That the City Council receive and file the Proposed Fiscal Year 2025-2026 (FY 25-26) Municipal Budget and direct staff regarding any revisions.

Executive Summary

Staff in City Administration, Finance, and City departments have worked collaboratively over the past several months preparing the FY 25-26 Proposed Municipal Budget for City Council review and consideration. The proposed $174.7 million overall municipal budget, which includes a $70.3 million proposed General Fund operating budget, is balanced. Last year the City was facing several systemic fiscal challenges including an unprecedented increase in the City’s fire services contract with the Los Angeles County Fire Department that resulted in the closure of Fire Station 193, as well as the impending loss of the City's Measure T local 1/2 cent transaction and use tax that was due to sunset in 2028. To address these challenges, the adopted FY 24-25 budget included $6.3 million in budget cuts to keep expenditures within projected revenues at that time. 

The subsequent passage of the Measure V local 1 cent Transactions and Use Tax (TUT) by La Habra voters in November 2024, which replaced Measure T, enabled City Council to approve the partial restoration of some of the previously approved budget cuts, with a focus on prioritizing public safety and municipal services that were previously reduced. The proposed FY 25-26 General Fund budget includes further restoration of prior year budget cuts and a significant increase in funding for public safety, as well as for capital projects and internal reserves.

While the passage of Measure V significantly stabilized the City’s fiscal outlook, challenges remain that may introduce fiscal uncertainty in the near and long term. There has been much speculation that, due to changes in federal spending priorities and policies, including significantly higher tariffs, the national economy could cool or even enter into a recession in 2025 or 2026. If this were to occur, the resulting slowdown would likely impact the City’s sales tax and TUT revenues, now the City’s largest combined source of General Fund revenue. The stock and bond markets have also been experiencing frequent, significant fluctuations and there are signals indicating a slowdown in consumer spending, although the job market appears to be resilient for now. Despite these challenges and based on current information, it is anticipated that the City’s tradition of fiscally sustainable budgeting practices, along with implementation of Measure V, will enable the City to more effectively weather economic instability. 

Fiscal Year 2024-25 Highlights and Notable Accomplishments 

The City of La Habra operates as a “full-service” suburban municipality with over 61,000 residents and hundreds of retail, commercial and home-based businesses. Since the City’s inception 100 years ago, the City Councils of both past and present have strived to improve the community and life for its residents, as well as support the local business community, through policies that encourage good governance, fiscal sustainability, responsive public safety and improving the quality of life. 

As the City of La Habra celebrates its Centennial year, below are a few key accomplishments from this past fiscal year that demonstrate how the City continues to provide quality services and programs to its residents, local businesses, and the community as a whole. 

Community Services Department
Administration

• The Graffiti Abatement team successfully removed almost 190,000 square feet of graffiti throughout the City, with the goal of removing graffiti within 24-hours, often significantly sooner
• The Holiday Wishes program, in collaboration with local schools and non-profits, supported 400 local families and their children during the winter holiday season 
• Produced two Life in La Habra magazines to keep residents informed of City policies, programs and activities
• Managed leases in support of several local non-profits which operate out of City owned facilities

Child Development

• Served over 280 children in State grant funded Preschool, School-Age General Child Care, and Family Child Care programs operated by the City
• Monitored and provided grant funded meal cost reimbursement to 138 registered Family Child Care Homes throughout Orange County
• Completed several grant funded capital improvement projects, including floor replacement and kitchen renovations at the City’s Child Development Center and the Claire Brown facility, along with significant repairs and improvements at the Child Care Main Office
• Worked with the La Habra’s Lil Learner’s Committee and LHCSD to improve the learning plan for kindergartners in La Habra and their Early Development Index scores
• Students in the City’s grant funded programs participated in community events such as the annual Christmas Tree Lighting Ceremony, Breakfast with Santa, Breakfast with the Bunny and Community Open House

