That the City Council, Agency & Authorities:
A. Approve and adopt the City of La Habra Fiscal Year 2026-2027 Municipal Budget;

B. APPROVE AND ADOPT RESOLUTION NO. CC 2026-__ ENTITLED: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA HABRA ADOPTING A BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2026 AND ENDING JUNE 30, 2027, 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 2026-__ 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, 2026 AND ENDING JUNE 30, 2027;

D. APPROVE AND ADOPT RESOLUTION NO. HA 2026- __ ENTITLED: A RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF LA HABRA ADOPTING THE ANNUAL BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2026, AND ENDING JUNE 30, 2027;

E. APPROVE AND ADOPT RESOLUTION NO. UA 2026-__ ENTITLED: A RESOLUTION OF THE UTILITY AUTHORITY OF THE CITY OF LA HABRA ADOPTING THE ANNUAL BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2026, AND ENDING JUNE 30, 2027;

F. APPROVE AND ADOPT RESOLUTION NO. CIA 2026-__ 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, 2026, AND ENDING JUNE 30, 2027;

G. APPROVE AND ADOPT RESOLUTION NO. CC 2026-__ 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, 2026, AND ENDING JUNE 30, 2027, AND AMENDING RESOLUTION NO. CC 2025-14; AND

H. Receive and file information regarding the status of job vacancies, recruitments, and retention efforts within the City of La Habra in accordance with Assembly Bill 2561 (AB 2561).

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 1, 2026, City Council meeting, staff presented the Proposed FY 26-27 Municipal Budget for Council review. The overall FY 26-27 Municipal Budget totals $186.2 million across all funds, of which the City's primary operating fund, the General Fund, comprises $72.9 million.

The report and presentation discussed a proposed budget which included increases in the Police Department due to negotiated labor agreements, and rising professional services and technology costs.  Public Works costs also increased compared to the prior year due to the opening of Vin Scully Centennial Park and Las Reinas Woman’s Club Park, which have resulted in increased water and maintenance costs. Facility maintenance costs have also risen due to aging City buildings, along with higher costs for services, supplies, and materials.

Revenues from the City’s Measure V one cent local Transactions and Use Tax (TUT) have helped to balance increases in operational costs. The proposed budget also included funding for negotiated labor agreements with the La Habra Municipal Employee Association and the General Services Employees’ Group, along with non-represented management staff.

Major goals for the upcoming fiscal year were presented at the June 1, 2026, City Council meeting and are listed below, by department:

The City Council reviewed and discussed the City's final proposed FY 26-27 municipal budget at its June 1, 2026, meeting. At the meeting, Mayor Medrano made a motion, seconded by Mayor Pro Tem Gomez, to provide additional funding in the final General Fund budget for a Drone First Responder program at the Police Department. Discussion regarding this change included the benefits of expanding the Police Department’s drone program to allow for additional officer safety when responding to calls and the utility of a Drone First Responder Program when responding to emergencies such as fires.

The Police Department estimated the annual cost of this new program to be $100,000, of which approximately half could be funded from non-General Fund sources. Staff expects to complete their evaluation of program providers in the coming months, with the goal of presenting the City Council with a report to select a provider and enter into a contract in the upcoming fiscal year.

At the conclusion of the budget presentation and discussion regarding the Drone First Responder Program, City Council voted unanimously to direct staff to include funding for the new proposed program in the final budget. To accommodate this City Council direction, staff reduced the transfer from the General Fund to the General Capital Improvement Projects (CIP) Budget by $50,000 and budgeted an additional $50,000 from Asset Forfeiture funding in the final proposed budget. This has reduced the General Fund transfer to the General CIP fund to $527,000; however, this reduction will not impact any proposed CIP projects in the FY 26/27 proposed budget.

Staff has implemented the policy direction given by City Council and is presenting the Final Proposed FY 26-27 Municipal Budget and corresponding resolutions for City Council review and approval.

