HomeMy WebLinkAboutItem 08b - FY 2025-26 Operating Budget and CIP and Equipment PlansFY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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DATE: June 3, 2025
TO: Honorable Mayor and City Council
FROM: Dominic Lazzaretto, City Manager
Henry Chen, Administrative Services Director
SUBJECT: RESOLUTIONS AND ACTIONS RELATING TO THE FISCAL YEAR 2024-
25 BUDGET CLOSE-OUT; ADOPTION OF THE FISCAL YEAR 2025-26
OPERATING BUDGET; AND THE FISCAL YEARS 2025-26 THROUGH
2029-30 CAPITAL IMPROVEMENT AND EQUIPMENT PLAN
RESOLUTION NO. 7638 ADOPTING A BUDGET FOR FISCAL YEAR
2025-26 AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN
AS EXPENDITURES FROM THE VARIOUS FUNDS
CEQA: Not a Project
Recommendation: Adopt
RESOLUTION NO. 7639 ADOPTING A CAPITAL IMPROVEMENT AND
EQUIPMENT PLAN FOR FISCAL YEARS 2025-26 THROUGH 2029-30
CEQA: Not a Project
Recommendation: Adopt
AUTHORIZE AND DIRECT THE CITY MANAGER TO MAKE
DISCRETIONARY TRANSFERS NOT TO EXCEED $10 MILLION FROM
THE FISCAL YEAR 2024-25 GENERAL FUND OPERATING BUDGET TO
THE CAPITAL IMPROVEMENT, EQUIPMENT REPLACEMENT, OPEB
TRUST, AND PENSION STABILIZATION FUNDS
CEQA: Not a Project
Recommendation: Approve
SUMMARY
Sections 1204 and 1205 of the Arcadia City Charter require a public notice and a public
hearing for consideration of the proposed Operating Budget and Five-Year Capital
Program for the ensuing fiscal year, which is required to be adopted by July 1. The
recommended actions are necessary to implement the budget for Fiscal Year 2025-26.
This year’s budget process started with a Budget Study Session with the City Council on
May 20, 2025. After the initial study session, one minor clerical modification was made to
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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the proposed budget – an addition to the Development Services Department budget in
the amount of $2,200 for the annual Chamber of Commerce Service Agreement.
Rapid shifts in economic policy, ongoing trade tensions, and financial market volatility
have contributed to high levels of uncertainty in both global and local economies,
underscoring the need for budgetary precautions in the upcoming fiscal year. Due to
Arcadia’s longstanding practice of fiscal restraint and prudent budgeting, the City’s
financial position is strong and will provide a buffer against potential economic instability.
Despite a healthy fiscal position, Arcadia will continue with its practices of fiscal restraint
and employ a cautious approach to the FY 2025–26 Budget. Through this approach, the
City is charting a responsible path forward that allows for the continuation of high-quality
services while preparing for less favorable economic outcomes.
The proposed FY 2025-26 General Fund Operating Budget outlines Total Operating
Revenues of $96.2 million and Expenditures of $91.3 million, resulting in a projected
operating surplus of $4.9 million before any transfers to equipment or capital funds. After
accounting for all Transfers In and Out, the General Fund is expected to end the fiscal
year with a net balance of $88,400. At the end of FY 2025-26, the projected Fund Balance
of the General Fund Operating Budget is expected to be $27.2 million, prior to any
additional transfers to long-term savings accounts, which are recommended in the Fiscal
Impact section of this report.
The General Fund Operating Budget is summarized in the table below:
GENERAL FUND SUMMARY
FY25-26 Budget
Beginning Fund Balance 27,075,000$
Estimated Revenues 92,490,400
Transfers In 3,676,800
Expenses & Uses (91,146,500)
New Programs (132,300)
Revenue over Expenses 4,888,400$
Transfer to Equipment Replacement (1,900,000)
Transfer to Capital Improvement Fund (2,900,000)
Total Transfer Out (4,800,000)
Subtotal Operating Balance 88,400
Ending Fund Balance 27,163,400$
Overall, new programs proposed for the City’s Operating Budget demonstrate Arcadia’s
commitment to being responsive to community needs. All new programs proposed for the
City’s General Fund Operating Budget for FY 2025-26 total $132,300. These new
programs represent vital investments in all areas of the community, specifically focusing
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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on improved service delivery to meet increasing demands and modernization of
operations.
In alignment with the City's pension strategy, the proposed FY 2025-26 Budget allocates
funds for addressing long-term liabilities. To this end, $1 million has been allocated for
the City’s Pension and Other Post Employment Benefits (“OPEB”) Trust accounts, which
help address future employee benefits costs, especially in times of economic constraint.
The $1 million allocation is in addition to required payments to CalPERS and the pension
obligation bond payments.
The Capital Improvement Fund plays a vital role in funding crucial maintenance projects,
including pavement rehabilitation, building repairs, and parks maintenance. In FY2025-
26 Budget, $4.8 million will be transferred into the Capital Improvement and Equipment
Replacement Funds, with the Equipment fund receiving $1.9 million and the Capital
Improvement Fund receiving $2.9 million. The transfer amounts equate to approximately
the 10-year average spend in these accounts, collectively.
