City manager presents proposed 2026–27 budget preserving reserves while trimming positions to absorb CalPERS costs

Laguna Beach city management presented a proposed fiscal 2026–27 budget in a study session, describing a balanced plan that maintains a 20% contingency reserve and a 7.3% disaster contingency reserve while responding to reduced transient occupancy tax (TOT) receipts and rising pension costs.

City Manager Dave framed the budget as “one of the most fundamental things” the city does and told council members the proposal is balanced and maintains the 20% contingency reserve. Staff said the proposal includes $19 million in contingency reserves, restores about $7.4 million for disaster contingency, and directs a one‑time $3.5 million contribution toward the insurance reserve.

Interim Finance Manager Steve Montano said the city projects roughly $103 million in general fund revenue next year and that property tax, sales tax and transient occupancy tax are the largest categories. “Property tax makes up the lion’s share of the pie,” Montano said, and staff noted a 1% property‑tax revenue gain equates to about $591,000 in budget capacity.

To stay in balance amid revenue pressure, the proposed budget eliminates eight full‑time positions and reduces some contracts, maintenance and capital outlays while restoring one position created by combining two part‑time jailer roles. Staff emphasized that the proposal protects core public‑safety staffing levels: police staffing remains at 67 sworn positions; fire staffing remains at 45 sworn positions.

The budget also programs increased investment in wildfire mitigation and safety work. Staff proposed adding roughly $2.2 million to the wildfire safety fund for fuel‑modification maintenance and construction and programming upgrades that include an 800‑MHz public‑safety radio replacement over multiple years (first year estimated at $2 million).

A major cost driver cited by staff is CalPERS (the California Public Employees’ Retirement System). Staff reported the city faces a near‑term peak in unfunded actuarial contribution payments — on the order of about $2 million more than current year costs — driven by CalPERS’ lower discount rate and smoothing of that impact across agencies.

Staff proposed two community workshops on the budget (one in person and one online) and planned to return a final budget for council adoption on June 23. Several council members asked staff to consider reprioritizing capital‑improvement projects, accelerate some beach‑access and lifeguard tower work where feasible, and to bring back options on technology and wildfire detection investments.

Next steps: council feedback at the workshops, staff follow‑up on housing‑fund strategy and technology choices, and return of a final proposed budget for adoption in June.