Children’s Museum

• Oversaw the replacement of the HVAC system to enhance energy efficiency, as well as a complete roof repair and replacement
• Revamped and expanded Museum tour offerings with the introduction of Blue Plant Heroes, California Critters, Incredible Insects and Dinosaur Safari tours
• Updated the Museum Tour Program and increased the tour bookings by almost 100%, attracting schools from all over Los Angeles and Orange counties
• Installed the Dinosaur Safari changing exhibit, new blockbuster traveling exhibit from Omaha Children’s Museum
• Designed and offered special entry days for families with children with autism and other conditions that offered lower lights, subdued sounds, and smaller crowds
• Increased special event activities for Museum members and friends, increasing participation by over 5,000
• Created the Mobile Museum and provided Museum exhibits at the La Habra Races, Eggstravaganza, Tamale Festival and more.

Employment and Training

• Exceeded the grant-funded program’s enrollment target of 600 youth and young adults into the countywide Ready S.E.T. OC program to help prepare them for employment, post-secondary schooling, and military enrollment opportunities
• Enrolled 115 youth in Individualized Training Accounts that allow opportunities to obtain or retain employment that leads to economic self-sufficiency for in-demand careers such as automotive, certified nursing and welding
• Placed over 50 youth in the Work Experience Program that provides 360 hours of hands on entry work experience with the goal of being hired upon completion of placement
• Successfully staffed and operated program locations in the cities of Brea and Laguna Niguel, as well as at the OC Probation Department and on the Los Alamitos Reserve Base

Facility Maintenance

• Responded to dozens of service and repair requests during the rainy season to repair roof leaks and prevent damage at City owned facilities
• Worked with the City Engineering division to replace the beam and repair walls at and the Child Development Main Office
• Completed the lobby renovation at the Police Station
• Installed photos for the Centennial Celebration Reception at City Hall
• Responded to hundreds of general maintenance and repair needs at City owned buildings

Recreation and Special Events

• Offered high quality and affordable programming for youth and families including Summer Active Day Camp, Trips and Tours Program, Contract Classes, Youth Sports, and more
• Worked with the La Habra City School District and the non-profit Youth Sports Organizations to continue to offer facilities for programming at City parks and School District sports fields
• Secured funding for $20,000 from a Parks California grant to offer the La Habra Outdoors Program to youth 13 - 18 years
• Completed the outdoor fitness area at Hillcrest Health & Wellness Center (Gary Center)
• Held numerous highly successful special events including 4th of July, Easter Eggstravaganza, Concerts in the Park, Community Open House, Tree Lighting Ceremony, La Habra Races and more
• Worked with the LHPD to plan, coordinate, and offer PD events such as Cool Cops, National Night Out, Shop with a Cop, and more
• Produced a successful annual Tamale Festival with an estimated attendance of 10,000 participants
• Successfully hosted the annual Student Government Day and Volunteer Recognition Programs
• Designed and planned the Centennial Celebration for 2025 including the Kick Off Celebration in January, 100 Things to Do in La Habra, Coin Quest Challenge, Images of La Habra book, Centennial Map, enhanced City special events and more

Social Services 

• Continued to coordinate the City’s Homeless Outreach Program to engage individuals without a fixed abode and offered services with the goal of placing interested and willing individuals in housing. This resulted in successfully placing nearly 40 clients into housing
• Provided over 600 client engagements and enrolled over 50 new unhoused clients into the Outreach Grid system
• Worked with Meals-on-Wheels Orange County and brought back hot meals in a congregate setting five days a week at the Community Center
• Expanded the Senior Shuttle and Taxi Services to pre-Pandemic levels to offer trips for local seniors to doctor’s appointments, grocery shopping, and more
• Designed and provided a Senior Citizen’s Health Fair, monthly senior dances, expanded social programs such as BINGO, table tennis, senior exercise and more
• Worked with the Gary Center/VCC and La Habra Collaborative to offer Food Giving services and enhance the offerings by adding mental health services, educational programs, and other social services
• Revitalized the Back-Pack Giveaway Program and partnered with local churches to rebrand the event as Back to School Block Party and served close to 1,000 local youth with new backpacks, school supplies and shoes and haircuts
• Hosted quarterly Ministerial Association breakfast meetings with local church leaders to enhance and share City community resources and support

