Mayor's remark comes as a mid-year review shows the city patching a $548,000 shortfall with one-time funds – a temporary fix for what staff describes as a permanent problem.

Hermosa Beach ended the first half of its 2025-26 fiscal year with a $548,000 general fund shortfall and a structural imbalance that staff warned Tuesday night will only widen in the years ahead. Mayor Mike Detoy did not mince words about the trajectory. "The county fire and the lifeguard contract will bankrupt us," he said. "We're at the point of no return." Detoy is himself a Fire Captain and union official in the City of Riverside, which adds an extra edge to his comments. He's also a supervisory board member of CalPERS, the state's pension scheme for government employees.

Hermosa's contracts with LA County for its fire and lifeguard services fall due for renewal within the next two budget cycles. The 20-year contract for beach maintenance dates back to 1997, and includes a complex revenue-sharing agreement involving the city's largest parking lot. City staff have already indicated that LA County are seeking significant increases in any renegotiation.

The city contracted fire and EMS to LA County Fire starting in December 2017, after dissolving its independent fire department. That contract allowed 4% annual increases for the first five years, with slightly larger increases negotiable after that, and either party can cancel after 10 years.

The mid-year budget review, presented to the City Council as the first item of a marathon session, laid out a picture of a city whose expenditures are consistently outpacing its revenues – and running out of one-time fixes to paper over the gap.

The city will close this year's shortfall by drawing on reserves: $236,000 freed up by the elimination of the deputy city manager position (a decision that Detoy argued against last year) and $312,000 from a grant contingency. That keeps the general fund technically in the black, but staff was direct about what that means. "The use of one-time funds are a temporary solution, not a permanent fix," the finance presentation noted. In total, the city has used approximately $910,000 in one-time money to balance this year's budget – and that figure would exceed $1 million if a one-time $100,000 administrative reimbursement were excluded from the revenue picture.

The five-year forecast presented alongside the mid-year figures shows expenditures exceeding revenues by $4.2 million over the period, driven primarily by labor costs. Newly negotiated MOUs with city employee bargaining units added $1.3 million to this year's expenditure side alone. Looking ahead, CalPERS pension obligations are expected to increase by approximately $600,000, fire service agreements with the county are nearing expiration with renegotiation expected to cost significantly more, and the city's light and landscaping district deficit requires an annual general fund subsidy of nearly $410,000.

The city has been here before. Voters rejected a sales tax measure twice. Parking rates were raised last October, generating a projected $645,000 increase in meter revenue this fiscal year – the largest single revenue increase in the mid-year report. A broader fee recovery discussion is scheduled for the next council meeting.

Where the money went

On the revenue side, gains in parking and plan check fees were partially offset by lower sales tax projections, declining permit revenue, and reduced recreation income -- the last partly attributable to the closure of the Kelly Courts pickleball facility for renovation. Property tax estimates were revised down slightly, reflecting higher delinquency rates and successful valuation appeals.

On the expenditure side, beyond the MOU increases, the city's legal budget jumped $200,000 -- from $480,000 to $680,000 -- due to litigation activity in the first half of the year. Community development contract services rose $150,000, covering contracted plan services and a permit technician to support state-mandated housing element reporting requirements.

The vehicles

One of the more pointed exchanges of the budget discussion concerned a $107,000 request to replace two 2014 Ford Fusion hybrids used by police administration with Ford Explorers. Police Chief Landon Phillips acknowledged the Fusions could probably be deferred another cycle. The council ultimately agreed, voting to push the vehicle replacement into the full 2026-27 budget review for a holistic look at the city's fleet.

The bus

The council also debated whether to continue its $20,000 annual subsidy for Beach Cities Transit line 109, which runs through Hermosa Beach.

BCT's transit manager appeared in person to present count data showing approximately 910 boardings and 1,130 alightings within Hermosa Beach over a four-month period – figures collected by bus operators at stops between November and March. Several public commenters spoke in support of retaining the service, including one resident who said she had taken the bus to the council meeting while recovering from knee surgery, and another who noted that seven riders a day at $20,000 annually works out to roughly $60 to $70 per rider – but argued the slow-season manual counts understated actual usage.

The council voted to continue BCT funding for the current year while directing staff toward a broader review of the city's overall public transit picture, including potential use of Measure A funds.

What comes next

The budget study session is scheduled for May, with full budget adoption in June ahead of the July 1 fiscal year start. Staff's message Tuesday night was unambiguous: the adjustments available within the current year are largely exhausted, and the 2026-27 cycle will require the council to make structural choices -- not just find another one-time reserve to draw down.

One public commenter, Laura Pena, put the challenge plainly: the five-year forecast shows a $4.2 million gap, and the public deserves a clear strategy for closing it that doesn't rely on higher taxes, higher fees, or one-time fixes alone. She also pointed to foregone property tax revenue from years of development delays as an underappreciated cost of inaction, estimating one stalled project alone cost the city upward of $170,000 in lost annual tax base.

The budget study session is expected to be the most consequential financial conversation the council has had in years. Based on Tuesday night's presentation – and the mayor's own assessment – it will need to be.

FURTHER READING

Mid-Year City Budget Review Highlights Financial Pressure

Hermosa Beach faces a $548K budget shortfall at midyear, with projected spending increases vs. original forecast outpacing revenue gains 3-to-1. Staff proposes one-time funds to close the gap for the third straight year.

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Pier Review Creates Pier Pressure

A year-long structural assessment of the Hermosa Beach pier comes to City Council Tuesday — with a cost-benefit analysis that could reframe how the city thinks about the structure’s future.

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