Seal Beach presents balanced FY 2026–27 budget; staff warns of longer‑term structural gap

Seal Beach — Finance Director Barbara Aronado told the City Council on May 5 that the proposed fiscal year 2026–27 budget is currently balanced and maintains healthy reserves, but the five‑year forecast projects growing structural pressure that will require revenue strategies or spending trade‑offs.

"The proposed budget is balanced with no structural deficits," Aronado said during a detailed departmental and capital presentation. She highlighted a contingency reserve at about 25% (above the Government Finance Officers Association benchmark) and noted one‑time steps already included in the proposed spending plan, such as accelerated pension payments.

Aronado walked the council through the city’s major revenue streams — property tax, sales tax, a local utility users tax (UUT), charges for services and transient occupancy tax — and said property tax remains the single largest revenue source and is relatively stable. Sales tax, she said, has softened compared with recent strong years and HDL projects a short‑term dip followed by recovery later in the five‑year outlook.

On the expenditure side, staff emphasized that maintenance and operations, contract services and insurance are among the largest and fastest‑growing line items — a trend that is crowding discretionary capacity for new positions and capital projects. Personnel costs were described as roughly half of the budget in Seal Beach — lower than the 68–80% range sometimes seen in similar cities — but pressures such as CalPERS and insurance increases will continue to push costs upward.

Key additions in the proposed FY 2026–27 budget include a small number of part‑time police aids focused on downtown/Main Street enforcement and a part‑time technology aid; the overall full‑time equivalent (FTE) count stays essentially flat compared with the current year. The finance team also proposed a CPI‑based interim fee update (3.16%) and minor fee clarifications to maintain cost recovery where appropriate; full fee studies are planned in later years.

Aronado noted the city has been actively pursuing grants — roughly $23 million in applications with about $5.4 million secured so far — to help pay for capital projects and reduce reliance on the general fund.

What this means: Staff said the budget can be adopted balanced for FY 2026–27 but that sustainable, longer‑term solutions are needed to avoid a projected structural gap in outer years of the forecast. The council asked for further detail on several CIP items and directed staff to return with options for closing gaps while preserving core services.