HomeMy WebLinkAbout- - Presentation - 5/12/2026City Council Study Session
May 12, 2026
FY 2026-27
PROPOSED OPERATING ANDCAPITAL IMPROVEMENT BUDGET
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“Measured Decisions.
Meaningful Impact.”
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FY 2026-27 PROPOSED BUDGET OVERVIEW
• Guiding Principles/Strategic Plan Goals
• Economic Update & Budget Assumptions
• FY 2026-27 Proposed Operating and Capital Budget
Proposed Revenue, Expenditures and CIP Overview
• FY 2026-27 Proposed General Fund Budget
Revenue and Expenditure Highlights
Public Safety Highlights
• Achieve Long-Term Fiscal Sustainability
Status of General Fund Reserves
• Budget Calendar
ECONOMIC UPDATE &
BUDGET ASSUMPTIONS
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FY 2026-27 Proposed Budget was inspired by the Strategic
Plan Goals:
• Strengthen the Public's Safety And Improve The Quality Of Life
• Diversify, Stabilize, and Increase Housing To Reflect Community Needs
• Advance Environmental Sustainability And Climate Resiliency
• Recruit And Retain High Quality Staff
• Achieve Long-Term Fiscal Sustainability
• Maintain and Enhance the City's Facilities, Technology, and Equipment
GUIDING PRINCIPLES
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STATE OF THE ECONOMY
• U.S Economy is still grappling with uncertainty spurred by :
Increasing fuel prices
Uninspiring interest rate
Inflation concerns
Shaken consumer confidence
Decreased concern about Recession.
Geopolitical concerns including tariffs and Middle East Conflicts
• California economy is fraught with same economic uncertainty and
consumer unease
Governor’s Proposed Budget May Revision for California FY 2026-27 Budget is due
May 14, 2026.
• Costa Mesa
Impacted but with more resilient economic and revenue base
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Revenue Assumptions and Impact:
• 2%-10% growth in major revenues from FY 2025-26 Adopted Budget:
(Approximately 3% growth compared to FY 2025-26 year-end projections)
Sales Tax
Property Tax
Transient Occupancy Tax (TOT)
Permits
Franchise Fee
• Flat to very low growth in most other revenue sources.
• City Fee study underway.
FY 2026-27 BUDGET ASSUMPTIONS
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Expenditure Assumptions and Impact:
• Built-in expenditure growth based on labor and contractual obligations
• Cost containment measures with a target reduction of 5% for departments
• Gradual/Incremental right sizing of departments’ budgets
Adjusting overtime and part-time budgets to be more reflective of actuals
• Fully staffed in the Police Department sworn positions
• Recruitment underway to fully staff sworn positions in the Fire Department
• 14 frozen positions (13 in General Fund)
• 2% attrition factor
Applying attrition factor citywide rather than department specific
• Fully fund and repayment of deferrals in the CAN and IT Needs funds
Properly apportioning project related labor costs into CAN & IT Needs funds
FY 2026-27 BUDGET ASSUMPTIONS
````FY 2026-27
PROPOSED OPERATING AND
CAPITAL IMPROVEMENT
BUDGET OVERVIEW
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ALL FUNDS DESCRIPTION
DescriptionFund Type
General operating fund of the City.General Fund
Grants (Federal, State and/or County), restricted funding sources.Special Revenue Funds
Costs of materials, equipment, and services used are accumulated in
these funds and charged to the user departments.
• Equipment Replacement Fund
• Self-Insurance Fund
• Information Technology Replacement Fund
Internal Service Funds
Large capital projects normally span over multiple fiscal years.
Typically, $30,000 or above including staff time.
Capital Improvement Fund
To serve as the housing successor by managing housing assets,
duties, and functions, including administrative costs and homelessness
prevention and rapid rehousing, in accordance with California Health
and Safety Code Section 34200 et seq.
