City officials presented a proposed fiscal year 2025–26 budget at a June council workshop, telling the City Council the $2.4 billion citywide plan balances ongoing operations for the coming year but depends on one-time revenues, bond proceeds and reserve draws to close an operating gap.

The workshop, led by the City Manager and Finance Director Moreno, outlined operating sources of roughly $608 million and operating uses of about $672 million in the general fund, producing an operating deficit that the staff plans to cover in part with one-time items including remaining bond proceeds, proceeds from the sale of a hotel parking structure and reserve draws. “We present a balanced budget for your consideration. But we only got there by drawing on reserves, bond proceeds, and one-time revenues from the sale of Car Park 2,” Finance Director Moreno said in the presentation.

Why it matters: the plan sustains current service levels for police, fire, parks, libraries and utilities but includes risks that could increase deficits in later years. Staff emphasized the city’s heavy reliance on transient occupancy tax (TOT)—about 39% of general fund operating sources—and on resort-related transfer formulas that will decline as the city’s LPMR (resort-related) bonds are retired. Council members pressed on reserve policy, staffing costs and public engagement before the budget returns for further review and a public hearing.

Major revenue and expense points

- Total proposed citywide expenditures: about $2.4 billion; the general fund is approximately 22% of that total.
- The “big three” general fund revenues: TOT (proposed ~$246.6 million for FY25–26; staff projects modest growth of 2.4%), sales and use tax (~$115 million), and property tax (~$111 million). Finance staff noted TOT has declined from prior budgeted levels and remains sensitive to changes in tourism patterns.
- Labor costs: roughly $369 million (nearly 70% of the general fund), expected to rise with expiring labor agreements and the ongoing classification/compensation study.
- Capital Improvement Program (CIP): a proposed five-year CIP of about $268.6 million; only the first year is adopted now and future projects will return for contract awards.

One-time fixes and near-term strategy

The budget balances the near-term operating gap using: remaining proceeds from pandemic-era deficit bonds, $20.3 million in proceeds from the Hilton parking-structure sale, roughly $10 million previously set aside for debt repayment, and planned reserve draws. Staff said early payoff of resort-related transfer bonds expected in 2027 will free up material recurring revenue in later years (staff estimated more than $120 million annually once those obligations end), but cautioned that the city is not at that point yet and reserves would fall to about 11% of general fund expenditures under the current plan.

Risks and sensitivity

Staff presented sensitivity tables showing how a modest decline in the “big three” revenues or higher-than-expected salary increases would widen the structural gap. Staff also highlighted dependencies on federal funding (for example, the Community Development Block Grant) and warned that proposed federal cuts could reduce revenues used to support programs now funded by grants. “We monitor revenue and expenditure performance regularly and we will reevaluate and respond accordingly as new information comes to light,” Finance Director Moreno said.

Department highlights in the workshop

- Community Services: Director Shawnee presented a $79.5 million departmental budget (all funds), with a $52.7 million general fund allocation for operations and a $7.9 million capital program. Staff said community services relies heavily on part-time labor and funds libraries, parks, recreation and human/neighborhood services; library visits and circulation remain high and park projects include new playgrounds and splash pads.

- Housing and Community Development (HCD): Director Grace Stepter reported a department budget of about $206 million, mostly federal and state grants and entitlement funds. HCD expects to disburse roughly $121 million in rental assistance in FY25–26, administer the Housing Choice Voucher (Section 8) program and continue development and rapid rehousing activities. Stepter said the department has secured tens of millions in state and federal development funds and continues to monitor federal proposals that could reduce CDBG, HOME or other housing funds.

- Public Works: Director Rudy Imami (as read in staff slides) described a $298 million proposed budget focused on capital needs, maintenance and corridor projects such as Beach Boulevard revitalization, neighborhood improvements and pavement management. The department noted a 21% increase in the capital budget due to the timing of multiyear projects and emphasized coordination across utilities and other agencies.

- Anaheim Public Utilities: Utilities General Manager Du Koo Lee outlined a proposed utilities budget of about $758 million that funds electric and water operations, wholesale purchases and a $133 million capital program for substations, undergrounding and reliability upgrades. The utilities program highlighted completion of two phases of the groundwater treatment project and a grant award to offset groundwater capital costs.

Council members’ questions and next steps

Council members pressed staff on reserve policy (several said 11% reserves were at or near policy minimums and counselled caution), community outreach for the budget (staff said the proposed budget was posted May 30 and outreach included district meetings and an online MyCityBudget page), and specific service areas such as park restroom repairs and public safety staffing. Staff said a second workshop is scheduled and a public hearing on the formal adoption will occur later in the week on June 17.

What’s next

This workshop was informational; no formal budget adoption occurred. Staff will present remaining departmental budgets at the next workshop and return with a formal proposed budget ordinance and public hearing on June 17. Council indicated it expects further follow-up on reserve policy, the classification-and-compensation study, and targeted park and public-safety infrastructure requests.