In the upcoming fiscal year, several key projects are budgeted within the Capital
Improvement Fund, such as plumbing and carpet repairs at the Arcadia Public Library,
lighting upgrades at all three Fire Stations, and debris removal at Wilderness Park. Due
to increasing water quality standards, the City will heavily invest in expanding the water
treatment capacity of the Orange Grove Well. The proposed projects budgeted in the
Capital Improvement Fund total $5.1 million. Combined, the capital projects across all
funds have been budgeted at $24.4 million.
The Equipment Replacement Fund helps replace equipment that has reached the end of
its useful life like computers, vehicles, and major office equipment. The total cost of asset
replacement through the Equipment Replacement Fund is $2.0 million in FY 2025-26.
Notably, significant purchases for the upcoming year include $273,700 for replacement
vehicles in the Streets Division and $451,500 for Police Department vehicle
replacements.
It is recommended that the City Council determine that these actions do not constitute a
project under the California Environmental Quality Act (“CEQA”); and:
1)Adopt Resolution No. 7638 adopting a Budget for Fiscal Year 2025-26 and
appropriating the amounts specified therein as expenditures from the various
funds; and
2)Adopt Resolution No. 7639 adopting a Capital Improvement and Equipment Plan
for Fiscal Years 2025-26 through 2029-30.
3)Authorize and direct the City Manager to make discretionary transfers, not to
exceed $10 million, as part of the close-out of Fiscal Year 2024-25 from the
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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General Fund Operating into the Capital Improvement, Equipment Replacement,
OPEB Trust, and Pension Stabilization Funds.
BACKGROUND
Sections 1204 and 1205 of the Arcadia City Charter require a public notice and a public
hearing for consideration of the proposed Operating Budget and Five-Year Capital
Program for the ensuing fiscal year, which is required to be adopted by July 1. The
recommended actions in this report are necessary to implement the budget for Fiscal
Year 2025-26.
This year’s budget process started with a Budget Study Session with the City Council on
May 20, 2025. Copies of the proposed Operating Budget were provided for the City
Council’s review. After the initial budget study session, one minor clerical modification
was made to the proposed budget – an addition to the Development Services Department
budget in the amount of $2,200 for the annual Chamber of Commerce Service
Agreement.
Inclusive in the draft budget were all operating funds, including General, Special
Revenue, Enterprise, and the Successor Agency. Additionally, the City Council received
the Capital Improvement and Equipment Replacement Fund budgets in a separate
document. All funds total $178.9 million in expenditures, of which the General Fund’s
budget is $96.2 million (including Transfers Out as noted below).
DISCUSSION
As the Fiscal Year 2025–26 Operating Budget was being developed, high levels of
uncertainty were observed in both the global and local economies, driven by rapid shifts
in economic policy, ongoing trade tensions, and financial market volatility. In this complex
environment, a wide range of economic outcomes are possible, requiring cities to be
adaptable and plan with caution. With this in mind, Arcadia is maintaining a conservative
and flexible approach to ensure responsiveness to evolving conditions.
Due to a longstanding practice of fiscal restraint and prudent budgeting, a strong financial
position has been established for Arcadia, providing a buffer against economic instability.
Although a recession is not being projected, signs of softness have been noted in some
of Arcadia’s revenue sources, with minimal growth, or in some cases, reductions planned
for the upcoming fiscal year.
Accordingly, a cautious strategy is being employed in the FY 2025–26 Budget, with built-
in flexibility to undertake rapid adjustments, should economic conditions arise. The City
is charting a responsible path forward, continuing its commitment to delivering high-
quality services, while preparing for a variety of economic scenarios. While the proposed
budget anticipates some economic struggles, no programs, events, or positions have
been reduced or eliminated to achieve a balanced budget. Rather, City staff have
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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curtailed new spending and found more efficient ways to deliver services. In addition,
major pension reforms and cost cutting measures initiated in previous years are assisting
the current budget outlook.
As Special Revenue, Enterprise, and Debt Service funds have restricted revenues and
expenses, this report will primarily focus on the General Fund’s Operating Budget.
Summarized in the table below is the General Fund Operating Budget, inclusive of FY
2024-25 Year-End Estimates; FY 2025-26 Proposed Budget; the FY 2026-27 Preliminary
Budget; and the Ending Fund Balance, which is projected to reach $27.2 million by the
end of FY 2025-26, without any additional transfers into long-term savings accounts.
GENERAL FUND
FY 24-25 FY 25-26 FY 26-27
Estimates Budget Budget
Beginning Fund Balance 27,041,000$ 27,075,000$ 27,163,400$
Estimated Revenues 89,708,100$ 92,490,400$ 93,729,600$
Transfers In 9,361,600 3,676,800 7,268,200
Expenses & Uses (92,235,700) (91,278,800) (99,181,200)
Revenue over Expenses 6,834,000$ 4,888,400$ 1,816,600$
Transfer to Equipment Replacement Fund (3,400,000) (1,900,000) (1,900,000)
Transfer to Capital Improvement Fund (3,400,000) (2,900,000) (2,900,000)
Total Transfer Out (6,800,000) (4,800,000) (4,800,000)
Subtotal Operating Balance 34,000 88,400 (2,983,400)
Ending Fund Balance 27,075,000$ 27,163,400$ 24,180,000$
As shown in the table above, City staff have helped eliminate a deficit for FY 2024-25,
which at one point, was expected to exceed $3 million. Due to some favorable revenues
and conscientious cost management, the City now expects a small surplus of $34,000.
