The City's $1.7M Budget Deficit - Cold Hard Facts

Do you have a question about the Sebastopol Budget? Please email Diana at drich@cityofsebastopol.gov so it can be added to a developing Budget FAQ.

Sebastopol's Finances in a Nutshell: The situation is grim. That's the bad news. The good news is very good: This is a solution-oriented City Council. I'm confident that we'll find a way forward that builds a good healthy sustainable future for Sebastopol (and all the wonderful people who live here).

But here's the first step toward building solutions: We need to face the reality of the facts. Here they are, from my perspective on this Council and from my recent term on the Budget Committee. (For full details (and resources) click on the title of this news article.)

1. Going into this fiscal year, Sebastopol faced a possible $2.6 million shortfall, but managed to reduce that to a $1.7 million shortfall through a variety of severe cuts. Click here for the article detailing these cuts.

2. Sebastopol's final adopted budget for this fiscal year (July 1, 2023-June 30, 2024) has the City needing ~$1.7M more than it will bring in as revenue (yes, even with the cuts just mentioned!)

$10,860,460: This is what we expect to have in revenue this FY.
-$12,537,996: This is what we expect to spend this FY.
= -$1,677,536: This is our shortfall as of June 30th of next year.

3. This pattern of annual shortfalls continues for all foreseeable future years, from $1.7M now to $2.6M in 2029-30.

Shortfall for July 2023-June 2024: -$1,677,536
Shortfall for July 2024-June 2025: -$1,467,656
Shortfall for July 2025-June 2026: -$1,567,387
Shortfall for July 2026-June 2027: -$1,741,987
Shortfall for July 2027-June 2028: -$1,923,749
Shortfall for July 2028-June 2029: -$2,344,039
Shortfall for July 2029-June 2030: -$2,579,303

4.The City's reserves cover the shortfalls through June 30th 2026 (and maybe three months into that fiscal year). After that the City has zero dollars in it's general fund reserves to cover increasing annual shortfalls.

$3,441,264: Our reserve balance on June 30, 2024, after using $1,677,536 for our shortfall.
-$1,467,656: This is the amount we will need to cover our shortfall for July 2024-June 2025.
= $1,973,608: Which leaves us this reserve balance on June 30, 2025, going into 2025-26.
-$1,567,387: This is the amount we will need to cover our shortfall for July 2025-June 2026.
= $406,221: Which leave us this reserve balance on June 30, 2026, going into 2026-27.
-$1,741,987: This is the amount we need to cover our shortfall for July 2026-June 2027.
=NEGATIVE RESERVE BALANCE: How do we cover a $1,741,987 shortfall with a $406,221 reserve?

5. The City needs an influx of an additional $1.7M to $2.6M each year to cover expenses through June 2030 (with no new expenses added...just maintaining the expenses already in the budget).

-$1,741,987:Shortfall for July 2026-June 2027 (with $406,221 in reserves).
-$1,923,749: Shortfall for July 2027-June 2028 (with $0 in reserves)
-$2,344,039: Shortfall for July 2028-June 2029 (with $0 in reserves)
-$2,579,303: Shortfall for July 2029-June 2030 (with $0 in reserves)
=-$8,182,857: Cumulative shortfalls July 2026 through June 2030, with only $406,221 available.

6. And...the kicker..the revenue influx just described is not the amount needed for Sebastopol to be a healthy sustainable town. The $1.7M to $2.6M annually is a baseline survival minimum. It does not include any additional expenses that would allow Sebastopol to thrive.

Funding for additional staff.
Funding for additional infrastructure needs.
Funding for reserves (should be 15% of expenses each year).
Funding for water and sewer deficits.
Funding for support for local businesses.
Funding for support for local nonprofits.
Funding for all the myriad enrichment efforts a healthy City offers its residents...

Resources:

NEXT STEPS: Developing a strategy to address this situation. I'm confident that this City Council is up to the task....but the work is just beginning...