Community and Economic Development Department
Economic Development

• Hosted the City’s third annual Economic Development Forum
• Hosted the City’s annual Top 25 Business Luncheon
• Continually marketed the City to prospective developers and retailers
• Managed the City’s federal Community Development Block Grant program funding

Housing

• Continued the Permanent Supportive Housing Program
• Continued the Home Rehabilitation Loan/Grant Program
• Coordinated Permanent Local Housing Allocation (PLHA) Funding for North Orange County 

Real Property Management

• Oversaw the management of two City owned mobile home parks
  • Park La Habra
  • View Park
• Purchased properties adjacent to Brio Park for a future public parking lot

Planning

• Presented 22 projects to the Planning Commission for consideration

Code Streamlining and Improvement Program

• Developed a Minor Conditional Use Permit process
• Provided support for Accessory Dwelling Unit applications in compliance with State Law
• Enacted Public Nuisances procedures to address continuing code violations
• Reviewed and issued Special Event permits
• Updated the City’s Inclusionary Housing Ordinance
• Oversaw the City’s Public Art Program

Building and Safety

• Issued 1,107 permits with a construction valuation of $47.8 million
• Integrated the use of the City’s new electronic permitting system to streamline and improve development processing

Code Enforcement

• Opened 779 Code Enforcement Cases year to date
• Averaged 50-100 cases per Inspector (three inspectors)  
• The average response time to conduct an inspection and issue a notice of violation: five days
• Scheduled extra weekend/night time enforcement, primarily related to unpermitted food vendors

Administration & Support Departments (Administration, City Clerk, HR, Finance and IT)

• Presented the City’s Annual Goals & Objectives and Legislative Platform to Council for review and approval
• Continued community engagement, including completion of the Community Satisfaction Survey to gauge resident satisfaction and priorities 
• Continued community relations and engagement through social media and production of La Habra Life quarterly newsletter which highlights information about City programs and projects, community events, local nonprofits, youth sports, schools, local businesses, and community member achievements  
• Successfully presented numerous special events such as State of the City and Community Open House, and ribbon cutting and grand opening events for two new/renovated parks 
• Successfully completed labor negotiations with the two of the City’s four employee bargaining units 
• Conducted the 2024 General Municipal Election for three City Council seats
• Successfully completed the annual recruitment process to fill vacancies on the Planning Commission and Community Services Commission 
• Continually monitored and protected the City’s data servers and networks from malicious actors 
• Maintained a centralized geographic information system (GIS) that is used by the Police Department’s Dispatch system and Community Development’s Land Management System and the entire City’s telecommunication network 
• Upgraded HR Livescan fingerprint system to meet DOJ new security mandates
• Completed the refunding of existing Water Revenue Bonds to save the Utility Authority ratepayers nearly $1 million in debt costs over the life of the bonds
• As of April 2025:
  • Completed over 46 staff recruitments including review of over 3,540 applications
  • On-boarded 24 new full-time hires
  • Processed 13 full-time separations
  • Processed 325 benefit changes during open enrollment
  • Collected over $78,976.20 in damage claims
  • Processed 26 liability claims
• Completed ongoing mandated harassment prevention training for City employees 
• Maintained a drug and alcohol testing program in compliance with the US DOT requirements
• Implemented state mandated Workplace Violence Prevention Program training 

