Arcadia Councilwoman Sharon Kwan dissented in the 4-1 vote to approve the upcoming fiscal year’s budget, citing concerns over the city’s “long-term fiscal sustainability” amid national and regional economic uncertainties and city spending that is significantly outpacing revenue.
City Manager Dominic Lazzaretto proposed a fiscal year 2026-27 General Fund Operating Budget with revenues of $96.6 million and expenditures of $100.1 million that include new programs requiring one-time funding transferred from dedicated savings accounts, according to his report to the council prior to the vote June 16. The General Fund is expected to end the fiscal year with a net balance of $276,000, with a “projected Fund Balance of the General Fund Operating Budget” of $21.7 million.”
In response to a question from Kwan, Lazzaretto pointed to a spreadsheet in his presentation that indicated when all savings accounts transfer in, actual revenue will total close to $105 million.
“So to me, that’s a surplus,” he said.
His report, which was co-authored by Administrative Services Director Henry Chen, noted economic worries that local governments must contend with.
“Recent shifts in federal and state economic policy, persistent inflationary pressures, evolving trade and tariff conditions, and continued volatility in financial markets have created heightened uncertainty for both the national and regional economy, reinforcing the importance of prudent fiscal planning for the upcoming fiscal year,” according to Lazzaretto’s report. “Due to Arcadia’s longstanding commitment to fiscal discipline and conservative budgeting practices, the City remains in a strong financial position and is well prepared to navigate potential economic challenges. While the City’s fiscal outlook remains stable, Arcadia will continue to maintain a cautious approach in implementing the FY 2026–27 Budget.”
The spending plan maintains essential service levels while avoiding structural cost increases where possible, according to the report.
“The Budget can be considered a ‘status quo’ type document with some proposed increases to address staffing needs and to enhance transparency and technological capabilities,” Lazzaretto added.
“I voted against the budget because I am concerned about the City’s long-term fiscal sustainability,” Kwan said in a statement to HeySoCal.com.
“According to the adopted budget, General Fund revenues are projected to increase from $94.0 million to $96.6 million, an increase of approximately 2.6%,” she said. “During the same period, General Fund expenditures increase from $92.3 million to $99.6 million, an increase of approximately 8.0%. In other words, spending is growing more than three times faster than revenue.
“The budget technically shows a small operating surplus of approximately $276,000, but that surplus represents less than three-tenths of one percent of the city’s $100 million General Fund budget,” Kwan continued. “Staff’s own three-year forecast also projects a deficit of approximately $3.1 million in FY 2027-28 if current trends continue.”
Noting her background “as someone who has spent decades running businesses and managing budgets,” the District 2 council member said “it is important to look beyond whether a budget balances today and examine whether the underlying trend is sustainable. When spending consistently grows faster than revenue, eventually the gap must be closed through service reductions, tax increases, or the use of reserves.”
Kwan observed that while Arcadia has unrestricted reserve funds totaling roughly $82.9 million, “reserves should be treated as a safeguard for emergencies, economic downturns, and major future needs — not as a substitute for maintaining long-term structural balance.”
She added that her “vote was not a criticism of staff, who worked hard on this budget. Rather, it reflects my belief that the City should exercise greater fiscal discipline today so we can protect essential services and maintain financial stability for residents in the years ahead.”
Council members and city officials did not immediately respond to requests for comment.
At the June 16 meeting, Councilman Michael Cao observed that for the last three years the city’s budget has been balanced with a focus by city staff on providing quality services.
“I want to continue to support our city because of the fact that when you look at the numbers our city manager has said, in all of our funds, it’s in the positive. … That’s all we can ask for, there’s a lot of cities that are not so lucky in this position.”
Video of the June 16 budget approval hearing is available on the city’s website, along with documents relevant to topics on the council meeting’s agenda.