 

The FY 26-27 Final Proposed Municipal Budget totals $186.2 million across all funds, with the General Fund comprising $72.9 million. The Final Proposed General Fund budget keeps expenditures within available projected revenues and prioritizes public safety, capital projects and other critical public services.

Notable items in the Final Proposed FY 26-27 General Fund budget include:

Public safety (Police, Fire and Ambulance combined) continues to be the single largest spending priority in the final 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 final proposed FY 26-27 budget is approximately $1.9 million (4%) more than what was allocated in the FY 25-26 Amended Budget.

 

Revenue projections for FY 26-27 anticipate that the General Fund’s two primary revenue sources, property tax and sales/transaction taxes combined, will account for 77% of all General Fund revenues used to fund City programs and services.

Property taxes account for 37% of the General Fund revenue and, when compared to the FY 25-26 Amended Budget, are estimated to increase by $1.1 million, or 4.1%. Mortgage rates remain high relative to the past decade’s average rates, a period when many homeowners and prospective home buyers became accustomed to abnormally low interest rates. Current interest rates, combined with historically high property values in the region, have kept many potential buyers largely sidelined from buying homes, resulting in significantly reduced home sales over the past few years. 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 Measure V transaction taxes now represent the City's largest combined source of General Fund revenue, comprising 40% of the General Fund revenue budget. This revenue source has always been a cornerstone of the City’s General Fund, but it became the single largest combined source of revenue when voters approved 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 to prioritize public safety, fund critical operations, support its business community, and enhance the City’s retail/commercial corridors to 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 $14.1 million in FY 26-27 GF revenue, a 2.8% increase compared to the FY 25-26 budget. The City’s 1% Measure V local TUT is projected to bring in approximately $15.2 million in FY 26-27 GF revenue, which is approximately 1.8% more than the FY 25-26 budget. The City’s sales tax consultant, HdL Companies, has advised that the City (and many other client cities) to temper revenue projections due to continuing shifts in the economy and retail shopping patterns. The City’s sales/TUT revenue estimates used to develop the FY 26-27 budget take these constraints into account.

 

The City has traditionally maintained a lean staffing model to ensure fiscal sustainability, yet the City continues to deliver a high level of customer service. The final proposed FY 26-27 budget includes funding for two new recommended staff positions. The first is an upgrade of a currently filled part-time Clerk position to a full-time Clerk position in the Building Maintenance Division in Public Works. This division is responsible for maintaining and repairing over 25 city-owned buildings and facilities. The City’s facilities maintenance division is currently composed of four full-time staff and one part-time staff. If approved, the division will replace its part-time Clerk with a full-time Clerk to support the Division’s field staff administrative work, and will eliminate the part-time Clerk hours from its budget.

The second position being recommended is the addition of a new full-time Public Information Coordinator in City Administration. Public outreach and communications have changed dramatically over the past decade, and the speed at which information is expected to be transmitted has accelerated. This position would be responsible for, among other things, coordinating public information across the City’s various social media and communications platforms, which include normal and emergency communications, as well as preparing information and promotional materials for City programs, projects, events, and news releases. In addition, this position would be responsible for website management across all City departments, and will help coordinate and review public information disseminated by other City departments. 

Beyond these two new full-time positions, the final budget includes several position upgrades or downgrades to better align positions with duties and more effectively provide service. The following are the proposed changes, by Department, and result in no net increase in number of employees.

The Final Proposed FY 26-27 General Fund’s operating budget of $72,920,250 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 $527,000 transfer to the City’s General Capital Projects fund.

The City’s non-General Fund budgets overall remain relatively stable with noteworthy changes in a few funds. 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 nearly $1.5 million increase in the Water Fund budget for planned water capital projects, including the Water Mainline Replacement Program and the Foothill Zone Consolidation Project.

Capital Improvement Projects Budget
The Final Proposed FY 26-27 Capital Improvement Projects (CIP) budget includes the addition of 36 new projects funded by a variety of sources, including the General Fund, totaling approximately $15 million in new spending. This includes a $527,000 transfer from the General Fund operating budget (Non-Departmental) to the CIP to help fund several non-grant funded 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 72 capital or special projects (streets, parks, utilities, facilities, etc.), totaling over $50 million.

