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Citrus Heights Messenger

City Council Discusses Two-Year Budget Draft

Apr 14, 2021 12:00AM ● By Story by Shaunna Boyd

CITRUS HEIGHTS, CA (MPG) - The Citrus Heights City Council held a study session on April 8, for the proposed two-year budget for fiscal years 2021-22 and 2022-23.

The draft budget accounts for revenues and expenditures as currently projected and does not include any new federal coronavirus relief funds. Mayor Steve Miller said, “We are still awaiting the treasury department guidelines for this money, which is anticipated, hopefully, to be around $15 million for Citrus Heights. When we know the amount, we will revise our budgets accordingly. Obviously, with free money, there’s strings attached, and until we know those strings, it’s kind of hard to plug those numbers in.”

The Mayor also made it clear that while additional federal funds will help the City, the money “will not solve our financial issues. … We need to keep our eye on the ball and be vigilant with our budget.”

Bill Zenoni, the City’s interim administrative services director, presented the draft two-year budget for the City’s General Fund. “This is definitely a hold-the-line budget,” he said. “There are no new programs requested in this next two-year window. It is, in fact, a budget where we are continuing to operate at the reduced levels that we did this fiscal year in order to get the budget to balance.”

Zenoni said that all City departments made a concerted effort during the current budget cycle to reduce expenditures. Reductions in staffing and services will continue in the upcoming budget cycle, including the continued lack of funding for 34 vacant positions. For the current fiscal year, the total revenue is $37.8 million while expenditures total $40.4 million, so the City is operating at a shortfall of $2.5 million. 

The projected revenue for fiscal year 2021-22 is $38.9 million and expenditures are expected to total $39 million—resulting in an operating shortfall of approximately $77,000.

Beginning in fiscal year 2022-23, Citrus Heights will retain its property taxes after the expiration of the Revenue Neutrality agreement with Sacramento County. Property taxes will bring approximately $6.4 million to the General Fund in that first year, becoming one of the three largest sources of City revenue for the General Fund—at 16%—along with sales tax at 34% and motor vehicles fees at 24%. Revenues of more than $40.3 million and expected expenditures totaling more than $36.6 million will bring the City’s General Fund to an anticipated surplus of $3.6 million in fiscal year 2022-23.

Zenoni explained that although street repairs are badly needed—at $12 million annually—those costs have not been included in the proposed budget. But the budget does include funding for some necessary items that have not been previously included, such as building maintenance and replacement of vehicles, equipment, and software. Total estimates for these additional costs are budgeted at $938,000 in the first year of the budget and $1.7 million in the second year.

City Manager Chris Boyd mentioned that Councilmember Tim Schaefer had at a previous meeting taken issue with including these additional items in the budget. Boyd asked Schaefer for clarification on his prior comments.

Councilmember Schaefer said he questioned why these items were recommended for funding at a time when the budget was already expected to be operating at a shortfall, “making this scenario worse than it needs to be.”

Mayor Miller explained, “We’ve always paid these costs. They just hadn’t been put in the budget. So, we always have equipment failing, maintenance to do.” With a budget surplus, these items were paid from the excess and didn’t have to budgeted. But with the City’s current financial situation, he said, “We’re so razor thin that we’re budgeting for it.”

City Manager Boyd then recalled Councilmember Schaefer’s comments at the February 11 meeting, in which he said he viewed the budget recommendations as reprisal for Measure M not passing, and further stated that it had shaken his trust in the City Manager and in Mr. Zenoni. Boyd said, “I think that the community and the Council and the staff definitely would like to understand what your comment meant.”

Councilmember Bret Daniels interjected before Councilmember Schaefer could respond, stating, “The Councilman is entitled to his opinion on the matter, and if the City Manager had a problem with the Councilman’s opinion on the matter, he should have taken that up with him before a live meeting and calling him out .... So, I’d like to ask just please move on with this meeting and stop this highly improper dialogue.”

Mayor Miller agreed that the meeting should move forward, and Mr. Zenoni continued the presentation, cautioning that the projected $3.6 million surplus in fiscal year 2022-23 would not immediately solve the City’s financial issues. He stressed the importance of building up the General Fund reserve over several years to ensure a stable financial future for the City.

Another concern of operating without much financial cushion is the impact on Capital Improvement Projects. While many of these projects, such as the Auburn Blvd. Complete Streets Project, receive either state or federal funding, the awards are given as reimbursement. So, the City has to pay for the projects up front and wait for the funding to pay back the General Fund. With the City’s reserve balance so low, this will be challenging.

The draft budget includes $121,850 for supporting non-profits community partners—such as Meals on Wheels and the Sunrise Ministry Food Closet—but the City intends to move some of those awards to alternate funding sources (like federal relief funds) as they become available. Shifting eligible costs to other sources could provide over $100,000 in savings to the General Fund.

In addition to the General Fund, the City also has restricted funds, such as assessment districts and development fees (for roadway, affordable housing, tree mitigation, park facilities, and transit impact). The money in these funds must be used as specified, so they are separate from the General Fund budget. Projections for these funds are revenues of $67.8 million and expenditures of $72.7 million for 2021-22, and revenues of $70.8 million and expenditures of $67.9 million for 2022-23. Zenoni said some of the assessment districts are not currently generating sufficient revenue to cover the increase in costs over time, but because the funds carryover from year to year, they are expected to balance.

After the presentation, Mayor Miller said he was “fearing the worst but hoping for the best” and was pleased that the budget doesn’t require any staff layoffs. 

The budget will be presented for adoption at the April 22 meeting.