The City's FY 2026-27 Adopted Budget (PDF) has a General Fund operational surplus of $2,716,946. When interfund transfers are included, the City expects to draw down fund balance by an estimated $8,825,292, primarily due to one-time transfers for capital projects and insurance reserves.

These are the final, adopted (PDF) figures. They reflect a change from the Proposed Budget presented on May 5, 2026, which showed a smaller operational surplus of $1,971,768 and, once transfers were included, a larger potential deficit of $9,588,758 (driven by $11,123,938 in net transfers out, including $5.0 million to the CIP Fund and $6.0 million to the Insurance Reserve Fund). On June 2, 2026, the City Council approved additional low-impact expenditure reductions of $773,978, which increased the operational surplus to the $2,716,946 reflected in the Adopted Budget.

Even with this planned use of fund balance in FY 2026-27, total General Fund reserves are expected to remain above recommended industry best-practice levels.

In February 2026, the City changed how it presents transfers between funds in its budget documents. In the past, the City's budget highlighted revenues and expenditures before accounting for transfers between funds. Now, those transfers are included alongside revenues and expenditures from the start. This is a presentation change, not a change in how money is actually spent.

The new approach follows a recommendation from the City's external auditors, aligns with guidance from the Government Finance Officers Association and the Governmental Accounting Standards Board, and matches how other AAA-rated cities present their budgets. It also supports the City's goal of making the budget easier for residents to understand and evaluate.

When transfers between funds are included, the FY 2026-27 Adopted Budget (PDF) projects a use of fund balance of $8,825,292. This is in line with the City's practice over the past several years, as shown below.

The single biggest reason for this year's number is a one-time $6.0 million transfer to the Insurance Reserve Fund. That fund has been underfunded for several years: rising claims and litigation costs, combined with a funding formula based on past averages, mean the fund has paid out more than it has taken in since FY 2022-23. By the end of FY 2025-26, the fund is projected to have only about $1.8 million on hand, which isn't enough to cover expected FY 2026-27 costs. The $6.0 million transfer closes that gap.

As pending litigation is resolved, the City expects to recover some costs through its excess insurance carrier. Because the timing of those recoveries is uncertain, they are not included in the adopted budget.

To keep pace with inflation, regulatory requirements, and increasing community demands for enhanced programming and infrastructure, the City has proactively brought forward tax increases and cost recovery fee updates:

• Measure A Transient Occupancy Tax (TOT) (2019): Paid by visitors staying in City hotels, motels, and short-term rentals to fund essential City services like police, fire/paramedic response, and street maintenance. After the rate increases went into effect, several public safety positions were added, as described below.
• Storm Drain Measure (2024): Approved for repairs, operations, maintenance, and improvements to the City’s aging storm drain system. The new assessments alleviated the General Fund subsidy of approximately $2 million per year.
• Measure MMB Transactions and Use Tax Measure (November 2024): Approved by voters for essential services and improvements, including:
  • Fixing potholes and maintaining City streets.
  • Keeping sidewalks, infrastructure, and parks safe, clean, and well-maintained.
  • Improving e-bike traffic enforcement and safety.
  • Making improvements to roads, intersections, bike lanes, and signals to improve traffic safety and reduce congestion.
  • Expanding sidewalks downtown to allow outdoor dining and improved access.
  • Repairing and upgrading aging community facilities.
• New Grant Funding from the State of California (2025): The City has secured $9.3 million in grant funding from various State, Federal, and County agencies for critical Capital Improvement Program (CIP), public safety, and regulatory compliance projects.

Under the Myers-Milias-Brown Act (MMBA), the City is required to engage in good faith labor negotiations regarding wages, hours and other terms and conditions of employment with its five bargaining units. In order to attract and retain qualified employees in a competitive labor market for these represented groups as well as for unrepresented employees, the Council evaluates various economic factors to inform their direction for salary and benefit increases. To prepare for labor negotiations, Council evaluates comparative compensation data from the City’s labor market of comparable Cities, recent CPI increases across multiple years, as well as the City’s budget and economic position. The City Council must continually balance affordability and economic uncertainty challenges with the need to stay competitive in the labor market. As an example, prior to the most recent round of police negotiations, the City Council reviewed and evaluated compensation analysis from 11 comparison agencies, which revealed Manhattan Beach ranked 6th in police officer base pay and 8th in total compensation following a period of high inflation, which significantly outpaced negotiated increases, and the provision of large increases to compensation packages in agencies across the region.