Public Works Department

• Streets Rehabilitation Projects
  • Completed construction of Euclid Street Rehabilitation (Whittier Blvd. to North City Limit)
  • Completed construction of Monte Vista Street Rehabilitation (Lambert Rd. to La Habra Blvd.)
• Transportation & Traffic Safety Improvements:
  • Complete construction of Harbor Blvd/Arbolita Drive Traffic Safety Improvements
  • Completed design of the Euclid Street Regional Traffic Signal Synchronization Project
  • Completed design of the Lambert Road Regional Traffic Signal Synchronization Project
• Water, Sewer & Storm Drain Improvements
  • Completed construction of a new water main line on Euclid Street (Whitter Blvd. to North City Limit)
  • Completed construction of a new water main line on Euclid Street (Montwood Ave. to Sandlewood Ave.)
• Park Accomplishments:
  • Completed construction of the brand new Las Reinas Woman’s Club Park
  • Substantially completed the construction of Vin Scully Centennial Park (formerly known as Vista Grande Park) with the grand opening scheduled for late summer 2025 
• Facility Improvements
  • Oversaw major facility repairs and renovations at the City’s Child Development Center Main Office

Fire Department (contracted with Los Angeles County Fire Department)

• For the period of July 2024 through April 2025, LACoFD:
  • Responded to 4,418 calls in La Habra, of which 3,814 (86%) were medical aid/service calls
  • Average response time to incidents was under 5 minutes
  • Participated in a wildland drill within La Habra Heights and the surrounding areas. Over 50 fire engines participated in the drill from areas including La Habra, Whittier, Hacienda Heights, Rowland Heights, Pico Rivera, La Mirada, Norwalk, Cerritos, Bellflower, Lakewood, Signal Hill, and Walnut.  Outside agencies OCFA, Downey, and Compton. The drill evaluated the scope of resources that could be deployed in the event of a major fire in the local area.     

Police Department

• Responded to 40,000 combined calls for service
• Maintained Priority One response times under 4 minutes
• Conducted two La Habra Emergency Preparedness Workshops 
• Successfully increased staffing in the City’s Dispatch center to eight full-time dispatchers out of ten budgeted positions
• Conducted an emergency operation center training and orientation session with key City staff
• Conducted Directed Enforcement of DUI, red light violations and speed violations through grant funding, which included citations issued for illegally modified vehicles
• Group A Offenses by Calendar Year (Group A Offenses are more serious crimes, such as Assaults, Robbery, Burglary, Fraud, etc. Group B offenses (crimes such as Curfew/ Loitering/Vagrancy Violations, Disorderly Conduct, Driving Under the Influence, etc.)

 

Group A Offenses by Calendar Year
	2023	2024	2025 YTD
Group A Crimes Against Persons	518	572	163
Group A Crimes Against Property	2,091	2,069	527
Group A Citywide Total	3,337	3,350	840

   

• Responded to an average of over 100 public records requests each week
• Processed over 4,500 parking permits annually 
• Processed over 6,000 pieces of evidence and property
• Made over 150 DUI arrests
• Issued more than 400 traffic citations for primary collision factors
• Cited 150 drivers for distracted driving
• Issued 21,000 parking citations
• Animal Control responded to over 2,500 calls for service
• Conducted both English and Spanish speaking Citizen’s Academy, CERT Training and the Explorer Program

FY 25-26 Proposed Municipal Budget

The overall FY 25-26 Municipal Budget totals $173,359,055 across all City funds, including a proposed General Fund operating budget of $70,344,645. 

The FY 25-26 Proposed Budget analysis will primarily focus on the City’s General Fund, and will include the following: 

• FY 25-26 Proposed GF Revenue
• FY 25-26 Proposed GF Expenditures
• Future Fiscal Challenges
• Summary of All Funds

General Fund
The proposed FY 25-26 General Fund revenue budget is $70.3 million, which is $8.2 million (13.2%) higher than the FY 24-25 amended revenue budget. The increase is primarily due to new revenues generated by the passage of Measure V, the City’s local voter approved 1% Transactions and Use Tax, which took effect on April 1, 2025.

The proposed FY 25-26 General Fund expenditure budget is balanced at $70.3 million, and is approximately $7.2 million (11.52%) higher than the FY 24-25 amended budget. The increase in budgeted expenditures is attributed largely to the restoration of a significant portion of the $6.3 million in cuts implemented in the FY 24-25 when the City Council approved a series of budget balancing measures. The proposed expenditures for FY 25-26 include funding for the remaining frozen positions that were not restored during the FY 24-25 Mid-Year budget review, as well as restoring full funding for vehicle replacement and other internal service reserves. In addition, funding has been budgeted for increasing costs of goods and materials, contract costs, and new labor agreements with the City’s represented police staff.

