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Item No. 1.

MEETING DATE: 06/16/2025
TO:	HONORABLE MAYOR/CHAIR AND COUNCILMEMBERS/DIRECTORS
FROM:	JIM SADRO, CITY MANAGER/EXECUTIVE DIRECTOR By: Gabriella Yap, Assistant City Manager
SUBJECT:	DULY NOTICED PUBLIC HEARING TO CONSIDER THE FISCAL YEAR 2025-2026 LA HABRA MUNICIPAL BUDGET FOR ADOPTION, AND TO ESTABLISH THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2025-2026

RECOMMENDATION:

That the Council:
A. Approve and adopt the City of La Habra Fiscal Year 2025-2026 Municipal Budget;

B. APPROVE AND ADOPT RESOLUTION NO. CC 2025-____ ENTITLED: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA HABRA ADOPTING A BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2025 AND ENDING JUNE 30, 2026, MAKING APPROPRIATIONS FOR THE CONDUCT OF CITY OF LA HABRA GOVERNMENT, ESTABLISHING POLICIES FOR THE ADMINISTRATION OF THE ADOPTED BUDGET, AND FOR OTHER BUDGET RELATED PURPOSES;

C. APPROVE AND ADOPT RESOLUTION NO. SA 2025-____ ENTITLED: A RESOLUTION OF THE SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY OF THE CITY OF LA HABRA ADOPTING THE ANNUAL BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2025 AND ENDING JUNE 30, 2026;

D. APPROVE AND ADOPT RESOLUTION NO. HA 2025- ____ ENTITLED: A RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF LA HABRA ADOPTING THE ANNUAL BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2025, AND ENDING JUNE 30, 2026;

E. APPROVE AND ADOPT RESOLUTION NO. UA 2025-____ ENTITLED: A RESOLUTION OF THE UTILITY AUTHORITY OF THE CITY OF LA HABRA ADOPTING THE ANNUAL BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2025, AND ENDING JUNE 30, 2026;

F. APPROVE AND ADOPT RESOLUTION NO. CIA 2025-____ ENTITLED: A RESOLUTION OF THE CIVIC IMPROVEMENT AUTHORITY OF THE CITY OF LA HABRA ADOPTING THE ANNUAL BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2025, AND ENDING JUNE 30, 2026;

G. APPROVE AND ADOPT RESOLUTION NO. CC 2025-____ ENTITLED: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA HABRA ESTABLISHING THE APPROPRIATIONS LIMIT IN ACCORDANCE WITH ARTICLE XIIIB OF THE CONSTITUTION OF THE STATE OF CALIFORNIA FOR THE FISCAL YEAR COMMENCING JULY 1, 2025, AND ENDING JUNE 30, 2026, AND AMENDING RESOLUTION NO. CC 2024-17;

H. APPROVE AND ADOPT RESOLUTION NO. CC 2025-____ ENTITLED: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA HABRA AMENDING RESOLUTION NO. 2024-13 AND 6123 PERTAINING TO A COMPENSATION PLAN FOR MANAGEMENT, POLICE MANAGEMENT, AND EXECUTIVE MANAGEMENT EMPLOYEES; AND

I. APPROVE AND ADOPT RESOLUTION NO. CC 2025-____ ENTITLED: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA HABRA AMENDING RESOLUTION NO. 6113 PERTAINING TO A COMPENSATION PLAN FOR GENERAL SERVICES EMPLOYEES' GROUP.

DISCUSSION:

Each year the City Council adopts a municipal budget that identifies the revenues and allocation of resources from all City funds to achieve the City Council's goals and objectives, and to provide the La Habra community with high-quality programs, projects and services. At the June 2, 2025, City Council meeting, staff presented the Proposed FY 25-26 Municipal Budget for Council review. The overall FY 25-26 Municipal Budget totals $173.4 million across all funds, of which the City's primary operating fund, the General Fund, comprises $70.3 million.