By bringing compensation closer to market rates, the City enhances its ability to:

• Attract qualified candidates
• Retain experienced and talented employees who might otherwise seek opportunities elsewhere
• Maintain the high-level public services Manhattan Beach residents expect and deserve
• Ensure robust staffing for public safety and essential City services

• Payroll broken down by fund
• Salary Schedule
• Class Specification
• Memoranda of Understanding (MOUs)

The City has added employee positions to reflect community priorities and to ensure the delivery of essential services, as documented in the City's Adopted Budgets.

The two new positions approved in Fiscal Year 2026-2027 are budget neutral, and result in a reduction of $22,829 in the general fund due to one of the new full-time position being allocated to multiple funds (water fund, sewer fund, parking fund and fleet fund) replacing part-time positions allocated to the General Fund.

Twenty of the 38 recently added positions (53%) were in public safety departments (Police and Fire), including seven sworn police officers and five sworn fire personnel.

Key Areas for Position Additions:

Public Safety

The Police Department added seven Sworn Police Officers, the first increase in sworn staffing since at least FY 2011-2012, in response to overwhelming community support (96% of 2022 survey respondents) for improved public safety.

Other positions in the Police Department were added to devote additional attention to crime prevention, active response, and investigative follow up. All were listed as priorities in community surveys. In addition, three new lead Community Service Officer positions were added to provide supervisory continuity in parking enforcement, animal control and community quality of life enforcement, and special events. The new positions are:

• 7 Sworn Police Officers
• Background Investigator
• Police Support Supervisor Administrative Assistant
• 3 Lead Community Services Officers

In the Fire Department, the Fire Marshal and Fire Inspector transitioned from sworn to civilian positions. The transition allowed the City to enhance suppression staffing and dedicate sworn staff to fire operations, while expanding technical fire prevention and inspection knowledge. In addition, three sworn firefighters/paramedics were added when the BLS Ambulance program was brought in-house for greater oversight of service delivery. Funding for these positions was offset by the elimination of contract ambulance services. The new positions are:

• Fire Marshal (Civilian)
• Fire Inspector (Civilian)
• Deputy Fire Chief
• 4 Firefighter/Paramedics plus the assignment of 2 former fire prevention positions to suppression, resulting in increased sworn suppression staffing of 6 Firefighter/Paramedics

The insourcing of the ambulance program has provided tangible benefits for City residents. While there is a cost for the additional employees, private ambulance costs decreased from $492,000 in 2022 to approximately $8,000 in 2025, nearly every 911 transport is now conducted by an in-house Advanced Life Support (ALS) unit instead of a Basic Life Support (BLS) unit through a contract company.

The investments in Fire Prevention have resulted in the completion of 100% State-mandated inspections, completion of a majority of plan reviews in-house, and the professionalization of fire prevention services by career professionals.

Finance

The Finance Department added four positions to meet growing workload demands resulting from new mandatory regulatory and reporting requirements by the Governmental Accounting Standards Board (GASB), State law, and the Internal Revenue Service. Due to the increased complexity and volume of new accounting regulations, the City’s independent external auditors recommended adding staff to comply with the accounting standards and improve overall accounting processes in all areas.

Additional staff was also critical to manage the City’s currently active grants totaling $77.5 million. The grants require dedicated staffing for accurate accounting and reporting, as well as communication with grant auditors. The work performed by the Grants & Financial Analyst results in additional grant funds being secured by the City. The new positions are:

• Grants & Financial Analyst
• Senior Accountant (recommended by external auditors to meet workload requirements)
• Accounting Technician
• Account Specialist I/II

Community Development Department

The Community Development Department enhanced plan review staffing to meet faster turnaround times for building plan review. The change was prompted by the higher volume of plan reviews and increasing complexity of land use regulations, including state and federal regulations and California Building Code requirements. Additionally, permit technicians were added to address service timelines for the processing of permits. These positions are funded by cost recovery fees (General Fund Service Charges) paid by development applicants. The new positions are:

