Hermosa Beach’s current labor contracts lock in raises through June 2028, protect senior staff from layoffs, and pay one group bonuses for meeting just one goal in five. Police pay alone rises about 18%, while the city’s own forecast shows deficits of $3.8 million to $5.6 million ahead.
More than half of what Hermosa Beach spends to run the city goes to the people who work for it. How much they are paid, and how hard that is to cut, was largely settled in August 2025, when the City Council approved three-year contracts with the city's employee unions.
Those contracts run through June 2028. They guarantee raises every July, protect longer-serving staff if jobs are cut, and in one case pay bonuses for meeting as few as one goal in five. Meanwhile, the city's own forecast shows spending overtaking revenue in 2027-28, with deficits of $3.8 million to $5.6 million projected over the next five years. On Nov. 3, voters decide on a half-cent sales tax expected to raise about $2 million a year.
"Although revenues are projected to grow modestly,expenditures continue to outpace revenues due to increasing labor costs, pension obligations, contractual services, inflation, and infrastructure demands. The City also faces significant long-term obligations, including increasing County Fire costs, ongoing beach operations expenses, aging infrastructure needs, and major unfunded capital projects such as the City Yard and long-term Pier rehabilitation efforts."
(City Manager Steve Napolitano)
The contracts, formally called memorandums of understanding (MOU's), set pay and job rules for each group of employees. Once the council approves one, its terms are locked in until it expires.
For most city employees, positions paid below the regional median were raised to it in July 2025. Everyone then got a 3% raise that month and 3% more in each of the next two years.
Police officers and sergeants got more: an 8% "market equity adjustment" plus 3% in July 2025, then 3% in 2026 and 2027. A top-step officer earned $9,198 a month in 2024-25 and earns $10,539 this year. By July 2027, officer base pay looks like it will be about 18% higher than before the contract.
Staff estimated the three-year cost at about $2.16 million for the police officers' contract and roughly $1.5 million for three other groups approved the same night. The council approved them all unanimously, without any discussion in open session or public comment. Two months earlier, finance staff had warned that revenue would grow only about 2% that year and that deficits would begin in 2027-28.
The 3% annual raises roughly match the 3% a year the city now expects its revenue to grow. The problem is what comes on top of them:
Personnel costs rose 4% this year. The city's forecast assumes raises continue at the same pace after the contracts expire, and on that basis spending passes revenue in 2027-28.
About 20 job titles in the professional and administrative group, including engineers, planners and analysts, can earn a "superior performance" bonus of up to 5% of pay every six months. The employee and department head agree on the goals. At the end of the period, the employee reports which were met and the director sets the bonus.
Share of goals met | Bonus |
|---|---|
Nearly all | 5% |
At least 80% | 4% |
At least 60% | 3% |
At least 40% | 2% |
At least 20% | 1% |
The contract says meeting any goal counts as superior performance. When Hermosa compares its salaries with other cities, it counts these employees' pay as 3.75% higher than base, which assumes the typical employee collects three-quarters of the maximum bonus.
The contract also says the bonus will count toward pensions "to the extent permissible by law." For employees hired since 2013, state law excludes bonuses from pension calculations. For earlier hires, CalPERS counts a bonus only for performance that is better than typical. In guidance issued Oct. 2, the agency said work that merely meets expectations does not qualify. CalPERS has rejected local bonus programs before and removed the payments from members' pension calculations. So, it would seem that this is another part of the package that definitely favors the longer-serving employees. That's even more important when you understand the significance of seniority when it comes to potential head count reduction in the future.
If the city eliminates a job, the contracts decide who goes. Layoffs follow seniority within each job title, so the newest employee goes first. A worker whose job is cut can drop into a lower title and displace someone with less seniority. Laid-off workers get first claim on their old jobs for two years.
That puts layoffs on the lowest-paid staff, so each one saves less. Newer hires are also in a cheaper pension tier created by a 2013 state reform, so cutting them leaves the costlier, older benefits in place.
So far the city has avoided layoffs. This year's budget closed a $3.2 million gap with $4.5 million in reductions, but about $3.2 million of that was postponed rather than cut. The city skipped $2.05 million in payments to replace vehicles and equipment and $1.16 million in contributions to its reserves. The jobs eliminated were two vacant positions and three vacant internships, which the city's June announcement called "workforce reductions." Savings from one of those jobs will pay for promoting other finance staff.
The police raises follow years of trouble keeping officers. In 2019, a retired Hermosa officer warned that the 38-officer department could shrink to 22. The city based the 8% adjustment on a salary survey of other police departments. The contract also lets new officers count up to 10 years at other agencies toward longevity pay, which adds 5% to base pay at each five-year mark.
Labor is not the only pressure. The city puts the added cost of its Los Angeles County agreements for fire protection, lifeguards and beach maintenance at about $3.1 million this year, and these contracts are all about to enter a potentially costly renegotiation. Mayor Mike Detoy sounded a warning during this year's budget cycle, claiming that these contracts 'could bankrupt the city' if the negotiation results in steep increases.
The contracts expire June 30, 2028, and the next council will negotiate their replacements. The city starts this year with no unassigned money left in its General Fund. If voters approve the sales tax, its estimated $2 million a year would cover about half of the smallest deficit the city now projects. Napoilitano has done a good job in opening the books this year to lay out the city's fiscal issues. But few people are talking about the locked-in challenges that these long-range staff contracts represent.
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