The FY 2025-26 budget is projected to have a surplus of $88,400, while the FY 2026-27
budget is showing a nearly $3 million deficit using standard growth assumptions and
known economic indicators. The City’s Executive Management Team will closely monitor
this budget and make any necessary adjustments to ensure a balanced budget is
proposed before adoption next year.
FY 2025-26 Expected Revenues
The FY 2025-26 Budget takes a cautious approach with a varied outlook across the City’s
revenue sources. A slight decrease is projected in Sales Tax revenue, while moderate
growth is expected to be shown in Property Tax revenues, which tend to be linear. Growth
in Licenses and Permit Fees is anticipated, driven by a few large projects expected within
the next Fiscal Year. Most other tax categories are projected to remain flat, except for the
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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Transient Occupancy Tax, which is expected to grow due to the opening of the new Hilton
Arcadia during the first half of the upcoming Fiscal Year.
Despite the slight decline anticipated in overall Sales Tax revenue, Measure A has
continued to play a critical role in maintaining Arcadia’s financial stability. Measure A, a
0.75% Transaction and Use Tax (Sales Tax), approved by Arcadia voters in June 2019,
has consistently contributed significant revenue to the General Fund. In FY 2024–25
alone, approximately $11.1 million was generated through Measure A. Without this voter-
approved measure, service reductions and alternative strategies would have been
required to achieve a balanced budget.
For FY 2025-26, total General Fund revenues are expected to increase 3.01% when
compared to FY 2024-25 Year-End Estimates. The largest revenue source for the City’s
General Fund is Taxes and Fees. The key revenues under these two groups are: Sales
& Use Tax, Property Tax, Utility Users’ Tax, Transient Occupancy Tax, and Motor Vehicle
License Fees. The projected receipts for each tax are shown in the tables below:
GENERAL FUND REVENUES
FY 24-25 FY 25-26
Estimates Budget $ %
Taxes 61,566,800$ 62,745,800$ 1,179,000$ 1.88%
License & Permits 5,624,200 6,746,800 1,122,600 16.64%
Fines & Penalties 415,000 390,500 (24,500)-6.27%
Use Money & Property 3,030,000 3,140,000 110,000 3.50%
Revenue from Other Agencies 9,542,400 10,039,400 497,000 4.95%
Charge Current Services 5,458,100 5,366,100 (92,000)-1.71%
Library 94,000 102,000 8,000 7.84%
Recreation 1,451,700 1,506,600 54,900 3.64%
Other Revenue 2,525,900 2,453,200 (72,700)-2.96%
Total Revenue 89,708,100$ 92,490,400$ 2,782,300$ 3.01%
Changes
GENERAL FUND TAX REVENUE SUMMARY
Description FY 2024-25 YE
Estimates
FY 2025-26
Proposed
Budget
Difference % Change
Sales and Use Tax $ 23,549,100 $ 23,415,300 $ (133,800)-0.57%
Property Tax 20,617,600 21,132,300 514,700 2.44%
Utility Users’ Tax 9,093,400 9,197,400 104,000 1.13%
Transient Occupancy Tax 5,824,600 6,537,000 712,400 10.90%
Motor Vehicle License Fees 9,461,400 9,744,800 283,400 2.91%
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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Sales and Transaction Use Tax: For Sales and Transaction Use Tax, the total estimates
for the upcoming Fiscal Year are $23.4 million, reflecting a 0.57% decrease compared to
the previous year’s revenues. Recent trends in retail data show economic uncertainty and
rapid price increases contribute to lower consumer confidence, limiting the growth rate in
sales tax revenue. It is projected that this trend will continue into FY 2025-26, with sales
tax revenue slightly decreasing due to the overall reduction in economic activity.
Property Tax: Arcadia’s status as a desirable community, along with its highly regarded
public school system, is expected to add to the growth in home valuations over the coming
year. Although home sales across California have slowed significantly due to the
persistence of elevated interest rates, price levels in Arcadia have remained steady
because of sustained demand. As a result of these conditions, some growth in Property
Tax revenue is expected, though at a lower rate than has been experienced in recent
years. For FY 2025–26, Property Tax receipts are estimated to increase by approximately
2.4%, or to $21.1 million.
Utility Users’ Tax: The projected revenue from the Utility Users' Tax (“UUT”) is $9.2
million, representing a 1.1% increase compared to the previous Fiscal Year. The Utility
Users’ Tax is expected to show moderate growth next Fiscal Year, due to electricity rate
increases to fund infrastructure development and growth in internet services. Those
revenues will be offset by the declining demand for cable TV services, as well as less
utility revenue from diminished work from home employment, a decreasing trend
nationwide.
