City Council addresses budget deficits with funding shifts, reserves spending

The Palm Springs City Council directed staff Wednesday to pursue a series of funding shifts and reserve spending to address projected general fund deficits of $1.3 million in fiscal year 2025-26 and $8.5 million in 2026-27.

The council’s direction came during a lengthy budget session where Finance Director Kristopher Mooney presented a draft budget showing total city spending rising from $172.7 million in the current year to $173.4 million in 2025-26 and $182.3 million in 2026-27.

City revenues are projected to grow modestly, from $172.1 million in fiscal year 2025-26 to $173.8 million the following year. Transient occupancy taxes are expected to hold steady at about $49 million annually, while cannabis taxes are predicted to continue their decline.

City officials attributed the shortfalls to rising personnel costs, a one-time $29 million payment to reduce pension liabilities, and continued transfers to housing and retirement reserves.

The council directed staff to use Measure J infrastructure funds to cover $5 million in general fund expenses in fiscal year 2026 and $8.5 million in 2027, focusing on deferred maintenance projects and public safety vehicle purchases rather than direct fund transfers.

“I would argue very strongly against taking money out of Measure J into the general fund,” said Councilmember Jeffrey Bernstein. “But you have mentioned that there are expenses in the general fund which makes sense as Measure J projects.”

The council also agreed to reduce annual contributions to the city’s pension reserve from $6 million to $1 million while maintaining the full $3 million annual allocation for affordable housing programs.

Mooney warned the city’s unassigned fund balance will drop from $54 million at the end of this fiscal year to around $21.4 million by 2027 under the proposed changes, which he said still meets recommended reserve levels.

Despite the budget pressures, the council maintained funding for nearly $150 million in capital improvement projects over the next two years, including a $42.5 million library renovation, $6 million for 24 pickleball courts at Demuth Park, and its share of major bridge improvements.

The budget adds four new police officers and four new firefighters. A $3 million firearms training facility renovation and $4.6 million Real-Time Operations Center for police are also included.

Still, Mayor Ron deHarte expressed concern the budget doesn’t adequately fund economic development initiatives, saying the department received only a $69,000 increase despite ambitious goals for business attraction and revenue diversification.

Palm Springs International Airport continues as a bright spot financially. During the airport budget presentation, councilmembers heard that airport revenues are projected at $108 million in fiscal year 2026 and $113 million in 2027.

The airport set a record in March with 493,450 passengers and maintains nearly $100 million in reserves. Major capital projects at the facility include an $80 million baggage handling system replacement and $10 million in terminal restroom renovations. Much of the work at the airport is paid for through federal taxes.

The council directed staff to implement quarterly budget reviews and bring back a revised budget incorporating the changes on June 25 for final adoption.

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