Housing Authority Fund
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FISCAL YEAR 2026-27 PROPOSED BUDGET
ALL FUNDS OVERVIEW
Highlights:
• The Proposed Budget for FY 2026-27 All Funds is $244.9M, an
$19.9M or 9% increase from the current fiscal year adopted budget;
• Appropriating $109.3M, or 55%, in General Fund resources to public
safety;
• Investing $22.0M into the City’s parks, streets, active transportation
network, facilities, and other infrastructure (additional $12.0M for Fire
Station #2 bond);
• Increase of $2.0M to the annual required CalPERS UAL contributions;
• Includes fully funding and repayment of the Capital Asset Needs and IT
Needs Funds; and
• Funds $1.3M to the Housing Authority Fund.
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FISCALYEAR 2026-27ALL FUNDS
$244.9 MILLION
General Fund,
$200.0M, 82%
Special Revenue
Funds, $16.6M,
7%
Capital Projects
Funds, $13.2M,
5%
Internal Service
Funds, $15.2M,
6%
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FY 2026-27ALL FUNDSAPPROPRIATIONS
$244.9M
Increase /(Decrease)ProposedAdoptedAppropriations
PercentAmountFY 2026-27FY 2025-26All Funds
4%$9,032,830 $211,466,653 $202,433,823 Operating Budget 1
177%6,277,488 9,825,3243,547,836Transfers Out 2
24%4,627,964 23,585,59518,957,631Capital Budget 3
9%$19,938,282 $244,877,572 $224,939,290 Total
1 Includes General Fund, Special Funds, and Internal Services Funds
2 Includes General Fund contribution to the CAN $6.7M and ITRF $3.1M
3 Includes $1.6M IT projects
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CAPITAL ASSET NEEDS (CAN) & INFORMATION
TECHNOLOGY NEEDS (IT Needs) CALCULATION
$ (millions)CAN Calculation
$10.0M5% General Fund
Revenues
(2.8M)Less: Lease Revenue
Bond Payments
(1.1M)Less: Fire Station #2 Bond
Payment
0.6MCAN Deferral Repayment
$6.7M Total
$ (millions)IT Needs Calculation
$3.0M1.5% General Fund
Revenues
0.1MIT Needs Deferral
Repayment
$3.1M Total
Total transfer out to CAN and IT Needs is $9.8M
• General Fund continues the contribution of $1.3M to the Housing
Authority Fund to support the Homeless Shelter and programs.
• Includes funding for all contractual obligations (e.g. Shelter
operator, Meals provider).
HOUSING AUTHORITY
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INTERNAL SERVICE
FUNDS
Information Technology Replacement Fund
• Appropriation of $3.1M, including:
$2.2M for IT Replacement eligible expenditures and projects.
$0.9M for project-related staff costs.
Self-Insurance Internal Service Fund
• $0.5M in additional funding for increases to insurance
premiums.
INFORMATION TECHNOLOGY
REPLACEMENT & SELF INSURANCE FUNDS
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SPECIAL
REVENUE FUND
• ½ percent of the seven percent Cannabis Retail and Delivery Tax
(Measure Q) funding for the Arts and Culture Master Plan ($242,200).
• Received direction from City Council on May 5, 2026 to allocate
additional funding towards the City's Art and Culture Programs.
• Will award a consulting contract on June 16, 2026 for the preparation
of the next 5-year Arts and Culture Master Plan.
• Upon completion of the proposed 5-year plan, staff will return to
Council with the adoption of the plan and funding sources.
ARTS AND CULTURE MASTER PLAN FUND
REQUESTED CHANGE IN POSITIONS
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FTEJob TitleDepartment
General Fund
(1.00)Park RangerPolice
(1.00)Public Safety DispatcherPolice
1.00Public Safety Dispatch SupervisorPolice
(1.00)Chief of Code EnforcementDevelopment Services
1.00Senior Permit TechnicianDevelopment Services
(1.00)Emergency Medical Services CoordinatorFire & Rescue
1.00Fire Battalion ChiefFire & Rescue
(1.00)Grand Total All Funds Impact
Note: Total FTE City count is 599.