Transient Occupancy Tax (“TOT”): The TOT revenue projected for FY 2025-26
represents a 10.9% increase compared to the previous year, resulting in expected
revenue of $6.5 million. A large portion of this increase is based on the new Hilton Arcadia,
which is expected to open toward the end of 2025. Arcadia’s TOT has grown and
performed well over the past several years, but demand is expected to level off in the
coming Fiscal Year due to international travel restrictions and the susceptibility of tourism
to economic downturn.
Motor Vehicle License Fees (“VLF”): The Motor Vehicle License Fees ("VLF") tax is
projected to increase by 2.9%, generating $9.7 million in revenue next Fiscal Year. Since
the State made a formulaic change to directly tie the City’s VLF to the annual property
assessment, the growth rate has proven to be healthy in Arcadia. This growth trend is
expected to continue into the next Fiscal Year.
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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FY 2025-26 Proposed Expenses
GENERAL FUND EXPENDITURES BY DEPARTMENT
The proposed FY 2025-26 Operating Budget sets total operating expenditures at $90.2
million, representing a 3.2% decrease compared to the previous year's Revised Budget
of $93.3 million. Much of this decrease can be attributed to reduced transfers to the City’s
capital and equipment funds. It is important to highlight that the FY 2025-26 Operating
Budget remains largely unchanged apart from contractual increases from multi-year
service agreements, and the expected increases in salary and benefits.
Furthermore, the budget continues to allocate "prefunding" of long-term benefit accounts,
including the City's Retiree Medical Benefit (Other Post Employee Benefit liabilities) and
the contribution to the City’s Pension Trust Account. The proposed budget includes a total
of $1.0 million for those accounts ($500,000 each).
Proposed New Programs
New services and programs are presented by various departments to respond to
emerging operational needs and direction from the City Council. New programs proposed
for the FY 2025-26 Budget total $132,300 and are described in the following sections.
CITY MANAGER
$2,553,400
3%
ADMIN SVRCS
$3,860,700
4%
HUMAN RESOURCES
$941,100
1%POLICE
$31,209,000
35%
FIRE
$26,197,900
29%PUBLIC WORKS
$6,736,300
7%
DEV. SVCS
$6,377,300
7%
RECREATION
$4,614,700
5%
LIBRARY & MUSEUM
$5,207,700
6%
GENERAL CITY
$2,536,400
3%
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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City Manager Office: Public Records Portal ($11,100): The City utilizes Laserfiche as
a document management platform for official City records. The City currently has 10
concurrent viewing licenses, which are often fully utilized, preventing the public and City
staff members from accessing and viewing City records. Upgrading the portal will add 15
additional licenses, bringing the total to 25 concurrent viewing licenses, and improving
access for staff and the public; this upgrade is a one-time cost.
Police Department: Sharp Performance App ($28,700): Sharp Performance's mobile
app offers a wellness solution that is tailored to individual users and uniquely aligned with
the needs of law enforcement. By providing easy access to mental health resources,
stress management, and wellness tracking, the app aims to enhance the overall wellbeing
of employees. This, in turn, can lead to improved job performance, greater job
satisfaction, and a reduction in burnout and work-related stress.
The cost of the program totals $43,700; $15,000 of the cost can be covered using grant
funding, so the net cost to the City would be $28,700. This program is a one-time cost.
Fire Department: Standards of Cover (“SOC”) Assessment ($80,000): Conducting a
Standards of Cover assessment will provide an in-depth analysis of the Fire Department's
operations. The SOC is a systematic process to assess community risks, evaluate
response performance, and identify opportunities for improvement. Through data
analysis, a SOC assessment will identify and determine the current levels of response,
response time objectives, standards for measuring resource effectiveness, and the
deployment of those resources. An analysis will be performed for fire and emergency
medical services in Arcadia. In reviewing historical documents spanning over 25 years,
no prior assessment was found.
The $80,000 cost of the assessment will be initially covered by the City. Future
developments that will impact the Fire Department’s service delivery will be required to
pay a portion of this cost to the City, similar to other development impact fees and
requirements.
Fire Department: Provide Community Emergency Response Team (“CERT”)
Training ($12,500): The CERT program will educate volunteers about disaster
preparedness for hazards that may occur. The CERT volunteers will learn basic skills in
fire safety, search and rescue, team organization, and disaster medical operations. This
training will be delivered and coordinated by Fire Department personnel. This training will
be conducted a maximum of three times annually and will have regular drills for CERT
team members to review training and upcoming events. CERT team members will be
qualified to support City events, assisting as needed. The $12,500 cost for the program
will be ongoing but may fluctuate each year depending on the need for supplies, training
materials, and the number of volunteers. In addition, the Arcadia Chinese Association has
shown interest in assisting with the funding of this program, so community resources may
be available to offset this expense.
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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The table below summarizes the New Programs included in this proposed budget.
