10-year budget forecast for Citrus Heights looks grim

Sentinel staff report–
The Citrus Heights City Council earlier this month heard an updated forecast of the city’s budget which shows shortfalls almost every year for the next decade, even with the city receiving a fresh influx of cash when it begins receiving property taxes in 2022.

The city’s budget woes were projected even prior to the coronavirus coming on scene, but economic shutdowns to slow the spread of the virus have added nearly $1 million in sales tax shortfalls this year, and more next year.

The city’s finance consultant, Bill Zenoni with Municipal Resource Group, said even without staffing increases and foregoing necessary capital improvements for seven years, the city’s 10-year budget outlook shows a shortfall in eight of the next 10 years. He also said cash reserves will be “completely depleted,” which will require “some sort of outside funding or other correction action” to address.

Current actions being taken to address the shortfalls include extending a hiring freeze, where open positions at City Hall and the police department will remain unfilled, according to Assistant City Manager Ronda Rivera. She said the unfilled positions already saved the city about $1 million in the current fiscal year, which ends June 30.

Despite savings from unfilled vacancies, the city is still left with a projected net $1 million shortfall this year, as the adopted budget had already factored in a pre-pandemic $1.4 million shortfall for the year, when the council adopted the budget last June. That shortfall was to be largely made up for by tapping into the city’s $12 million line of credit, which remains the current course of action.

The line of credit would then be paid off in full during fiscal year 2024-25, after the city begins receiving its share of property taxes, estimated to be between $5-6 million annually.

Zenoni, who has served in various financial administrative roles in cities like Vallejo, Oakland and San Leandro, said Citrus Heights has been proactive in implementing cost-saving measures over the past few years, including reorganizing and consolidating department staff, re-negotiating cost-sharing agreements for employee benefits, exploring grant funding and partnerships, and prioritizing expenditures.

Watch the city’s budget presentation: click here

The city’s 10-year forecast assumes no outside funding from federal and state sources for COVID-19 relief, and also assumes no second wave of the coronavirus. The forecast also assumes inflation at 2.5-3% and limited or no contributions being made towards Other Post Employment Benefits (OPEB).

The forecast also accounts for no allocation going from the general fund towards capital projects for the first seven years, followed by $3 million per year in the final three years of the projection, which Zenoni said is “significantly less than the city’s capital funding needs.”

Councilwoman Jeannie Bruins inquired during the June 11 budget presentation whether assumptions included current levels of staffing continuing at the same level for the next decade, which Zenoni affirmed was correct. Bruins was skeptical whether the assumption was realistic.

Moving forward, Zenoni said city staff will assess and prioritize unfunded needs and continue to identify and implement cost-saving measures. Furloughs and pay cuts were not mentioned, although other cities have announced such measures to address budget shortfalls related to the coronavirus.

Additional budget updates from staff are slated for later this year in October and/or November, which will include recommendations for addressing projected shortfalls.

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For a more detailed look at Citrus Heights’ budget shortfalls for fiscal years 2019-20 and 2020-21, see article: Citrus Heights council to address million-dollar budget shortfalls