Improvements planned for FY 26-27 include several traffic safety projects, such as developing the Safe Routes to School Masterplan, constructing the Traffic Signal Synchronization Project on Euclid, implementing the HSIP at six intersections, and implementing the Neighborhood Traffic Management Program. Park improvements are also slated for FY 26-27 to include shade sails and irrigation system upgrades at Vin Scully Centennial Park, design work for major improvements to the ballfield lighting and amenities at Portola Park, and potentially more parks projects if additional grant funding is made available. Major facilities and infrastructure improvement projects listed in the upcoming fiscal year’s budget include Senior Center Renovations, furniture and equipment purchases, and completing renovations of the City’s Community Center Grand Ballroom.

A number of Citywide improvements planned for FY 26-27 include arterial street rehabilitation projects and traffic safety improvements, funded by multiple sources. The largest budget increase was in grant funding from multiple sources, which rose from $4.7 million in the amended FY 25-26 budget to $9.7 million in the FY 26-27 budget. This increase includes $3 million to help fund an anticipated Union Pacific Rail Line Bikeway Easement acquisition, and $1 million for improvements to the City-owned child care facility at 1440 West Whittier Boulevard, along with $119,950 towards a new Community Center EV charging station. The City’s Gas Tax fund spending is anticipated to increase by $4.2 million from $3.3 million in FY 25-26 to $7.6 million in FY 26-27, in part due to carryover funds. This will help fund the City's Annual Arterial Street Rehabilitation projects and Annual Alley Improvement projects.

Major constraints to successfully completing many of these projects includes managing the high workload assigned to existing City engineering staff to oversee the large number of projects, and also the difficulty in recruiting and retaining qualified engineers. The lack of skilled civil engineers has affected many cities’ ability to staff and La Habra is no exception. There is also reduced availability in qualified contract engineer/project management consultants to assist staff, coupled with limited capacity of qualified contractors to bid on projects at price points the City is willing to pay.
Non-General Fund Staffing
In order to continue providing a high level of customer service and fulfill the goals and objectives of the City Council, staff is proposing to add new positions in Community Services for the Children’s Museum, Employment and Training Division, and Child Development. These positions would be funded by grants and/or enterprise funds, with no impact to the General Fund.

Within the City’s Children’s Museum Enterprise Fund, staff is proposing to add a new full-time Museum Supervisor position, which would be responsible for the day-to-day onsite management of Museum programming and operations.

Within the Community Services Employment and Training Division, which is funded by a Workforce Innovation and Opportunity Act federal grant administered by Orange County, Community Services is proposing to reduce two Case Manager positions and convert those to part-time positions to allow more flexibility in terms of scheduling and coverage.

Within the City’s state grant-funded Child Care Division, staff is proposing to add three new full-time positions. They include a new Lead Teacher and two new Teachers. It should be noted that, if approved by City Council, these positions will only be filled if there is sufficient grant funding available to do so, as well as if the program is meeting its enrollment targets.

In addition, the following departments are requesting to modify the following budgeted positions to more appropriately align duties with positions. If approved, there will be no impact to the General Fund, with the exception of the Associate Civil Engineer position which is allocated across a number of funds, including the General Fund. It should also be noted that these proposed changes will result in no net increase or decrease in the number of employees currently budgeted for.

Community Services - Child Development Fund

Community Services – Employment and Training Fund

Public Works – Fleet Management Internal Service Fund

Public Works – Utility Authority Water Fund

Public Works – Engineering (allocated to multiple projects and funds)

Assembly Bill 2561 (AB 2561) – Local Public Employee: Vacant Positions

AB 2561, which became effective January 1, 2025, requires public agencies to present the status of job position vacancies and recruitment and retention efforts at a public hearing before the agency’s governing board at least once per fiscal year. If a bargaining unit has a vacancy rate of 20% or more, the bargaining unit must also be given the opportunity to present during the hearing. All recognized employee organizations were notified of this public hearing and invited to attend and participate in accordance with AB 2561.