NEW PROGRAMS
FY 2025-26 Ongoing Annual
Proposed New Programs Start Up Costs Costs
City Manager
Public Records Portal 11,100$ -$
Police
Sharp Performance App 28,700 -
Fire
Standards of Cover (SOC) Assessment 80,000 -
Community Emergency Response Team (CERT) Training 12,500 12,500
Total New Programs 132,300$ 12,500$
Capital Improvement and Equipment Replacement Funds
The City intentionally sets aside funds in the Capital Improvement and Equipment
Replacement Funds to save for significant purchases that occur intermittently. The
balance of each fund has grown through financial prudency and by transferring any
excess General Funds at the end of each fiscal year. The goal is for the General Fund to
transfer at least the 10-year average expenditure from each account. This proactive
approach to funding is crucial in preventing failure of the City's infrastructure system and
ensuring staff have the necessary resources to carry out their essential duties. The FY
2025-26 Budget will transfer $4.8 million from the General Fund, with $2.9 million
allocated to the Capital Improvement Fund and $1.9 million to the Equipment
Replacement Fund. Collectively, this is the 10-year average spend from these accounts.
A larger transfer amount is being recommended for the Capital Improvement Fund due
to its substantially lower fund balance at this time.
The FY 2025-26 Capital Improvement Plan entails 32 projects, with a total expenditure of
$24.1 million. Of this amount, $4.7 million will be funded from the Capital Improvement
Fund. The Capital Improvement Fund primarily supports crucial maintenance initiatives
such as pavement rehabilitation, building repairs, and parks maintenance. The following
table provides a summary of some major proposed projects scheduled for the year.
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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FY 2025-26 MAJOR CAPITAL IMPROVEMENT PROJECTS
Project Description Project Budget Funding Source
Orange Grove Well Treatment $6,000,000 Water Fund/
Dow Settlement Fund
Colorado Complete Streets $4,500,000 SGVCOG/Federal
Grants
Pavement Rehabilitation Program $2,500,000
Capital Improvement
$1.0M & RMRA (SB1) -
$1.5M
Sewer Capacity Upgrade $1,350,000 Sewer Fund
Annual Slurry Seal Program $1,350,000 Capital Improvement
Fund
SCADA System Replacement $1,000,000 Water Fund/
SewerFund
The Equipment Replacement Fund plays a critical role in funding essential equipment
such as computers, vehicles, and major office equipment. The budgeted annual transfer
of $1.9 million properly funds current spending levels and allows the City to replace
equipment before it becomes obsolete.
In the proposed budget, there are several vehicle replacements planned – specifically,
heavy-duty vehicles used by the Public Works Services, Fire, and Police Departments.
The Equipment Replacement Fund encompasses a comprehensive list of 32 equipment
purchases, totaling $3.2 million. Sixty-three percent (63%) of the $3.2 million (or $2.0
million) will be funded by the Equipment Replacement Fund. The table below summarizes
some significant equipment purchases for the upcoming period.
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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FY 2025-26 MAJOR EQUIPMENT REPLACEMENT PURCHASES
Equipment Replacement
Description
Replacement
Budget Funding Source
Water Vehicle Replacements:
•New Loader
•Compact Pickup Truck
•¾ Ton Pickup Truck
•Installation of Equipment and
Accessories
$636,900 Water Fund
Fire Department:
•½ Ton Pickup Trucks
•Communications Equipment
•Installation of Equipment and
Accessories
$305,000 Equipment Replacement
Police Department:
•3 New Patrol Vehicles
•1 New HD Pickup
•Surveillance Trailers
•Radio Replacement
•Installation of Equipment and
Accessories
$817,900 Equipment Replacement
Streets Vehicle Replacements:
•¾ Ton Pickup
•½ Ton Pickup
•½ Ton 4x4 Pickup
•Installation of Equipment and
Accessories
$273,700 Equipment Replacement
Looking ahead, since the City has made significant investments in capital projects and
equipment replacements recently, the Capital Improvement and Equipment Replacement
Funds will decrease to a concerning level in a few years, unless additional transfers are
made. It would be prudent for the City to transfer some of the excess balance in the
General Fund Operating Budget to the Capital Improvement and Equipment Replacement
Funds, restoring those balances to ensure those funds remain at sustainable levels.
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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ECONOMIC OUTLOOK
The General Fund FY 2025-26 Operating Budget was developed based on an economic
landscape of moderate growth, evolving inflation dynamics, and heightened policy
uncertainties. The U.S. economy is projected to experience a slowdown in Gross
Domestic Product output, attributable to moderated consumer spending and business
investments. While inflationary pressures coming out of the pandemic appear to have
subsided, recent trade policies may inject additional pricing pressures into the economy,
especially an international travel-based economy, such as that in Arcadia. These macro
events will have an impact on economic activity and the revenue picture for the City into
the next Fiscal Year.
Despite a regional softening of the housing market due to high interest rates, Arcadia’s
housing market remains resilient. Even with a decline in total sales volume, prices remain
strong in the City. As home values remain stable, this will help with the City’s property
tax revenue, facilitating moderate growth.
Economic ambiguity will impact consumer confidence and spending, with consumers
prioritizing necessary expenditures over discretionary spending. This trend will have an
impact on Arcadia’s sales tax activity and should contribute to a minor contraction in
receipts at the Shops at Santa Anita, local restaurants, and other retailers.
