TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Libby Bretthauer, Finance Director
Emy-Rose Hanna, Financial Services Manager
Alexis Motonaga, Budget & Financial Analyst
SUBJECT:Title
Presentation of the Fiscal Year 2027 Proposed Operating Budget and Consideration of CERT Funding Request (Not Budgeted) (Finance Director Bretthauer).
(Estimated Time: 1 hr.)
DISCUSS AND PROVIDE DIRECTION
Body
_________________________________________________________
RECOMMENDATION:
Staff recommends that the City Council receive this report on the Proposed Operating Budget for Fiscal Year (FY) 2027 and provide direction.
FISCAL IMPLICATIONS:
The Proposed Budget for FY 2027 includes revenues and expenditures for all the City’s Funds. The document includes sufficient funding for ongoing operations as well as scheduled projects in the Capital Improvements Plan (CIP).
The Proposed Budget reflects a strategic and thoughtful approach to using accumulated General Fund reserves to address current needs and capital improvement goals. The long-term outlook of structural cost pressures deserves continued attention and proactive measures to ensure the City’s outstanding municipal services are maintained, while meeting other intensifying funding obligations for pension costs and insurance claims. After years of prudent fiscal decision-making, strong foundational policies and long-term forecasting practices, Manhattan Beach is well-positioned to navigate these budget challenges and mitigate any operational impacts.
The FY 2027 General Fund Proposed Budget has a projected structural budget surplus of $1,971,768 based on on-going revenues of $118,965,764 exceeding ongoing expenditures of $116,993,996. When taking into account non-recurring expenditures (one-time costs and capital purchases) and net transfers to other funds, there is a projected decrease in fund balance of $9,588,758.
|
On-going Revenue |
$118,965,764 |
|
On-going Expenditures |
$116,993,996 |
|
FY 2027 Structural Budget Surplus |
$1,971,768 |
|
|
|
|
Non-recurring Equipment Replacements |
($436,900) |
|
Transfer Out to Street Lighting Fund |
($270,376) |
|
Transfer Out to Capital Improvement Fund |
($5,000,000) |
|
Transfer Out to Insurance Fund |
($6,000,000) |
|
Transfer in from County Lots Fund |
$146,750 |
|
FY 2027 Decrease in Fund Balance |
$ (9,588,758) |
The FY 2027 Proposed Budget includes the following transfers from the General Fund:
• $270,376 to the Street Lighting and Landscape Fund to cover ongoing operations and capital expenses. This fund receives revenues from assessments to property owners, which have not increased since 1996. Without a successful Prop 218 vote, the Fund will continue to require subsidies from the General Fund to cover ongoing operations and capital expenses.
• $5.0 million to the Capital Improvements Program (CIP) Fund for deferred maintenance and one-time projects, and anticipated debt service to finance the purchase of 400 Manhattan Beach Boulevard (“400 MBB”).
• $6.0 million to the Insurance Fund to support rising costs in claim liabilities due to an unprecedented increase in litigation and claims, and related defense costs and expenses, which have depleted reserves in the Insurance Fund. The City expects to be reimbursed from its insurance pool for amounts in excess of the applicable self-insured retention amount, but the timing and amount of such reimbursements are currently unknown.
The scheduled transfer of $3.5 million to the Pension Trust Fund was temporarily paused while we focus on funding the one-time $6.0 million cash infusion to the Insurance Reserve Fund and rising CalPERS UAL payments ($2.7 million in FY 2027).
The General Fund also receives a transfer-in of excess funds from the County Parking Lots Fund annually, which is estimated at $146,750 in FY 2027. This amount was partially reduced in FY 2027 to account for the Lot B parking lot closure at Bruce’s Beach due to the staging and construction schedule for the 28th Street Infiltration Project.
BACKGROUND:
On February 17, 2026, staff presented the FY 2026 Mid-Year Update. Year-end estimates for FY 2026 indicated that revenues would exceed expenditures by about $17,425,900. At this meeting, staff discussed changes to the presentation of interfund transfers and the reclassification of Transfers as revenues and expenditures. These changes were recommended in accordance with GFOA standards and best practices to develop a more financially transparent budget. After accounting for the impact of the transfers, the year-end projection for FY 2026 would result in a revised surplus of $8,782,541.
This anticipated surplus is primarily due to one-time bond proceeds received in August 2025 and the effect of reclassifying interfund transfers as revenues/expenditures. Other cost increases were largely tied to public safety overtime, contract services and plan check consultants that were projected higher than budget.
|
Revenues |
$131,122,230 |
|
Expenditures |
$113,696,330 |
|
FY 2026 Mid-Year Projected Structural Surplus |
$17,425,900 |
|
|
|
|
Net Transfers In/Out to Other Funds |
$(8,643,359) |
|
FY 2026 Mid-Year Projected Surplus After Transfers |
$8,782,541 |
Based on the projected surplus for FY 2026, the General Fund balance on June 30, 2026, is projected to be $34.5 million.
DISCUSSION:
The City Council’s priorities of public safety and outstanding City services are the foundation of our budget development. Our City’s history of prudent policy decisions has allowed us to maintain and enhance essential services even in challenging times.
