Newport Beach staff present balanced $475.5M citywide budget, $40M pension paydown

City finance staff presented a proposed FY 2026–27 operating budget that officials described as balanced and focused on pension reduction and capital planning.

Deputy Finance Director Peter Kemp told the council the proposed general fund operating budget is approximately $348,400,000 and that the citywide operating budget across all funds totals $475,500,000, a roughly 3% increase over the prior year. Jason Aleman, administrative services director, said the proposed capital improvement program incorporates $47.8 million in new CIP funding and that total proposed CIP funding amounts to $95,000,000, roughly half of which is carryover from earlier appropriations.

Kemp highlighted a $40,000,000 allocation in the proposed budget dedicated to the baseline pension paydown and said staff recommends an additional $5,000,000 supplemental appropriation at fiscal-year end. "The proposed budget includes a $40,000,000 allocation towards the city's unfunded pension liability," Kemp said. Staff noted the city’s pension funded status had improved from earlier lows and is currently reported near 82 percent funded; projections presented to council showed the funded status rising to 90 percent within three years under certain return assumptions.

The staffing changes embedded in the budget include requests for a fourth firefighter-paramedic on one ladder truck, two additional police officers (one assigned to Fashion Island and one to Corona Del Mar), one associate civil engineer in public works and a mix of part-time additions for recreation and harbor staffing. Kemp said most of the increase in the general fund is driven by scheduled personnel cost increases and also called out a $10 million proposed loan for the water fund from the Orange County Water District that staff will bring forward to council soon.

Council members praised the work and asked staff to clarify bargaining-unit treatment for employees transferred between departments and how certain transfers were reflected in the adopted numbers. "We'll have better data on a fiscal year-end basis," Kemp said when asked about comparisons with CalPERS returns. Members of the public questioned budget transparency and the mechanism by which the city manager can adjust line items; Jim Mosier urged clearer documentation of revisions that accompany the final budget.

No formal vote on the operating budget occurred at the study session; staff said the draft will return for adoption at a future meeting as the budget process continues.