Sanger reviews tentative budget plan for city

Assistant city manager presents Sanger City Council with groundwork for fiscal year ‘24-25 budget, goes over challenges faced by staff amid preparation

Sanger City Council during a convening on June 24, 2024.
Darren Fraser
Published June 26, 2024  • 
9:30 am

SANGER – As the deadline for the next fiscal year approaches, the city of Sanger is on track towards approving a rough budget plan to keep the city in order, with further plans to get it back into order within the next few months.

At its June 24 meeting, Sanger City Council, after listening to a presentation from Assistant City Manager Michelle Speer on the draft of the city’s fiscal 2024-2025 budget, agreed to reconvene on the matter on June 26. During that meeting, it is probable the council will approve the budget with the provision that the many outstanding issues that still need to be addressed will be resolved by the adoption of a comprehensive budget amendment by Oct. 3, 2024. 

“The budget put before you this evening is not perfect,” Speer told the council, “but it must be in place by July 1 so the city can continue to pay our bills, pay our employees, pay contractors and continue with our capital projects.”

Speer referred to a state law that requires all municipalities to have a budget in place by the start of the new fiscal year, which is July 1.

VERY MUCH A WORK IN PROGRESS

In her presentation, Speer went over what still needs to be looked at in the city budget as much as she went over what is actually in the budget. She noted that city staff faced significant challenges in preparing the budget. She mentioned a number of administrative changes, including the hiring of Nathan Olson as city manager in February of this year, and her own recent hiring on May 28.

“When we came onboard, the budget development was in its process,” she said. “We came in when the process had started but had not yet been completed.” For that reason, she said, the city had less than 30 days to assemble the 2025 budget.

Speer added there were other factors contributing to the delay. The city’s financial information – which Speer described as financials in her presentation – was last audited in 2021. There have been no audits conducted for fiscal years 2022 and 2023. Speer said the shortage of financial information, while not insurmountable, made the task of formulating the current budget challenging.

“Part of the budget will include fund balances which tells you how much (money) each of your funds has,” she said. “But without knowing how you ended the year prior, that makes it difficult. We do have numbers; they just have not gone through the independent audit review.”

With that in mind, Speer said, the city adopted an interesting approach to how it developed the 2025 budget.

“What we have decided to do is present a budget that is very similar, if not identical, to fiscal year 2024, with the exception of these few factors,” said Speer.

The proposed budget includes the following expenditures:

  • Maintenance needs, including costs related to the upkeep of infrastructure. “If these requests came in (while the budget was being formulated), I put them in,” said Speer;
  • Previously approved council projects;
  • Capital projects with specific timelines or grant requirements; 
  • Measure S expenditures that were approved by the Citizen Oversight Committee; and
  • Any changes to fees associated with the South Kings Groundwater Sustainability Agency (SKGSA) in order to stay in compliance with the Groundwater Sustainability Act.

Still on the drawing board were six items, the kinks of which will, presumably, be ironed out by October. Speer said there are no expected wage increases projected for next year but there will be an increase in the contribution rate to the California Public Employees’ Retirement System (CalPERS).

Risk management allocations also must be evaluated. “Sanger will see a 23% increase in general liability (costs) in Workers’ Compensation over 2024,” said Speer.

She added that Internal Service Fund allocations, capital project requests, ARPA projects, and budgets for the Successor Agency, the Sanger Finance Authority and the Housing Authority all must be reviewed by October.

PLEASE DO NOT BE FRIGHTENED

This was Speer’s advice to the council when she informed the members that the city’s General Fund, which includes the bulk of the city’s budget, for 2025, is projected to include $16.8 million in revenues (city funds) and $19.6 million in expenditures (city spending).

In keeping with the theme of the presentation, Speer reminded her audience that these are preliminary figures.

“This looks like there’s a deficit,” she said. “But there is so much that needs to be evaluated. Do not expect this to be the final set of numbers. After further review of revenue streams, this gap should narrow.”

The city’s Water Operations Fund is projected to have $3.6 million in revenues but $8.1 million in expenditures. Speer said the fund will be partially bailed out by a 5% increase in water rates. She also said it is likely there will be a fund balance to cover the gap.

The Sewer Operations Fund and the Disposal Operations Fund are in a similar predicament. The former is expected to have $5.7 million revenues and $7.4 million in expenditures, but unlike water, sewer rates are not increasing next year. Disposal Operations are in somewhat better shape, with projected revenues of $2.9 million and expenditures of $3.1 million. The city is currently undertaking a rate study to determine if the rates it charges for waste disposal are sufficient for continued operation.

Speer said the Internal Services Fund (ISF) is one of the major processes that still needs to be evaluated before revising the current draft budget. This fund is how the city pays its service departments – city manager, city clerk, human resources, finance and IT. As Speer explained, non-service departments pay their proportionate share of services according to a cost allocation plan approved by the council.

Ideally, ISF revenues should match expenditures. For 2025, the ISF budget is projected to have revenues of $3.8 million and expenditures of $4.2 million. Speer said the increased expenditures related to the creation of her position, the search for a financial consultant to audit the aforementioned fiscal information for 2022 and 2023 and a city-wide compensation study.

 Speer noted the city is currently in talks with various city employee bargaining groups but since Sanger has not conducted a compensation study – which determines what employees in other municipalities earn for the same or similar job titles – in over 35 years, it is necessary the study be undertaken.

Lastly, Speer mentioned that staff needs the 90 days afforded by the Oct. 3 deadline to review expenditures for the Risk Management Fund. She said for the current year, the city paid $1.8 million in fees associated with the fund. These fees are expected to increase to $2.2 million for 2025.

As with the ISF, revenues and expenditures in the Risk Management Fund should balance at the end of each fiscal year.

IN OTHER COUNCIL NEWS

The council adopted Resolution No. 2024-34 to continue the Utility User’s Tax for fiscal year 2024-2025. This is an excise or privilege tax residents pay to use utilities. Each year the council must decide whether or not to continue the tax, which Speer described as one of the main sources for the city’s discretionary income.

The last business the council undertook was to adopt Resolution No. 2024-35 – creating a finance manager position. The council adopted the resolution based on Speer’s recommendation. She acknowledged that an Administrative Services Department employee was – essentially – doing the work of a finance manager. The resolution changed the employee’s job description and included an increase in pay.

Darren Fraser
Reporter