Additionally, the community’s priorities are the cornerstone of our budget process. With our steadfast commitment to open communication, collaboration, and civic engagement, the City launched an online Budget Survey that ran from December 19, 2025, through February 28, 2026, and garnered 476 responses from engaged community members. To achieve this, the City engaged in various activities including 1) sending multiple email notifications and social media postings promoting the survey, 2) promoting the Survey during community announcements at City Council Meetings, 3) attending various in-person community group meetings for targeted outreach regarding the budget survey, and 4) utilizing a user-friendly survey platform through Microsoft Forms that was easily accessible by QR code through any mobile device or desktop computer.
The survey focused on funding priorities for the General Fund and areas requiring most attention from elected officials and City administration. The results revealed that Manhattan Beach residents deeply value their community's character and safety, with strong preferences for enhanced public safety, improved infrastructure, and community-centered development that preserves our small-town feel.
Following this initial community input phase, staff began preparing the Proposed Budget through detailed revenue projections and comprehensive internal reviews of all expenditure line items.
The FY 2027 Proposed Budget was developed as a comprehensive spending plan that supports City Council and community priorities. Where appropriate, service level
investments were added in response to feedback received from the Budget Survey, as well as for City Council Work Plan items.
The Proposed Budget also factors funding availability when considering budget proposals for program changes, one-time projects, equipment needs, technological advancements, and staffing adjustments. In any case where a Proposed Budget did not have adequate funding availability, Departments were asked to reprioritize all budget requests based on the highest need to determine which expenditure line items would move forward in the Proposed Budget versus which items would be deferred. This practice of reprioritization leads to budget savings and ensures that expenditures are aligned with current community needs. The results of this prioritization are reflected in the attached List of Deferred Budget Enhancements.
Following these steps, the Finance Department worked closely with all operating departments to prepare the Proposed Budget for City Council consideration.
Proposed Budget
The City’s Proposed Budget Book is comprised of seven key sections as follows:
1) Introduction, Including City Manager’s Budget Message
2) Budget Overview
3) Fund Summaries
4) Department Operating Budgets
a. A new Non-Departmental Section was added to reflect Interfund Transfers not associated with any particular department.
5) Five Year Forecast
6) Capital Budget Summary
7) Appendix
To obtain an overview of the Proposed Budget, staff recommends that readers first review the City Manager’s Budget Message and Budget Overview located in the 1) Introduction section of the attached Proposed Budget document. The Message includes an explanation of the City’s current fiscal outlook as well as proposed staffing changes and service delivery investments. The 2) Budget Overview includes updates on key revenue sources as well as a comprehensive summary of each City fund. Following the Budget Overview is the 3) Fund Summaries section, which presents revenues and expenditures by fund and by category.
The next section provides 4) Department Operating Budgets, which include department overviews with narratives on key objectives, service level trends, staffing tables and financial tables. The 5) Five Year Forecast for fiscal years 2027 through 2031 covers all City funds and includes funding for operations as well as the projects identified in the Proposed Five-Year CIP found in the 6) Capital Budget Summary section.
The final 7) Appendix section of the Proposed Budget includes various schedules and tables to provide further context to the Budget as well as the City’s Financial Policies and Budget Policies.
Budget Process and Opportunities for Community Input
To encourage additional community input and participation, the City engaged in various activities to get gain feedback through the budget survey and get the word out on the budget meetings by 1) placing multiple ads in The Beach Reporter regarding the Budget Survey and Budget Calendar, 2) sending multiple email notifications and social media postings, 3) promoting the Survey during community announcements at City Council Meetings, and 4) attending various in-person community group meetings for targeted outreach regarding the budget survey.
Additionally, the City’s website (www.manhattanbeach.gov/budget <http://www.manhattanbeach.gov/budget>) is periodically updated with the latest information on the upcoming budget, and the budget@manhattanbeach.gov email address is once again available for input from the community.
The Beach Reporter recently included an advertisement announcing this FY 2026 Proposed Budget discussion agenda item along with the upcoming budget schedule, as follows:
Tuesday, May 5 Regular City Council Meeting Proposed Budget - 6:00 p.m.
Tuesday, May 12 City Council Meeting Budget Study Session - 6:00 p.m.
Tuesday, June 2 Regular City Council Meeting - Public Hearing and Budget/CIP Adoption - 6:00 p.m.
All meetings are held in-person at City Council Chambers and via Zoom.
CERT Funding Request Letter
Similar to prior year funding requests from other 501(c)(3) non-profit organizations, the Manhattan Beach Community Emergency Response Team (CERT) Association has formally requested a budget allotment of $10,200 (Attachment). MB CERT is an all-volunteer organization dedicated to strengthening disaster preparedness and response within the City. Since its inception, the program has trained over 700 residents, delivering a 20-hour FEMA-approved curriculum that equips participants with the essential skills needed to care for themselves, their families, and their neighbors during emergencies. Staff is seeking direction on whether to include this item as an addition to the General Fund Proposed Budget.
PUBLIC OUTREACH:
The past and future opportunities for public input are described above.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Fiscal Year 2027 Proposed Budget (Web-Link Provided)
2. List of FY 2027 Deferred Budget Requests
3. General Fund Budget Summary
4. CERT Funding Request Letter
5. PowerPoint Presentation