The FY 25-26 General Fund expenditure budget also includes the annual transfer to the City’s Section 115 Trust, also known as the Pension Rate Stabilization Fund (PRSF), to help offset future potential pension cost increases. This critical tool provides a mechanism for the City to set aside funds that could be invested to specifically help address current or future UAL obligations. The City Council’s adopted Pension Policy requires the City to transfer half of the annual savings realized from the issuance of Pension Obligation Bonds in 2021, estimated at $1.4 million in FY 25-26. As of April 2025, the 115 Trust Fund had a balance totaling approximately $12 million.

The proposed FY 25-26 budget also includes a transfer of $1.4 million to the City’s General CIP fund for investment in capital projects, facility improvements and special projects. This transfer line item is included in the Non-Departmental Division of the City Administration budget.

Table 1

GENERAL FUND BUDGET COMPARISON
REVENUES
Estimated FY 25-26 Budget	$70,344,645
Amended FY 24-25 Budget	$62,127,266
YoY Change: 13.2%	$8,217,379
EXPENDITURES
Proposed FY 25-26 Budget	$70,344,645
Amended FY 24-25 Budget	$63,112,211
YoY Change: 11.5%	$7,232,434
FY 25-26 PROPOSED BUDGET
Estimated FY 25-26 Revenues	$70,344,645
Proposed FY 25-26 Expenditures	$70,344,645
Variance	0

Overview of FY 25-26 Proposed General Fund Revenue Budget
The City’s General Fund primarily relies on two major sources of revenue to fund general municipal operations: property tax and sales/transaction taxes. When combined, property taxes and sales and transaction taxes generate over 77% of the resources dedicated to the City's General Fund. As a result, any long term or persistent impacts to either source of tax revenue could cause significant fiscal constraint on the City's general operations. 
 
Chart 1

Property Taxes 
Property taxes are a primary source of General Fund revenue, accounting for approximately 37% of the City's General Fund revenue base, and is expected to grow by approximately $769,000 (3.1%) in FY 25-26. 

In May, the Federal Reserve held its key interest rate unchanged in a range between 4.25% to 4.50%, with the Federal Open Market Committee citing recent market volatility and increased uncertainty about the economic outlook. Many economists have discussed the risks of stagflation or recession, rising unemployment, and that tariffs could aggravate inflation and slow economic growth, making it difficult for the Federal Open Market Committee to adjust rates. 

Persistently high mortgage rates, combined with historically high property values in the region have kept buyers largely sidelined from buying homes, resulting in significantly reduced home sales activity over the past year, which may continue well into the upcoming fiscal year. Should housing prices begin to drop as a result, there could be a meaningful negative impact to City property tax revenues in the future; however, this impact could be partially offset if long held properties are sold, which would reset their property tax basis to higher valuations.

Sales/Transaction Taxes
Combined sales and transaction taxes now represent the City's largest source of General Fund revenue, accounting for 40% of the General Fund revenue budget. This revenue source has always been a cornerstone of the City’s General Fund, but the change from second largest combined source of revenue to largest was due to voter approval of the City’s 1% Measure V local transaction and use tax in November 2024. The passage of this critical local tax measure, accounting for 21% of the General Fund’s revenue base, will allow the City to continue prioritizing public safety, provide key programs and services, and enhance the City’s retail/commercial corridors to support the local business community and continue attracting a variety of shoppers from both within and from outside the City. 

