Auditors Report No Material Weaknesses or Significant Deficiencies in City’s Internal Controls

As part of Monday’s consent calendar, City officials are set to receive and file the city’s fiscal year 2025 annual financial reports, which show generally stable financial management despite pressures on operating funds and rising service costs.

The reports, covering the fiscal year that ended June 30, 2025, were presented to the City Council and its Finance/Audit Committee. Officials reviewed eight annual financial statements and four compliance-related reports detailing the city’s fiscal condition, internal controls and component agencies.

External auditors issued unmodified, or “clean,” opinions on all financial statements, indicating Pasadena’s financial data is fairly presented in accordance with generally accepted accounting principles and government auditing standards.

The audit marks the third year of work by Lance, Soll & Lunghard, LLP, which conducted the review through a hybrid process combining on-site and remote analysis using the city’s digital financial systems.

Government-wide statements show Pasadena’s total assets increased, driven largely by $38.5 million in capital asset additions and higher cash reserves tied to the issuance of $195 million in general obligation bonds. The bonds funded projects including seismic retrofitting and improvements to the Central Library under Measure PL.

Still, the city’s overall net position declined by about $16 million. While governmental activities produced an $8.8 million gain, accounting adjustments — including implementation of new standards on compensated absences — offset those increases.

Pasadena’s business-type operations, such as water and refuse services, boosted net position by $57.4 million, reflecting higher revenues. However, electric utility revenues declined amid lower sales and higher fuel and energy costs.

The General Fund, the city’s primary operating account, saw its balance fall by $22 million, or 14%, as expenditures outpaced revenues. Officials cited rising personnel costs, inflationary pressures on supplies and services, and a one-time $11 million contribution to the Fire and Police Retirement System as key drivers. Some costs tied to the Eaton Fire are expected to be reimbursed.

Auditors reported no material weaknesses or significant deficiencies in internal controls.

Financial statements for component units — including the Rose Bowl Operating Company and Pasadena Center Operating Company — also received clean opinions.

Here are the other items on Monday’s consent calendar:

• Reject Bids for Unmarked Detective Fleet Leases

City Council is expected to reject all bids submitted for unmarked detective fleet lease services after officials determined the original solicitation requires revisions..

City purchasing officials released a Notice Inviting Bids on Nov. 25, seeking vendors to provide leased, unmarked vehicles for the department’s detective operations. The bid opportunity was posted through OpenGov.com and remained open for 48 days, closing Jan. 12,.

Six proposals were submitted. Of those, three met the city’s stated minimum qualifications and specifications.

However, after reviewing the submissions, police officials concluded the bid package needs to be revised to clarify lease terms and vehicle outfitting requirements. Department leaders said rejecting the current bids will allow staff to issue a new, updated solicitation better aligned with operational needs.

Police officials said the move supports the City Council’s strategic goal of maintaining fiscal responsibility by ensuring contract specifications are complete before awarding a lease agreement. There is no fiscal impact associated with rejecting the bids, according to the report.

If approved, the Police Department will move forward with a revised bid process for the unmarked detective fleet leasing program.

• $750,000 Police Vehicle Upfitting Contract

A new contract for police vehicle upfitting services after the city’s previous vendor withdrew from the project.

Under a recommendation from the Police Department, council members will consider approving a contract with Lehr Upfitters in an amount not to exceed $750,000 over three years.

The contract would cover the installation of emergency and law enforcement equipment in both marked and unmarked police vehicles.

Patrol units must be outfitted to meet California Code of Regulations requirements, including forward-facing red emergency lights and additional warning systems. Vehicles also require prisoner partitions, firearms storage, push bumpers, window protection and other specialized equipment to support police operations and officer safety.

The city first solicited bids for the work on May 29 posting an Invitation for Bids through its OpenGov procurement portal. Four companies submitted proposals.

Airwave Communications Enterprises was initially selected as the lowest responsive bidder, and the City Council approved a contract in July 2025. However, the company later became unresponsive. After a formal demand letter was issued in November, the vendor agreed to terminate the agreement.

Lehr Upfitters, the next lowest bidder, agreed to honor its original pricing. Police officials said references from other government agencies confirmed the firm’s ability to perform similar public safety vehicle upfitting work.

The contract supports strategic goals of maintaining public safety readiness while ensuring fiscal responsibility.

Funding will come from the Police Department’s existing and future operating budget allocations within the city’s General Fund.

• Pasadena to Approve $9.38 Million Contract for Substation Transformers

A major infrastructure investment aimed at strengthening the city’s electric grid, with the City Council set to authorize a contract of up to $9.38 million for new substation power transformers.

The proposed agreement with Shihlin Electric USA Company Limited covers the purchase of transformers over a period of up to five years. The contract includes a base amount of $8.53 million and a contingency of about $852,000 for potential change orders.

Pasadena Water and Power, which provides electricity to more than 65,000 customers, said the equipment is critical to maintaining reliable service. Substation transformers convert high-voltage power from transmission lines into lower voltages suitable for neighborhood distribution and eventual residential and commercial use.

Utility officials said several key components at the Fair Oaks and Brookside substations are nearing the end of their operational life. Replacing the transformers is the first phase of a broader, City Council-approved capital improvement program to modernize substation infrastructure.