REQUESTED NEW POSITIONS
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RECOMMENDED FROZEN POSITIONS
FTEJob TitleDepartment
FY 2026-27FY 2025-26General Fund
(1.00)-Deputy City ManagerCity Manager
(1.00)-Assistant Dir. of Dev Services (9 months)Development Services
(1.00)-Principal Planner (3 months)Development Services
(1.00)-Associate PlannerDevelopment Services
(1.00)(1.00)Code Enforcement Officer IIDevelopment Services
-(1.00)Chief of Code EnforcementDevelopment Services
(1.00)-Assistant Finance DirectorFinance
(1.00)-Police Records Shift SupervisorPolice
(1.00)-Assistant Fire MarshallFire
(1.00)(1.00)Office Specialist IIParks
(1.00)-Programmer Analyst IIInformation Technology
(1.00)(1.00)Engineering Technician IIIPublic Works
(1.00)(1.00)Lead Facilities Maintenance TechnicianPublic Works
(1.00)(1.00)Maintenance SupervisorPublic Works
-(1.00)Senior EngineerPublic Works
(13.00)(7.0)General Fund Total
Other Funds
(1.00)(1.00)Office Specialist IIDevelopment Services
(1.00)(1.00)Other Funds Total
(14.00)(8.00)Grand Total All Funds Impact
REQUESTED NEW POSITIONS
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FY 2025-26
AB 2561 ANNUAL VACANCY REPORT
*Does not include 7 council members and FY 2025-26 frozen positions.
Vacancy Rate VacanciesFT Employees
BudgetedEmployee Group
8%23288Costa Mesa City Employees Association (CMCEA)
10%880Costa Mesa Fire Association (CMFA)
0%03Costa Mesa Fire Management Association (CMFMA)
0%0131Costa Mesa Police Association (CMPA)
0%09Costa Mesa Police Management Association
(CMPMA)
5%121Costa Mesa Division Managers Association (CMDMA)
6%233Confidential Unit (Non Respresented)
14%17Confidential Management Unit (Non Represented)
23%313Executive Employees (Non Represented)
6%38585Total*
REQUESTED NEW POSITIONS
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CITY WIDE VACANCIES
VACANCYDEPARTMENT
Deputy City ManagerCommunity Outreach SupervisorCITY MANAGER
Senior Management AnalystExecutive Assistant
Associate Planner Administrative AssistantECONOMIC &
Principal PlannerAssistant Dev. Services DirectorDEVELOPMENT SERVICES
Assistant Planner
Finance DirectorAssistant Finance Director FINANCE
Assistant Fire MarshalFire ChiefFIRE
Emergency Medical Services CoordinatorFirefighter (8)
Senior Recreation SupervisorRecreation SpecialistPARKS & COMMUNITY SERVICES
Sr. / Police Records Technician/ (2)Custody OfficerPOLICE
Sr. / Public Safety Dispatcher Dispatcher (7)Park Ranger
Police Records Shift Supervisor
Senior Maintenance WorkerSenior Management AnalystPUBLIC WORKS
38TOTAL VACANCIES:
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CIP FUNDING SOURCES
AMOUNT FUND
$ 6,100,000 Capital Improvement
5,744,920 Grant Funds*
4,666,000 Measure M2 Fairshare
1,790,000 Gas Tax (HUTA)
3,150,000 Gas Tax (RMRA)
100,000 Park Development
250,000 Traffic Impact Fee
150,000 Cannabis Traffic Impact Fees
$ 21,950,920 All Funds Subtotal
12,000,000 Future Bond/ Financing
$ 33,950,920 All Funds Grand Total
*Federal, State, and County grant funding.
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All Funds Budget FY 2026-27 Capital Improvement Program (CIP) is $34.0M, which
includes $12.0M potential bond for Fire Station #2 reconstruction project.
