The city plans to dip deeper into reserves to cover expenses in the 2025-26 Fiscal Year, going below the minimum reserve level of 18 percent set by previous councils.
The Ceres City held a two-hour budget workshop Monday evening, mostly led by City Finance Director Shannon Esenwein and City Manager Doug Dunford. The council aims to adopt the budget with changes on June 23.
The city’s General Fund is expected to receive $27.5 million in revenue but spend $29.5 million, resulting in a $2 million deficit. To cover the shortfall, Esenwein said the city plans to use $2 million in reserves. That leaves the city with a “rainy day” fund that is 16.3 percent of the General Fund and below the 18 percent minimum established by prior councils. Esenwein said that at fiscal year’s end, Ceres’ reserves will be a bit lower than the recommended 17 percent from the Government Finance Officers Association (GFOA).
“While using fund balance is not ideal, this allows us to preserve service levels and staff continuity in the short term,” said Esenwein. “Our goal is to avoid long term structural deficits, and this drawdown is a temporary measure while we continue pursuing longer term solutions.”
The General Fund is what supports core services like police, fire, parks and recreation and administration.
Enterprise funds include utilities such as water and sewer. Revenues for this fund type are projected to total $30.5 million, making up about 35 percent of citywide revenues. These funds are supported by water and sewer fees and are intended solely for repairs, operations, maintenance, and infrastructure of those systems.
Esenwein delivered bullet points from the 136-page document, noting that expenses again will outstrip revenues by about $2 million, which Dunford classified as a structural deficit.
“This year’s proposed budget continues to maintain essential service levels despite economic headwinds,” said Esenwein. She said revenues are expected to remain “relatively flat overall” with only slight increases projected in sales, property and business license taxes. The city, she noted, has brought cost recovery and fees in line with actual costs to help in sustainability.
The city no longer has ARPA funds to plug its ongoing budget gap. Last year $1.5 million in ARPA funds and reserves were used for the General Fund deficit.
Not helping matters is a slow housing market, which affects the property tax revenue stream. Esenwein noted that home sales in Ceres dropped nearly 17 percent in 2024. Driving up city costs are increased pension costs, insurance costs, contract increases and inflation.
Key points of the budget include:
• The budget includes “placeholder” salary increases to retain employees;
• Adds a senior civil engineer after eliminating two lower level engineer positions.
• Provides no funds for fleet replacement, meaning older cars will be operated longer.
• Keeps seven unfunded positions including two police officers, three dispatchers, Finance Department secretary and the deputy Public Works Director.
• Maintaining a staffing level of 181 full-time employees while unfunding higher level roles, such as the police captain and sergeant, and the community development director, positions that are not currently financially viable.
Dunford said unknowns in Ceres’ budget future include impacts from the state’s facing multi-year deficits of $45 billion or more. Cities could face reductions in local funding or receive new unfunded new programs from lawmakers.
“Ceres’ current fiscal conundrum did not occur overnight,” said Dunford. “This has been years in the making that we can track back as far as 2015.”
He went on to say that the city needs to increase new residential housing and commercial development to bolster revenues to “help address the rising costs of doing business in California.” If that doesn’t happen, he said “significant and undesirable” reductions in service will occur in one or two years.
Dunford noted that the city is exploring ways to cut expenses, such as changes to its contract with Stanislaus Animal Services Agency (SASA) since a $200,000 increase is projected.
The city is also expecting the city of Modesto will be increasing the fire service contract by $171,000. To that, Dunford said his staff is “looking at all avenues for reductions in costs and anticipates the presentation to the council in September about all options that are open to the city for fire services.”
Some residents shared ideas about cutting city costs. Gene Yeakley said $881,386 for animal control for a small city “is just bizarre.” Dunford said SASA bases costs on the number of unwanted dogs brought in from Ceres.
“For us to start our own animal services agency it’d be far more expensive,” said Dunford.
Still, Vice Mayor Daniel Martinez said he wants to see Ceres set up its own animal control service, calling the SASA contract “ridiculous” and cited how service levels have been disappointing.
“We are definitely not getting $800,000 worth of services,” commented Martinez.
Dunford said Ceres is “not the only city that’s in an uproar about SASA and lack of responsibility and lack of response.”
Shirley Rogers asked why the city still owns the Clinton Whitmore Mansion, calling it a “white elephant” that “does no good for the city.” She suggested selling it and using the proceeds for city operations. Dunford said that would be a decision up to the council.
Rogers also questioned by members of the City Council are offered free medical insurance.
Councilwoman Cerina Otero said she feels the city has been reactive instead of proactive in finances. She proposed dropping insurance for the council, an idea not supported by Daniel Martinez or Mayor Javier Lopez. Before Councilman James Casey announced he agreed with Otero, he slammed the council for asking for a consensus on direction, feeling the need to include missing Councilwoman Rosalinda Vierra who could break deadlocks.
Alvaro Franco opined that he didn’t feel extra pay to retain officers would stop lateral shifting to other agencies. He also stated animal control services are not responsive.
In looking at the $2.45 million line item for parks, Martinez asked for the prospects of improving Lions Park which is now a dirt lot. Public Works Director Sam Royal said the park is overdue to years ago the cost estimate was $5 million to $6 million. He said costs would “probably be double that number.”
