By Brian Hews
Publisher | Follow X
June 19, 2026
Proposed budget includes $153 million in spending, $143 million in revenue and significant capital improvement costs.
CERRITOS — The Cerritos City Council will hold a June 22 public hearing to consider the Fiscal Year 2026-27 budget, facing a projected $10.6 million total budget deficit and an increasingly uncertain financial outlook.
For decades, Cerritos enjoyed a reputation as one of Southern California’s most financially stable cities, supported by strong retail activity, automobile sales, and redevelopment-era revenues. However, city staff is now warning that the revenue sources that fund the city’s extensive services, facilities, and community programs are no longer keeping pace with rising costs.
The warning comes in the proposed Fiscal Year 2026-27 budget, where staff states that “overall, revenue growth has remained relatively flat over the past four years.”
The report notes that fourth-quarter sales tax receipts declined 2.2 percent year over year, largely due to slowing automobile sales. The trend is significant because sales tax remains the city’s largest recurring revenue source, accounting for roughly one-third of annual revenues.
Many of the city’s largest sales tax generators are located within the Cerritos Auto Square, including AutoNation Toyota Cerritos, Cerritos Acura, Cerritos Nissan Infiniti, Kia of Cerritos, Lexus of Cerritos, Jaguar Land Rover Cerritos, Penske Buick GMC, Penske Chevrolet, Norm Reeves Honda, Norm Reeves Ford, and Norm Reeves Hyundai.
While revenue growth has slowed, expenditures continue to rise.
According to the budget report, operating expenditures increased by approximately $2.7 million while capital project spending increased by approximately $8.6 million. Much of the increase was attributed to the emergency failure of the city’s C-4 water well and the resulting need to purchase imported water while repairs were completed.
Perhaps the most striking statement in the report appears in the section discussing the city’s long-term outlook.
“We cannot sustain the programs, services, and facilities residents have enjoyed for decades,” staff wrote.
The statement represents one of the strongest acknowledgments in recent years that Cerritos can no longer rely on the revenue growth that historically funded its high level of municipal services and amenities.
The budget follows three study sessions held by the City Council, including a final workshop on June 8 in which councilmembers directed staff to move forward with a single budget scenario rather than a previously discussed dual-budget approach that would have included a potential voter-approved Transactions and Use Tax.
Under the adopted approach, the city assumes no new revenue sources and instead relies on expenditure reductions, reserve funding, and operational changes to close the budget gap.
City officials estimate a limited hiring freeze could save approximately $1.7 million during the upcoming fiscal year. Another $3.7 million in savings would come from deferred maintenance of city facilities and landscaping.
Additional reductions include a 20 percent cut in non-Arts Education programming, staffing, and marketing initiatives at the Cerritos Center for the Performing Arts, generating approximately $700,000 in savings. City officials have also discussed one-day-per-week facility closures, reduced operating hours, and reductions in community programming.
Earlier budget discussions included proposals to eliminate or significantly reduce numerous city services and events, including the Sky Knight helicopter patrol program, Community Calendar, Thursday Summer Concert Series, Halloween Festival, Festival of Friendship, Water Lantern Festival, Veterans Day Ceremony, Christmas Tree Lighting, Martin Luther King Jr. celebration, Memorial Day observance, and the L.E.A.D. Cerritos program. Several of those reductions were later partially restored following public feedback and council direction.
Despite the reductions, the city continues to face substantial long-term obligations.
A recent Facility Condition Assessment identified approximately $140 million in facility and park repair needs, $70 million in street rehabilitation projects, $8.8 million in tree replacements, and $6.3 million in playground replacements over the next decade. Together, those obligations total more than $225 million before accounting for future ADA improvements and other capital needs.
The report also notes that city utility operations continue to rely on General Fund support. Current budget plans include transfers of approximately $3 million to the Water Fund, $1 million to the Sewer Fund, and $857,000 to support electric utility operations.
Although the City Council ultimately abandoned consideration of a Transactions and Use Tax as part of the current budget, staff estimated that a one-percent sales tax measure could generate approximately $19.1 million annually, with more than half of the revenue coming from non-residents shopping in Cerritos.
The city’s financial challenges became increasingly evident during the June 8 budget workshop.
Council members unanimously voted to delay the next scheduled water and sewer rate increase from January 2027 until July 1, 2027. The council also directed staff to reduce projected utility revenues as a contingency in case a voter initiative seeking to repeal recent water and sewer rate increases ultimately succeeds.
In a separate 3-2 vote, the council directed staff to add $1.84 million to the City Clerk’s election budget to cover potential special election costs associated with two recall petitions and a separate initiative seeking repeal of the water and sewer rate increases.
As presented, the city would rely on reserve funds to cover the projected deficit, thereby reducing reserve balances and potentially affecting long-term fiscal sustainability. While the budget projects an overall deficit of approximately $10.6 million, city documents show day-to-day operations remain in the black, with the deficit largely driven by capital projects, infrastructure investments, and other long-term expenditures.
The fiscal pressures now facing Cerritos did not emerge overnight. Budget documents indicate the city is confronting years of deferred infrastructure obligations, slowing revenue growth, changing consumer spending patterns, increasing labor and pension costs, inflationary pressures, and utility system expenses that accumulated across multiple city councils and administrations.
The City Council will hold the public hearing and vote on the budget at its June 22 meeting, determining how Cerritos will address slowing revenue growth, aging infrastructure, and the long-term sustainability of future services.
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