CITY COUNCIL – Budget  projection shows reserves tapped in 5 years

The City of Manhattan Beach has a General Fund of $93 million. The graph shows the projected fund balance over the next five years, which includes economic uncertainty reserves and undesignated funds, both which are projected to be depleted by ongoing subsidies of stormwater fees. Courtesy City of Manhattan Beach 

Mark McDermott 

City of Manhattan Beach finance director Steve Charelian gave his initial budget report to the City Council Tuesday night, and it mostly showed the City in robust financial health. 

Revenues are up nearly across the board, enough that the City was able this year to both significantly add to its police force, further save for future employee retirement costs, and take $1 million from its General Fund to further fund the new Senior and Scout House Community Center. 

The City has retained its coveted AAA bond rating due to its financial soundness. But three-quarters through Charelian’s presentation, a black cloud appeared in the form of a graph that showed the City’s $22 million in undesignated funds and economic uncertainty reserves entirely dissipated within four years. 

The culprit: the General Fund’s subsidy of stormwater fees, a tax that residents are supposed to pay but that has not been increased in three decades. 

“The stormwater fund continues to impact the general fund, with $2.7 million going for operations and critical capital projects,” Charelian said. “The street lighting and landscape fund has a subsidy of $293,000.” 

City Manager Bruce Moe, in his budget message, spelled out the implications of this ongoing subsidy. 

“The projected subsidies to the Street Lighting and Landscape Fund and Stormwater Fund are projected to total about $11 million over the next five years, which adds to the strain on our essential services valued by our public, as well as our ability to fund needed infrastructure improvements,” Moe said. “Due to these fund subsidies, [the] Unreserved General Fund balance will be exhausted in [fiscal year] 2025-2026 and the Reserve for Economic Uncertainty of $4 million will be exhausted in FY 2026-2027.” 

Moe said that finding new revenue sources to fund these operations is an “immediate priority” in order to “ensure fiscal sustainability in the long-term.” 

The only new revenue source Charelian identified Tuesday was an increase in parking tickets from $53 to $55. Although LA County takes about $15 from each citation, Charelian said the revenue increase would be significant. He also noted there has been no parking ticket increase since 2015. 

“That would generate about $166,000 in revenue growth [annually], and if you’re looking at the five-year forecast, that’s almost $800,000,” he said. 

Tuesday night was the very beginning of the City’s extensive budget process, which includes a workshop on May 9, council discussion on May 16, another workshop on May 23, and a public hearing on June 6. Charelian said that other revenue ideas would be proposed in coming weeks. If the Council wanted to increase the stormwater fee, it would need to propose a ballot measure in order to do so. The existing annual fee is a little over $19, and last year generated about $345,000. The fee has remained unchanged since the passage of Proposition 218 in 1996. Prop. 218 requires voter approval of fee increases. 

The City is mandated by state law to maintain a stormwater drainage system that prevents excessive water, during rains, from reaching the ocean. Cities that do not meet this obligation can be subjected to millions in dollars in fines. 

Council deferred discussion of the budget until its workshop next week. ER 


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