Huntington Beach leaders talk budget at town hall meeting
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In the face of projected upcoming budget deficits, the city of Huntington Beach held a budget town hall meeting on Monday night at City Hall.
Mayor Pat Burns, Mayor Pro Tem Casey McKeon and interim Chief Financial Officer David Cain fielded questions from the audience,
“The reason why we wanted to do this is that we wanted to be as transparent as possible, and bring you guys into the room with us,” McKeon told the crowd of dozens gathered in City Hall’s room B-8. “When we first got elected, it was challenging because right away, we were faced with a budget deficit that we had to solve within those first six months. Ever since then, these last two years, it’s always kind of like whack-a-mole, trying to get ahead of it.”
The budget for fiscal year 2024-25, approved last June by the previous council, included $301.7 million in general fund revenues and $300 million in expenditures. Cain said in recent years, the city has been able to balance the budget by reducing costs and being more efficient.
But structural deficits — where ongoing revenues are less than ongoing expenditures — are projected beginning in fiscal year 2025-26. Without action, they are projected to grow over the next seven years, reaching more than $50 million by 2032.
“We really need to begin to address that challenge today,” Cain said.
Cain said during a presentation that Huntington Beach has increased non-controllable costs, including construction costs, state-mandated requirements including housing mandates and personnel costs related to retaining quality staff.
Property tax ($108 million) generates the most revenue for the city, followed by sales tax ($53.5 million), user fees ($35.7 million) and utility users tax ($23 million).
The police and fire departments combine for slightly more than half (51.4%) of the city’s general fund expenditures.
Resident Dave Rynerson expressed concern that the city’s infrastructure, not included in Monday’s presentation, was recently given a “C” rating overall in the most recent Infrastructure Report Card, including a “D” in a few categories including facilities and stormwater.
He also said he believed that current city leadership has made Huntington Beach a “pariah” for tourism dollars.
“When Vans pulled out of the U.S. Open [of Surfing], everyone said we’d never get a sponsor,” McKeon replied. “Well, we got a sponsor, I think, a few weeks later. We have several businesses that approach us every single day, and there’s going to be a new rodeo on the beach coming. The Darker Waves festival was the single-best day for hotels, in terms of occupancy and hotel rates, that we’ve ever experienced.”
Pat Goodman asked about city lawsuits, with Cain responding that there is a liability fund set up for ongoing lawsuits that currently totals about $35 million.
Another resident asked if the city could increase the hotel tax.
“There’s that sensitivity line of what is too much, but that’s always on the table,” McKeon said. “If that were to happen, the voters would have to approve it.”
He added that the city could also increase sales tax in the city, but that could be seen as a last resort.
Former council members Natalie Moser and Kim Carr also asked questions, with Moser asking McKeon about funding for the city’s Navigation Center coming out of the general fund.
Moser said past councils chose not to receive funding from the county because strings were attached, and the city would have to provide services and accept people from beyond Huntington Beach.
McKeon said the landscape has changed, after the city put 132 people into permanent housing over the last two years. He added that he has talked to Orange County Supervisor Janet Nguyen about receiving funding for the Navigation Center, possibly from alternative sources that didn’t have those strings attached.
“Between Be Well and the Navigation Center, that represents 40% of our projected budget deficit,” McKeon said. “If we can solve that piece, that’s huge, and we have until June to figure it out.”
Carr said if the city had a compliant housing element, it would be eligible for SB 2 funding and grants that would help the situation.
“You have taken the city off a fiscal cliff,” she said, addressing McKeon, who was elected in 2022 along with Burns, Gracey Van Der Mark and Tony Strickland. “You inherited a $15-million surplus, and now look at what we’re dealing with.”
“You guys want to know why they had a surplus?” McKeon responded. “Look at that ARPA funding. That’s all COVID money.”
Another budget town hall meeting is scheduled for March 12 at the Central Library, and McKeon said a portion of each of the next several City Council meetings will be dedicated to the budget.
“We are working hard throughout the whole city, everybody involved,” Burns said in wrapping up the meeting. “We’re going to try to bring up our revenues where they should be, reasonably, and bring down the expenses. By the end of it all, I’m optimistic, but I believe we won’t have a deficit at the end of this.”
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