Huntington Beach City Council members are relying on financial reserves and one time funding to close a nearly $4 million budget gap as city staff projects even more challenging municipal budgets in the coming years.
Expanding spending for the city’s police and fire departments, along with smaller expansions to both the city treasurer and city attorney’s offices, combined with shrinking tax revenue is continuing to dog city leaders as they try to find a workable solution to funding.
Similar budgeting issues are hitting cities throughout Orange County as local elected officials grapple with expenditures outpacing revenues.
Most recently, Fullerton officials began the early stages of potentially asking voters to approve an overall 1% sales tax increase to help close the city’s projected $3.9 million deficit.
[Read: Fullerton Considers Sales Tax Increase to Ease Budget Strain]
At Tuesday night’s city council meeting, Surf City staff repeatedly warned city council members that they will face another deficit next year, and that this would not be the end of the city’s long running financial problems.
Over the past few years, city leaders have been confronted with multi-million dollar structural budget deficits they’ve managed to shave off through a mixture of budget cuts, hiring freezes and dipping into reserves.
[Read: Surf City Hangs Onto Libraries After Public Outcry, Cuts $7 Million Elsewhere]
There’s also been an increasingly high level of turnover in the city’s finance department, which is currently on its fourth chief financial officers since 2022 as top level executives moved to other cities.
[Read: Surf City Bleeds Executive Staff Under New City Council Leadership]
To make up the gap this year, city leaders cut nearly $3 million in ongoing expenses including their mobile mental health program and pulled over $9 million from a series of other accounts, including their equipment replacement reserve and their self-insured worker’s compensation fund.
While the adopted budget ultimately lists a $1.1 million surplus, officials got there by using one time monies according to city staff – without that extra $5 million in funds, the city’s general fund would’ve been nearly $4 million in a deficit.
“You’re voting on a budget that has a deficit,” said Ken Inouye, a Huntington Beach resident and frequent critic of the city council. “We are in fiscal crisis.”
While council members have largely blamed past city councils for Huntington Beach’s current financial woes, they acknowledged on Tuesday night that it’s on them to find a way to build a structurally balanced budget as future projections show an increasing gap between revenue and expenditures.
“We used strategic and prudent use of reserve funds, which is what these reserve funds are designed for in situations like this,” said Councilman Casey McKeon. “We’ll be balanced this year, but as soon as we adopt this budget tonight, next year we’ll have a significantly large budget deficit.”
City council members also approved a series of raises for employees such as their municipal teamsters union and their management employees union, which is set to cost an additional $14 million between the salary and pension costs.
Councilman Don Kennedy was the sole vote against raises, saying that while it was a nice idea the city doesn’t have the money.
“Unfortunately what’s happening is the surrounding cities continue to allocate raises that seemingly would be financially unsustainable,” Kennedy said. “It’s no indictment on the staff, they work hard, they love this city.”
Those boosts also come as the city saw a dip across a variety of its tax income streams, with sales tax, franchise taxes and several other income streams dipping below what they brought in last year while property taxes increased.
While city leaders are moving forward with several new programs to raise money, like selling advertising on lifeguard towers, it’s unclear if that will make enough to curb the growing deficit.
Despite the questions around funding, city council members also got into an extensive debate about hiring additional fire captains, with several city council members who received support from the firefighters union in their last election calling for an expansion of the department.
“They asked for it, we have it. Why don’t we give it?” said Councilman Chad Williams, who the firefighters union spent over $10,000 advertising in last year’s election. “They asked for it because they need it.”
McKeon again highlighted the city’s ongoing budget deficit, pointing out that any raises or increases the council approves only dig the hole deeper for next year, and moved to hire just one captain instead of two.
“Adding that second position now, you’re adding to your expense costs,” McKeon said. “It’s not a one time cost. Yes we have created a surplus, but next year we have a deficit.”
Noah Biesiada is a Voice of OC reporter. Contact him at nbiesiada@voiceofoc.org.