Despite the softening of certain revenue streams, the City has managed its finances
responsibly and will be able to maintain the high level of service the community expects.
These prudent financial practices will enable the City to have a balanced budget for FY
2025-26, despite a moderate slowdown that could impact revenues.
Although current economic conditions make long-term trends difficult to predict, and the
impact of existing policies uncertain, Arcadia is able to adapt to changing circumstances
thanks to its strong financial position. The City employs conversative budget estimates
and staff is able to quickly respond to any changes in outlook or projections. By being
vigilant and flexible, the City will be able to address challenges and continue to deliver a
high level of service to the community.
CONCLUSION
The proposed FY 2025-26 General Fund Operating Budget demonstrates a balanced
financial position, with a projected surplus of $88,400. This surplus is the result of Total
Operating Revenues and Transfers In, amounting to $96.2 million, net of Operating
Expenditures and Transfers Out, totaling $96.1 million.
Arcadia’s continued commitment to conservative budgeting has created a healthy
financial buffer, positioning the City to better withstand short-term economic uncertainty.
The General Fund has built a reserve balance of $25.3 million, providing the flexibility
necessary to respond to unforeseen events as they arise. The City’s ability to maintain
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
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critical services during periods of economic challenge demonstrates its adaptability and
resourcefulness, delivering what is most valued by residents and businesses. In the years
ahead, these foundational strengths will be built upon by the management team, ensuring
that effective and fiscally responsible municipal services continue to be provided.
To move forward with the proposed budget and ensure effective financial planning, it is
recommended that the City Council adopt the proposed resolutions, which include
enacting the FY 2025-26 Operating Budget as well as the Five-Year Capital and
Equipment Replacement Plans.
It is also recommended that the City Council direct staff to move a total of $10 million from
the General Fund Operating account into long-term savings accounts as part of the close-
out of the current Fiscal Year, as described further below.
Attached to this staff report are the following:
• Exhibit “A”: a summary of Sources and Uses for All Funds reflecting the proposed
Operating Budget presented to City Council for Adoption.
• Exhibit “B”: a summary of the proposed Five-Year Capital Improvement and
Equipment Replacement Plan.
ENVIRONMENTAL ANLYSIS
The proposed actions do not constitute a project under the California Environmental
Quality Act (“CEQA”), based on Section 15061(b)(3) of the CEQA Guidelines, as it can
be seen with certainty that they will have no impact on the environment.
Many of the budgeted items in the attached documents may require their own
environmental review, which will be conducted when each project is brought forward for
consideration.
FISCAL IMPACT
The proposed budget is balanced, with revenues exceeding expenditures by $88,400. In
accordance with the City's financial policies, which recommend maintaining a 20%
balance in the Emergency Reserve Fund relative to annual operating expenditure, a
transfer of $1.9 million is expected to be made to the Emergency Reserve Fund at the
conclusion of FY 2024-25. As a result, the General Fund Operating Fund Balance is
projected to reach $25.3 million by the end of FY 2024-25, providing the necessary
reserve to sustain operations throughout the Fiscal Year.
In addition, as discussed at the Budget Study Session on May 20, it would be prudent to
move a portion of funds from the General Fund Operating account into long-term savings
accounts. The purpose of this transfer is to ensure that the funds are saved for future
FY 2025-26 Operating Budget and CIP and Equipment Plans
June 3, 2025
Page 15 of 15
needs, but also because the long-term savings accounts are invested using long-term
strategies, which allow for greater investment returns. This approach will help improve
the overall financial position of the City over time. Specifically, at the close of FY24-25, it
is recommended that a total of $10 million be transferred from the General Fund
Operating account into the Capital Improvement, Equipment Replacement, OPEB Trust,
and Pension Stabilization Funds, in an exact distribution that is left to the discretion of the
City Manager, with the goal of maximizing security and flexibility over time. These
additional transfers would help support each of those funds, while still leaving the General
Fund Operating account with a healthy balance of $15.3 million to respond to any
economic events that may arise in the short-term.
RECOMMENDATION
It is recommended that the City Council determine these actions do not constitute a
project under the California Environmental Quality Act (“CEQA”); and:
1)Adopt Resolution No. 7638 adopting a Budget for Fiscal Year 2025-26 and
appropriating the amounts specified therein as expenditures from the various
funds; and
2)Adopt Resolution No. 7639 adopting a Capital Improvement and Equipment Plan
for Fiscal Years 2025-26 through 2029-30.
3)Authorize and direct the City Manager to make discretionary transfers not to
exceed $10 million from the Fiscal Year 2024-25 General Fund Operating Budget
to the Capital Improvement, Equipment Replacement, OPEB Trust, and Pension
Stabilization Funds.
