by Laura Garber
When newly appointed Hermosa Beach Interim City Manager Steve Napolitano appeared at his first Council meeting on June 10th, he told the council, “Given this is my eighth day on the job I can’t take any credit for [the work], but will be happy to take the blame, as needed.”
In the same lighthearted tone, he added, “We’re good, but…”
He was referring to the 2025-26 budget prepared by City Manager Suja Lowenthal, his recently departed predecessor.
The budget projects a 2% revenue increase, but also warns of fiscal headwinds. These include: inflationary impacts, upcoming service negotiations with the Los Angeles CountyFire Department, and a County beach maintenance and lifeguarding agreement set to expire in 2027.
The County contracts’ costs are expected to increase by 20 percent or more. “Costs could swing pretty aggressively. It all depends on how those negotiations go,” Hermosa Administrative Services Director, Brandon Walker, told the council at the June 10 meeting.
Napolitano advised the Council to resurrect its finance subcommittee, and for it to work with City Treasurer David Pedersen and City staff to find ways to cut costs and increase revenue.
Other concerns raised by Walker included a potential economic downturn; unfunded Capital Improvements (CIPs), estimated at $160 million; rising CalPERS, and pension liabilities and rising insurance premiums for claims and litigation.
Walker said the upcoming budget proposes $33.9 million for CIP projects. Among them are $100,000 for citywide beautification, and $75,000 for improvements to the 14th Street beach restrooms.
Despite the City’s uncertain financial future, Walker complimented the Council for their fiscal restraint and maintaining a healthy 20 percent general fund reserve.
A healthy general fund reserve, Walker said, “will help improve our credit rating and keep borrowing costs low.”
Walker presented a five-year budget forecast that predicts expenditures gradually outpacing revenue. The projected deficit increases from $1.3 million in 2027-28 to $4.2 million in 2030-31. “We’ve been beneficiaries of a balanced budget the last few years. Tougher times are coming,” Walker said.
Increased inflation and recent tariffs were conservatively considered when creating the projections, which Walker credited to Henry Chao, the City’s finance manager. “[Chao] actually saw the tariff situation unfolding before it actually did,” Walker said, “There is some wisdom in the general directionality of these lines.”
Walker encouraged Council to restructure outdated fees for permits, parking citations and meter rates to levels charged by neighboring cities.
Property taxes are the city’s largest source of revenue, at 39%. Services charges are 18%; fines and permits 9%; TOT (Hotel Transient Occupancy Taxes) 7%; and sales taxes 5 percent.
“Today is a monumental day for finance and accounting geeks,” Walker said at the Tuesday, June 24 council meeting. “It’s budget adoption. It’s our Superbowl and Rosebowl all wrapped into one.”
A major change from the last budget study session, on June 10, was removing the $90,000 set aside for outside emergency operations and assigning that task to staff.
Councilmember Michael Keegan noted a vacancy in one of the City staff salary budget lines. “There’s a position missing from the City management office.” Keegan said. “That missing person is the Deputy City Manager role. I’d like to remove the position from the budget permanently.”
His motion to remove the positions follows potential litigation from Adrienne Lindgren, who was hired as Deputy City Manager by former City Manager Lowenthal days before her resignation. The job offer was subsequently withdrawn.
Mayor Rob Saemann asked interim City Manager Napolitano, “Can the City Manager hire a new Deputy without approval from Council?”
“At their peril, but yes.” Napolitano said.
Mayor Pro Tem Mike Detoy suggested the position be budgeted pending a decision on whether or not to fill the position by the new, permanent City Manager
“We’re spending more time on this Deputy City Manager than we did on hiring our Interim City Manager, which is disconcerting,” Councilmember Raymond Jackson said, adding Napolitano “turned off the hiring” of the Deputy City Manager despite “months of recruiting, vetting and an offer being made.”
Detoy and Jackson voted in the minority against adoption of the new budget, with the Deputy City Manager position deleted. ER
