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CC - ACTION ITEM: (1) Receipt and Discussion of List of Capital Improvements Projects to Consider Defunding in Order to Fund a Potential One-Time $2.5 Million Donation to the Culver City Unified School District (CCUSD); (2) Receipt and Discussion of Report on the Impact of a Potential One-Time $2.5 Million Donation to CCUSD from the City’s Contingency Reserve; and (3) Direction to the City Manager as Deemed Appropriate.
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Meeting Date: August 11, 2025
Contact Person/Dept.: Lisa Soghor, Chief Financial Officer
Elizabeth Shavelson, Assistant Chief Financial Officer
Phone Number: City Manager’s Office - (310) 253-6000
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Attachments: Yes [X] No []
Public Notification: (E-Mail) Meetings and Agendas - City Council (08/07/2025)
Department Approval: John Nachbar, City Manager (08/07/2025) _____________________________________________________________________
RECOMMENDATION
Staff recommends the City Council (1) receive and discuss a list of Capital Improvements Projects to consider defunding in order to fund a potential one-time $2.5 million donation to the Culver City Unified School District (CCUSD); (2) receive and discuss a report on the impact of a potential one-time $2.5 million donation to CCUSD from the City’s Contingency Reserve; and (3) provide direction to the City Manager as deemed appropriate.
BACKGROUND
At the June 16, 2025 meeting of the Culver City Unified School District - City Council Liaison Subcommittee meeting, representatives from Culver City United School District (CCUSD) requested City funding to help fill its budget shortfall. The Subcommittee subsequently voted to put consideration of the issue on the City Council agenda.
CCUSD presented two potential City funding scenarios:
• $7.5 million for 3 years, beginning in Fiscal Year 2025-2026
• $2.5 million for 3 years, beginning in Fiscal Year 2025-2026
Under both scenarios, CCUSD offered the City expanded public use of CCUSD facilities, including the maintenance and staffing necessary to open school campuses to the public during non-school hours, and additional flexibility for CCUSD to host City Parks, Recreation and Community Services programming. These uses would be documented in the City’s Memorandum of Understanding with CCUSD, which is currently in the process of being negotiated.
CCUSD described the impact of the City’s funding as giving it time to implement creative revenue generating solutions while maintaining a positive budget certification from the State, continuing benefits for employees, and retaining priority interventions. According to CCUSD, funding at the higher, $7.5 million level would allow CCUSD to avoid major budget cuts, maintain some essential educators for priority interventions, and avoid drawdown of redevelopment funding.
CCUSD cites the following as factors negatively influencing its budget: reduced state discretionary block grants, loss of Federal funding based on changes at the US Department of Education: Title IIA and Title III, increased operational costs, and lower revenue. In response, CCUSD has implemented austerity measures including staff layoffs in 2024 and 2025. They state that the continuation of benefits for employees is at risk. They are unable to meet their state mandated reserves level of at least 3%, which may result in County Office of Education (COE) intervention.
At the July 14, 2025 City Council Meeting, the City Council considered the request from CCUSD and directed staff to return with: 1) a list of capital improvements projects that could be defunded in order to fund a potential one-time $2.5 million donation to CCUSD; and 2) a report on the impact of a potential one-time $2.5 million donation to CCUSD from the City’s Contingency Reserve. A copy of the July 14, 2025 staff report including attachments is provided as Attachment 1.
DISCUSSION
Capital Improvements Projects
The City uses a variety of funding sources to fund its Capital Improvement Projects (CIPs) including but not limited to Refuse Disposal Fund, Municipal Bus Fund, Equipment Replacement Fund, Cultural Arts Fund, Gas Tax, Prop C Local Return Measure M Local Return, Measure R Local Return, and Capital Grants. The City also uses the General Fund, including the Committed General Fund Reserves for Facilities Planning and Recreational Facilities, to fund CIPs.