Attachments: Exhibit “A” – All Funds Operating Budget Summary
Exhibit “B” – Five-Year Summary of Capital and Equipment Plan
Resolution No. 7638
Resolution No. 7639
Exhibit "A"
Ending Fund
Fund Beginning Outside Transfer Total Appropriation Transfer Total Balance
Fund FY25-26 Sources In Out FY25-26
General Fund 27,075,000 92,490,400 3,676,800 123,242,200 90,366,800 5,712,000 96,078,800 27,163,400
Narcotic Seizure Federal 285,300 37,100 0 322,400 0 0 0 322,400
COPS 291,300 211,500 0 502,800 202,800 0 202,800 300,000
Medical/Dental 489,600 0 4,321,800 4,811,400 4,100,000 1,800 4,101,800 709,600
Local Law Enforcement 500 138,000 138,000 276,500 275,900 0 275,900 600
IRS Task Force 500,500 12,500 0 513,000 0 0 0 513,000
Worker Compensation/Liability 5,745,000 143,400 3,719,400 9,607,800 3,704,500 0 3,704,500 5,903,300
Homeland Security 0 100,000 0 100,000 100,000 0 100,000 0
Library State Grant 600 0 0 600 0 0 0 600
Homelessness Plan 79,700 210,000 0 289,700 210,000 0 210,000 79,700
Office of Traffic Safety Grant 58,500 85,800 0 144,300 85,800 0 85,800 58,500
California OES HSGP 0 37,800 0 37,800 37,800 0 37,800 0
Autotheft Prevention Taskforce 0 0 0 0 0 0 0 0
Misc. P.E.R.S. Employee Retirement Fund 0 0 0 0 0 0 0 0
Emergency Reserve 16,338,000 0 0 16,338,000 0 0 0 16,338,000
Emergency Response 2,536,800 0 0 2,536,800 0 0 0 2,536,800
America Rescue Plan Act 4,396,400 0 0 4,396,400 4,396,400 0 4,396,400 0
Public, Educational/Governmental Access 1,317,200 102,900 0 1,420,100 0 0 0 1,420,100
Parks & Recreation 6,004,100 1,610,900 0 7,615,000 1,514,100 0 1,514,100 6,100,900
Fire Facilities Fund 379,800 104,700 0 484,500 0 0 0 484,500
Used Oil Grant 1,200 8,100 0 9,300 8,200 0 8,200 1,100
DOC Beverage Grant 84,600 16,300 0 100,900 14,500 0 14,500 86,400
Traffic Safety 0 196,800 0 196,800 0 196,800 196,800 0
Solid Waste 2,430,700 810,000 0 3,240,700 555,300 300,000 855,300 2,385,400
Measure W - Safe Clean Water Program 3,580,700 1,109,500 0 4,690,200 1,033,000 0 1,033,000 3,657,200
Dow Settlement Fund 6,058,800 89,800 0 6,148,600 5,800,000 0 5,800,000 348,600
State Gas Tax 148,000 1,592,300 0 1,740,300 104,500 1,400,000 1,504,500 235,800
Road Maintenance/Rehabilitation Act 2,216,700 1,547,700 0 3,764,400 1,500,000 0 1,500,000 2,264,400
Air Quality Management District 282,800 81,100 0 363,900 127,600 0 127,600 236,300
Community Development Block Grant 700 307,900 0 308,600 307,900 0 307,900 700
Santa Anita Grade Separation 782,600 19,600 0 802,200 0 0 0 802,200
Transit 0 3,616,600 663,400 4,280,000 3,616,600 0 3,616,600 663,400
Proposition A 4,685,300 1,560,100 0 6,245,400 501,400 1,346,700 1,848,100 4,397,300
Transportation Impact Fund 632,800 435,800 0 1,068,600 200,000 0 200,000 868,600
Proposition C 4,145,800 1,300,500 0 5,446,300 1,315,600 0 1,315,600 4,130,700
TDA Article 3 Bikeway 17,300 45,000 0 62,300 40,000 0 40,000 22,300
STPL & ITS Special Fund 0 0 0 0 0 0 0 0
Measure R 2,803,300 967,800 0 3,771,100 90,300 1,115,600 1,205,900 2,565,200
Measure M 2,483,700 1,079,500 0 3,563,200 1,077,000 0 1,077,000 2,486,200
Capital Improvement 13,697,200 693,800 2,900,000 17,291,000 9,257,100 0 9,257,100 8,033,900
City Hall Reserve 100 0 0 100 0 0 0 100
Lighting Maintenance 193,300 1,474,900 873,300 2,541,500 1,485,400 0 1,485,400 1,056,100
Water Fund (7,943,100) 17,295,000 0 9,351,900 20,563,500 0 20,563,500 (11,211,600)
Sewer Fund 8,086,700 2,839,500 0 10,926,200 3,249,600 0 3,249,600 7,676,600
Par 3 Golf Course Fund 3,096,600 2,068,400 0 5,165,000 1,494,000 0 1,494,000 3,671,000
Equipment Replacement 16,151,100 421,400 1,900,000 18,472,500 1,980,000 36,600 2,016,600 16,455,900
Redevelopment Successor Agency (2,484,500) 2,661,400 0 176,900 2,661,400 0 2,661,400 (2,484,500)
General Obligation Bond 2012 504,000 422,600 0 926,600 407,100 0 407,100 519,500
General Obligation Bond 2011 590,400 535,500 0 1,125,900 522,000 0 522,000 603,900
Pension Obligation Bonds 2020 0 5,873,500 0 5,873,500 5,873,500 0 5,873,500 0
Total 127,745,100 144,355,400 18,192,700 290,293,200 168,779,600 10,109,500 178,889,100 111,404,100
USES OF FUNDSSOURCES OF FUNDS
CITY OF ARCADIA