The City’s 1% Bradley-Burns sales tax accounts for 19% of revenues for the General Fund and is projected to bring in $13.7 million in FY 25-26 GF revenue, a 4% decrease compared to the FY 24-25 budget. At the time of passage, Measure V was expected to double the then 0.5% Measure T TUT and produce approximately $15.6 million in revenue. Although the local transaction and use tax rate increased to 1%, the City’s sales tax consultant, HdL Companies, advised tempering revenue projections due to shifts in the economy and consumer spending patterns. Measure V, the City’s local one cent TUT, accounts for 21% of revenues for the City and is projected to bring in approximately $14.9 million in FY 25-26 GF revenue.
 
Chart 2
 


According to HdL, the regional and local economic outlook is characterized by uncertainty. Ambiguity in national public policy is leading to delays and curtailment in capital investment. Tariff impositions are fluctuating on an almost daily basis, often lacking specificity, with changing start dates and unclear impacts. Other sources of volatility include global events, inflation concerns, and potential changes to the Fed Funds rate. Consumers appear to be prioritizing core day-to-day expenditures, which may begin to erode discretionary spending due to weakened consumer confidence. Retailers acknowledge that shoppers are experiencing price fatigue, and while people continue to spend, how they spend and where tax allocations are going continue to shift. HdL’s statewide forecast has weakened in the short term, with limited growth expected in FY 2025-26. 

Overview of FY 25-26 Proposed GF Expenditure Budget
The proposed FY 25-26 GF expenditure budget has been developed to achieve the City Council's goals, priorities and objectives, while holding to the principles of producing a balanced budget. As discussed above, the Total FY 25-26 GF Revenues are projected to be $70.3 million. Departmental GF expenditures are estimated at $70.3 million, which includes previously negotiated labor costs, new labor costs from current negotiations, and increases in the costs of services, supplies, and materials. 

The allocation of General Fund resources, by Department, for FY 25-26 is as follows:

Table 2
 

A recap of notable increases in the proposed FY 25-26 General Fund budget include:

• Combined public safety budgets (police, fire and ambulance) accounts for over two thirds (68%) of the City’s General Fund expenditures 
• $1.4 million is proposed to be transferred from the Administration’s Non-Departmental budget to the Capital Improvement Projects (CIP) budget 
• $978,000 set aside for new PERS unfunded liability expenses
• $943,000 budgeted in the Police Department for anticipated first year costs related to the new labor agreement with the La Habra Police Association
• $468,000 in Facility Maintenance costs, $200,000 of which is for increased property insurance premiums 
• $556,000 for Fire services, which includes a $289,000 budget increase for Los Angeles County Fire Department contract fire services and $267,000 related to pension costs for the City’s former municipal fire employees
• $309,000 of new funding necessary to support the City’s Homeless Outreach Team due to the anticipated loss of North Orange County Public Safety Collaborative federal grant funding
• $106,000 more for the City’s contract with Falck Ambulance 
• $99,000 more for increased plan check and inspection contract services
• $85,000 more for the Inland Valley Humane Society animal sheltering contract

The FY 25-26 proposed budget includes funding to fill all existing vacant staff positions.  There are only two new staff positions being recommended to be added in FY 25-26. The first is the addition of a new Building Maintenance Coordinator to assist with the ongoing support and preventative maintenance at the City’s numerous buildings and facilities. Currently, the City’s facilities maintenance division is comprised of three full-time staff and one part-time staff, responsible for 18 City buildings and facilities. If approved, the division will receive one new full-time staff member to help manage and maintain City facilities.

Staff is also proposing the addition of a full time Geographic Information Systems (GIS) Analyst in the City’s Information Technology department due to the growing number of City systems now dependent on GIS data, including the City’s Land Management System, the Police Department’s CAD system, and Public Work’s Engineering Division’s use for state-mandated water/sewer mapping in GIS format. In the past, the department utilized part-time staff to help input GIS data; however, due to constant staff turnover, this function has not been consistently addressed and requires a full time-position to effectively maintain the City’s internal mapping and data systems. 