Upgrades will include new transformers, switchgear, circuit breakers and advanced protection systems. The improvements are designed to prevent outages, modernize aging equipment and support the city’s conversion from 4kV to 17kV distribution voltage — a shift expected to increase system capacity and efficiency.

The Fair Oaks Substation, which serves Northwest Pasadena, plays a vital role in supporting residential demand and future economic growth, officials said.

The city issued a bid solicitation in August 2025, with 56 vendors downloading specifications. Five bids were submitted, but Shihlin provided the only responsive proposal meeting all technical requirements.

Funding will come from the Fair Oaks and Brookside Substation Upgrades capital improvement budget, with no impact on the city’s General Fund.

• Five Electric Cargo Vans for Utility Fleet

Officials are set to expand the city’s zero-emission vehicle fleet with the purchase of five electric cargo vans for utility operations under a proposed $434,499 contract.

The City Council will consider authorizing the city manager to enter into an agreement with Transwest Truck Center, the lowest responsive bidder, to supply five Ford E-Transit cargo vans with custom upfitting for Pasadena Water and Power.

The contract includes a base cost of about $395,000 and a contingency of $39,500 to cover potential change orders, supply chain fluctuations or specification adjustments.

Pasadena Water and Power said the vans will replace five aging gasoline-powered vehicles currently used by Power Delivery field crews. The older units, model years 2003 through 2006, have experienced declining reliability and rising maintenance costs, officials said.

Field crews rely on specialized cargo vans to transport personnel, tools, heavy equipment and materials used to maintain and repair the city’s electrical transmission and distribution system, including emergency response work.

Funding for the purchase is included in the fiscal year 2026 Capital Improvement Program under a vehicle and equipment replacement project.

Utility officials said the purchase aligns with the department’s fleet electrification strategy and supports compliance with California Air Resources Board Advanced Clean Fleets regulations. The rules require that at least 50% of certain medium- and heavy-duty vehicle purchases be zero-emission beginning in 2024.

The purchase also advances goals in Pasadena’s Climate Action Plan by reducing emissions and promoting alternative fuel vehicle adoption.

• Pasadena to Expand Workers’ Compensation Dispute Program to Public Safety Unions

Pasadena officials are moving to expand an alternative workers’ compensation dispute resolution program to additional public safety labor groups, building on what city leaders describe as early success with police officers.

The City Council is scheduled to adopt resolutions approving Workers’ Compensation Alternative Dispute Prevention and Resolution Program agreements with the Pasadena Fire Fighters Association, the Pasadena Firefighters Management Association and the Pasadena Police Lieutenants Association. The action would authorize the city manager to execute and amend the agreements as needed.

The programs, commonly known as “carve-out” systems, allow employers and unions to create customized processes for medical care delivery and claims dispute resolution outside the state’s traditional workers’ compensation system.

Under the model, disputes may be handled through mediation, arbitration or an ombudsperson rather than the California Workers’ Compensation Appeals Board, though employees retain appeal rights. Programs also establish agreed medical provider networks, faster treatment authorization and joint labor-management oversight.

The City first launched a carve-out program in 2021 in partnership with the Pasadena Police Officers Association. City officials report the program reduced litigated claims by about 55%, shortened claim resolution timelines and improved cooperation between management and labor.

Following that outcome, city staff began discussions in late 2024 with fire and police management bargaining units about expanding the framework. State approval to negotiate was granted in 2025, and agreements were subsequently reached.

Each program will be overseen by an Alternative Dispute Resolution director, an ombudsperson and a joint labor-management committee responsible for monitoring effectiveness and compliance.

City officials estimate annual administrative costs between $60,000 and $80,000, funded through the Risk Management Division budget. Performance metrics will include claim costs, litigation rates, treatment timeliness and return-to-work outcomes.

The agreements will take effect upon state approval and continue year to year unless terminated.

• Midyear Budget Amendments, Staffing Increase

A series of midyear budget amendments that would adjust spending across multiple departments and add one full-time position as part of ongoing fiscal oversight.

The City Council is scheduled to review and approve amendments to the fiscal year 2026 adopted operating budget, reflecting unanticipated needs, grant adjustments and project carry-forwards identified since the budget was adopted in June 2025.

If approved, the changes would increase total operating appropriations citywide by about $1.58 million, partially offset by roughly $301,900 in additional revenues. The General Fund’s unappropriated balance would decline by a net $125,996.

Among the largest adjustments is a Pasadena Police Department request to carry forward purchase orders and grants from fiscal year 2025. The amendment would recognize $275,928 in revenue and appropriate $610,633 to cover contractual obligations, including vehicle purchases and grant-funded items delayed into the current fiscal year.

Public Works is seeking more than $673,000 combined for sewer infrastructure readiness, fire-related equipment losses and inspection services. That includes $355,000 for emergency sewer repairs, $228,894 to replace graffiti abatement vehicles and pressure washers destroyed in the Eaton Fire — funded through insurance — and $90,000 for federally mandated discharge inspections.

The Fire Department is proposing a $357,684 technical adjustment within fleet replacement funds to correct an earlier administrative oversight.

Planning officials are requesting $272,056 to complete phases of the citywide Historic Resources Survey, with final reporting expected by the end of 2026.

Additional amendments include a $26,000 youth soccer grant from the LA84 Foundation and a fund realignment within Housing Department grant accounts.

The proposal also adds one administrative intern position in the Public Information Office to support increased outreach demands.