• Senior Planner
• Associate Planner
• Plans Examiner
• 2 Permit Technicians

In conjunction with maximizing the optimization of the automated plan review process, the enhanced staffing has decreased plan check review times significantly, as outlined in the following chart:

Infrastructure & Technology Support

Seven positions in Public Works were added to improve the delivery of capital projects, manage the water distribution system, and reduce expenses by replacing costly street pressure washing contracts with in-house maintenance staff. The new positions are:

• Associate Engineer
• Maintenance Supervisor
• (2) Maintenance Worker I/II
• Maintenance Assistant
• Management Analyst (New in FY 2026-2027)
  • The new Management Analyst will provide much needed analytical, administrative and professional-level support to the five sections within Field Operations: Facilities, Fleet, Parks Maintenance, Street Maintenance and Urban Forestry in functions such as budget management, creating staff reports, and contract administration in connection with departmental managers and supervisors. This full-time position will be partially offset by two part-time positions currently allocated to the general fund, and be funded across multiple funds (water, sewer, fleet, parking).
• Water Systems Operator I/II

Other Departments

The Information Technology Department added one Office Assistant to meet increased needs of administrative and clerical support driven by the City’s growing reliance on technology in all City operations.

Also new in FY 2026-2027, the Human Resources Department added one cost-neutral Human Resources Assistant. Human Resources and Risk Management Divisions support employees in all aspects of their employment (benefits and leave administration, recruitment of new positions, safety and workers compensation, and employee and labor relations). Additional staff is needed to support the increased number of employees and evolving legal compliance requirements, while centralizing key functions currently handled by staff across all City departments. The addition of this full-time position was fully offset by savings in part-time salaries budgets and controllable cost expenditures.

The City maintains a staffing level that allows it to meet high community service demands and deliver the full scope of services expected by residents and visitors. While the employee-per-capita ratio is quantifiable, it must be considered alongside factors that uniquely impact staffing needs:

• Full-Service Public Safety: Manhattan Beach operates its own local Police and Fire services, unlike some cities of similar population that contract for these services with the County.
• Daytime Population and Tourism: As a desirable travel and leisure destination, Manhattan Beach attracts a significant number of visitors and a high daytime population that requires a greater level of public safety and infrastructure maintenance than solely residential communities of similar size.
• Scope of Services: The City manages its own utilities and has varying levels of capital improvement programs and development activity.

When compared to other Los Angeles County cities of similar resident populations with full-service Police and Fire Departments, Manhattan Beach's staffing is within the expected range:

*Population counts gathered from State of California Department of Finance Provisional population estimates as of January 2026 Count
**Information on employee counts obtained from the respective Cities' 2026-27 Budget Documents

Managing the City’s pension liabilities is a high-priority topic discussed annually during the budget development process and in the Annual Comprehensive Financial Report (ACFR).

The City’s financial planning uses a Five-Year Forecast within the Budget document and incorporates CalPERS projected liability payments. This serves as a critical planning tool to see funding imbalances in outer years to plan accordingly for adjustments.

The City proactively took a major step to manage this liability with the issuance of Pension Obligation Bonds (POBs) in 2021. Background information on the POBs and the City's overall pension strategy can be found on the Pension Obligation Bonds webpage.

The City is committed to fiscal stewardship through both cost-reduction and the pursuit of necessary new revenues to maintain and enhance community service standards.

City staff proactively implemented significant cost reductions and reprioritizations in the budget process to align spending with higher community priorities:

• In the FY 2026-27 Proposed Budget, City staff included $1.1 million in expenditure reductions to fund higher community priorities. Subsequently, the City Council directed an additional $773,978 in low-impact expenditure reductions and directed staff to bring further cost-containment options to the Finance Subcommittee for future consideration.
• In the Fiscal Year (FY) 2025-26 Budget process, a total of $862,365 was reduced or eliminated to fund higher community priorities.
• In the Public Works Department, the City replaced more costly street pressure washing contracts by hiring in-house maintenance staff in 2023, which reduced expenses and allowed for improved park upkeep.

Further cost reductions would impact service levels below the standards our community expects.