•Citywide Alley Improvements
•Police Department Chiller Replacement
•Police Department Emergency Communications Center
•Citywide Tree Maintenance (in Public Right-of-Way)
•Harper Park Playground Replacement
•Moon Park Playground Replacement
•Costa Mesa Skate Park Expansion
• Fire Station #2 Reconstruction (Future Bond Funding)
CIP HIGHLIGHTS
Note: The FY 2026-27 Capital Assets Needs (CAN) is fully funded and includes a scheduled repayment of
$0.6M from prior year deferrals.
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FY 2026-27
PROPOSED GENERAL FUND
BUDGET OVERVIEW
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GENERAL FUND OVERVIEW (IN MILLIONS)
Adopted vs ProposedProposed
FY 2026-27
Projected
FY 2025-26
Adopted
FY 2025-26Category PercentDifference
7%$13.1$200.0$193.9$186.9Estimated Revenues
7%$13.1$200.0$193.9$186.9Total Sources of Funds
3%$6.1$190.2$191.0$184.1Operating Budget
251%7.09.8*2.82.8Transfers Out
7%$13.1$200.0$193.8$186.9Total Uses of Funds
-%$ -$ -$0.1$ -Difference
*Includes full General Fund contribution and deferral repayment to the CAN and ITRF.
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• General Fund revenue is budgeted at $200.0M, reflecting an increase of $13.1M, or 7% from
the FY 2025-26 Adopted Budget;
• Sales Tax is estimated at $82.5M, an increase of $7.5M, or 10% from FY 2025-26 Adopted
Budget;
• Property Taxes are estimated at $64.0M, reflecting a 2% growth over from FY 2025-26
Adopted Budget;
• Transient Occupancy Tax are estimated at $10.6M, reflecting a 7% increase from FY 2025-
26 Adopted Budget of $9.8M;
• Fees and Charges are estimated at $13.9M reflecting an approximate increase of $808K
from the FY 2025-26 Adopted Budget; and
• Cannabis taxes are estimated at $3.7M, an approximate increased by $49K, or 1% from FY
2025-26 Adopted budget.
GENERALFUND REVENUE HIGHLIGHTS
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FY 2026-27 PROPOSED
GENERAL FUND REVENUE
Sales Tax,
$82.5M, 41%
Property Tax,
$64.0M, 32%
Cannabis Gross
Receipts Tax,
$3.7M, 2%
Transient Occupancy
Tax, $10.6M, 5%
Licenses and
Permits, $6.0M, 3%Use of Money &
Property,
$6.1M, 3%
Fees &
Charges,
$14.0M, 7%
Other Revenues,
$1.6M, 1%
Franchise Fees,
$7.4M, 4%
Fines and
Forfeitures,
$1.7M, 1%
Other
Government
Agencies,
$1.4M, 1%
Business
License,
$1.0M, 0%
Total Revenues – General Fund by Category $200.0M
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Economic and Development Services Department is requesting to update their
name to “Community Development.”
The name change to “Community Development”would reflect the broader service
base and purpose the department provides to the City of Costa Mesa.
Department’s responsibilities includes:
• Manages all private-owned property in the City through the complete life
cycle of the build environment;
• Review new construction, managing land uses for new and existing
buildings;
• Overseeing operational details, housing and community program assistance;
• Ensuring property maintenance and code compliance; and
• Permitting demolition.
REQUESTED DEPARTMENT NAME UPDATE
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STRENGTHEN THE PUBLIC’S SAFETY
Public Safety Represents 55% of General Fund
Total Appropriations – General Fund by Department $200.0M
City Attorney,
$1.2M, 1%
City Council,
$1.0M, 1%
City Manager,
$10.4M, 5%
Development
Services,
$10.7M, 5%
Finance,
$5.9M, 3%
Fire and
Rescue,
$39.4M, 20%
Information
Technology,
$6.6M, 3%Parks and
Community
Serivices,
$9.7M, 5%
Police,
$69.9M,
35%
Public Works,
$22.8M, 11%
Non-
Departmental
$22.3M,11%
Police Department
• Sworn staffing levels at142positions;
• Fully staffed in Police sworn positions;
• Other annualized enhancements include:
Reallocation of a Public Safety Dispatcher to a Public Safety Dispatch
Supervisor and elimination of a Park Ranger; and
$0.7M in funding for new and replacement vehicles.
