Imperial Beach leaders on Wednesday approved budgets for the next two years that they believe will keep the small coastal city afloat amid rising costs for maintaining public services and projected revenue declines.

The city operates on a two-year budget cycle. Via a 4-0 vote, officials adopted spending plans for fiscal years 2025-26 and 2026-27, which begin on July 1 and end on June 30, 2027. Councilmember Matthew Leyba-Gonzalez was absent.

Expenses out of the city’s general fund, which pay for day-to-day operations such as fire, law enforcement and park maintenance, are projected at $31.6 million in the new fiscal year and $32.1 million in the following fiscal year. The current fiscal year is expected to close with expenditures totaling about $30.8 million, according to the city budget report.

Higher annual pension payments to the California Public Employees’ Retirement System and rising labor costs are driving more spending. For example, the city’s Street Division, which is responsible for maintaining public streets and sidewalks and removing graffiti, will see its budget increase from $1.2 million in the current year to $1.5 million in 2026 and $1.6 million in 2027 due to higher salaries and benefits, more overtime pay and service-related costs.

Another notable increase is in the Marine Safety Division. The department provides lifeguard services along the 4-mile shoreline and often assists outside agencies with water rescues, while also being challenged by cross-border pollution. Its current budget of $1.8 million is projected to rise to $2.2 million in 2026 and $2.3 million in 2027, due primarily to higher labor costs.

Imperial Beach’s Recreation Department is expected to see a half-million-dollar budget cut from the current year, primarily due to the discontinuation of swim programs at Mar Vista High School, which began in October 2023. Last year, officials agreed to terminate an agreement with the Sweetwater Union School District that had given the public access to Mar Vista’s swimming pool. The public was allowed to use the 50-meter competition pool mostly between the weekday hours of 5:30-7 a.m. But officials felt paying more than $400,000 annually in personnel and service costs for the limited access was too costly. According to the city, an average of 150 people had used the swim programs.

The decision to end the aquatics program did not come easily as officials acknowledged that the pool was the only alternative for swimming in Imperial Beach amid beach closures due to cross-border sewage contamination. But other recreational opportunities are in the works thanks to investments from the Port of San Diego and city reserves, including a splash pad at Pierwood Plaza and a design for pickleball courts. Officials discussed requesting state and county funding for future recreation opportunities.

The city is projecting revenues of $30.9 million in 2026 and $32 million in 2027. The current fiscal year is expected to generate approximately $31.8 million. Taxes, the city’s primary source of revenue, are projected to rise by roughly $791,000 in 2026, mainly due to property and franchise taxes. Sales tax revenue is expected to decline slightly due to changing economic conditions, city officials said.

The city “faces a slower-growth environment, flattening revenues, and continued financial volatility,” City Manager Tyler Foltz and Chief Administrative Officer Erika Cortez-Martinez said in their budget report, adding that city departments were instructed “to control costs, streamline operations, and defer non-essential expenses.”

Imperial Beach will use about $750,000 from its reserves for one-time expenses, including upgrades to fire engines, equipment for the Sports Park and storm drain improvements. A draft version of the 2026 budget included spending $100,000 to create an economic development plan that would help the city address the impacts of monetary and tourism downturns related to the sewage crisis. Officials agreed to postpone the expense for now and potentially push for a report in the future that would indicate the financial impact of the crisis on the city.

The city anticipates having more than $11 million in its general fund reserves by 2027.