Pasadena Spending Is Outpacing Revenue, and the Gap Keeps Growing, City Staff Tell Council

Pasadena’s expenses are growing about 6% a year while its revenue grows about 4% — a gap City staff projected at a cumulative $40 million to $50 million over the next five years — Councilmembers were told June 8 as they reviewed the City’s coming budget.

Rather than a one-time shortfall, the gap compounds each year, staff said, as expenses keep growing faster than revenue.

Property tax, the City’s largest single source of general fund revenue at more than $100 million, has cooled from the 7% to 8% annual growth of the recent zero-interest-rate era, slowing growth on the revenue side of the ledger.

To help shrink the gap, staff said steps already in place — including a fire fee study — are reducing the shortfall, and they pointed to economic development as an ongoing way to reduce it.

Looming over the budget are major costs the City has not identified a way to pay for.

City staff have put the full build-out of the Fire Department at about $200 million; bringing roadways up to the City’s target condition at about $125 million; a year-round homeless shelter at roughly $10 million in capital plus $2 million to $4 million a year; and an economic-development strategic plan, with placemaking, at about $25 million.

Among the Fire Department’s needs are seismic retrofitting of two stations considered unable to survive a major earthquake — Station 33 on North Lake and Station 37 on East Foothill, each estimated in the tens of millions of dollars to tear down and rebuild — and a new ninth station called for under a 10-year plan.

As a first step toward paying for a promised homeless shelter, staff recommended setting aside about $2 million in one-time money — including roughly $1.78 million in debt-service reserves the City can release — with as much as $3 million more in one-time funds possible in the coming months that could go toward any of the priorities.

The Fiscal Year 2027 spending plan before the Council is the city manager’s recommended operating budget. On Monday the Council took public comment and continued the public hearing, as staff recommended, rather than adopting the budget.

The same agenda included the proposed Fiscal Year 2027 general fee schedules for the City and the Fire Department and an informational update from the Fire Department on its Local Hazard Mitigation Plan.

The budget hearing is set to continue to the Council’s June 15 meeting at 6 p.m., when members are expected to be asked to close the hearing and adopt the Fiscal Year 2027 operating budget.