The General Fund is the least restrictive source of funds and can be used for any City purpose. The use of General Fund Committed Reserves is more restrictive as established by Council Policy 5002. Policy Statement 5002 includes a Financial Reserves Policy section which lays out the maintenance of some portion of funds available to be reserved for future use. As part of the policy, the City Council established the Facilities Planning Reserve and the Recreational Facilities Reserve within the City’s General Fund balance. The Facilities Planning Reserve was established to offset the costs of replacement or major refurbishment to critical City facilities. The Recreation Facilities Reserve was established to set aside recreational class and rental revenues for the refurbishment of certain recreational facilities, programs and equipment. These General Fund Committed Reserves can only be used for specific purposes pursuant to constraints imposed by formal action by the City Council and remain binding unless removed in the same manner.
Staff has examined all the City’s active CIPs currently funded with contributions from the City’s General Fund, General Fund Facilities Planning Reserve and General Fund Recreational Facilities Reserve. An overview of these CIP projects identified for defunding consideration including the project status and estimated remaining balance is provided in Attachment 2.
This list includes projects for maintenance and repair as well as facility upgrades to address the City’s aging facilities. If selected for defunding, these rehabilitation projects will likely need to be revisited in the near-term to prevent further and more costly repair or replacement work in future years. The list also includes road and bicycle improvements, sidewalk repairs, park enhancements, and technology infrastructure.
The remaining balance for each CIP shown in Attachment 2 is an estimate based on expenditures posted to date in the City’s financial system. The City is currently in the midst of closing Fiscal Year 2024-2025 and is still processing invoices from Departments. The actual CIP balances remaining may be lower than current expenditures indicate once all invoices are accounted for.
Finance staff worked with City departments to evaluate the status of these CIPs focusing on those funded by the General Fund not the Committed Reserves. Staff has identified $1,082,902 of bicycle and pedestrian improvement projects approved in previous fiscal years that would be eligible to be funded from the new Mobility Improvement Fund (Fund 437) instead of the General Fund. As of August 11, 2025, the estimated fund balance for Fund 437 is approximately $2 million.
Staff has highlighted an additional $1,425,354 in CIPs that could be defunded. Some of these projects have been completed or are not currently moving forward. This information is outlined in the project status column of Attachment 2. Some other projects may be in preliminary stages and could be more easily revisited later. Staff recommends that City Council review the list and provide direction.
If Council approves CIP projects for reallocation and/or defunding, staff will return to City Council with an item to authorize a budget amendment to reallocate and/or defund the projects identified and appropriate funds for a donation to CCUSD. A budget amendment requiring a four-fifths vote will be necessary. Depending on the projects selected, a Council resolution may also be necessary to reallocate funds from the City’s Committed Reserves for General Fund Facilities Planning and General Fund Recreational Facilities to be used for the City’s donation to the CCUSD.
Contingency Reserve
As part of Policy Statement 5002, the City Council established the Contingency Reserve, a committed fund balance within the City’s General Fund balance.
Section VIII.C.1 of the Financial Reserves Policy states “The Contingency Reserve shall have a target balance of thirty percent (30%) of General Fund “Operating Budget” as originally adopted. Operating Budget for this purpose shall include current expenditure appropriations and shall exclude Capital Improvement Projects and Transfers Out. Appropriation and/or access to these funds are reserved for emergency situations only.”
The Financial Reserves Policy provides that reserve funds, including the Contingency Reserve, will not be spent for any function other than the specific purpose of the Reserve account from which they are drawn without specific direction in the annual budget or by a separate City Council action. The Financial Reserves Policy also states that a portion of a fund balance that includes amounts that can only be used for specific purposes remain binding unless removed in the same manner they were established.
On June 9, 2025, Council adopted Resolution 2025-R052 amending Policy Statement 5002 to establish a committed reserve for loan to Community Corp of Santa Monica toward construction of affordable housing units in the Jubilo Village Project located at 4464 Sepulveda Boulevard. The $12 million needed to fund the Jubilo Village Reserve was reallocated from the Contingency Reserve. Council adopted Resolution 2025-R051 authorizing a decrease to the Contingency Reserve below the established target for Fiscal Year 2025-2026 in order to reallocate funds.