The report and presentation discussed a proposed budget which includes restoration of position and budget reductions made in the FY 24-25 budget, balanced by new projected revenues from the recently passed Measure V local 1 cent Transactions and Use Tax (TUT). The proposed budget also included a transfer of $1.4 million into the City's Capital Improvement Projects (CIP) budget, as well as funding for negotiated labor agreements and non-represented staff compensation.

Major goals for the upcoming fiscal year were presented at the June 2, 2025 City Council meeting and are listed by department below:

Community Services

Continue to pursue grant funding/sponsorship opportunities to provide high-quality events and programs for the community at little to no cost
Complete the renovation plan for the Community Center's Grand Ballroom
Facilitate the move of the Art Association, Woman’s Club, and Historical Museum to City owned facilities on Euclid to complete the City’s “Museum & Cultural Arts District”
Reopen Child Development facilities at the Main office and the Girl’s Activity Building
Develop Standard Operating Procedures for all programs and services
Continue efforts to address the needs of homeless individuals with the goal of providing housing options and reducing the number of unhoused individuals in the community
Complete a comprehensive facility needs assessment
Continue Centennial Celebration events and activities throughout the balance of 2025
Develop a plan and funding proposal for the renovation of the Children’s Museum

Community and Economic Development

Continue to improve the City’s business retention and expansion program
Develop a cohesive strategy and implementation tools to establish a downtown district along La Habra Boulevard.
Work closely with commercial and residential property-owners to improve and maintain the appearance of their properties
Continue to evaluate and improve the City’s development review process and continue fostering a “business friendly” environment

Public Works

Major street paving projects will include:
- Macy Street (Whittier Blvd to north City limit)
- La Habra Blvd (Harbor Blvd to Fonda)
- Palm (La Habra Blvd to Lambert Road)
- Whittier Blvd (Harbor Blvd to east City limit)
- Imperial Hwy (Beach Blvd to west City limit)
- Harbor Blvd (Whittier Blvd to north City limit)
- Residential streets (various)
- Alleys (various)
Begin construction of Transportation and Traffic Safety Improvements
Water and Sewer projects will include: Hacienda Water Pump Station, Improvements to Idaho Well, Annual Sewer Lateral Maintenance Program, Annual Water Meter Replacement Program, Annual Water Main Replacement Program
Complete construction and open Vin Scully Centennial Park
Complete building renovations at City owned facilities at 106 E. First Avenue and 205 S. Euclid Street

Administration and Support

Implement the new Payroll/Human Resources Management System with a go live date of 1/1/2026
Update Accounts Payable and Purchasing Policies to be consistent with the City’s new Financial Management System.
Implement a next-generation email security protection system
Develop the next phase of the City’s Enterprise Geographic Information System (GIS)
Replace all structural computer cabling at the Police Station
Initiate and complete contract negotiations with General, Field and Professional units
Develop additional recruitment strategies and improve the City’s onboarding process for new employees to positively impact recruitment and retention
Continue monitoring and analyzing claims and risk management cases and develop mitigation strategies
Implement a new Civics Academy program for the community

Police

Continue to promote and deliver outstanding customer service to the community throughout all levels of the Police Department
Continue average response times of under 4-minutes for emergency (Priority 1) calls, and under 12 minutes for less urgent calls
Continue to provide support to the City’s Community Outreach Team in their efforts to reduce the number of unhoused individuals in the community
Continue to collaborate with other City departments to aggressively enforce the City’s graffiti ordinance and to address homelessness
Continue to combat gang violence and reduce the incidence of gang-related crimes

Fire Department (Los Angeles County Fire)

Continue average response times of under 5-minutes
Continue regional disaster drills with surrounding agencies for emergency preparedness

In addition to the recommendation to fund all existing vacant staff positions, two new staff positions were 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 public facilities. Currently, the City’s facilities maintenance division is comprised of three full time staff and one part time staff, responsible for over 20 City buildings and facilities. If approved, the division will receive one new full-time staff member to help manage, maintain and improve City facilities.

