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Part two of two
Finance Director Barbara Arenado told the council on March 10 that “we anticipate overall revenue will come in at budget.”
The occasion was the mid-year budget review, the start of a series of public discussions of the Seal Beach city budget. As reported last week, the council received and filed the report.
(For details from the written staff report, see part one Mid-year budget update)
“Most of our revenues come in at the second half of the fiscal year,” Arenado said.
The following is a look at the presentation and the discussion that followed.
Revenues
At the start of the midyear budget review, Arenado said overall revenues were coming I slightly lower than expectations. She said this was due to the timing of payments. She also said the city was seeing a slowdown of sales tax.
According to Arenado, property tax, sales tax, and utility users tax make up 74% of the General Fund. “When you include charges for service fines and forfeitures and franchise fees, that makes up 89% of the city’s revenues,” Arenado said.
She said property tax is Seal Beach’s largest revenue source. Property tax makes up 35% of the General Fund, according to Arenado.
“We anticipate to hit budget by year end,” Arenado said.
“The county rolls increased 5.4% compared to 6.4% last year,” Arenado said.
She said Seal Beach’s property tax roll increased 5.01% compared to 7.2% last year.
“This means we’re slowing down a little bit,” Arenado said.
She said Seal Beach property tax rolls were not increasing as quickly as the county and definitely not as quickly as last year.
“Median home prices increased in December to 1.6 million for homes sold. That’s really good news. Last year it was 1.45 million, so those homes that sold this year sold at a higher rate,” Arenado said.
“Sales tax is the second largest revenue source for the city,” Arenado said.
She said Seal Beach really needs to focus on the city’s businesses.
Arenado said Seal Beach’s third quarter (of 2024) sales tax results were down 4.6% compared with the previous year. She said the state and county were both down 2.3% compared to last year.
“This means that our city is trending down in sales tax slightly more than the city and the state,” Arenado said.
Arenado pointed out that a new home furnishings store brought in revenue. “If that was not here and did not come, we would also show a negative there,” Arenado said.
She said it was important to shop Seal Beach. “It’s the small businesses in this town that we are helping to survive,” Arenado said.
She said the numbers she was showing the council were prior to the passage of Measure GG. (The half cent sales tax increase will go into effect on April 1.)
According to Arenado, the city was seeing sales tax numbers decline.
She said utility users tax was 12% of the city’s budget.
Arenado said the UTT is charge to customers for electricity, natural gas, phones, and prepaid wireless.
She said the city receiving growth in UTT revenues, especially in electricity. According to Arenado, staff anticipated seeing this revenue source to remain on budget or be slightly higher.
She then turned to charges for services, which Arenado put at 7.1% of the budget.
She said charges for services are to recover costs for specific programs.
She said plan check fees and the Seal Beach Tennis and Pickleball Center were trending higher than the budget.
“We expect this to continue throughout the remainder of the fiscal year,” Arenado said.
Arenado said fines and forfeitures were budgeted at $1.6 million, which was mostly parking citation revenue.
According to Arenado, the city is seeing “pull backs” in parking citation revenues and this was happing in the actual revenues through December 2024.
Then she discussed the transient occupancy tax, also known as the hotel bed tax. The transient occupancy tax is 4% of Seal Beach’s General Fund.
“This is a really volatile revenue and could be severely impacted based on consumer optimism,” Arenado said.
“Two of our hotels have been fully renovated and overall is coming in at budget,” Arenado said.
“This is a hard revenue to predict long term,” Arenado said.
“We continue to anticipate this is going to be strong through this year and through next year, barring any unforeseen economic impacts,” Arenado said.
Expenditures
Arenado said 47% of Seal Beach’s expenditures are salaries and benefits, including retirement. “This is a drop from 50% last year,” Arenado said.
According to Arenado, Seal Beach is lean for a full-service city which raises concern about the city’s ability to hire and keep employees.
“Expenditures are pretty much I alignment with last year at the same time,” Arenado said.