SUMMARY BY FUND
FISCAL YEAR 2025-2026 PROPOSED BUDGET
ESTIMATED ESTIMATED PROPOSED ESTIMATED
FUNDS FIVE-YEAR FIVE-YEAR FUNDS
7/01/2025 REVENUE EXPENDITURE 6/30/2030
CAPITAL OUTLAY FUND 13,697,300 20,222,300 (30,683,900)3,235,700
AMERICAN RESCUE PLAN FUND 4,396,400 - (4,396,400)-
PARK AND RECREATION FUND 6,004,100 7,277,800 (4,864,100)8,417,800
FIRE FACILITIES FUND 318,800 558,300 - 877,100
MEASURE W CLEAN, SAFE WATER PROGRAM 3,208,000 5,566,800 (3,986,400)4,788,400
GAS TAX (HUTA) FUND 148,400 7,913,400 (7,121,000)940,800
ROAD MAINTENANCE AND REHABILITATION
PROGRAM 2,216,700 7,681,100 (7,800,000)2,097,800
AQMD 246,800 406,700 (218,400)435,100
PROP C LOCAL RETURN 4,170,300 6,265,700 (9,193,400)1,242,600
TRANSPORTATION IMPACT FUND 542,000 1,328,500 (1,190,700)679,800
MEASURE R LOCAL RETURN 1,773,900 4,688,700 (5,880,800)581,800
MEASURE M LOCAL RETURN 2,024,500 6,838,200 (6,768,600)2,094,100
WATER FACILITY RESERVE 12,397,700 477,000 (15,494,400)(2,619,700)
WATER EQUIPMENT RESERVE (869,700)- (2,842,100)(3,711,800)
SEWER FUND 8,972,200 14,302,400 (17,987,200)5,287,400
EQUIPMENT FUND 16,157,700 10,960,000 (18,966,700)8,151,000
SUMMARY OF PROPOSED FIVE YEAR CAPITAL PROGRAMS
FISCAL YEAR 2025-26 THROUGH 2029-30
CITY OF ARCADIA
Exhibit "B"
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RESOLUTION NO. 7638
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA,
CALIFORNIA, ADOPTING A BUDGET FOR FISCAL YEAR 2025-2026
AND APPROPRIATING THE AMOUNTS SPECIFIED THEREIN AS
EXPENDITURES FROM THE VARIOUS FUNDS
WHEREAS, on June 3, 2025, the City Manager submitted to the City Council a
proposed Budget for Fiscal Year 2025-2026, a copy of which is on file in the Office of the
City Clerk; and
WHEREAS, Section 1204 of the Arcadia City Charter requires notice and hearing
for consideration of a proposed operating budget and its adoption by resolution; and
WHEREAS, the aforementioned proposed Budget includes the budget for the
ensuing Fiscal Year 2025-2026; and
WHEREAS, notice of the public hearing on the proposed Budget and a summary
of the proposed Budget were published on May 23, 2025; and
WHEREAS, the duly noticed public hearing was conducted by the City Council on
June 3, 2025.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA,
CALIFORNIA, DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS:
SECTION 1. That certain “City of Arcadia Budget, Fiscal Year 2025-2026”, as on
file in the office of the City Clerk, together with any approved amendments thereto, is
hereby adopted, in pertinent part, as the official budget of the City of Arcadia for the Fiscal
Year 2025-2026 and the amounts specified therein as expenditures from the funds
indicated are hereby appropriated for the purposes specified therein.
SECTION 2. The City Clerk shall certify to the adoption of this Resolution.
RESOLUTION NO. 7639
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA,
CALIFORNIA, ADOPTING A CAPITAL IMPROVEMENT AND
EQUIPMENT PLAN FOR FISCAL YEARS 2025-26 THROUGH 2029- 30
WHEREAS, on June 3, 2025, the City Manager submitted to the City Council a
proposed plan entitled, "Capital Improvement and Equipment Plan, Fiscal Years 2025-
2030", a copy of which is on file in the office of the City Clerk; and
WHEREAS, Section 1205 of the Arcadia City Charter requires notice and hearing
for the consideration of a capital program and its adoption by resolution of the City
Council; and
WHEREAS, notice of the public hearing on the proposed Capital Improvement and
Equipment Plan was published on May 23, 2025; and
WHEREAS, the duly noticed public hearing was conducted by the City Council on
June 3, 2025.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA,
CALIFORNIA, DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS:
SECTION 1. That certain "Capital Improvement and Equipment Plan, Fiscal Years
2025-2030", as on file in the office of the City Clerk, together with any approved
amendments thereto, is hereby adopted, in pertinent part, for Fiscal Year 2025-2026.
SECTION 2. The City Clerk shall certify to the adoption of this Resolution.
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