The proposed budget also included the addition of a full time Geographic Information Systems (GIS) Analyst in the City’s Information Technology department. This new position is being requested due to the growing number of City information 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 of state-mandated water/sewer mapping in GIS format. In the past, the department utilized various part time staff to help input GIS data when available; however, due to constant staff turnover, the responsibilities in this area have 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 Police Department has requested upgrading the current vacant Management Analyst II position in their department to an Emergency Management Coordinator. The department has had challenges in recruiting a qualified Management Analyst II to fulfill critical emergency preparedness functions, in addition to providing general administrative, analytical, and budgetary support required of the position. Human Resources and Finance staff 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 proposed balanced budget.

The City Council reviewed and discussed the City's proposed FY 25-26 municipal budget at its June 2, 2025, meeting and, at the conclusion of the budget presentation directed staff to implement the following item:

Increase the signing bonus for new lateral Police Officers from $10,000 to $20,000 for recruitment purposes.

Staff is implementing the policy direction given by City Council and is presenting the Final Proposed FY 25-26 Municipal Budget and corresponding resolutions for City Council review and approval.

In addition to what was presented at the June 2, 2025, meeting, there is an additional staff recommendation to approve the removal of the Management Analyst position classification from the represented General Services Employees unit and, instead, classify this position as part of the non-represented Management group. Human Resources staff has met and conferred with the General Services Employees unit and both are in agreement that the Management Analyst position is more appropriate for inclusion as part of the non-represented Management group. If approved by City Council, this position will now be included with other similar existing positions in the series including Management Analyst II and Senior Management Analyst. It should be noted that there are currently no individuals working for the City in the position of Management Analyst, so this change will have no impact on existing staff.

MUNICIPAL BUDGET SUMMARY

The FY 25-26 Final Proposed Municipal Budget totals $173.4 million across all funds, with the General Fund comprising $70.3 million. The final proposed General Fund budget keeps expenditures within available projected revenues and prioritizes public safety, capital projects and other critical public services.

General Fund Budget Overview
General Fund Expenditures
Table 1

Notable changes in the final proposed FY 25-26 General Fund budget include:

$1.4 million of projected GF revenue 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
$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
$468,000 in Facility Maintenance costs, $200,000 of which is for increased property insurance premiums
$309,000 of new funding necessary to support the City’s Community Outreach Team due to the anticipated loss of North Orange County Public Safety Collaborative grant funding for homeless services
$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

Public safety (Police, Fire and Ambulance combined) continues to be the single largest spending priority in the proposed General Fund budget, accounting for 68% of resource allocation, with all other departments combining for approximately 32% of resource allocation. The increase in funding for public safety in the proposed FY 25-26 budget is approximately $4 million more than what was allocated in the FY 24-25 Amended Budget.

Chart 1

Table 2

Revenue projections for FY 25-26 anticipate that the General Fund’s two primary revenue sources, property tax and sales/transaction taxes combined, will account for 76% of all General Fund revenues used to fund City programs and services.

General Fund Revenues
Table 3

Property taxes account for 36% of the General Fund revenue and, when compared to the FY 24-25 Amended Budget, are estimated to increase by $769,000, or 3.1%.

In May 2025, 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.

Combined sales and transaction taxes now represent the City's largest source of revenue, accounting for 40% of the General Fund (19% from the 1 cent Bradley-Burns sales tax and 21% from the City's local 1 cent voter-approved Measure V transaction tax). Bradley-Burns sales tax revenues are forecast to decline by over $593,000, or 4.2%, in the upcoming fiscal year. Although sales and transactions and use tax revenue generally has been trending downward, the passage of Measure V increased the City’s existing transaction and use tax by an additional ½ cent, and revenues are expected to grow by approximately $6.1 million, or 70.1% in FY 25-26 over the FY 24-25 Amended Budget.

Chart 2

According to the City’s revenue consultant, 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 product details. 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 25-26.

