The council on Tuesday, June 17, unanimously approved the 2025-26 Avalon city budget.
Councilmember Mary Schickling was absent.
The council reached consensus quickly. Discussion was brief following the presentation by the director of the Finance Department.
Background
Space limits make it impossible to include everything. The following are highlights.
“The proposed FY 2025-2026 Operating and Capital Budget of $55.18 million reflects a 8.5% decrease from the prior year’s budget,” wrote Finance Director Matt Baker in the staff report.
“The decrease in budgeted expenditures was the result of more detailed estimates around the timing of capital expenditures, particularly related to the Cabrillo Mole terminal, and the start of construction for the Five Corners Pedestrian Improvement Project in the current year,” Baker wrote.
“Avalon has made significant strides re-building its reserves while restoring the levels of services from the cuts made in response to the pandemic,” according to the budget message signed buy City Manager David Maistros.
“The proposed budget is funded by General Fund revenues totaling $19.36 million, including $13.65 million in operating revenues and $5.71 million in grant funding for capital improvements,” according to the budget message.
“General Fund appropriations total $24.19 million, with operating expenditures totaling $13.65 million, capital outlays totaling $9.66 million, and transfers to other funds totaling $880 thousand. Recurring revenues exceed ongoing expenditures; however, reserves are required to fund significant one-time capital outlays, including the Five Corners Pedestrian Improvement Project, Pebbly Beach Road Revetment Repairs, and other capital outlays,” according to the budget message.
“The proposed budget estimates Harbor Fund revenues totaling $13.48 million, comprised of $10.65 million in operating revenues and $2.30 million in grant revenues. Harbor Fund appropriations total $13.48 million with $9.05 million in operating expenditures and $4.43 million in capital outlays,” according to the budget message.
“Similar to the General Fund, recurring revenues exceed recurring expenditures in the Harbor Fund, with reserves utilized to fund significant capital outlays. The Harbor Fund does not currently have reserves at the targeted level, with significant capital outlays utilizing its existing working capital. During the current fiscal year, the City Council approved increases to cross channel and cruise ship wharfage rates which should provide additional funding to restore reserves to target levels, after completing the significant capital investments required to maintain the harbor,” according to the budget message.
“The proposed budget anticipates General Fund operating revenues of $13.65 million and grant revenues of $5.71 million. Visitor-driven tax revenues, including transient occupancy tax (TOT), sales tax, admission tax, account for 71.3% of operating revenues in the General Fund. Property tax revenues budgeted at $2.07 million, includes General Fund property tax revenues, property tax in lieu of Vehicle License Fee (VLF) revenues, and residual and pass-through property taxes from the Redevelopment Property Tax Trust Fund (RPTTF) and account for 15.1% of operating revenues. The remaining 13.5% of General Fund operating revenues include other taxes (e.g. business licenses, franchise fees), charges for services (e.g. ambulance fees), and licenses and permits (e.g. vehicle permits, building permits). The overall increase in these revenues is largely attributable to increased interest income estimates and increases in property tax revenue estimates,” according to the budget message.
“Post-pandemic pent-up demand and other inflationary pressures contributed to a significant increase in TOT revenues for both hotels and vacation rentals beginning in April 2021 through December 2022,” according to the budget message. TOT stands for transient occupancy tax (hotel/vacation rental tax).
“The revenue increase was driven by increases in average nightly rates as room inventory and occupancy rates returned to pre-pandemic levels. While average room rates remain higher than pre-pandemic averages, average occupancy rates reported to the City have decreased slightly resulting in decreased TOT revenues. Temporary hotel closures for renovation are anticipated to impact revenues in the upcoming fiscal year with hotel revenues estimated at $5.10 million or 3.8% below current year estimates,” according to the budget message.
“On August 6, 2024, the City Council voted unanimously to further extend a moratorium on the issuance of new transient rental licenses to July 30, 2025 to provide City Staff with additional time for analysis and to enhance existing regulations. While revenues from transient rentals are estimated to be down 1.4% during the fiscal year, the decrease was likely not attributable to the moratorium considering similar decreases were experienced in revenues from hotels over the same period. The proposed budget estimates TOT from transient rentals to be down 4.0% compared to current year estimates,” according to the budget message.
“Sales tax revenue, budgeted at $1.39 million is the second largest revenue source in the General Fund, representing approximately 10.2% of operating revenues. One percent of the current 10.25% sales and use tax rate in the City, commonly referred to as the Bradley-Burns Local Tax, is distributed to the City’s General Fund. The City’s sales tax consultant estimates sales tax revenues to total $1.44 million next year; however, the budget estimates sales tax revenues to be flat compared to current year estimates. As shown in the chart, restaurants account for over half of all taxable sales generated in the City and County Pools account for another 18.1%,” according to the budget message.
“Admission tax revenues, a 4% tax on gross receipts for ticketed tours, activities, and events, totaling $845 thousand account for approximately 6.2% of General Fund revenues in the proposed budget. Admission tax revenues are derived from daily amusement activities available in the City, including zip-line and golf cart rentals, as well as from major ticketed events, including the Catalina Island Wine Mixer and JazzTraxx music festival. Similar to sales tax revenue, admission tax revenue has continued to grow from post-pandemic peaks albeit at a slower rate. The budget for the upcoming fiscal year estimates revenues to be down slightly from current year estimates with any growth derived from increased gross receipts from existing operations in the City as no new ticketed activities or events were factored in the budget,” according to the budget message.
“The proposed General Fund operating expenditures, totaling $13.65 million, represent an increase of approximately $1.03 million or 8.2%, compared to the current year budget,” according to the budget message.
