Beverly Hills Expenditures

It is time for a serious conversation about Beverly Hills finances. We enjoy a very high end lifestyle in our beautiful city. We want it to continue. But money is tight and we can see some black clouds on our near term horizon. It appears that our expenditures will soon exceed our revenues, perhaps substantially. And we know that this condition is unsustainable because when things cannot go on forever, they won’t.

Here are some basics. Every year the Beverly Hills City Council adopts a budget for the City’s fiscal year which runs from July 1 to June 30. The budget includes not only the revenues and expenditures anticipated for the upcoming year but also includes a forecast for future years. For several years, these projections have anticipated that, starting in the 2025-26 fiscal year, the City would be experiencing increasing deficits. This is largely a result of increases of expenditures outpacing increases in revenues.

The current position is reflected in a staff report presented to the City Council on March 18, 2025 by Jeff Muir, the City’s Director of Finance and members of his staff. This report projects that there will be only a very small deficit ($103,000) for the 2025-26 fiscal year but a very substantial deficit of approximately $44 million for the three fiscal years starting on July 1, 2026.

Yogi Berra taught us that “predictions are risky, especially when they are about the future.” Seriously, no one has a crystal ball. For this reason, making projections, which are a form of predictions, is an art, not a science. For example, if you project that expenses will rise 5% per annum the results will be very different than if you projected that expenses will rise only 3% per annum. But absent fixed expense components such as contractual increases, no one can seriously question why 3% rather than 5% was used. So, it is always critthe financial future, to look critically at the assumptions.

Nonetheless, at the time that Julian Gold was installed as Mayor in April 2023, he was keenly aware of and concerned about the looming projected deficits. Accordingly, at the installation, Dr. Gold announced the formation of a Blue Ribbon Committee under the direction of City Treasurer Howard Fisher to address the deficit issue by examining opportunities to raise revenues and cut expenditures. This committee did examine and then report on new revenue opportunities and concluded that such opportunities were limited. It did not, for reasons that are not clear to me, address the issue of expenditures. Rather, examinations of expenditures have proceeded in house under the auspices of Mr. Muir and the Council’s Accounting and Finance Committee.

From March 18, 2025 staff report to the Council:

“To preserve the long-term financial health of the City, it is critical that current operations be supported by ongoing revenues, and that one-time revenue (like that of major development projects) be relied upon to fund one-time costs” [The emphasis is mine].

Unassigned reserves alone will not be adequate to address the forecasted deficits of fiscal years 2026-27 through 2028-29. Utilization of certain existing earmarked or budget stabilization reserves could also be considered an option for offsetting some of the forecasted future deficits.

That report described various cost reduction actions that were being considered including: a one-time savings of $.9M by shifting costs of transporting unhoused from Nastect to Covered 6; review of the costs of the Ambassador program, zero based budgeting of capital improvement projects, review of city-sponsored events, review of insurance contracts and reconfiguration of commissions. No one seems to be able to quantify what was saved, if anything, sports scores BHHS Baseball Team Defeats St. Pius X-St. Matthias, Lawndale By Steven Herbert by the reconfiguration/combination of commissions. I am informed that the Finance Department was not asked to make an estimate of the cost savings.

Notably, these are relatively small portions of the City’s total expenditures which are now estimated to be approximately $337M for the 2024-5 fiscal year. The lion’s share of expenditures are salaries and benefits for city employees and contractual services which include consultants hired by various city departments. These account for between 55% and 80% of the total expenditures.

As for those, Mr. Muir explains that the City Manager is “collaborating with individual departments to identify and evaluate potential expenditure reduction opportunities” and this review will include large vendor contracts and large purchases of materials and supplies.

Of course, such in-house efforts are necessary but they are far from sufficient. One of the most important jobs of the various department heads is to ensure that their operations, contracts and purchases are conducted in a cost-effective and efficient manner. If the department heads have not already incorporated all expenditure reductions that they consider necessary and appropriate, they have not been doing their job.

On the lighter side, selection of the fox to guard the henhouse is not always the best idea. It may be that in the past, the City has been sufficiently flush with revenues that cost was no object. However, a projected $50M deficit is a wake up call that a culture shift is necessary. This, of course, will not happen overnight. We cannot leave to the folks who have made the decisions that have created the problem the difficult job of solving the problem.

What is necessary is to revive Dr. Gold’s idea of having an independent “blue ribbon” committee complete the job of identifying and recommending sufficient cuts in expenditures to eliminate the anticipated deficit without undue impact on the services that we expect. There are undoubtedly many highly qualified residents who would be willing to volunteer their time to undertake and complete this task.

There are those who feel that the City Council will be unwilling to make the Asher Miller limited St. Pius X-St. Matthias Academy to two hits over six innings, striking out 12, in his first appearance since pitching a no-hitter in Beverly High’s 5-2 victory in a nonleague baseball game at La Cienega Park April 4. Miller held the Warriors hitless through 3 2/3 innings until Benjamin Xique singled with two outs in the fourth. Adam Gates singled in the sixth, but Miller struck out three consecutive batcuts and inflict the pain that may be required to ensure that current operations are supported by ongoing revenues. Therefore, they advocate exploring new taxes on residents that will increase revenues to match unconstrained expenditures.

At the installation event on April 1, newly installed Vice Mayor John Mirisch advocated that we explore whether Beverly Hills should become a “charter city” instead of continuing as a “general law” city. Charter cities enact their own “charter” that serves as the city’s constitution and have greater control over its “municipal affairs.” This change would require the adoption of a draft charter and a vote of the residents. While various arguments can be expressed to justify the change, the principal difference is that a charter city has more opportunities to impose taxes on its residents than does a general law city. I think that transforming Beverly Hills into a charter city at this time is a very bad idea. It would be irresponsible to consider deficit reduction through imposition of additional taxes before we have made every reasonable effort to reduce expenditures. This would be a very time-consuming endeavor that would distract our municipal leaders from other important governing activities. And, at the end of the day, it would be unlikely to pass once our residents understand that it would provide license to impose more taxes. It is the height of irony that Vice Mayor Mirisch, who has often railed against “using our residents as ATMs”, would support new and higher taxes directly on our residents. (In case you were wondering, charter cities’ control over “municipal affairs” does not extend to over-ride state legislation that limits local control over development in aid of creation of “affordable housing.” If it did, I might alter my thinking.)

We do have a looming projected deficit that is likely to come sooner and be larger than we currently anticipate for a lot of reasons. Part of the effort to solve this problem is to obtain independent (volunteer) expert advice on how to reduce responsibly our City’s expenditures. I am hopeful that Mayor Sharona Nazarian and the City Council will have the wisdom to obtain that type of advice and the fortitude to implement such advice once rendered.