In addition to the two proposed new full-time positions to be added to the budget, the proposed budget also reflects some internal changes to some departmental staffing models, including a reorganization of Community Development’s Economic Development division into its Administration division. The budget also proposes moving the City's Information Technology division from the Finance Department to City Administration, with the goal of establishing it as a stand alone department in FY 26-27. The budget also proposes moving some Police Department positions from the Operations division to the Investigations division. In addition, the Police Department has requested upgrading the current vacant Management Analyst II position in their department to an Emergency Management Coordinator. The department has had difficulty in recruiting a qualified Management Analyst II to fulfill the critical emergency preparedness functions necessary, in addition to general administrative, analytical, and budgetary support required of the position. Human Resources and Finance have reviewed the proposed new positions in terms of classification and compensation, and the costs of these proposed changes have been included as part of the balanced budget. 
 
Chart 3
 

As is typical for most established, full-service cities in Southern California, public safety (Police, Fire and Ambulance combined) in La Habra continues to be the single largest spending priority in the proposed General Fund budget, accounting for 68% of total General Fund resource allocation, which is in line with the historical allocation of General Fund resources for City operations. All other non-safety departments combined accounting for 32% of resource allocation. 

The FY 25-26 Proposed Budget for all public safety expenses increased by $4 million, or 9.1%, above the FY 24-25 Amended Budget. The Police Department’s FY 25-26 Proposed Budget accounts for over $3.3 million of this increase in spending, with nearly $1 million of that amount set aside to fund new labor costs based on recently negotiated new labor contracts, subject to Council approval. The Fire budget, which includes a $289,000 increase for the Los Angeles County Fire Department agreement, along with $267,000 in increased legacy pension costs associated with former La Habra City fire personnel, resulted in an overall budget increase of $556,000 over the FY 24-25 Amended Budget. The City’s ambulance agreement with Falck increased by $106,000 over the FY 24-25 Amended Budget. 

Table 3
Future Fiscal Challenges
As discussed above, fiscal uncertainty in the near term is affecting the economy at all levels – globally, nationally, state, and locally. Tariffs, high interest rates and inflation are impacting consumer spending patterns which has a direct nexus to the City’s combined sales tax and TUT, now the City’s largest source of revenue. High mortgage interest rates, combined with limited housing supply and historically high housing prices, have kept would-be homebuyers out of the market, resulting in property tax revenues not rising as quickly as in past years. Although there have been some changes in tariff policies and negotiations, many economists continue to speculate about the possibility of a recession or stagflation on the horizon, along with a continued decline in real estate activity. If these factors materialize, they will likely have a meaningful, if not significant, impact on the City’s primary General Fund revenue sources.

Looming budget cuts at the federal, state and county levels also may directly impact City programs and represents another significant potential threat to City operations. This includes the loss of the North Orange County Public Safety Collaborative federal funding that the City has been using to fund its Homeless Outreach Team staff, exacerbated by delays in Permanent Local Housing Allocation (PLHA) funding promised by the state, which is several years overdue. Homeless outreach efforts and sheltering services had traditionally been the County’s responsibility, but was transferred to cities in the County several years ago and now the accompanying funding promised is not being realized in a timely fashion, placing additional fiscal burdens on cities. 

The City of La Habra also operates a Child Development Program that is completely funded through State grants through the Department of Education and Department of Social Services for early childhood education, nutrition, and childcare that services our community, particularly residents who are low-income. It is unclear what the future status of this grant funding will be.

At the federal level, long-time funding sources like the Community Development Block Grant, which was in large part meant to help low-income individuals and turn around blighted communities, has continually been declining and may now be targeted for elimination by the federal government.  

Additionally, the City operates and provides the overall programming and supervision of the Orange County "Ready S.E.T. OC" Program, funded through the Orange County Workforce Development Board's Workforce Innovation Opportunity Act (WIOA) via a federal grant. This City operated, countywide grant funded program is aimed at assisting at-risk youth by enrolling over 500 youth and young adults each year into the Program and providing quality services that include career exploration and guidance, continued support for educational attainment, and opportunities to develop and improve skills within in-demand industries and occupations, all culminating with employment along a career pathway or enrollment in post-secondary education. While there haven’t been any indications about cuts regarding this program, it is unclear whether the federal funding supporting this program will continue at current levels or at all. 

