Because the county was late issuing a $1.1 million check to the city for its share of local property tax, City Manager Toby Wells on Monday asked the Ceres City Council to approve a five-day loan from the sewer fund to the general fund. The late check represented 55 percent of the city's property tax share for the 2016-17 fiscal year. To Wells it was nothing more than a cash flow problem. But after his request was approved, Councilwoman Linda Ryno launched into a renewed push for the city to scale back on spending.
"This is really a cash flow issue that we wouldn't be asking for this if we would have received that payment on Friday," Wells told the council.
Wells said the first of the property tax money usually comes in during the first week of January and the county assured the city the check would be issued by last Friday. It did not come because the city had a $403,000 payroll to meet on Friday the General Fund hit a negative balance. Because all of the city's funds are comingled and include enterprise accounts, the city truly did not have a negative balance, only on paper. The city expected the county payment to come in yesterday morning, meaning the five-day shortage of cash was remedied through a temporary loan - with council's approval - from the sewer account to the General Fund.
More money is expected to come in from the state this week, said Wells.
"To me it's a real red flag when we, as a city, wind up with a negative in our bank account," said Ryno. "That really worries me and since I've been on the council I have talked about how we continue to spend more than we bring in and it's been a concern, as everyone is aware."
She asked if going negative means the city is spending too much. Wells replied that since 2009 the city has been dipping into reserves and has a structural deficit. That's a different issue than lagging sales and property tax payment, he said. But he agreed, "we can't continue to spend more than we bring in."
Wells stressed that the money crunch does not impact the projections for the city budget.
The council approved the 2016-17 budget with a beginning balance of $4.6 million and projects to receive $18.3 million in revenues but spend $18.9 million. The city believes it will end the fiscal year on June 30 with reserves of $3.9 million, or 21 percent of the general fund. At the time the council was clear they want Wells to develop a plan so that the city quits slowly whittling down on reserves. Without any adjustments in spending or revenue, the city is headed to a 4 percent reserve by 2020, which Wells pronounced in July as "clearly unacceptable."
Next month the council and city staff are expected to delve into some tough budget talks that could lead to employee layoffs.