GENERAL
FUND
STRENGTHEN THE PUBLIC’SSAFETY
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Fire and Rescue Department
• Sworn staffing levels at 86 positions;
• Currently recruiting 8 Fire Fighter positions and pursuing full staffing;
• Other annualized enhancements include:
Reallocation of an Emergency Medical Services Coordinator to a
Fire Battalion Chief; and
$0.1M in funding for new vehicle.
STRENGTHEN THE PUBLIC’SSAFETY
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GENERAL
FUND
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ALL
FUNDS
FY 2026-27 CIP IMPROVEMENT AREAS
BY CATEGORY
Parks, $1.9M,
5%
Facilities,
$16.2M, 48%Transportation,
$7.0M, 21%
Streets, $8.9M,
26%
PROPOSED CIP BUDGET BY CATEGORY $34.0M
(Includes $12.0M Bond for Fire Station #2)
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FY 2026-27 PROPOSED GENERAL FUND HIGHLIGHTS
• Structurally balanced budget with no use of General Fund Reserves;
• Includes 55% commitment to Public Safety;
• Reallocate 3.0 positions, while reducing 1 FTE;
• Includes $2.0M in CalPERS UAL year-over-year increase;
• Includes a 2% attrition factor across all departments;
• Allocate $6.7M (including scheduled repayments of $0.6M to Capital Asset Needs to
ensure compliance with the Municipal Code Ordinance No. 2020-06); and
• Allocate $3.1M (includes $0.1M in deferral repayment) to ensure compliance with the
Information Technology Needs Municipal Code requirement of 1.5% of GF revenue.
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Achieve Long-Term Fiscal Sustainability
“Measured Decisions. Meaningful Impact.”
35
FUND BALANCE - GENERAL FUND
(IN THOUSANDS)
FY2026-27
Projected
FY2025-26
Projected
FY2024-25
Audited
FY 2023-24
Audited
FY 2022-23
AuditedFund Balance Category
$883$883$883$630$460Nonspendable
Restricted
2,0922,0922,0923,3673,178Pension & OPEB
Committed
14,12514,12514,12514,12514,125Declared Disasters
2,0002,0002,0002,0002,000Self Insurance
9,0009,0009,0009,0009,000Economic Reserves
Assigned
5,9825,9825,9825,9826,209Compensated Absences
1,5721,5721,5721,5721,737Police Retirement
2,0002,0002,0002,0002,000Workers Comp
2,0002,0002,0002,0002,000Facilities Reserve
2,0002,0002,0002,0002,000Strategic Plan Projects
19,40719,40719,30717,68616,328Unassigned
61,06261,06260,96260,36259,037Total Fund Balance
GENERAL
FUND
ACHIEVE LONG-TERM FISCAL
SUSTAINABILITY
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• Structurally balanced General Fund Budget without the use of reserves.
• Provides full funding for the Capital Asset Needs Fund at 5% of General
Fund revenues.
Includes a $1.1M in projected debt service payment for the bond
funded reconstruction costs of Fire Station #2.
• Provides full funding for the IT Replacement Fund at 1.5% of General
Fund revenues.
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FY 2026-27 Budget Calendar
City CouncilFY 2026-27 Proposed Budget Study Session5/12/2026
FiPACFY 2026-27 Proposed Budget Special
Meeting5/13/2026
City CouncilFY 2026-27 Proposed Operating and CIP
Budget Public Hearing & Adoption6/2/2026
City Council
FY 2026-27 Proposed Operating and CIP
Budget Public Hearing & Adoption (if
needed)
6/16/2026
QUESTIONS