The grant-funded services listed above allow the City to assist a wide variety of residents both in La Habra and in the region. If these grant funds are curtailed or eliminated in the future, the City Council will likely need to evaluate what, if any, of these programs should receive direct City General Fund support in order to continue, or if the programs should be discontinued. Staff will continue to closely monitor the economy and the status of various grand funds dedicated to these and other City-operated programs and will report to Council in the future if there are any significant changes that require Council consideration and policy direction.

Summary
The proposed $70,344,645 FY 25-26 General Fund’s operating budget is balanced and expenditures do not exceed revenues. All staff positions are fully funded in the budget, as are internal service charges to departments to maintain internal reserves and equipment maintenance and replacement. The budget also includes significant funding to support capital projects and facility improvements.

The City’s non-General Fund budgets overall remain relatively stable with noteworthy changes in a few funds. The largest budget decrease was in grant funding, which declined from $14.4 million in the amended FY 24-25 to $4.6 million in the FY 25-26 budget. This decrease is largely due to the pending completion of the Coyote Village HOA private storm channel repair project which was funded through $8.5 million in state grant funds administered by the City and budgeted in FY 24-25. The City’s Gas Tax fund also decreased by $1.8 million from $5.2 million in FY 24-25 to $3.3 million in FY 25-26 as staff completed several street improvement projects in FY 24-25 and are planning new projects in FY 25-26. The budget reflects capital spending plans that address key infrastructure improvements with a volume of work that current Engineering staffing can effectively manage in FY 25-26. 

The Water and Sewer Operations utility funds adjusted rates in January 2025 and have sufficient funding for operations and to allocate to capital projects. The proposed budget reflects a notable decrease in planned Water capital projects (approximately $3.6 million) due to the successful completion of several significant projects in FY 24-25, including replacing water mains and meters in the northern area of the City. 

The Refuse Fund saw a decrease of $3.7 million and the Park Grants fund showed a decrease of $2.9 million in the FY 25-26 budget from the current year due to the substantial completion of the Vin Scully Centennial Park project. The park is being built on the site of an old county and city landfill and funding from a prior settlement with the County, along with other grant funds, have been used to help fund the construction of the new park. 

The proposed FY 25-26 Capital Projects (CIP) budget includes the addition of 37 new projects funded by a variety of sources, including the General Fund, totaling approximately $11 million in new spending. This includes a $1.4 million transfer from the General Fund (Non-Departmental budget) to the CIP to help fund several facilities improvement and special projects in the upcoming year. When combined with prior fiscal year capital projects that the City Council has already approved, City staff will be working on a total of 65 capital projects (streets, parks, utilities, facilities, etc.), totaling $51 million. 

A number of improvements planned for FY 25-26 include arterial street rehabilitation projects and traffic safety improvements. Major infrastructure improvements are also slated for FY 25-26 with a design of the Hacienda Water Pump Station, improvements to the Idaho Well, and Annual Sewer and Water maintenance and replacement programs. 

Currently, the most significant constraints to successfully completing many of these projects include the high workload assigned to City engineering staff to oversee the large number of projects, the high cost and reduced availability of qualified contract engineer/project management consultants to assist staff, and the continued high cost and limited capacity of qualified contractors to bid on projects at price points the City is willing to pay.

Table 4

Staff recommends that the City Council receive and file the proposed FY 25-26 municipal budget report and presentation, and direct staff regarding any modifications.

 

None at this time. Final fiscal impact will be calculated upon further direction by the City Council and will be presented to the City Council when it considers and approves the City's FY 25-26 municipal budget at a public hearing that will be scheduled at the June 16, 2025 City Council meeting.

The proposed budget presentation is consistent with the following areas of the General Plan:
ED 9.1 -- Balanced Fiscal Practice

It is also consistent with the following City Council Goals and Objectives:Goal 2, Objective A: Closely monitor revenues, expenditures and fiscal trends to ensure the City's long-term fiscal stability.