Based on the Adopted General Fund Operating Budget for Fiscal Year 2025-2026 of $192.7 million, the target Contingency Reserve is approximately $57.8 million. Based on the estimated Fiscal Year 2024-2025 revenues and expenditures at the time of budget preparation, the Contingency Reserve is estimated to be $41.4 million, approximately 21.5% of the City’s operating budget.
The Contingency Reserve balance is an estimate at the time of budget adoption. The City’s actual Contingency Reserve balance will be determined once the City has closed Fiscal Year 2024-2025 and the City’s auditors have issued the Annual Comprehensive Financial Report.
Drawing an additional $2.5 million from the City’s Contingency Reserve to fund a $2.5 million contribution to CCUSD will further reduce the City’s estimated Contingency Reserve balance to $38.9 million, approximately 20.2% of the City’s operating budget.
If the City Council desires to use funds from the City’s Contingency Reserve towards a $2.5 million donation to CCUSD, a resolution authorizing the use and the decrease in the Contingency Reserve is required. If given this direction, staff will return to Council with a resolution for Council adoption at a future meeting as well as a budget amendment to appropriate funds for a donation to CCUSD. A budget amendment requiring a four-fifths vote will be necessary.
Per Policy Statement 5002, the City Manager shall present a plan to City Council to replenish the Contingency Reserve within five years. Resolution 2025-R051 directed the City Manager to present such plan within six months of the adoption of the Resolution. Staff is planning to return to City Council by December 2025 with a plan following the City Council’s June 9, 2025 action.
If Council directs staff to bring back a resolution to further decrease the Contingency Reserve, staff will incorporate this action into its replenishment plan. The replenishment plan will likely include expenditure reduction measures including defunding CIP projects, freezing or eliminating staff positions, reducing service levels and reducing City programs. The extent of the expenditures reductions to be identified in the replenishment plan will likely depend on the outcome of the August 26 Municipal Election.
FISCAL ANALYSIS
In the Adopted Budget for Fiscal Year 2025-2026, General Fund expenditures exceed General Fund revenues by $22.1 million and require the use of the City’s General Fund reserve balances to make up the deficit. The City’s General Fund has no remaining unassigned balance for Fiscal Year 2025-2026. The City’s Contingency Reserve (meant for emergencies) is projected to be approximately $41.4 million at the end of Fiscal Year 2025-2026. This balance is only 21.5% of the General Fund Operating Budget, which is below the City’s target goal of 30%. Regardless of the outcome of the August 26, 2025 election for the 0.25% sales tax measure, the City will need to consider further budget reductions to address its structural deficit and allow full funding of the City’s Contingency Reserve.
Staff has identified $1,082,902 of bicycle and pedestrian improvement projects approved in previous fiscal years that would be eligible to be funded from the new Mobility Improvement Fund (Fund 437) instead of the General Fund. As of August 11, 2025, the estimated fund balance for Fund 437 is approximately $2 million. Reallocating these projects to Fund 437 would leave just under $1 million for other projects. Staff has highlighted an additional $1,425,354 in General Fund CIPs that could be defunded. Drawing on special funds and canceling some CIPs would enable the City to make a one-time $2.5 million donation to CCUSD.
ATTACHMENTS
1. 2025-08-11 ATT 1 July 14, 2025 Staff Report with attachments
2. 2025-08-11 ATT 2 Overview of CIP Projects currently funded with General Fund, General Fund Facilities Planning Reserve and General Fund Recreational Facilities Reserve funds
MOTION(S)
That the City Council:
1. Review and discuss the list of capital improvement projects and, if desired, identify projects to defund; and request the City Manager to return to City Council with a budget amendment and other actions as necessary to fund a donation to CCUSD;
2. Review and discuss the impact of a potential one-time $2.5 million donation to CCUSD from the City’s Contingency Reserve and, if desired, direct the City Manager to return to City Council with a budget amendment and other actions as necessary to fund a donation to CCUSD; and
3. Provide direction to the City Manager as deemed appropriate.