Hermosa Beach's budget squeeze, explained — where the money goes, and what's coming

June 2026 · Last updated: June 11, 2026

Hermosa Beach is staring at a $3.2 million structural deficit in its 2027 general fund budget, and a projected five-year shortfall of $19.3 million — nearly twice the city's $10.6 million in general fund reserves — per Administrative Services Director Brandon Walker's presentation reported by Easy Reader. "Doing nothing is no longer an option," City Manager Steve Napolitano told the council at the first of seven budget sessions.

If you pay taxes, park downtown, or pull a permit in Hermosa, here is how the math broke, what bills are coming, and what's likely to land on you.

How did Hermosa get here?

The structure, not one bad year. Recurring costs are growing 4–6% annually while revenues grow 2–4%, Walker told the council, per Easy Reader. "We were just lucky enough to have one-time windfalls every year to cover shortfalls," he said — federal pandemic relief, staff vacancy savings, and deferred capital spending balanced the 2025-26 budget. Those are gone.

The cost drivers are mostly contracts the city doesn't fully control: the LA County fire contract is rising 26%, adding roughly $1.8 million over three years; police overtime ran an estimated $1.18 million; labor costs climb about 3% a year. And the county has signaled it wants Hermosa to pay the full cost of lifeguards and beach maintenance — $4.9 million annually — when the current $400,000-a-year arrangement expires, per the same report.

What big bills are coming?

Three stand out, none funded:

The pier. A new pier pencils at $58.6 million in 2032 dollars; repairing the existing one indefinitely runs roughly $100 million, per the May 5 staff report covered by Easy Reader. Council must pick a direction by the end of 2026. We covered the full decision in our pier deep dive.

The City Yard. The city's maintenance facility — its auto garage is thought to be the oldest building in Hermosa — needs full replacement, listed at $21 million in the 2024-25 capital budget (staff cited $20 million this spring), per Easy Reader's January report. Council approved a $565,000 pre-construction contract with Cumming Management Group in January, and on May 26 awarded Roux Associates a $498,800 CEQA-analysis agreement (plus a $75,000 contingency), per the council's May 26 post-agenda; Public Works Director Joe SanClemente was candid that with about $1 million in the capital budget and another $1 million in reserves, the project "does remain largely unfunded."

Everything else. The city's unfunded capital backlog is estimated at between $90 million and $220 million, per Easy Reader's May 27 council coverage. At the May 5 pier session, Walker put the gap plainly: Hermosa needs $8–12 million a year for basic citywide infrastructure repair but is replenishing its general funds at $4–6 million.

What has the city already done?

On April 28 the council approved the first citywide fee update since 2016 — phased over two years, closing what staff sized at roughly $1 million a year in hidden general fund subsidy from under-priced permits, per Easy Reader. Nearly 20 of the most contested items, including a commercial use-permit fee proposed to more than double, were pulled for revision after business pushback. For FY2027, the gap has been patched with deferred equipment purchases, reduced reserves, and over $1 million in departmental operational cuts, per Walker; staff was also directed to develop a 10% reduction strategy.

What new revenue is on the table?

Per Easy Reader's budget coverage: a 1% sales tax measure (roughly $4 million a year — polling at 55%, headed for a council decision before August; our deep dive here); legalizing short-term rentals in commercial districts and collecting the 14% hotel tax on them, up to $1 million a year, plus a staff estimate of up to $5 million in retroactive STR fees; and parking rate increases with "dynamic" pricing, $1.5–2 million.

What happens next — and how do you weigh in?

Budget adoption hearings are set for June 9 and June 23, with final adoption June 23, per Easy Reader. The sales-tax-versus-hotel-tax decision comes before August, the deadline for the November ballot. Agendas post at least 72 hours ahead on the city's agenda portal, and the city accepts written eComments until 3 hours before each meeting, per the Agendas, Minutes & Video page.

We track this story, and everything else that hits your money in MB and Hermosa, in the twice-weekly Pier to Pier newsletter.

General information, not advice.

Sources

  • Easy Reader, "City confronts deficit as one-time budget fixes are exhausted," May 7, 2026 — https://easyreadernews.com/city-confronts-deficit-as-one-time-budget-fixes-are-exhausted/
  • Easy Reader, "City Yard overhaul takes first step after years of delay," January 15, 2026 — https://easyreadernews.com/city-yard-overhaul-takes-first-step-after-years-of-delay/
  • Easy Reader, "Clock ticking on Hermosa Beach pier's future," May 7, 2026 — https://easyreadernews.com/clock-ticking-on-hermosa-beach-piers-future/
  • Easy Reader, "City approves fee increases, holds some fee items after business community pushback," April 2026 — https://easyreadernews.com/city-approves-fee-increases-holds-some-fee-items-after-business-community-pushback/
  • Easy Reader, "Survey on 1% sales tax measure shows community support," May 27, 2026 — https://easyreadernews.com/survey-on-1-sales-tax-measure-shows-community-support/
  • City of Hermosa Beach, Agendas, Minutes & Video — https://www.hermosabeach.gov/our-community/agendas-minutes-video

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