“Maintenance and operations is 53% of the budget,” Arenado said.
She said maintenance and operations were anticipated to be on or slightly under budget by the year end. She was apparently referring to the end of the fiscal year.
“This is really due to city-wide staff still recovering from last year’s budget rounds,” Arenado said.
According to Arenado, city staff continues to be conservative with long-distance training, and purchasing supplies. “Contracted services are managed very tightly,” she said.
“A lot of these costs are mandatory,” Arenado said.
As examples, she cited $7.1 million for the contract with the Orange County Fire Authority, $2.8 million for general liability property insurance and workman’s comp, and $1 million for West Cities Police Communications.
Arenado said the maintenance and operations costs were increasing. She said the mandatory costs were putting pressure on other areas of the budget for discretionary funding.
Arenado said regular salaries in the first half of the year were on budget.
Arenado said overtime was well monitored.
Revitalization plan
Arenado said during a previous budget process, City Council directed staff to allocate revitalization funds to priority projects, such as additional payments to CalPERS to reduce pension liability. “That’s going to provide the city (with) a savings of about $50,000,” Arenado said.
Arenado said US economic policy was causing volatility. She said staff was monitoring revenues and expenditures closely.
“We do not know how this will impact all of our revenues,” she said.
The next budget study session will be held at 5:30 p.m., Monday, March 24.
In response to a question from District Two Councilman Ben Wong, Arenado confirmed that the first half of every fiscal year is slower than the second half because property taxes are paid in December. “So we don’t receive those [payments] ’til a couple of months later,” Arenado said.
Wong asked if the sales tax was abnormally lower or just about normal.
“I would say this is not normal,” Arenado said.
She said Seal Beach’s sales tax revenue is mostly consumer goods and restaurants.
“So when you start to see consumers pulling back and you see a reduction there, we’re going to get substantially hit harder than another city that has more of an Amazon pool or more business in other industries,” Arenado said.
Wong asked for confirmation that Seal Beach would meet budget in the second half.
Arenado said yes. “That is partially due to the Measure GG funds coming in,” Arenado said.
District Four Councilwoman Patty Senecal asked what was the original estimate for potential Measure GG revenue.
“Approximately 3 million,” Arenado said.
Senecal, referring to the pullback in consumer spending, asked if staff had re-estimated what Measure GG might bring in.
“We were conservative in the planning for Measure GG at 3 Million so in this upcoming budget we are still looking at 3 million because we’re watching this every month,” Arenado said.
Senecal, referring to a grant writing budget amendment in the current budget, indicated that she would like to see grant writing outsourced so the city will see more money.
“That is exactly what we’re looking for,” Arenado said.
District Five Councilman Nathan Steele said the Measure GG money was not coming in yet.
Arenado said: “Correct.”
Arenado said Seal Beach would probably see Measure GG revenue in July.
“None of that is actually accruing to us yet,” Steele said.
“I look at our Main Street and I keep thinking to myself, ‘we need to do something,’” Steele said.
“We don’t have the resources to do anything major on Main Street but it’s on my radar at some point in the not distant future we do something to up the atmosphere, the look and feel, the walk of Main Street,” Steele said.
Steele also asked about requirements to buy electric vehicles. “If we bought two backhoes, one would have to be electric, correct?”
“As it currently stands, yes,” said Public Works Director Iris Lee.
She put the cost of an electric backhoe at “double” the current cost without giving a specific figure. Lee described the price of an electric backhoe as “a moving target”.
Steele, a critic of state mandates, said as of Jan. 1, 2026, replacement vehicles have to be 100% electric vehicles. “We just simply can’t afford it, in my opinion,” Steele said.
District Three Councilwoman/Mayor Lisa Landau said her questions were already asked and answered.
District One Councilman Joe Kalmick said West-Comm was roughly 5% of the budget. “Is that our share?”
“It is our share, yes,” Arenado said.
West-Comm is the communications service for the cities of Seal Beach, Los Alamitos, and Cypress, as well as Orange County Parks.