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 provides funding for recently approved labor contracts, as well as a $1.4 million transfer to the City’s General Capital Projects fund.

Non-General Fund Budgets

The City’s non-General Fund budgets overall remain relatively stable with notable 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 storm channel repair project which was funded through $8.5 million in state grant funds administered by the City.

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 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 process 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 section 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 a former County and City landfill with the help of funding from a prior settlement with the County, along with other grant funds, which have been used to help fund the construction of the new park.

Capital Improvement Projects Budget
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 is 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.

Future Budgetary 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 may also directly impact City programs and represent 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 help fund its Community Outreach staff in their effort to help reduce homelessness in the community, exacerbated by delays in Permanent Local Housing Allocation (PLHA) funding promised from the state, which has been as much as three years overdue. Homeless outreach efforts and sheltering services had traditionally been the County’s responsibility, but was transferred to cities 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 grant funded through the State Department of Education and Department of Social Services for early childhood education, nutrition, and childcare in the La Habra community, particularly for residents who are low-income. It is unclear what the future status of this grant funding will be.

At the federal level the Community Development Block Grant, which was in large part meant to help support low-income individuals and address blight in 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 federal Workforce Innovation Opportunity Act (WIOA) 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 in both La Habra and in the region. Staff will continue to closely monitor the status of various grant funds dedicated to these and other City-operated programs and will report to City Council in the future if there are any significant changes that require City Council consideration and policy direction.

FISCAL IMPACT/SOURCE OF FUNDING:

Approval of the City's proposed FY 25-26 budget will appropriate funds for the following operating units, special revenue funds, authorities, agencies and enterprise funds. The overall FY 25-26 Municipal Budget totals $173.4 million across all funds, with the General Fund, comprising $70.3 million.

Table 4

The final proposed budget includes a transfer of $1.4 million into the Capital Improvement Projects (CIP) budget from Administration's Non-Departmental account, as well as funding for negotiated labor agreements and non-represented staff compensation.

The resolutions and agreements with the La Habra Police Association (LHPA) and Professional Employees’ Group were approved at the June 2, 2025, and the resolution for Management and Executive employees is attached.

La Habra Police Association

The four-year agreement with LHPA for both Sworn and Civilian staff was approved at the June 2, 2025, meeting. The cost of the first year of the agreement for FY25-26 is approximately $942,529, and “one-time” costs for FY 24-25 is approximately $244,150.

The total annual and four year cost for Sworn staff in the agreement is as follows:

Table 5

The total annual and four year cost for Civilian Staff in the agreement is as follows:

Table 6

Management and Executive

If approved by Council, the total cost of pay and benefit increases for non-represented Management, Public Safety Management, and Executive Management is estimated to be approximately $580,912 in total. This estimated cost consists of $415,316 recurring costs and $165,596 in "one-time" costs apportioned between the General Fund and Non-General Fund budgets. These costs also include contractual adjustments to the City Manager’s contract, subject to City Council approval.

The breakdown of these estimated costs and funding sources, is as follows:

Table 7

Professional Employees' Group

This estimated cost consists of both recurring costs and “one-time” costs apportioned to the Non-General Fund budget. The breakdown of these estimated costs and funding source, is as follows:

The six-month agreement approved at the June 2, 2025, meeting with the Professional Employees’ Group is estimated at approximately $113,013. Costs associated with salary, benefits, and other terms and conditions of employment with employees in this group are completely state grant-funded. Staff will negotiate with the Professional Employees’ Group for the second half of FY 25-26 after the state issues the final FY 25-26 funding marks and will bring forth a proposal to the City Council for review and approval at that time.

Table 8

GENERAL PLAN RELEVANCE/CITY COUNCIL GOALS & OBJECTIVES:

The FY 25-26 Municipal Budget is consistent with the following area 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.

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FISCAL IMPACT/SOURCE OF FUNDING:

GENERAL PLAN RELEVANCE/CITY COUNCIL GOALS & OBJECTIVES:

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