Table 4 reflects the vacant positions by bargaining unit. Due to the Professional Unit Vacancy Rate exceeding the 20% threshold, the City is required to provide specific data related to total vacancies, applicant numbers, and average hiring times for the unit upon the Professional Unit’s request. For transparency purposes, the City is providing information for all bargaining units in Table 4 below. Additionally, the City is required to identify necessary changes to recruitment activities, policies, and procedures that may lead to obstacles in the hiring process.   

The Human Resources Department has prepared the following data on all vacancies for the period of July 1, 2025, through May 1, 2026, along with associated recruitment and retention information.

Fiscal uncertainty in the near term is affecting the economy at all levels. The gains on Wall Street are not necessarily being reflected on Main Street. Individual investment portfolios and the stock market are currently at elevated levels, experiencing new highs with Artificial Intelligence dominating the conversation and driven by a relatively small number of outsized technology companies representing a large percentage of the gains. On the other hand, consumers are feeling the effects of inflation, increasing fuel costs, higher unemployment and factors that create conditions conducive to a recession or possibly stagflation.

In April 2026, the Federal Reserve held its key interest rate unchanged in a range between 3.5% to 3.75% as it considered the challenge of balancing the threats of persistent inflation and a softening labor market. Due to higher inflation readings, many economists are anticipating a Federal interest rate hike at the end of this calendar year or next year, contrary to consumers’ desire for lower interest rates. An interest rate hike could further slow down real estate sales activity, which could then further impact City revenues and funding sources, such as Property Tax revenues and the state’s Permanent Local Housing Allocation (PLHA) funding allocations to cities.

Small businesses in California continue to contend with higher post-pandemic labor and material costs, along with state-mandated policies and regulations that make it less attractive or viable to operate in California. Higher interest rates also create challenges for small businesses to obtain loans to start a business, make major improvements to existing businesses, and/or expand. In La Habra, there are currently a number of retailers that have gone out of business, leaving empty storefronts. This is a challenge that the City’s Economic Development Division staff is focused on as they work to help property owners fill those empty storefronts.

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. This critical local program provides early childhood education, nutrition, and childcare to the La Habra community, particularly for residents who are low-income. In past years, grant funding has typically increased; however, FY 26/27 funding levels have remained flat. This is also the first year since the pandemic that the City will not be “held harmless” and must meet student enrollment thresholds to receive the full grant funding allocations.

Additionally, the City operates and provides the overall programming and supervision of the countywide "Ready S.E.T. OC" Program, funded through the Orange County Workforce Development Board's Workforce Innovation Opportunity Act (WIOA) via a federal grant. The grant-funded services allow the City to assist a wide variety of residents in both La Habra and throughout the county. If these grant funds are curtailed or eliminated in the future, the City Council may 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 monitor the status of various grant 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.

An additional area that staff is closely monitoring is the status of labor negotiations between Los Angeles County and the International Association of Fire Fighters (IAFF) Local 1014. Although the two sides have reached a tentative agreement for fringe benefits, they have been negotiating salary increases since December 2024. Future salary and benefit increases for this bargaining unit are not currently reflected in the LA County Fire Department (LACoFD) Fire Services agreement with the City and, as a result, the FY 26-27 budgeted amount only includes a modest 1.95% contract cost increase. It is expected that, once negotiations are complete, LACoFD will be assessing a significantly higher increase to their annual contract with the City to take into account what are likely to be significantly higher negotiated labor costs.

Approval of the City's final proposed FY 26-27 budget will appropriate funds for the following operating units, special revenue funds, authorities, agencies and enterprise funds. The overall FY 26-27 Municipal Budget totals $186.2 million across all funds, with the General Fund, comprising $72.9 million.

The FY 26-27 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.
Goal 4: Recruitment, Selection and Training of Employees/Objective G.