee voted 5‑0 to forward the LTFP to City Council for receipt and filing.
Staff said the LTFP will continue to be updated yearly and that the FY27 sheriff contract estimate will be brought to City Council when final numbers are available.
