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Last week, the city Finance Department director told the council that the city has to increase revenues.
The City Council is scheduled to approve the 2025-26 budget following a public hearing on Monday, June 9. The council had questions for staff during the Tuesday, May 27, meeting. (The meeting was held a day later than usual, after editorial deadline, due to the observance of Memorial Day on Monday, May 26.) The discussion was the first item on the agenda of the third council meeting held that day. The regular session lasted more than three hours.
The following is not a transcript but highlights from the budget discussion.
Finance Director Barbara Arenado said she would answer council questions as best she could. She said if she couldn’t answer them, she would return with any information that she needs to look up.
“I have read all 389 pages of the budget,” said District Four Councilwoman Patty Senecal. She said she thought she had read it twice. “We do have a balanced budget that’s been presented,” she said.
“We don’t have a budget to the market and so we have to take into account the economy,” Senecal said.
She asked how quickly the city could react if the projects for revenue sources fell off. “How fast will we know about it? How do we move to a plan B?” Senecal asked.
“First, the budget is a snapshot in time,” said Arenado.
“This sets the foundation of the direction to staff where we can spend the money,” Arenado said.
Arenado described what the city would do in a “black swan” event. (The Corporate Finance Institute described a black swan event as “an extremely negative event or occurrence that is impossibly difficult to predict”.)
“We meet with the city manager. We meet with the consultants. We present to you [the council] and tell you this is coming. Then we start doing fiscal analysis. How much is this going to impact us? What’s going to impact us? Arenado said.
She cited COVID as an example. “With that, we started shutting down operations. You start freezing positions, freezing spending,” Arenado said.
Seal Beach has 25% contingency reserve in the budget. According to Arenado, that is $12 million. “We would implement that immediately and immediately inform you,” Arenado said.
Arenado said she and the city manager would probably work around the clock to figure out what non-essential programs the city has that the city could freeze.
She said the city has property tax revenue, with a lag of about 18 months. “Then sales tax is really volatile right now,” Arenado said.
“So let’s say if we had a large dip in that in this budget, we’re in a really good fiscal position. We’re in a really healthy position,” Arenado said.
She said the budget had set aside another $1.5 million. She said the city would boost the contingency up to $3.2 million. “That would sustain us,” Arenado said.
“If we know there’s a $3.2 million downturn, we would implement immediately freezing positions, freezing non-essential purchases, moving out CIP projects, and then utilize that funding if necessary,” Arenado said.
She said during COVID, the city planned to use the contingency reserve but did not.
Senecal said that was very reassuring.
“What about our five-year outlook?” Senecal asked.
Arenado said in the city’s strategic plan chapter, staff looks out beyond 10 years. “Are we going to build hotels? What can we build? Are things coming down the pipeline?” Arenado asked.
Arenado said the strategic plan does not build in a recession.
“If a recession happens, we’re solid for the short term this year,” Arenado said.
She said the city had set aside money for police and safety vehicles and was also doing a pension paydown of $250,000. “Those are really putting us in a healthy position today,” Arenado said. “But in the long term, we know and as you know costs are rising. Our expenditures are rising at 3.3% and our revenues are at 2%. So you’re going to continue to hear me on a continuous basis saying we’ve got to increase revenues. We know what’s coming. We can’t stop,” Arenado said.
“Every time something increases, it squashes what services we provide and that’s where we have to do cuts,” Arenado said.
“Just because we’re in a good place today that doesn’t mean we can stop. We need to keep looking, keep turning every stone and every leaf and everything that we can look at to fund some of these essential programs,” Arenado said.
Senecal said she wanted to discuss Lifeguard headquarters because the longer the city delays, the more expensive it gets.
“We don’t want this to be another pool scenario where we study it and it just becomes so costly that we can’t move forward,” Senecal said.
Senecal had raised the question of moving pier insurance money into the Lifeguard headquarters project fund. (As reported last week, the council has moved pool funds to the lifeguard headquarters project.)
District Three Councilwoman/Mayor Lisa Landau suggested a staff report. “Right now we’ve got our water, sewer, we’ve got other urgent needs, but the Lifeguard headquarters and police substation I believe are also very important to the community and to visitors,” Landau said.
Landau recalled the cost of the proposed lifeguard headquarters was about $12 million.
Landau suggested exploring the city’s fundraising options, such as a 501c3, or a GoFundMe campaign.
“We don’t have to pay all $12 million at once,” said District Five Councilman Nathan Steele.
“We can do the construction in phases over a few years’ time. We can get the important stuff done with the money that we do have, which would probably be, I’m hoping, several million, that we’re kind of locked into our capital improvement funds, Steele said.
“We would need to know that we’ve got the $12 million,” Landau said. “We can’t just start a project with half the money.”
Arenado said: “If I may, there’s many funding opportunities and staff is actually looking at those now.” She said the city was doing an assessment of the pier area. “Director [Iris] Lee is overseeing that and we’ll be bringing that back to the council.
She said that would be the time to talk about moving pier money if that’s what the council decides to do.
“That’s the importance of having more design, which can lead us to a better cost projection,” Senecal said.
Public Works Director Iris Lee said the Lifeguard headquarters project was moving along. She said staff was studying the project from a conceptual standpoint before they drill down into the lifeguard headquarters.
Lee said they were looking at another month or two for the Main Street and greater pier area assessment. (During a previous budget meeting, Lee described the assessment as a Main Street area vision plan.)
Lee said staff wanted to bring the assessment back to the council and public for feedback before moving forward with further steps.
Later, Landau asked about consultants. “It seems like we have consultants in every department,” Landau said.
“Would it behoove us to examine what we need versus what we want?” Landau asked.
Arenado said contracts are handled within each department because they are the subject matter experts.
“All those come through the city council,” Arenado said.
She referred to those contracts approved by department heads or the city manager that are less than $40,000. The city reports on those contracts quarterly.
“But all of those agreements come to council at some point. All of them,” Arenado said.
Interim City Manager Patrick Gallegos said the departments were not exceeding the city manager’s authority to approve contracts.
Landau asked if there was anywhere on the city website that someone could go to Seal Beach’s current contracts.
Arenado said Laserfiche houses all of the city’s documents.
(Go to the city website, scroll down to the Quick Links, select E-Records in Laserfiche, and then click browse. Then select the City Clerk’s folder. Then select the Contracts and Agreements folder. Inactive contracts are in one folder. Memorandums of Understanding are in one folder. Agreements are listed in alphabetical order by AMGT, hyphen, and the name of the business or person providing the contracted service.)
Senecal said the list was hard to search. “The first time I used it, I said, ‘Oh, my gosh,’” Senecal said.
“It’s a great resource. I use it all the time,” Arenado said.
She said the city doesn’t have the funding for a better, more robust system.
