Review of the Mid-Year Financial Report for Fiscal Year 2025-2026.
 

Staff recommends that the City Council receive, approve, and file the Mid Year Financial Report for Fiscal Year 2025-2026.

This report reviews the City’s budget and financial condition at the mid-year point of FY 2025-26.  Staff recommendations to maintain the City’s operational effectiveness and financial health are proposed for the City Council’s consideration.  In addition, a mid-year review is a recommended best practice by the Government Finance Officers Association.

Mid-Year Fiscal Year 2025-2026 Revenues
At this point in the fiscal year, staff has compared revenues received to date with prior year actuals and determined that several revenue categories have dropped below budget estimates.  Staff has reviewed the results with the City consultants, and recommendations for specific revenue line reductions are included in the mid-year appropriation change file. General Fund revenues are currently $35,474,986, compared to $33,721,561 during the same reporting period in FY 2024-25, reflecting a 5.2% increase, or about $1.7 million.  Prior to FY 2023-24, City revenue increases were in the double digits.

The economic slowdown continues.  This downward trend is expected to continue through fiscal year 2025-26.

 


 


 









The most notable changes in taxes have been Business License Tax increase of 224%, and Transient Occupancy Tax (“TOT”), increase of 19%.  Sales Taxes reflected an increase of 9% while revenue from use of money and property decreased by 40% in FY 25-26.   Business License Tax collected during the first half of the year is usually for delinquent payments from the prior fiscal year.   With respect to Transient Occupancy Tax (“TOT”), this revenue source is wholly dependent on visitors to the City of Hawthorne.  Hotels saw increases in tourist and business travel. 

The City’s construction permit revenue has not fully recovered in FY 25-26, experiencing a 34% decrease during the first half of FY 25-26. There was a 118% increase in FY 24-25, a 42% decrease in FY 23-24, a 7% decrease in FY 22-23, a 16% increase in FY 21-22, and a 50% decrease in FY 20-21. This fluctuation in permit revenue relates to effects from COVID-19 and the economic slowdown. During this period, more commercial construction applications were submitted compared to previous fiscal years. Our Building Manager estimates that 97 commercial applications were received from July to December 2025, 81 from July to December 2024, 72 in FY 2023, 102 in FY 2022, and 46 during the same period in 2021.

The City of Hawthorne has been fortunate to have a stable and diverse economic base, which has somewhat shielded its economy from downturns in any one revenue category. Despite the slowing economy, the city shows a 5.2% increase in total revenue.

Mid-Year Fiscal Year 2022-2023 Expenditures
General Fund expenditures are currently trending at 49.07%, with $55.5 M spent as of December 31, 2025.  Any time our General Fund expenditures as a whole are below 50% spending in the second quarter of the fiscal year, we consider that a success.  For many years, the direction from the City Manager, as well as the City Council, has been to spend wisely and conservatively.  At this time, the specific line items with expenditures over 50% are personnel overtime, fire contract, Retiree Health/Employee Relations, and operating transfers out.  

Personnel overtime, when combined with regular salaries and benefits, brings the total percentage for both to 45.97%.  Training for Sworn personnel is required every 2 years and approved MOU increases were implemented in July.  As a result, overtime increased in fiscal year 2026.  Overtime is also used to backfill staffing shortages.  In addition to backfilling full-time positions, Hawthorne PD has been providing support at the Sofi Stadium.  The overtime worked for Inglewood is fully reimbursable.  

Fire contract and Operating transfers are above 50% due to the timing of invoices and bond/liability payments. 


 

General Fund Cash Balance
The required General Fund cash balance for Fiscal Year 2025-26 is $28,283,395, as required by Section O of HMC 2.04.040, which is the average of 3 months of operating expenditures for the current Fiscal Year.  As of December 31, 2025, this balance was $78,140,125.  As of December 31, 2024, this same balance was $86,693,489.

The above balance, as of December 31, 2025, includes interfund activity of ($21,336,544) for funds with deficit balances related to Bond Payments, liability insurance payments, and grant reimbursable expenditures, which are expected to be collected throughout the current fiscal year. 

Investments
The total investment for City-held accounts is $119,059,746.  Total General Fund investment earnings through Quarter 2 FY 2025-26 were $$1,312,923.  Compared with $2,182,950 during the same reporting period in FY 24-25, this represents a 40% decrease.
 

.

None.

72 hours posted notice pursuant to the Ralph M. Brown Act