The document identified the following “significant” changes:
“Contracted law enforcement services with the Los Angeles County Sheriff’s Department budgeted at $2.13 million account for 89.5% of the City’s law enforcement budget and a 2.9% increase from the current year’s budget. The overall decrease in budget is attributable to an estimated decrease in funding from the Citizens’ Option for Public Safety (COPS) program, which is used to fund additional deputy patrols during the peak visitor season,” according to the budget.
“Fire Department operating budget increased by $441 thousand or 12.6% with salaries and benefits accounting for 72.9% of the department’s operating budget. Salaries and benefits includes a new part-time administrative assistant position. Maintenance and operations budget increased by $62,000 with a $30,000 increase in personal protective equipment to be partially offset by $20,000 in grant funds,” according to the budget.
“Public Works budgeted operating expenditures increased by $405 thousand or 20.8%, driven by increases in salaries and benefits and internal services. The increase in salaries and benefits is partially attributable to the Project Manager position being reallocated to the department from Planning. The increase in internal services reflects the department’s share of increased expenditures for vehicle replacement in the proposed budget,” according to the budget.
“Planning Department budgeted operating expenditures decreased by $72 thousand or 9.4% from the current year with reduction in salaries and benefits from the reallocation of personnel to Public Works offset by additional increases to contract services to cover contracted building inspector services, added during the middle of the current fiscal year, for a full fiscal year,” according to the budget.
“Community Services budgeted operating expenditures increased by $192 thousand or 14.1% as the result of estimated increases in salaries and benefits from MOU negotiations and increased facility maintenance budgets to address landscaping and lighting at City parks and Tremont Hall,” according to the budget.
“Other General Fund departments include the City Infrastructure (Fund 105), Stormwater Fund (Fund 124), Cemetery Fund (Fund 133), and Successor Agency Administration (Fund 136), with Hospital Fund (Fund 141) activity reported separately from the General Fund,” according to the budget.
“The proposed budget anticipates Harbor Fund operating revenues of $10.93 million. Similar to the General Fund, visitor-driven revenues, including cross channel and cruise ship wharfage fees, account for the majority of revenues in the Harbor Fund. Harbor revenues increased with the lifting of pandemic related restrictions in Fiscal Year 2021-2022 and have grown slightly over the following three fiscal years. During the current fiscal year, City Council adopted increases in cross channel and cruise ship wharfage rates that will go into effect in September 2025 and January 2026, respectively. City Council also approved fee increases of 3.2% to nightly moorings and other miscellaneous harbor fees based on CPI increases over the prior year,” according to the budget.
“The City currently charges a three dollar ($3) per passenger wharfage fee on cross-channel ferry operators utilizing the Cabrillo Mole ferry terminal, which increased from $2.50 in March 2019 with the additional $0.50 dedicated to harbor capital projects. Cross-channel wharfage accounts for 39.1% of operating revenues based on current year revenue estimates. Historically, the City has not increased the per passenger rate on an annual basis and relies on increased visitor counts in order to grow the revenue. During the current fiscal year, the City Council adopted a $2.00 per passenger increase on passengers departing Avalon harbor that is scheduled to go into effect on September 2, 2025. The increase is estimated to generate approximately $450 thousand in new revenues during the upcoming budget year with the entire increase dedicated to funding harbor capital improvements, including harbor maintenance. As the increase was entirely dedicated to harbor capital, wharfage revenues dedicated to harbor operations, including Harbor Patrol, are budgeted to be flat with current year revenue estimates,” according to the budget.
“Nightly mooring fees are the second largest revenue source in the Harbor Fund and account 18.3% of operating revenues. Nightly mooring rates are set annually by City Council through the miscellaneous fee schedule and were increased by 3.9% in July 2024 based on CPI. Mooring rates are scheduled to increase by an additional 3.2% in the upcoming fiscal year. Mooring revenues tend to be more sensitive to the impacts of weather than other harbor revenues. Nightly mooring revenues are estimated to total $2.07 million in the current fiscal year but are budgeted to be down 3.4% compared to current year estimates, despite the increase in nightly rates,” according to the budget.
“Cruise ship revenues account for the majority of growth in Harbor revenues, as a result of increased per passenger rates (previously $4 per passenger prior to the pandemic) and larger average ship passenger capacities post-pandemic,” according to the budget.
“The current year had 106 arrivals with an average passenger count of 3,259 passengers compared to 112 scheduled arrivals with an estimated passenger count of 3,219 in the current year budget. For the upcoming fiscal year, there are 124 scheduled arrivals with an average estimated occupancy of 3,422 passengers. During the current fiscal year, City Council approved a $2.50 per passenger rate increase to provide additional funding for the cruise ship passengers’ proportional share of capital improvements in the harbor which is scheduled to go into effect January 1, 2026 and is estimated to generate an additional $545 thousand during the upcoming fiscal year,” according to the budget.
“While the current fiscal year is anticipated to see a record number of visitors to the City, the growth in visitors is largely attributable to the increase in cruise ship passengers,” according to the budget.
“The proposed Harbor Fund operating expenditures, totaling $9.05 million, represent an increase of approximately $443 thousand or 5.1%, compared to the current year budget,” according to the budget.
“Harbor Public Works operating expenditures are budgeted to increase by $189 thousand or 7.5% in the proposed budget, with salaries and benefits increasing by $58 thousand or 11.0%. Contract services are budgeted to increase by $128 thousand or 7.9% due to estimated increases in the co ntract for lifeguard services with the County of Los Angeles Fire Department of $50 thousand and increases in the beach maintenance account of $68 thousand for increased maintenance efforts at City beaches,” according to the budget.
