La Palma's Financial Situation



The City of La Palma is at a financial crossroads and continues to face a very challenging financial environment. Over the past few years, the City has seen a 24% reduction in revenues and the City Council has responded by reforming employee pensions, reducing the full-time workforce by 20%, postponing maintenance projects, and cutting back on City services, including a reduction in police officers. These cuts, which add up to $1.77 million in ongoing costs are not nearly enough for the City to achieve and sustain long term fiscal health. In fact, the Fiscal Year 2016-17 Budget, adopted in May continues to draw on reserves. The long term forecast shows that the City will have a $1 million deficit by FY 2021-22 and a $1.5 million deficit by FY 2025-26 if nothing is done. As already stated, the City has been addressing these forecasts with cuts throughout the organization; however without a change in revenues, it appears that future budgets could not be balanced without drastic reductions to services and, if nothing is done, the City will spend through its reserves in the next ten years.

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What caused this situation?

Over the past several years, the City has experienced a 24% decrease in revenues which equates to a loss of $2.9 million dollars. This loss of revenue was due to a number of reasons—all out of the City’s control—including a drop in sales tax revenue due to the loss of a major business, another business changing its business model, declining oil prices, a drop in property tax due to the move of a major property owner to non-profit status, and the loss of redevelopment, which requires the City to allocate more of its general fund dollars towards street maintenance and other major capital projects. In addition to revenue challenges, the City faces two significant long term expenditure threats; increasing retirement costs largely associated with prior unfunded liabilities and increasing insurance costs due to escalating cost trends into the foreseeable future.

10 Year Projected Revenue and Expenses (In Millions of Dollars)

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What cuts have been made?

In response to decreasing revenues, the City has done much over the past several budget cycles to address its financial situation. Through the revision of the General Plan, revenue opportunities were created, including digital billboards along the freeway corridor which will generate $204,000 in annual revenues once completed. In addition to creating new revenue opportunities, the City has made several reductions, including: 

  • 20% reduction in full time staff from 65 to 52 employees - the smallest workforce since 1985
  • Restructuring throughout the organization, including reducing upper management while maintaining as many line positions as possible
  • Significant changes in both the 2011 and 2015 labor agreements, which reduced costs and unfunded pension liabilities, including increased employee contributions towards retirement, lower retirement tiers, and most recently a 5% reduction in take home pay for all employees.
  • Cuts to programs and expenditures
  • These reductions total $1.77 Million in cuts. As you can see the City’s financial situation is not in response to inaction, but in spite of significant actions already taken.

Citywide Staffing History